Sparway Pty Ltd v Lakkis [2017] NSWSC 1465 | Case summary

Summary of evidence

Mr Doumanis' account of the meeting is set out at some length in paragraphs 27 to 45 of his affidavit. It commences with the following: We met in a small office at the back of the service station. After some initial pleasantries we had a conversation in words to the following effect: "Me: I've been wanting to talk to you for a long time. Lakkis: You could have spoken to Raf. When Lakkis referred to Raf, I understood that to be reference to his nephew. The conversation continued in words to the following effect: Me: I wanted to talk to you as the owner. I assumed you were the person that I needed to deal with. Lakkis: Yes but Raf is a part of this with me. Me: But I dealt with you originally on this site, that's why I wanted to talk to you. Lakkis: Okay Raf is away at the moment overseas for around another week and he'll need to be part of any decision making.
Mr Doumanis deposed that he understood those words to be "a negotiation technique to give Lakkis time to shop a deal around if necessary".
Mr Doumanis deposed that the conversation continued as follows: "Me: Okay. Can we discuss a deal in relation to extension of our lease? Lakkis: I have a good offer on the site from 7-Eleven. Me: What sort of money are they offering? Lakkis: They have offered me $320,000 rent and a 4% rental increase per year. The lease term will be 15 years plus three 5 year options. Me: Well we are prepared to invest in the site to meet the VR2 requirements both aboveground and underground. If we agree on a further lease term we will also look at upgrading the shop and modernising the site at some point. Lakkis: Well that's fine but I'm not happy with the rent that you are currently paying. Me: We're prepared to pay more rent and a one off cash payment on the signing of the documents". I can offer you: a 20 year term, that is 10 plus 10; the existing lease to stay in place which provides for another 5 year option; we will pay for the VR2 works; we will pay a starting rent of $300,000; and we will give you a $250,000 cash payment on signing the new lease." After I made that offer to Lakkis I observed that he exhaled, grinned, relaxed his shoulders and sat back in his chair. The conversation continued in words to the following effect: "Me: It's a great deal. Lakkis: The biggest problem I have with United is I can't agree on the rent and the rental increases. I want a fixed percentage increase over the 10 year terms. I don't want complications I want to make it simple. Me: Okay well what type of fixed increase are you looking for? Lakkis: A fixed increase of 4% annually. Me: Yes but we are offering you a generous fee on signing as well as agreeing to remediate the site for the VR2 issues. Lakkis: I still want a 4% increase per year. Me: Well I'll offer you 3%. Lakkis: No I'm not happy with that. Me: Look I'll go out and make a call but if I can get approval to give you 4% will you agree to the rest of the deal. Lakkis: Yes I will".
Mr Doumanis says that he then went outside and made calls to United's Chief Operating Officer (Mr Szymczak), during which approval was obtained to offer 4% increases in rent each year. Mr Doumanis deposed that he returned to Mr Lakkis' office and told him that he could "do the 4%", to which Mr Lakkis replied "OK, great". Mr Doumanis says that he again stated the terms of the offer, each of which he wrote on the front of a manilla folder. Mr Doumanis further says that during that conversation Mr Lakkis picked up a piece of paper and began writing down each of the terms of the offer.
Mr Doumanis deposed that the conversation continued as follows: "Me: Are you clear on those terms? Lakkis: Yes I'm clear. Me: Do you want me to write it out for you? Lakkis: No. I've got everything. … "Me: Okay so just to be clear let's run through the deal one last time: The existing lease to stay in place which provides for another 5 year option; A further 20 year term, that is 10 plus 10; From the start of the new term in 2022, starting rent of $300,000; 4% fixed rental increases; A $250,000 cash payment on signing the new lease; and We'll pay for the VR2 works. Lakkis: This is close to the 7-Eleven deal. The $250,000 payment makes up for the short fall between the $300,000 rent from United and the rental offer from 7-Eleven, so I'm happy. Me: Ok so do we have a deal? Lakkis: Yes we do". "Me: Great I'll organise for our lawyers to draft the lease documents with all the agreed terms and sent them to you. Who should we send them to? Lakkis: You can send them to the same guy that I used last time. I think you know him. Me: Oh yes I do".
Mr Doumanis deposed that they both then stood up, shook hands and Mr Lakkis said "that's good". He says that the conversation then turned to other issues, including the need for new vapour recovery equipment (referred to as "VR2") to be installed.
Mr Doumanis deposed that shortly after the meeting he made a note in his diary as follows: Agreed 2x10 @ 4% CPI $250K Payment Lease to stay as is New Rent $300K
Later on the afternoon of 10 February 2017 Mr Doumanis sent an email to Mr Szymczak, Mr Silver (the sole director of the plaintiff) and Ms Garvey (United's National Property Manager) in the following terms: Please be aware the following has be [sic] agreed with the landlord at Medlow Bath - Existing lease in place which provides for another 5 year option after 21/11/2017 will remain as is. A further 2 x 10 years will be provided post the end of the current lease. The starting rent will be $300,000 + gst Increases will be fixed at 4% for the periods covering the 2 x 10 years United will be responsible for site upgrade to meet VR2 both underground and aboveground. United will pay Antoun Lakkis (landlord) a $250,000 fee on signing the new terms. Next steps - Notice and lease preparation to be provided to Antoun Lakkis solicitor - currently on file.
Mr Lakkis' account of the meeting of 10 February 2017 is dealt with in paragraphs 19 to 32 of his affidavit (which was sworn prior to Mr Doumanis' affidavit). Mr Lakkis deposed as follows: At this meeting Mr Nick Doumanis attended my service station on his own. I was working in my office at the service station attending to my books. I recall hearing Mr Doumanis asking the console operator, my employee, Naeim, words to the effect of: "Can I see Mr Lakkis". I got up from my chair and went to the door and opened it for him. Mr Doumanis then came in to my office and he said, "Can we have another option for the service station in Medlow Bath for another ten by ten years". I said, "No". He then said, "What are we going to do about the VR 2" The VR 2 is the latest legislation requiring the operator of the service station to comply with regulations. I said, "It is your obligation, under the lease it is your obligation to do such works" He said, "Part of it is ours, and part of it is yours. Anything underground is your obligation and anything above the ground is ours". I said, "No that is not right. The obligation to comply is yours". He said, "Listen, I am going to give you an offer, we will give you $250,000.00 and we will complete this lease as it is, and we will do all the jobs above and below ground. We will then take another 10 x 10 year lease". Mr Doumanis wrote something down at this meeting, I recall seeing that he wrote the following: "$250,000.00" and "We will complete our lease with the option and after that we want a "10 year x 10 year option, starting at $300,000.00 a year with an increase of 4% every year" I said, "I can't give you an answer until I have spoken to my nephew, as he is the Manager of my business, I will have to ask him". Mr Doumanis asked me several times for an extension of the lease and I replied to him, "I don't anything until my nephew comes back from holiday". He then left.
Mr Lakkis further deposed that on 18 February 2017, after his nephew Mr Hayek had returned from his holiday, they had a discussion about what had happened on 10 February 2017. Mr Lakkis says that Mr Hayek said: "No, don't give them the new lease, I will run it for you".
Mr Lakkis then tried to call Mr Doumanis but could not reach him. He left a message on Mr Doumanis' phone.
Mr Lakkis and Mr Doumanis had a telephone conversation on the morning of 20 February 2017. Mr Lakkis deposed: On Monday morning 20 February 2017 at 9.53am I spoke to Mr Nick Doumanis and I said, "I don't want to lease the property". Nick Doumanis said, "I want to speak to you and your nephew". I said, "Yes, I will call him". He then said, "I am coming to see you". He told me that he was coming later that afternoon.
Mr Doumanis deposed that the conversation was in the following terms: On around 20 February 2017, I received a call from Lakkis at around 10:00am. We had a conversation in words to the following effect: "Lakkis: Nick, I can't give you the lease. Me: Are you okay? Lakkis: No I can't do the lease. Me: Antoun, I'll be over there as soon as I can and we can talk about it".
Mr Doumanis went to the Bexley service station later that day and met with Mr Lakkis and Mr Hayek who had at Mr Lakkis' request driven from the service station at Epping where he was working on that day. Mr Doumanis deposed that the conversation that followed included words to the following effect: When I entered the service station I saw Lakkis and his nephew Raf. We had a conversation which included words to the following effect: "Lakkis: I don't want to do the deal with you. Me: I don't understand. We have a deal, we shook hands on that deal. What has changed? Lakkis: We want the site back. Me: Why? Lakkis: I have a relative coming over to Australia from Venezuela and he needs a job and we'd like him to run the service station. Me: What do you mean. Do you want him to run it in 5 years' time?" I did not understand how Raf's relative from Venezuela was going to be able to run the service station at the Premises when Sparway would still lease those premises for another 5 years under the present lease. The conversation continued in words to the following effect: Me: Well if you are after a job for your relative I can offer him a job at another one of our service station sites. Raf: No. Why should he work at another service station when we have one ourselves? Me: Are you not happy with the commercial terms that were agreed? Lakkis: No it's not that we just want the site back. Me: But we have an agreement. I've already told the business about the agreement and the solicitors are drafting the lease documents Raf: We just want our service station back. Me: I came in good faith, we reached an agreement and now you are trying to renege on it. Raf: Bad luck. The deal is off and we want our service station back.
Mr Lakkis deposed that there was a conversation which included the following words: Mr Doumanis said, "Why aren't you going to lease it to us". I said, "We don't want to lease it".
On 3 March 2017 K&L Gates, solicitors for the plaintiff, sent a letter to Mr Lakkis in which it was asserted that at the meeting on 10 February 2017 an immediately binding agreement was made to vary the lease of the Medlow Bath site. The letter contained a demand that Mr Lakkis execute and return an attached Variation of Lease by 7 March 2017. That did not occur. The proceedings were commenced on 9 March 2017.
Evidence was also given by Mr Hayek and Mr Naeim Baluch (an employee of Mr Lakkis who was working at the Bexley service station when the meeting took place on 10 February 2017).
Mr Hayek deposed that a few days before he left to go on an overseas holiday in early February 2017 he told Mr Lakkis that Mr Doumanis had called and said he wanted to discuss the Medlow Bath site. Mr Hayek deposed that Mr Doumanis had made the call in about early January 2017. He further deposed that in that conversation Mr Doumanis had said he wanted to discuss upgrades of the service station and "an extension of a new lease". Mr Hayek says that he told Mr Doumanis that a new lease was "out of the question" and would not be discussed, and any upgrades were "your business and it has nothing to do with me", but that Mr Doumanis could discuss it with Mr Lakkis.
Mr Hayek deposed that on 18 February 2017 (about three days after he returned from his holiday) he went to work at the Bexley service station and spoke to Mr Lakkis. Mr Hayek stated that Mr Lakkis told him that Mr Doumanis wanted upgrades and an extension of the lease, and that he said to Mr Lakkis "we are not leasing it and we are not doing any upgrades". Mr Hayek also stated that Mr Lakkis told him various things about his meeting with Mr Doumanis, including that he told Mr Doumanis that he was not going to extend the lease but in any case "would have to discuss the issue with me [Mr Hayek]".
Mr Hayek deposed that at the meeting at the Bexley service station on 20 February 2017 he told Mr Doumanis, following a discussion about upgrades and the lease, that "we do not want to lease the service station to you. I am going to run it for Tony [the defendant]". Mr Hayek deposed that there was no conversation at the meeting "referring to an agreement".
Mr Baluch deposed that he recalled that in about early February 2017 someone from United came to the Bexley service station to see Mr Lakkis. He further deposed that he recalled Mr Lakkis on that occasion saying "I don't do anything until my nephew comes back from holiday". Mr Baluch says that Mr Lakkis said these words on two or three occasions, and each time his voice was raised. Mr Baluch deposed that he did not recall any other conversation between Mr Lakkis and the man from United.
All of the witnesses were cross-examined.
Mr Doumanis recalled having a conversation in about early January 2017, but stated that it was not a conversation with Mr Hayek. He said that he was not sure who he was speaking to, as the person did not give his name. Mr Doumanis conceded that he may have been speaking to Mr Hayek.
In relation to the meeting with Mr Lakkis on 10 February 2017, Mr Doumanis initially denied that during the course of the discussion Mr Lakkis said "I don't do anything until my nephew comes back from holiday". He accepted, however, that Mr Lakkis mentioned that Rafael was part of his business. Mr Doumanis then said that he did not deny that Mr Lakkis said "I don't do anything until my nephew comes back from holiday." Later in his cross-examination, Mr Doumanis said that he could not recall Mr Lakkis saying those words several times in response to requests for an extension of the lease. Mr Doumanis then explained that there was no such discussion "during the course of the negotiations" but he could not recall if it might have happened before the negotiations. I note that still later in his cross-examination Mr Doumanis denied that Mr Lakkis had said that he could not give an answer until he had spoken to his nephew who was the manager of the business, and again denied that Mr Lakkis said "I don't do anything until my nephew comes back from holiday".
Mr Doumanis did confirm that Mr Lakkis told him that Rafael was away for around another week "and he'll need to be part of any decision making". Mr Doumanis said that he did not take that statement (which was made at the outset of the conversation) to mean that Mr Lakkis was not going to make any decision until he discussed it with Rafael. He stated that he did not "take it to that degree", seeing it as a means of "just getting a position in place". I interpolate that Mr Doumanis seems to have regarded the statement as part of a negotiating tactic aimed at allowing Mr Lakkis to "shop a deal around if necessary".
In relation to the meeting that took place on 20 February 2017, I note that Mr Doumanis agreed that both Mr Lakkis and Mr Hayek said words to the effect that they did not want to lease the site to United.
Mr Lakkis stated in cross-examination that the decision as to whether to lease the site was one for him with his manager, his nephew. He explained that Mr Hayek had been his manager for more than 10 years and was authorised to do everything when he (Mr Lakkis) was not present. Mr Lakkis seemed to accept that as the owner he could make a decision to sell or lease the service station, but he stated that he would have to talk to Mr Hayek "because the service station it is my name but financially was supported by his mother". Mr Lakkis maintained that he told Mr Doumanis on 10 February 2017 that he could not do anything until his nephew came back.
Mr Lakkis recalled that Mr Doumanis went outside during the meeting. However, he could not recall Mr Doumanis saying "if I get to 4% do we have a deal?" or that he responded "yes". Mr Lakkis also did not recall Mr Doumanis saying "I can do the 4%" to which he responded "okay, great", or Mr Doumanis saying "do we have a deal?" to which he responded "yes, we do". Mr Lakkis says he was insisting that the decision would be made when his nephew came back, and that he would have to ask his nephew. He agreed that he shook hands with Mr Doumanis.
Mr Lakkis denied that he had written some notes on a piece of paper during the meeting. He said that Mr Doumanis had made notes on some paper which Mr Lakkis provided to him. He said that Mr Doumanis left the paper on the desk in the office, and that some time after the meeting he (Mr Lakkis) threw out the paper. Mr Lakkis denied that he had deliberately withheld or destroyed a document containing notes he had made.
Mr Lakkis also denied that Mr Doumanis had said he would organise for United's lawyers to draft lease documents containing the agreed terms.
Mr Lakkis stated that when he spoke to Mr Doumanis on the phone on 20 February 2017 he told him that "we don't want to lease the service station", and Mr Doumanis said "can I see you and your nephew".
In relation to the meeting held later on that day, Mr Lakkis agreed that after Mr Doumanis had said "why don't you want to lease with us?" he said "I can't give you the lease". Mr Lakkis did not accept that he had said "the deal is off". He said that he told Mr Doumanis that he did not want to lease the service station. Mr Lakkis did not recall Mr Doumanis saying "we have a deal, we shook hands on that deal, what has changed?" Mr Lakkis denied that Mr Doumanis said "aren't you happy with the commercial terms we agreed?" He also denied that Mr Doumanis said he had already told the business about the agreement, and had further accused him of trying to renege on the deal. Mr Lakkis did not recall Mr Hayek saying "bad luck, the deal is off".
Mr Hayek agreed that whilst Mr Lakkis could make leasing decisions, Mr Lakkis would always speak to him and get his input before making the decision. Mr Hayek stated that on 18 February 2017 Mr Lakkis told him about a deal offered by Mr Doumanis that included two ten-year terms at a starting rent of $300,000, 4% annual rental increases, a payment of $250,000 on signing the new lease, and United fixing up the VR2 issues. Mr Hayek stated that Mr Lakkis informed him that he had told Mr Doumanis that he would need to speak to him (Mr Hayek) about the offer. Mr Hayek also said that Mr Lakkis mentioned that Mr Doumanis had written some notes on a piece of paper.
In relation to the meeting held on 20 February 2017, Mr Hayek agreed that Mr Lakkis told Mr Doumanis that he did not want to do the deal with him. Mr Hayek agreed that Mr Doumanis said "I don't understand, we have a deal, we shook hands on that deal, what has changed?", and his uncle said "we want the site back". Mr Hayek also agreed that Mr Doumanis said "aren't you happy with the commercial terms that we agreed?", and "but we have an agreement. I have already told the business about the agreement".
Mr Baluch maintained that on the occasion Mr Lakkis met the man from United Mr Lakkis raised his voice and loudly said three or four times "I don't do anything until my nephew comes back from holiday". Mr Baluch said it was unusual for Mr Lakkis to raise his voice, and he had never done something like that before.

Determination

The case advanced by the plaintiff is that a binding contract was made in the course of the conversation that took place on 10 February 2017 between Mr Doumanis and Mr Lakkis. It is contended that the Court should accept Mr Doumanis' account of what occurred, and find that after some discussion Mr Doumanis outlined the terms of an offer which was then unconditionally accepted by Mr Lakkis.
The plaintiff contends that viewing the matter objectively, the Court should conclude that the parties reached an agreement of a type which fell within either the first or second class of agreement identified in Masters v Cameron (1954) 91 CLR 353 at 360.
The defendant contends that no concluded agreement was reached. He submitted that there was no acceptance of the offer made by the plaintiff, or at least no unconditional acceptance. It was submitted that the defendant clearly stated that he had to speak to Mr Hayek before making a decision about the offer.
Based upon my assessment of Mr Doumanis as a witness, coupled with various concessions made by Mr Lakkis in cross-examination about the 10 February 2017 meeting, I am prepared to accept that the meeting largely occurred as Mr Doumanis deposed in his first affidavit. According to that account, the meeting commenced with a conversation to the following effect: We met in a small office at the back of the service station. After some initial pleasantries we had a conversation in words to the following effect: "Me: I've been wanting to talk to you for a long time. Lakkis: You could have spoken to Raf. When Lakkis referred to Raf, I understood that to be reference to his nephew. The conversation continued in words to the following effect: Me: I wanted to talk to you as the owner. I assumed you were the person that I needed to deal with. Lakkis: Yes but Raf is a part of this with me. Me: But I dealt with you originally on this site, that's why I wanted to talk to you. Lakkis: Okay Raf is away at the moment overseas for around another week and he'll need to be part of any decision making.
It appears that Mr Doumanis (who apparently had some knowledge of an involvement on the part of Mr Hayek) wanted to establish that Mr Lakkis was the person he should deal with. Mr Lakkis agreed that he was that person, but went on to state that Mr Hayek was "a part of this with me", and that whilst Mr Hayek was away for about another week, he would need to be part of any decision-making. That was a clear statement to the effect that no final decision would be made until Mr Lakkis had discussed the matter with Mr Hayek.
This conversation is of some importance. It seems to me to bear the character of a laying down of ground rules upon which the discussion to follow would be based. It is noteworthy that on Mr Doumanis' account, the topic the subject of this conversation was not later touched upon at the meeting, at least explicitly.
The plaintiff contends that any conditionality imposed by that conversation was effectively superseded or overcome by the subsequent manifestations of assent on the part of Mr Lakkis, including his agreement that there was "a deal", the discussion about the drafting of documents, and the shaking of hands.
I am unable to accept that contention. I think that it understates the importance of the initial conversation. Having taken the trouble to establish ground rules at the outset, the parties (in particular the defendant) should not be readily taken to have abandoned them without further reference to them. The conduct of Mr Lakkis which followed is not after all inconsistent with the maintenance of his stipulation that Mr Hayek would need to be part of any decision-making. On Mr Doumanis' account, Mr Lakkis was apparently happy with the offer ultimately made by Mr Doumanis, but at no stage did he state that despite what he had earlier said, he was prepared to commit to it immediately without first speaking to Mr Hayek.
Moreover, I think it is likely that on at least one subsequent occasion during the 10 February 2017 meeting Mr Lakkis said something to the effect that he would not "do anything" until his nephew returned from holiday. Mr Doumanis' evidence on this matter was somewhat inconsistent. He initially denied that such words were said, but then said that he did not deny they were said. He later stated (somewhat diffidently, as previously mentioned) that he could not recall whether those words were said several times. I did not find convincing his subsequent answer to the effect that those words were not said during the negotiations themselves. On this particular matter I am prepared to accept Mr Lakkis' evidence to the extent that on at least one subsequent occasion during the meeting he told Mr Doumanis, in effect, that he would not make a decision until he had spoken to Mr Hayek.
Mr Lakkis (who is 76 years of age) gave evidence that his nephew had been his business manager for more than 10 years and was authorised to do everything when he was not present. Mr Lakkis also stated that the service station was financially supported by Mr Hayek's mother. That evidence was not challenged. There was also evidence that Mr Lakkis had been overseas for about five months prior to late January 2017, leaving Mr Hayek in charge. In these circumstances there were no doubt sound reasons why Mr Lakkis would want to talk to Mr Hayek about any offer involving a new lease term before committing to it. That is the case even if Mr Lakkis himself was favourably disposed towards the offer.
I accept that Mr Doumanis genuinely believed that Mr Lakkis had unconditionally accepted the offer made on 10 February 2017. Mr Doumanis' notes made shortly after the meeting, and the email he sent later that day, are consistent with him holding that view. It may be that he came to that view because he regarded what Mr Lakkis had said about his nephew as a mere negotiating tactic, which was ultimately dropped. In any event, Mr Doumanis' subjective views are not determinative.
Subsequent conduct of the parties may be taken into account as part of a determination as to whether a binding contract was made (see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]). In that regard, I have taken into account the content of Mr Doumanis' notes and email created later on 10 February 2017. I have also taken into account what was said on 20 February 2017. In light of the numerous concessions made in cross-examination by Mr Hayek about what Mr Doumanis said at the meeting held on that day, I am prepared to accept that the meeting occurred largely as deposed to by Mr Doumanis. On that basis, it appears that Mr Doumanis asserted that a deal had been made, and an agreement reached. In the face of those assertions, Mr Lakkis did not state that any agreement was subject to him discussing the matter with Mr Hayek. Mr Lakkis seems to have simply said that he did not want to do the deal with United. Of course, that is consistent with Mr Lakkis holding the view that he was never bound to proceed, and in any case it is clear that Mr Lakkis told Mr Doumanis on 10 February 2017 that Mr Hayek would need to be involved in any decision.
In my opinion, viewing the circumstances objectively, and in light of the totality of the evidence, no binding agreement was made in the course of the discussion that occurred between Mr Doumanis and Mr Lakkis on 10 February 2017. I am not persuaded that the parties intended to be immediately bound by a contract on the terms of the offer made at the meeting by Mr Doumanis. I consider that the consensus apparently reached between Mr Doumanis and Mr Lakkis should be regarded as subject to the qualification that Mr Lakkis would not be making a final decision until he had discussed the matter with Mr Hayek. The agreement to "the deal" signified by Mr Lakkis was thus not unqualified or unconditional. There was no unqualified or unconditional acceptance of the offer made by Mr Doumanis on behalf of the plaintiff. It follows that the plaintiff has not discharged its onus of establishing that a binding agreement was made as alleged.
In these circumstances, it is strictly unnecessary to consider s 23C of the Conveyancing Act. However, I should state that in my opinion s 23C would have had no application to the agreement alleged by the plaintiff, as the agreement is an executory agreement under which property rights are to be created or disposed of when the agreement is performed; that is to say, it is an agreement to assure property in the future (see Baloglow v Konstantinidis (2001) 11 BPR 20,721; [2001] NSWCA 451 at [161]-[162]; Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184 at [51]-[53]). As noted earlier, the defendant decided not to seek to rely upon s 54A of the Conveyancing Act.
It follows from the above that the plaintiff's Statement of Claim should be dismissed. The plaintiff should pay the defendant's costs of the proceedings. The Court will so order.

Sparway Pty Ltd v Lakkis

At a glance

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Judgment (5 paragraphs)

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Legislation Cited (1)

Cases Cited (7)

Cited By (1)