Tennent and ors v Moukhlina and ors [2008] NSWADT 26 (16 January 2008)

Last Updated: 12 February 2008

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL

CITATION:
Tennent and ors v Moukhlina and ors [2008] NSWADT 26


DIVISION:
RETAIL LEASES DIVISION

PARTIES:
APPLICANTS
Sacha Tennent
Simon Conroy
Alexander Djordjevic
Red Star Pizza Pty Ltd

RESPONDENTS
Alexandra Moukhlina
Alexandre Chevtchenko
Serge Guinzbourg



FILE NUMBERS:
075097

HEARING DATES:
27, 28 September 2007

SUBMISSIONS CLOSED:
16 October 2007



DATE OF DECISION:
16 January 2008

BEFORE:
Chesterman M - ADCJ (Deputy President)Griffiths G - (Advisory) Non Judicial Member Harrison B - (Advisory) Non Judicial Member





LEGISLATION CITED:
Administrative Decisions Tribunal Act 1997
Conveyancing Act 1919
Interpretation Act 1987
Real Property Act 1900
Retail Leases Act 1994

CASES CITED:
Carberry v Gardiner (1936) 36 SR (NSW) 559
Carter v Schmitt [2003] NSWSC 1166
Churcher v Danes Hotels Pty Ltd (1980) 8 BPR 15863
Danziger v RJ Thompson [1944] 2 All ER 151
Hardinge v Schidor [2002] NSWCA 277
MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515
Parras v FAI General Insurance Co Ltd [2001] NSWSC 1077
Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673
Smith v Wheatcroft (1878) 9 Ch D 223
Tsaoucis v Gallipoli Memorial Club Ltd [1998] NSWSC 229
Wallville Pty Ltd v Liristis Holding Pty Ltd [2001] NSWSC 894 Williams v Bulat [1992] 2 Qd R 566
Young v Lamb [2001] NSWCA 225

TEXTS CITED:


APPLICATION:
Claim for compensation - misleading or deceptive conduct
Claim for declaration of rights, obligations and liabilities under a lease
Claim for relief against forfeiture
Costs
Damages
Unconscionability

MATTER FOR DECISION:
Principal matter


REPRESENTATION:
A Narayan, barrister
G McGrath, barrister


ORDERS:
1. The application is dismissed
2. Any application for costs in these proceedings must be filed and served with supporting submissions within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted the matter will be resolved 'on the papers' pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.


Reasons for Decision:

REASONS FOR DECISION

Introduction

1 The principal question raised in this case was whether an option for the renewal of a registered lease of retail shop premises had been validly exercised by the sending of a letter. The specific issues raised by the parties included the following: whether at the time of the alleged exercise of the option the lessees were the two individuals named in the lease; whether the person who sent the letter had sufficient authority to exercise the option; whether the person to whom the letter was sent (who was the solicitor for the lessors in the granting of the lease) was an appropriate agent of the lessors to receive it; and whether, on the balance of probabilities, the letter reached the office of that person.

2 The lease in question (here after ‘the Lease’) was governed by the Retail Leases Act 1994 (here after the ‘RL Act’). The address of the property being leased (‘the Premises’) was 161/806 Bourke Street, Waterloo.

3 Two of the four Applicants–Ms Sacha Tennent and Mr Simon Conroy–were the individuals identified in the Lease as ‘the lessee’. The grounds on which the other two Applicants–Mr Alexander Djordjevic and Red Star Pizza Pty Ltd –claimed to be entitled to participate in these proceedings as Applicants are outlined below. The three Respondents–Ms Alexandra Moukhlina, Mr Alexandre Chevtchenko and Mr Serge Guinzbourg–were the lessors.

4 Because the claims made in this case include an allegation of unconscionable conduct, the Tribunal is constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.

5 At the hearing on 27 and 28 September 2007, the evidence on both sides was adduced. Pursuant to directions given at the end of the hearing, counsel for the parties (Mr Narayan for the Applicants; Mr McGrath for the Respondents) then filed written submissions. The latest submissions filed (on 16 October 2007) were headed ‘Applicants’ Submissions in Reply’. The Respondents contended that these were not permitted under the Tribunal’s directions and should therefore be rejected. The Tribunal considers, however, that on one interpretation of the directions they were in fact permissible and has therefore taken them into account in reaching its decision.

The negotiations leading to execution of the Lease

6 On 31 May 2002, Red Star Pizza Pty Ltd (hereafter ‘RSP’) was incorporated, with Mr Djordjevic and a friend of his, Mr David Bajic as the directors and Mr Bajic as the secretary. It was intended to be the vehicle for operating a pizza restaurant. Some months later, Mr Bajic lost interest in this project.

7 During the early months of 2003, Mr Djordjevic, Ms Tennent, Mr Conroy and Mr Conroy’s wife, Ms Tania Conroy, agreed to proceed with this venture. During their discussions, Mr Conroy made it clear that because of other commitments he would not be able to work full-time in the business.

8 After having tried without success to obtain a lease of a suitable property in Waterloo, Mr Djordjevic, having seen a ‘for lease’ sign in the window of the Premises, commenced negotiations for a lease with Mr Guinzbourg. The negotiations continued for some months, being carried on between these two gentlemen and also between their solicitors. Mr Robert Storey acted for the Applicants in this respect and Mr Eric Fung for the Respondents.

9 During these negotiations, Mr Djordjevic sought to have the proposed lease granted to RSP. Mr Storey stated this in a facsimile to Mr Fung dated 6 November 2003. But during a conversation with Mr Djordjevic soon afterwards, Mr Guinzbourg, who worked in property management and has an Australian law degree, said that he wanted the lessees to be the directors of RSP because he did not want to grant a lease to a company.

10 On 11 November 2003, Ms Tennent and Mr Conroy were appointed as directors of RSP. Mr Bajic resigned his directorship and his position as secretary. Mr Djordjevic resigned his directorship and was appointed as secretary.

11 Pursuant to instructions from Mr Djordjevic, Mr Storey wrote as follows in a letter to Mr Fung dated 14 November 2003:

I understand our respective clients had had some discussions since [my facsimile of 6 November] and my clients have now decided to exceed (sic) to your client’s request to have Simon Conroy and Sasha Tennent as the Lessees.

12 In answer to a question in cross-examination, Mr Djordjevic agreed that about this time he discussed with Mr Storey the difference between individual and corporate lessees. Mr Storey was not called as a witness. In addition, Mr Conroy, when cross-examined on this matter, testified as follows: (a) that Mr Storey had discussed it with him; (b) that according to his understanding at the time, the Respondents wanted to have individuals as the lessees even though RSP would be running the business, on account of a concern that RSP might not be able to meet the payments due under the lease; and (c) that at that stage, RSP had no assets. On this last point, Mr Conroy’s evidence appeared to differ from evidence from Mr Djordjevic, in his principal affidavit, to the effect that during 2003 he and Mr Conroy had placed significant sums into a bank account that RSP had opened.

13 Various other matters were then resolved before execution of the Lease, including the following. Development approval for the proposed pizza restaurant was obtained; on 14 November 2003, Mr Conroy established with the National Australia Bank a bank guarantee for $9,320.54 in favour of the Respondents; and Mr Djordjevic obtained on 19 December 2003 an NRMA insurance policy for the business, issued in the name of RSP. Mr Djordjevic testified that he showed this policy to Mr Guinzbourg at or around the time Ms Tennent and Mr Conroy signed the Lease.

14 As from December 2003, payments of rent in accordance with the as yet unexecuted Lease were made from RSP’s bank account. Installation of fitout for the pizza restaurant occurred in early 2004 and the restaurant commenced trading in February 2004, under the name ‘Red Star Pizza’.

The Lease

15 It is not clear when the Lease was signed by the various parties. It would appear that Ms Tennent and Mr Conroy signed it in December 2003 or January 2004. They do not recall whether it had already been signed by the three Respondents. The date of execution shown on it was 31 March 2004.

16 The Lease was in a form appropriate for registration under the Real Property Act 1900. Beside the words ‘Lodged by’ and under the words ‘Name, Address or DX and Telephone’, the following words were typed:

ERIC FUNG & CO

DX 11555 SYDNEY DOWNTOWN

TEL: [phone].

17 The Lease described the ‘lessor’ as the three Respondents and the ‘lessee’ as ‘Simon Conroy & Sacha Tennent’.

18 The Lease stated also that the term was to be three years, from 10 November 2003 to 9 November 2006, and that there should be two options to renew of three years each, as ‘set out in clause 19 and item 7 of the reference schedule’. Item 7 simply specified what each of the three-year periods would be. The relevant parts of clause 19 are set out below.

19 The Lease also stated that the rent for the first year was to be $33,892.26 plus GST per annum and that in subsequent years the rent should be ‘subject to rental review pursuant to Section 18’. It provided for rent to be paid in monthly instalments (the initial amount of these being $2,824.41 plus GST per month). It also provided for the payment of outgoings. Also required was a bank guarantee of $9,320.54 (which was the amount specified in the guarantee given by Mr Conroy), representing three months’ rent plus GST. It set out the permitted use as ‘café/pizza restaurant’.

20 In Section 1, headed ‘Definitions and Interpretations’, the following provisions appeared:

1.2 LESSEE: The term "the lessee" shall where the context admits extend to and include in the case of a corporation its successors in title and permitted assigns and in the case of a natural person or persons their and each of their respective heirs administrators and permitted assigns.

1.4 PLURALS AND GENDER: Words importing the singular or plural number include the plural and singular numbers respectively and words of each gender shall include any other gender.

1.5 LESSEES SEVERALLY BOUND: Where two or more persons are lessees the covenants and obligation (sic) on their part herein contained shall bind them jointly and each of them severally.

21 Section 6, headed ‘Assignment and Sub-letting", contained provisions of a standard nature on these topics. It stated that assignment or sub-letting could not occur except with the lessor’s consent; that the lessee, if proposing to assign or sub-let, should provide to the lessor evidence that the proposed lessee was ‘respectable, responsible and solvent’ and was ‘capable of observing and performing the covenants of the Lease’; and that, subject to this and other matters stated in the section, the lessor’s consent would not be unreasonably withheld.

22 Section 14, headed ‘General Provisions’, included the following clause:

14.2 NOTICE: Any notice direction or request hereunder may be served in manner mentioned in section 170 of the Conveyancing Act 1919 and may be signed on behalf of the lessor by its managing agent attorney or by a director associate director manager or secretary of the lessor and any notice so signed shall be conclusive evidence of the authority of the person whose name appears therein to sign the same.

23 Within section 18, which was headed ‘Rental Review’, clause 18.2 provided a procedure for adjusting the rent in any case where the lease provided for adjustment of the rent from annual rent to market rental. This procedure included determination, in the event that the parties could not agree on the adjusted rent, by a valuer appointed by the parties or (in default of agreement) by the President of the NSW division of the Australian Institute of Valuers and Land Economists (Inc).

24 In addition, clause 18.2 contained the following provision, to which no specific reference was made in the submissions in these proceedings:

(vii) No determination of the market rental pursuant to sub clause 18.2 shall operate to reduce the annual rent payable by the Lessee below the annual rent payable immediately preceding the review date.

25 Section 19, headed ‘Option for Renewal’, comprised clause 19.1, which commenced as follows:

19.1 That if the lessee shall desire to take a renewed lease of the demised premises for a further term as set out in item 7 from the expiration of the term of this lease the lessee shall prior to the expiration of the said term give to the lessor not more than nine (9) months and not less than six (6) months previous notice in writing and if there shall not be at the time of giving of such notice and at the expiration of the term hereby granted any subsisting breach or non-observance of any of the covenants on the part of the Lessee contained in this lease the Lessor will at the cost of the Lessor demise the said premises hereby demised for a further term as set out in item 7 subject to the same covenants and agreements and provisos as are contained in this lease with the following amendments:...

26 Amongst the ‘amendments’ set out in the balance of clause 19.1 was a provision in subparagraph (d) that the commencement annual rent for any further term of the Lease should be the amount agreed by the parties as the market rental or, in the event of agreement not being reached, the market rental as determined pursuant to clause 18.2.

27 Within Section 25, headed ‘General’, clause 25.1(a) provided that the Lease ‘comprised the whole of the agreement between the parties with respect to the leasing of the premises’, and clause 25.11 that it was ‘deemed to be a Deed’.

Events following the execution of the Lease

28 On 8 March 2004, Mr Guinzbourg granted to RSP a lease of storage space at an address in Waterloo until 28 October 2006. The lease was executed on RSP’s behalf by Mr Djordjevic.

29 The Respondents did not appoint an agent to collect the rent due under the Lease of the restaurant, or to manage other aspects of it. Until mid-2004 (according to Mr Djordjevic) or early 2005 (according to Mr Guinzbourg), Mr Guinzbourg, being the ‘main contact person’ for the Respondents, would call at the Premises each month to collect the rent.

30 Mr Guinzbourg returned to Russia, his home country, in February 2005. Annexed to his affidavit was a copy of a page of his passport showing his departure from Sydney on 14 February 2005 and his arrival in Moscow the next day.

31 When Mr Guinzbourg ceased to be the contact person, the rent was collected by Mr Chevtchenko. Mr Chevtchenko alleged, but Mr Djordjevic denied, that after Mr Chevtchenko became the contact person, he gave his residential address and contact phone numbers to Mr Djordjevic. According to Mr Djordjevic, it was often difficult to make contact with him.

32 Mr Djordjevic or Ms Tennent paid the monthly rent, using cheques drawn on RSP’s bank account. They also paid the outgoings in the same manner. All the accounts for the business were in fact maintained by RSP, which also employed all the staff.

33 In cross-examination, Mr Guinzbourg stated that he treated the business as ‘Mr Djordjevic’s shop’ and conceded that all payments purporting to have been made by RSP were in fact made by that company.

34 Initially, the full-time employees were Mr Djordjevic, Ms Tennent and Ms Conroy. Mr Conroy, who had a full-time job during the day, ‘helped out’ during the evenings. But in or about March 2004, Mr and Ms Conroy indicated that since his job had become more demanding and she was pregnant, they wished to get out of the business. They ceased working there a few weeks later. Mr Djordjevic testified that he advised Mr Guinzbourg of these matters, but according to Mr Guinzbourg he was only told of Ms Conroy’s pregnancy.

35 Between September and December 2004, Ms Tennent and Mr Djordjevic repaid to Mr Conroy the money that he had contributed to the commencement of the business. In addition, at Mr Conroy’s request, Mr Djordjevic asked Mr Chevtchenko if Mr Conroy’s guarantee could be replaced. He alleged that Mr Chevtchenko was unco-operative on this matter, but that eventually he consented.

36 According to Mr Chevtchenko, he was not asked about this until early in 2006 and he initially refused because Mr Djordjevic did not offer a replacement guarantee. When Mr Djordjevic indicated that a replacement would be provided, he agreed.

37 Ms Tennent then organised for Westpac Bank to issue a guarantee for the sum of $10,000. It was dated 27 February 2006. According to her evidence it was in her name, but in fact the designated ‘customer’ was RSP. It named the Respondents as the ‘favouree’ and set out the following as the ‘favouree’s address’:

C/-Eric Fung & Co

Suite 2 / LvL 3 728 George St Sydney 2000.

38 In cross-examination, Mr Djordjevic said that he saw a copy of this guarantee at about the time when it was issued. There was no evidence as to when any of the Respondents first saw it.

39 Notices of strata levies relating to the Premises during the period of the Lease gave a residential address for Mr Chevtchenko and Ms Moukhlina in Rosebery. Under the Lease, these levies were payable by the lessees. Mr Djordjevic alleged, however, that although the requisite payments were made, he did not see these notices. Ms Tennent and Mr Conroy claimed also not to have seen them.

40 Mr Djordjevic testified that in January or February 2006 he and Ms Tennent decided that they would like to exercise the option to renew contained in the Lease. He did not raise the matter with Mr Conroy.

41 Mr Djordjevic alleged that (a) at about this time he told Mr Chevtchenko that they wished to exercise the option and have the market rent determined, and (b) Mr Chevtchenko’s reply was to the following effect:

I know you are staying. We want you to stay. I know you want to stay, you just need to take the matter up with Mr Guinzbourg.

42 Mr Chevtchenko denied that any such conversation occurred.

43 Early in March 2006, Mr Djordjevic, having realised that under clause 19.1 of the Lease any exercise of the option had to occur before 10 May, decided to write a letter about it to the Respondents’ solicitor. He believed that Mr Chevtchenko, if given such a letter, would do nothing about it. He said that he had no address, either business or residential, for the Respondents. He therefore obtained Mr Fung’s DX number from the front page of the lease and, having phoned directory assistance, was told that the postal address was Hong Kong Bank Building, 728 George Street, Sydney. On 12 March 2006, he placed in an Australia Post letter box at Coogee a stamped envelope, addressed to ‘Eric Fung & Co Solicitors Hong Kong Bank Building, 728 George Street, Sydney NSW 2000’. It contained a letter that Mr Djordjevic had prepared, purporting to exercise the option.

44 A copy of this letter was annexed to Mr Djordjevic’s affidavit. This copy was not signed. It was in the following terms:

11th March 2006

To Eric Fung & Company,

Regarding lease to 161/806 Bourke St, Waterloo

We wish to inform you that we are exercising the option to renew the lease for the above premises and if you can contact your clients Alexandra Moulkhina (sic), Alexandre Chevtchenko and Serge Guinsbourg (sic) so we can start negotiating the new rent.

For any further information please contact Alex Djordjevic on 0416370657

45 Mr Fung testified (a) that he never saw the original of this letter, and did not see a copy of it until after these proceedings had been instituted; (b) that at all relevant times he practised as a sole practitioner; (c) that during March 2006 his staff comprised his secretary, a receptionist and two paralegals; (d) that all incoming mail, including junk mail, was delivered by an employee of Australia Post to his receptionist, who then brought it unopened to him or, if he was absent, left it unopened on his desk; (e) that he opened and read all the mail himself; (f) that the file on the Lease (in relation to which he had completed all the necessary tasks on the Respondents’ behalf on 14 May 2004) had been placed in a drawer in his office; and (g) that neither a search of this file (which he had produced to the Tribunal) nor other searches and inquiries in his office had unearthed this letter or any evidence of its having been received at his office.

46 In cross-examination, Mr Fung said that he believed that there were scarcely any exceptions to this practice in dealing with incoming mail. He said also that he did a good deal of conveyancing, including leases, and that his searches within his office had not extended to other files that had been created relating to other properties in Waterloo. He could not say how many other letters he might have received, or how many appointments inside or outside the office he might have had, on the day when this letter would in the ordinary course have arrived. He also acknowledged that in a few instances a letter might remain on his desk for more than one day before he dealt with it.

47 Mr Colin McKenzie, who was employed by Australia Post as its Manager, Operational Improvement Branch, said in an affidavit that according to a survey of Australia Post’s delivery services during March 2006, 95.8% of letters posted were delivered on time and 98.4% were delivered on time plus one day. He said also that he was not aware of any delivery problems at this time for mail posted in Coogee or for mail addressed to Mr Fung’s office in the Hong Kong Bank Building, 724-728 George Street, Sydney.

48 Affidavits sworn by five other individuals carrying on business in this building contained statements to the effect that on occasions they received mail addressed to other occupants of this building or to individuals or corporations that did not carry on business in the building. They variously estimated the frequency of this as ‘at least 2 or 3 times every 3 months’, ‘at least 5 or 6 times a year’, ‘more than 6 times a year’, ‘at least 2 or 3 times a month’ and ‘at least twice a month’. Each of them testified that when this occurred they either delivered the mail to the office of the addressee within the building or returned it to Australia Post.

49 Mr Djordjevic alleged that after posting this letter he asked Mr Chevtchenko on every occasion when he paid the rent as to when Mr Guinzbourg would be returning, so that the new market rent for the next three years could be negotiated. He claimed that Mr Chevtchenko replied: ‘Serge is coming back to Australia soon. Work it out with him.’ Mr Chevtchenko denied these allegations.

50 Mr Djordjevic agreed in cross-examination that at none of these meetings did he give to Mr Chevtchenko a copy of the letter purporting to exercise the option. His reasons, he said, were that he believed that (a) it had been sufficient to send the letter to Mr Fung and (b) Mr Chevtchenko would have lost any copy given to him.

51 Mr Djordjevic and Ms Tennent testified that between April and August 2006, believing that the option had been validly exercised, they incurred various expenses in order to improve the business. They spent $1500.00 on pots and plants; they paid $1320.00 for new cupboards, a display case and a chalk board; they purchased a new cool room, paying $1768.80; they had new flyers printed, costing $310.00; they contributed $400.00 to an art prize to advertise the business; and they purchased a new awning, at a cost of $939.40.

52 Their affidavits referred also to some significant outlays by them in later months. For example, in October 2006 they spent $330.00 on repairs to the air-conditioning unit and in November they spent $1900.00 on renovation of the restaurant and installation of the new awning. In addition, on 13 November, Ms Tennent applied for a liquor licence, which was eventually granted in June 2007.

53 Following Mr Guinzbourg’s return to Australia on 14 August 2006, he and Mr Djordjevic had discussions about what the rent for the Premises should be following the expiry of the Lease in November 2006. Mr Djordjevic asked Ms Dalia Raymundo, a real estate agent carrying on business in Randwick, to carry out some research into retail retails in Waterloo and to assist him in his discussions. Mr Djordjevic sought, with Ms Raymundo’s assistance, to negotiate a rent lower than was currently paid. (At this stage, the weekly rent was $708.05 plus GST.) Mr Guinzbourg took the view that the figures being suggested by Mr Djordjevic were unduly low, and insisted on a higher amount.

54 According to Mr Guinzbourg, it was on 24 August 2006, in the course of these discussions, that he first became aware that Mr Djordjevic claimed to have exercised the option by a letter sent to Mr Fung. He rang Mr Fung, who told him that no such letter had been received. In cross-examination, Mr Guinzbourg said that he was not sure whether Mr Fung told him straightaway, or after having checked the file relating to the Lease.

55 A copy of a file note headed ‘Serge’ and dated 24/8/06 was annexed to Mr Fung’s affidavit. It was as follows:

1. The tenant told him they have exercised the option.

2. He asked whether we have received anything from the tenant.

3. Told him that we have never received anything, doc or notice etc.

4. If we have, we would have given him a copy immediately after we receive it.

5. Ask him to get a copy of the doc from the tenant.

6. He said they are collecting the rent from the tenant every month. It is strange that the tenant did not give the Notice to Alex or his sister.

7. He’ll get back to us.

56 On 24 or 25 August 2006, Mr Guinzbourg delivered to Mr Djordjevic a letter dated 24 August, addressed to ‘the business owners of RED STAR PIZZA’. It offered a new lease of the Premises for five years (with a five-year option) commencing on 11 November 2006. It proposed an initial rental of $670 per week plus GST, annual percentage increases and all outgoings to be paid by the tenant. The names of the three Respondents appeared at the bottom.

57 Mr Guinzbourg alleged, but Mr Djordjevic denied, that at this meeting Mr Djordjevic both claimed that a rent of $500 would be in line with current rents in the area and showed him a copy of the letter dated 11 March 2006 to Mr Fung. According to Mr Djordjevic, this prompted a disagreement between them as to whether the option had been validly exercised.

58 In a letter dated 29 August 2006 addressed to the Respondents, Mr Djordjevic rejected their offer of a new lease. He maintained that ‘we’ had validly exercised the option in the letter of 11 March 2006, claimed that according to Ms Raymundo’s research a fair rent for the Premises would be $430 per week plus GST plus outgoings, and proposed, ‘in the interest of concluding these negotiations quickly and satisfactorily’, a rent of $500 per week plus GST plus outgoings for the new period of three years. He also said that in the event that the offer was not accepted within 48 hours, ‘we will require market valuation as specified in the lease’.

59 On 30 August 2006, Mr Guinzbourg delivered to Mr Djordjevic a letter to ‘the proprietors of Red Star Pizza’, bearing that date. It rejected the proposed weekly rent of $500, maintaining that the tenant should pay $670 plus GST plus outgoings. It varied the earlier offer by proposing that the term should be 3 plus 3 years and that increases of rent should be calculated by reference to the CPI. It repeated the assertion by the Respondents, whose names appeared at the bottom, that the option had not been validly exercised. It also claimed that for this reason the Respondents were not legally obliged to commission a valuer, adding that they saw no practical need to do so, since ‘similar valuations have been done in recent times and the figures speak for themselves’.

60 On 3 September 2006, Mr Guinzbourg returned to Russia. He did not come back to Sydney until 14 March 2007.

61 On 9 November 2006, the initial term of the Lease expired. Mr Djordjevic and Ms Tennent continued, however, to carry on their business at the Premises and to pay rent, and the Respondents accepted their payments.

62 According to Mr Guinzbourg, on or about 20 March 2007, he visited the Premises and told Mr Djordjevic that the Respondents wanted to sell them and that they therefore needed to enter into a new lease. When Mr Djordjevic claimed that the rent being sought was too high and suggested that they obtain an independent valuer, he agreed. He then obtained approval for this course of action from the other Respondents.

63 Mr Djordjevic denied that this conversation occurred, alleging instead that Mr Guinzbourg had agreed during August 2006 that an independent valuation should be obtained.

64 On or about 27 March 2007, Mr Guinzbourg, at Mr Djordjevic’s request, signed a blank form of application to the Tribunal for appointment of a specialist retail valuer under section 31 of the RL Act. He also filled in the names of the three Respondents, with an address for service. He claimed to have believed that this form would be used to obtain a ‘non-binding valuation’. He then returned to Russia.

65 Mr Djordjevic stated in his affidavit that he subsequently noticed that Mr Guinzbourg had not signed a section of the form showing that the Respondents consented to the making of the application. He therefore asked Mr Chevtchenko to sign on the Respondents’ behalf, whereupon Mr Chevtchenko replied that he needed to ‘take it away and consider it’. Mr Djordjevic then gave him ‘a fresh set of forms’. In cross-examination (though not in his affidavit), he said that he gave new forms to Mr Chevtchenko because he thought he had lost the form that Mr Guinzbourg had signed.

66 On 5 May 2007, Mr Chevtchenko and Ms Moukhlina indicated to Mr Djordjevic that they were not prepared to sign the application form. They also handed to him a letter ‘to the business owners of RED STAR PIZZA’, dated 5 May 2007. It claimed that currently the Premises were occupied on a month-by-month lease. It offered a five-year lease of the Premises, with a renewal option of 5 years, with an initial weekly rent of $708 (subject to percentage increases) plus GST plus outgoings. It also gave notice that if a new lease with these terms was not signed within seven days, the recipients of the letter were required to vacate the Premises within 30 days from 12 May 2007.

67 Although this offer was not accepted, the Respondents took no steps to obtain possession of the Premises and, as at the date of the proceedings, the lessees remained in occupation of them, paying rent.

The proceedings in the Tribunal

68 On 11 May 2007, solicitors apparently instructed by Ms Tennent and Mr Djordjevic filed in the Tribunal an application (numbered 075076) under section 31 of the RL Act for the appointment of a specialist retail valuer to determine the current market rent for the Premises. The applicant lessee was stated to be ‘Sacha Tennent & Alexander Djordjevic (as assignor (sic) of Simon Conroy)’. It named the Respondents as the lessor and was accompanied by a copy of the Lease. All the parties’ names on the form were typed.

69 In an accompanying statutory declaration, also dated 11 May 2007, Mr Djordjevic stated that ‘the Lessor originally consented to the making of’ the application for appointment of a valuer and ‘executed a form of application’, a copy of which was annexed to the declaration. It then referred to the dispute between the parties as to whether the option to renew the Lease had been validly exercised.

70 Annexed to this statutory declaration was a copy of the form of application for appointment of a valuer that Mr Guinzbourg had identified in cross-examination as bearing his signature and the names and contact address of the Respondents in his handwriting. The remaining sections of this form were completed in handwriting which Mr Djordjevic identified as his handwriting.

71 On 4 June 2007, the present proceedings were instituted against the Respondents. In the application, the applicant was stated to be ‘Sacha Tennent & Alexander Djordjevic (as assignee of Simon Conroy)’. Amongst other remedies, the application sought a declaration that ‘there remains in force and effect a lease between the applicants and the respondents in terms of the original document dated 31 March 2004’.

72 On 22 June 2007, an amended application was filed. In it, the applicant was stated to be ‘Sacha Tennent, Simon Conroy & Alexander Djordjevic and Red Star Pizza Pty Ltd (ACN 100 764 805)’. The declaration now sought was that ‘there remains in force and effect a lease between the Lessees/RSP and the respondents in terms of the original document dated 31 March 2004’.

73 The other remedies sought were, in summary form, as follows; a declaration that the option had been validly exercised by ‘the Lessees/RSP’, or (in the alternative) that the Respondents had waived strict compliance with the Lease’s provisions regarding notice of exercise of the option, or were otherwise estopped from denying valid exercise of the option; an order restraining them from acting on the purported notice of termination dated 5 May 2007, or (in the alternative) relief against forfeiture under section 129 and or section 133F of the Conveyancing Act 1919; declarations that the Respondents had engaged in misleading or deceptive conduct and in unconscionable conduct; damages; an order that a specialist retail valuer be appointed as sought in application no. 075076; and costs.

Assessment of the evidence

74 The foregoing account refers to some conflicts in the evidence given by Mr Djordjevic, on the one hand, and by Mr Guinzbourg or Mr Chevtchenko, on the other. In the Tribunal’s opinion, Mr Djordjevic was a less credible witness than either of these two individuals. More than once, his answers were vague and evasive.

75 In particular, Mr Djordjevic was not convincing when attempting to explain why, on his instructions, the application for appointment of a valuer signed by Mr Guinzbourg was put before the Tribunal even though Mr Chevtchenko and Ms Moukhlina had told him not to use this document. In a distinctly hesitant way, he suggested that the reason was that at the time when he was discussing this document with these two Respondents the three of them thought that it had been lost. Although in the application itself it was made clear that the Respondents were not formally consenting to its being made, the Tribunal does not see why the status of the form signed earlier by Mr Guinzbourg should have been affected in any way by its having been temporarily misplaced. It may be added that the claim that it had been misplaced was not, in fact, made in Mr Djordjevic’s affidavit.

76 An important consequence of this conclusion by the Tribunal is that it does not accept Mr Djordjevic’s allegations, denied by Mr Chevtchenko, that (a) both before and after posting the letter of 11 March 2006 to Mr Fung he spoke about exercising the option to Mr Chevtchenko and (b) Mr Chevtchenko on each occasion gave him to believe that this was in accordance with the Respondents’ wishes but that he would have to await Mr Guinzbourg’s return before negotiating the new rent.

77 This is not to say, however, that the Tribunal places no weight on any of Mr Djordjevic’s evidence. In particular, it accepts his assertion that he prepared and posted the letter of 11 March 2006. Mr McGrath (counsel for the Respondents) did not significantly challenge this assertion.

78 Mr Narayan submitted that the Tribunal should find that Mr Fung was ‘less than candid’ in his evidence. The Tribunal rejects this submission. It considers that Mr Fung’s evidence regarding the system that he maintained for dealing with incoming mail, the searches and inquiries for the letter of 11 March 2006 that were carried out in his office and the file note of his conversation with Mr Guinzbourg on 24 August 2006 was honest and reliable. It notes in particular that he was prepared to acknowledge that (a) on occasions a piece of incoming correspondence might remain on his desk for more than one day before he dealt with it, and (b) that his searches for this letter did not extend to his files relating to other properties in the Waterloo area.

The issues requiring resolution

79 The principal issues canvassed by Mr Narayan (counsel for the Applicants) and by Mr McGrath in their written and oral submissions were these: (1) the identity of the lessee or lessees at the time of granting of the Lease; (2) whether, and if so to whom, any assignment of an interest as lessee under the Lease took place before the letter of 11 March 2006 was sent; (3) whether the sending of this letter brought about an exercise of the option of renewal in accordance with the terms of the Lease; and (4) if not, whether any prior or subsequent conduct by or on behalf of the Respondents constituted a waiver of compliance with these terms, or otherwise caused them to be estopped from denying compliance.

80 It is convenient to discuss each of these issues separately. In so doing, the Tribunal has not found it necessary to refer to all the points made and all the authorities quoted in the extensive submissions that it has received. In adopting this approach, it does not wish to show any disrespect for counsel’s efforts.

Who was the initial ‘lessee’ under the Lease?

81 The Lease itself identified two persons, Ms Tennent and Mr Conroy, as the ‘lessee’. Both of them executed it. Under clause 1.2 (see [20] above), ‘lessee’ was defined to include ‘in the case of a natural person or persons their and each of their respective heirs administrators and permitted assigns’.

82 Mr Narayan submitted, however, that on a proper consideration of all the evidence the Tribunal should conclude that Ms Tennent and Mr Conroy acted as agents for RSP, which was the ‘true’ lessee. He relied in particular on the fact that these two people were the directors of RSP and that RSP, to the knowledge of the Respondents, obtained the requisite insurance for the business, operated it from the outset and paid all its accounts, including rent and outgoings.

83 He relied also on authorities – in particular, Danziger v RJ Thompson [1944] 2 All ER 151 and Hardinge v Schidor [2002] NSWCA 277–showing that specifically in the case of a leasing or hiring agreement the description of a person as the lessee or hirer in the written document does not preclude the possibility that he or she may be shown by appropriate evidence to have acted as agent for the ‘real principal’.

84 In Williams v Bulat [1992] 2 Qd R 566, a further case on which Mr Narayan relied, the daughter of a person named as the purchaser in a contract for the sale of land instituted proceedings for specific performance. She adduced evidence to show that the named purchaser, her mother, acted as her agent. In a passage at 570-571 reproduced in Mr Narayan’s submissions, Ambrose J said:

It is my view that the mere fact that had the defendants been aware that Mrs Humphreys was acting for her daughter in offering to purchase their property, they would have been prepared to sell it only at a much greater price, does not of itself make the identity of the purchaser a material fact for the purpose of determining whether the contract is voidable at the option of the defendants. In arriving at this conclusion I adopt the approach of Fry J in Smith v Wheatcroft [(1878) 9 Ch D 223 at 230] and ask myself "whether the defendants have shown that any personal considerations entered into this contract?" Have they shown me that they would have been unwilling to enter into a contract in the same terms with anyone else? ...

I have little doubt on the cases that Mrs Humphreys who acted as agent for the plaintiff could have instituted an action against the defendants for specific performance of the contract in such a way as to require the defendants to transfer the property upon completion of the contract to which she was a party to her daughter as nominee. Had such a course been taken I do not understand how the defendants could have resisted her application for specific performance in those terms. There is nothing very complicated or difficult about that contract... On the material before me it is clear and indeed uncontradicted that the purchaser acted as agent for her daughter. The plaintiff then as undisclosed principal has a perfect right in my view to seek to enforce this contract against the defendants in her own name.

85 In the Tribunal’s opinion, this passage, far from supporting Mr Narayan’s argument, explains succinctly why it should be rejected. In this case, the Respondents clearly indicated during the negotiations for the Lease that ‘personal considerations’ entered into the matter and that they were indeed ‘unwilling to enter into a contract in the same terms’ with the person – that is, RSP – subsequently claimed to have been the ‘true principal’. Both in discussions with Mr Djordjevic and through their solicitors, they explained why they did not want RSP to be the lessee. The two persons who were ultimately named as the ‘lessee’ – Ms Tennent and Mr Conroy – understood these reasons and agreed that the Respondents’ wishes should prevail, as also did Mr Djordjevic.

86 It is highly relevant too that, unlike a contract for the sale of land, a lease is a contract under which continuing rights and liabilities arise. Typically under the RL Act, the minimum period for which the parties are or may be bound is five years. For this reason alone, the identity of a lessee is of much greater significance to a lessor than is the identity of a purchaser of land to the vendor.

87 Furthermore, another case given prominence in Mr Narayan’s submissions, Hardinge v Schidor [2002] NSWCA 277, contains at [34] a statement of principle given by Jordan CJ in Carberry v Gardiner (1936) 36 SR 559 which supports the Tribunal’s view. At 574 - 575, the Chief Justice stated as follows (with emphasis added, and the authorities that he cited omitted):

Again, it may appear that either or both of the parties, although on the face of the contract they do not appear to be other than principals, had in fact acted as agents for third parties in entering into the contract. In such a case, if the contract be not under seal, there are cases in which even at Common Law the actual principals may sue or be sued on the contract, although they are neither named nor indicated, and this notwithstanding that the contract is in writing and is also within the Statute of Frauds... In order that this position may arise, it is necessary (i) that, in a case within the Statute of Frauds the actual contracting party should contract as principals so as to be themselves chargeable under the contract ...; (ii) that the other party should not have deliberately chosen to accept the obligation of the agent in lieu of that of the principal, with knowledge of who the principal was and that his obligation was available to him...; (iii) that the terms of the contract should not be such as to state or imply that the parties to it were not only the principals but the real and only principals ...; and (iv) that the contract must not be of the kind that the personality of the contracting parties is material....

88 In relation to the first of these three italicised passages, it is relevant to recall that under clause 25.11 (see [27] above), the Lease was ‘deemed to be a Deed’. In the Tribunal’s opinion, all three passages reinforce the conclusion that it has reached in the present case.

89 It is true that in Hardinge v Schidor at [35] (a paragraph quoted in full in Mr Narayan’s submissions), the Court of Appeal held that in the particular circumstances of the case the true hirer of a bus under a hiring contract was not the person who signed the contract of hire but a company of which he was the director. But the Tribunal considers the facts of that case to be clearly distinguishable from those of the present case. In Hardinge, the company’s name appeared on the contract and there was nothing to suggest that the owner objected to the company’s being the hirer. Indeed, the issue before the Court was not whether the company was a party to the contract, and therefore liable to be sued for an alleged breach, but whether the director who signed the contract was also a party.

90 The Tribunal views its conclusion on this matter as entirely consonant with fundamental principles of contract law. To rule that RSP, not Ms Tennent and Mr Conroy, was the lessee under the Lease in this case would be to produce a result that entirely contradicted the consensus explicitly reached by the negotiating parties after specific consideration of the issue at stake – that is, whether two individuals, or a company of which they were the directors, should become subject to the liabilities, and entitled to the rights, of the lessee under the proposed lease.

91 By virtue of this reasoning, the Tribunal rejects also a submission by Mr Narayan based on section 8 of the RL Act. This section states:

8 When the lease is entered into

(1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).

(2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease.

Note. Therefore, if the lessee starts to pay rent as lessee or enters into possession as lessee, the lease is considered to have been entered into even if neither party has executed the lease at that time. Money paid in advance (purportedly as rent) as a deposit to secure premises for a proposed lease does not constitute rent paid as lessee under the lease.

92 Mr Narayan argued that during the months of December 2003 and January 2004 RSP, to the knowledge of the Respondents, both began to pay rent and entered into possession of the Premises. Both of these events occurred before the Lease had been executed by the parties to it. Accordingly, before execution there arose, in his submission, a lease pursuant to section 8(1), in which RSP was the lessee.

93 In the Tribunal’s opinion, this submission must fail because the operation of section 8(1) is only triggered if one or other of the two events mentioned in it –payment of rent and entry into possession – takes place ‘under the lease’. The leading authorities interpreting this provision–see, for example, Aspromonte Pty Ltd v Zagari [1999] NSWSC 831 at [52 – 53], on which Mr Narayan relied–make it clear that this means that there must at the relevant time have been a ‘consensus’ as to the terms of the contemplated lease, even though no written lease has yet been executed.

94 On or about 14 November 2003–i.e., before any payment of rent or entry into possession – the consensus reached by the negotiating parties in this case was that Ms Tennent and Mr Conroy, not RSP, should be the lessee. Subsequent execution of the Lease gave formal effect to this consensus. It therefore cannot be said that either payment of rent or entry into possession by RSP took place ‘under the lease’.

95 For the foregoing reasons, the Tribunal concludes that Ms Tennent and Mr Conroy were ‘the lessee’ under the Lease at the time of its execution.

Was there any subsequent assignment of an interest under the Lease?

96 In submissions handed up on 28 September 2007, the final day of the hearing, Mr Narayan expressly abandoned the claim, made in the application originally filed in these proceedings, that Mr Conroy, being one of the two initial lessees, had assigned his interest under the Lease to Mr Djordjevic. The Applicants’ position as set out in those submissions was that the ‘real’ lessee was and always had been RSP.

97 In his further submissions, filed on 5 October 2007, Mr Narayan argued however that if the Tribunal rejected his contention that the ‘true’ lessee was RSP, it should hold that there occurred during 2004 an equitable assignment by Mr Conroy of his interest under the Lease to Ms Tennent and Mr Djordjevic jointly. This was a consequence of the payments made by them to him, following his indication that he wished to leave the business. In Mr Narayan’s submission, the Respondents became aware of this assignment, both because Mr Djordjevic described it to Mr Guinzbourg and because of the substitution of RSP for Mr Conroy as guarantor.

98 Relying on a passage in the judgment of Dixon CJ in MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515 at 520-521, Mr Narayan submitted that this assignment, since it took effect in equity only, did not breach the covenant prohibiting assignment by the lessee without the lessor’s consent, contained in section 6 of the Lease.

99 In his further submissions, filed on 18 October 2007, Mr McGrath argued that the Tribunal should not accept these contentions by Mr Narayan because any claim of an assignment of this nature had been expressly abandoned in the amended application filed by the Applicants, and in Mr Narayan’s submissions dated 28 September 2007. Mr McGrath argued that Mr Narayan’s ‘belated re-assertion of an abandoned allegation’ was ‘procedurally unfair’.

100 The Tribunal considers this claim by Mr McGrath to have some force. But in its opinion, the validity of Mr Narayan’s claim that an equitable assignment of Mr Conroy’s interest under the Lease took place need not be determined. The reason is that, on grounds outlined below, the outcome of this case does not depend on this question. The Tribunal adds that it would not dispute his submission, based on MacDonald v Robins, that if such an assignment did take place it did not constitute a breach of the covenant regarding assignment.

Was there an effective exercise of the option of renewal?

101 Resolution of this question requires consideration of a number of separate, albeit linked, issues. Most of them relate to the letter dated 11 March 2006 sent by Mr Djordjevic to Mr Fung (hereafter ‘the letter’).

102 Did the letter communicate a sufficient intention to exercise the option? Applying criteria set out by Kirby P in Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677 (a case cited by Mr Narayan), the Tribunal considers that the terminology of the letter did communicate a sufficient intention to exercise the option. It was such as would convey such an intention to a reasonable recipient of the letter who was familiar with the terms of the Lease and the surrounding circumstances, including the dealings between the parties. Mr McGrath did not show any inclination to dispute this proposition.

103 By whom was the option exercisable? The Lease identified ‘the lessee’ as Ms Tennent and Mr Conroy and was executed by both of them. As has just been held, these two individuals, not RSP, were indeed the ‘true’ lessee. Under clause 1.2, as already mentioned, ‘lessee’ was defined to include ‘in the case of a natural person or persons their and each of their respective heirs administrators and permitted assigns’. It is clearly the case, therefore, that the option conferred on ‘the lessee’ by clause 19.1 was open to exercise by Ms Tennent and Mr Conroy, acting jointly.

104 Mr Narayan’s submissions, however, suggested two other possibilities. These will be considered in turn.

105 He argued first that the option could be exercised by one or other of the two lessees, acting alone. He relied here on clause 1.5 of the Lease, which stated: ‘Where two or more persons are lessees the covenants and obligation (sic) on their part herein contained shall bind them jointly and each of them severally.’ A further clause of potential relevance was clause 1.4, deeming the plural to include the singular and vice versa.

106 In the Tribunal’s opinion, this involves a misreading of clause 1.5. Its evident purpose was to entitle the lessor, in the event of any breach of covenant by the two persons identified as ‘the lessee’, to pursue legal remedies against them either jointly or individually. Neither in its express terms nor by necessary implication did it extend to one only of these lessees a right or entitlement that the Lease elsewhere conferred on the two of them, in their capacity as ‘the lessee’.

107 This conclusion is directly supported by the decision of White J in Gillion v Casserly [2000] QSC 144, a case cited by Mr McGrath. In the lease dealt with in that case, the ‘lessee’ was described as three named persons, ‘as joint tenants’. Clause 7 stated as follows:

Unless such interpretation shall be excluded by or be repugnant to the context then:

(a) the singular numbers shall include the plural and the covenant agreement and grants herein contained or implied shall be deemed to be entered into jointly and severally...

108 Dr Salkeld, who was one of the three lessees, assigned his interest in equity to Mr Gillion, who was another of the lessees. Subsequently, Mr Gillion and the third lessee, Akuity Pty Ltd, sought to exercise an option conferred by the lease on ‘the lessee’.

109 White J held that this purported exercise of the option was ineffective. At [33], he rejected the argument that it received support from clause 7. He held that this clause was excluded by or repugnant to the context, because ‘the intention of the parties reflected in the lease is that "the Lessee" exercises the option and "the Lessee" is constituted by 3 persons’.

110 His Honour then distinguished observations by the High Court in MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515. Here ‘the lessees’ under a lease were defined to include ‘the lessees and each of them’, and an option to purchase the land was conferred on ‘the lessees’. Dixon CJ (at 522 - 523) and Webb J (at 526) considered it at least possible that under these provisions one only of the two lessees might be entitled to exercise the option on behalf of both of them.

111 White J in Gillion v Casserly pointed out, however, at [34] that any such conclusion would be dependent on the words ‘and each of them’ forming part of the definition of ‘lessees’. In that case, as in the present case, ‘the lessee’ was defined without any such words being present. His Honour then said:

The general provision in clause 7 does not have the effect of ousting the particular definition of "the Lessee" which is all three. To hold otherwise could lead to clearly undesirable outcomes in the case of conflict between the individual tenants or the landlords being left with one unsatisfactory tenant.

112 Mr Narayan’s second alternative submission in this context was that Mr Djordjevic, as the equitable assignee of Mr Conroy’s interest under the Lease, could exercise the option jointly with Ms Tennent, the other named lessee. He relied in this context on a further passage from the judgment of Dixon CJ in MacDonald v Robins at 523-525, to the effect that an equitable assignee of an interest under a lease may exercise, in right of the assignor, an option of renewal that the lease conferred on the assignor.

113 In Gillion v Casserly at [35]. White J considered this aspect of MacDonald v Robins. He emphasised that an equitable assignee could not in this situation exercise the option in his or her own name, but only ‘in right of the assignor’. Citing a dictum of Holland J in Churcher v Danes Hotels Pty Ltd (1980) 8 BPR 15863 at 15877, he held further that any exercise of an option by an assignee in these circumstances must clearly ‘manifest his reliance upon the assignor’s right and not assert the right to be his own’.

114 The Tribunal’s conclusion regarding this second alternative submission is that if Mr Djordjevic was indeed an equitable assignee of Mr Conroy’s interest under the Lease the option may indeed have been exerciseable by him jointly with Ms Tennent (the other named lessee), provided that the notice of exercise ‘manifested’ that the option was being exercised jointly by Ms Tennent, in her own right, and by Mr Djordjevic ‘in right of’ Mr Conroy.

115 By whom was the option purportedly exercised? As Mr McGrath emphasised, the terms of the letter provided no answer to this question. The key words in it were ‘we are exercising the option’, but it was signed by only one person, Mr Djordjevic.

116 In these circumstances, the Tribunal is bound to say that the conflicting submissions by the Applicants regarding the identity of the ‘lessee’ under the Lease have the effect of weakening their case overall. It has determined that the persons entitled (in each case, jointly) to exercise the option were (a) Ms Tennent and Mr Conroy, or possibly (b) Ms Tennent and Mr Djordjevic, the latter ‘in right of’ Mr Conroy. It has rejected the argument that RSP was the lessee and could therefore exercise the option.

117 In the Tribunal’s judgment, the letter, on its receipt by the Respondents, could only be reasonably interpreted by them as purporting to exercise the option on behalf of the named lessees, Ms Tennent and Mr Conroy. It failed to manifest clearly an intention by Mr Djordjevic to join in the exercise of the option ‘in right of’ Mr Conroy, in accordance with the requirement laid down in Churcher v Danes Hotels Pty Ltd.

118 Did Mr Djordjevic have authority to exercise the option as an agent for the persons entitled to exercise it? The Tribunal agrees with Mr Narayan that an option of renewal can be effectively exercised by a duly authorised agent of the lessee or lessees. It is sufficient to refer in this context to Young v Lamb [2001] NSWCA 225, which is one of a number of authorities that Mr Narayan cited.

119 Young v Lamb also stands for the proposition that where the lessees under a lease comprise two or more partners, the general rule of partnership law that each party has authority, unless there is evidence to the contrary, to bind his or her fellow-partners in transactions relating to the partnership business provides a sufficient basis for one of the lessees to exercise an option of renewal.

120 The Tribunal accepts, however, Mr McGrath’s submission that even if it may be assumed that Mr Djordjevic had authority to act as Ms Tennent’s agent in writing the letter, he had no such authority from Mr Conroy. There was no evidence that Mr Conroy was in partnership with either Ms Tennent or Mr Djordjevic, even during the brief period when he participated in the conduct of the restaurant business. Furthermore, there was a conspicuous absence of evidence from Mr Conroy, either in his affidavit or in cross-examination, to the effect that he authorised the writing of the letter, or even knew at the time that it was to be written.

121 The Tribunal views this as a matter of considerable importance. To hold that Mr Djordjevic had sufficient authority from Mr Conroy to exercise the option on his behalf by writing the letter would involve committing him, despite his decision in 2004 to quit the business, to assuming the obligations of a lessee for three years commencing in November 2007. No doubt, he could seek to procure an assignment of his interest to Mr Djordjevic or indeed RSP. But that would involve, amongst other things, fulfilling the requirements set out in section 6 of the Lease for obtaining the consent of the Respondent lessors.

122 With reference to this issue, Mr McGrath cited the decision of Young J in Tsaoucis v Gallipoli Memorial Club Ltd [1998] NSWSC 229. It is sufficient here to refer to the following dictum of his Honour:

It is, of course, always possible to exercise an option by an agent... However, the authorisation must exist at the date of the exercise of the option. Sometimes there can be ratification later, but once proceedings have commenced the time for ratification is usually over...

123 Since in the present case the principal argument by the Applicants was that RSP was the lessee and the option was exercised on its behalf, it cannot be assumed that Mr Conroy, by participating in these proceedings as one of the Applicants, thereby impliedly ratified (if that were still possible) any purported exercise of the option on his behalf.

124 This conclusion by the Tribunal is sufficient to defeat the claim by the Applicants that the option was validly exercised. In its opinion, this is the correct outcome irrespective of whether Mr Conroy had assigned in his interest in equity to Mr Djordjevic before the letter was sent.

125 Brief consideration will, however, be given to the remaining issues raised in this context.

126 Was Mr Fung an appropriate person to receive notice of exercise of the option? The Tribunal accepts a submission by Mr Narayan that in appropriate circumstances an option may be validly exercised by a notice sent to the lessor’s solicitor, as agent for the lessor. A number of authorities (for example, Carter v Schmitt [2003] NSWSC 1166) support this proposition.

127 With some hesitation, the Tribunal also accepts Mr Narayan’s submission that, in the particular circumstances of this case, the lessees under the Lease would have been entitled to assume that Mr Fung was an agent duly authorised to receive a notice exercising the option. While it is inclined to the view that, contrary to Mr Djordjevic’s testimony, Mr Chevtchenko did provide him with contact details, it infers from the presence of Mr Fung’s name and address on both the Lease and the substituted bank guarantee that he could properly be regarded as the Respondents’ agent for this purpose. The evidence is not clear as to how an accurate version of Mr Fung’s address appeared on the guarantee. But it is more probable than not that one at least of the Respondents saw this document, and it is clear that none of them suggested to the lessees thereafter that Mr Fung should not be regarded as an agent to receive notices of a formal nature under the Lease.

128 Was the letter in fact ‘given’ to Mr Fung? The requirement that a notice of exercise of the option was to be ‘given’ to the Respondent lessors appears in clause 19.1 of the Lease.

129 The arguments raised on this issue before the Tribunal related both to the ‘giving’ and to the ‘serving’ of notices (the latter term being used in clause 14.2). They brought into consideration a number of authorities in the case law – notably Wallville Pty Ltd v Liristis Holding Pty Ltd [2001] NSWSC 894 and Parras v FAI General Insurance Co Ltd [2001] NSWSC 1077 – and two statutory provisions – section 170 of the Conveyancing Act 1919 and section 76(1) of the Interpretation Act 1987.

130 The underlying factual issue of prime importance was whether, on the balance of probabilities, the letter, having been posted by Mr Djordjevic on 12 March 2007, actually reached Mr Fung’s office. If it did so, it must, in the Tribunal’s judgment, be taken to have been ‘given’ to Mr Fung.

131 The resolution of this question – which, for reasons already given, is not necessary for the present decision–involves the difficult task of deciding which of two relatively improbable events was the more likely to occur. One of these events was that the letter went astray, either while in the hands of employees of Australia Post, or while in the possession of an occupant of the Hong Kong Bank Building other than Mr Fung himself or one of his employees. The other is that the system operating in Mr Fung’s office failed to bring it to his notice or to ensure that it reached the file that he had created for the Lease.

132 In the Tribunal’s opinion, the evidence adduced by the Respondent regarding letters being misdelivered in the building does not assist them greatly. The reason is that each of the five deponents stated that if a letter to another occupant was delivered to them by mistake, they ensured that it was sent to the correct occupant.

133 The Tribunal is inclined to the view that the latter of the two ‘improbable events’ just defined is the more likely, on balance, to have occurred. In so saying, it does not intend any disrespect to, or criticism of, Mr Fung. The misplacing of such a letter within any solicitor’s office cannot be regarded as an impossible occurrence.

Was there waiver or estoppel, such as to preclude the Respondents from claiming that the option was not exercised?

134 The Tribunal has found (see [76] above) that statements claimed by Mr Djordjevic to have been made by Mr Chevtchenko, to the effect that the Respondents ‘wanted’ the lessees to have the benefit of a further lease, were not in fact made.

135 In the light of this finding, the Tribunal sees no basis for an argument that the Respondents waived compliance with the Lease’s requirements for exercise of the option, or that they should be estopped from asserting non-compliance.

136 With regard to the claim of estoppel, the Tribunal points out also that the expenses incurred by Ms Tennent and Mr Djordjevic during the period when they might have thought that their exercise of the option had been acknowledged were matched, more or less, by further expenses incurred after they were told that the Respondents did not believe the option to have been exercised. This significantly weakens their claim of reliance on relevant conduct by the Respondents.

137 The same applies, in the Tribunal’s opinion, to Mr Guinzbourg’s conduct in signing the form of application for the appointment of a specialist retail valuer. Mr Djordjevic knew that the Respondents had denied, and were continuing to deny, that the option had been validly exercised. This single act by Mr Guinzbourg cannot be taken to have signified a reversal of the Respondents’ attitude on this issue.

Conclusion

138 For the foregoing reasons, the Application in these proceedings must be dismissed.

139 Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.