Thorn Australia Pty Ltd v Centuria Property Funds Ltd

Summary of salient evidence

1. On 23 April 2021 the parties entered into a Heads of Agreement. The Heads of Agreement was prepared by the defendants. It took the form of an offer or proposal that was accepted by the plaintiff by signing. The Heads of Agreement included the following: Heads of Agreement RE: Suite 801, Level 8, 8 Central Avenue, Eveleigh We are pleased to confirm the detailed terms of a lease over suite 801, 8 Central Avenue, Eveleigh based on the terms set out below: Lessor The Trust Company (Australia) Limited Lessee Thorn Australia Pty Ltd ABN 63 008 454 439 Premises Suite 801, Level 8, 8 Central Avenue, Eveleigh Area 1,274.60 m2 (As per survey) Term of Lease Five (5) Years Option Five (5) years (the Lessee must notify the Lessor of its intent to renew no later than nine (9) months prior to its lease expiry). Access The Lessee will be granted early access from 1 June 2021 on a Gross Rent-Free basis to commence any tenancy fitout changes, IT requirements and occupancy prior to its Lease Commencement Date subject to Lessor receipt of executed lease documents, provision of bank guarantee and appropriate insurances. Date of Lease & Rent Commencement 1 March 2022 Commencing Net Rent $780 per m2 per annum + GST Rent Reviews 3.0% fixed annual increases … Lessor Works The Lessor will freshly paint all walls, replace any damaged ceiling tiles and install new carpet. Alternatively, the Lessor can provide a contribution in lieu of the above noted works. Additionally, the Lessor will give the Lessee a $50,000 contribution towards any capital works required. … Guarantees The Lessee will be required to provide a bank guarantee equivalent to ten (10) months gross rental. The bank guarantee must: be irrevocable. refer to the Favouree as being "the Lessor". relate to the performance of the Lessee's obligations under the lease; be issued by an Australian Bank with offices in Sydney; and not have an expiry date earlier than 12 months from expiry. All bank guarantee amounts will be subject to a satisfactory financial assessment and is required prior to access being granted. The guarantee will be calculated on the last year's lease value. Insurances The Lessee must provide satisfactory evidence of the following on execution of the lease, noting the Lessor as an interested party: Public liability insurance: $20 million minimum Plate glass insurance The Lessee's insurer must be reputable and represented in Australia. … Utilities The Lessee is responsible for all electricity, telephone and other utilities and services to the premises from the earlier of the Date of Lease Commencement, or the date the Lessee was first given access to the Premises. … Documentation With the exception of the terms and conditions of this lease proposal, the Centuria Property Services standard lease for the Building will be used as the base template which is subject to review and agreement between the parties. Upon execution of the heads of agreement by the Tenant, expiring 45 days after the Landlord's solicitor issues draft lease documents, the Landlord agrees to exclusively deal with the Tenant in respect of leasing the Premises/the requirement and vice versa. The lease and associated documentation will include a limitation of liability provision of the Lessor and responsible entity. … Lease Deposit The Lessor will require a deposit of $25,000 payable via EFT to be paid into Knight Frank's trust account. It is acknowledged that should this transaction not proceed due to the Lessee withdrawing post instructing solicitors, the Lessor's accrued legal fees will be deducted from this deposit and the balance subsequently refunded to the Lessee. The deposit shall otherwise be returned to the Lessee at the appropriate juncture. … Provisions This proposal is valid until COB on 23rd April 2021. This proposal is subject to: Lessee and Lessor board approval; and Execution of appropriate legal documentation The information contained in this proposal is not a binding lease between the prospective Lessee and the Lessor and is subject to final Lessor and Lessee board approval. The Lessee and the Lessor reserve the right to withdraw from and terminate negotiations at any time prior to execution of formal Lease documents by both the Lessee and the Lessor. The Lessor's rights in respect of the deposit and legal costs remain irrespective of approval. Following receipt of the signed proposal, the Lessor will instruct the Lessor's solicitors to prepare the lease documentation and issue it to you.
2. The plaintiff retained CR Commercial Property Group ("CR") in relation to the transaction. Shortly after the signing of the Heads of Agreement, a Project Manager at CR, Jesse Huizenga, made contact with the defendants (including Mr Schmidt-Lindner) in relation to the payment of the deposit referred to in the Heads of Agreement. The deposit was paid on 26 April 2021.
3. On 4 May 2021, Ms Jalozaite of Makinson d'Apice, the solicitors retained by the defendants, sent draft documents to Mr Brendan Aubusson of Church and Grace, the solicitors retained by the plaintiff. The covering letter included the following: We act for the Landlord and in accordance with the Heads of Agreement submit to you the following for approval and execution: Lease. Incentive Deed. Please note that the documents are submitted to you subject to our client's approval and in this regard we reserve our client's right to make amendments. As you may appreciate, our client does not wish the concession and any other ancillary aspects to be incorporated into the Lease and accordingly they have been included in an Incentive Deed, which will be executed by both parties. Obviously, the Tenant will need to liaise with our client (attention: David Schmidt-Lindner) concerning its requirements for fit-out so that these can be formally approved, subject of course to any conditions imposed by our client. In order to ensure prompt finalisation of this matter our client requires any amendments sought to be marked up in tracked changes in the documents. To this end we attach Word versions of the above documents for you to mark up, if necessary. When the documentation has been finalised, we will require the items noted on the attached Document Return Checklist to be returned to us.
4. It is not necessary to refer to the content of the draft Lease and draft Incentive Deed, save to note that the draft Lease provided for a five year term commencing on 1 March 2022, and that cl 5 of the draft Incentive Deed was concerned with early access to the premises. Clause 5.1 of the draft Incentive Deed was in the following terms: The Landlord agrees to grant to the Tenant a non-exclusive licence for access to the Premises as soon as practicable after the later of: (a) completion of the Landlord's Works; (b) 1 June 2021; and (c) receipt of the executed Lease, the Bank Guarantee and insurances referred to in the Lease, for the purposes of allowing the Tenant to carry out the Tenant's fitout works (as approved by the Landlord) and after completion of those fitout works for occupation. The Tenant must provide the Landlord with an occupation certificate upon completion of the Tenant's fitout works.
5. The Document Return Checklist referred to in the covering letter relevantly provided as follows: Lease (in duplicate) duly executed in accordance with the Execution Requirements set out below. Incentive Deed (in duplicate) duly executed. Bank Guarantee with the details noted on the attached Bank Guarantee Requirements Sheet. We suggest that to avoid delays, you provide to us a draft of the proposed Bank Guarantee for the approval of our client prior to having the Bank Guarantee finalised by the Bank. Copy of the required current insurance policies with the details noted on the attached Insurance Policy Requirements Sheet. A direct deposit to our trust account for the registration fee ($146.40) payable to NSW Land Registry Services and lodgement fee ($55.00) as follows: Amount: $201.40 Account: Makinson & d'Apice Trust Account …
6. On 13 May 2021 Mr Aubusson sent revised and marked-up versions of the Lease and Incentive Deed to Ms Jalozaite. The amendments to the documents included amendments to cl 5.1 of the Incentive Deed and the inclusion of a new cl 8 in the Incentive Deed which provided for an agreement for lease. These and other amendments to the documents were the subject of negotiations that took place until about 16 June 2021.
7. On 16 June 2021 Ms Jalozaite sent what she described as "the execution versions of the documents" to Mr Aubusson. The covering email included the following: Please arrange for the attached to be executed by the Tenant in duplicate and return the originals to our office to arrange for the execution by the Landlord.
8. On 23 June 2021 Mr Aubusson sent an email to Ms Jalozaite in which he suggested a number of alterations to the documents. These suggestions were largely accepted. On 25 June 2021, Ms Jalozaite sent amended versions of the documents to Mr Aubusson and stated that she looked forward "to receiving the Tenant executed documents".
9. On 28 June 2021 Mr Aubusson sent an email to Ms Jalozaite in the following terms: We are having the execution versions signed and returned to us. Can you let us know when your clients have signed, so we can exchange the Incentive Deed and we can hand over the signed lease, bank guarantee, etc.
10. Very shortly thereafter Ms Jalozaite responded by email in the following terms: Thank you for your email below. Once the Tenant signs the documents, please send them to our office to check and certify before the Landlord signs. We have to certify the originals of the Tenant executed documents before the Landlord can sign.
11. Later on 28 June 2021, Nicole Duncan, the Managing Director of CR, sent an email to Mr Schmidt-Lindner in which she indicated that the Lease would be executed on the following day and that "we will have copies to you asap thereafter".
12. The Lease and Incentive Deed were in fact signed on 29 June 2021 by a director and the secretary of the plaintiff. On the same day, Mr Huizenga of CR sent an email to Mr Schmidt-Lindner which included the signed documents as an attachment. It seems that a Certificate of Currency in respect of the plaintiff's insurance (noting the defendants as interested parties) was also attached. The email included the following: Please see attached soft copies as promised of the lease and incentive deed executed by our client. These are in the process of being delivered to your legal team.
13. Later on 29 June 2021 Ms Duncan sent an email to Mr Schmidt-Lindner in the following terms: Out of courtesy, and just to keep you in the loop, we are madly now trying to action the team in for a cosmetic upgrade of the space. We do not intend to do any major or construction works - it is simply going to be improving the look of the place whilst Thorn focuses on their business. This is the most sensible solution given the delays with the Lease legals (not your fault!!) We hopefully have access in the morning to get quotes for the carpet, painting and AV/IT set up. We will then provide Centuria with details of what works we are proposing (including Grant of course) and work out the payment methodology.
14. On 30 June 2021 Mr Aubusson sent a letter by courier to Ms Jalozaite which was in the following terms: We enclose the following: Incentive Deed duly executed by the tenant. Lease duly executed by the tenant. Certificate of Currency issued by Arthur J Callagher & Co (Aus) Limited dated 17 June 2021. Proforma Bank Guarantee to be issued by Westpac Banking Corporation. We propose the following procedure for formalising the arrangements between our clients: (a) We note your advice that neither the Lease nor the Incentive Deed have been signed by the Landlord and that on receipt of the documents enclosed with this letter, you will certify the same to the Landlord and arrange for the same to be signed. (b) When you receive the signed documents from the Landlord, would you please send us scanned copies for our perusal. (c) If we are satisfied with the documentation as executed by the Landlord we will authorise you to exchange and date the Incentive Deed and to date the Lease. (d) After the exchange you are to forward the original Incentive Deed signed by the Landlord to us. (e) You are then to proceed with the registration of the Lease and to provide us with the registered Lease after registration has been effected. (f) You are not authorised to exchange the Incentive Deed nor deal with the Lease until we give you our written authorisation to do so. (g) We will send to you the Bank Guarantee as soon as we receive it.
15. It seems that although duplicates of the signed Lease were sent on 30 June 2021, only one signed Incentive Deed was sent. On 2 July 2021 Ms Jalozaite sent an email to Mr Aubusson in the following terms: We refer to the matter above and note that we have only received one counterpart of the Tenant executed incentive deed. Please let us know if the other counterpart is being delivered to our office or whether the Tenant will accept the certified copy of the duly executed and dated deed instead. We look forward to hearing from you.
16. Also on 2 July 2021, Mr Huizenga sent an email to Grant McFarlane, a Facilities Manager with responsibility for the premises. By his email, Mr Huizenga enquired whether it would be possible to obtain access on 5 July 2021 for the purpose of a broadband installation. Mr McFarlane responded early on 5 July 2021, requesting that a scope of works be provided.
17. Ms Jalozaite deposed that she had a telephone conversation with Mr Aubusson on 5 July 2021. She did not make a file note of the conversation. Ms Jalozaite recalled that the main topic of the conversation was an amendment proposed by Mr Aubusson which was to accommodate a possible takeover of the plaintiff's holding company. However, Ms Jalozaite recalled that at the outset of the conversation Mr Aubusson referred to her 2 July 2021 email, and there was then a conversation to the following effect: Mr Aubusson: Why do we need a second executed counterpart? Aren't we exchanging the executed counterparts? Ms Jalozaite: We aren't exchanging. We don't exchange counterparts. We normally get the tenant executed copies in duplicate. Then we certify the duplicates for the landlord, and then we send both duplicates to the landlord for execution. After that, the landlord will return the executed documents to us for registration and we will distribute a copy to you. Mr Aubusson: My client will want to have an executed copy as well so I will send you a second executed counterpart of the Incentive Deed.
18. Later on 5 July 2021 Mr Aubusson sent an email to Ms Jalozaite in the following terms: Further to our telephone discussion this morning we confirm our advice to you that there is currently a takeover bid for the tenant's holding company and there is a possibility that the holding company will be delisted such that clause 11.2(a) will not apply from the date of delisting. That has focused our attention on clause 11.2(b) which we think needs some minor modification. We suggest that there is added at the end of clause 11.2 the following words "provided always that subclause (b), (c) and (f) will not apply unless there is an actual transfer of the Lease or a subletting and subclause (a) applies with the Landlord being satisfied in respect of the Tenant's holding company". We are having a further copy of the Incentive Deed signed as requested and suggest that the above amendment be achieved by inserting a new page 21 in the document. In the meantime, can you please continue the process with the Landlords to enable them to execute the documents promptly (as soon as you receive the second copy of the Incentive Deed). If you have any questions regarding this matter would you please contact the writer.
19. By 7 July 2021 the $201.40 for lease registration fee and lodgement fee had been paid by the plaintiff into the Makinson d'Apice trust account.
20. Also on 7 July 2021 Ms Duncan sent an email to Mr Schmidt-Lindner which included the following: Thanks for pointing us in the direction with Grant [Mr McFarlane]. He has been very thorough really helpful and we hope to have our client into the space by the end of this month, subject to COVID!!!!. Tight I know, but we are hopeful! As you are aware in the Agreement between the relevant parties, the carpeting and painting costs were to be bourne [sic] by the Landlord along wth [sic] a $50K + GST contribution towards fitout costs. On the carpet and painting, you were happy to get our contractors in to quote on the carpet and painting, as long as they were reasonable. A quote is attached which would need to be readdressed to Centuria but I thought I would just double check that you are comfortable with the quote. We have selected all the finishes and have been very cost efficient with those selections. The TOTAL to carry out the works is $116,480 + GST. I thought I should send this to you first as I was not sure of your internal procedures. Would welcome your thoughts as soon as you have a moment.
21. On 8 July 2021 Mr Schmidt-Lindner replied, stating that it "seems reasonable". Mr Schmidt-Lindner asked Ms Kimberley Brennan to liaise with Ms Duncan about the matter. Ms Duncan then promptly sent to Ms Brennan a revised quote that was addressed to the defendants.
22. Also on 8 July 2021 Ms Jalozaite sent an email to Mr Aubusson in which she stated that his proposed amendment to cl 11.2 of the Lease was agreed, and that a replacement page 21 had been inserted accordingly "in the Tenant executed leases". Ms Jalozaite stated in her email that she looked forward to receiving "the second counterpart of the Tenant executed incentive deed".
23. On 8 July 2021 Mr McFarlane allowed Mr Steven Lepessiotis to have access to the premises. It seems that Mr Lepessiotis was involved in the arrangements being made by the plaintiff for Internet Technology services to be provided for the premises. Mr Huizenga sent an email to Mr McFarlane later on 8 July 2021 which included the following: Thank you for allowing Steve access today to the tenancy! Greatly appreciated by us and our client. Please see attached requested documents from the appointed builder who will be completing works on our client's behalf. The works are simply refurbishment works - Please see Thorn scope of works. We only have time for cosmetic upgrades so we are keeping works to a minimum with Centuria having approved the costs for the carpet and painting. As you are aware, we are working to an extremely tight deadline which has been exacerbated as a result of the lockdown in Sydney. … With costs approved this morning by my client, we are working to complete a programme of works for your reference and will provide this to you ASAP. Our builder is hoping (subject to your approval) to commence works onsite ("soft start") onsite this weekend, to ensure appropriate protective materials and all safety equipment is set-up for the week commencing 12/7.
24. On 9 July 2021 Mr Aubusson sent a letter by courier to Ms Jalozaite which enclosed "a further copy of the Incentive Deed executed by the tenant". It is apparent (from Mr Aubusson's email of 5 July 2021) that this copy of the Incentive Deed was signed at some stage between 5 July 2021 and 9 July 2021.
25. Also on 9 July 2021 Mr Huizenga sent an email to Mr McFarlane which attached a proposed works schedule, "subject to your approval for site access".
26. The parties thereafter continued to deal with each other on the question of access. It is not necessary to make further reference here to the detail of those dealings, save to note that the plaintiff's representatives continued to press for access to undertake works, but due, it seems, to the restrictions imposed in connection with the COVID-19 pandemic, access was not given by the defendants. At one point, on 15 July 2021, Ms Brennan acknowledged that "per the Lease recently signed" the defendants were obliged to provide access, but in the circumstances would only be prepared to give access if the plaintiff provided an indemnity against the possibility that contractors brought on site tested positive for the virus. The plaintiff, through Ms Duncan, appears to have resisted the giving of any indemnity.
27. On 16 July 2021 the defendants' solicitors received a bank guarantee that had been issued by Westpac for the plaintiff as security for the performance by the plaintiff of its obligations under the Lease.
28. On 20 July 2021 Mr Aubusson sent an email to Ms Jalozaite in the following terms: We refer to our letter dated 30 June 2021 and in particular to paragraph (b) of that letter. Could you please advise whether the Landlord has executed the Lease and the Incentive Deed and if so, would you please provide us with scanned copies for our perusal and checking.
29. Ms Jalozaite responded by email later on 20 July 2021. Her email included the following: We have received the second counterpart of the incentive deed from you last week. At this stage we are instructed to keep the originals in our office since the Landlord does not have a possibility to accept the documents at their office during this lockdown. We will let you know as soon as the documents are executed by the Landlord and the lease is registered.
30. Later on 20 July 2021 Mr Aubusson sent another email to Ms Jalozaite. The email was in the following terms: Receipt of your email dated today at 3:25 PM is acknowledged. We note the following matters: In our letter to you dated 30 June 2021 we proposed a procedure for formalising the Lease and Incentive Deed and at the time forwarded to you the documents executed by our client. Moreover, the Incentive Deed contains an agreement for lease procedure which has been agreed to. While we appreciate that COVID has intervened in the meantime, it is simply not satisfactory that our client has signed and your client has not. It is our experience that in the current circumstances scanned signatures (with originals to follow) is a procedure which is acceptable. We suggest therefore that you send a version of the documents to your client to have them signed, scanned and returned to you. You can then send the same to us for checking and we expect that our client's instructions will be to proceed on that basis and then date the documents (with the originals to follow, when possible).
31. On 21 July 2021 Ms Jalozaite responded to the above email as follows: Thank you for your email below. Unfortunately at present with the lockdown, getting signatures is proving difficult. However, our client has confirmed that they will be proceeding to execute as soon as possible once lockdown is lifted and we can then provide copies to you.
32. It seems that at this stage the plaintiff was continuing to seek access to the premises for the purpose of having works undertaken, but Mr McFarlane was maintaining that the property was closed to contractors if they were not considered to be "essential". On 30 July 2021 Mr McFarlane sent an email (carbon copied to Ms Duncan) that indicated that no site works could commence before the following Tuesday at the earliest. It further seems, from an email sent earlier that day by Ms Brennan to Ms Duncan, that the defendants would be happy for the plaintiff "to proceed with the tenancy works" but would require an indemnity of the type earlier discussed. Later on 30 July 2021, Nicole Ferris, an Executive Assistant to Mr Schmidt-Lindner, sent an email to Ms Duncan in the following terms: Given the worsening Covid situation in NSW and the subsequent health order and lockdown in place in Sydney, this lease document has not been landlord executed. Unfortunately, it is not the only document on hold, however we are in unprecedented times and the safety of all is paramount at this time. I have been given assurance by David that landlord execution of this lease is merely a formality and that it will certainly be landlord executed as soon as it is safe to do so. Additionally, he has confirmed that the tenant gaining early access to site to commence works will not be hindered by this. Could you pls (sic) relay this information and provide your client this comfort. Appreciate all parties understanding as we navigate through this time.
33. On 16 August 2021 Mr Aubusson sent a letter to Ms Jalozaite that included the following: I refer to the heads of agreement dated 23 April 2021 between the parties, and to our subsequent letter to you of 30 June 2021, enclosing various documents. We note no binding agreement exists between our clients. Further, our letter to you of 30 June 2021 provided that once your client signed the documents, that "If we are satisfied with the documentation as executed by the Landlord we will authorise you to exchange and date the Incentive Deed and to date the Lease." Your client has not signed the documents, so the occasion for the provision of any authority to exchange and date the documents has not arisen. We are now instructed that our client withdraws and terminates the negotiations between our respective clients. Further, any offer to enter a lease constituted by the submission of documents, or otherwise, is withdrawn. Would you please arrange for the immediate return of the documents forwarded to you under cover of our letter of 30 June 2021, together with the bank guarantee delivered to your firm on or about 16 July 2021. We note your email of 20 July 2021 confirmed you were holding the documents. Accordingly, we will arrange for a courier to collect the documents from your firm. As the documents include a bank guarantee, we would like to do so as soon as possible.
34. On the same day, the plaintiff sent a letter to the defendants in the following terms: We refer to the letter sent to you by our solicitors, Church & Grace today on our instructions. We confirm that we withdraw and terminate the negotiations between us in relation to the proposed lease and further that any offer to enter into a lease by us constituted by the submission of documents, or otherwise is withdrawn. Please deal with the documents as requested by Church & Grace in their above referred to letter.
35. On 17 August 2021 Makinson d'Apice sent a letter to Mr Aubusson in response to his letter of 16 August 2021. Issue was taken with the plaintiff's assertion of a right to withdraw. It was stated that the Lease and the Incentive Deed were executed by the plaintiff as deeds, and the deeds were delivered such that the plaintiff became bound by them and could not recall them.
36. On 19 August 2021 the defendants' solicitors sent soft copies of the Lease and Incentive Deed, as signed by the defendants, to the plaintiff's solicitors. It is common ground that the defendants had not signed the documents when the plaintiff sought to withdraw on 16 August 2021.
37. The proceedings were commenced on 20 August 2021.

Relevant principles

1. Delivery is essential before a deed becomes binding (see Pittmore Pty Ltd v Chan (2020) 104 NSWLR 62; [2020] NSWCA 344 at [68]). Delivery in this context is not to be equated with a physical delivery. As I stated in Realm Resources Ltd v Aurora Place Investments Pty Ltd (2019) BPR 39,235; [2019] NSWSC 379 at [70]: It is not necessary, for delivery of a deed, that there be a physical delivery of the executed instrument. Equally, a physical delivery of an executed deed does not necessarily amount to a delivery. In this context, delivery depends upon the intention of the executing party. As stated by Sackville AJA (with whom Allsop P and Campbell JA agreed) in Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,235; [2012] NSWCA 253 at [58]: The critical question is whether the party executing the deed has evinced an intention to be bound immediately. (See also Pittmore Pty Ltd v Chan (supra) at [70]-[71]).
2. The intention is to be ascertained objectively, by reference to the words and conduct of the executing party and the circumstances surrounding the execution of the deed (see Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,235; [2012] NSWCA 253 at [59]-[60] and [73]; Taouk v Ho [2019] NSWCA 156 at [47]).
3. The question whether there has been delivery of a deed (including delivery subject to a condition so as to constitute delivery in escrow) is a question of fact (see Pittmore Pty Ltd v Chan (supra) at [75]). In considering that question it is permissible to take into account later events, as well as circumstances prior to or contemporaneous with the alleged delivery of the deed, in order to ascertain the intention of the person concerned at the time of execution (see NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd (2020) 19 BPR 40,711; [2020] NSWSC 1378 at [77]).
4. Where the relevant intention is found to exist, the executing party is taken to have delivered the deed and thereby become bound by it, such that the deed cannot be recalled. That is the case even if the deed is taken to have been delivered in escrow (see Realm Resources Ltd v Aurora Place Investments Pty Ltd (supra) at [71] and the cases cited therein).
5. In some cases, the requisite intention is found to be lacking because the parties have conducted themselves on the basis that they would not be bound until all parties are bound. 400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302; [2010] QCA 245 is an example of such a case. The plaintiff submitted that the present case is very similar due to the statement in the Heads of Agreement to the effect that the parties reserved the right to withdraw "at any time prior to execution of formal Lease documents by both the Lessee and the Lessor".
6. The plaintiff further submitted that the present case was similar to Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 where Helsham CJ in Eq held that there was no delivery of a deed in circumstances where the parties to the transaction had dealt with each other in such a way that there was an intention to be bound only upon an exchange of executed documents (see at 118E and 121A-C). In this regard, reliance was placed upon the terms of Mr Aubusson's letter of 30 June 2021 which accompanied the original signed deeds sent to defendants' solicitors on that day.

Determination

1. It is appropriate to commence with the Heads of Agreement. As noted above, the plaintiff places reliance upon the statement contained in the Heads of Agreement that: The Lessee and the Lessor reserve the right to withdraw from and terminate negotiations at any time prior to execution of formal Lease documents by both the Lessee and the Lessor. The Lessor's rights in respect of the deposit and legal costs remain irrespective of approval. In submissions the plaintiff described this as "the right to withdraw clause", and submitted that the parties at no time agreed to vary the terms of the Heads of Agreement including the right to withdraw clause.
2. It is correct that there was no later variation of the Heads of Agreement. However, it should not be overlooked that the so-called right to withdraw clause does not give rise to binding legal rights or obligations. Rather, it is a statement made by the parties of a principle that would apply to the negotiations towards the lease that was contemplated by the Heads of Agreement (see Realm Resources Ltd v Aurora Place Investments Pty Ltd (supra) at [80]). It follows that the words and conduct of the plaintiff need to be considered in the light of that statement of principle when determining whether the plaintiff ever evinced an intention to be immediately bound by the deeds it signed.
3. Another aspect of the Heads of Agreement that assumed some significance in the arguments advanced by the parties is the provision concerning "Access" which reads: The Lessee will be granted early access from 1 June 2021 on a Gross Rent-Free basis to commence any tenancy fitout changes, IT requirements and occupancy prior to its Lease Commencement Date subject to Lessor receipt of executed lease documents, provision of bank guarantee and appropriate insurances.
4. The plaintiff submitted that this was one of a number of provisions of the Heads of Agreement that gave rise to immediately binding rights. Other provisions said to be of that nature included: 1. the provision for a period of exclusive dealing found under the heading "Documentation"; and 2. the provision for the payment of a $25,000 deposit (and later return of some or all of the deposit) found under the heading "Lease Deposit". In written submissions in reply, the plaintiff sought to characterise the right to withdraw clause as another provision that created immediately binding rights and obligations. However, I do not accept that characterisation (see above at [51]).
5. The defendants disputed that the Access provision gave rise to immediately binding rights.
6. This question bears upon the character of the plaintiff's later conduct in seeking access to the premises. The plaintiff characterised the conduct as seeking to exercise rights under the Heads of Agreement, whereas the defendants characterised the conduct as seeking to exercise rights under the Incentive Deed. Ultimately, I have not found it necessary to resolve the question whether the Access provision gave rise to immediately binding rights, although I think there is force in the submission that the parties are unlikely to have intended that the plaintiff would have access rights in circumstances where it was not bound to the terms of a lease.
7. I accept that the Heads of Agreement at least gave rise to legally binding rights of the kind referred to above at [53]. Otherwise, and leaving aside the question whether the Access provision gave rise to immediately binding rights, the Heads of Agreement may be regarded as a record of the commercial terms that had been agreed between the parties for a lease of the premises. The document makes it clear that there is no binding lease, and it is contemplated that before that would occur, board approvals would be obtained and appropriate legal documentation would be executed. Importantly, and as emphasised by the plaintiff in submissions, it was stated that either party could withdraw at any time prior to execution of formal legal documents "by both the Lessee and the Lessor". I agree with the submission of the plaintiff that those words mean what they say, so it is a statement that there is a right to withdraw until the formal lease documents have been executed by both parties. The Heads of Agreement did not describe what the formal lease documents would entail, other than by stating that a standard lease employed by the defendants would be used as the "base template".
8. The lease documents prepared by the defendants' solicitors comprised a Lease and an Incentive Deed. They were submitted to the plaintiff's solicitors on 4 May 2021 "in accordance with the Heads of Agreement". The covering letter explained that the defendants did not want the rental concession, or any other ancillary aspects, incorporated into the Lease. The Lease was of course expected to be registered and thus publicly available. The draft Incentive Deed provided for a Rent Reduction Incentive to be given to the Tenant, and further provided for other matters such as Landlord's Works, Landlord's Contribution to Capital Works carried out by the Tenant, and a licence to the Tenant for early access to carry out fitout works.
9. It should be noted that both the draft Lease and the draft Incentive Deed were prepared in the form of deeds. Clause 24.8 of the draft Lease provided that the Lease is a deed even if it is not registered. The execution pages are headed with the words "Executed as a deed". In addition to its title, the draft Incentive Deed is described as "THIS DEED", and its execution pages are headed with the words "EXECUTED as a Deed".
10. It should also be noted that the Document Return Checklist that accompanied the draft documents provided for the documents to be duly executed by the plaintiff in duplicate and returned to the defendants. The procedure thus envisaged seems not to entail a conventional exchange of counterparts signed by one of the parties. The email sent by Ms Jalozaite to Mr Aubusson on 16 June 2021 is consistent with the procedure envisaged by the Document Return Checklist. The email states that once the documents have been executed by the plaintiff in duplicate, the originals were to be returned to enable arrangements to be made for execution of the documents by the defendants. I will add that the envisaged procedure is not necessarily inconsistent with the existence of an intention that the parties will not be bound until both parties have executed the documents. That is so, even if the documents take the form of deeds. Whether a party who has executed a deed has become bound by it depends upon whether it has, by its words and conduct, objectively evinced an intention to be bound immediately.
11. The "execution versions" of the Lease and the Incentive Deed were the subject of communications between Mr Aubusson and Ms Jalozaite on 28 June 2021. At that stage, the documents were in their final forms, save only for an amendment to cl 11.2 of the Lease that was negotiated and agreed upon between 5 July 2021 and 8 July 2021. The communications between the solicitors on 28 June 2021 concerned the procedure to be followed in dealing with the documents. Mr Aubusson's email apparently contemplated that there would be an exchange of the Incentive Deed. It was not suggested that there be an exchange of the Lease, which was to be handed over along with the bank guarantee. It seems to have been thought that an exchange of the Incentive Deed would be the first act that would give rise to legal rights. That would conform with cl 8 of the Incentive Deed which contained an agreement for the grant of a lease, as well as a procedure for the execution and registration of the lease. However, in her email in reply Ms Jalozaite did not expressly refer to any exchange of documents. Her email refers only to the Tenant signing and returning the documents, followed by checking and certification before the Landlord can sign the documents. Ms Jalozaite's email seems consistent with her earlier communications, and the Document Return Checklist. At this point, the solicitors appear to be somewhat at cross purposes in relation to how executed documents would be dealt with.
12. The plaintiff signed the Lease (in duplicate) and the Incentive Deed on 29 June 2021. There is no evidence as to the precise circumstances in which the signing occurred, or as to what decisions were made or instructions given in relation to the signed documents. However, it is known that soft copies of the Lease and Incentive Deed were made available to the plaintiff's agent CR, and that CR sent soft copies of the documents to Mr Schmidt-Lindner of the defendants later on 29 June 2021. That was in accordance with what Ms Duncan of CR had foreshadowed to Mr Schmidt-Lindner on the previous day. Ms Duncan's email to Mr Schmidt-Lindner on 29 June 2021 stated that the signed documents were in the process of being delivered to the defendants' solicitors.
13. It is also known that the originals of the signed documents came into the possession of the plaintiff's solicitors. On 30 June 2021 Mr Aubusson sent a letter by courier to the defendants' solicitors that enclosed the signed documents - the Lease in duplicate and one Incentive Deed.
14. By his 30 June 2021 letter, Mr Aubusson proposed a procedure for "formalising the arrangements" between the parties. The proposed procedure appears to acknowledge (in paragraph (a)) the content of Ms Jalozaite's email of 28 June 2021 in relation to the certification of the documents prior to their signing by the defendants. The proposed procedure would then entail scanned copies of the signed documents being sent to the plaintiff's solicitors for perusal (paragraph (b)), following which the plaintiff's solicitors would, if satisfied, authorise the defendants' solicitors "to exchange and date the Incentive Deed and to date the Lease" (paragraph (c)). After the exchange, the defendants' solicitors would send "the original Incentive Deed signed by the Landlord" to the plaintiff's solicitors (paragraph (d)), and the defendants' solicitors would then proceed to have the Lease registered and provide the registered Lease to the plaintiff's solicitors (paragraph (e)). Paragraph (f) of the proposed procedure made it clear that the defendants' solicitors could neither exchange the Incentive Deed, nor deal with the Lease, until the plaintiff's solicitors gave written authorisation to do so.
15. The defendants contend that delivery of the Lease and the Incentive Deed occurred on 29 June 2021 in circumstances where copies of the signed deeds were sent to Mr Schmidt-Lindner, and later on that day Ms Duncan sent an email to Mr Schmidt-Lindner in which she asked that access to the premises be given to the plaintiff for the purpose of carrying out works. The defendants contend, in the alternative, that delivery occurred in escrow on 30 June 2021 when the original signed deeds were sent to the defendants' solicitors. The defendants submitted that the relevant condition for the escrow was that the defendants sign "their counterparts".
16. I do not accept these contentions. In my opinion, the evidence surrounding the signing of the deeds by the plaintiff and the manner in which the plaintiff dealt with the deeds on 29 June 2021 and 30 June 2021 does not objectively manifest an intention to be immediately bound by the deeds.
17. The plaintiff's conduct on 29 June 2021 and 30 June 2021 must of course be viewed in the context of the dealings between the parties up to that time. As I have already said, this includes the statement in the Heads of Agreement about the parties having the right to withdraw until formal lease documents are executed by both parties. The procedure envisaged by the Document Return Checklist later provided by the defendants' solicitors is not necessarily inconsistent with the existence of a right in those terms. The communications between the parties via their solicitors on 28 June 2021 do not refer to the Heads of Agreement, or to the terms of any right to withdraw. However, Mr Aubusson's email suggests that the plaintiff was intending to become bound, if at all, through an exchange of the Incentive Deed. Ms Jalozaite's email in response did not expressly refer to any exchange of documents, but seems consistent with the Document Return Checklist. The parties were somewhat at cross purposes in relation to how executed documents would be dealt with. The statement in the Heads of Agreement about the right to withdraw had not been expressly referred to since, but in these circumstances I do not think the parties should be taken to have abandoned or otherwise departed from that principle.
18. Against that background, the Lease and the Incentive Deed were signed by the plaintiff on 29 June 2021. It can be inferred that the Lease was signed in duplicate but only one version of the Incentive Deed was signed. When regard is had to Mr Aubusson's email of 28 June 2021, this seems to me to indicate an intention to proceed by way of an exchange of the Incentive Deed, cl 8 of which would then operate as an agreement for lease and prescribe how the execution of the Lease and registration of the Lease would occur. An intention to that effect is further evident from Mr Aubusson's letter of 30 June 2021 which accompanied the original versions of the documents signed by the plaintiff. This letter, which was presumably written in accordance with instructions given by the plaintiff, may be taken into account as bearing upon the plaintiff's intention at or around the time the documents were signed.
19. The terms of the letter are in my view inconsistent with an intention to be immediately bound by the deeds that were signed. That is plainly so in relation to the Incentive Deed which was to be exchanged only once written authorisation was given by the plaintiff's solicitors (see Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers (supra)). The position is less clear in relation to the Lease, which was not to be dealt with until written authorisation was given. However, when all of the communications between the parties are considered, it can be discerned that the plaintiff was intending that exchange of the Incentive Deed would be the first act giving rise to legal rights, with the lease documents to be dealt with in accordance with cl 8 of the Incentive Deed. That is, I think it is apparent that the plaintiff did not intend to become bound by the Lease (even conditionally) prior to becoming bound by the Incentive Deed.
20. It is true that prior to the receipt of the 30 June 2021 letter and the accompanying original signed documents, soft copies of the signed documents had been provided by the plaintiff's agents to Mr Schmidt-Lindner. It is also true that no qualifications or conditions were expressed in that email in relation to the documents, although reference was made to the fact that the documents were in the process of being delivered to the defendants' solicitors. That would have been understood as a reference to the original signed documents that were being dealt with by the solicitors for the respective parties. In these circumstances I do not think that the provision of the soft copies of the signed documents on 29 June 2021 objectively evinced an intention on the part of the plaintiff to be immediately bound by the deeds it had signed. The provision of the signed soft copies would not be reasonably understood as evincing such an intention when that conduct is considered in the light of the Heads of Agreement and the earlier communications between the parties, including the communications between the solicitors about how the executed documents would be dealt with.
21. Neither do I think that a different conclusion is warranted when regard is further had to Ms Duncan's request, made later on 29 June 2021, for access to the premises. That is so even if it is assumed (and as submitted by the defendants) that the Access provision in the Heads of Agreement did not give rise to immediately binding rights, and that any right to early access would be given by the Incentive Deed. Whilst the terms of the request for access seem to assume that a right of access had come into existence or would soon come into existence, there appears also to be a recognition that this was or would be the outcome of a legal process described as "the Lease legals". That should be understood as a reference to the dealings the parties were having via their respective solicitors. Accordingly, I do not think that the request for access ought be regarded as an assertion of existing legal rights. The request was rather of a practical nature, made on the assumption that a right of early access either had been given, or would soon be given, as a result of the dealings involving the solicitors. To my mind, the request for access is of little significance in determining whether the plaintiff evinced an intention to be immediately bound by the deeds it signed.
22. The defendants contend, in the further alternative, that there was a delivery of deeds after 30 June 2021. On 2 July 2021 Ms Jalozaite raised with Mr Aubusson the fact that only one signed Incentive Deed had been received. This became the subject of some discussion in the telephone conversation that occurred on 5 July 2021 between Ms Jalozaite and Mr Aubusson. I accept that a telephone conversation occurred on that day to the effect of that deposed to by Ms Jalozaite. She was not cross-examined, and no evidence was adduced from Mr Aubusson. I have not overlooked the fact that Ms Jalozaite made no file note of the conversation, but her version of what she said is consistent with her earlier communications with Mr Aubusson, and also consistent with the usual practice she described earlier in her affidavit in respect of acting for landlords in lease transactions.
23. The terms of the conversation show that Mr Aubusson had been of the view that there would be an exchange of executed counterparts of the Incentive Deed. However, Ms Jalozaite made it clear that there would be no such exchange. She said that the defendants would not be exchanging counterparts of the deed. She went on to explain that what the defendants normally do (and implicitly what they proposed to do in the present case). That involves: 1. the defendants' solicitors obtaining duplicates signed by the tenant; 2. the certification of the duplicates by the solicitors for the defendants; 3. the signing of the duplicates by the defendants; 4. the defendants' solicitors attending to registration (this must be registration of the Lease); and 5. the defendants' solicitors providing the plaintiff's solicitors with copies of the signed documents.
24. Mr Aubusson did not take issue with what Ms Jalozaite told him. He appears to have at least implicitly accepted the position as put to him. He agreed to send a second executed counterpart of the Incentive Deed. In the email he sent later that day, Mr Aubusson stated: We are having a further copy of the Incentive Deed signed as requested and suggest that the above amendment be achieved by inserting a new page 21 in the document. In the meantime, can you please continue the process with the Landlords to enable them to execute the documents promptly (as soon as you receive the second copy of the Incentive Deed). The reference to "the process with the Landlords" is likely to be to the process that was described by Ms Jalozaite in the earlier telephone conversation.
25. The content of this email indicates that steps had been put in train for the plaintiff to execute another copy of the Incentive Deed. I think it can be inferred that this was done in furtherance of the process that had been described by Ms Jalozaite. As stated earlier, the second copy of the Incentive Deed was signed by the plaintiff at some stage between 5 July 2021 and 9 July 2021.
26. On or shortly prior to 7 July 2021 the lease registration fee and lodgement fee was paid by the plaintiff into the trust account of the defendants' solicitors.
27. On 8 July 2021 agreement was reached on a proposed amendment to cl 11.2 of the Lease, and the Leases executed by the plaintiff were amended accordingly by means of a replacement page 21. When Ms Jalozaite informed Mr Aubusson of that having been done, she stated that she looked forward to receiving "the second counterpart of the Tenant executed incentive deed". Also on 8 July 2021 a contractor (Mr Lepessiotis) was given access to the premises in connection with the plaintiff's internet requirements.
28. On 9 July 2021 the second signed version of the Incentive Deed was sent by Mr Aubusson to Ms Jalozaite by courier. The covering letter merely described the accompanying document. However, viewed in the light of the telephone conversation of 5 July 2021 and Mr Aubusson's email sent later that day, it would be reasonable to have understood that the second signed version of the Incentive Deed was provided to facilitate the process that Ms Jalozaite had described. That process envisaged no exchange of counterparts signed by one party only (cf Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers (supra)); rather, deeds would be signed first by the plaintiff, and then by the defendants, and it was contemplated that the defendants' solicitors would then attend to registration of the Lease without any further involvement of the plaintiff.
29. The defendants submitted that the conduct of the plaintiff after 30 June 2021, including in particular its conduct in relation to the second signed version of the Incentive Deed, evinced an intention to be immediately bound by the deeds it had signed, or at least the Incentive Deed. In addition to the provision of the second signed Incentive Deed, the defendants pointed to the payment of the lease registration fee on 7 July 2021, the sending of the bank guarantee on 16 July 2021, and the continued seeking of access to the premises.
30. The plaintiff denied that there had been any delivery of deeds. The plaintiff emphasised the right to withdraw clause in the Heads of Agreement and submitted that there was no departure from that position. The plaintiff described the provision of the second signed Incentive Deed as merely a procedural step.
31. As I have said, the provision of the second Incentive Deed should be seen as an act done to facilitate the process that Ms Jalozaite had described. In that limited sense, it may be accurate to describe it as a procedural step. That process, which contemplates execution of the deeds in duplicate by the plaintiff, followed by execution of the deeds in duplicate by the defendants, is not inconsistent with the existence of a right to withdraw in the terms set out in the Heads of Agreement; that is to say, a right to withdraw prior to the execution of formal lease documents by both the plaintiff and the defendants. Accordingly, the parties were not proceeding on a basis that was inconsistent with the existence of such a right of withdrawal.
32. The parties did not refer to any right of withdrawal in the course of their dealings after the Heads of Agreement was entered into, but again I do not think that the parties should be taken to have abandoned that statement of principle. The principle was never expressly abrogated. It remained, albeit in the background, as a statement of a principle that would apply to the negotiations towards binding agreements.
33. I have come to the conclusion that the conduct of the plaintiff in relation to the second signed version of the Incentive Deed did not evince an intention to be immediately bound by it, or the other deeds it had signed. There was in my opinion no delivery of any deed. In circumstances where the right to withdraw had not been abrogated or abandoned, it remained the position that the parties had reserved to themselves the right to withdraw until such time as formal lease documents were executed by both sides. The submission of the deed has to be considered in that light. The position differs from that present in Realm Resources Ltd v Aurora Place Investments Pty Ltd (supra) where the principle stated was only that satisfactory legal documentation be entered into by the parties (see at [88]-[89]). The principle stated here allowed a right to withdraw until documents were signed by both parties. Moreover, the process described by Ms Jalozaite to Mr Aubusson on 5 July 2021, which Mr Aubusson at least implicitly accepted, was not inconsistent with the continued existence of that right, and did not indicate that the plaintiff was giving up that right. The plaintiff did not therefore evince an intention to be bound by any of the deeds it had signed prior to the defendants signing the deeds. The evident intention was rather to become bound if and when the defendants signed. In this regard the case is similar to 400 George Street (Qld) Pty Ltd v BG International Ltd (supra) where it was found that there was nothing in the conduct of the parties following the April 2008 letter (including in what passed between the solicitors) to show that the position stated in that letter had changed (see at [47]-[48] and [53]).
34. The payment of the lease registration fee and the sending of the bank guarantee do not lead to a different conclusion. They indicate a desire on the part of the plaintiff to have the transaction proceed but they are not inconsistent with maintaining a right to withdraw prior to the defendants committing to the transaction by signing the deeds themselves.
35. The plaintiff, through its agents, continued to press for access to the premises (see, for example, Mr Huizenga's email to Mr McFarlane on 12 July 2021). The requests for access are a further indication of the plaintiff's desire to have the transaction proceed. However, none of the requests were explicitly made in reliance upon either the Access provision in the Heads of Agreement or the terms of the Incentive Deed. They are not in their terms assertions of existing legal rights, albeit that it seems to have been assumed that on some basis the defendants had agreed to allow access. Again, I do not think that much significance should be placed upon these requests for access. The conduct of the parties overall indicates that the creation of any legal rights was the province of the dealings involving the solicitors.
36. For completeness, I should refer to the two emails Mr Aubusson sent to Ms Jalozaite on 20 July 2021. The first email referred to paragraph (b) of his 30 June 2021 letter. That paragraph concerns the sending of scanned copies of documents signed by the defendants so the documents can be perused by the plaintiff's solicitors. The email refers to "perusal and checking". The email makes no broader reference to the 30 June 2021 letter, and no reference to the conversation that occurred on 5 July 2021. The email should be interpreted as a request for an opportunity to check that the documents, once signed by the defendants, were in proper order (for example, that they included a new page 21 of the Lease that correctly recorded the agreed amendment to cl 11.2).
37. Mr Aubusson's second email on 20 July 2021 was sent in response to an email from Ms Jalozaite which stated, in essence, that the defendants had not yet executed the documents due to lockdown restrictions, but that Mr Aubusson would be informed as soon as possible once the documents were executed and the Lease registered. In his response, Mr Aubusson expressed dissatisfaction with the situation where "our client has signed and your client has not". He suggested that execution occur by means of scanned signatures. In the final paragraph of the email reference is again made to checking the documents after they are signed, and also to dating the documents. It is not entirely clear what was intended by the reference to instructions from the plaintiff "to proceed on that basis", but it seems likely to be concerned with the use of scanned signatures. Even though Mr Aubusson makes reference to his 30 June 2021 letter (which it will be recalled suggested a procedure involving an exchange of the Incentive Deed), there is no express reference to an exchange and he does not take issue with the statement in Ms Jalozaite's email about execution of the documents by the defendants and the registration of the Lease. I do not read Mr Aubusson's email as any indication that when the plaintiff signed the second copy of the Incentive Deed and provided it to the defendants' solicitors, the plaintiff was proceeding otherwise than in furtherance of the process Ms Jalozaite described in their telephone conversation.

Conclusion

1. For the above reasons, I have concluded that the plaintiff did not deliver any of the deeds it signed. It did not evince an intention to be immediately bound. Rather, the evident intention was only to become bound by the deeds once they were signed by the defendants. In the meantime, both parties had the right to withdraw from the transaction. It follows that as the defendants had not signed the deeds by 16 August 2021 the plaintiff was entitled to withdraw from the transaction and recall the deeds, as it purported to do.
2. It would be appropriate for the Court to make declarations to the effect that the plaintiff did not become bound by either the Incentive Deed or the Lease, and that the parties did not enter into any binding agreement for lease, or binding lease, in respect of the premises. The Cross-Claim will be dismissed. There is no apparent reason why costs should not follow the event. Accordingly, the Court will also order that the defendants/cross-claimants pay the plaintiff/cross-defendant's costs of the proceedings. The parties are directed to confer and submit within 7 days a proposed form of orders to give effect to these reasons.

Amendments 28 September 2021 - Coversheet amended - spelling of counsel's name corrected. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 September 2021