Stonewall Hotel Pty Ltd v Papantoniou

Judgment (6 paragraphs)

[1]

Introduction

The plaintiff is the lessee under registered lease AC807481 over the ground floor of 177 Oxford Street, Darlinghurst. The plaintiff became the lessee pursuant to a transfer dated 20 March 2007. At the time of the transfer, the lease was varied so as to provide for four options to renew the lease, which was for a term of 5 years from 4 November 2005 to 3 November 2010. These proceedings concern the validity of the plaintiff's attempts to exercise the first and second of the options to renew in 2010 and 2015 respectively.
The defendants are the registered proprietors of the premises. The first and second defendants, the brothers John and Aristotelis Papantoniou, were the lessors when the lease was initially granted in 2005. By transfers effected in June 2007, John Papantoniou transferred his interest in the premises to himself and his wife Stella Papantoniou (the third defendant), and Aristotelis Papantoniou transferred his interest in the premises to himself and his wife Efthemia Papantoniou (the fourth defendant). John and Stella Papantoniou jointly hold a half share in the property as tenants in common with Aristotelis and Efthemia Papantoniou who jointly hold the other half share. There was evidence that John and Stella Papantoniou on the one hand, and Aristotelis and Efthemia Papantoniou on the other, hold their interests in their capacities as trustees of their respective superannuation funds.

The exercise of the option to renew in 2010

The first option to renew was able to be exercised in the period from 4 May 2010 to 4 August 2010.
On 28 July 2010 Mr Richard Foo, a director of the plaintiff, received an email from Mr James Garvan of Matthews Solicitors. The email included the following: As discussed, I confirm that I have spoken to Stella Papantoniou who confirmed that the notice of exercise of option is to be sent to: Papantoniou Blake Solicitors PO Box 183 TOONGABBIE NSW 2146 You should send it by registered post and also by fax and e-mail.
The reference in the email to Stella Papantoniou is to the third defendant who was at that time practising as the sole solicitor at Papantoniou Blake Lawyers. She was not called as a witness in the proceedings. However, Christodoulos Papantoniou, the son of John and Stella Papantoniou, gave evidence that in mid-2014 his mother was diagnosed with Alzheimer's Disease, and is no longer able to engage in conversation longer than a minute or two. Christodoulos Papantoniou, who does not have legal qualifications, became the Practice Manager of Papantoniou Blake Lawyers in October 2014.
On 30 July 2010 Mr Foo and another director of the plaintiff, Mr Craig Bell, sent a letter on the plaintiff's letterhead to "John Papantoniou and Aristotelis Papantoniou C/- Papantoniou Blake Solicitors PO Box 183 Toongabbie NSW 2146". The letter, which was dated 29 July 2010, was in the following terms: RE: Option to Renew Lease at 177 Oxford St Darlinghurst 2011 being the whole of the Ground Floor, Folio 1/59870 Pursuant to cl 4.4, annexure B of the Lease, Stonewall Hotel Pty Ltd hereby exercises it's option to renew the Lease for a further 5 year period being 4th November 2010 to 3rd November 2015. Executed by Stonewall Hotel abn 74 060 528 136.
The letter contained the seal of the plaintiff and was signed by Mr Foo and Mr Bell as directors. The letter was sent by email, facsimile and registered post.
There is no issue about the form or content of the notice, or that the notice was received at Papantoniou Blake Lawyers within the period stipulated for the exercise of the option. The question is whether service upon Papantoniou Blake was service on the landlord for the purposes of cl 4.4.1 of the lease.
The lease does not define "the landlord" in terms that include agents of the lessor. Neither is "the landlord" defined so as to exclude agents of the lessor. The landlord (or lessor) is defined only by reference to the names John Papantoniou and Aristotelis Papantoniou. The lease does not contain an address for the landlord. In these circumstances there is no good reason to construe cl 4.4.1 in such a way that service upon a duly authorised agent of the landlord is not effective as service on the landlord (see Young v Lamb (2001) 10 BPR 18,553; [2001] NSWCA 225 at [36]; cf Express Clearances Pty Ltd v The Austral Brick Company Pty Ltd (2007) 13 BPR 24,271; [2007] NSWSC 213 at [10], [17]-[18] and [70]-[72]). I did not understand counsel for the second and fourth defendants to contend to the contrary. The point of controversy was whether Papantoniou Blake Lawyers was the agent of the second and fourth defendants with authority to receive the notice of exercise of option in July 2010 (see Young v Lamb (supra) at [37]).
As Brereton J stated in Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) 17 BPR 32,645; [2006] NSWSC 1203 at [38], whether an alleged agent had authority to receive such a notice is to be judged having regard to the whole of the circumstances of the case, including the terms of the lease and the role of the agent in the relationship between the parties.
None of the defendants gave evidence. The absence of Stella Papantoniou as a witness is explained by the evidence, referred to earlier, of her present mental condition. However, the first and third defendants adduced evidence from their son Christodoulos, and the third and fourth defendants adduced evidence from their son, Panos Papantoniou.
Christodoulos Papantoniou deposed that his father and Aristotelis Papantoniou purchased the premises at 177 Oxford Street in about 1968, and held it as tenants in common in equal shares. He stated that from 1991 he assisted his father in managing the property, and in the period since 1995 had primary responsibility for representing his parents' interests. He deposed that from about 1996 Panos Papantoniou represented the interests of his parents (Aristotelis and Efthemia) in the property.
Christodoulos Papantoniou deposed that in about 1988 his mother, Stella Papantoniou, a solicitor, was instructed by John and Aristotelis Papantoniou to act for them in respect of the property. There is documentary evidence that Stella Papantoniou (then of Papantoniou & Associates) was acting for John and Aristotelis Papantoniou in late 2006 when they entered into an Agreement for Lease of the premises to the plaintiff. There is also evidence that Stella Papantoniou acted as solicitor for the parties when John and Aristotelis Papantoniou effected the transfers of their interest in the property in June 2007.
Christodoulos Papantoniou further deposed that in 2010 Stella Papantoniou of Papantoniou Blake Lawyers was the solicitor acting for "both the owners". It is apparent that this statement was based in part on the fact that the letter dated 29 July 2010 from the plaintiff was on "the file". In cross-examination by counsel for the second and fourth defendants, Christodoulos Papantoniou stated that he was referring to "the lease file" kept by the firm. He confirmed that there were no other documents on the file in relation to the exercise of the option. He went on to state that his statement about the existence of a retainer by both the owners (that is, the two superannuation funds) was based in part upon meetings he had with Panos and Aristotelis Papantoniou in relation to the management of the Oxford Street property and the various leases associated with the property. In cross-examination by counsel for the plaintiff, Christodoulos Papantoniou referred to meetings between the owners and their representatives (Panos and himself) at which instructions were given, including by Panos, to Stella Papantoniou to prepare documents and "whatever was required legally". He said that such meetings had taken place sporadically from the mid 1990s when there were issues with the premises. He also referred to occasions when Aristotelis gave him instructions to give to Stella.
The affidavit of Panos Papantoniou did not contain any admissible evidence concerning the issue of the retainer of Papantoniou Blake Lawyers in 2010. Leave to adduce such evidence was not sought, and the issue was not touched upon in his cross-examination.
Mr Foo gave evidence in cross-examination that he knew in 2010 that the landlords had a managing agent (Ray White at Carlingford). He agreed that the managing agent was the point of contact with the landlords for matters "to do with the operation of the premises". Mr Foo also gave evidence to the effect that for quite a few years the plaintiff had dealings with Stella Papantoniou's firm "as representatives of the owner". Mr Foo stated that he was in the practice of contacting Papantoniou Blake Lawyers to liaise with the landlords "for leasing kind of matters".
There is documentary evidence that indicates that Papantoniou Blake Lawyers was acting for the landlords in November 2009 in relation to the lease. On 19 November 2009 Stella Papantoniou sent a letter on behalf of Papantoniou Blake Lawyers to the directors of the plaintiff. The letter included the following: We refer to the above and as instructed pursuant to your Lease we have calculated your new rental payable is $167,385.24 plus GST per annum and monthly is $13,948.77 plus GST. Further on instructions, as indexed by CPI increases, the following amount outstanding is due and payable by you for the periods indicated herein. Please ensure that as of December 2009 you deposit the increased monthly amount of $13,948.77 into the nominated account.
It further appears (from a letter sent by Nicholas Angelos & Co Solicitors to Papantoniou Blake Lawyers on 25 June 2012) that Papantoniou Blake Lawyers was acting for the second and fourth defendants in 2010 in relation to the registration of a lease over a property in Carlingford.
In addition, it may be inferred from Mr Garvan's email to Mr Foo of 28 July 2010 that on or shortly prior to that date Stella Papantoniou had a conversation with Mr Garvan in which she told him that the notice of exercise of option should be sent to Papantoniou Blake Lawyers. The making of such a statement to another solicitor on an important topic is consistent with Stella Papantoniou having an understanding that the firm was authorised to receive such a notice.
It is noteworthy that in the period after the purported exercise of the option in 2010 the parties appear to have dealt with each other on a basis consistent with a valid exercise of the option. The landlord (through the managing agents - Ray White at Carlingford until March 2012 and thereafter Lazaris Real Estate) notified annual increases in rent in accordance with movements in the Consumer Price Index ("as per the terms of your current lease" and "as per your lease agreement"), and the plaintiff thereafter paid the rent at the increased rates. Increasing the rent in that fashion is consistent with the terms of the new lease that would arise upon exercise of the option to renew (see cll 4.6, 5.4 and items 13 and 17 of the Schedule). Increasing the rent in that fashion is inconsistent with the terms that would apply if the plaintiff was allowed to continue to occupy the property after the end of the lease period other than under a new lease (see cl 12.4).
I note also that on 14 September 2015 the solicitor acting for the second and fourth defendants sent an email to the plaintiff's solicitor in which it was stated that the second and fourth defendants were not aware of any exercise of option in 2010 and "they could not obtain any information from Stella Papantoniou in relation to the status of the tenancies at 177 Oxford Street Darlinghurst". Even though the solicitor was aware that the notice of exercise of option had been sent in 2010 to Papantoniou Blake Lawyers, no suggestion is made that Papantoniou Blake Lawyers was not acting for the second and fourth defendants when the notice was received.
Having considered the totality of the evidence which bears upon the question I have come to the conclusion that Stella Papantoniou of Papantoniou Blake Lawyers was acting as the solicitor for the landlord when she received the notice of exercise of option on about 30 July 2010. I am satisfied that by that time Stella Papantoniou (initially of Papantoniou & Associates and later of Papantoniou Blake Lawyers) had acted as the solicitor for the owners of the property for many years in respect of various matters concerning the property, including the lease itself. Those matters at least included acting for John and Aristotelis Papantoniou in relation to the Agreement for Lease with the plaintiff in 2006 and in relation to the transfers of ownership effected in 2007, and acting for the owners in late 2009 concerning a demand for payment of rent under the lease. It seems to me likely that throughout that time Stella Papantoniou held what might be described as a general retainer to act as the solicitor for the owners on whatever matters of a legal nature arose concerning the Oxford Street property and the various leases that had been granted in respect of the property. It seems that Stella Papantoniou maintained a single "lease file" in respect of the work she carried out.
Whilst the evidence given by Christodoulos Papantoniou was expressed in rather general terms and was in some respects quite vague, I accept his testimony as a truthful account of how the affairs concerning the property were conducted over the years, and in particular of his mother's role as the solicitor. This evidence was to an extent corroborated by Mr Foo's evidence that the plaintiff had had dealings over a number of years with Stella Papantoniou as the representative of the owner.
Mr Foo was an impressive witness. He appeared to give his evidence carefully and as accurately as he could. He seemed unconcerned about whether his answers might assist or damage the plaintiff's case. I have no hesitation in accepting Mr Foo as a witness of truth who endeavoured to give evidence that was as accurate as possible.
I have also taken into account the evidence of Stella Papantoniou's conversation with Mr Garvan in late July 2010 which, in my view, is consistent with her then having an understanding that her firm was authorised to receive a notice of exercise of option. The evidence suggests that she continued to be the solicitor for the owners in respect of legal matters arising in relation to the lease. If she was not in that position (or if she had ceased to be the solicitor for some of the owners) it is most unlikely that she would have made an unqualified statement to a fellow legal practitioner that the notice of exercise of option could be sent to her firm. I note that there is no evidence of the second and fourth defendants engaging their own solicitors to deal with their property matters prior to mid-2012.
Finally, the conduct of the parties after July 2010 supports the conclusion that the option was validly exercised and that a new lease thereby came into existence (see above at [30]). Moreover, the assertion that the option had not been validly exercised was not made until August 2015. It seems that the second and fourth defendants (or their representative Panos Papantoniou) may not have then been aware of the details of how the plaintiff sought to exercise the option. However, their current solicitor was aware of those details by early September 2015 and, as noted earlier, his email of 14 September 2015 to the plaintiff's solicitor did not suggest that Papantoniou Blake Lawyers was not acting for the second and fourth defendants when the notice of exercise was received.
For the above reasons I am satisfied on the above evidence that Stella Papantoniou of Papantoniou Blake Lawyers was acting as the solicitor for the landlord when she received the notice of exercise of option on about 30 July 2010. This conclusion can be reached with more confidence in circumstances where neither the second nor fourth defendants were called as witnesses and the failure to call them was not explained (see Jones v Dunkel (1959) 101 CLR 298 at 312 and 321) and no evidence was sought to be adduced from Panos Papantoniou on the matter (see Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418).
The receipt of the notice of exercise of option was in my opinion something which fell within the scope of Stella Papantoniou's actual authority as the solicitor for the owners. The receipt of a notice about a legal matter in relation to the lease is a matter of a kind that falls within the retainer of Stella Papantoniou that I have found. The receipt of a notice of exercise of option is not an act akin to the making of a contract on behalf of the landlord, even if such receipt may bring about the plaintiff's entitlement to a new lease (cf Nguyen v Taylor (1992) 27 NSWLR 48 at 59D-E).
Service of the notice was thus made upon a duly authorised agent of the landlord. In my opinion the notice of exercise of option was validly served by the plaintiff "on the landlord" within the meaning of cl 4.4.1 of the lease. The challenge made by the second and fourth defendants to the validity of the exercise of the option to renew in 2010 accordingly fails.
It is not necessary to consider the argument raised by the plaintiff that in any event the second and fourth defendants are estopped from denying the validity of the exercise of the option because they subsequently charged rent at higher rates consistent with the option being exercised and a new lease coming into effect, and accepted rent at such higher rates from the plaintiff. It is also not necessary to consider the argument that upon the true construction of the lease (including clause 2.4) service of a notice on one of the parties that makes up the landlord is sufficient service "on the landlord".

The exercise of the option to renew in 2015

The second option to renew was able to be exercised in the period from 4 May 2015 to 4 August 2015.
On 8 May 2015 Mr Foo sent an email to Christodoulos Papantoniou which contained the following: Thanks for your time on the phone this week. As discussed, we wish to renew the lease we have on the Ground Floor 177 Oxford St. I will send you the official renewal notice next week. Could you please confirm that you are the person that is now representing the Landlords.
It seems clear that around that time Christodoulos Papantoniou had a telephone conversation with Mr Foo in which he told Mr Foo that Papantoniou Blake Lawyers now acted only for the first and third defendants, and that the second and fourth defendants and Panos Papantoniou were now using Nicholas Angelos & Co Solicitors.
On 17 July 2015 Mr Foo sent an email to the addresses of both Christodoulos Papantoniou and Panos Papantoniou, attaching a notice of exercise of option by the plaintiff. The notice, which was dated 4 May 2015, was in the following terms: RE: Option to Renew Lease at 177 Oxford St Darlinghurst 2010 being the whole of the Ground Floor, Folio 1/59870 Pursuant to clause 4.4, annexure B of the Lease Stonewall Hotel Pty Ltd hereby exercises it's option to renew the Lease for a further 5 year period being 4th November 2015 to 3rd November 2020. Executed by Stonewall Hotel abn 74 060 528 136
The notice contained the seal of the plaintiff and was signed by Mr Foo and Mr Bell as directors.
It seems that the notice was also sent by email on 22 July 2015 to Nicholas Angelos & Co, although the email itself was not adduced in evidence.
In any event, there is no doubt that the notice was received by both Christodoulos Papantoniou and Panos Papantoniou. Christodoulos Papantoniou acknowledged receipt of the notice on behalf of his parents' superannuation fund. Panos Papantoniou accepted in cross-examination that he had received the notice. He further accepted that at that time he was acting for both of his parents under powers of attorney in relation to the lease.
Again, there is no issue about the form or content of the notice. Aside from the contention that the option to renew had not been exercised in 2010 such that there was no option to renew in 2015, the only point taken by the second and fourth defendants in relation to the 2015 exercise of option was that service of the notice by email was not in accordance with s 170 of the Conveyancing Act, and that service in accordance with s 170 was required in order to validly exercise the option to renew.
For the reasons given earlier, a notice of exercise of option pursuant to cl 4.4 of the lease may be validly served on the landlord if served in accordance with s 170 of the Conveyancing Act or the general law. Here, the receipt of the notice by email plainly amounts to service in accordance with the general law. The notice was thereby brought to the attention of the addressees of the email to which it was attached. The challenge made by the second and fourth defendants to the validity to the exercise of the option to renew in 2015 accordingly fails.

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Judgment (6 paragraphs)

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