Alleged agreement to lease in March/April 2015
93 On 31 March 2015, Pentaco sent (by email) a letter to United which is the first of three documents said by United to constitute an agreement to lease. The letter was sent under cover of a letter from Wisewould Mahony Lawyers, Pentaco's solicitors, to Mr Szymczak. The cover letter stated:
We act on behalf of Pentaco Oil (Aust) Pty Ltd. We enclose herewith letter in relation to the proposed Lease of various premises.
94 The enclosed letter was signed by Mr George Andrianopoulos on behalf of Pentaco and addressed to Mr Szymczak at United. It read:
Petroleum Products Supply Agreement - Pentaco Oil (Aust) Pty Ltd & United Petroleum Pty Ltd
Pentaco Oil (Aust) Pty Ltd is a monthly tenant from Yarraside Service Station Pty Ltd of the following premises:-
1. 1365 Princes Highway Pakenham
2. 625 Lower Dandenong Road Dingley
3. 48 Princes Highway Doveton
4. 82 Barkers Road Hawthorn
5. 645 Bridge Road Richmond
6. 50 South Gippsland Highway Dandenong
7. 265 Darebin Road Thornbury
Pentaco has been advised by Yarraside that Yarraside intend to determine its monthly tenancy and to lease the sites on the following terms:-
Rent $2,080,000.00 per annum plus GST plus outgoings.
Permitted Use: Service Station, retail convenience, restaurant, other retail services.
Lease Term: 10 years from the lease commencement.
Option: 3 X 5 year lease options.
Rent Reviews: Rent to be increased annually by 3%.
Market reviews will be conducted at the expiration of the lease term and each further term. The annual rent following such a review will not increase by more than 105% of the previous rent and will not be decreased by more than 95% of the previous annual rent.
Pentaco are not in a position to offer to lease on such terms however under the terms of its existing Supply Agreement with you dated 14 October 2011 you are entitled to a right of first refusal to a lease on similar terms and Pentaco in a spirit of goodwill has requested Yarraside to extend such offer to you.
Pentaco has been advised that Yarraside may be prepared to lease the sites to you on the same terms as mentioned above and you are hereby notified that it will not proceed with such arrangement for a period of 14 days from the date hereof. If you wish to accept an offer to lease on similar terms please notify us on behalf of Pentaco and Yarraside of your acceptance or rejection.
(emphasis added)
95 At this stage it is convenient to make some observations about the letter. First, the letter sets out with some specificity the key terms of a proposed lease with a third party. It identifies the properties and sets out: the rent; the lease term; the number and term of the options; and the terms applicable to rent reviews. Second, the letter specifically refers to the right of first refusal in the Supply Agreement. After saying that Pentaco (the party to the Supply Agreement) is not in a position to offer to lease the properties to United on similar terms as the proposed lease with a third party (in other words, Pentaco is not in a position to give effect to the right of first refusal), it says that, in a spirit of goodwill, Pentaco has requested Yarraside to extend such an offer to United. I would infer from the terms of the letter and circumstances more generally that the respondents felt some sense of obligation (legal or moral) to give effect to the right of first refusal in the Supply Agreement notwithstanding that the properties were not owned by Pentaco. Third, as with the Puma proposal, the letter proceeds on the basis that Yarraside owns all seven sites whereas in fact the Richmond site was owned by the Directors. Fourth, there is a degree of tension in the language used in the letter. On the one hand, the words "may be prepared" appear to be tentative, suggesting that Yarraside has not made a decision to offer to lease the properties to United on similar terms. On the other hand, the words "[i]f you wish to accept an offer" tend to suggest that an offer is being made, which it is open to United to accept. Fifth, the words "on behalf of … Yarraside" in the last sentence suggest that the letter is sent on behalf of Yarraside, not just Pentaco in its own right.
96 Mr Szymczak received and read the letter on or about 31 March 2015. Mr Szymczak telephoned Mr George Andrianopoulos about the letter soon after he read it (either on 31 March or 1 April). They had a brief conversation. Each gives a slightly different account of the conversation but the differences are not material. According to Mr Szymczak, during the conversation, Mr George Andrianopoulos said words to the effect: "the letter contains all the information you need to know, just respond to the letter". According to Mr George Andrianopoulos: Mr Szymczak said that he had received the letter but had not previously heard of Yarraside; Mr George Andrianopoulos told Mr Szymczak to call "our" solicitor if he wanted any information about the letter; Mr Szymczak sought a meeting but Mr George Andrianopoulos said, no, speak to his solicitor.
97 On 2 April 2015, Mr McLean of United sent a letter to Wisewould Mahony Lawyers stated:
I refer to the supply agreement between Pentaco Oil (Aust) Pty Ltd (Pentaco) and United Petroleum Pty Ltd (United) (Supply Agreement) and your letter dated 31 March 2015.
As I understand your client's letter it was prepared in accordance with clause 13.1 of the Supply Agreement which stipulates that:
Whenever any disposition is proposed other than a disposition by public auction, the Customer must first offer to sell its interest to United by written notice to United by providing a Contract of Sale and Vendor's Statement of Assignment stating the price the Customer is willing to accept and acceptable terms and condition of the offer".
United is interested in the offer as set out in your client's letter but requires further details in order that it can make an informed decision.
Accordingly United requests that your client provide the Contract of Sale and Vendor's Statement in accordance with clause 13.1 of the Supply Agreement.
Once United receives that above documentation it will provide its written response in the time frame required in accordance with clause 13.2 of the Supply Agreement, namely 14 days upon receipt of such.
98 On 8 April 2015, a conversation took place at Pentaco's offices between Mr Szymczak and Mr Con Andrianopoulos. Mr George Andrianopoulos was present for part of the conversation. During cross-examination, both Mr Con Andrianopoulos and Mr George Andrianopoulos were firmly of the view that this was not a 'meeting' or a 'discussion' but merely a 'coffee'. Nothing turns on the label attached to it, and I will adopt the neutral word, 'conversation'.
99 Some aspects of the conversation are not controversial. It is common ground that Mr Szymczak telephoned Mr Con Andrianopoulos at about 7.30 am on 8 April and asked if he could drop in to his office for a coffee. Mr Con Andrianopoulos agreed. Mr Szymczak then visited Mr Con Andrianopoulos's office in Bridge Road, Richmond at about 8.00 am. They had a conversation in the bar area. During the conversation, Mr Szymczak asked Mr Con Andrianopoulos questions about the sites and Mr Con Andrianopoulos provided some information. Mr George Andrianopoulos walked in during the conversation. When he heard them discussing the sites he told Mr Con Andrianopoulos not to provide too much information.
100 There is, however, a dispute about other aspects of the conversation. Mr Con Andrianopoulos gave evidence in paragraph 15 of his affidavit that, "I told Mr Szymczak that we were not leasing the petrol station sites and the directors had not agreed to lease the petrol sites". He also gave evidence in his affidavit that Mr George Andrianopoulos said to Mr Szymczak that "Pentaco only wanted to know if he was interested in leasing the sites; that no decision had been made to lease the sites". Mr Con Andrianopoulos gave generally similar evidence during cross-examination. Evidence to generally similar effect was also given by Mr George Andrianopoulos during cross-examination. For example, Mr George Andrianopoulos gave evidence that he said that Pentaco was only testing whether United was interested in leasing the sites. He also gave evidence that he believes he said to Mr Szymczak that "Pentaco have decide[d] not to lease the sites at that time".
101 On the other hand, Mr Szymczak's evidence was that statements to this effect were not made. Although Mr Szymczak did not refer in his second affidavit to paragraph 15 of Mr Con Andrianopoulos's affidavit, Mr Szymczak was very clear in his evidence during cross-examination that Mr Con Andrianopoulos did not say that the Directors had decided not to lease the sites (or that the Directors had not agreed to lease the sites). Mr Szymczak also gave evidence (in his second affidavit) that Mr George Andrianopoulos did not say that Pentaco only wanted to know if he was interested in leasing the sites.
102 In considering which account of the conversation is likely to be correct, it is important to consider two documents which form part of the evidence. One of these is an email sent by Mr Con Andrianopoulos to Mr Szymczak at 10.31 am on 8 April 2015, a short time after the conversation. The subject line on the email was "Offer to Lease - Further Information". The email (which is the second document relied on by United as constituting an agreement to lease) reads as follows:
As discussed this morning, further to the letter dated Tuesday 31st March 2015, signed on behalf of Pentaco Oil (Aust) by George Andrianopoulos, please see the below clarifications and further information.
• Equipment - $1,950,000.00 + GST
• Tank and line testing - completed by Lessee at the Lessee's expense.
• Environmental testing - completed by Lessee at the Lessee's expense. Starting base line.
• Tanks, lines and equipment to be maintained throughout the lease by the Leasee.
• All plant and equipment becomes Pentaco's/Yarraside property at the expiry of the Lease.
• Dandenong - Common road to the rear of the property.
• Richmond offices at Ground and Level 1, 645 Bridge Rd, Richmond 3121 do not form part of the lease.
• Preparation of Individual and Master Lease documentation to be borne by the Leasee.
• Development Clauses - 645 Bridge Rd, Richmond and 74-82 Barkers Rd, Hawthorn can be removed from the Lease under a development clause not before 5 years.
• Minimum operating hours for all sites is 18 hours per day 7 days a week.
• No site can be decommissioned during the term of the lease.
• Guarantee required as security for the term of the lease.
• Outgoings to be borne by the Leasee.
• Breakdown of initial yearly rent per site.
• Dandenong - $255,000.00 + GST
• Dingley - $360,000.00 + GST
• Doveton - $224,000.00 + GST
• Pakenham - $490,000.00 + GST
• Thornbury - $230,000.00 + GST
• Hawthorn - $161,000.00 + GST
• Richmond - $360,000.00 + GST
The offer stands as per the original letter dated 31st March 2015. Awaiting your acceptance or rejection as per the original letter.
(emphasis added)
103 The other document is an A4 page containing (save for two lines) Mr Szymczak's handwriting (Exhibit A3). This document was written by Mr Szymczak during the conversation on 8 April 2015 and records matters they discussed. At the end of the conversation, Mr Con Andrianopoulos asked Mr Szymczak to leave the note with him. I infer (notwithstanding the suggestion in Mr Con Andrianopoulos's evidence to the contrary) that this was to assist him (Mr Con Andrianopoulos) in preparing the email which he subsequently sent a short time later: there is an evident overlap between the matters in the note and the matters in the email. The matters recorded in the note are consistent with a conversation in which Mr Szymczak sought, and Mr Con Andrianopoulos provided, further information about the offer or proposal outlined in the 31 March 2015 letter. There is no reference in the note to the Directors having decided not to lease the sites or to the Directors merely seeking to ascertain if United was interested in leasing.
104 One of the matters included in the note, but not in the email, is "date to be determined". In relation to these words, Mr Szymczak gave oral evidence in chief that these words reflected discussion about "the practical implementation of the changeover". He described this aspect of the conversation and said, "the date would be determined on the basis of the - as soon as the leases could be drawn up. So, really, it was, you know, when could you have the leases drawn up, have those signed off, and then it was a matter of a week or two to actually implement the - the changeover".
105 Returning to the factual dispute about the 8 April 2015 conversation, in my view the evidence of Mr Szymczak is to be preferred to that of Mr Con Andrianopoulos and Mr George Andrianopoulos to the extent that there is a dispute between their accounts. I have reached this conclusion for a number of reasons. First, the evidence of Mr Con Andrianopoulos and Mr George Andrianopoulos is inconsistent with the 8 April 2015 email. This email is expressed in terms of an "offer" which is open for "acceptance or rejection". If Mr Con Andrianopoulos or Mr George Andrianopoulos had said that the Directors had decided not to lease the sites (or had not agreed to lease the sites) or that they were merely seeing if United was interested in leasing the sites, it is most unlikely that the email, sent only a short time after the conversation, would have been expressed in these terms. Moreover, had these things been said during the conversation, it is likely that they would have been referred to in the email. Secondly, Mr Szymczak's account is supported by the handwritten note that he made during the conversation. If Mr Con Andrianopoulos or Mr George Andrianopoulos had said that the directors had decided not to lease the sites or that they were merely seeing if United was interested, it is likely that this would have been reflected in the note, but it is not. To the contrary, the note reflects a discussion about the detail of the offer or proposal in the 31 March letter. Thirdly, to some extent, Mr Con Andrianopoulos's and Mr George Andrianopoulos's account is inconsistent with Mr George Andrianopoulos's own evidence (referred to below) that on or about 15 April 2015, the Directors decided not to proceed at this stage with a lease of the seven sites. If that decision was made on or about 15 April 2015, it is unlikely that they would have said that the Directors had decided not to lease the sites during the conversation on 8 April 2015. For these reasons, I find that Mr Con Andrianopoulos and Mr George Andrianopoulos did not say, during the 8 April 2015 conversation, that the Directors had decided not to lease the sites, or that they were merely seeking to find out if United was interested in leasing the sites. Rather, the conversation (which was mainly between Mr Con Andrianopoulos and Mr Szymczak) involved fleshing out in more detail the offer or proposal contained in the 31 March 2015 letter. The topics discussed are reflected in the email sent by Mr Con Andrianopoulos a short time after the conversation.
106 I should make clear that, although I have rejected some of the evidence of Mr Con Andrianopoulos and Mr George Andrianopoulos about the conversation, I do not consider their evidence to have been dishonestly given; rather, I consider their recollection to be honest but faulty, for the reasons explained above.
107 As noted above, at 10.31 am on 8 April 2015, Mr Con Andrianopoulos sent an email to Mr Szymczak. The text of the email has already been set out. It is convenient to make some observations about the email at this point. First, it is expressed in stronger terms than the 31 March letter. The subject line refers to an "[o]ffer to lease". The penultimate sentence treats the 31 March letter as an "offer" and the last sentence seeks United's "acceptance or rejection" of that offer. Second, the email expands the scope of the 31 March letter to include an offer to sell equipment for $1,950,000 plus GST. This was not part of the 31 March letter. Third, the letter provides considerably more detail than was included in the 31 March letter.
108 At 11.01 am on 8 April, Mr Szymczak sent an email to Mr Silver and Mr Hirsch, forwarding the email from Mr Con Andrianopoulos of 10.31 am. The email says that he (Mr Szymczak) visited Pentaco's offices that morning and met with Mr Con Andrianopoulos. The email states that Mr Con Andrianopoulos had promised to send an email setting out the deal and that the email below (that is, the email from Mr Con Andrianopoulos of 10.31 am) was consistent with the discussion that morning. The email then states that a few more things were discussed, and sets these out.
109 After that email was sent, Mr Hirsch and Mr Szymczak had a discussion about the 31 March letter and 8 April email. Mr Hirsch told Mr Szymczak that he (Mr Hirsch) needed to have the shop sales figures for the seven sites before making a decision on whether to lease the properties. At this stage, Mr Hirsch knew the proposed rent (from the 31 March letter and the 8 April email) and the fuel sales (as United was the supplier), but didn't have the shop sales figures. He told Mr Szymczak to go back to see Mr Con Andrianopoulos to get the shop figures.
110 On the morning of 9 April 2015, a conversation took place between Mr Szymczak and Mr Con Andrianopoulos. It was common ground that a conversation took place, but there was a dispute about whether it was by telephone or face-to-face, and about what was said. Mr Szymczak gave evidence in his second affidavit (but not his first) that a second face-to-face conversation took place with Mr Con Andrianopoulos on that day. The purpose of the conversation was to obtain information about shop sales, at the request of Mr Hirsch. Mr Con Andrianopoulos disputed that a further face-to-face conversation took place on 9 April. Although perhaps not much turns on this, I am not satisfied on the evidence that a second face-to-face conversation took place on 9 April. First, Mr Szymczak did not refer to any such face-to-face conversation in his first affidavit, suggesting that he does not have a clear recollection of the conversation. Second, Mr Szymczak's account of the two conversations was quite similar (including, for example, Mr George Andrianopoulos walking in during the conversation and saying words to the effect that Mr Con Andrianopoulos should not provide too much information) suggesting that he may be confusing them.
111 As for the content of the 9 April conversation, Mr Con Andrianopoulos gave evidence in his affidavit that he phoned Mr Szymczak and told him that no offer had been made to United to lease the sites and that Pentaco was only finding out if United was interested in a lease from Yarraside; and that the Directors hadn't decided whether to lease and he would let United know down the track. On the other hand, Mr Szymczak's evidence is that he sought, and Mr Con Andrianopoulos provided, information about shop sales figures. I think this account of the conversation is more likely to be correct. Mr Hirsch was very clear in his evidence, which I accept, that at the time he discussed Mr Con Andrianopoulos's 8 April 2015 email with Mr Szymczak, he (Mr Hirsch) did not have the shop sales figures and he sent Mr Szymczak back to get these; and that by the time he (Mr Hirsch) signed the 9 April 2015 letter (referred to below) he did have these figures. Mr Szymczak's account of the conversation with Mr Con Andrianopoulos is also supported by Mr Szymczak's handwritten notes (Annexure "DBS-12"); the second page appears to set out the shop sales figures he was told.
112 At 1.08 pm on 9 April 2015, Mr Szymczak sent Mr Con Andrianopoulos a text message which read: "Con, give me a call when you have a moment. I have a letter I want to present to you. Regards, David." He also left a voicemail message to similar effect a few minutes earlier.
113 Later on 9 April 2015, Mr Szymczak emailed and hand delivered a letter to Mr Con Andrianopoulos and Mr George Andrianopoulos. The email, which was sent at 6.10 pm, read: "Following on from our conversation please find attached the letter I foreshadowed this morning. Please acknowledge receipt."
114 The letter was dated 9 April 2015. It was addressed to Mr George Andrianopoulos at Pentaco and signed by Mr Hirsch on behalf of United. It stated:
I refer to your letter dated 31 March 2015 and your email to David Szymczak dated 8 April 2015, copies of which are attached.
I confirm that United Petroleum Pty Ltd accepts the offer set out in the above correspondence.
I will forward the relevant lease documentation and contracts of sale to you, which reflect the agreed terms.
115 Over the following weeks, there was correspondence between the solicitors for the parties.
116 On 13 April 2015, the solicitors for United sent a letter to the solicitors for Pentaco referring to the correspondence of 31 March, 8 April and 9 April 2015. The letter concluded by stating that (as set out in the 9 April letter) they would prepare the relevant lease documentation and asset sale agreement and requested the following information to assist with this: the leasehold details (including landlord and site details) of each site; and a list of assets to be sold to United.
117 Mr George Andrianopoulos gave evidence in his affidavit that, on or about 15 April 2015, the Directors decided not to proceed at this stage with a lease of the seven sites. I accept that evidence. It is consistent with the letter sent by Pentaco's solicitors to United on 16 April 2015, referred to below, and with Mr Con Andrianopoulos's evidence about a telephone conversation he had with Mr Szymczak on 15 April.
118 On 15 April 2015, Mr Szymczak called Mr Con Andrianopoulos and left a voice message on his phone. The message said in part: "I just want to talk about the current state of play. We haven't had any contact from your lawyer and I was really just after an update." Mr Con Andrianopoulos telephoned Mr Szymczak and asked what he wanted. Mr Con Andrianopoulos's evidence is that during this conversation he told Mr Szymczak: that Yarraside and Pentaco had not agreed to lease the sites to United or Puma; and that the Directors had met and decided not to lease the sites. I accept this evidence. It is consistent with the letter from the respondents' solicitors of the next day, referred to below.
119 On 16 April 2015, the solicitors for Pentaco sent an email to the solicitor for United, the general effect of which was that at this point in time the "Landlord" had not determined the monthly tenancy to Pentaco and had not made a decision as to when or whether to do so; it was therefore premature to prepare any agreement.
120 On the basis of the evidence referred to in paragraphs [117] to [119] above, I accept that on or about 15 April 2015 the respondents decided not to proceed with the Puma proposal for the time being. During cross-examination, it was put to Mr Con Andrianopoulos that the respondents had not written to Puma saying that they were not going ahead with the proposal, and he accepted this. Nevertheless, there is no evidence to contradict the proposition that they decided not to proceed with the Puma proposal for the time being and it is understandable, given the legal issues which are the subject of this litigation, that they would make this decision.
121 In late April 2015, there was further correspondence passing between the lawyers for the parties. This correspondence essentially put forward the positions of the parties which they have maintained in this litigation, and it is not necessary to refer to it in any detail.