Duncan Properties Pty Ltd v Hunter [1990] QSC 172 [1991] 1 Qd R 101

10 20 IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BEFORE MR. JUSTICE de JERSEY BRISBANE, 7 JUNE 1990 No. 2960 of 1989 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: DUNCAN PROPERTIES PTY. LTD. -and- SIDNEY WAYNE HUNTER and GLORIA KAY HUNTER JUDGMENT Plaintiff Defendants HIS HONOUR: There will be a declaration that there is qo/ /1JJ 10 20 30 30 a lease agreement between the plaintiff as lessor and the 40 50 60 defendants as lessees for a term of five years from l November 1989, on the terms referred to in clause 56 of registered lease no. 8695647, at a rental for the first year agreed at $84,000. I dismiss the counterclaim. I order the defendants to pay the plaintiff's taxed costs of and incidental to the action, _subject to the costs orders made against the plaintiff previousl½ referred to in the reasons for judgment which I now deliver. -Govt. Printer, Qld. l 40 50 60 -- 1 of 13 -- CJ (. ) J IN THE SUPREME COURT OF QUEENSLAND Sc No. 2960 of 1989 Before Mr. Justice de Jersey BETWEEN: DUNCAN PROPERTIES PTY. LTD. Plaintiff AND: SIDNEY WAYNE HUNTER and GLORIA KAY HUNTER Defendants JUDGMENT - de JERSEY J. Delivered the 7th day of June, 1990. CATCHWORDS: Lessor and lessee purport to agree out of time to exercise of option for renewal in lease - whether exercise of option or fresh lease agreement - sufficiency, as memorandum of agreement, of notice purportedly exercising option. Counsel: Solicitors: C.J.L. Brabazon Q.C. and H.A. Weld for plaintiff K.C. Fleming Q.C. and N.J. Thompson for defendants Tobin and Co for plaintiff Gustafson's for defendants Hearing dates: 14th and 15th days of May, 1990 -- 2 of 13 -- ( ) i. ) J IN THE SUPREME COURT OF QUEENSLAND No. 2960 of 1989 BETWEEN: DUNCAN PROPERTIES PTY. LTD. Plaintiff AND: SIDNEY WAYNE HUNTER and GLORIA KAY HUNTER Defendants JUDGMENT - de JERSEY J. Delivered the 7th day of June, 1990. The plaintiff claims a declaration that an agreement should be specifically performed. The agreement, referred to in para. 1 of the claim for relief in the amended statement of claim, is said there to be contained in a lease dated 6th March, 1985 and a letter dated 14th April, 1989. The defendants are the le~sees under that lease, and the signatories to that letter, by which they purported to exercise an option to renew contained in cl. 56 of the lease. The defendants counter claim for a declaration that the notice dated 14th April, 1989 is of no effect, and a declaration that the plaintiff cannot enforce any purported exercise by the defendants of the option. The lease is dated 6th March, 1985, and provided for a term of five years commencing on 1 st November, 1984. Clause 56 contains the option for renewal, for a further five years, to be exercised on "not less than six months previous notice in -- 3 of 13 -- 2 writing". In accordance with·the requirem~nts of that clause, notice of ·exercise· of option had to be given in writing prior to 1st 'May, 1989. No'such notice was given prior to 1st May, 1989. At the · end of May, 1989 the · 'plaintiff entered into a contract to sell the land the subject of the lease, together with other adjacent · larid~ to another company, Winold Pty. Ltd. Mr. Duncan, a director of the plaintiff company which ,was the defendants' lessor, told the male defendant that he had entered into· that contract, and Mr. Duncan had earlier told Mr. Hunter (the male defendant) of negotiations with Mr. Devine of Winold Pty. Ltd. in respect of a possible purchase. Mr. Hunter, for his parf, ~as interested in ultimately purchasing the land on which the warehouse used by him was situated, and which was the subject of: the defendants' lease:· As Mr. Hunter· 'heard of· the neg'otiati·ons between Mr. Duncan and Mr. Devine and 'of the contract which they finally concluded, he became concerned about the security of 'the defendants' tenure. Mr. Hunter wanted to be protected against the possibility that a sale to Winold Pty. Ltd. might be completed, with Winold Pty. Ltd. then however refusing to~ell the warehouse land to the defendants, in which case, not having·exercised the option of renewal in their lease in time, the defendants'would lose their tenure. rn·ea~li May, 1989 there was a resultant discussion between Mr. Duncan, on behalf of the plaintiff, and Mr. Hunter. I accept Mr. Duncan's account of· what was said. Mr. Hunter· expressed concern that if the defendahts·could not purchase the building, they would have no security of tenure, after the expiration of the terhl~of the lease. Mr. Durican suggested, in response, that (J C) () 0 -- 4 of 13 -- 3 if the defendants prepared a letter exercising the option and dated it prior to the end of April, the plaintiff would accept that as a valid exercise of the option. Mr. Hunter agreed to do that. The only further discussion concerned what would happen if the defendants did.themselves purchase the building, in which event, Mr. Duncan explained to Mr. Hunter, the defendants would simply become their own landlord. Mr. Hunter gave a ve_rsion of this conversation in his evidence (especially at pp. 71-2) which was not greatly different from the account of Mr. Duncan, but Mr. Hunter's version, if (~ accepted, would have fallen far short of the case pleaded in paras. 5 and 7 of the defendants' amended defence. The case pleaded there is that it was agreed between them that the back dated document would be."used as an exercise of option" only if. '.: ''·~·.... :'. .-: ... ·," .·.:. . .;, ..: -},~' ·.:·.~ .•• ,, ·'. ' '.· !, the plaintiff's sale of the land to Winold Pty. Ltd. was completed, but Winold refused to sell the warehouse land back to i ) the defendants. Mr. Hunter's evidence did not. go as far as that. ) I am satisfied that Mr. Hunter wanted that to be the case, but it was not specified by him to Mr. Duncan, and there was no agreed qualification upon the prima facie effect of the letter dated 14th April, 1989. One could not properly draw such a qualification from the surrounding circumstances, .as was urged. But in any case, as I have said, I accept Mr. Duncan's account of this conversation. (I should make it clear that I have no doubts as to Mr. Hunter's honesty, my reservation being confined to the reliability of his recollection.) The defendants sent the letter dated 14th April, 1989 to the plaintiff in about mid-May, 1989, as Mr. Duncan asserted. -- 5 of 13 -- 4 In earlj June, the defendants also sent a letter dated 7th June, offering to buy the warehouse property, presumably to gain added comfort from advising the' plaintiff formally of their willingness to purchase ·· the warehou·se·. Mr. Hunter subsequently had his company purchase other land, so that · he preferred not to continue with this warehouse. Perceiving the letter of 14th April to be a potential problem, he :asked Mr.· Duncan to return it. I accept Mr. Duncan's evidence that he; Mr.' Duncan, did not agree to do that, and I do not accept as ·r.eliable Mr. Hunter's recollection to the contrary. Submissions as to the credibility of Mr. Duncan were based, am6n~ other"lhings, on inconsistency between various statements as to when the letter dated 14th April, 1989 was provided by the deieridants t6 ~he plaintiff. The iricori~istencies emerge from Exs. 9:.12 -~ which do suggest · some vagueness in Mr. Duncan's recollection and carelessness in checking what he was signing. It was common ground at the trial that the letter was delivered after April; 1989, well after 'it was dated. In view of that and () 0 CJ my·· ·assessment of Mr. Duncan's demeanour while he was giving Q evidence, I am not disincliried to accept his evidence because of those inconsistencies. It is · unfortunate that al though Mr. Hunter · wanted this letter of 14th April, 1989 to take effect·only in particular circumstances, he did not communicate·or specify that limitation or qualification to the plaintiff. On my view of the facts, encouraged bi the plaintiff,- the defendants ·sought to exercise the option, althou~h ~ut of time, in order to give them security of tenure after the expirifion· of the lease, and the plaintiff -- 6 of 13 -- 5 agreed to their doing so. They subsequeni:ly delivered the letter of 14th April, which the defendant accepted for what it appeared to be - an exercise of the option for renewal of the lease. The facts alleged in paras. 5, 7 and 12 of the amended defence were not made out. For the agreement to treat the notice as a nullity, alleged in para. 12 of the amended defence, the defendants rely on Mr. Hunter's claim that Mr._Duncan agreed to return the notice (which would in any case have involved reading C) a lot into such a promise), but as I have said I accept Mr. Duncan's evidence that he did not agree to return the (j document. / ·\, ( I How should one characterise what occurred? The due exercise of the option of renewal in cl. 56 depended on exact compliance with its notice requirement .. In my opinion, when notice was not ' .·.._.---~,- .. ,. ....:~ .. ·-·,. ::· :· -:.~. "·/· ~· ":,,, ... ,~.,·.\: ., - given by 1 st May, 1989, th~ option lapsed completely, that"' re~ul t conforming with views expressed in United Scientific Holdings Ltd. v, Burnley Borough Council (1978) A.C. 904, 928-9 per Lord Diplock, 945 F-H per Lord Simon and p .. 951 A-C per Lord_~almon, and the decision of the New South Wales Full Court in Gilbert J. Mccaul (Aust) Pty. Ltd. v. Pitt Club Ltd. (1959) 59 S.R. (N.S.W.) 122, 123-4. Mr. Brabazon Q.C., who appeared for the plaintiff, contended, in effect, that were such an option to renew not exercised in time, it would nevertheless in some way be suspended, available to be exercised out of time were the lessor subsequently agreeable. He sought to compare the_ case with the non-completion of a contract on the stipulated date for_ completion, where the parties extended time, preserving the . ; . -- 7 of 13 -- 6 contract and contemplating an ultimately effectual settlement. He also mentioned cases·of voidability for non-fulfilment of conditions subsequ~nt.~ But as their Lordships point out, it is quite wrohg to analyse so called "if contracts" - like the covenant fn cl. 56 - by reference to principles governing true, mutual coritracts. See the above passages in United Scientific. In.terms of legal theory, the reliance by the plaintiff on the doctrine of waiver, contending that it had effectively, although out · of time, waived the need for compliance with the time - not{de re4uirement of cl. 56, was misconceived (c£. Gilbert J. Mccaul, supr~, p. 124). As 1st May passedj so the option lapsed completely. -· On my analysis, the parties did however subsequently agree that there.~should be a -new lease £or---five years from 1st November, "1989, -at an initial rent of ·$84,000.00 (Ex. 2) for the ·:first year. That agreement arose from the defendants' letter dat~d 14th April, 1989, sent pursuant to the plaintiff's invitation communicated orally at the discussion in early May, 1989, ~nd ~hich the plaintiff signed, and the plaintiff's agreement to accept that back dated letter as a valid exercise of:·· the ·option in the lease. That should be construed, in the circumstances, as an agreement to give and take a fresh five year lease, as if.the option p~ovision had been effecti~ely utilised, although of course it had not been. - The plaiht·iff seeks a· declaration that an agreement arising upoh~exercise cif the option-should be specifically performed. The form of the· relief · claimed therefore does not properly reflect what I consider to·be the true nature of the plaintiff's () () C) - --------- I -- 8 of 13 -- 7 right. More importantly, neither did the body of the amended statement of claim, which pleaded the basis of the claim as, simply, the due exercise of the option in the lease. Before the conclusion of the evidence, I mentioned to the parties in court that were I to find the facts favourably to the plaintiff, I doubted that I could enter judgment for the plaintiff, if constrained strictly by the plaintiff's pleading as it then stood, for although there would be a lease agreement, (-) it could not be said to have arisen on the pleaded basis, that is, by the exercise of the option. That led to amendment by the .. ( ) defendants, to allege that time was '.'of the essence" wi tl:l respect to cl. 5 6 of the lease, and a response by amendment by -· the plaintiff to the effect that the time stipulated in cl. 56 had been waiveq_. That did,,~,ot J1,ow:ever suff;i.ciently meet my 9orn;:ern, which :r: continued to express. After the conclusion . of . the addresses, I called the parties back and asked the plaintiff's ( ) Counsel directly whether the plaintiff disav<::)Wed my granttng. relief on any basis other than that pleaded. That pro~oked.an application by the plaintiff for further amendment to the statement of claim. Paragraph 7., of the proposed amendment would, if allowed, set up the manner of characterising the situation which I consider correct, that is, that there was a fresh agreement for lease, rather than a renewed term arising upon the exercise of the option. Mr. Fleming Q.C., who appeared for the defendants, opposed my granting leave . to amend for three reasons: the extreme lateness of the application, . the plaintiff having refused to amend earlier, despite the clearest of invitations from-;me; on -- 9 of 13 -- , '' 8 the' ground that the defendants would have called further evidence on· cine aspect to which I will refer shortly; and because the defendants would ·wish to plead the absence of a written memorandum of the new agree~ent. As I saw thematter, all relevant facts were canvassed at th~ trial, and the ·subject of the amendment proposed by the plaintiff really amounted to no more than an attempt to characterise properly, in law, what had occurred. The only area of evidence which Mr. Fleming said he may have C) expl'ored further, had the subject matter of these proposed amendments 1 been there from the start, concerned the agreement Q about an $84,000.00 rental for the first year of the renewed ter~. The plaintiff's case was that the terms of cl. 56 of the le·ase ·would ·''apply/ •in ·e-ff'ect ·mutatis mutandis, to the new lease. I regarded Ex. 2, which confirmed that figure of $84,000.00, as evidencing an agreement about rental which, although reached with reference toan alleged exercise of option, properly applied () a~ well to a fre~h agreement for lease, reached, not throtigh exercise of· the option, but nevertheless by reference to the LJ option provision. Mr. Fleming said that had the defendants turned their min<::l to thi·s characterisation of what was occurring - "a f~esh agreement for lease rather than the exercise of the. op'tion - ·they may not have been prepared to allow the agreement about the $84,000.00 to be applied to such a situation. But I did . not read Ex. 2 as leaving' that argument open. Exhibit 2 refie6ts an agree~ent thaf if there has been a renewed term (which the plaintiff alleged, but which the defendants denied), . . .. , __ , ,. then the rent for its first year should be $84,000.00. · I was -- 10 of 13 -- !\) 9 therefore not persuaded that the defendants would likely have called further relevant evidence on that point, which would have affected the outcome, had this characterisation of the case been there in the statement of claim from the start. The only other matter of concern was whether, had that framework been pleaded, the defendant could successfully have relied on the absence of a sufficient memorandum of the agreement. I also invited and received additional submissions on that point. In . my opinion the defendants' letter dated 14th April, ) supplemented by relevant details incorporated because of the reference to the lease and cl. 56 of it, provided a sufficient memorandum signed by the defendants as parties to be charged. It therel;>y ,.id~.ntified the parties, tJ1e).fin,q, and the terms of t-he. . . ····· . t,. . .. ,, . . _, ....... .,., ...... . ,.'• ,)\ . _, . '• .i\, . , • .,,._,-.., --· ) ,) lease (including especially its term, and the rent fixing mechanism). An arguable difficulty about using the letter in that way, as the basis for a new agreement to lease, was that it. referred to notice "pursuant to cl. 56 11 of the lease, that clause having earlier lapsed for the reasons expressed above. But I did not think that one should read the letter too pedantically. One should, rather, acknowledge that the defendants were in substance thereby agreeing to take on a new lease, by reference to the terms of cl. 56, and that the letter may therefore be regarded as a sufficient memorandum. I considered that for the purposes of Tiverton Estates Ltd. v. Wearwell Ltd. (1975) 1 Ch. 146, the expression in the letter of the intention to exercise the option. to renew, implicitly carrying with it an assertion that the plaintiff was bound to -- 11 of 13 -- ~ • t ... 10 recognise the resultant ne'w lease, sufficiently acknowledged the existence of an· agreed position. Insofar as the letter wrongly - as·· I find - talked of exercising the option, I would, for the purposes 'of s. 59 of the Property Law Act, disregard that as simply an incorrect characterisation of what was occurring. It is· enough that · the letter · evidences an · assertion by the defendants (acknowledged, indeed, by the ·plaintiff, by its signature) that there is a new lease. I was, therefore, prepared, notwithstanding the lateness of the ~pplidation, to allow the plaintiff to amend the statement of claim ·yet again, in accordance with the· draft submitted to me, adding paras. 6, ·7 and 8. Paragraph 7 properly characterised the case, in accordance with my findings of fact, and the amendment should be made, to facilitate· my declaring the true position between the parties. I was s'atisfied that allowing the amendment would not cause prejudice to the defendants. I also granted leave to the defendant to make the consequential amendments foreshadowed to the defence and counterclaim, and to the plaintiff to deliver an amended reply and answer. I had already ordered that the plaintiff· pay the defendants' costs of and in·cidental to the hearing on 17th May, 1990 at which these matte~s were danvassed. I now order the plaintiff to pay any further costs, to be taxed, thrown away by reason of the plaintiff's further amendment to the statement of claim and the conse~ueht amendment made by the defendants. · The proposed amended reply and answer was not provided to me until ·sth June, 1990, and it was then, having considered all proposed amended pleadings; that I finally determined to allow , ___ ------ ----- --- ------------- ---·-- --- ------·-------- () 0 0 0 -- 12 of 13 -- 1 1 the amendments. I informed Counsel for the defendant of that, and asked him whether he w~shed to call any further evidence. He sought instructions, and told me that his client did not wish to call · any further evidence .,. which .of course confirmed me in my decision to allow the amendment. In what I have said already, I have sufficiently canvassed the matters raised in the amendments. Also after the conclusion of the case, Counsel for the \ ) plaintiff referred me to Traywinds Pty. Ltd. v. Cooper (1989) 1 Qd.R. 223, which has some factual similarity to this case. The ( ) Full Court did not however resolve the question whether, in a ) case like this, a purported exercise of an option out of time is in truth a counter offer - the view which I prefer - although Kelly S. P. J. found that. there was, .. as here., a fresh agreement . ,~ ~ .... , ..... ·•,.'•,,,, .•~;., ~ ................ •~, .... ,,·., · ... ,,~, ~ ·' (p. 227), gaining support in the end from the sort of robust approach taken in a similar situation in Hill v. Hill (1947) 1 Ch. 231 . That case is therefore not of great help to the resolution of this one, in which because of persisting inadequacy in the plaintiff's pleading, it has been necessary for me to express a conclusion as to the real nature of its rights. There will be a declaration that there is a lease agreement between the plaintiff as lessor and the defendants as lessees for a term of five years from 1st November, 1989 on the terms referred to in cl. 56 of Registered Lease No. 8695647 at a rental for the first year agreed at $84,000.00. I dismiss the counter claim. I order the defendants to pay the plaintiff's taxed costs of and incidental to the action, subject to the costs orders made against the plaintiff previously referred to. -- 13 of 13 --