Dixi-Lee Pty Ltd t/as Fresh Made Café v A & M Investments Pty Ltd [2020] QCAT 297

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Dixi-Lee Pty Ltd t/as Fresh Made Café v A & M Investments Pty Ltd [2020] QCAT 297 PARTIES: DIXI-LEE PTY LTD T/AS FRESH MADE CAFE (applicant) v A & M INVESTMENTS PTY LTD (respondent) APPLICATION NO/S: RSL017-20 MATTER TYPE: Retail shop leases matter DELIVERED ON: 29 July 2020 HEARING DATE: 2 June 2020 HEARD AT: Brisbane DECISION OF: Member Richard Oliver ORDERS: There was a valid and enforceable agreement for lease between the Applicant and the Respondent in the terms set out in the Offer to Lease dated 5 August 2019 CATCHWORDS: LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – where the dispute as to whether a lease exists between the parties – where the parties executed an Offer to Lease – where the respondent sought to withdraw the Offer to Lease – whether the Respondent is bound by the Offer to Lease – whether the Offer to Lease could be withdrawn. Retail Shop Leases Act 1994 Masters v Cameron (1954) 91 CLR 353 Austotel Pty Ltd v Franklins Selfserve Pty ltd (1989) 16 NSWLR 582. Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 APPEARANCES & REPRESENTATION: Applicant: L J Colgrave, director of applicant Respondent: D Sanderson, as agent for respondent -- 1 of 7 -- 2 REASONS FOR DECISION Mr Lee Colgrave is a director of the Applicant, Dixi-Lee Pty Ltd. Between 19 August 2019 and 1 March 2020 the Applicant rented Shop 17 at the Station Square Shopping Centre in Maryborough to conduct the business of a coffee shop. The Applicant took over the operation of the business from a previous tenant, Georgina Claxton, who had operated the shop for some years. The Respondent is the owner of the Station Square Shopping Centre in Maryborough. It retained Green Group Property Investments as Centre Manager. Green Group was represented by Douglas Sanderson. Green Group’s role was to act as the Respondent’s agent for the purposes of the management of the centre and also for the negotiation of retail shop leases with the tenants of the shopping centre as the need arose. In August 2019, Mr Sanderson had discussions with Mr Lee Colgrave, a director of the Applicant, about leasing Shop 17 to the Applicant to conduct the business of a coffee shop. An Offer to Lease1 was signed by Mr Colgrave for Shop 17 which set out the essential terms of the lease, being: (a) the area leased; (b) the base rental of $63,000 per year; (c) outgoings of $157.41 per square metre; (d) term of the lease 3 years and date of occupation 19 August 2019; (e) date of lease commencement 19 August 2019. There is a further provision in the Offer that the formal lease documentation will be in accordance with the Offer’s essential terms. There is also a further provision in the Offer which is relevant to this application, that is: The information contained in this letter is not intended to be a binding lease between the Tenant and the Landlord. The Tenant acknowledges that this offer may be withdrawn by the Landlord until such time as executed lease documentation has been delivered by the Tenant to the Landlord’s solicitors in a form acceptable by the Landlord. No other act or conduct of any kind will be considered as giving rise to a lease. Annexure “A” to the Offer to Lease sets out the Tenancy information, noting that the tenant will be the Applicant. It also provided details of the Applicant’s solicitors. The Applicant took possession of the premises in August 2019 and continued in occupation until 1 March 2020. It did so without a formal lease being prepared and signed by the lessee and the lessor. The dispute arose between the Applicant and the Respondent concerning the Applicant’s proposal to use crockery mugs for serving tea and coffee rather than just being restricted to disposable cups as required by the Respondent. The Applicant considered it was at a disadvantage in the food court because other outlets were not 1 Attachment D1 to the Notice of Dispute – Retail Shop Leases Act 1994. -- 2 of 7 -- 3 restricted to disposable cups, thus resulting in a loss of business. The Applicant must have known of the restriction, hence the seeking of a relaxation from Mr Sanderson about the restriction. There was an exchange of emails in respect of this issue between Mr Colgrave and Mr Sanderson but ultimately Mr Sanderson took the firm position that “the food court is only ever disposable and that cannot change”. The issue between them escalated, until on 29 January 2020 the Respondent’s lawyers, MRH Lawyers, wrote to the Applicant noting the history of the Offer to Lease and alleging that the Applicant had not traded during the hours required by the Offer to Lease. The letter referred to the emails between Mr Colgrave and Mr Sanderson concerning the dispute about the use of crockery and whether a lease was in place. The Respondent’s lawyers then informed the Applicant that: 1. The information contained in the Offer to Lease is not intended to be a binding lease between you and our client. 2. The offer contained in the Offer to Lease may be withdrawn by our client until such time as executed lease documentation has been delivered by you to our office in a form acceptable to our client. 3. No other act or conduct of any kind will be considered as giving rise to a lease. As it appears from your correspondence to our client that you are either unable and/or unwilling to trade in the premises in accordance with our client’s standard lease, we advise that in accordance with our rights, our client withdraws its offer to lease to you contained in the Offer to Lease dated 12 August 2019. There was a demand that the Applicant vacate the premises by 28 February 2020. That letter initiated the application in the Tribunal being the Notice of Dispute – Retail Shop Leases Act 1994. In that application the Applicant sought broad relief. At the same time the Applicant filed an application for an interim order seeking to restrain the Respondent from taking possession of the premises on 28 February 2020. That application came on for hearing on 28 February 2020 and was contested.. The Respondent’s position in that hearing was that there was no binding lease between the parties and therefore there was no basis upon which a restraining order could be made. The application for the interim order was dependant on a determination as to whether a lease existed between the Applicant and the Respondent consistent with the terms of the Offer to Lease. An order was made restraining the Respondent from taking possession of the retail shop premises until further order of the Tribunal. The day after making the restraining order, the Applicant sent an email to Mr Sanderson informing him that the Applicant had decided to vacate the shop. More specifically the email said, “Despite having been granted an interim order, it is with sad regret that we have decided to vacate Shop 17, Station Square Shopping Centre.” Subsequently the restraining order was vacated. -- 3 of 7 -- 4 The Respondent raises two issues for determination. Firstly whether the Offer to Lease was made to Mr Colgrave personally instead of the Applicant; and secondly, that the Offer to Lease was validly withdrawn which could give rise to there being no lease between the parties. Who is the Lessee The Respondent contends that it did not offer the lease to Dixi-Lee Pty Ltd but rather, to Lee Colgrave t/a Freshmade as is evident on the first page of the Offer. However that ignores Annexure “A” which clearly identifies the Applicant as the ‘lessee’ and that Mr Colgrave and Ms Stephenson are the directors of the Applicant. Furthermore the Offer was signed by Mr Colgrave as director. The correspondence, from MRH Lawyers directed to the Applicant is also consistent with a finding that the Applicant was the intended lessee. The demand was made for the Applicant to vacate the premises by the end of February 2020 and not Mr Colgrave. I therefore find that at all times it was intended that the Offer to Lease was made between the Applicant and the Respondent and if and when the lease was formalised, the lessee would be Dixi-Lee Pty Ltd. Withdrawal of the Offer to Lease The next question is whether there is an enforceable lease in terms of the Offer to Lease between the Applicant and the Respondent or a periodic tenancy. ‘Lease’ is defined in the Retail Shop Leases Act as: Means an agreement under which a person gives or agrees to give to someone else for valuable consideration a right to occupy premises whether or not the right is – (a) an exclusive right to occupy the premises; or (b) for a term or by way of a periodic tenancy or tenancy at will.2 Mr Colgrave knew when he was negotiating the lease with Mr Sanderson, representing the Centre Manager, that he was acting on behalf of the Respondent. Mr Colgrave also knew that the Respondent would ultimately have to agree to the lease in accordance with the Offer to Lease, even if it was a formality. Based on these facts I also infer that Mr Colgrave knew that the Centre Manager could not bind the Respondent to a lease in terms of the offer with the Applicant. All of this is supported by the process of the terms of Offer to Lease submitted to Mr Colgrave dated 12 August 2019. I accept that Mr Colgrave was anxious to ensure that the Applicant had a lease after taking over the business in July 2019. To this end they sought an assurance from Mr Sanderson that they would be granted a lease because there was little point in buying/taking over the business from the previous owner unless they were assured of a lease. I find that Mr Colgrave and Ms Stephenson met with Mr Sanderson at the Centre Management office on 15 August 2019 and were assured that the Offer would be accepted by the Respondent and they then signed the Offer to Lease on 15 August 2 RSL Act Dictionary -- 4 of 7 -- 5 2019. I accept Mr Colgrave’s evidence that Mr Sanderson said it “was a given’ and signing the Offer to lease ‘was a formality’. Even though Mr Sanderson’s assurances do not go so far as to amount to an acceptance by the Respondent they did induce Mr Colgrave to sign the Offer and proceed to take possession of the premises and commence operating the business. There were further assurances given by Mr Sanderson in late December 2019 as to the existence of the lease and these fall within the same category. There is no doubt that a properly formulated agreement to lease with the agreed essential terms can be specifically enforced.3 This is particularly so, where both parties have partly performed the lease by giving up possession of the leased premises and the payment of rent and outgoings. In such circumstances, here the lessor would be estopped from refusing enter into a formal lease. However, the Respondent contends that because of the specific wording of the Offer to Lease that it ‘is not intended to be a binding lease between the Tenant and the Landlord’ no lease exists because the Offer was withdrawn. The Applicant relies on the many assurances given by Mr Sanderson, even the recording of the conversation, where Mr Sanderson acknowledged that the Applicant had a lease with the Respondent. But there is no evidence, nor any factual basis upon which to infer, that his authority as agent went so far as to bind the Respondent to a lease which created a formal interest in the tenancy for the 3 year term in favour of the Applicant. The Respondent relies on Masters v Cameron,4 which sets out the principles to assist in deciding whether a binding contract/lease had been entered into between the parties. In that case the High Court posed three scenarios concerning the making of a contract after negotiations: Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. Mr Colgrave was certainly of the view that an agreement as to the lease of the premises had been reached with the Respondent on the basis of the conversations with Mr Sanderson. Then, pursuant to and in reliance on those assurances he proceeded to take possession of Shop 17 and commence trading in the business. At no stage was any 3 South Coast Oils Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qld R 680 4 (1954) 91 CLR 353, 360. -- 5 of 7 -- 6 query or concern raised by the Respondent about the Applicant taking possession and paying rent. The commercial relationship proceeded on the basis that a formal lease would be prepared for the parties mutual execution. Therefore, the circumstances here fall within the first class of cases referred to by the High Court. That is, there was agreement as to all of the essential terms and which would then be restated in the formal document. It follows from this conclusion that there was retail shop lease between the parties in the terms set out in the Offer to Lease. Is the Withdrawal of the Offer effective? The right retained in the Offer to Lease to withdraw the offer is preserved ‘until such time as executed lease documentation has been delivered by the Tenant to the Landlord’s solicitors in a form acceptable by the Landlord’. Further, it specifically provides that ‘no other act or conduct of any kind will be considered as giving rise to a lease’. The difficulty here for the Respondent is that: (a) in August 2019 the Respondent has delivered up possession of the premises to the Applicant; (b) the Applicant has paid rent from August 2019 through to February 2020 on the basis it had a lease; (c) the Respondent seeks to withdraw the offer on the basis that the Applicant has not complied with stipulated trading hours; (d) save for any dispute about the trading hours, the Applicant has performed all of its obligation under the agreement for lease until it vacated the premises on 1 March 2020 (e) both parties have proceeded on the basis that a binding lease had been entered into between them. In these circumstances, although not specifically relied on by Mr Colgrave who is not a lawyer, the principles of equitable estoppel are enlivened. For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable.5 Given that both parties proceeded after August 2019 on the basis that a lease existed it would be unconscionable for the Respondent to purport to rely on the right to withdraw the offer when the Applicant, with the agreement of the Respondent performed all of its obligations pursuant to the Offer to Lease. The agreement for lease was specifically enforceable by the Applicant but it chose to adopt a course of accepting the Respondents demand to deliver up the premises and reserve its rights. 5 Austotel Pty Ltd v Franklins Selfserve Pty ltd (1989) 16 NSWLR 582 following Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 -- 6 of 7 -- 7 It also seems that he Respondent was reliant of the agreement for lease to terminate the tenancy on the basis of the alleged non-compliance with the conditions concerning trading hours. Also it sought to enforce the requirement for the Applicant to only use disposable cups for beverages. This is inconsistent with any notion of a right to withdraw the offer or that the Respondent is not bound by the Offer. The agreement for lease has now been terminated and the consequence of that remains to be determined. The Applicant contends it has a claim for damages but has not formulated the claim pending the determination of this issue. Once formulated it will be part of the substantive application. The Respondent also has a claim for $13,697.74 outstanding rent and outgoings because it submits it did not retake possession until the Tribunal vacated the restraining order and is entitled to rent up until that time. Once again the determination of this issue will be part of the substantive application. The order of the Tribunal is that: 1. There was a valid and enforceable agreement for lease between the Applicant and the Respondent in the terms set out in the Offer to Lease dated 5 August 2019. -- 7 of 7 --