Gary Newton, Partner at HWL Ebsworth, together with Khushaal Vyas, Law Graduate provides a case note of ACME Properties PTY Ltd v Perpetual Corporate Trust Ltd as Trustee for Baeside Trust [2019] FCA 1189.
In Brief
In ACME Properties Pty Ltd v Perpetual Corporate Trust Ltd as Trustee for Braeside Trust [2019] FCA 1189, the Court considered whether the acceptance of an apparent offer to lease a premises constituted a legally binding agreement. Whilst such a document would ordinarily appear likely to have created a binding contract, the Court emphasised the significance of the fact that the offer was subject to the execution of all legal documents. It was held that the use of such words were particularly significant in demonstrating an intention to not be bound by any other document until such a time that all legal documentation relating to the lease had been executed. Thus, the court held that there was no binding lease agreement.
Factual Background
Since 2016, ACME Properties (the Lessee) leased some commercial space in Braeside, Victoria from Perpetual Corporate Trust Ltd (the Lessor). With the initial lease term coming to an end, the Lessee and Lessor entered negotiations in 2018 and early 2019 for a new lease agreement. The Lessor conducted these negotiations through its agent, ARA Australia (ARA).
On 25 March 2019, ARA provided the Lessee with a document styled as an “Offer to Lease”. The terms of this offer to lease also included the statement that the offer was subject to the “formal approval of the Landlord to be given or withheld at its absolute discretion” and the “execution of all legal documentation by the Landlord and Tenant”.
The Lessee provided ARA with a signed copy of the Offer to Lease document on 27 March 2019. Following this, on 3 April 2019, ARA provided a signed copy of the Offer to Lease which was signed on behalf of the Lessor under the words “accepted for and on behalf of the Landlord”. However, on 30 April 2019, ARA provided the Lessee with notice that the Lessor would be accepting a third party offer to lease the premises. By 30 April 2019, the legal documentation for the lease had not been executed.
In response, the Lessee argued that the Offer to Lease document was a binding agreement and, in the alternative, the Lessor had engaged in misleading or deceptive conduct under the Australian Consumer Law.
Judgment
The Lessee argued that any reasonable business person would have interpreted the signing of the Offer to Lease document, that the Lessor invited the Lessee to accept, would constitute a binding offer. However, the Court rejected this submission. Whilst the Court held that the Lessor’s signature meant that it had given its formal approval at its discretion to accept the lease, it noted that the Lessee had failed to absorb the significance of the term that the offer to lease was also subject to the execution of all legal documentation. The Court emphasised that there could be no contract independent of the execution of such documents.
The Court was sympathetic to the Lessee’s argument in that it noted that the expression of an “offer for acceptance” was signed by both parties and the fact that the offer document contained virtually all the commercial terms of the lease would ordinarily “support the view that the parties’ intention…was to enter into a contract upon the document being signed”. However, the Court determined that the added condition of the contract being subject to the execution of all legal documentation ultimately “outweigh(ed) these factors”.
For the same reasons, because of the qualification provided by the contract not coming into effect until the execution of all legal documentation, there was no misleading or deceptive representation made to the Lessee. Therefore, the Lessee’s case failed on both counts.
Lesson
Parties should take extreme care when reviewing contractual documents and ensure that the offers that they accept are not subject to any further conditions. As this case demonstrates, one simple phrase added to an offer letter, which in other circumstances may have been considered a legal agreement, can render a document as non-binding.
Gary Newton is an accredited specialist in property law since 1994 and has a built broad property practice since 1983. Gary advises on a variety of real estate transactions including retail leasing and commercial leasing, both for landlords and tenants, property acquisitions, property developments and sales including residential, commercial, retail and industrial, buying property in Australia, strata, community and neighborhood title law, property joint ventures, due diligence, finance and structuring, partitions, environment and planning; and general property advice.
Gary’s personal clients comprise a mixture of property developers, high net worth individuals, insurance companies, major NFP organisations and government authorities such as Roads and Maritime Services, Snowy Monaro Regional Council and Transport for NSW. Gary’s clients have also include Chinese investors conducting property transactions in Australia.
Gary has been named in Best Lawyers™ Australia for Leasing Law and Real Property Law. Gary has also been recognised in the Recommended Tier of the ‘Leading Property & Real Estate Lawyers’ for the 2018 edition of Doyle’s Guide. In 2016, Gary was listed as a recommended lawyer in Real Estate by the Asia Pacific Legal 500.
He has been recognised in the Asialaw Leading Lawyers Guide (2017) as Leading Lawyer in Construction & Real Estate and has been selected for inclusion in the Asialaw Profiles Legal Directory (2017 & 2018) for Real Estate.
He was also awarded in 2016 a Lexology Client Choice Award for his excellence in client service in the area of Real Estate.
Gary is a member of the Law Society Property Law Committee and is the current Chairman of the Australia Property Law Group of the Law Council of Australia, General Practice Section. Gary is a Freeman of Rostrum, an award for long service to Rostrum and he is the current Honorary Secretary of NSW Rostrum and a member of the organising committee for the “Voice of Youth” NSW High School public speaking competition. He is also the Vice President of the Darling Point Society.
Gary has published 8 books on property law including 2 books in 2017. Gary is one of the authors of the LexisNexis Butterworths NSW Conveyancing Service (loose leaf). Gary is a regular speaker at Property Law Conferences. For the Real Estate Institute of NSW Gary presents a regular webinar programme for commercial real estate agents. You may connect with Gary via email gnewton@hwle.com.au
