Homesun Pty Limited v Roslyn Rae Crawley and Dysaran Pty Limited [1996] ACTSC 99 (13 September 1996)

SUPREME COURT OF THE ACT

HOMESUN PTY LIMITED v. ROSLYN RAE CRAWLEY and DYSARAN PTY LIMITED
No. SC500 of 1994
Number of pages - 20
Contract - Equity - Estoppel - Landlord and Tenant

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
HIGGINS J

CATCHWORDS

Contract - lease of premises - oral agreement - whether negotiations amounted to offer and acceptance - terms of offer - conditions of acceptance - terms of sublease - rent in arrears - repudiation of sublease - equitable remedies - damages - doctrine of part performance - doctrine of equitable estoppel - factors necessary to establish an equitable estoppel - assumption of a particular relationship - conduct of the defendants inducing the assumption - action in reliance on the relevant assumption or expectation - the defendants knew of or intended that reliance - the plaintiff has or will suffer detriment if the expectation is unfulfilled - the defendants failed to act so as to fulfil that expectation and/or avoid the detriment - judgment debt - entering into occupation of land pending a formal lease agreement - periodic tenancy - notice of intention to quit.

Equity - equitable remedies.

Estoppel - equitable.

Landlord and Tenant - implied tenancy - periodic tenancy - notice of intention to quit.

Statute of Frauds 1677 (Imp), s4

Gordon v Macgregor [1909] HCA 26; (1909) 8 CLR 316

Harvey v Edwards, Dunlop and Co Ltd [1927] HCA 13; (1927) 39 CLR 302
Thomson v McInnes [1911] HCA 30; (1911) 12 CLR 562
McBride v Sandland (No. 2) [1918] HCA 59; (1918) 25 CLR 369
J C Williamson Ltd v Lukey [1931] HCA 15; (1931) 45 CLR 282
Maddison v Alderson (1883) 8 App Cas 467
Regent v Millett [1976] HCA 40; (1976) 133 CLR 679
Ballas v Theophilos (No. 2) [1957] HCA 90; (1957) 98 CLR 193
Spencers Pictures Ltd v Cosens (1918) 18SR (NSW) 102
Mooney v Williams [1905] HCA 34; (1905) 3 CLR 1
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Austotel Pty Ltd v Franklins Self-serve Pty Ltd (1989) 16 NSWLR

582
S and E Promotions Pty Ltd v Tobin Bros Pty Ltd [1994] FCA 1109; (1994) 122 ALR 637

Moore v Dimond [1929] HCA 43; (1929) 43 CLR 105
Turner v York Motors Pty Ltd [1951] HCA 52; (1951) 85 CLR 55
Cohen v Milner (1960) VR 499
Butcher v Bowen (1963) 80 WN (NSW) 1520
Reeves v Diffin (1964) 82 WN (Pt 1) (NSW) 93

HEARING

CANBERRA, 19 October 1995 and 16 April 1996
13:9:1996

Counsel for the Plaintiff: Mr B Meagher and Ms S Sheppard

Instructing solicitors: Clayton Utz

Counsel for the Defendant: Mr J Constance and Mr A Williams

Instructing solicitors: Snedden Hall and Gallop

ORDER

THE COURT ORDERS THAT:

1. There be judgment for the plaintiff against the first
defendant in the sum of $39,233.55.

2. The plaintiff's claim against the second defendant be
dismissed.

DECISION

HIGGINS J Towards the end of 1991, the plaintiff, Homesun Pty Ltd (Homesun), a company controlled by three doctors, Ian Pryor, Joseph Radkovic and Ian Brown, agreed to take a 10 year lease with two further options each of five years from Nikias Nominees Pty Ltd (Nikias).

2. They had in mind to attract sub-tenants who were also health professionals. They had also in mind to offer serviced consulting rooms for visiting specialists.

3. Following a suggestion from the letting agent who assisted with negotiating Homesun's agreement with Nikias, Dr Pryor entered into negotiations with Ms Crawley, the first defendant. She controlled the company, Dysaran Pty Ltd (Dysaran), the second defendant, which offered a variety of health related services.

4. It should be noted that evidence of these negotiations is admissible for the purpose of determining whether there was an agreement between the parties. It is not admissible to interpret a written agreement insofar as there was one, see Gordon v Macgregor [1909] HCA 26; (1909) 8 CLR 316.

5. The nature of the contract relied upon in the present case, the lease of land, is such as to require a note or memorandum in writing of the agreement in order for it to be enforceable. The note or memorandum must contain all the essential terms, see Harvey v Edwards, Dunlop and Co Ltd [1927] HCA 13; (1927) 39 CLR 302, s4 Statute of Frauds 1677 (Imp).

6. It is not necessary that the note or memorandum acknowledged by the party to be charged be in one document, see Thomson v McInnes [1911] HCA 30; (1911) 12 CLR 562.

7. If there is an agreement but no note or memorandum thereof sufficient to satisfy the Statute of Frauds, equity has allowed enforcability on the basis of the doctrine of part performance.

8. The origins of the doctrine may be obscure but it is recognised as applicable in this country, see McBride v Sandland (No. 2) [1918] HCA 59; (1918) 25 CLR 369; J C Williamson Ltd v Lukey [1931] HCA 15; (1931) 45 CLR 282.

9. To enable the doctrine to apply, not only must there be an oral agreement, the acts of part performance must be referable to "some such contract as that alleged", see Maddison v Alderson (1883) 8 App Cas 467.

10. I have no doubt that, if there was a concluded oral agreement for the lease relied upon by the plaintiff, then the same would be relevantly part performed as a result of,

. The taking of possession;
. The fitting out of the premises for the purpose of the defendants' possession;
. The payment of rent.

See for example, Regent v Millett [1976] HCA 40; (1976) 133 CLR 679.

11. However, it should be noted that, where it applies, the doctrine of part performance does not entitle a party entitled to the benefit of it to common law remedies. Nor is it the only equitable doctrine which may be applicable. There is a question of the application of the doctrine of equitable estoppel even absent a concluded agreement.

Was there an Agreement, if so, what was it?
12. This, of course, is the primary question. Ms Crawley was the proprietor of a business, conducted with Dysaran as its corporate vehicle, known as Canberra Occupational Therapy service or "COTS". It was because of the obvious relevance of that business to the proposed medical centre the three doctors hoped to establish that the letting agent suggested her as a possible suitable sub-tenant.

13. Ms Crawley and her husband thus met with the three doctors at Dr Pryor's house. The negotiations were conducted mainly by Dr Pryor and Ms Crawley. This was late November 1991. Dr Pryor was not sure of the area to be let or the rent to be charged. However, he told Ms Crawley that she could specify the nature and extent of the fitout of her portion of the premises. Dr Pryor referred to the terms of the head lease. The doctors were interested, he said, in letting the area for 10 years, that being the term of their head lease over the total area.

14. At that stage, the doctors were merely seeking an expression of interest in a lease of a large area, say 150-200m2.

15. The terms discussed at this stage were so vague that nothing more than a general expression of interest in a proposed agreement could be inferred.

16. A few days later, Ms Crawley telephoned Dr Pryor and said that she was interested in proceeding. That communication can be construed as no more than an expression of interest in continuing negotiations.

17. Notwithstanding this, Dr Pryor seems to have assumed that a deal had been "done" and proceeded to facilitate Ms Crawley agreeing on a fitout for the area she would wish to occupy. That process commenced in December 1991 and involved consultation by her with an architect engaged by the doctors for the purpose.

18. It was in late December 1991 that Dr Pryor proposed, in effect, that Ms Crawley, who was unsure of the space she required, might take more space than she needed but use it to provide reception and secretarial services for the proposed serviced consulting rooms. It was not specified how that arrangement would be made legally binding or to what extent, if any, it was to form an integral part of the proposed agreement.

19. Dr Pryor says that about this time he indicated that the likely rent would be $240.00 to $260.00 per square metre per annum (m2pa).

20. It was further agreed that an extra 180m2 would be leased by the three doctors (through Homesun) to be available for Ms Crawley to occupy. That was arranged with Nikias.

21. Following this, Dr Pryor advised Ms Crawley that the rent would be $250.00 m2pa, including an allowance for the space deemed to have been let representing common areas, exclusive of the cost of fitout.

22. The form of the fitout was agreed by Ms Crawley by end December 1991.

23. At that stage, no draft lease had been prepared or presented nor was the cost of the fitout known. The doctors nevertheless believed, at that stage, that Ms Crawley was committed to a long-term occupation.

24. The head lease was entered into by the doctors, through Homesun, on 13 January 1992.

25. In January 1992, there was a meeting between Ms Crawley, Dr Pryor and Dr Radkovic. It was there made clear that they would not contribute to the cost of the fitout of a kitchen and reception area but would pay for the use of those facilities by them or their licensees.

26. What that meant was also left vague.

27. In mid-January 1992, Dr Pryor indicated to Ms Crawley that the total rent, including the fitout, "would be" in excess of $300.00 m2pa. He seems to have regarded this as a matter not requiring Ms Crawley's acceptance. This betrayed a lack of understanding that, at least up to this time, no agreement had been reached on the essential terms of the sublease, including the rent.

28. It was not until early March 1992, when the fitout designed to meet Ms Crawley's expressed needs was reaching completion that the doctors commenced to calculate more precisely the rent they wished to charge. They resolved to charge $250.00 m2pa plus $70.00 m2pa in respect of the fitout costs, a total rent of $320.00 m2pa.

29. Dr Pryor conveyed that decision to Ms Crawley. She initially protested that it was more than the $60,000.00 per annum rent she had been prepared to pay having regard to the increased area. She was reminded of the advantages of referrals. She was offered a further "rent-free" month.

30. There was no reference, at that stage, to the collateral arrangement concerning servicing fees. Dr Pryor recalls Ms Crawley's response then as being, "That will work, that will do".

31. What she may have meant by that was not explained. It was clearly contemplated, as later events make clear, that the parties would consult solicitors to formalise their arrangement after legal advice was sought and obtained concerning that proposed arrangement. It clearly was not an unequivocal acceptance of the entire proposal. Indeed, there were, in any event, other terms which needed to be formulated and agreed before the whole proposal could be available to be accepted.

32. Ms Crawley moved into occupation of the part of the premises fitted out for her on 16 March 1992. There was nothing, at this stage, in writing to evidence the terms on which she then took possession.

33. The best evidence of those terms, at least from Homesun's perspective, is to be found in the letter subsequently written by its solicitors to solicitors retained by the defendants.

34. That letter enclosed a floor plan of the area underlet to Dysaran which was then understood to be the corporate vehicle which would take the lease in relation to the premises and a draft sublease document in respect of the premises. The status of that document was expressed as follows,

The Sublease documents are provided to you in draft only and
have not been sited (sic) by our client and therefore no legal
obligations can arise until such time as our client has executed
the same.

They concluded, after asking for payment of their costs and anticipated stamp duty,

As your client has already taken possession of the premises as
we understand it, we look forward to receiving documents
executed by your client in very short time.

35. Obviously, as the lessor, Homesun, was reserving the right to reject any acceptance of the draft sublease and make a different offer, the proposed lessee, Dysaran, was free to accept or reject the proposed sublease or to make a counter-offer for Homesun's consideration.

36. The draft sublease offered a term of 10 years less one day, commencing 1 February 1992 to 30 January 2002 at a rent of $79,113.25 per annum (or $6,592.17 per month).

37. The reply from the defendants' solicitors did not accept Homesun's proposals. They advised six areas of disagreement.

1. They proposed that the reception area be part of the common area for rental purposes, its main purpose being to service Homesun's specialist clientele. That would have reduced the total lettable area upon which the lessee would pay rent.

2. They noted that $250.00 m2pa had been the "agreed rate per metre". The addition of $70.00 m2pa was intended, they said, to recoup the costs of the fitout carried out at Homesun's expense. They requested a separate lease of the fitout. Further, they asked for an itemised costing of the fitout costs. They said,

... our client is not prepared to accept any architect's fees
included in the fitout charges which do not relate specifically
to the fitout of the subject premises.

It is clear from this that they regarded the $70.00 m2pa as a figure requiring justification and open to further negotiations.

3. They raised the question of reimbursement to Dysaran (or Ms Crawley) for outgoings used by and services rendered to consulting specialists. It was suggested that there should be either adjustment to the rent (as proposed) or reimbursement otherwise of those expenses and fees. They suggested that a Service Agreement be prepared and executed in respect of those matters. They did not specify whether that agreement would be with Dysaran or Ms Crawley.

4. They proposed that the compulsory insurance cover for the premises be reduced from $5m to $4m.

5. They proposed that the lessee be Ms Crawley rather than Dysaran.

6. They expressed their instructions as to the term of the lease as follows,

Our client would prefer that the term of the Lease be reduced to
five years with an option term of five years but this would
depend on a large extent on whether it would be possible for her
to repay the fitout costs over a five year period as opposed to
a ten year period. If the company could meet the fitout costs
over the shorter term would you please advise whether your
client would agree to our client's request.

38. It thus appears that the extent of the demised area was not agreed. Nor was the precise rent, nor the mechanism by which fitout costs, by then already incurred, were to be quantified and recovered. The recovery of an allowance for service fees and overhead costs in relation to use of the reception and kitchen facilities by consultants, which would clearly impact on the net cost to the tenant, was not agreed. The level of insurance cover was not agreed. Not even the identity of the tenant was agreed. Finally, the precise term of the lease was not agreed. It was, at least, agreed that no rental would be paid until 1 May 1992.

39. In those circumstances, with the defendants in occupation, and the first rental payment yet to be made, urgent action was required.

40. Negotiations did proceed. Dr Pryor met with Ms Crawley. His recollection of the meeting was that Ms Crawley agreed to drop her first request and accept the space as offered on the basis that she would receive fair payment for the use of the reception and kitchen areas by Homesun or its client consultants. No doubt, it made no difference whether the benefit was received by Dysaran rather than herself.

41. As to point 2, he concluded that Ms Crawley's concern was that $70.00 m2pa proposed would, in fact, attract the rent escalation clause. That, he agreed with her, was unfair and he proposed that the $70.00 m2pa figure would be excepted from that clause.

42. Of course, that was not the only question raised by point 2. There was a query as to whether $70.00 m2pa fairly reflected the recovery of the fitout cost. Dr Pryor's evidence of Ms Crawley's reaction to his proposal was, at T36,

... she agreed with that, she was quite happy with that point.

43. I have to say, without doubting Dr Pryor's word at all, that I am left quite uncertain as to whether Ms Crawley had thereby abandoned her desire to verify the $70.00 m2pa figure or was merely accepting of the proposal that, whatever the fitout figure was, it would be excepted from the rent escalation clause.

44. As to point 3, Dr Pryor conceded that it was not possible to come to an agreement on that point. That was to be "negotiable" when the level of costs and usage by consultants was better known.

45. Point 4 was agreed to by Dr Pryor, as was point 5.

46. Dr Pryor refused to agree to point 6. He stated that he was not prepared to re-negotiate that point. He reported Ms Crawley as saying "that was reasonable".

47. Of course, to acknowledge a negotiating position as "reasonable" does not imply acceptance of it. Nor does it indicate acceptance of it irrespective of agreement upon other points remaining to be agreed.

48. Dr Pryor's understanding of the result of the discussion was conveyed to Ms Crawley's solicitors by letter dated 27 May 1992.

49. While I do not doubt that Dr Pryor honestly believed that the position was as set out in the letter of 27 May, leaving only the terms of the service agreement to be worked out, that clearly was not Ms Crawley's understanding. Nor was it the effect of Dr Pryor's account of the conversation as opposed to his impression of the effect of it. It seems to me that Dr Pryor was guided by the mistaken belief that once a point for negotiation was agreed or conceded, it could not be re-visited even though other points remained to be agreed. In law, of course, it was a "package" deal. The whole of the offer had to be unconditionally accepted to form a contract, see Ballas v Theophilos (No. 2) [1957] HCA 90; (1957) 98 CLR 193, Spencers Pictures Ltd v Cosens (1918) 18SR (NSW) 102. Until accepted, an offer or any term of it was open to be withdrawn or rejected whether or not terms of it had been previously accepted or not, see, for example, Mooney v Williams [1905] HCA 34; (1905) 3 CLR 1.

50. Of course, other remedies may arise out of a course of negotiation even if a concluded agreement is not reached, see Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387.

51. It would also have been open to accept the sublease whatever the outcome of negotiations on the service agreement. However, Ms Crawley at no time agreed to so treat that issue.

52. Dr Pryor recalled that the issue as to the term of the lease was raised again in June or July 1992. Ms Crawley, he said, advised him that one of her colleagues referred to as "Sue", would like to have the term of the (proposed) lease changed "from 10 years to five years because it would give her (Ms Crawley) more flexibility".

53. Dr Pryor rejected that request.

54. In truth, this was no more than a request to vary an offer which had yet to be either entirely formulated or entirely accepted. Whether, if that variation had been agreed to, Ms Crawley would then have accepted the offer in its entirety or agreed to sever the service agreement component from it is open to question. On both sides, the term of the offer involving service fees was still subject to negotiation not only as to what would be paid but also as to whether it was to be a condition of acceptance of the other terms of the offer.

55. There were ongoing discussions concerning the rates to be paid for the services provided by Ms Crawley or Dysaran for consulting specialists and Homesun.

56. The uncertainties in the negotiations were not, however, further resolved. It did seem to be expected by both sides that, at least as an interim measure, Ms Crawley would tender rent payments in the sum reserved under the sublease document of 23 April 1992.

57. That document was apparently accepted by Ms Crawley as the general basis for her continuing occupation of the premises pending final agreement.

58. On 2 August 1992, Ms Crawley wrote a letter to Homesun asking for modification of the repainting obligation in what she described as "my lease agreement". It might be construed as acceptance of the "lease agreement", which, no doubt, refers to the draft sublease, however, it is equivocal as, by necessary implication, the terms of that document would, mutatis mutandis, be expected to be applicable to the period of occupation pending finalisation of the long-term agreement. In any event, Ms Crawley was clearly and genuinely optimistic that the areas of concern to her would, with further negotiation, be resolved satisfactorily.

59. Further attempts were made to resolve the servicing costs issue satisfactorily. On 8 October 1992, for example, Dr Radkovic recollected a meeting with Ms Flanagan, Ms Crawley's financial adviser. The doctors agreed to charge consultants more so that they could raise the fee to Ms Crawley. At that stage, he said, he was "surprised" when the topic of the sublease was raised. These matters were referred to. First, the fitout cost and whether $50.00 or $60.00 m2pa would be a more reasonable figure in respect of it than $70.00 m2pa. Second, it was again proposed that the sublease term be fixed at 5 years plus an option of 5 years rather than 10 years. The question of ownership of the partitioning was also raised. Ms Flanagan warned that there were "cash flow problems".

60. About a week later, Dr Radkovic spoke again with Ms Flanagan. The draft lease proposed vesting the fitout in the lessor at the end of the term. Dr Radkovic explained it would not be worth anything at the end of the lease in any event. Her request was, therefore, rejected.

61. That issue was raised again in February 1993, but the doctors again declined to alter their proposal. There was, however, still no unequivocal acceptance of the entire proposal by Ms Crawley, nor any completion of the proposal by the tendering of a draft service agreement.

62. There was, in March and April 1993, correspondence between the parties seeking to reconcile sums due for servicing fees. It included a claim by Dr Radkovic, for Homesun, for rent from 1 May 1992 at $320.00 m2pa for an area of 246m2. That, though close to it, is slightly less than the area which, if the rate of $320.00 m2pa be accepted, was assumed by the draft sublease (247.23 m2).

63. In her reply of 16 April 1992, Ms Crawley appears to accept that rental calculation, though she contended that an additional payment had been made.

64. In June 1993, there was further discussion as to the arrears due to Homesun. However the sublease remained unsigned and no service agreement had been drawn up for consideration, let alone signed.

65. In November 1993, Dr Radkovic wrote again with regard to the arrears of rent. He proposed that sums due for servicing fees and costs to Dysaran or Ms Crawley be deducted from the sum due for rent. The reference to the sums due for servicing was said to be pursuant to the following arrangement,

We agreed that you could charge what you felt was appropriate to
cover your costs. (This was about $270.00/room/week or
$35.00/half day.) Your costs were to include a component for
electricity and cleaning, and that Homesun would be charged a
proportion of electricity and cleaning according to the vacancy
rate. Full occupancy would be assumed to be 200 half days/month.
Eg Assume for November there is an occupancy of 100 half
days/month. This is 50% "full" (200 half days), and you would be
recovering 50% of the electricity and cleaning costs from the
tenants. So that you were not out of pocket, we would pay for
the other 50% of the electricity and cleaning for November.

66. However, even this does not seem to reflect a situation agreed as between Homesun and Ms Crawley. It drew a response dated 1 December 1993. In that response, Ms Crawley,

. Disagreed with Dr Radkovic's proposal as to the basis on which overhead costs of servicing professional suites were to be reimbursed;
. Gave notice of intention to vacate the premises and offered to pay her "arrears", less the fees owing to her, over the subsequent six months;
. Asked for payment of "say $10,000" for the kitchen and reception fitout - to be credited to her "arrears", otherwise the fittings would be removed and taken away by her.

67. That prompted further discussions between Ms Crawley and the doctors.

68. Dr Pryor told Ms Crawley that Homesun did not accept her right to vacate. He made it clear that legal action would follow if she did. He suggested a compromise arrangement whereby an alternative compatible tenant or tenants might be found to take up the area she occupied.

69. Pursuant to that proposal, on 6 December 1993, Ms Crawley provided a suggested list of tenants.

70. There were further meetings but the arrangements for alternative tenants fell through.

71. The doctors maintained that Ms Crawley was bound by the terms of the sublease, including the 10 year term. Ms Crawley maintained that she was not.

72. There were subsequent attempts by the doctors to relet the premises. The only substantive underlease negotiated was to the Commonwealth for a period from 10 October 1994 to 9 October 1995 at an annual rental of $121,200.00.

73. By its statement of claim dated 8 March 1995 the plaintiff, Homesun, expressly elected to treat the arrears of rental and abandonment of possession as a repudiation of the sublease. However, it claims damages in respect thereof.

74. So far as the arrears are concerned, no damage flows therefrom, save for lost interest. It is the loss of the balance of the 10 year term after 8 March 1995 for which damages are claimed. Further, whilst the defendants concede the existence of arrears of rent up to the end of December 1993, they deny responsibility for rent (less receipts of rent from others) between then and 8 March 1995.

75. Central to that claim by Homesun is that it concluded an agreement for sublease with either Ms Crawley or Dysaran and is entitled to specific performance of that agreement.

76. It is clear that, insofar as this contention relies on an expression of complete acceptance of Homesun's proposal, it must fail.

77. However, insofar as Ms Crawley purported to be uncertain as to what the rent payments were to be or suggested that the doctors represented that they were prepared to recalculate the sum due for rental in respect of her previous occupation, I regret that I do not accept that evidence. I prefer the evidence of Doctors Pryor and Radkovic. Indeed, the contention advanced by Ms Crawley was entirely contrary to the correspondence between the parties.

78. Of course, she was hoping to obtain acceptance of an alternative proposal to that represented by the draft sublease. She was seeking to get agreement to less net rent being payable whether by reducing the fitout repayments, by increasing servicing charges or a combination thereof. However, I do not believe that Dr Radkovic, in particular, expressed any view to her that such a proposal was or would be acceptable to the doctors. Indeed, the respective demeanour of the witnesses lends support, to my mind for that conclusion.

79. In the absence of express agreement and, notwithstanding the terms upon which the draft sublease was forwarded, Homesun claims to be entitled to specific performance of the sublease agreement and, then, or in the alternative, damages for its breach and wrongful determination by virtue of the application of the doctrine of estoppel.

The doctrine of estoppel
80. Estoppel can support the existence of an agreement for a sublease on the terms of the draft document if there is evidence of conduct from which the reasonable onlooker would conclude that the lessee has assented to each of the terms of the sublease as drafted. That conduct must have created a situation whereby it is unconscionable to permit the proposed lessee to act contrary to that representation.

81. In Waltons Stores (Interstate) Ltd v Maher (supra) there were certain factual features corresponding to the present case. The owner of land agreed to fitout a new building to the proposed lessee's specifications. A draft lease had been forwarded to the owner's solicitors. The owner's solicitor sought an assurance from the proposed lessee that the terms of the lease, with amendments as proposed by the owner, were acceptable. It was not going to proceed with the fitout otherwise. That acceptance was conveyed orally by the proposed lessee's solicitor, but he stated that it was subject to formal instructions being obtained from his client. The redrafted lease was returned without any indication of disagreement with the amendments thereby proposed. There was no subsequent expression of disagreement. Building work then proceeded.

82. Thereafter the proposed lessee decided not to proceed with the deal. It did not execute and return the counterpart copy of the proposed lease.

83. In those circumstances, it was held that the proposed lessee was estopped from denying that it was bound. However, it will be noted that whilst a written agreement or memorandum thereof signed by the proposed lessee was lacking, there was an apparent acceptance of the terms of the proposed lease and a representation that the proposed lessee would observe the formal requirements for the creation of a valid and binding lease. On the basis of that representation, the lessor had acted to its detriment.

84. Those circumstances may be contrasted with Austotel Pty Ltd v Franklins Self-serve Pty Ltd (1989) 16 NSWLR 582. "Letters of Intent" were exchanged concerning the erection and fitout of a building to be used for a shopping development. Franklins agreed that it would take space to be fitted out for its purposes. The agreement expressed in the letters of intent was,

... subject to approval of the plans and store size and to all
parties entering into a formal agreement for lease.

85. Agreement was reached in the course of negotiations to increasing the store size but not as to whether the rent for the enlarged premises would be at the same rate as that for the previously agreed area or less. Franklins cancelled its existing lease and obtained tenant fixtures to move into the new premises but did not seek first to resolve that outstanding issue.

86. Kirby P noted that, as the parties had failed to agree upon an essential term of the lease for the expanded area, no contract had been concluded. Thus there was no actual agreement for Austotel to be estopped from denying. That still left the question as to whether Austotel's conduct had been so unconscionable that Franklins was entitled to relief by way of specific performance of the original proposal.

87. Kirby P, at 585, accepted that,

... for equitable estoppel to operate, there must relevantly be
the creation of encouragement by the defendant in the plaintiff
of an assumption that a contract will come into existence, or a
promise be performed, or a transaction carried out between the
plaintiff and the defendant, and reliance on that by the
plaintiff in circumstances where departure from the assumption
by the defendant would be unconscionable.

88. However, as his Honour noted at 585, these parties, although proceeding as if all would be resolved in the end, were playing "a sort of cat and mouse game". Each was trying to gain a financial advantage from the term remaining to be agreed. His Honour said,

We are not dealing here with ordinary individuals invoking the
protection of equity from the unconscionable operation of a
rigid rule of the common law. Nor are we dealing with parties
which were unequal in bargaining power. Nor were the parties
lacking in advice either of a legal character or of technical
expertise.

89. In the circumstances, his Honour was persuaded that equitable relief should have been withheld. Whilst Priestley JA dissented, Rogers AJA concurred with the learned President. He was persuaded that,

(620) There is ... a fundamental difference between a situation
where the parties simply fail to address a question necessary
for a complete and concluded agreement and the present, where
there is a deliberate and conscious decision to refrain from
coming to agreement on the term.

90. That decision was given consideration by a Full Court of the Federal Court in S and E Promotions Pty Ltd v Tobin Bros Pty Ltd [1994] FCA 1109; (1994) 122 ALR 637. The case concerned the renewal of an existing leasing arrangement, the lessor proposing instead to grant a new sublease over an expanded and redeveloped area and for a different and potentially longer term. It was accepted that, to provide for a remedy where none exists at law, the party against whom the relief is sought must have acted unconscionably towards the other party. That was found by the learned trial judge to have occurred. His decision was supported on appeal.

91. In the present case, each of the parties had access to legal advice and assistance. Each, in substance, were health professionals in private practice. The choice not to conclude the agreement in legally valid form was as much that of the doctors as of Ms Crawley. Indeed, it seems to me that the doctors perceived an advantage commercially in having Ms Crawley and her enterprise committed to their premises as the location for her business. Further, they knew that she was seriously and genuinely concerned about the additional cost to her of the arrangement they proposed. She went into occupation not knowing how the rent cost would be calculated nor how the cost to her of servicing the consultancy rooms would be adjusted. She hoped that the net result would be affordable. There had been two representations made to her by Dr Pryor which she was entitled to expect would be fulfilled. The first was that their site would better attract business for her, thus increasing her cash flow and that the consultancy servicing arrangement would offset approximately two months of rental.

92. This is not a case in which Ms Crawley seeks to set aside a concluded agreement for misrepresentation but the fact that those representations were made and were not met to her reasonable satisfaction is relevant to whether her conduct in terminating negotiations and vacating the premises could be described as "unconscionable".

93. It is not the case that her occupation of the premises during negotiations was either at her insistence or for her commercial benefit. It primarily benefited the bargaining position of the doctors.

94. I turn now to the six factors Brennan J in Waltons Stores (Interstate) Ltd v Maher, 428-9 considered necessary to establish an equitable estoppel.

1. Assumption of a particular relationship
95. I accept that the doctors believed that Ms Crawley had agreed to or at least acquiesced in an agreement for a 10 year term for the stated rent.

96. However, that was, in my view, based not on what Ms Crawley had represented but rather on their own mistaken view of the legal position.

2. Conduct of the defendants inducing the assumption
97. It is true that Ms Crawley failed unequivocally to declare that until agreement was reached on all outstanding matters she regarded herself as free to resile from the arrangement proposed by the doctors.

98. However, that could not be construed as more than an acceptance that, whatever the legal position, a satisfactory agreement on terms more favourable to her might be effected. Further, by changing her business location she would have sacrificed a commercial position. In that, but not a legal sense, she was "locked in".

3. Action in reliance on the relevant assumption or expectation
99. No doubt the doctors proceeded with the fitout of the area to be let to Ms Crawley in the expectation that she would agree to a long term (10 year) lease. However, they were not and could not validly have claimed that she had agreed, at that time, to all material terms of that letting.

4. The defendant knew of or intended that reliance
100. It is apparent that Ms Crawley was aware of the view of the doctors that she would be permitted to remain in occupation only on the basis of her acceptance of a 10 year term. However, she did from time to time express her concern about, at least, the terms of the service agreement.

101. The term of 10 years was suggested and insisted upon not by her but by the doctors. Further, if she had wished to remain in occupation without concluding a long term agreement, she would have been unable to resist action to terminate her occupation.

5. The plaintiff has or will suffer detriment if the expectation is unfulfilled
102. The doctors' expectations were that they could "lock-in" Ms Crawley's business for 10 years on terms favourable to themselves. That expectation was indeed disappointed. However, although they may have believed it was a legal obligation, it was, in truth, merely economic.

6. The defendants failed to act so as to fulfil that expectation and/or avoid the detriment
103. Ms Crawley might have refused to occupy the premises until all relevant terms were agreed. The doctors might have refused to permit her to occupy the premises until all relevant terms were agreed. Neither did so. Each had legitimate expectations as to the outcome of the negotiations between them. Each was disappointed.

104. It must be emphasised that, the six factors referred to above were not proposed as more than a guide to the ultimate conclusion which is whether or not it would be unconscionable to permit the defendant (or defendants) to resile from the arrangements in question.

105. In my opinion, it is clear that in deciding to break off negotiations and vacate the premises, neither Ms Crawley nor her company was acting unconscionably, even accepting the account of Drs Pryor and Radkovic in preference to hers.

The occupation agreement
106. Of course, that is not an end to the matter. The parties agree that there was, at least, an implied tenancy. They do not dispute that the terms of that tenancy were, mutatis mutandis, those set out in the draft sublease. They are at issue as to whether the notice of termination given by the defendants was sufficient. If it was, the sum due is agreed at $30,876.26 after allowance for credits due to the defendants. There is, also, a question as to whether judgment for that sum, plus interest, should be entered against one or other or both defendants. Interest, it is agreed, should be calculated to 1 November 1995 at $5,660.65 and $8.48 per day thereafter until judgment.

107. It is clear that, pending agreement, there was a tenancy. I reject the plaintiff's submission that it was to be a long term arrangement. It was, clearly, to be terminated when agreement was finalised in relation to the long term sublease and service agreements. The fact that the parties neglected to expedite that process is not indicative of any different conclusion.

108. The case of Moore v Dimond [1929] HCA 43; (1929) 43 CLR 105, cited by both parties, is authority for the view that holding over after a formal lease has expired enables an implication that such holding over was on the terms of the expired lease, unless otherwise agreed, mutatis mutandis, but on a periodic basis. The issue in that case was whether a weekly or yearly tenancy was to be implied.

109. Knox CJ, Rich and Dixon JJ, rejected the notion either that a yearly tenancy automatically follows on holding over pending a new lease being negotiated or that the period by reference to which rent is calculated necessarily determines the period of the implied tenancy which follows. The period by reference to which rent is calculated is relevant to that question but the true enquiry is as to the intention of the parties insofar as that can be ascertained. There is a presumption in favour of a yearly tenancy and a presumption otherwise that the period chosen by the parties for calculation of rental payments is determinative of the period of the implied tenancy.

110. The difference in this case, of course, is that the parties had yet to agree upon the terms upon which, inter alia, a long term lease would be granted. It was clearly contemplated that final agreement would be concluded within a short time.

111. Turner v York Motors Pty Ltd [1951] HCA 52; (1951) 85 CLR 55, cited by counsel for the defendants, illustrates the application of those principles in relation to circumstances closer to the present than those in Moore v Dimond (supra). In Turner's case (supra), as here, the tenant entered into occupation of land pending a formal lease being agreed and signed. It never was. Rent was originally paid weekly but later monthly. By the time the lessor sought ejectment, the lessee had been in occupation, paying rent, for over two years.

112. Dixon J, at 65, noted as follows,

If an intending lessor lets the intending lessee into occupation
of the premises in anticipation of an agreement for a lease or
of a lease, simply so that he may temporarily occupy while they
proceed to negotiate concerning the conditions upon which the
intending tenant shall hold, it is of course true that in the
meantime the intending lessee holds as a tenant at will only. It
is not inconsistent with the intending lessee's continuing so to
hold that he pays the landowner some compensation for the use of
the land and indeed if it is not intended that his occupation of
the land shall be gratuitous the owner may recover from him upon
a quantum valebat for use and occupation.

113. The presumed intention upon entering into occupation pending an agreement, is not necessarily the same as the presumed intention following the expiry of a previous lease and the expectation of a new one. The words of Dixon J, at 67, in construing the implications of the arrangement in Turner's case seem to me, mutatis mutandis, applicable to the present, including the following comment,

It seems to me impossible to suppose that for two and a half
years the parties proceeded on the basis that the defendants
were in possession provisionally pending negotiations and were
liable to be turned out at any moment.

114. In Cohen v Milner (1960) VR 499 the lessees had gone into possession in the expectation of a negotiated lease. That did not eventuate. Rent was paid monthly. Dean J concluded that the nature of that interim tenancy, in the absence of express agreement, was monthly. Rent was payable monthly in advance.

115. The right to give notice to quit is shared equally by a lessee as much as a lessor in the absence of a contrary agreement, see Butcher v Bowen (1963) 80 WN (NSW) 1520; Reeves v Diffin (1964) 82 WN (Pt 1) (NSW) 93.

116. It follows that to validly end the periodic tenancy, the notice of intention to quit had to expire at the end of a recurring period of the tenancy.

117. In the present case it is clear that the defendants entered into possession on 16 March 1992. The first rental period, however, was to commence on 1 May 1992. It appears that the defendants, pending final agreement, accepted that the rate of payment of rent was $6,533.33 per month. That was the sum the doctors requested. Ms Crawley had hoped that the final agreement, whatever it was, would include a reduction in rent due but that did not happen.

118. The amount of $6,533.33 is a sum different from that proposed in the draft sublease. The reason for the difference is not explained. It may reflect a revised calculation of the area demised. In any event, as I have noted, it was accepted as applicable for the purposes of the occupation period.

119. It is, nevertheless, beyond question that none of the parties to this arrangement, unless totally devoid of any sense of commercial reality, would have contemplated that the negotiating period was to extend for as long as it did without resolution.

120. Thus, it seems to me inappropriate to impute to either party the intention that, if negotiations failed, the premises should be vacated only upon 12 months' notice expiring at the end of a yearly period, whether from 16 March 1992 or, more probably, the anniversary of the first rent day, namely 30 April or 1 May 1993. On that basis, as at December 1993, the first date for termination would have been 30 April 1995. That is, of course, subject to the plaintiff's right to accept a termination on lesser notice from the lessee. It does, of course, accept termination on and from 3 August 1994.

121. It also seems unthinkable to me that, had the parties reached an impasse in their negotiations, it would have been contemplated that the short term occupation period would nevertheless have had to continue, absent mutual agreement, for a further period of between 12 and 23 months. It is much more likely that the monthly payment was intended to reflect an intention that the interim tenancy would be from month to month commencing on 1 May 1992 terminable on being subsumed into a long term tenancy or on one month's notice.

122. It was not contended by the plaintiff that the notice given by Ms Crawley on 1 December 1993 was ineffectual to terminate the interim lease on and from 1 January 1994 if the tenancy was from month to month. Ms Crawley does not deny liability for rent for the month of December 1993.

123. The form of the fitout does not detract from my acceptance of this conclusion. It was designed to fit Ms Crawley's business in the expectation of a long term arrangement but there is nothing to suggest any promise by her to pay for it if the arrangement did not eventuate. Further, it does not seem to me that the doctors are relevantly prejudiced. They, through Homesun, own the fitout and it is not proved to my satisfaction that it is unsuitable for any alternative tenant or tenants, with or without modification.

Is the tenant Dysaran or Ms Crawley?
124. There is no doubt that the initial arrangement contemplated Dysaran as the tenant with Ms Crawley as one of the guarantors. In the course of negotiations in relation to the long term lease, she requested that the lessee be herself rather than Dysaran. That was prior to the first rental payment becoming due but after she had entered into occupation.

125. It is difficult to detect whether, had she turned her mind to the identity of the lessee under the interim arrangement, she would have regarded it as modified similarly. None of the correspondence emanating from Ms Crawley clearly distinguishes between her role as the controlling force behind Dysaran and her personal capacity as proposed lessee. That is not surprising and, of course, the doctors regarded Homesun similarly.

126. Further, it is by no means clear from the correspondence between the parties that the service agreement was to be between Ms Crawley and Homesun. Notwithstanding the former was to be the lessee, it might well be that her intention was herself to sublet to or licence Dysaran to operate the business on the premises and be the beneficiary of the service agreement. There would, no doubt, be valid accounting reasons for such an arrangement.

127. Insofar as it assists, I note that the terms of the correspondence (Ex 15 - dated 7 October 1992), concerning "Running Costs of Professional Suites" seems to contemplate that arrangement as a matter to be agreed between Dysaran and Homesun. On the other hand, the letter concerning the repainting obligation contained in the draft lease (Ex 13 - 2 August 1992), both assumes it to be a term of the interim lease arrangement and, though signed by Ms Crawley as "Managing Director", refers to the lease and the obligations it imposes in personal, not corporate, terms.

128. In my view, on the balance of probabilities, Ms Crawley, at least impliedly, intended her request of 8 May 1992 that she be the lessee, accepted by Homesun on 27 May 1992, to apply also to the interim lease agreement. Similarly, it seems to me that Homesun may similarly be taken to have accepted that position. It is, of course, by no means inconsistent with that concession by the plaintiff that the service agreement might, in due course, have been executed between Homesun and Dysaran. Homesun, at least if personal guarantees were offered, was apparently indifferent to the issue.

129. Judgment is therefore entered for the plaintiff against the first defendant only, in the sum of $30,876.26 plus interest from 1 January 1994 to date, namely, $8,357.29, a total of $39,233.55.

130. The suit is dismissed as against the second defendant.

131. I will hear the parties as to costs.