_Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd_
[2011] QCA 150
Court of Appeal (Qld)|2011-06-24|Before: Muir and White JJA and Fryberg J, Separate reasons, for judgment of each member of the Court, each concurring as to the order, made
Muir and White JJA and Fryberg J, Separate reasons, for judgment of each member of the Court, each concurring as to the order, made
Catchwords
LANDLORD AND TENANT – RENEWALS AND OPTIONS – EXERCISE OF
OPTIONS – VALIDITY OF EXERCISE – where two leases
over land for 10
years contained three options to renew each for five years – where the
Source
Original judgment source is linked above.
Catchwords
LANDLORD AND TENANT – RENEWALS AND OPTIONS – EXERCISE OFOPTIONS – VALIDITY OF EXERCISE – where two leasesover land for 10years contained three options to renew each for five years – where therespondent failed to give written noticeexercising the options to renew theleases within time – whether the parties reached an agreement for newleases on terms asif the options had been validly exercised – whether theprimary judge erred in so findingLANDLORD AND TENANT – LEASES AND TENANCY AGREEMENTS – TERM OFLEASE OR TENANCY –DURATION – HOLDING OVER AFTEREXPIRATION OF TERM– where the respondent continued in occupation of premises after the endof the term of leases – whetherthe tenancy could be construed as onepursuant to the holding over provisions contained in the leases – whetherthe tenancyconstituted a month to month tenancyAir Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2
NSWLR 309, cited
Allen v Carbone (1975) 132 CLR 528
[1975] HCA 14,
cited
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd
(1988) 18 NSWLR 540, cited
Australian Energy Ltd v Lennard Oil NL
[1986] 2 Qd R 216, cited
Barrier Wharf’s Ltd v W Scott Fell & Co
Ltd (1908) 5 CLR 647
[1908] HCA 88, cited
Brambles Holdings
Ltd v Bathurst City Council (2001) 53 NSWLR 153
[2001] NSWCA 61,
cited
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666,
cited
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd
Abbey Life Assurance Co Ltd [1979] 2 Lloyd’s Rep 334,
cited
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32
[1994] VicRp 53, cited
Judgment (136 paragraphs)
[1]
LANDLORD AND TENANT - RENEWALS AND OPTIONS - EXERCISE OF OPTIONS - VALIDITY OF EXERCISE - where two leases over land for 10 years contained three options to renew each for five years - where the respondent failed to give written notice exercising the options to renew the leases within time - whether the parties reached an agreement for new leases on terms as if the options had been validly exercised - whether the primary judge erred in so finding
[2]
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - TERM OF LEASE OR TENANCY -DURATION - HOLDING OVER AFTER EXPIRATION OF TERM - where the respondent continued in occupation of premises after the end of the term of leases - whether the tenancy could be construed as one pursuant to the holding over provisions contained in the leases - whether the tenancy constituted a month to month tenancy
[3]
Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd(1985) 2 NSWLR 309, cited
P J Flanagan SC, with L J Nevison, for the appellant
[19]
G W Diehm SC, with S J R Cilento, for the respondent
[20]
The appellant leased to the respondent two of the three parcels of land on which the Maraboon Motor Inn at Emerald stands under two leases with terms of 10 years expiring on 30 June 1999. The leases, which were in identical terms, contained an option to renew for a further term of five years exercisable in writing not less than six months prior to their expiration.[1] No written notice of exercise of option was given within the time required by the leases.
[21]
[2] The central issue for determination by the primary judge was whether, despite the respondent's failure to exercise the options within time, a letter of 25 January 2009 from the respondent to the appellant and a letter of 1 April 2009 from the appellant to the respondent constituted an agreement by the appellant to grant new leases on the terms that would have been contained in the leases which would have come into existence had the options been duly exercised. The primary judge found in favour of the respondent.
[22]
[3] Before considering the issues raised for determination on this appeal, it is desirable to explain the circumstances under which the two critical letters came to be written.
[23]
[4] The directors of the respondent were Robert and Christopher Waterson. Max Waterson, Robert Waterson's father, was one of the respondent's shareholders. The directors of the appellant were Frederick Murray ("Murray"), John Crossan ("Crossan") and Max Waterson. Crossan was a retired solicitor.
[24]
[5] Robert Waterson was actively engaged in the businesses carried on by members of the Waterson family. He attended to the bookkeeping and financial management of the businesses and had authority to act on behalf of the respondent. In February 2008, the respondent, through Robert Waterson, submitted a written proposal to the appellant's directors that the leases be extended by the provision of two further five year options for renewal beyond the three options already provided. There was no written response to the letter.
[25]
[6] On 18 April 2008, Robert Waterson discussed the proposal with Murray, whose response was cool. The proposal was discussed at the meeting of the respondent's directors on 29 May 2008. The minutes record:
[26]
"Robert to re-approach Weemah: we are not looking to sell, but still wish to extend. Would undertake not to sell without Weemah approval within 5 yrs."
[27]
[7] On or about 5 June 2008, Robert Waterson had a telephone conversation with Crossan in which Crossan suggested that the respondent's proposal be resubmitted to the appellant. This was done under cover of a letter dated 6 June 2008. The proposal was rejected by the appellant in a letter to the respondent dated 4 July 2008 signed by Crossan.
[28]
[8] Assuming that the options would be exercised, processes were put in train to review the rent payable in the first year of the new term of each lease. The option period then expired without the options having been exercised. On 20 January 2009, Crossan wrote to Max Waterson enclosing a copy of the "rental assessment" received by the appellant from its valuers. In the letter, Crossan said that "[n]o correspondence" had been sent to the respondent and that Max Waterson's comments were "awaited". No reference was made to the options not having been exercised.
[29]
Events after the parties became aware that the options had not been exercised
[30]
[9] After the 20 January letter was sent, Murray telephoned Crossan and told him that the options had not been exercised. Crossan satisfied himself that this was so. He then contacted Max Waterson and told him that the respondent would become a tenant from month to month. "Crossan never wavered from that view."[2]
[31]
[10] On or about 25 January 2009, Robert Waterson had a conversation with Crossan in which he sought Crossan's advice on what he should say in a letter he was preparing to write to the appellant's directors concerning the exercise of the options. The primary judge found in respect of this conversation:
[32]
"Crossan was cautious in what he said to Robert Waterson. He did not say that he believed that the options had been validly exercised. Nor did he say that he considered they had not been and that plaintiff (sic) would have a month to month tenancy. He appreciated that there was always a degree of friction between Robert Waterson and Murray, and adopted the position of peacemaker. I think it is more probable than not that he said something along the lines 'The less said the better,' and I do not think anything turns on his precise words in that regard. I think it is more probable than not that it was during that conversation that he referred to there being three directors of Weemah Park and Murray being only one of them. I am satisfied that he told Robert Waterson the thrust of what he should say in the letter." (emphasis added)
[33]
[11] Crossan said, in examination-in-chief in the context of questioning about a conversation with Robert Waterson, prior to the sending of the 25 January letter, concerning the exercise of the options and the attitude of the appellant's directors, that he definitely said to Robert Waterson, "There are three directors of Weemah Park and Mr Murray is only one." The point of the comment, as Crossan admitted in cross-examination, was to indicate that Robert Waterson should not be concerned about Murray's stance in relation to the exercise of the options.[3]
[34]
[12] The letter dated 25 January 2009, sent by Robert Waterson to the directors of the appellant and which was also faxed to Crossan and emailed to Murray, stated:
[35]
"On behalf of Glenlaton Investments Pty Ltd I hereby exercise our right under the terms of our lease to exercise the option to renew for the further term of five years from 1 July 2009."
[36]
[13] A response to the letter was provided by an email sent on 6 February 2009 by Murray to Robert Waterson with a copy to Crossan, which stated:
[37]
"In relation to your email, I wish to advise you that your Notification of Intention to take up the options is Null & Void as it is well past the date stipulated in the lease document.
[38]
I intend to further speak about this matter with both Max & John and will advise further following such discussions.
[39]
In relation to the rental I have to say that I personally don't consider it very satisfactory as it does not align very favorably [sic] with other motels in Emerald. I note in particular that the small motel next door has a room rate some 20% greater than that adopted for the Maraboon.
[40]
I am however obliged to accept this and do so without any further argument.
[41]
I think your actions in querying Pat Lyons,[4] a little over the top especially in view of the fact that Weemah Park could be searching for a new leasee (sic) at this present time."
[42]
[14] The primary judge found that Murray did not speak with Max Waterson as foreshadowed in the email or "advise further following such discussions."
[43]
[15] The finding of the primary judge that Murray, in sending the email, was not purporting to speak on behalf of the appellant was not challenged.
[44]
[16] The appellant wrote to Robert Waterson on 10 February 2009 and 18 February 2009, giving instructions concerning the way in which future rental payments were to be made. The second letter was signed by Crossan. The letters made no reference to the 25 January letter.
[45]
[17] On 1 April 2009, Crossan, on behalf of the appellant, wrote to Robert Waterson, on behalf of the respondent, as follows:
[46]
As you are aware rental on the above property is due for review and a valuation assessment received from Taylor Byrne Valuers.
[47]
At a meeting of the Directors of Weemah Park held at Emerald on 18th March last a resolution was passed that the rent assessment be adopted on and from 1st July 2009 i.e. Lots 2 & 52 commence at $449,500.00 and Lot 1 $58,000.00 plus GST.
[48]
The proposal to borrow further funds is currently being considered and whence (sic) this matter is resolved we will notify you in relation to rental payments."
[49]
[18] The rent specified was approximately $60,000 per annum more than that payable under the leases at the expiration of their terms.
[50]
[19] In a letter to the directors of the appellant dated 13 April 2009, Robert Waterson wrote:
[51]
"On behalf of Glenlaton Investments Pty Ltd I advise that while we acknowledge a substantial increase is justifiable, we disagree with the rent proposed in your letter of 1st April 2009.
[52]
The rent proposed in your letter is based on the Rent Assessment made by Mr Pat Lyons of Taylor Byrne Valuers dated 8 December 2008. While we agree with the basis of his valuation and determination of the rent at 45% of the net income before rent we have noted several discrepancies (or invalid assumptions) in the calculation of the net income figure.
[53]
Though Glenlaton Investments, the Lessee, is also a Lessor we fully understand if you wish to exclude us from communication with Taylor Byrne due to the conflict of interest which exists.
[54]
Rather than resorting to dispute resolution under the terms of the lease we would much rather continue the co-operative business relationship we have mutually enjoyed and reach a negotiated agreement on the new rental.
[55]
We respectfully request that you ask Mr Lyons to consider the additional, clarified information supplied to him. Once he has responded both parties can consider their positions.
[56]
I am intending to be in Emerald at the end of April / early May. If it suited you (John & Mark) this would be a good opportunity for us to meet and discuss the new rental.
[57]
whether you agree to have Mr Lyons consider the clarified information,
[58]
(if "yes" to (b) above) whether there are dates in the last week of April or first two weeks of May which would not suit you for a meeting." (emphasis added)
[59]
"[46] Robert Waterson telephoned Max Waterson, who declined the invitation to a meeting. He said the other matter referred to in the letter should be taken up with Murray. Murray acknowledged receipt of the correspondence in an email to Robert Waterson on 15 April 2009. He discussed obtaining a valuation of the freehold to support the financing proposal. Robert Waterson responded that evening: he hoped they could sort out their differences about the rent assessment rather than proceed to an expert determination.
[60]
[47] The next day Robert Waterson sent Murray a copy of the email he had previously sent the valuer. He said that he was doing so 'as requested' - but Murray was adamant he had made no such request. Later that day Robert Waterson emailed Murray again, suggesting he delay obtaining the freehold valuation until the rent was "sorted".
[61]
[49] On 23 April 2009 Robert Waterson wrote to the directors of the defendant -
[62]
'After further consideration and discussions with Mark, the Directors of Glenlaton Investments Pty Ltd have determined to accept the rentals for the further term of the lease of the Maraboon Motor Inn as adopted at your meeting of 18th March and set out in your letter of 1st April, 2009.'
[63]
[50] Copies of the letters of 1 and 23 April 2009 were provided to the valuer by someone in Murray's office. However, as the plaintiff conceded at the trial, neither Crossan nor Murray instructed the valuer that the options had been exercised. The valuation of the freehold, dated 6 May 2009 was emailed to Murray on 11 May 2009. The valuer (Pat Lyons) said -
[64]
'As discussed previously the first option period for the above leases falls due on 30 June 2009. We have undertaken a separate rent review of the property for the lessors. Rent was assessed at $507,500 which has been accepted by both the lessees and lessors. Letters to this affect are attached as annexures to this report.
[65]
The rental of $507,500 was assessed for the full complex including Rooms 62-69 with the rental to be apportioned in the ratio of 62/70 or $449,500 for the subject property and 8/70 for the part excluded from our valuation i.e. Rooms 62-69'." (emphasis added)
[66]
[21] Robert Waterson said, in cross-examination, that in a conversation in May 2009 between Crossan and him, Crossan expressed the opinion that the respondent had a month to month tenancy.
[67]
[22] The respondent continued to occupy the Motel premises after the terms of the leases expired, paying the rent specified in Crossan's letter of 1 April 2009.
[68]
[23] Murray wrote to the respondent's solicitors on 6 July 2009, referring to a letter of 24 June 2009 and requesting particulars of "when the option was validly exercised". The respondent's solicitors replied to that letter on 13 July 2009, relying on the chain of correspondence and conduct including the letters of 25 January 2009 and 1 April 2009. The appellant's solicitors advised in their letter of 13 August 2009 that the appellant did not admit that the options had been validly exercised.
[69]
[24] Her Honour said that in construing the relevant communications she had taken into account "the context in which they were written - that is, of matters of objective fact known to both parties, and in particular:
[70]
(a) that the plaintiff on whose behalf it was written and the defendant to whose directors it was addressed had been parties to leases of motel premises, which had expired on 31 December 2009;
[71]
(c) that the plaintiff had failed to exercise the options to renew in the time allowed;
[72]
(d) that the defendant had obtained a valuation of the market rent of the premises;
[73]
(e) the letter from Crossan to Max Waterson of 20 January 2009;
[74]
(f) that the plaintiff was aware of the contents of the valuation;
[75]
(g) that at least one director of the defendant (Murray) was asserting that the options had not been duly exercised;
[76]
(h) the preceding communications between the parties."
[77]
[25] Her Honour found that the letter of 25 January 2009 was "an offer to take new leases as if the options had been duly exercised", and that the letter of 1 April 2009 constituted an acceptance of the offer. She placed particular importance on the reference in the 1 April letter to the rent being "due for review" and on the reference to the adoption of the valuer's assessment of rent "...on and from 1 July 2009 i.e. Lots 2 & 52 commence at $449,500.00...plus GST". (emphasis added) The significance of the last mentioned matter being that what was assessed was an annual market rent not a monthly rent.
[78]
[26] Her Honour did not regard Murray's 6 February 2009 email as critical as in it Murray had stated an intention of speaking with his fellow directors and of advising further. Her Honour pointed out that the terms of the email "bespoke the need for [Murray] to consult his fellow directors". She also said (accurately) that, in the email, Murray was stating his own opinion and that the email thus did not constitute a rejection of the respondent's offer of 25 January 2009.
[79]
[27] Counsel for the appellant submitted that the appropriate starting place for a determination of whether an agreement was constituted by the two letters was an examination of their words. It was pointed out that the 1 April letter made no reference to the 25 January letter, that it did not refer to any acceptance by the appellant of the exercising of the options out of time. Also, it was submitted, the letter did not evince any departure from the positions previously adopted by Murray and Crossan. The 1 April 2009 letter refers to a resolution passed at a meeting of directors of the appellant that "the rent assessment be adopted on and from 1st July 2000". However, neither the minutes nor the letter refer to the term or duration of any leases. The rental review process was one that had commenced well before 25 January 2009 and the rent assessment referred to in the 1 April 2009 letter is equally consistent with a month to month tenancy. The mere fact that the mechanism for review of market rental under the expired leases continued to be utilised for determining market rent on and from 1 July 2009 does not make the words of the 1 April letter sufficiently clear or unequivocal as to amount to acceptance of the alleged offer.
[80]
[28] Another point which was argued vigorously was that the respondent's case was not advanced by the fact that a new rent in excess of that provided under the leases for a lessee holding over at the expiration of the terms had been negotiated and agreed. It was said that the parties were at liberty to agree on a higher rent.
[81]
[29] The following contentions were also advanced. The surrounding circumstances were inconsistent with there being a consensus between the parties. The evidence was that the respondent knew that the directors of the appellant were not ad idem. It follows from this that the respondent knew that the appellant and the respondent were not ad idem and that no contractual relationship, as alleged, was intended. The documentary evidence supporting these contentions was identified as:
[82]
(b) The minutes of the 18 March 2009 meeting of directors of the appellant;
[83]
(c) The tenor of subsequent correspondence relating to the request by the respondent; and
[84]
(d) The refusal by the appellant to do all things necessary to perfect the grant of any new lease term.
[85]
[30] After the directors of the appellant became aware in January 2009 that the respondent had failed to exercise the options, Murray told Robert Waterson, in a conversation with him, that he did not believe that the respondent had validly exercised the options. It does not seem to me that much, if anything, turns on what was or was not said about the exercise of the options at this stage. It is clear that by about the end of January 2009, the directors of both parties understood that the options had not been duly exercised.
[86]
[31] Of more significance, is the fact that the letter of 25 January 2009 was drafted and sent by Robert Waterson after, and having regard to, Crossan's advice as to the letter's content and after Crossan had intimated, in effect, that Murray's position on the exercise of the options would not prevail. The 25 January letter was clearly expressed. It purported to exercise options under the leases to renew the terms for five years from 1 July 2009. Crossan, at no time between 25 January and 1 April 2009, said anything to the effect that the appellant would not act as if the options had been exercised. Nor did Max Waterson. The evidence suggests that the respondent could reasonably have expected that Max Waterson would be sympathetic to the respondent's position. Murray, the appellant's other director, did state in his 6 February 2009 email that the "Notification of Intention to take up the options is Null and Void". However, he also stated that he intended to speak to the other directors about the matter and would "advise further following such discussions". The email went on to discuss rental matters and the concluding remarks in the letter suggested that the appellant was not, in fact, looking for a new lessee.
[87]
[32] The 1 April 2009 letter showed, on its face, that the directors of the appellant had met and considered matters relating to the subject tenancies. There was no reason to conclude that the letter was unrelated to the 25 January letter, to which there had been no prior response by the appellant. In the 1 April letter, the appellant advised the respondent that its directors had resolved that the rent assessed by Taylor Byrne Valuers be adopted "on and from 1st July 2009" and that the new rent would "commence at $449,500.00 [for Lot 2] and Lot 1 $58,000.00 plus GST." The letter thus dealt with a rent review process under the leases and appeared, on the face of things, to be addressing rent for the first year of a new term. The heading of the letter referred to a "Market Review", an expression used in Clauses 3.2.2 and 3.3 of the leases.
[88]
[33] If what was contemplated by the 1 April 2009 letter was a rent to be payable by the respondent under a month to month tenancy, the rent which would have been payable under Clause 15.8.3 of each lease was "the amount of Rent payable monthly...immediately prior to the expiration of the term." In such a case, no rent review was appropriate and, as counsel for the respondent submitted, the fact that the rental sums specified in the letter were amounts payable annually was of significance as the rent payable under clause 15.8.3 was a monthly rental.
[89]
[34] Another relevant circumstance was that under Clause 3.3(1) the earliest date on which the appellant could notify the respondent "in writing of the amount of which the [appellant] considers to be the annual market rent appropriate to the Premises as from the Market Review Date" was 1 April 2009: the date of the appellant's letter. The timing may have been a co-incidence but the respondent was not to know that.
[90]
[35] One of the points made by counsel for the appellant was that the 1 April 2009 letter did not evidence a departure from the positions previously adopted by Murray and Crossan. Murray, as was mentioned earlier, left the question of a renewal of leases open in his 6 February letter. Crossan, whatever his private views may have been, was no doubt seen by Robert Waterson as supporting the respondent's position. As far as he could tell, both Crossan and Max Waterson accepted that the option should be regarded as having been duly exercised. This, of course, is highly relevant to how the respondent was entitled to understand the import of the 1 April letter and, more importantly, to what a reasonable person in the position of the respondent would have understood.
[91]
[36] I do not find persuasive the contention that the parties should be taken to have done no more than continue to use the rent review processes for determining the rent for the first year of term of renewed leases set in train before the failure to exercise the options in order to determine a rent for a month to month tenancy. The parties were not lacking in commercial sophistication and one looks in vain for any indication that the rent review process related to a monthly rental.
[92]
[37] The 1 April letter speaks of the rent being "due for review", indicating a contractual imperative. The respondent, after initial reluctance, accepted the rent review without attempting to negotiate security of tenure and no security of tenure was offered. These matters also suggest that the parties had in mind rentals under renewed leases. Another consideration, perhaps minor in itself, but adding appreciably to the weight of the other factors favouring the respondent's argument, is the use of the word "commence" in relation to the stated rents. That was inconsistent with a fixed monthly rent but consistent with a rent for the first year of the terms of the renewed leases which would be increased from time to time by operation of the rent review mechanisms in the renewed leases.
[93]
[38] The conduct of the parties after the alleged entry into of a contract is also relevant to the determination of whether the parties intended to enter into a binding agreement.[5]
[94]
[39] Such conduct here was also consistent with an agreement having been reached on 1 April 2009 that the parties would proceed as if the options had been duly exercised. Robert Waterson's letter of 13 April made it plain enough that the respondent was proceeding on the basis that a rent review process under the leases was continuing. Murray's email of 15 April 2009 did not suggest that the respondent was mistaken in its understanding. Robert Waterson's letter of 15 April, by its reference to "expert determination", conveyed the respondent's understanding that the processes under leases were available to resolve disputes as to rent.
[95]
[40] The letter of 23 April 2009 stated that the directors of the respondent had "determined to accept the rentals for the further term of the lease...as adopted at your meeting of 18th March and set out in your letter of 1st April, 2009." That letter made it glaringly obvious that the respondent was acting on the basis that the terms of the leases had been renewed. No one on behalf of the appellant suggested that the respondent was labouring under a misapprehension. Indeed, the valuer, in his report of 6 May 2009 emailed to Murray on 11 May 2009, noted that the rent had been accepted "by both the lessees and lessors". He annexed to the report copies of the letters of 1 and 23 April 2009 which had been provided to him by a person in Murray's office. The report made it plain that the valuers had undertaken a rent review under the leases. The appellant, once again, did not assert that the leases had not been renewed and that the rent review was pointless.
[96]
[41] It was only in a letter of 13 August 2009 from the appellant's solicitors to the respondent that there emerged a clear assertion concerning the exercise of the options. It was there said that the appellant "does not admit that the option has been validly exercised."
[97]
[42] Prior to that, in May, Robert Waterson said that Crossan had expressed an opinion to him to the effect that a month to month tenancy was in existence. It does not appear that they discussed the 25 January and 1 April letters in this context and much had happened earlier to indicate that the parties accepted that they would proceed as if the options had been duly exercised.
[98]
[43] I accept that there is difficulty in regarding the letter of 25 January 2009 as an offer capable of acceptance if it is literally construed. The letter purports to be an exercise of an option. However, a reasonable person in the position of the parties would have concluded that the 25 January letter should not be construed as an attempt to exercise a right under the leases. All concerned knew that the option period had expired and would have appreciated the respondent to be advancing a proposal that the options be taken as having been duly executed. The letter constituted an expression of willingness to proceed as the options had been duly exercised. It was an offer made with the intention that it become binding when accepted by the appellant.[6]
[99]
[44] The 1 April letter makes no reference to the 25 January letter, to any exercise of option or to the renewal of the leases. However, acceptance of an offer may be communicated without the use of explicit terms of acceptance.[7]
[100]
[45] Whether a contract has come into existence is to be determined by reference to the intention of the parties "disclosed by the language the parties have employed."[8] Where, as is the case here, an exchange of correspondence is relied on to establish the existence of a contract, it is not merely those communications which are alleged to constitute the offer and the acceptance which are able to be looked at. In G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd,[9] McHugh JA put the matter this way:
[101]
"However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances..."
[102]
[46] The "surrounding circumstances" include the chain of correspondence and the parties' relevant dealings.[10] The appellant's protracted silence after the receipt of the 25 January letter could not, in itself, be construed as acceptance,[11] as some external manifestation of assent to the offer was required. Silence may be relevant, though, to how the later communication may be viewed.[12]
[103]
[47] In his email of 6 February, Murray did not close the door on acceptance by the appellant of the exercise of the options. The matter was left on the basis that he would get back to Robert Waterson. The 1 April letter was the first communication of a formal nature after 6 February which was capable of being regarded as related to Murray's advice in his February letter. Viewed objectively, it should be seen as a statement of the appellant's position in relation to the renewal of the leases.
[104]
[48] The 25 January letter raised an issue of importance to the parties which obviously called for prompt resolution. If the 25 January letter is not to be construed as the respondent contends, it would mean that the appellant, whilst purporting to proceed under the terms of the leases to increase the rent payable by the respondent and using language consistent only with the existence of renewed leases should be taken to have ignored the respondent's approach in its 25 January letter and to have failed to acknowledge that the terms of the leases had been renewed. That conclusion is not open on the evidence discussed above. With respect, the primary judge's analysis was correct. A "reasonable person" would have regarded the 1 April letter as communicating acceptance of an offer to proceed as if the options to renew had been duly exercised.
[105]
[49] The primary judge was also criticised for having regard to discussion in decisions[13] concerning the limitations of the traditional approach of finding the existence of a contract through the clear identification of an offer and an acceptance. I do not accept that the criticism was justified. The primary judge was making the point, implicitly, that in determining the existence of a commercial contract, the emphasis should be on what the relevant communications would have conveyed to reasonable persons in the position of the parties rather than on a pedantic analysis of language and emphasis on form over substance. The following discussion also supports the approach taken by the primary judge.
[106]
[50] In Brambles Holdings Ltd v Bathurst City Council,[14] Heydon JA, after quoting the passage from the reasons of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd,[15] said:
[107]
"Those passages were cited with approval by Ormiston J in Vroon BV v Foster's Brewing Group Ltd[1994] VicRp 53; [1994] 2 VR 32 at 82-83. He also approved the following statement of Cooke J in Meates v Attorney-General[1983] NZLR 308 at 377:
[108]
'... I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field, although any difficulty on that head is a factor telling against a contract. The acid test in the case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.'
[109]
'... I am prepared to accept ... that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances. In the language of para 22(2) of the Second Restatement on Contracts: "A manifestation of mutual assent may be made even though neither offer or acceptance could be identified and even though the moment of formation cannot be determined".'
[110]
'... there is now sufficient authority to justify the court enquiring as to the existence of an agreement evidenced otherwise than by offer and acceptance.'
[111]
In Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd(1988) 14 NSWLR 523 at 535, McHugh JA (with whom Samuels JA concurred) said:
[112]
'... where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms.'
[113]
One further observation of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (at 11,117) is relevant:
[114]
'... it is an error "to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed"... Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words... The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract....'"
[115]
[51] The appellant has demonstrated no appellable error in the primary judge's reasons and I would order that the appeal be dismissed with costs.
[116]
[52] WHITE JA: I have read the reasons for judgment of Muir JA and am grateful to his Honour for the careful and, with respect, compelling analysis of the correspondence between the parties and the background conduct. For the reasons which he expresses I, too, am persuaded that there is no demonstrated error in her Honour's approach and conclusion.
[117]
[53] I agree with the orders proposed by his Honour.
[118]
[54] FRYBERG J: I add slightly to the findings of fact referred to by Muir JA.
[119]
[55] In her thoughtful and thorough reasons for judgment, the trial judge found that there was always a certain amount of friction between Robert Waterson (who at all times acted on behalf of the respondent) and Murray.[16] That finding was not challenged on appeal. Murray did not wish the respondent to have more than a tenancy from month to month. That was not, I infer, the position of Murray's codirectors. Max Waterson's attitude may be inferred not only from his relationship to Robert but also from his conduct in showing him Crossan's letter of 20 January 2009. Crossan's attitude is implicit in his response to Robert Waterson, "Don't worry about Mark. Remember there are three votes in Weemah and Mark is only one of them." I infer that each of them wished to see the relationship between the parties continue as if the options had been exercised.
[120]
[56] That explains why Crossan's letter of 1 April 2009 was accepted by the appellant both at trial and in this Division as having been written on its behalf, notwithstanding the fact that the only resolution capable of implying authority to write it was, "[T]he valuation be adopted for rent from 1 July 2009". Crossan was a solicitor. He had told Robert Waterson the thrust of what he should say in his letter to the appellant of 25 January on behalf of the respondent.
[121]
[57] The actions of the appellant's directors may not have amounted to world's best practice in corporate governance, but they do not determine the objective existence or otherwise of a contract.
[122]
[58] For these reasons and for those set out in the reasons for judgment of Muir JA, that correspondence constituted a contract by offer and acceptance. Consequently the appeal should be dismissed.