Ebbage and Madden v McMahon's (Transport) P/L [1996] QCA 332 (6 September 1996)

Last Updated: 23 March 1999

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 126 of 1995

Brisbane

Before Davies J.A.

Pincus J.A.

Dowsett J.

[Ebbage and Madden v. McMahon's (Transport) P/L]

BETWEEN:

JOHN J. EBBAGE and MARTIN MADDEN

(Second Defendants) Appellants

AND:

McMAHON'S (TRANSPORT) PTY. LTD.

(Plaintiff) Respondent

Judgment delivered 06/09/1996

Separate Reasons for Judgment of each member of the Court, all concurring as to orders made.

___________________________________________________________________________

APPEAL ALLOWED TO THE EXTENT OF REPLACING ORDER 2 MADE BELOW BY AN ORDER THAT THE PLAINTIFF RECOVER AGAINST THE SECOND DEFENDANTS THE SUM OF $5,094.33. ALL OTHER ORDERS WILL STAND. FURTHER ORDER THAT THE RESPONDENT PAY THE APPELLANTS' COSTS OF THE APPEAL TO BE TAXED.

___________________________________________________________________________

CATCHWORDS: RECEIVER - statutory provisions - liability of receivers for liabilities arising under pre-receivership contracts - receiver in occupation - receivers and managers - s. 324(1) Companies (Queensland) Code - personal liability of receiver.

Re British Investments and Development Co. Pty Ltd [1979] A.C.L.R. 40-522

ACCORD AND SATISFACTION - cheque - notice given that not accept condition and proceeded to negotiate cheque - opportunity to stop payment - aware of condition - contract.

Homeguard Products v. Kiwi Packaging [1981] 2 N.Z.L.R. 322

FIXTURES - conversion - unlawful detention - significant damage - purpose of annexation - degree of annexation - tenant's fixtures - removable - time to remove fixtures - reasonable time to remove.

Counsel: Mr L Bowden for the appellants.

Mr P Morrison Q.C. for the respondent.

Solicitors: Bowdens for the appellants.

Hempenstall & O'Donoghue & Co. for the respondent.

Hearing date: 6 November 1995.

REASONS FOR JUDGMENT - DAVIES J.A.

Judgment delivered the 6th day of September 1996

I agree with the orders proposed by Pincus J.A. and with his Honour's reasons.

REASONS FOR JUDGMENT - PINCUS J.A.

This appeal attacks a judgment of the District Court given in a dispute about events in the course of a receivership. The plaintiff, now respondent, which is conveniently called the landlord, sued the receivers of Just Juice (Queensland) Pty Ltd ("Just Juice" or "the company") for moneys said to be due by the receivers in respect of their occupation of factory premises (which I shall call the factory) and warehouse premises (which I shall call the warehouse) at the inception of the receivership. There were also before the primary judge a claim relating to what were said to be fixtures and a counterclaim by the receivers against the landlord for $5,000 damages in detinue.

There is, as it seems to me, a legal question of some significance in the litigation; that is the effect of statutory provisions governing the liability of receivers for liabilities arising under pre-receivership contracts.

The judge gave judgment for the landlord on both the claim and the counterclaim and the appeal attacks both these decisions. The landlord has countered with a notice of contention setting up that the primary judge erred in rejecting part of its claim.

The landlord was at relevant times the lessee of the factory under a Crown lease and it sublet the factory to Just Juice for a period of one year from 1 January 1990. The landlord was also the lessee of the warehouse under a Crown lease and, on the view the primary judge took, Just Juice became on 1 January 1990 the tenant of the warehouse from month to month. Just Juice was in possession of the factory and the warehouse when the receivers, according to the findings made by the primary judge, entered into possession of both on 29 June 1990. The disputes between the parties related to the events of the two following months, July and August 1990 and each issue must be dealt with separately. The task of doing so has been facilitated by the character of the admirable reasons for judgment given by the primary judge; his Honour discussed the facts and issues comprehensively but concisely.

Landlords Claim in Respect of Receivers' Occupation of Premises

The receivers were appointed pursuant to a security given by Just Juice. It is to be noted that although referred to in the evidence and submissions as "receivers", a usage which will be followed in these reasons, the relevant parties were in truth receivers and managers, having power to manage the Just Juice's business as its agent. Since 23 June 1993 the position of a landlord of premises let to a company which undergoes receivership has been alleviated by s. 419A of the Corporations Law, operative from that date and so inapplicable in the present case. Prior to that the law in my view permitted a receiver, speaking generally, to continue to occupy premises leased to the company in question, as agent of the company, without incurring personal liability for rent. Section 324(1) of the Companies (Queensland) Code, being the law applicable at the relevant dates, made a receiver entering into possession or assuming control of any property of a corporation for the purposes of enforcing any charge "liable for debts incurred by him in the course of the receivership, possession or control for services rendered, goods purchased or property hired, leased, used or occupied".

Although it might perhaps have been possible to read this provision as creating a liability in a receiver of the assets of a company for the rent payable on property leased to the company, merely by virtue of the circumstance that the receiver had taken possession of leased property, that does not appear to be the proper construction. The equivalent provision in the 1961 companies legislation was considered by Needham J. in British Investments & Development Co. Pty Ltd. [1979] A.C.L.R.. 40-522.

His Honour had to construe s. 188(1) of the Companies Act (NSW). He was inclined to read the words "debts incurred by him" in s. 188(1) as meaning "debts for which the receiver makes himself responsible, either expressly or by necessary implication" (emphasis added). If the construction which Needham J favoured (although not as a final view) is to be adopted, and applied to the construction of s. 324(1), then the question for this Court is essentially whether the primary judge was correct, on the facts, in deciding that the receivers had made themselves responsible for the relevant debt in that way. It is convenient to consider the case, initially, on that basis. But a question arises as to whether the test proposed by Needham J gives the section too little scope; that will be discussed at a later stage.

One looks then, in the present case, for evidence of some act done by or on behalf of the receiver justifying the judge's conclusion, which was that the receivers accepted personal liability in respect of their occupation of the subject premises during August 1990. The primary case made for the landlord was that the evidence showed that the receivers had agreed to become personally responsible for payments due under the agreements relating to the factory and to the warehouse, between the landlord and Just Juice.

There is evidence of both conversations and exchanges of correspondence which is perhaps capable of supporting the view that the receivers accepted personal liability; the question, which I have found a difficult one, is whether that evidence is sufficient. No question arises, in this part of the case, as to the correctness of the judge's views on the credit of witnesses.

As to conversation, the judge found (555) that the receivers were liable because they entered into possession knowing there was a lease and continued in possession on the terms stated orally by one Murphy on 2 July 1990. The judge added a number of other reasons, in the course of which his Honour referred again to the conversation with Murphy. It is unnecessary to set it out in full and enough to summarise the account of it given by the witness McMahon, a director of the landlord. He said in effect that on 2 July he told Murphy, a representative of the receivers, that the landlord did not object to the receivers remaining in possession provided they paid the rent and outgoings under the lease. According to McMahon, Murphy said that "they will not adopt the lease but . . . will act to the spirit of the lease". McMahon explained that from his experience, as an accountant with the firm of which the receivers were members, Murphy "would have to go and talk to his senior cum manager cum partner to be advised on what he should say and do". That comment related to a remark attributed to Murphy, that "he'll go away and talk to his seniors because he was only a day to day man".

In cross examination relating to the conversation of 2 July, McMahon was asked whether Murphy was non-committal and answered "He didn't - he couldn't give me an answer". McMahon agreed that he pressed Murphy from time to time and also agreed that he did not do any final deal with Murphy.

It would be impossible to hold, on this evidence, that the receivers agreed through Murphy that their occupation should be on the basis that they were personally liable for moneys due under the agreements relating to the factory and the warehouse. That is so not only because Murphy did not finally commit himself to any proposition, but also because he was not held out as having authority to bind the receivers, nor did McMahon understand him to have such authority.

But the landlord's case must be considered having regard to the correspondence, which it is necessary to review. On 29 June 1990 (four days before the McMahon/Murphy conversation) the landlord's solicitor Mr O'Donoghue wrote to the receivers referring to the factory and to the warehouse and enclosing a copy of the relevant agreements. The purpose of the letter was to inform the receivers that the landlord wished O'Donoghue to liaise with them "for the purpose of ensuring that the commercial arrangements between the lessor and lessee are maintained intact". This letter contained no suggestion that the landlord required that the receivers become personally responsible for payment of moneys due under the agreements relating to the premises.

On 5 July 1990, three days after the McMahon/Murphy conversation, O'Donoghue wrote again, saying that the receivers had "advised that you are considering your position with respect to whether you will affirm the leases". The letter urged the receivers "to see to it that the rental is paid forthwith". The terms of the letter are in my view inconsistent with there having then been any agreement made between McMahon and Murphy under which the receivers undertook personal liability for the rent and other outgoings under the agreements. The letter concluded with a threat to terminate the lease unless the receivers advised on the following day that the rent would be paid, and made arrangements for that payment. On that day O'Donoghue spoke to Murphy who said that the rent would be paid on the following Monday and that was done.

It appears that Murphy was not further involved in the matter. On 31 July O'Donoghue wrote again to the receivers noting that the "terms of payment under the lease for July" had been met, threatening termination of the lease by reason of the loss of Just Juice's franchise and, at least by implication, asking for payment of some $63,000 due by way of outlays. The receivers replied in a letter of 2 August signed by Mr Ebbage and including the following paragraph:

"I advise that I will not be making any further payments pursuant to the lease agreement. I confirm my earlier advice to your client that I was not adopting the lease agreement however would continue to make payments pursuant to same whilst in occupation."

This is a puzzling letter because there is no evidence, other than the letter, that Ebbage told anyone on behalf of the landlord that the receivers would continue to make payments under a lease. It was submitted on behalf of the receivers that that could have been a reference to certain "without prejudice" discussions; that seems purely speculative. One Stephenson, who composed the letter being discussed, said in evidence that he had told O'Donoghue, in effect, that payment under any lease agreement was conditional upon payment of certain other sums to Just Juice. O'Donoghue, whose evidence was accepted by the primary judge, appeared to agree with the evidence of Stephenson just mentioned; he said:

"Mr Stevenson and I spoke on the phone. I asked him whether he was going to pay the rent and outgoings which amount to some $89,000 but he would only pay the rent if McMahon Drinks Pty Ltd paid its account owing to Just Juice (Queensland) the amount of that account he said was to the order of $60,000, so if Softdrink paid the 60,000 odd dollars that was due to Just Juice, Just Juice could pay the 20 odd thousand dollars rent for the month of August".

O'Donoghue added certain other details, to the effect that he argued against the stance Stephenson had taken. In the circumstances, that is, where there seems to be substantial agreement that anything Stephenson promised about payment was subject to a condition, it would not be right to use the letter of 2 August 1990 signed by Ebbage as a basis for finding that there was a unconditional promise to pay.

In the primary judge's careful explanation of the reasons for his conclusion on this issue against the receivers, his Honour refers to the receivers' "agreement to pay as evidenced by [their] letter of 2 August 1990". I am respectfully in disagreement with this approach. It is true that the letter evidences such an agreement, but it was not in contest that in truth the agreement referred to was subject to a condition; that condition was not fulfilled. It appears to me, also, that the fact that the fairly elaborate plaint which was filed in the District Court does not allege that there was such an agreement as was found, or indeed any relevant agreement to which the receivers were party, goes against the judge's view.

The submissions made on behalf of the landlord pointed out that it was not Stephenson who had the conversation of 2 July 1990, but Murphy; the argument is, as I understand it, that Stephenson must have been giving, in the letter of 2 August, the receivers' understanding of the outcome of the conversation between McMahon and Murphy, referred to above. But for the reasons I have explained, it does not seem right to hold, accepting everything McMahon says, that Murphy made any relevant agreement, binding on the receivers, on that occasion.

The only other communication between the parties which is relevant for this purpose is a letter of 4 September 1990 from the solicitors for the receivers to Mr O'Donoghue. Reading that letter as a whole, it unequivocally accepts liability for rental for the period during which the receivers remained in possession of the relevant premises, but only on the basis that the liability was limited to the date on which the landlord re-entered possession, 17 August 1990. It appears to me improbable that there ever was such an agreement as the letter mentioned; if there was, it does not avail the landlord, because it is common ground that rental up to the date mentioned, 17 August 1990, has been paid. In his reasons the judge points out that there is a slight miscalculation of the amount, to the extent of about $2.00, but neither party took any point about that.

My conclusion on this aspect of the matter is that it was not established - and as I have pointed out, not alleged in the pleading - that the receivers ever agreed to become personally liable for the sums which are in question. But the primary judge put forward other bases to justify his conclusion. These may be summarised as follows:

1. The receivers entered into possession knowing there was a lease and continued in possession.

2. In reliance on Murphy's statement about acting to the spirit of the lease the landlord forbore to put the receivers out and incurred further charges.

3. Such forbearance delayed the reletting of the property.

4. The receivers' conduct in staying in possession brought them a benefit by way of fees.

After referring to these and other matters his Honour held that it would be unconscionable for the receivers not to pay a reasonable sum and his Honour thought that sum was the amount due under the agreements.

My view is that the additional matters listed above do not justify the conclusion that the receivers made themselves liable for the sums claimed. As to forbearance, counsel for the landlord has pointed out that at the time when the receivers went into possession the landlord had a right to re-enter, the receivers knew additional local authority charges were being incurred while they were in possession and that the landlord re-entered in August. None of this, with respect, justifies a conclusion that the landlord forbore relying on any promise made by the receivers. No-one on behalf of the landlord said so, nor, if it matters, was any such case set up in the landlord's pleaded reply - which did, it might be noticed, allege an estoppel on another point.

And the correspondence, as it seems to me, does not support the notion that the landlord refrained from going back into possession until 17 August because of what was understood to be a promise made on behalf of the receivers by Murphy. The letter O'Donoghue wrote shortly after that conversation made no mention of any such promise, although it did urge the receivers to pay the rental and mentioned the possibility of a termination. Then the next letter, that of 31 July, talked about the possibility of termination on different grounds, but did not suggest that the landlord was holding off because of anything Murphy said or did. Lastly, none of the letters written on 17 August 1990, the date on which the landlord (according to the unchallenged finding of the judge) retook possession, makes any mention of the delay in taking possession having been due to a promise made by Murphy, or indeed of any promise, by the receivers.

Although the judge thought the receivers acted unconscionably in failing to pay, I can see nothing unconscionable in their conduct. Commercially, the conduct of the parties is explicable on the basis that the receivers were initially not sure what steps on their part would best preserve the interest of the creditor which appointed them, or indeed the creditors generally; that the landlord, likewise, although it made vigorous efforts to obtain payment of what was due by Just Juice, the company in respect of whose property the appointment was made, did not immediately conclude that it was in its interest to retake possession, or reach the contrary conclusion. It was no doubt possible that the receivers would decide to carry on the business for a substantial term and that might have suited the landlord well enough. But after about a month and a half of occupation by the receivers the landlord decided to go back in, being, quite understandably, discontented with the fact that not only the rental for August, but the whole of the outgoings, remained unpaid. Both sides acted in what they saw from time to time as their best interests and it is notable that at no time before 17 August (when it retook possession) did the landlord demand that the receivers give up possession, nor assert that it refrained from making such a demand on the basis that it understood that the receivers had made themselves personally liable to pay all the rental and outgoings during the period when they were in possession.

I mentioned above that the case would be approached initially on the basis of the interpretation of s. 324(1) of The Companies (Queensland) Code which the judge adopted. It is now necessary to consider whether the judgment may be wholly or partly upheld on the basis that his Honour's construction of s. 324(1), following the decision of the New South Wales Supreme Court in re British Investments and Developments Co. Pty Ltd [1979] A.C.L.R. 40-522, was too favourable to the receivers. The provision construed in the New South Wales case differs in some respects from s. 324(1), but the only difference which appears to be presently relevant is that the later section begins "A receiver, or any other authorised person, who, whether as agent for the corporation concerned or not, enters into possession . . ." whereas s. 188(1) of the provision considered in the New South Wales case did not include the words "whether as agent for the corporation concerned or not". That expression leaves no room for argument on the point whether the receiver may defeat a claim under the section by showing that the debts in question were incurred as agent for the company and that therefore the company alone is liable.

That is, the presence of the expression "whether as agent for the corporation concerned or not" shows that the legislature intended that where the section applies both the receiver, the company's agent, and the company itself may be liable. Were that not so, a receiver might no doubt defend a claim in respect of a debt incurred simply on the basis of the rule of the law of agency that unless it is stipulated otherwise the principal only and not the agent is liable on a contract made by an agent.

A second point to notice is that, quite apart from the statute, a receiver would become liable personally by dealing in such a way as to make it clear, expressly or by implication, that a remedy was to be available against the receiver himself or herself. That is, if a receiver in the course of his or her duties as agent of the company ordered goods on the basis that the receiver was personally liable, the statute would not be needed as a foundation of a claim based on that arrangement.

But the provision in question - s. 324(1) - must have been intended to make the receiver liable in circumstances where in its absence there would have been no liability. To confine its operation to circumstances in which the receiver has agreed, expressly or otherwise, to accept personal liability is to deprive it of effect.

A third point to notice about the section is that it does not appear to contemplate that mere entry into possession or assumption of control by the receiver will in itself be sufficient to create liability; the section does not say that if that happens all debts which fall due subsequently, even if pursuant to contracts made before appointment of the receiver, are the receiver's responsibility; to fall within the section, a debt must be "incurred by him" - i.e. incurred by the receiver. It is for this reason that, as it seems to me, ordinarily a receiver would not, under s. 324(1), have become liable for rental payable by the company the subject of the receivership, merely by entering into and continuing in possession of the company's business, conducted on leased property. That view accords with the opinion of the Harmer Committee in its 1988 report for the ALRC "General Insolvency Inquiry": see paras. 218 et seq. Merely taking and keeping possession of the company's property consisting in premises leased to the company does not create any liability; it is the lease agreement which creates the liability and, ordinarily, that liability would continue whether or not the company was continuously in possession during the period of the lease. But if an act done by the receiver, or one done on behalf of the receiver, creates a liability in the company which would not otherwise have existed, it appears to me that s. 324(1) makes the receiver personally liable; that is so even if the liability has its origin in a contract made by the company before the receivership. For example, electric power purchased with the receiver's authority during the period when the receiver is in possession would be a debt incurred by the receiver under s. 324(1), even if the supply has been arranged under a pre-receivership contract.

In the present case these considerations have relevance to the claim for outgoings. As was pointed out on behalf of the landlord, outgoings were incurred as a result of the company's activity, during the receivership, in carrying on business. I have expressed the view that there is nothing to show that the receivers agreed to accept liability either for the outgoings or for the rent, but the question remains whether the outgoings were debts incurred by the receivers within the meaning of s. 324(1).

The primary judge noted that (p. 553) the landlord knew that while the receivers "were conducting the business the [landlord] would be incurring substantial water and sewerage (B.O.D.) charges". Under the lease of the factory these charges were payable by Just Juice (cl. 4) and the judge pointed out that the factory was producing, during the receiver's possession, only in July.

The judge allowed what he took to be the proper proportion of both those outgoings which would have been incurred whether or not the factory was occupied and those outgoings which would not have been incurred but for the receiver's occupation of the factory and activities in the factory.

His Honour's calculations were not challenged. It is therefore right to base on them an estimate of the amount of the additional liability which has come into existence because of activities of the receivers - i.e. liability which, although it has its origin in the pre-receivership lease agreements, would not have accrued but for acts done by or on behalf of the receivers. These appear to be identifiable from the findings at pp. 23 and 24 of the reasons given in the District Court. As I understand the table at the foot of p. 24, read with the explanation which precedes it, the only items which were dependent on usage of water or services by or on behalf of the receivers are the last two which total $5,094.33 and it is that sum for which the receivers are, subject to an argument to be considered now, liable.

It is desirable to deal with another aspect of the learned primary judge's reasons. His Honour recorded that it was argued before him on behalf of the receivers that since it was common ground that the landlord took possession on 17 August 1990, nothing could have been due to the landlord after that date except damages for trespass. The judge regarded that submission as a quibble and awarded the rent for the relevant period, that is, from 17 August to 31 August 1990.

Neither the pleading, in its final form, nor the evidence, makes absolutely clear what was the situation between the parties in the period under discussion - i.e. from 17 August till the end of that month. The landlord alleged that it re-took possession on 17 August, by para. 9.1 of its plaint; although that was denied by the defence, ultimately it became common ground that the landlord re-took possession on that date. What happened during the rest of the month may be best inferred from the correspondence and in particular the letter written by Mr O'Donoghue, the landlord's solicitor, on 4 September 1990. The letter explains that on 17 August the landlord entered into possession, but on that date gave the receivers an assurance that it would not "interfere with your clients' security because of the obvious value of the chattels within the demised premises". The letter explains that subsequently there were discussions between the parties "with a view to resolving a range of commercial matters involving related parties". It appears from the letter that a subject of these discussions was whether, and if so to what extent, the receivers should be liable for the rent after 17 August; on that topic, no agreement was reached. Mr O'Donoghue accused the receivers of dishonourable and deceitful conduct, apparently in relation to the way they behaved during these negotiations; the letter suggests that the receivers went back on assurances which they then gave. There was a response from the solicitors for the receivers, dated 6 September, in which Mr O'Donoghue's assertions were not accepted.

Precisely what the legal position was with regard to the status of the tenancy after 17 August is debatable, but one thing which seems plain is that the landlord acquiesced in the receivers remaining in defacto possession after the landlord formally re-took possession on 17 August; another is that the parties attempted but failed to reach agreement as to what would be payable by the receivers in respect of their defacto possession after 17 August - a state of affairs which it was, it appears, agreed to with a view to enabling or facilitating discussions for settlement.

There is nothing in the landlord's pleading setting out the factual basis on which it is said that the receivers were personally liable for rent during the discussions I have mentioned, nor have any findings been made along the lines of the contentions put forward by Mr O'Donoghue in the letter of 4 September 1990 which I have discussed. I conclude that the landlord has not established any basis for recovering rent against the receivers in respect of the period after 17 August 1990.

Accord and Satisfaction

On 4 September 1990 a letter was written by the solicitors for the receivers to Mr O'Donoghue, as mentioned above; it enclosed a cheque for $11,611.73 for rental up to 17 August 1990. The cheque was sent "in full and final satisfaction of all claims" the landlord might have against the receivers with respect to the premises in question. The letter said the cheque might only be accepted on that basis and if it was not accepted on that basis the landlord must return it. Mr O'Donoghue replied saying that the landlord proposed at the expiration of one week to negotiate the cheque and, to put it simply, did not accept the basis on which the cheque had been sent. The receiver's solicitors replied in effect repeating their original stance, but the cheque was eventually negotiated.

The argument is that it was not open to the landlord to keep and negotiate the cheque as it did, while preserving its right to sue for additional sums - that it could only keep and negotiate the cheque on the basis that it gave up all its claims.

It is odd that the law relating to this rather common debtor's stratagem is not yet quite clear. The only point which differentiates the present from what might be called the ordinary case in which a cheque is tendered in full satisfaction of all claims is that here the payee warned the payer that it intended to ignore the condition and gave the payer an opportunity to stop payment. It was contended for the appellants that insistence on this issue being treated, somewhat oddly, as a question of fact has led to inconsistency in the outcomes which are to be found in the reported cases.

In some instances a problem is created by routine treatment of a cheque sent in this way, where the payment is banked by a junior employee and the payee may say it has not had proper notice of the special condition. That does not arise here; there is no doubt that the landlord was aware of the condition and decided to ignore it, except to the extent that the landlord gave the payer an opportunity to stop payment.

The principal argument put forward on behalf of the receivers, challenging the primary judge's view that there was no accord, was that stated in the New Zealand case of Homeguard Products v. Kiwi Packaging [1981] 2 N.Z.L.R. 322 at 331, where it was said in effect that in this sort of situation the creditor's retaining and banking the cheque -

" . . . is conclusive evidence of his assent to the conditions upon which the cheque was sent. So what really matters, irrespective of his intent, is the conduct of the creditor."

Counsel referred to the "objective theory of contract", by which was meant that the intention of a party negotiating a contract is in law that which would be reasonably deduced by the other party, not the subjective intention.

But objectivity does not assist the receivers much here; no-one reading the landlord's responses to the receipt of the cheque could have read them as accepting the condition on which the cheque was proffered. The question, so far as contract is concerned, is whether an offeree who chooses to retain or to dispose of property which has been obtained by him on stipulated terms, while purporting to reject those terms, is bound by them. Here, the problem arises in relation to payment of a cheque, but the same principle is involved if one postulates that some other sort of property - say, cash - is sent on the basis that if the person to whom it is sent keeps it or spends it, he is to be taken to be bound by certain stipulations, as a matter of contract.

The basis on which it is said that one party may effectively force an agreement on another, by telling that other that a certain sort of action (other than assent to the proposal) will be taken to be assent to the terms of the proposed agreement, is unclear. One can understand why, in this area, a distinction is drawn between the case in which the contract when made imposes no obligations on the offeree, as in Carlill v. Carbolic Smokeball Co. [1892] EWCA Civ 1; [1893] 1 Q.B. 256, and that in which it is sought to impose an obligation on the offeree, the obligation coming into existence because the offeree has performed an act stipulated by the offeror - such as, to take Corbin's example (Vol. 1 p. 310), hanging out a flag on Washington's birthday.

The question is obviously not merely one of fact, but involves matters of legal principle, such as those just alluded to. The cases on conditional tender of payment, although numerous, give no clear guidance. I, like the primary judge, prefer to follow those in which the Court has rejected the offeror's assertion that there has been an accord; I do so on the basis that the question is whether there is a contract and that the answer to that question is that there is none, because in general the law does not allow the imposition of an obligation in contract to be achieved by a stipulation that it shall be deemed to be imposed if the prospective obligor performs a stipulated act (other than one by way of express assent to the lease proposed), or does nothing as in Felthouse v. Bindley [1862] 11 C.B.(N.S.) 869. Since writing the above, I have noticed the decision of this Court in Amos v. Citibank Ltd (C.A. No. 243 of 1994, 10 May 1996); the views there expressed are consistent with my conclusion: see pp. 5, 7 of the principal judgment.

I should add that there may be another question, namely whether the property in the cheque passed, as it was proffered on a condition which the profferee would not accept; but that issue has not been raised, the lawfulness of the banking of the cheque being unchallenged.

Fixtures

The landlord's plaint alleged that there were on premises the subject of this litigation fixtures connected by bolting, nailing and/or cementing; a list was given. It alleged that the receivers had converted to their own use each of the items listed and damages were claimed. There was a counter-claim filed by the receivers seeking damages for wrongful detention of certain pallet racking, which is discussed below.

Resolution of the issues raised by these claims was rendered more difficult by the obscurity and vagueness of the proofs advanced. With a minor exception, the judge rejected the claims relating to these fixtures, his Honour's reasoning being in summary as follows. He held that, for many years prior to the commencement of the interest of Just Juice, items of plant, equipment and machinery had been purchased by Just Juice and installed on the relevant site. Most of it was bolted to the floor, but every item was removable, the purpose of the bolts being to hold the machines steady. The judge held that with two exceptions, (their value being fixed at $100), the items the subject of the landlord's claim in conversion were tenant's fixtures,. The judge proceeded on the basis that no claim for conversion could be made in respect of the tenant's fixtures.

It should be noted that the precise nature of the interest of the landlord was not proved. According to the plaint, the land was held by the landlord as lessee pursuant to a perpetual suburban lease, in part, and under a special lease in part. The first allegation was admitted by the defence, but not the second. There was no evidence as to the content of these alleged leases in favour of the landlord, but the case was conducted on both sides on the basis that such leases existed. The parties also argued on the basis that, for the purposes of the claim in conversion, the landlord was in no worse position than the freehold owner; it seem unnecessary to discuss whether or not that assumption can be accepted.

With respect to the claim relating to the pallet racks, the judge found that Just Juice held the warehouse premises in which the pallet racks were located, as a monthly tenant. His Honour described the racks as being quite large, bolted to the floor and ceiling and secured one to the other. He said that although they could be dismantled they were clearly fixtures. On 29 October 1990 the receivers sold the pallet racking for $5,000, but were refused permission to remove it; subsequently, the landlord itself sold the pallet racking. The receivers claim in damages for unlawful detention failed because the judge was not satisfied that the racking belonged to anyone other than the landlord on that date (29 October 1990).

It is now necessary to deal with the questions raised as to the correctness of his Honour's conclusions on these points.

All the machinery in issue was in the factory and it was, in general, attached to the factory premises by bolts, although some rested on the ground under its own weight. The judge held that two items, a suction fan and exhaust fans, were fixtures; their removal would have left a large hole in the factory wall and his Honour's conclusion is plainly correct. More difficult issues arise with respect to a number of items bolted to the building or integrally connected with items bolted to the building; these include a heat exchanger, stainless steel tanks, conveyers, pumps and motors. More precisely, they consist in all the items claimed in the plaint other than the fans just dealt with and other than those which could be described as "lightly attached" and which are numbered as follows, in the final version of the plaint: Nos. 24.6, 24.12, 24.15, 24.16, 24.17(1), 24.32, 24.37 and 24.38.

The remaining items in the plaint were more solidly attached and were prima facie fixtures. To remove machinery bolted to the floor it was only necessary to unscrew nuts, but that left the problem of disposing of the bolts; although some evidence was given by the witness McMahon, on behalf of the landlord to a contrary effect, it appears to me that no significant damage would have been done to the structure by removal of any of the items being discussed.

On the orthodox test, to determine whether the items were fixtures it is necessary to have regard to the purpose of annexation, as well as the degree of annexation. Similar problems arose in Attorney-General v. R T Company Pty Ltd [1957] HCA 29; (1957) 97 C.L.R. 146, where Fullagar J. held that the relevant items of equipment, used in the printing industry, were fixed by nuts and bolts "for the purpose of holding them steady when in operation and for the more efficient use of them as presses" (157); his Honour treated these items as chattels. Decisions having a contrary tendency, as it seems to me, are Hobson v. Gorringe [1897] 1 Ch. 183 at 189 to 191, Reynolds v. Ashby [1904] A.C. 466 at 472, Commissioner of Stamps (W.A.) v. Whiteman [1940] HCA 30; (1940) 64 C.L.R. 407 at 411, Grigor v. International Harvester [1942] Qd.S.R. 238, and Starline Furniture [1982] 1 A.C.L.C. 221. The better view is that the equipment being discussed - i.e. that other than the fans already dealt with and the lightly attached items I have listed - should be treated as fixtures.

There remain the lightly attached items, which on the evidence were either resting on the ground or attached to items resting on the ground; some of them were extremely heavy and would therefore have been difficult to remove, but their lack of permanent attachment appears to me to point in the direction of their being chattels; I would so hold.

The pallet racking, the equipment the subject of the $5,000 counter-claim, is attached by bolts to the floor and also, it appears, welded in some places to the walls and/or roof. The judge held that the racking, which is in effect a substantial structure attached to the main structure, is a fixture and I respectfully agree; it was conceded that such a finding must lead to upholding of the judge's decision with respect to the pallet racking.

There is left to be dealt with the landlord's claim for conversion, in respect of the fixtures and chattels discussed above.

Were the more substantially attached items, which I have held to be fixtures, landlord's fixtures or tenant's fixtures? I have already pointed out that all of this machinery was removable without doing any significant harm and it was unquestionably installed for the purposes of the business being conducted: see Young v. Dalgety [1987] 1 E.G.L.R. 116 at 119H, and Webb v. Frank Bevis [1940] 1 All.E.R. 247; in the latter case, machinery and a structure housing it was held to be a tenant's fixture even though it was attached by bolts, fastened through metal straps laid into concrete. The same result should ensue in this case.

The remaining question, under this head, is whether the items other than the fans, which are plainly landlord's fixtures, were legally able to be removed by Just Juice at relevant times. I have already mentioned that the lease of the factory premises, which is where all the equipment other than the pallet racking was located, was determined on 17 August 1990, when the landlord formally re-took possession; but, on a rather obscure basis, possession was not physically handed over until the end of the month. The primary judge held that the bulk of the machinery was sold before 31 August; but some of the items in issue were sold after that date.

There is authority in favour of the view that once the tenant gives up physical possession, which in this case occurred on 31 August 1990, the right to remove fixtures is gone: see the discussion in D'Arcy v. Burelli Investments Pty Ltd (1987) 8 N.S.W.L.R. 317. But the better view, and certainly one more in accordance with practical justice, is that the right to remove continues for a reasonable time after a lease has been terminated; that was assumed to be so in Official Assignee v. Maxwell (1893) 11 N.Z.L.R. 312 at 316, and held to be so in Smith v. City Petroleum [1940] 1 All E.R. 260 at 261. It should be added that the landlord did not dispute before us there was a right to remove within a reasonable time after forfeiture.

Some of the relevant items have, it is plain, not been removed from the premises; others have been removed and there is a substantial number in respect of which there is no satisfactory evidence relating to removal. The result is that there are only four items remaining in issue; there is no doubt as to the fact that items 24.1, 24.2, 24.3 and 24.7, being on my view tenant's fixtures, were severed and removed; that occurred early in October.

Before the primary judge, there was no argument advanced as to the period within which tenant's fixtures could lawfully be removed (see pp. 9 and 10 of the reasons below). However, the judge was conscious of the issue and must be taken to have decided it against the landlord. The items in question were advertised for sale in September and offers closed on 5 October 1990. There were a number of circumstances which, as a matter of commercial reality, were likely to have complicated the sale. A new tenant moved in immediately after possession was abandoned by the receivers and that would not have speeded things up; in fact, the new tenant used and later purchased some of the equipment. There is nothing to suggest that the continuing presence of the equipment was found to be a disadvantage. Then, no doubt it would have been necessary to ensure that the equipment in question was owned rather than leased or hired and that it had not already been sold to the new tenant. Although there was, it appears, a delay of some weeks from the date when possession was physically relinquished until advertisements appeared, I would not disagree with the primary judge's implicit finding on this point, that the relevant items were removed within a reasonable time.

It is necessary to make some reference to the factory lease which provided by cl. 6(e)(ii) that all "machinery, plant, equipment and/or fittings" brought on the premises by the sublessee with the approval of the sublessor should remain the property of the sublessee. There was some discussion before us and in the trial judge's reasons as to the effect of this clause. The difficulty in applying it is that there is no evidence as to the date on which the property in question was brought on. If it was brought on prior to the commencement of the factory lease then, as it seems to me, the clause has no operation. It was necessary for Just Juice to establish the facts necessary to bring the disputed items within the clause and it failed to do so.

The only additional point about the fixtures requiring mention is that, in my opinion, there was no evidence that the fans referred to above were removed; the award of $100 damages relating to them must be upset.

I would not wish to part from this complicated case without again mentioning the quality of the judge's reasons under appeal; although in some respects I have disagreed with his Honour's conclusions, I respectfully reiterate that they are exemplary, in having dealt fully but concisely with the many questions raised.

It is my opinion that the appeal be allowed to the extent of replacing Order 2 made below by an order that the plaintiff recover against the second defendants the sum of $5,094.33; and the other orders will stand. I further order that the respondent pay the appellants' costs of the appeal to be taxed.

REASONS FOR JUDGMENT - DOWSETT J.

I agree with the orders proposed by Pincus JA and with his Honour's reasons.