Ausko Cooperation Pty Ltd v Junapa Pty Ltd [2021] NSWSC 615 (1 June 2021)

Last Updated: 1 June 2021

Supreme Court New South Wales

Case Name:	Ausko Cooperation Pty Ltd v Junapa Pty Ltd
Medium Neutral Citation:	[2021] NSWSC 615
Hearing Date(s):	19 May 2021
Date of Orders:	1 June 2021
Decision Date:	1 June 2021
Jurisdiction:	Equity
Before:	Darke J
Decision:	Statement of Claim is dismissed with costs.
Catchwords:	CONTRACTS – formation of contracts – intention to make concluded bargain – lessee sought to negotiate new five-year lease with lessor – retail shop premises – parties reached consensus as to terms necessary for a new lease but did not execute a lease document – previous lease dealt comprehensively with the parties’ obligations to each other – no discussion of a number of important matters including insurance, bank guarantee and guarantee of lessee’s obligations – requirements of Retail Leases Act 1994 (NSW) not met – not implicit that the parties intended to be bound on the terms of previous lease save for changes to accommodate the matters agreed upon in negotiations – held that the parties did not intend to be bound immediately – no binding agreement reached LAND LAW – leases – Retail Leases Act 1994 (NSW) (“the Act”) – “retail shop lease” – necessary that there be a concluded agreement intended to be binding whereby a right of occupation is granted – no such agreement concluded for a right of occupation for a 5 year term with an option for a further term of 5 years – section 8 of the Act is concerned with when a retail shop lease is deemed to have commenced or been entered into not whether a retail shop lease has come into existence – no retail shop lease came into existence
Legislation Cited:	Retail Leases Act 1994 (NSW) ss 3, 8, 11, 12A, 15, 16, 16BA
Cases Cited:	Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 9141 Darzi Group Pty Ltd v Nolde Pty Ltd [2019] NSWCA 210 Darzi Group Pty Ltd v Nolde Pty Ltd [2019] NSWSC 335 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 531 In the matter of Creditors’ Trust Deed established in the administration of Bevillesta Pty Ltd [2013] NSWSC 1258 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 Streat v Fantastic Holdings Limited [2011] NSWSC 1097 Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21
Category:	Principal judgment
Parties:	Ausko Cooperation Pty Ltd (Plaintiff) Junapa Pty Ltd (Defendant)
Representation:	Counsel: Mr D Weinberger (Plaintiff) Mr B M Green (Defendant) Solicitors: Keystone Lawyers (Plaintiff) Kent Attorneys (Defendant)
File Number(s):	2021/31966
Publication Restriction:	None

JUDGMENT

Introduction

1. These proceedings were commenced by Summons filed by the plaintiff on 4 February 2021. The plaintiff sought to challenge the validity of a Notice to Vacate that had been served by the defendant in respect of certain shop premises on the Ground Floor and First Floor of 58 Mortlake Street, Concord. The plaintiff was in occupation of the premises for the purpose of conducting a café restaurant and associated gift shop business. The plaintiff also sought declaratory relief to the effect that it was entitled to have an agreement for lease of the shop premises specifically performed.
2. On 5 February 2021 the Court made various orders by consent, including an injunction restraining the defendant from acting upon the Notice to Vacate, and an order that the proceedings continue on pleadings.
3. A Statement of Claim was filed on 17 February 2021. Relief was claimed in substantially the same terms as that sought in the Summons, except that an alternative claim in damages was added.
4. On 18 February 2021 the Court made further orders including an order that all questions concerning the quantification of any damages claimed be heard and determined separately from and after the trial of all other issues.
5. On 25 February 2021 the matter was provisionally listed for hearing on 19 May 2021. A Defence was filed on 17 March 2021 in which issue was taken with the plaintiff’s claims for relief. On 26 March 2021 the provisional hearing date was confirmed.
6. The central issue in the proceedings is whether on about 3 September 2020 the plaintiff and the defendant entered into a binding agreement for a new lease of the shop premises. The plaintiff as lessee and the defendant as lessor had been parties to registered lease (AJ884156) of the shop premises for a five year term from 31 August 2015 to 30 August 2020. That lease contained an option to renew for a further period of 5 years. The plaintiff decided not to exercise the option within the available period, which ended on 30 May 2020. However, on 15 June 2020, solicitors acting for the plaintiff (PSK Legal) sent a letter to the defendant’s managing agents (Khoury & Partners) indicating a willingness to continue its business at the premises, but only at a substantially lower rent. These proceedings are chiefly concerned with the effect in law of the negotiations between the parties that followed. There is no substantial dispute as to the facts. Further, it is common ground that the shop premises are a “retail shop” within the meaning of the Retail Leases Act 1994 (NSW) (“the Act”).

Summary of salient facts

7. As already noted, the parties were parties to registered lease AJ884156 for a term ending on 30 August 2020. The sole director and secretary of the plaintiff, Jay Young Kim, was also a party to the lease as a guarantor of the plaintiff’s obligations. The lease employs the standard Real Property Act 1900 (NSW) Form 07L, together with Annexure A (18 pages), Annexure B (13 pages), two pages of “Rules, Regulations, By-Laws & Restrictions”, and a page for execution by the guarantor. It is not necessary to refer to the provisions of the lease at this point save to note that:

(a) in addition to the rent, which at the end of the term was about $110,000 per annum or $9,166.66 per month (including GST), the plaintiff was obliged to pay a share of various identified outgoings for the property; and

(b) the plaintiff was obliged to provide a bank guarantee in the sum of $21,450.

8. There is evidence that following the outbreak of the COVID-19 pandemic in 2020, the parties engaged with each other on the question of appropriate reductions, waivers and/or deferrals of rent. Neither party suggested that anything of significance turned upon those exchanges or the outcome of those exchanges.
9. The letter dated 15 June 2020, referred to earlier, was sent by Ms Michelle Kwon of PSK Legal to Mr Tony Youssef of Khoury & Partners. It included the following:

We act for the current tenant and we understand that you are the property managing agent for landlord.
As you are maybe aware, our client has decided to NOT exercise the option on this Lease.
Our client’s business has excellent reputation in the area as you can see from the attached information including Tripadvisor and Google reviews. Despite that, the business is not profitable enough to sustain long term. Even selling the business will be difficult as the rent is too high compared with turnover.
Our client is willing to continue the business as our client has put in a lot of effort to cultivate loyal clientele BUT it will have to be at substantially lower rent to justify the effort required to maintain the business.
Please seek instruction from your client whether your client is willing to offer significantly lower rent for a new term.

10. On 25 June 2020 Mr Youssef sent an email to Ms Kwon in the following terms:

We have had a discussion with our client regarding the letter.
Can you please notify us what sort of rent your client is requesting?
Your client is also in arrears at the present moment and we require immediate rental payment.
Please do not hesitate to contact us should you wish to discuss further.

11. On 8 July 2020 Ms Kwon sent an email to Mr Youssef which attached a letter in the following terms:

We refer to previous correspondences in this matter and we are instructed to offer the following proposal for a new lease:
Rent at Commencement: $83,400 (Equivalent to $78,000.00, the commencement rent for previous Lease, + 6.92% CPI increase from 2015 to 2019.) The rent increases for the past five years of nearly 30% cannot be absorbed by the business of our client.
Term: 5 years + 5 years
Annual rent increase: by CPI
Outgoings to be paid be Lessee:
(a) Council rate (40%)
(b) Metered water rate & water usage (100%)
(c) 3 recycled bins (40%)
A reserved car space for the Lessee
Repair of the dedicated toilet to rid of smell that is related with structural plumbing issues.
Repair of front door to enable easy closure.
Our client had engaged tradesmen to fix the door but they have advised that the door needs to be fixed by the builder as the door is made specially to fit the premises with special height & width.
Repair of shop windows to prevent water leakage during rain.
50% rent reduction for June 2020.
(The 50% rent reduction for April & May 2020 has already been agreed to.)
Should you have any queries, please contact the writer.

12. On 16 July 2020 Mr Youssef sent an email to Ms Kwon in the following terms:

Thank you for your offer, we have had a discussion with the owner and note the following:
Rent Commencement: $88,000.00 per annum + GST
Lease Term: Five year
Option Period: Five year
Annual Rent Review: 3% increases per annum
Outgoings to be paid by Lessee
Council Rates (40%)
Water charges, usage and trade waste (40% of total meter or 100% if separately metered)
3 recycled bins (40%) Tenant provides their own rubbish bin
Car Space: Unfortunately, no car spaces are available however the tenant will have the first right of refusal if a car space is available
Lessor agrees to repair the following:
Organise a plumber to attend to the sewerage smell
Repair the front door
Repair shop front windows which are leaking
Rent reduction: In relation to April and May 2020, the owner had previously offered a 50% waiver however this was rejected by the tenant. As a sign of good faith, the owner will accept 50% waiver for April and May 2020. As for June 2020, the owner will only offer a 50% reduction based on the acceptance of above.
Please let us know if you [sic] client accepts, please do not hesitate to contact us should you wish to discuss further.

13. On 22 July 2020 Ms Kwon sent an email to Mr Youssef. This email was substantially in the form of Mr Youssef’s email of 16 July 2020 except that Ms Kwon’s comments were added to it in a red typeface. The email (showing Ms Kwon’s comments in red typeface underlined) was in the following terms:

Thank you for your offer, we have had a discussion with the owner and note the following:
Rent Commencement: $88,000.00 per annum + GST - > Our client is agreeable to $85,700 + GST per annum. Please note that our client’s business is continually being affected by the current Corona virus crisis.
Lease Term: Five year - > Noted.
Option Period: Five year - > Noted.
Annual Rent Review: 3% increases per annum - > agreed.
Outgoings to be paid by Lessee
1. Council Rates (40%) - > Agreed.
2. Water charges, usage and trade waste (40% of total meter or 100% if separately metered - > Agreed 100% for separately metered.
3. 3 recycled bins (40%) Tenant provides their own rubbish bin - > Agreed.
Car Space: Unfortunately, no car spaces are available however the tenant will have the first right of refusal if a car space is available - > Please advise when the space reserved for the premises will be available for our client. Our client requests that the space should be provided free of extra costs.
Lessor agrees to repair the following within 3 months from commencement date of Lease:
Organise a plumber to attend to the sewerage smell
Repair the front door
Repair shop front windows which are leaking
Repair water meter (Please note that currently the water is not working correctly. Our client has contacted Sydney Water previously who has advised that the lessor should contact and repair with Sydney Water.)
Rent reduction: In relation to April and May 2020, the owner had previously offered a 50% waiver however this was rejected by the tenant. As a sign of good faith, the owner will accept 50% waiver for April and May 2020. As for June 2020, the owner will only offer a 50% reduction based on the acceptance of the above. - > Regardless of changes to above no. 1, our client requests the lessor to allow a 50% rent reduction for June.

Please note that our client can only accommodate approx. 60% of customer seating arrangement as a result of COVID19 4 sqm distance restriction.

Please let us know if you [sic] client accepts, please do not hesitate to contact us should you wish to discuss further.

14. Later on 22 July 2020 Mr Youssef sent an email to Ms Kwon which stated that the agents would discuss the matter with the defendant and “get back to you shortly”. Ms Kwon sent emails on 7 August 2020, 20 August 2020 and 26 August 2020 following up a response. The email of 20 August 2020 was in the following terms:

It’s almost the end of August.
Would you follow up with the lessor asap?

15. The email of 26 August 2020 was in the following terms:

Our office closes for the short break from 4/9/2020 to 18/9/2020.
Can we finalize the terms and conditions of this matter soon before 4/9/2020?

16. On 26 August 2020 Mr Youssef sent an email to Ms Kwon in the following terms:

I’ve been informed that the owner is meeting with upper management tomorrow.
We expect to receive a reply shortly after. We will try have this finalised as soon as possible.

17. On 3 September 2020 Mr Youssef sent an email to Ms Kwon in the following terms:

As discussed today, the Lessor has approved your attached email with your comments in red.
Please let us know if you will be preparing the lease as per previous.

The attached email referred to is the email sent by Ms Kwon on 22 July 2020.

18. On 4 September 2020 Ms Kwon sent an email to Mr Youssef in the following terms:

Our client request our email reply in red point 5(c) to be deleted as our client will arrange their own bins and pay their own.
Please obtain the lessor’s instruction asap today.

19. Later on 4 September 2020 Mr Youssef and Ms Kwon exchanged a series of emails as follows:

(a) Mr Youssef sent an email to Ms Kwon stating:

We will notify the solicitor accordingly

(b) Ms Kwon replied stating:

Does below mean that the landlord has agreed to delete point 5(c)?

(c) Mr Youssef responded in the following terms:

I will [sic] the solicitor to confirm however I believe the clause will be reworded to stated [sic] that the tenant will organise their own bins and show contractual agreements in place.

20. It appears that it was contemplated at that time that a solicitor retained by the defendant would proceed to draft a lease.
21. I interpose to note that the plaintiff contends that by this time the parties had agreed to be bound by a new lease on the terms agreed in the correspondence set out above. I note further that neither Ms Kwon nor Mr Youssef was called to give evidence in the proceedings.
22. Evidence was given by Hun Tae Kim, who became the sole director and secretary of the plaintiff on 23 November 2020. He confirmed in cross-examination that in the months leading up to the end of August 2020 the rent (excluding any discount or reduction due to the pandemic) was $9,166.66 per month including GST. However, in the months of October, November and December 2020, Mr Kim caused the plaintiff to pay an amount of $7,855.83 per month including GST. That amount is the monthly equivalent of an annual rent of $85,700 plus GST, as referred to by Ms Kwon in her response to Mr Youssef on 22 July 2020, which was said by Mr Youssef on 3 September 2020 to have been approved by the defendant.
23. Mr Kim explained that he paid those amounts in October, November and December 2020:

Because I was advised by the solicitor at PSK Lawyers in September that there was an agreement, the lease, and that amount was to pay starting from October.

24. Nevertheless, the evidence establishes that throughout the period September to November 2020 Khoury & Partners were issuing monthly rent invoices to the plaintiff in the amount of $9,166.66 (including GST). Mr Kim agreed that he did not receive any requests or invoices from the defendant seeking rent in the amount of $7,855.83 before he made the payments in that amount. Mr Kim further agreed that he received no receipts for such payments, but he had earlier stated that no receipts had been received “in the last five years”.
25. Mr Kim also gave evidence in cross-examination that in January 2021 (after the defendant had served a Notice to Vacate) the plaintiff paid an amount of $9,166.66 in rent. Mr Kim said that he was advised by his solicitor that because of the notice it was “better to pay the old rent money”.
26. No draft lease document had been issued by early November 2020. On 12 November 2020 Ms Kwon sent an email to Mr Youssef in the following terms:

You may ask the landlord’s solicitor to hold for preparing the new lease documents.
We have been informed by our client today that the sole director/secretary: Jay Young Kim of Ausko Corporation Pty Ltd will now [sic] replaced by her father in law Mr. Hun Tae Kim (known as Daniel Kim) who will also be sole director/secretary of the same company and who is currently operating the business together with Jay Young Kim since from initial/previous commencement date of Lease.
Please seek the landlord’s consent to this change of directorship and confirm our office soon so that we can forward you the updated ASIC company abstract copy.

Based on the content of an email sent by Mr Youssef to Ms Kwon on 17 November 2020, it seems likely that Mr Youssef forwarded Ms Kwon’s 12 November 2020 email to the defendant’s solicitors, and was awaiting a response.

27. On 18 November 2020 Mr Youssef sent an email to Ms Kwon which incorporated a response received by him from the solicitors. The solicitors asked that “the updated ASIC company abstract showing the change of director” be forwarded to them.
28. As noted earlier, Mr Kim became the sole director and secretary of the plaintiff on 23 November 2020. He replaced Jay Young Kim, the guarantor under the registered lease, who had held those positions.
29. On 24 November 2020 Ms Kwon sent an email to Mr Youssef which included the following:

We attach the ASIC Company abstract showing a new director of “Hun Tae Kim”.
Please forward it to the lessor solicitor and we await lease documents soon so that we can finalize this transaction.

30. Ms Kwon followed up the lease documents by way of an email to Mr Youssef on 8 December 2020. He responded by email later that day stating that the solicitor was “awaiting final authority before sending the lease”. The email concluded:

We are hoping to have this completed soon as the leases are finalised and ready.

31. However, on 7 January 2021 the defendant sent a letter to the plaintiff headed “Notice to Vacate”. The letter included the following:

Your company’s lease of the above premises expired on 30 August 2020 and your company has chosen not to exercise the option for renewal. Therefore, the lease is at an end and your company has continued in occupation of the premises after the expiry date as a periodic tenant at our company’s discretion.
Our company’s agent, Tony Youssef of Khoury & Partners, has been in discussions with your company’s solicitor, Michelle Kwon of PSK Legal, regarding a possible new 5 plus 5 year lease, but no agreement has been reached in relation to the terms of a new lease and we have decided not to proceed with those negotiations.
We now give you notice that your company is required to vacate the premises on or before Sunday, 7 February 2021, and to yield up possession of the premises to us in accordance with the lease.

32. Keystone Lawyers, acting for the plaintiff, responded by letter on 21 January 2021. This letter included the following:

1. We act on behalf of the Lessee, and we refer to the letter dated 7 January 2021 you issued to our client which contained a notice to vacate the Premises (“Notice To Vacate”).
2. In relation to the Notice To Vacate, we are instructed as follows:
(a) On 8 July 2020, PSK Legal Lawyers, the Lessee’s previous solicitor acting on the Lessee’s behalf (“PSK Legal Lawyers”), issued a letter to your agent Khoury & Partners (“Your Agent”) offering a proposal for a new formal lease for the Premises (the “New Lease”);
(b) On 16 July 2020, Your Agent issued to PSK Legal Lawyers a counteroffer, proposing amended commercial terms of the New Lease (the “Counteroffer”);
(c) On 22 July 2020, PSK Legal Lawyers issued an email to Your Agent accepting the Counteroffer;
(d) On 3 September 2020, Your Agent issued an email to PSK Legal Lawyers:
(i) confirming you had granted to the Lessee a New Lease on the commercial terms agreed between the parties; and
(ii) inviting Legal Lawyers to take up the option to draft the New Lease.
(e) Your Agent subsequently advised PSK Legal Lawyers that your solicitor had been tasked with drafting the New Lease;
(f) In reliance on the New Lease, the Lessee continues to occupy the Premises and is performing all obligations required of the Lessee.
3. On the basis of the above, we are instructed the Lessee considers:
(a) The email communications between 8 July 2020 and 3 September 2020 inclusive constituted:
(i) the forming of a contract, incorporating the commercial terms agreed between the parties, which both parties intended to be binding (the “Contract”); and
(ii) an agreement to formalise the terms of the Contract by drafting and duly executing the New Lease.
(b) You are estopped from enforcing the Notice To Vacate and from retaking possession of the Premises;
4. Accordingly, the Lessee demands that you issue to the Lessee the New Lease to formalise the terms of the Contract.

33. The defendant did not accede to the demand made in the Keystone Lawyers letter, and the plaintiff commenced these proceedings on 4 February 2021.

The plaintiff’s case

34. The case pleaded by the plaintiff is that on or around 3 September 2020 the plaintiff and the defendant either entered into a new lease of the shop premises or made a binding agreement for a new lease of the premises on the commercial terms agreed between them. In particular, reliance is placed on the content of the email communications between PSK Legal and Khoury & Partners on 8 July 2020, 16 July 2020, 22 July 2020 and 3 September 2020. The alleged agreement for a new lease is said to either consist of the terms identified in those communications, or alternatively be an agreement to such terms which would be restated in a form that would be fuller or more precise but not different in effect.
35. The latter basis is clearly framed as falling within the so-called first class of case described in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360, as one where 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. In such a case, the parties are bound at once to perform the agreed terms whether the contemplated formal document comes into existence or not.
36. The plaintiff further alleged that since 3 September 2020 it has been in occupation of the shop premises under the terms of the new lease or alternatively in accordance with the terms of the agreement for a new lease, in particular by paying rent in accordance with those terms, and by the defendant’s acceptance of that rent.
37. In its written submissions, the plaintiff referred to s 8 of the Act, and contended that a retail shop lease should be deemed to have been entered into because the plaintiff was in possession of the retail shop as lessee under the lease and had commenced to pay rent as lessee under the lease. This contention was further developed in oral submissions where it was stated that the defendant at least acquiesced in the payment of rent at the newly agreed rate. It was put that a retail lease came into existence by reason of s 8(1) of the Act and the fact that there was an agreement or consensus on essential commercial terms. Reference was made to various cases involving agreements for lease, including the decision of Pembroke J in Streat v Fantastic Holdings Ltd [2011] NSWSC 1097, the facts of which were said to bear some analogy with the facts present here, and the decision of Helsham J in Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 9141. The plaintiff submitted that it was clear that the parties had reached consensus as to the terms of a lease albeit that no formal written lease was entered into (see Darzi Group Pty Ltd v Nolde Pty Ltd [2019] NSWSC 335 at [190] – Henry J).
38. It was submitted in the alternative that the parties should be taken to have agreed to enter into a new lease on the terms of the existing lease save for changes made to accommodate the matters agreed upon in the correspondence between them.
39. The plaintiff also advanced a case in estoppel, based on an alleged representation made by the defendant to the effect that it was intended that the new lease or agreement for a new lease was to be legally binding. The plaintiff claims to have incurred expenditure (and paid rent at the new rate) in reliance upon the representation. The estoppel is said to operate so as to preclude the defendant from denying the existence of the new lease or agreement for a new lease.

The defendant’s response

40. The defendant accepted that the correspondence showed a consensus on some of the important terms of a lease, such as rent and term (although no commencement date was agreed). Reference was made to the principle that the question whether the parties intended to make a concluded bargain is different from the question whether the parties had reached agreement upon such terms as are legally necessary to constitute a contract (see Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 per Gleeson CJ; referred to by Bathurst CJ in Darzi Group Pty Ltd v Nolde Pty Ltd (2019) 19 BPR 39,563; [2019] NSWCA 210 at [4]). The defendant submitted that some issues were not resolved or clearly resolved between the parties, such as the issue concerning the provision of a car space and the issue concerning rubbish bins and recycling bins (which was the subject of discussion after 3 September 2020). The defendant pointed out that important issues that were the subject of the existing lease were not the subject of discussion at all, for example, the bank guarantee and the guarantee of the plaintiff’s obligations. A contrast was drawn with the facts present in Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21. The defendant submitted that when the conduct of the parties is viewed objectively, they should not be regarded as having intended to be immediately bound to a lease for a term of 5 years with an option for a further 5 years.
41. The defendant submitted that Ms Kwon’s email of 12 November 2020 was an indication that no concluded agreement had been reached. It was submitted that the suggestion that the solicitors hold off on the preparation of the new lease, in circumstances where the defendant’s consent was sought to a change of directorship of the plaintiff, amounted to an acknowledgement that the issue was seen as a potential “deal breaker”, and thus an indication that no concluded bargain had been made.
42. In relation to the rent paid after 3 September 2020, the defendant noted that the agents continued to invoice the plaintiff at the rate under the existing lease, and that the receipt of direct transfers of lower amounts did not constitute an acceptance by the defendant of the lower rent.
43. In relation to the Act, the defendant submitted that there was no claim made in the pleading for relief by way of a “statutory lease” under the Act (see Darzi Group Pty Ltd v Nolde Pty Ltd (supra) at [187] – Henry J); rather, the claim was for specific performance of a general law agreement for lease. It was submitted that, in any event, s 8(1) of the Act did not remove the requirement for a legally binding agreement and, in addition, there was no relevant entry into possession or payment of rent for the purposes of s 8(1). Further, it was suggested that the fact that formal requirements of the Act, including the provision of a lessor’s disclosure statement, were not satisfied, was another indication against a finding that the parties intended to be immediately bound.
44. In relation to the estoppel claim, the defendant submitted that insofar as the plaintiff spent money on or in relation to refrigeration equipment for its business, the amounts were trifling and in any case incurred in the ordinary course of the business.

Determination

45. It is convenient to deal first with the question whether the parties entered into a binding agreement for a new lease on about 3 September 2020. As in Darzi Group Pty Ltd v Nolde Pty Ltd (supra – Court of Appeal), also a case involving parties to a retail shop lease, the critical question is whether by an exchange of correspondence the parties entered into a binding agreement for the grant of a lease (see at [3], [99] and [141]). Questions of this nature are ordinarily determined by reference to the classification of cases as expressed in Masters v Cameron (supra) at 360, and the principle stated in that case at 362 that the question depends upon the intention disclosed by the language the parties have employed. The relevant principles have been stated and applied in countless cases since. For example, in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (supra) Gleeson CJ stated at 548:

In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron ((1954) [1954] HCA 72; 91 CLR 353) dispute, it will normally be of importance that the court have an understating of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence...
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.

46. The determination as to intention rests upon an objective analysis of the conduct of the parties (see, for example, GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634E-F per McHugh JA; Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [64]- [65] and [69] per Beazley P; Darzi Group Pty Ltd v Nolde Pty Ltd (supra – Court of Appeal) at [4]). It is legitimate for this purpose to have regard to the subsequent conduct of the parties to determine whether, at an earlier juncture, the parties intended to enter into a binding agreement (see Pavlovic v Universal Music Australia Pty Ltd (supra) at [118]).
47. The relevant conduct of the parties in this case took place in the context of an existing landlord and tenant relationship. The relationship between them was governed by a registered lease of the premises for a 5 year term which was drawing to a close in circumstances where the plaintiff had decided not to take up the option to renew the lease for a further 5 year period. The registered lease, which may be referred to as “the existing lease”, is a “retail shop lease” within the meaning of the Act. The existing lease is a lengthy and detailed document which deals with a wide range of matters in an apparently comprehensive manner. Apart from the central matters of rent and outgoings, the existing lease made provision for matters including repairs, insurance, transfer of the lease, forfeiture of the lease, provision of a bank guarantee by the plaintiff, and the giving of a guarantee of the plaintiff’s obligations. A rent free period was provided for in cl 31, and cll 34 and 35 dealt with lessor’s works and lessee’s works respectively.
48. By Ms Kwon’s letter to Mr Youssef on 15 June 2020, the plaintiff sought an indication from the defendant that it would be “willing to offer significantly lower rent for a new term”. After Mr Youssef requested Ms Kwon to indicate the rent the plaintiff was seeking, she responded on 8 July 2020 with a “proposal for a new lease”. The proposal relevantly covered five items, namely:

(i) rent at commencement and annual rent increases;

(ii) term of lease, including option for further term;

(iii) outgoings to be paid by the lessee;

(iv) car space for the lessee; and

(v) repairs to be undertaken.

49. On 16 July 2020 Mr Youssef responded to each item of the proposal, which he described as an offer. There was agreement on some items (including as to a 5 year lease term with an option for a further 5 year term) but not others (including as to rent and annual rent increases). Ms Kwon’s email in response on 22 July 2020 provided further agreement on some items (such as annual rent increases and lessee’s obligations concerning rubbish bins and recycling bins), but some of the other items remained in issue (such as the rent and the car space), and some additional requests were made concerning repairs. The email concluded with a request that Mr Youssef state whether the defendant “accepts”. It is apparent that as the expiry of the term of the existing lease was looming, Ms Kwon was keen to obtain an answer from Mr Youssef to “finalize the terms and conditions of this matter”. In his email of 26 August 2020 Mr Youssef said that “we will try to have this finalised as soon as possible”. I note these references to finality but do not think that much weight should be placed upon them; Ms Kwon also spoke of finalising the transaction in her email of 24 November 2020.
50. On 3 September 2020 Mr Youssef sent an email to Ms Kwon which referred to a discussion that took place between them on that day. No evidence was adduced of the terms of that discussion. However, the balance of the email indicates that the defendant had approved of the content of Ms Kwon’s email of 22 July 2020, and it may be inferred that the discussion concerned that matter. The last sentence of Mr Youssef’s email suggests that it was contemplated (at least by him) that a lease document would be prepared, as had occurred on the previous occasion the parties entered into a lease.
51. It can be said that at this point the parties had seemingly reached agreement or consensus upon each of the five items that had been under discussion since Ms Kwon’s proposal on 8 July 2020, although it should be noted that some uncertainty attends whatever agreement was reached in relation to the car space. I think it can be said that the plaintiff and the defendant had reached agreement upon such terms as are legally necessary to constitute an agreement for lease. That is, the plaintiff and the defendant were in agreement as to the premises, the term and the rent. There was no agreement as to the commencement date of the term, but if an agreement is a retail shop lease, s 8 of the Act would operate to fill that gap.
52. However, agreement on what is legally necessary for an agreement is not the same as an intention to make a concluded bargain. To determine whether the parties had that intention at a particular time it is necessary to objectively analyse their conduct, including relevant subsequent conduct, in the context in which it occurred.
53. As I have said, the context includes an existing retail shop lease within the meaning of the Act. The parties must be taken to have been aware of that statutory background.
54. The parties were negotiating for a new lease with a term of 5 years with an option for a further 5 year term. By s 16 of the Act, a retail shop lease for such a term is required to be lodged for registration. In these circumstances the parties should be taken to have contemplated that a formal lease document would be prepared and executed. That conclusion would in any event be drawn from the last sentence of Mr Youssef’s email of 3 September 2020 (see also s 15 of the Act).
55. There are, in addition, other requirements of the Act that relate to the making of a retail shop lease, notably the requirement in s 11 of the Act for the lessor to give a disclosure statement to the lessee at least 7 days before a retail shop lease is entered into. That is an important requirement, and failure to satisfy it is not only an offence, it also affects the enforceability of a retail shop lease. Section 12A, for example, provides that a lessee under a retail shop lease is not liable to pay any outgoings unless the liability is disclosed in the lessor’s disclosure statement. The parties here contemplated a lease that would make the plaintiff liable for certain outgoings. I think they should be taken to have contemplated that a lessor’s disclosure statement would be given before the proposed retail shop lease was entered into.
56. There are other circumstances that, in my view, are indications that the parties, although in agreement by 3 September 2020 on matters essential for an agreement for lease, did not intend to make a concluded bargain or binding agreement at that point. The detail and scope of the existing lease leads me think it unlikely that the parties would intend to become legally bound when a number of matters the subject of the existing lease were not the subject of the discussions leading up to 3 September 2020. For example, there was no discussion concerning insurance, the provision of a bank guarantee, or the giving of a guarantee of the plaintiff’s obligations. It seems to me that these are matters about which these parties would be expected to reach agreement before becoming bound to a new lease, particularly a lease for a 5 year term, with an option for a further 5 years. It strikes me as unlikely that these parties, having dealt so comprehensively with their relationship in the existing lease, would proceed to bind themselves to a lengthy lease without having these not insignificant matters dealt with.
57. I note in passing that by s 16BA of the Act, the defendant would have been required to return the bank guarantee given by the plaintiff pursuant to the existing lease. There was thus a clear need for something to be done if any such security was to be provided for the proposed new lease.
58. For the above reasons I am unable to accept that the parties intended to be bound to an agreement on only the terms set forth in the correspondence up to and including 3 September 2020 without addressing the many matters they had previously taken the trouble to deal with in the existing lease.
59. I turn then to the plaintiff’s alternative argument that the parties should be taken to have agreed to enter into a new lease on the terms of the existing lease save for changes made to accommodate the matters agreed upon in the correspondence between them. This argument gains some support from the approach taken by Helsham J in Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (supra). In that case, his Honour found that the parties to an existing lease entered into an agreement for a renewed lease, and granted specific performance in respect of the agreement. His Honour found (at 9146 and 9147) that it was implicit in the terms of the communications between the parties that the contemplated formal document would contain the agreed terms but would otherwise be in the form of the current lease. Helsham J evidently placed some reliance upon the fact that the existing lease contained “the ordinary sort of covenants and conditions that one would expect to find in a five year lease of business premises”; and also the references in the correspondence to “renewing the lease”.
60. The present case differs in various respects. Here, the existing lease contains at least some provisions which I doubt could be considered “ordinary” covenants or conditions (e.g. cl 8.6 concerning an indemnity in favour of the defendant, and cl 20 containing an exclusion of warranties) and further contains some provisions which seem to have become redundant (e.g. those concerning the rent free period, the lessor’s works and the lessee’s works). Further, this is not a case where the parties were explicitly speaking of a renewal of an existing lease. The plaintiff decided not to exercise its option to renew the lease and instead sought to negotiate what Ms Kwon described as “a new term” or “a new lease”.
61. That is perhaps not a major difference in itself, but taken with the matters already referred to, and in circumstances where the parties must be taken to have contemplated that a formal lease document would be prepared and executed yet made no express reference to the existing lease playing any role in that regard, I do not think it is implicit that the parties contemplated that the formal document would take the form of the existing lease save for changes to accommodate the matters agreed upon in the correspondence. Had that been intended it would have been very simple to make a statement to that effect. Moreover, it should not be overlooked that in one respect, namely, the car space, entirely new provisions would need to be drafted and included in the new lease document. I have already observed that some uncertainty attends the agreement reached in relation to that matter. There seems to be considerable scope for further discussion on the precise terms of the envisaged first right of refusal. In my opinion, the circumstances suggest that, at most, the parties may have expected that the existing lease would be used as a basis or template that would assist in the formulation of a new lease document.
62. In summary, it is my opinion that the present case is one where the parties, as at 3 September 2020, should be taken to have in contemplation that there could be further negotiations as to the terms to be included in a new lease. As I have said, a number of matters, including matters of apparent importance, were not the subject of the discussions up to that time. I think that the parties intended that those matters, or at least the significant ones (such as insurance, bank guarantee, and guarantee of the plaintiff) would be dealt with by provisions to be included in the new lease document, and contemplated that there could be negotiations about such matters. When further regard is had to the statutory context, including the requirement to give a lessor’s disclosure statement before a retail shop lease is entered into, I am unable to be satisfied that on or around 3 September 2020, these parties made a concluded bargain and intended at that time to be immediately bound to perform the terms that had been agreed up to that point. There was no binding agreement for a new lease for a term of 5 years, with an option for a further 5 years, on such terms.
63. In reaching these conclusions I have taken into account the conduct of the parties after 3 September 2020.
64. The content of the emails sent on 4 September 2020 seems to be equivocal. Ms Kwon was seeking the defendant’s agreement to delete one of the matters that had been agreed (concerning rubbish bins and recycling bins). That is consistent with either a concluded bargain or a continuation of negotiations in the absence of a concluded bargain.
65. The evidence concerning the payment of rent is of little weight. There is no direct evidence of the amount of rent paid in September 2020, but having regard to Mr Kim’s evidence, it can be inferred that if rent was paid it was at the “old” rate of $9,166.66. At the suggestion of Ms Kwon, the plaintiff paid rent in October, November and December 2020 at the “new” rate of $7,855.83. These payments were simply deposited into the appropriate account and in a limited sense may be considered to have been “accepted” by the defendant or its agents. However, the agents continued to invoice the plaintiff for rent at the rate of $9,166.66, and there was no express acceptance by or on behalf of the defendant that only $7,855.83 was payable. Whatever force there is in the making of the payments of $7,855.83, it is somewhat diminished by the plaintiff’s reversion to the “old” rate in January 2021 (again on the advice of a solicitor) after the defendant denied that any new lease had been agreed.
66. Ms Kwon’s email of 12 November 2020 suggests that the plaintiff thought that the consent of the defendant was needed in respect of a foreshadowed change in the directorship of the plaintiff. The basis for that belief is not revealed in the evidence. Neither is it clear why the request was made for the defendant’s solicitor to “hold for”, which I think should be read as “hold off”, on the preparation of the new lease documents. The reason is likely related in some way to a guarantee of the plaintiff’s obligations. Again, I think that the conduct is equivocal. The plaintiff may be seeking consent to a change in what it regarded as a concluded bargain involving a guarantee given by Jay Young Kim; or it may be putting Mr Kim forward as a prospective guarantor in the course of negotiations in the absence of a concluded bargain, in either case suggesting that there be a pause in the drafting process. I do not think that the email necessarily bespeaks of a recognition by the plaintiff that the issue was a potential “deal breaker”, and thus an indication that no concluded bargain had been made.
67. For these reasons, the “subsequent conduct” of the parties does not seem to me to significantly assist the case of either party on the question whether a binding agreement for a new lease had been made on or around 3 September 2020.
68. I should add that I do not consider that the facts in Streat v Fantastic Holdings Ltd (supra) are closely analogous to the facts in the present case. In the former case, the Court found an agreement for lease in the form of a lease that had been executed by the lessee and returned to the lessor. The form of lease, which embodied the terms agreed in earlier communications, had been prepared by the lessor and sent to the lessee (see at [6]-[7]). Pembroke J found that all of the terms of the lease had been agreed and that nothing remained to be done other than execution of the document by the lessor (see at [3] and [8]). His Honour rejected the contention that the parties did not intend to be bound until both had signed. I regard that case as considerably stronger than the present case.
69. For substantially the same reasons as are set out above, I am not satisfied that a retail shop lease came into existence on or around 3 September 2020. A retail shop lease is relevantly defined in s 3(1) of the Act to mean any agreement under which a person grants to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop. In my opinion, agreements for the purpose of the definition are in the nature of concluded agreements intended to be binding whereby a party grants, for valuable consideration, a right of occupation for the purpose of the use of retail shop premises (see Darzi Group Pty Ltd v Nolde Pty Ltd (supra – Court of Appeal) at [39]-[40] per Basten JA). That is so whether the agreement is express or implied, oral or in writing, and whether or not the right is a right of exclusive occupation. However, contrary to the submissions of the plaintiff, no such agreement was concluded on or around 3 September 2020 whereby the defendant granted to the plaintiff, for value, a right of occupation of the shop premises for a 5 year term with an option for a further term of 5 years.
70. I am also of the view that s 8(1) of the Act does not operate to deem that a retail shop lease came into existence. Section 8 is concerned with a temporal question, namely, when a retail shop lease is deemed to have commenced or been entered into, rather than with whether a retail shop lease has come into existence (see Darzi Group Pty Ltd v Nolde Pty Ltd (supra – Henry J) at [188]-[189]; Darzi Group Pty Ltd v Nolde Pty Ltd (supra – Court of Appeal) at [33] per Basten JA; see also In the matter of Creditors’ Trust Deed established in the administration of Bevillesta Pty Ltd [2013] NSWSC 1258 at [31] per Black J). No retail shop lease came into existence between the parties on or around 3 September 2020. Accordingly, the plaintiff did not (notionally) enter into possession of the shop premises as lessee under such a lease, and neither did it begin to pay rent as lessee under such a lease.
71. I turn now to consider the plaintiff’s estoppel claim. As pleaded, the claim rests upon the allegation that the defendant represented to the plaintiff that it was intended that the new lease or agreement for a new lease be legally binding. The representation is said to have been made in the circumstances of the negotiations between the parties between July 2020 and 3 September 2020, and the circumstances pertaining in the period between September 2020 and December 2020 when the parties were in the process of drafting and executing a formal lease and said to be in the process of fulfilling the terms of the agreement for a new lease (see Statement of Claim paragraph 18, which refers, inter alia, to paragraphs 5, 14 and 15). It is alleged that from about 3 September 2020 the plaintiff entered into possession of the shop premises on the terms of the new lease or agreement for a new lease, and thereafter paid rent accordingly.
72. The estoppel case was not referred to in the plaintiff’s written submissions, and was only briefly developed in the closing submissions, but it is clear that the case was pressed. In my view, the case must fail because the conduct of the defendant throughout the period in question did not amount to or give rise to any representation to the effect that what had been agreed in the negotiations up to 3 September 2020 was intended to be legally binding. The defendant made no express representation to that effect, and I do not think that such a representation should be implied from the conduct of the defendant either in the negotiations or thereafter.
73. The negotiations do not objectively convey a representation by the defendant that an immediately binding agreement had been made, and the mere receipt of the rent payments of $7,855.83 in October, November and December 2020 without complaint in circumstances where invoices were being issued for amounts of $9,166.66 does not amount to a clear representation by the defendant that a legally binding agreement for a new lease had been made. Neither does the defendant’s conduct in instructing solicitors to draft lease documents.
74. I accept that the plaintiff may have thought that a new lease had been agreed upon in September 2020. I further accept that such a belief contributed to the plaintiff’s decision to spend money (about $3,200) in September 2020 on refrigeration equipment and repairs to refrigeration equipment. However, to the extent that this expenditure might be said to have caused detriment to the plaintiff, it was not detriment incurred in reasonable reliance upon a representation made by the defendant as alleged. The same can be said in relation to the payments made in October, November and December 2020. It is in any case difficult to see how any detriment could have been suffered by making those payments which were smaller than the amounts being invoiced.
75. For the above reasons, the defendant is not precluded by estoppel from asserting that no new lease or agreement for a new lease came into existence.
76. I should add that no submissions were advanced in support of the pleaded claim that the making by the defendant of the alleged representation amounted to a contravention of s 18 of the Australian Consumer Law. That claim is in any event defeated by my conclusion that the alleged representation was not made.
77. It follows from the above that the plaintiff has failed to make out any of its claims against the defendant. No questions concerning the quantification of any damages remain for determination. In these circumstances it is appropriate to proceed now to dismiss the Statement of Claim. An order will also be made that the plaintiff pay the defendant’s costs of the proceedings.
78. The defendant did not file any Cross-Claim seeking an order for possession. However, it appears that by the Notice to Vacate dated 7 January 2021 the then monthly tenancy (that arose under the holding over provisions of the existing lease) was terminated on 7 February 2021. Of course, the plaintiff should be afforded a reasonable period to allow it to vacate the shop premises in an orderly fashion.

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