Common Intention - What is the bargain
78The starting point is to discover the bargain between the parties, Isaacs J in Bacchus Marsh and Mason J in Codelfa that "the purpose of rectification is to reform instruments to make them accord with what the parties actually agreed".
79The Tribunal finds the following matters as relevant in establishing what the parties actually agreed:
(a) the Harris Letter confirmed by all witnesses was a contemporaneous document issued by Colonial's agent to Colonial and copied to Mr Vidor setting out the salient commercial matters that were agreed between the parties. It made no mention of any annual rent free or outgoings free period to be repeated in the second term;
(b) Mr Ellicott asked Mr Harris as to whether the Harris Letter truly reflected the agreement that he, Mr Harris understood had been reached between Toga and Colonial that in fact there were two annual rent free periods, one in the first year of the Sublease period and a second rent free in the first year of the option, notwithstanding omission of the second rent free period in the letter. Mr Harris maintained that belief but admitted under cross examination that his letter was poorly drafted as it did not refer to the second rent free period.
(c) Mr Harris was adamant that he mentioned the second rent free period to and received assent from Mr Ganci of Colonial. However, Mr Ganci categorically denied discussing let alone agreeing to a rent free period. With regard to the difference in recollections of the conversation between Mr Harris and Mr Ganci, the Tribunal prefers Mr Ganci on this matter, as he referred in his Affidavit to a notebook which he maintained in relation to these important conversations and confirmed that there was nothing in the notebook that indicated that there was any discussion or any consent to a second rent free period;
(d) Mr Gray of Colonial used the Harris Letter as the basis of his instructions to Colonial's lawyers. He categorically denied that Colonial had agreed to a second annual rent free period. He clearly identified that the Harris Letter acknowledged an adjustment of rent in the last month of the rent free period for payment of services, and that such adjustment would be irrelevant if there was a second annual rent free period;
(e) Mr Cohen confirmed that he never received instructions to draft a provision to cater for a second rent free period;
(f) According to Mr Cohen, Mr J Andrews of Freehills never raised the issue that Toga was to receive a further rent free and outgoings free period in the Option Lease, but did specifically raise altering the second market review date to operate in the last year of the term so that Toga would know the rent for the first year of the second term and be able to make an informed commercial decision when it had to exercise its option to renew. This appears to run counter intuitively to the concept of Toga having a rent free period in the first year of the option lease and yet wishing to know the rent for the first year;
(g) Mr Vidor of Toga did say in his evidence that he had requested a rent free period of one year in the first year of the Option but there is no evidence that anyone from Colonial agreed to this (notwithstanding what Mr Harris says in his evidence). Mr Vidor never spoke directly with Colonial and relied on Mr Harris and on the conversation Mr Harris had with Mr Ganci;
(h) Mr Vidor received a copy of the Harris Letter which he acknowledged in cross-examination formed the basis of the commercial agreement with Colonial, but he did not query the omission of a second rent free period;
(i) Mr Vidor talked of desiring a rent free period in the first year of the option but does not refer to a rent free and outgoings free period (which is substantially different to a plain rent free). The drafting of a second rent free period without the Lessee's Contributions is not a simple repeat of Item 14. Mr Cohen, the only lawyer called to give evidence confirmed that if he had been requested to draft such a provision the drafting required a specific provision stating that no rent was to be paid in the first 12 months of the Option Lease but that Lessee's Contributions (outgoings) would continue to be payable by the Lessee.
(j) A repeat of Item 14 in the Option Lease does not accord with what Mr Vidor thought that he had negotiated with Colonial, that is a second annual rent free period. Item 14 as it stands provides for an Annual Rent free and Lessee's Contributions free period, not just a gross Annual Rent free period..
80Consequently, the Tribunal finds the bargain between Toga and Colonial to be that only one Annual Rent free and Lessee's Contributions free (outgoings) period was granted and it was not to be repeated in the Option Lease.
81Secondly, it is necessary to show that a concurrent intention by the parties existed at the time when the Sublease was executed and that the Sublease reflected the agreement between the parties and in particular did not have additional terms that had not been agreed, such as a second Annual Rent free and Outgoings free period in the Option. Mr Cohen stated in his affidavit that when certifying to Colonial and to Perpetual/Permanent that the Deed of Agreement and Sublease were ready for execution, he confirmed his instructions and intention with respect to those instructions right up to execution that there was no second rent free mentioned anywhere. Mr Gray, as the instructing officer at Colonial was also firm on those instructions that the documentation reflected the agreement as he understood had been negotiated between the parties. Mr Vidor in his evidence stated that he held the same intention when executing the Deed as when he agreed to the deal based on the Harris Letter, He said in evidence that he signed the Deed of Agreement and Sublease based on that intention and the Harris Letter only referred to the one rent free period.
82Thirdly, there must be clear and convincing proof of the bargain that is objectively apparent. This is clear for Colonial from the evidence of Messrs Ganci, Gray and Cohen in that they were unaware of a second rent free period. Mr Vidor says that while he considered and hoped for a second annual rent free period as part of his commercial negotiations, he accepted the Harris Letter as constituting the principal and salient points of the deal and never queried the omission.
83Fourthly, Mr Balafoutis relied on the dicta of Campbell JA in Franklins v Metcash Trading Ltd that if a document was negotiated through solicitors, and in this case the Sublease was, then it is unlikely that the parties would have recorded their common intention incorrectly. To consider this matter further I turn to the exact words of Campbell JA. At paragraph 461 His Honour held:
To conclude that the parties have misrecorded their common intention in that sort of situation involves the solicitors on both sides of the transaction having each failed to grasp and express the intention of his or her own client. In other words, each of the solicitors has been mistaken, and, furthermore, mistaken in the same way. There is a measure of inherent unlikelihood in such an event happening. If the words of which rectification are sought are clear in meaning on their face, that unlikelihood is compounded - one would not ordinarily expect two lawyers, each professional dealers in language, are to make the same mistake about the meaning of words that are clear on their face. However, we know that sometimes even experienced solicitors take or are given inadequate instructions, or misunderstand their instructions, or in consequence misrecord their client's intention, so these matters are no more than reasons for caution in making the factual findings upon which a rectification order is based.
84Mr Ellicott points out that Toga did not lead any evidence from its then solicitor Mr J Andrews and by way of contrast, there is ample evidence from Colonial's solicitor Mr Cohen. Mr Ellicott asks the Tribunal to draw an inference that in light of the absence of any evidence from Mr Andrews his evidence would not have assisted the case of Toga (Jones v Dunkel) regarding the non-misrecording of the common intention of the parties. The inference to be drawn is along the lines that without evidence from Mr Andrews then it is possible that the "inherent unlikelihood" of misrecording of the common intention of the parties was the case.
85However, with regard to the inference that Mr Ellicott seeks the Tribunal to draw as a consequence from the fact that no evidence was given by Mr Andrews, Mr Balafoutis directs the Tribunal's attention to paragraph 1215 in Cross on Evidence by J D Heydon, Justice of the High Court of Australia 8th Edition, 2010 which says:
Fourthly, the rule in Jones v Dunkel does not apply where the witness not called is the party's solicitor at least where the evidence which is in consequence not given is privileged and the privilege has not been waived. This is because if the solicitor gave evidence on the subject of privileged communications the privilege would be lost, and the Court will not permit the destruction of the privilege by this back door.
86What (if there are any) are these privileged communications that Toga does not waive? The Tribunal is not aware. However Mr Cohen annexed to his Affidavit all the relevant correspondence, as he has stated, with his client Colonial and with Mr Andrews at Freehills. In none of these communications, as far as I could see was there any mention of a rent free period in the first year of the Option Lease. There are requests for amendments to the Deed of Agreement and Sublease dealing in particular with alterations to the market review dates but never once is there a question or query regarding Item 14 operating within the Option Lease nor is there any query or seeking of any confirmation that Toga is entitled to a second Annual Rent and Lessee's Contributions free period for twelve months in the Option Lease. Given the negotiations between the lawyers one might have expected to see such a query from the lawyers for Toga.
87Mr Cohen in his affidavit and in his evidence before the Tribunal expressed a view as to how the Sublease operated in that upon renewal of the lease, Item 14 was eliminated based on the structure of the document itself and the commercial rationale behind the transaction. At paragraph 39 of his affidavit he said that he understood that at the time of drafting the Sublease the "Commencing Date" meant 13 November 2000 and consequently Item 14 was only applicable for the initial period. He appears to have given no regard to the operation of clause 16.2 in the Sublease in that it only excluded clause 16 and Items 15 and 16 of the Sublease itself. As the Tribunal has found Item 14 was not excluded and the Commencing Date is the date of the opposite paragraph (H)2 of the cover page of the Option Lease which is the 13th of November 2010. The question is was Mr Andrews, like Mr Cohen under a similar misapprehension as to the operation of the words "Commencing Date" when referrable to Item 14 in the Option Lease and the operation of clause 16.2 in the Sublease? Do Messrs Cohen and Andrews fall within the dicta of Campbell JA that "each of the solicitors has been mistaken, and, furthermore, mistaken in the same way?". Mr Andrews was not called by Toga. The Tribunal can only rely upon the evidence presented to it and construe that evidence as best it can.
88The Tribunal makes no inference pursuant to Jones v Dunkel regarding the non-calling of Mr Andrews. However, in construing the evidence particularly the correspondence annexed to Mr Cohen's affidavit the Tribunal notes that there is no mention whatsoever by either solicitor with respect to the granting of a second Annual Rent free and Lessee's Contributions free period in the Option Lease. Consequently, the Tribunal is of the view that each of the solicitors operated under the same misapprehension regarding renewal of the Sublease that Item 14 was not to be repeated in the Option Lease. Mr Ellicott in oral submissions called it a lacuna in drafting which in the view of the Tribunal is an apt assessment of the issue.
89The Tribunal notes that an alternate position open is that Mr Andrews was not so mistaken in the drafting of the Sublease regarding the repeat of Item 14 in the Option Lease. This position may lie in the reference in Cross on Evidence with respect to privileged correspondence. However, the Tribunal does not wish to go down that path. The Tribunal prefers the view contrary to "and inherent unlikelihood" that both solicitors were mistaken in the operation of the renewal of the Sublease that Item 14 was not to be repeated in the Option Lease.
90Finally, on this discussion on rectification Mr Balafoutis in his submissions suggested that there should be evidence from Perpetual/Colonial that there was a positive intention to exclude an Annual Rent free (not necessarily an outgoings free but only a rent free) period from the Option Lease. However, the evidence is to the contrary in that only Mr Harris appears to have communicated any mention of a second rent free to Colonial and that communication either was not received or, not recalled and certainly on the evidence put before this Tribunal, not agreed to by the representatives of Colonial. Consequently, on the evidence before this Tribunal it is quite clear that Colonial had no knowledge of Toga's desire and certainly there was no agreement in relation to a second Annual Rent free period. It is impossible in my view to require a party which on the evidence has no knowledge of a particular matter to provide evidence that it actively and positively excluded any consideration of that particular matter from its negotiations and from its instructions to its lawyers in drafting documents.
91Accordingly, the Tribunal finds that the common intention of the parties from the beginning of the negotiations up to and including execution of the Deed of Agreement and the Sublease is that Item 14 would only apply to the first term of the Sublease and not in the Option Lease, that is Toga was only entitled to an Annual Rent and Lessee's Contributions free period in the first term of the Sublease.
92Consequently it is open to Colonial to ask Toga to consent to the Sublease being rectified to state that Item 14 should be included within clause 16.2(a) as one of the items to be excluded from the renewed Lease.