Q. So you were representing both of them?
A. Yes."
62 It is necessary to address the question of the authority that KPS - and therefore Mr Pyatt - had from Constructions by reason of its role "representing both of them". Analogy with the case of a traditional selling agent is not helpful. Resort must be had to the particular circumstances.
63 Two particular points emerge from the evidence. First, it is clear that Mr Elias did make use of the services of Mr Pyatt (that is, KPS) in order to communicate with Mr Rubinstein. It is true that Mr Elias sought in his evidence to distance himself from Mr Pyatt, to deny that they met face to face on occasions referred to by Mr Pyatt as involving such meetings and to suggest that there was no more than occasional telephone contact. But there is no doubt in my mind that Mr Pyatt did communicate to Mr Rubinstein things he was told by Mr Elias to communicate; and that he did so with Mr Elias's consent and at his request. I say this because the terms of the emerging bargain, as they developed through the emails ostensibly sent by Mr Pyatt in order to relay Mr Elias's wishes, came to be, in their final form, the terms of the transaction - with the sole exception of the now controversial matter of the period of the lease. It is inconceivable that this process of development could have occurred in the absence of an ability of Mr Pyatt to speak for Mr Elias. That ability obviously derived from ad hoc authority conferred by Mr Elias, for Constructions, that enabled Mr Pyatt to relay Mr Elias's statements to Mr Rubinstein.
64 A particular aspect of this system of communication concerns a proposal that the prices of the two units to be bought by Waldorf should be artificially inflated, with Waldorf then charging Constructions a "fee" of some kind to take care of the inflation factor. No such arrangement formed part of the final transaction. Mr Pyatt represented to Mr Rubinstein in his email of 22 June 2005 that the idea came from Mr Elias. Mr Elias denied this. The documents make it clear that Mr Rubinstein was not the originator of the proposal. There is, in any event, no apparent reason why he would wish to implement such a proposal. Nor would it have advantaged Mr Pyatt for such a course to be taken. It was Mr Elias and Mr Elias alone who had a motive - the motive of making it appear that units in Constructions' newly completed building were changing hands at prices higher than those actually pertaining. The events concerning this aspect confirm that Mr Pyatt, in his communications with Mr Rubinstein, was executing instructions received from Mr Elias.
65 The second point of particular importance concerning Mr Pyatt's authority concerns the letter he sent Constructions' solicitors, on or about 11 July 2005 enclosing a copy of the "sales advice". Had Mr Pyatt been acting without the authority of Mr Elias (and Constructions) in negotiating terms, he would not have represented to Constructions' solicitors that what was, in reality, some concoction of his own represented "the proposed agreement". The fact that he was willing to expose to Constructions' solicitors what he understood to be "the latest version of the proposed agreement" indicates strongly that he believed that, to the extent that he had made contributions to the negotiations ostensibly on the instruction of Mr Elias, he had authority to make those instructions. He must have assumed that the solicitors would confer with Mr Elias who would have exposed any unauthorised concoction made by Mr Pyatt. Mr Pyatt would not have put himself at risk in that way.
66 In summary, therefore, I accept that KPS, through Mr Pyatt, had actual authority from Constructions, through Mr Elias, conferred specifically from time to time as negotiating points came up, to communicate to Waldorf, through Mr Rubinstein, things said and things accepted by Constructions. In particular, I am satisfied that the "sales advice" and Mr Pyatt's letters of 11 July 2005 to the parties' respective solicitors, reflected the commercial agreement the parties had reached, with Mr Pyatt relaying Mr Elias's instructions to Mr Rubinstein from time to time.
67 It follows that I accept that the commercial arrangement negotiated by the parties involved a lease term of three years with a single option for the tenant to renew for a further three years. This aspect was explicitly stated in the "sales advice" prepared by Mr Pyatt. There is nothing in the evidence to suggest that the matter was later revisited or revised. Mr Elias accepted that three plus three - indeed, three plus three plus three - had been discussed in negotiations. In the light of my findings about the "sales advice" and the absence of later revision, his evidence to the effect that he never expressed agreement to three plus three must be rejected.
68 In expressing this conclusion, I do not overlook evidence of and concerning Mr Elias's wife, Samira Elias. Mr Rubinstein deposed to having received a telephone call from Mrs Elias in about September or October 2006 in which Mrs Elias asked whether Waldorf was going to "exercise its option over all the remaining apartments" or whether it wishes "to hand some back". Mr Rubinstein's evidence is that he said that Waldorf would be exercising its option over all remaining apartments. Mrs Elias's affidavit evidence is that she phoned Mr Rubinstein in about August 2006 to arrange accommodation for a relative of hers at Waldorf serviced apartments at Rouse Hill and did not speak to him about the Blacktown leases or the renewal of them.
69 Each of Mr Rubinstein and Mrs Elias denied in cross-examination the material part of the conversation deposed to by the other. Two objective facts must be mentioned. First, Mrs Elias, on her own evidence, helped her husband in his business. She explained that she is responsible for keeping records for him and deals with business matters in an office at their home, spending on average three days a week on business matters. It is therefore to be expected that Mrs Elias would be conscious of and attuned to business matters such as whether continuation of occupancy by Waldorf as lessee would inhibit plans to sell units with vacant possession. In the circumstances, there was good reason for her to make of Mr Rubinstein the inquiry he says she made.
70 Second, there is no aspect of the evidence, apart from the consensus of Mr Rubinstein and Mrs Elias that they spoke by telephone somewhere in the period August to October 2006, to suggest that Mrs Elias had had any dealings at all with Mr Rubinstein (although it is clear that she was aware that her husband had had such dealings). It would, in that context, have been odd for Mrs Elias to approach Mr Rubinstein about accommodation at Rouse Hill for her relative. He was, from her perspective, merely a business acquaintance of her husband. He was also the head of an organisation with 24 serviced apartment locations in Australia and New Zealand obviously not in touch with bookings and availability at Rouse Hill. While she may have telephoned him about a business matter, it is inherently unlikely that she would have approached him about a personal or family matter.
71 I conclude, on the balance of probabilities, that the conversation between Mr Rubinstein and Mrs Elias was as deposed to by Mr Rubinstein and not as deposed to by Mrs Elias.
72 This lends some weight to the conclusions, separately reached and already expressed, that the commercial arrangement negotiated by Waldorf and Constructions involved a lease term of three years with a single option for the tenant to renew for a further term of three years. This was the parties' common intention.
73 There is a question, however, as to the parties' common intention as to matters of detail.
74 In particular, there is a question regarding the rent to be paid under any renewed lease for a further three year term. That matter should, in my view, be resolved by a finding that the common intention was as indicated by Mr Rubinstein's evidence at paragraph [41] above. I did not understand Mr Elias's evidence to say anything specific on that subject - by which I mean anything beyond his general denials of having reached any agreement on the matter of an option to renew.
75 In the result, therefore, Waldorf has established an entitlement to have each of the twelve leases rectified by adding a provision as follows:
"The tenant has an option to extend this lease for a further period of three years, exercisable at any time prior to 15 October 2008. The rent for the further term is to be as agreed between the parties or failing agreement to be fair market rental as determined by a licensed valuer appointed by the parties."
76 This formulation omits the aspect for which Waldorf contends dealing with what is to happen if the parties cannot agree on the choice of a valuer. But since the evidence does not show that that element formed part of the common intention, the rectification the court orders cannot extend to it.
77 I turn now to a submission made on Constructions' behalf to the effect that it would be futile for the court to order rectification in the terms just stated since the option will be exercisable only by action taken before 15 October 2008 and it is now too late for any such action to be taken.
78 It was submitted on Constructions' behalf that any exercise must be in writing (Tsaoucis v Gallipoli Memorial Club Ltd [1998] NSW ConvR 55-860) and that no relevant writing passed from Waldorf to Constructions before 15 October 2008. Counsel for Constructions also referred to a statement in an affidavit of Mr Rubinstein of 6 September 2008 filed in these proceedings (emphasis is placed on the word "will"):
"If the court does order the leases to be rectified, Waldorf will exercise the option."
79 Counsel for Waldorf pointed to several matters in support of the proposition that there had been, before 15 October 2008, unequivocal written statements on behalf of Waldorf amounting to exercise of an option. Reference was first made to a pre-action letter of 19 August 2008 from Waldorf's solicitors to Constructions' solicitors containing the following demand:
"The purpose of this letter is to require that within a period of seven (7) days from the date of this letter, Elias agrees to enter into an appropriate written agreement to vary the Tenancy Agreements such that they provide an option to Waldorf to renew for a period of 3 years or, alternatively, a written agreement by which Elias agrees to renew the Tenancy Agreements for a further period of 3 years from their expiry dates. Should we not receive written confirmation from you that Elias agrees to enter into such written agreement within the period stipulated above, Waldorf intends to commence legal proceedings …"
80 Waldorf also points to one of the claims made by it in its summons filed in these proceedings on 9 September 2008, being a claim for:
"A declaration that pursuant to the terms and conditions of the Leases as rectified in the manner specified in Schedule B the plaintiff has validly exercised an option to extend the term of the Leases for a period of three years beginning on 16 October 2008 and ending on 16 October 2011."
81 It is the contention of Waldorf that the solicitors' letter of 19 August 2008 and the summons of 9 September 2008, considered in the light of the statement in Mr Rubinstein's affidavit of 6 September 2008 quoted above, constituted sufficient written communication of Waldorf's taking up of a further term of three years in accordance with what it considered to be its right to do so (albeit a right that was, by mistake, not recorded in the leases).
82 Counsel for Waldorf referred, in this connection, to the decision of the Court of Appeal in Young v Lamb [2001] NSWCA 225; (2001) 10 BPR 18,553. It was there held that what was, in terms, a statement of intention to exercise an option operated, in the light of surrounding circumstances, as a present and operative exercise. Reliance was placed on what someone receiving the letter containing the statement would fairly have understood it to convey. Reference was also made to the decision of Hope J in Johnson v Bones [1970] 1 NSWR 28 in which it was held that service of a statement of claim alleging a completed exercise of an option manifested an intention of the plaintiff to inform the defendant that the plaintiff regarded the option as exercised; and that the defendant receiving the statement of claim could be under no misapprehension about the matter.
83 When regard is had to the whole of Waldorf's relevant conduct before 15 October 2008, Constructions cannot but have been clearly on notice that Waldorf wished to have, and considered itself entitled to have, a renewal of each lease for a further term of three years. Waldorf was inhibited in delivering a routine notice of exercise in a routine way because there was, at that point, no explicit recognition of the option. That explains Mr Rubinstein's statement cast as an intention in his affidavit of 6 September 2008.
84 Despite that inhibition, Waldorf's position, clearly articulated and communicated through the solicitors' letter of 19 August 2008, Mr Rubinstein's affidavit of 6 September 2008 and the summons filed on 9 September 2008, was that Waldorf considered itself to have an established entitlement to a lease of each relevant property for a further term of three years. To the extent that that entitlement depended on communication of a decision of Waldorf to take up such new leases, the letter, the affidavit and the summons conveyed that communication in unmistakeable terms. To the extent that writing may have been required, it was provided by means of all three documents.
85 In view of my findings regarding communication to Mr Rubinstein by Mr Pyatt, with the consent of Mr Elias and at his request, of things that Mr Elias told Mr Pyatt to communicate, it is not necessary to pursue the allegation of breach of warranty of authority levelled at KPS by Waldorf.
86 The outcome of these proceedings is as follows:
1. Order that each of the residential tenancy agreements made on 15 October 2005 between the plaintiff as tenant and the first defendant as landlord with respect to units 11, 14, 15, 17, 18, 23, 28, 32, 33, 35, 36, 40, 51 and 52 of premises known as 24 - 28 First Avenue Blacktown be rectified by including therein an option to renew as follows:
"The tenant has an option to extend this lease for a further period of three years, exercisable at any time prior to 15 October 2008. The rent for the further term is to be as agreed between the parties or failing agreement to be fair market rental as determined by a licensed valuer appointed by the parties."
2. Declare that the plaintiff validly and effectually exercised each such option to renew.
3. Order that the plaintiff's claims against the second defendant be dismissed.
87 Given this outcome and the relationship between the claims against Constructions and the claims against KSP, the question of costs is reserved for further argument. I shall make directions in that respect.
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