Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd [No. 1] [2014] ACTSC 11

3. Clause 10.13 obliged Cotrell to undertake anything "required to be done in relation to the Centre or the Premises for the essential operation of a retail shopping centre" which was not the responsibility of Supabarn.

4. Supabarn and Cotrell also entered a Development Deed in early 1999, and a Supplemental Deed in September 2001. The Supplemental Deed related to the installation of airconditioning in the common areas of the Centre and an airlock at the main entrance to the Centre.

5. Supabarn's claim in relation to cl 10.7, at least as advanced in the context of the objections to the affidavit, seems to be that the obligation to conduct, manage and operate the Centre to the specified standard should be read as, among other things, an obligation to conduct a specified refurbishment within an identified timetable.

6. Aristidis Eric Koundouris, the Chairman and Managing Director of the Koundouris Group of Companies (the Group) and a director of Supabarn, which is a company in the Group, swore an affidavit on 20 April 2009 describing his dealings with one Dr Solomon, described as the director of Cotrell, in the period leading up to the signing of the Lease and the Supplemental Deed. Cotrell objected to the admission in evidence of various paragraphs in that affidavit, specifically paragraphs 9, 10, 15, 17 and 28, which set out what are said to be the contents of conversations between Mr Koundouris and Dr Solomon that Mr Koundouris says explain the meaning that was intended to be given to cl 10.7. Paragraph 25 of the affidavit related to the matters dealt with in the Supplemental Deed. That paragraph, as well as paragraphs 12, 13, 14 and 24, and the last sentence of paragraph 18, were not pressed.

7. The paragraphs concerned report extended monologues by Mr Koundouris, interspersed with occasional statements of agreement by Dr Solomon. Paragraphs 9, 10, 15 and 17 are as follows:

1. One evening, I received a telephone call from the director of Cotrell, Dr Solomon. The conversation on this occasion proceeded to the following effect:

Dr Solomon: "I understand that you're interested in purchasing the Jewel supermarket at Kaleen. As owner of the building, I have first right of refusal to purchase the supermarket. If I purchased the supermarket and on-sold it to you, would you be prepared to pay me a premium?"

Me: "Yes, I am interested and I would be prepared to pay a premium."

This was the first that I had heard about Cotrell, the owner of the Centre, having a first right of refusal over the sale of the Jewel supermarket at Kaleen. Negotiating with Doctor Solomon was attractive to me as it enabled me to purchase the Jewel supermarket without the restrictive conditions that Davids (who were a competitor in the supermarket industry) wanted to impose.

1. Following that telephone conversation, I held further negotiations with Dr Solomon on at least three or four occasions. These meetings occurred over a period of several months up until March 1998, before negotiation of the first Lease commenced. These meetings were usually held in the foyer of the Park Royal Canberra, where Dr Solomon used to stay during his visits from Malaysia. The effect of these conversations were as follows:

Me: "You have a poor asset at Kaleen. It is [sic] doesn't have a proper magnet of a full line supermarket which is necessary for a group centre. If we can work together, we can both win. We end up with a supermarket and you end up with a bigger, better Centre. If you expand the Centre and I give you a full line supermarket, you will have a major tenant just like a Woolworths or Coles in the centre, which you haven't had before. We own shopping centres in town. We know retailing well. Your Centre will never be successful until it is put on par with the other group centres. Until you have a major supermarket which is a one-stop-shop, together with good quality specialty stores that are necessary in the suburbs, such as a pharmacy, newsagent, a good butcher, a deli, a bakery and a coffee shop, you won't have a good quality group centre.

If we work together, we are happy to help you on the retail side, with getting the best of the tenancy mix, because that will help us to. We believe in working with the other tenants in the Centre so that even if we are trading in the same general products, we can complement each other. We do not target smaller tenants to shut them down.

We are building up our competition against Woolworths and Coles to focus on points of difference. A major point of difference is for us to do our fresh food better. We believe the strongest department in our supermarket is our fruit and vegetable department. We propose to be the best in the country at that. We therefore want to purchase the fruit shop that is next to the supermarket to enlarge the space. The current fruit shop owner is wholesaling right now from the rear of his shop, to other shop owners. This is not much use to the Centre or the other tenants because they do not attract customers.

If we enter into a lease with you, we want a clause that says that we are to be the only fruit and vegetable shop in the Centre, and this will work better for both of us. All the other tenants will gradually need to be replaced with a better quality of tenant, with the exception of the pharmacy, the dry cleaners, the hairdresser and the butcher. Once we have a full line supermarket in the Centre, these traders will be encouraged to improve their own stores. As for the others, they are very poor operators who are never going to get any better and will do nothing for the Centre.

On your behalf and with your authority, we will apply to the government for the land behind the fruit and vegetable shop to increase the size of the supermarket.

Once we start to do this work, you realise don't you that the balance of the centre will need to be brought up, as a minimum, to the same standards as other group centres currently have, as they are our direct competition. You need to totally refurbish and relaunch the centre. Then together with our Supermarket, it can be turned around. Both are necessary for success."

Dr Solomon: "If you do this, we will work together and I promise you that I will spend money on the rest of the centre, upgrading it to a modern and attractive group centre."

Me: "The result of what we do will be that our end of the Centre will be higher quality than most other group centres. You must agree to refurbish the rest of the Centre to the same standard, otherwise you will have a situation where the Centre looks like a guy with a new suit who is wearing sandals."

Dr Solomon: "Yes I am willing to do all of that. I might get your building company to do my part of the work at the same time as you are doing your part of the work."

Me: "Fixing up the common area in the Centre is not difficult. The wind and weather problems can easily be fixed by your putting in two new airlocks at the main entry points. You would retile the common areas and paint them. You would heat and air-condition the common areas. You must also do something about the outside. You should render the whole building rather than just do a cheap paint job, so it will look like it is really a new centre.

You must also clean up the car park, put in proper lighting, line marking, identify handicap parking bays and put in trolley bays. All the landscaping around the car park has not been maintained for several years. Some of the trees are dead. They are possibly even a fire hazard. You need to replace them with trees that are not dead, to make the place more attractive to customers. Later on these trees can give shade to the cars. I will even plant some for you."

Dr Solomon: "But that is the government's responsibility. They have to fix up that area."

Me: "Even though that land is owned by the government, the local government authority couldn't care less about its upkeep because it exists only to service your centre. It is common practice for you centre owners to take responsibility and tell the government what you are going to do to clean up and upgrade the car park.

Then, using your leases, you can get your other tenants to put in new shopfronts and redecorate their shops. Then there is not much more for you to do other than to upgrade the centre and improve the tenancy mix, to make this centre better than the other good group centres in Canberra. We are happy to give you access to our interior designer to help you coordinate colours throughout the centre, free of charge."

Dr Solomon: "Yes, yes. We can do that"

Me: "I am going to be spending more on the expansion of the Centre in dollar terms than you have spent in purchasing the whole Centre and that you will spend on refurbishing it. If I leave here one day I can't take the walls with me and I will have to leave the fit out here with you. In my view your centre, the way it is today is worth about three million dollars. I am going to spend over 4 million dollars. So I am going to spend more than you have spent so far. It is only fair that you spend some serious money as well because you will be the major beneficiary of all of this."

Dr Solomon: "Yes, I will do that and we will work together and we will have a great centre."

...

1. In the course of one of the conversations at the Park Royal I said to Dr Solomon words to the following effect:

Me: "Doctor, I'd like you to see that we are experienced and professional in what we do. We're not just a corner store. When it comes to the lines that we offer and the quality of our retail offer, we aim to compete directly with Woolworths and Coles. I'd like you to come and see our operation at City Markets."

Dr Solomon: "Yes, I'd be interested to do that"

Me: "Look, the other reason is that I need you to spend money to do up the Kaleen centre to the same standard as our competitors around Canberra. Nothing has been spent on your centre since it was built and I want you to see the latest and best - for example, what we have done at Centrepoint. This is a centre that we have developed and refurbished from an old run-down Woolworths and this is the standard that you need to have at Kaleen."

Dr Solomon: "Yes, yes. I am very interested."

Arrangements were made for us to visit the City Markets store and the Centrepoint Shopping centre the next day.

...

1. We visited the City Markets and the Centrepoint Shopping centre the next day. When we were in the City Markets premises, looking at the Supermarket and the Centre, the following conversation took place between us:

Me: "Have a look Doctor, this is what we said we could do. In your Centre we will be able to do better than we have done here. We bought this store and refurbished it. At Kaleen we would be doing it from scratch."

Dr Solomon: "Yes I see. This is very good."

Me: "Of course no matter how good our Supermarket is in your Centre, without good support from the speciality tenants, and a high standard for the whole Centre, we won't succeed. Remember here we are in the CBD, we have David Jones and we are surrounded by other majors so at Kaleen we will have to be that much better in order to attract customers because we don't have the number of magnets that exist in the City. Because your centre in Kaleen is currently run down, together we have to be very clever and do a group centre better than other group centres in Canberra to bring the customers back."

Dr Solomon: "Yes, that is great. I will leave it to you to do the enlargement and when you are finished I'll do my part."

...

8. Paragraph 27 of the affidavit, which was not objected to, referred to Mr Koundouris having obtained a copy of the Woolworths lease for its supermarket at Kippax. Paragraph 28 was as follows:

1. Clause 10.7 of the Woolworths lease provided that "the Landlord must conduct, manage and operate the Centre in a first class and efficient manner at all times". We negotiated various clauses in the lease and when we came to clause 10.7, the following conversation took place between Dr Solomon and myself:

Me: "Because of our substantial investment to expand the centre, I insist that, to give us some protection that you must maintain a high standard of centre at Kaleen. We need to alter the clause about this and beef it up. It has to end up at a higher level than the existing Woolworths model. I suggest that the new clause 10.7 reads 'The Landlord must conduct, manage and operate the Centre as a high quality retail shopping centre and in an efficient manner at all times'.

We are going to spend an awful lot of money. I think we are going to spend over $4 million on this. We want to make sure that you match our standard and do not just do a bandaid or repair job. You need to spend substantial amounts of money similar to us. We don't want to get into an argument later about what the standard is that is expected of you when you do this. We want it to be above the standard of the group centre at Kippax, which is the Centre that this Woolworths lease is written for. You have seen the standard we've done in the City at Centrepoint, you've seen our competitors at other group centres. In order to bring customers back to Kaleen from those group centres, we need to be a standard above those group centres, more like Centrepoint in the city.

Our problem is that people have told us that they have given up going to Kaleen over the years because the centre is a shambles. In order to convince people to change, it's not easy, we need to do something above what the other centres have, something special so they talk about it and say "have you seen the new Kaleen?" I will do with my supermarket, something that they will talk about. But you need to do the rest of the Centre the same way. It has to be a complete package because once people leave a centre dissatisfied, it's hard to get them to come back. Do you realise that there are people who live in Kaleen who only do convenience shopping at your centre, and go to the Belconnen Mall and other group centres to do their full shopping? We need to turn that around."

Dr Solomon: "Yes, yes. I agree with this and will agree to the words you want."

Me: "It has to be a complete package: a new centre and a new name. "Village" implies a small convenience centre. There is confusion in the public's mind with the smaller Kaleen shops further up the road. Kaleen is a designated group centre and should have a name that reflects that."

9. Cotrell's central objection, shortly stated, was that the specified provisions of the affidavit seek to introduce extrinsic evidence to be used in construing provisions of the Lease, which is inadmissible under the parol evidence rule.

10. Supabarn and Cotrell agreed that the applicable principles for the use which may be made of extrinsic evidence, especially evidence of prior negotiations between the parties, are set out by Mason J in Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 (Codelfa) at 352-353.

22. The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

23. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

24. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

25. There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances. See Heimann.

26. The importance of this evolution of the law as it affects the construction of contracts is that it centres upon the presumed, rather than the actual, intention of the parties. Once it is accepted that in the construction of the contract account is taken of the presumed intention of the parties it naturally follows that account should also be taken of their presumed intention when the court is called upon to decide whether a term is to be implied. The existence of the remedy of rectification and the purpose which it serves makes it obvious that the actual intention of the parties cannot constitute the basis of an implied term.

27. However, it is equally obvious that in making the inquiry whether a term is to be implied the court is no more confined than it is when it construes the contract. For the implication of a term is an illustration of the process of construction, though differing from the more orthodox ascertainment of the meaning of a contractual provision.

11. Counsel for Supabarn pointed to the several exceptions recognised to the general principles that exclude evidence of prior negotiations.

12. The first exception is that evidence of prior negotiations may be admissible to establish objective background facts known to both parties (Codelfa at 352; Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2009) 240 CLR 45 (Royal Botanic Gardens) at [11] and [26]-[30], in which negotiations that resulted in a detailed agreement between the parties were relied on, in interpreting a deed intended to give effect to that agreement but executed some years later, as establishing a variety of "objective background facts" about the nature of the negotiating parties and the intent of the agreement reached).

13. Secondly, where negotiating parties have reached agreement, which is then implemented by a formal document, the agreement may be used in construing the formal document (Royal Botanic Gardens at [26] and [27]).

14. Thirdly, where "it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal" (Codelfa at 352). I take this description to refer to a circumstance where an agreement of the relevant kind would normally be expected to make a particular provision, but the parties have "united in rejecting" the inclusion of such a provision. In such a case the court may receive evidence of that rejection to negative any inference that such a provision would have been intended.

15. Finally, Supabarn says, evidence of "mutually known facts" may be admitted "to identify the meaning of a descriptive term". In Codelfa at 351, Mason J said:

In D.T.R. Nominees Pty. Ltd. v. Mona Homes Pty. Ltd., Stephen and Jacobs JJ. and I, following Prenn, in a joint judgment said :

"A court may admit evidence of surrounding circumstances in the form of 'mutually known facts' 'to identify the meaning of a descriptive term' and it may admit evidence of the 'genesis' and objectively the 'aim' of a transaction to show that the attribution of a strict legal meaning would 'make the transaction futile' ..."

And in Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. in a judgment concurred in by other members of the Court I not only accepted and applied the statement in the majority judgment in B.P. Refinery of the conditions necessary to support the implication of a term, but I also accepted and applied Lord Wilberforce's different treatment, for the purpose of construing a contract, of evidence of surrounding circumstances on the one hand and of the parties' intentions on the other hand. Having considered the topic in more detail on this occasion I see no reason to qualify what I then said. (footnotes omitted)

16. Counsel for Cotrell submitted that Mason J's comments about "mutually known facts" are simply a re-casting of the proposition already identified as the second exception, namely where the parties have reached agreement about the meaning of a term. The exception for "mutually known facts" might also be seen as a re-statement of the first exception relating to "objective background facts" known or presumed to be known to both parties.

17. If the meaning of the phrase "high quality retail shopping centre" was sufficiently ambiguous, or perhaps doubtful, to meet the threshold test set out in Codelfa or Royal Botanic Gardens, the challenged material might have been admissible if Supabarn had been able to bring it within one of the three or four exceptions to the Codelfa principles identified at [12] to [16] above.

18. Counsel for Supabarn submitted that the availability of the exceptions identified in Codelfa arises not only where the language of the contract is strictly "ambiguous or susceptible of more than one meaning", but also "wherever the intention of the parties is for whatever reason, doubtful". In submitting that the exceptions also apply to cases of meanings that are "doubtful", counsel relied on remarks by Spigelman CJ in South Sydney Council v Royal Botanic Gardens [1999] NSWCA 478 at [35] as follows:

It is permissible to look at surrounding circumstances for purposes of interpretation of a contract "if the language is ambiguous or susceptible of more than one meaning". (Codelfa supra at 352 per Mason J). As this passage indicates, in this context the word "ambiguity" - ironically a word not without its own difficulties - does not refer only to a situation in which the words used have more than one meaning. A broader concept of ambiguity is involved: reference to surrounding circumstances is permissible whenever the intention of the parties is, for whatever reason, doubtful. (C/f with reference to a similar issue in the context of statutory interpretation: Bowtell v Goldsborough Mort & Co Ltd [1905] HCA 60; (1905) 3 CLR 444 at 456-477; Minister for Immigration and Ethnic Affairs v Teoh [1995] HCA 20; (1994-1995) 183 CLR 273 at 287-288; Cross on Statutory Interpretation (3rd ed 1995) p83-p84; and my Sir Ninian Stephen Lecture "Statutory Interpretation: Identifying the Linguistic Register" to be published in the Newcastle Law Review, accessible at www.lawlink.nsw.gov.au/sc.)

19. However, I note that when the matter went to the High Court (Royal Botanic Gardens) the plurality (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) at [9] were at pains to identify what they referred to as an "ambiguity".

20. This matter was again addressed in Western Export Services Inc. v Jireh International Pty Ltd [2011] HCA 45. In that case, Gummow, Heydon and Bell JJ, on a special leave application, reminded intermediate appellate courts as well as first-instance judges that they remain bound to follow the statement of the High Court in Codelfa requiring ambiguity, until such time as the High Court disapproves or revises that statement (at [3]).

21. The exact meaning of the relevant phrase in cl 10.7, "a high quality retail shopping centre", is not immediately apparent in the context of the Lease, but it had been indicated that there would be expert evidence about whether the phrase had a recognised meaning within the relevant industry, and if so, what meaning. For this reason, it would have been difficult to reach a conclusion about how uncertain the meaning was, and the nature of any uncertainty, without considering that evidence. As it happened, I did not need to reach a conclusion about whether the phrase met a threshold test of being "ambiguous or susceptible of more than one meaning", or whether "ambiguity" included other cases where the intention of the parties was doubtful in some respect.

22. Supabarn's submissions did not claim that the challenged parts of the affidavit fell directly under one of the Codelfa "exceptions".

23. There was no claim that the paragraphs objected to themselves set out "objective background facts" or "mutually known facts".

24. There was no claim that the affidavit identified any provisions agreed to be left out of the Lease.

25. There was no claim that the affidavit described the terms of an agreement intended to be implemented by the relevant provisions of the Lease.

26. This was unsurprising. With one minor exception, the relevant paragraphs set out Mr Koundouris's opinions and aspirations, punctuated by non-committal or at least non-specific words of approval from Dr Solomon.

27. Instead, Supabarn in written submissions identified what it said were the "surrounding circumstances showing the aim and object of the Development Deed and Lease which bear on the construction of clause 10.7 of the lease", as follows:

(a) The Kaleen Centre was in poor condition; it had not been refurbished since it was built (paras 9 and 15);

(b) Supabarn would take over the existing supermarket, purchase the existing fruit shop and redevelop the area at a cost of $4m (para 9);

(c) The work in (b) would result in the Supabarn Supermarket being of a higher quality than most other existing group centres (para 9);

(d) Once the work in (b) commenced, the Centre was to be totally refurbished (paras 10 and 17);

(e) The standard of the refurbished Centre was to exceed the standard of existing group centres; equalling the standard of Centrepoint (paras 15 and 17);

(f) Supabarn would lease the area of the extended and redeveloped supermarket, from the Defendant (paras 26 and 28);

(g) To achieve the high quality retail centre referred to in Clause 10.7 of the lease, the Centre was required to be refurbished to a standard above that of existing group centres; and to a standard like the refurbished Centrepoint in Canberra City (paras 15 and 28).

(a) that the negotiations attested to in Mr Koundouris's affidavit reflected the circumstances and understandings quoted at [27] above;

(b) that those circumstances and understandings can be read into the Development Deed and the Lease; and

(c) that the Development Deed and the Lease as so "interpreted" in turn provide a basis for construing cl 10.7 of the Lease to impose on Cotrell a series of obligations that are significantly more specific than would initially seem to be extractable from cl 10.7 on its face.

29. Cotrell pointed to Supabarn's struggle to formulate its real arguments in relation to the affidavit. Rather than relying on the words of the affidavit as it reports what are said to be negotiations, Supabarn in submissions on the admissibility of Mr Koundouris's affidavit has reformulated the import of the affidavit to provide yet a further version of the obligations Supabarn seeks to impose on, or enforce against, Cotrell. That is, Supabarn did not submit that the negotiations described in Mr Koundouris's affidavit directly indicated that the phrase "high quality retail shopping centre" was intended to incorporate directly a specific refurbishment obligation and timetable.

30. The attempt was to describe a two-stage process of interpretation, in which the initial negotiations (by evidencing mutually known or agreed facts) reflect an otherwise obscure meaning of the Lease and the Development Deed, and that hitherto obscure and still unstated meaning for the Lease and the Development Deed in turn evidences or reflects a particular meaning for cl 10.7, being among other things a meaning that is not conceptually congruent with the words of that clause.

31. An obligation to operate a shopping centre to a particular standard may in fact require some refurbishment of the centre over time, although I cannot see why in some cases it could not be satisfied by conscientious maintenance. It is hard to see how such an obligation could imply a particular kind of refurbishment to a particular timetable. Nor was there any claim that the description "high quality retail shopping centre" reflects a precise recognised industry standard that carries with it identifiable and detailed refurbishment obligations (although, as noted, evidence was to be provided during the trial about the meaning that might be given to the phrase within the shopping centre industry).

32. The difficulties for the plaintiff are apparent from the form of this submission.

33. First is that the contents of the affidavit do nothing to bridge the conceptual gap between an obligation to operate the Centre in a particular way, and an obligation to refurbish the Centre to a particular timetable.

34. Secondly, the High Court has accepted that in certain circumstances otherwise inadmissible evidence of prior negotiations may be admissible to the extent that it establishes "objective background facts which were known to both parties and the subject matter of the contract" or "the objective framework of facts". Almost none of the material referred to by Supabarn could be said to establish "objective background facts" or "the objective framework of facts"; it is at best "statements and actions of the parties which are reflective of their actual intentions and expectations", although the form of the evidence in most cases leaves doubt about whether the material is reflective of the intentions of anyone except Mr Koundouris.

35. From the list of "surrounding circumstances" said to be established by Mr Koundouris's affidavit, the only one that refers to what might amount to "objective background facts" is that set out in paragraph (a) quoted at [27] above, that the Kaleen Centre had not been refurbished since it was built (said to emerge from paragraphs [9] and [15] of the affidavit).

36. This (subject to giving an agreed meaning to "refurbish") may be an objective fact, but if so, there is nothing relevant to it in paragraph [9] and the only thing relevant in paragraph [15] is Mr Koundouris's claimed assertion to Dr Solomon that "Nothing has been spent on your centre since it was built" (a matter on which Dr Solomon should not have needed Mr Koundouris's advice and as to which Dr Solomon was in any case not claimed to have assented).

(a) there are no objective background facts, or at least no useful ones, in the affidavit material;

(b) there is nothing that could be identified as an "agreement" that was merely implemented by the formal lease;

(c) there was no suggestion that any standard or implied term of the Lease had been omitted by agreement; and

(d) there was no basis for finding that any particular meaning had been agreed for the disputed expression "high quality retail shopping centre" in reliance on "mutually known facts".

38. In the course of argument about Cotrell's objections to Supabarn's evidence, I expressed the view that there might be a basis for admitting paragraph 28 of the affidavit, to the extent that it describes a discussion, and agreement, between Mr Koundouris and Dr Solomon that the ultimate form of clause 10.7 was intended to ensure that the shopping centre maintenance obligation imposed on the landlord under the Lease was "at a higher level than the existing Woolworths model". This, in the context of the parties' consideration of a copy of the Woolworths Kippax lease that had been provided to Mr Koundouris by the landlord of Woolworths Kippax, seemed to hint at the incorporation into the Lease of an obligation that might be able to be given some content by reference to a recognised standard in the retail shopping centre industry, being the standard required by "the existing Woolworths model".

39. However, I came to the conclusion that for two reasons this approach should be rejected. First, Woolworths supermarkets are found in a very wide range of shopping centres across Australia. It seems to me highly unlikely that, if there is an "existing Woolworths model" as mentioned by Mr Koundouris, and if it applies to all shopping centres in which Woolworths operates (a matter which was not the subject of either evidence or submissions), it is specific enough to provide useful content to the obligation asserted here, being an obligation of which Mr Koundouris deposes he said:

[Clause 10.7 of the Lease] has to end up at a higher level than the existing Woolworths model.

40. Furthermore, there is no basis in Mr Koundouris's affidavit for accepting that whatever content that model might have had, it was known to either Mr Koundouris or Dr Solomon when they had the conversation described by Mr Koundouris.

41. Secondly, admitting Mr Koundouris's claim that he and Dr Solomon had agreed on a standard that would be "higher" than "the existing Woolworths model" would then, presumably, have required the admission of further, possibly extensive, evidence about that model and the standards it set at some point before (possibly well before) September 2001 when the Lease was entered into. This would not, however, have guaranteed, or even given rise to a reasonable expectation, that an unambiguous meaning for the disputed clause could be inferred from evidence about the Woolworths model, or that it would make the task of interpreting the clause any simpler.

42. Section 135 of the Evidence Act 2011 (ACT) is as follows:

135 General discretion to exclude evidence

The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might -

(a) be unfairly prejudicial to a party; or

(b) be misleading or confusing; or

(c) cause or result in undue waste of time.

43. In this case, for reasons set out above, the probative value of the material in paragraph 28 about the Woolworths lease would have been low, and its admission would at least have "cause[d] or result[ed] in undue waste of time"; it might also have been misleading or confusing. Section 135 in my view provided a further justification (if any were needed) for excluding evidence said to show that the parties agreed that the "existing Woolworths model" would identify a minimum standard that the agreement was intended to require Cotrell to exceed.

44. I return to Mason J's comments in Codelfa, quoted at [10] above, that:

statements and actions of the parties which are reflective of their actual intentions and expectations ... reveal the terms of the contract which the parties intended or hoped to make ... [and] are superseded by, and merged in, the contract itself.

45. I was satisfied that the affidavit material, as "statements and actions ... reflective of ... intentions and expectations", was explicitly inadmissible.

46. Furthermore, Supabarn's general proposition, that evidence of prior discussions can be admitted to be used in the interpretation of agreements to give those agreements a different but unspecified effect that would in turn allow a particular provision of one of the agreements to be given a very specific meaning significantly removed from the words of the provision, in my view only needs to be stated to be rejected.

47. I mention briefly a secondary argument arising from Cotrell's citation of Macedonian Orthodox Church Inc v ACTPLA [2013] ACTSC 19 as another case in which material external to a Torrens title lease was excluded from consideration in interpreting the lease.

48. The argument seemed to be that the Codelfa principles, or what may be more usefully described as the Codelfa exceptions (at [12] to [15] above) were not applied to a Crown lease in that case and, for the same reasons as relied on in that case, are not applicable to the Lease, which is a sub-lease of a Crown lease.

49. Supabarn's response to this argument was that the exclusion of the Codelfa exceptions applied only to agreements giving indefeasible title (Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCA 45; (2007) 233 CLR 528 at [37]) to the extent that indefeasibility attached to the agreement and the agreement was assignable (Phoenix Commercial Enterprise Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [156]- [166]).

50. Supabarn argued that since cl 10.7 did not confer any kind of indefeasibility, and nor was the Lease assignable, the Codelfa exceptions were not excluded.

51. Since I concluded that none of the Codelfa exceptions permitted the admission of any of the challenged paragraphs of Mr Koundouris's affidavit anyway, there was no need to reach any conclusion about the particular application of those exceptions in construing a lease in the nature of the Lease entered into by Supabarn and Cotrell.

52. For the reasons set out above, I ordered that paragraphs 9, 10, 15, 17 and 28 of Mr Koundouris's affidavit sworn on 20 April 2009 not be admitted in the trial of this matter.

I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Penfold.

Solicitor for the defendant: Norton Rose Fulbright Australia