Realm Resources Ltd v Aurora Place Investments Pty Ltd

This a dispute about whether a binding sublease for a term of 5 years was entered into between the plaintiff as sublessee and the defendant as sublessor in respect of part of Level 16 of the Aurora Place building in Phillip Street, Sydney. The plaintiff, Realm Resources Ltd (“Realm”), contends that no binding sub-lease was entered into; the defendant, Aurora Place Investments Pty Ltd (“Aurora”), contends to the contrary.

In brief, Aurora contends that in August 2017 Realm became bound by the terms of a sublease, for a 5 year term commencing on 1 September 2017, in any one of three ways. These are:

Realm, on the other hand, disputed that the sublease was intended to operate as a deed. Realm further contended that the parties negotiated on the basis that the sublease would not become binding until either:

The nature of the issues raised dictates that the enquiry must focus upon the communications that passed between the parties concerning the proposed sublease. Both parties are sophisticated commercial entities. Both retained solicitors to act for them in the transaction. The salient communications between the parties are all in writing. Whilst a number of affidavits were read, little of the affidavit evidence was of significance in the determination of the matters in issue. None of the deponents were required for cross-examination.

In May 2017 negotiations took place between Realm and Aurora (through Aurora’s agent Jones Lang LaSalle (“JLL”)), concerning terms for a 5 year lease of about 300m2 of space on Level 16 of the Aurora Place building. In June 2017, Realm and Aurora signed a Lease Proposal which was expressed to be not binding upon the parties except for cl 36 (concerning the payment by Realm of a Lease Deposit) and cl 39 (concerning confidentiality). The Lease Proposal evidently describes the main provisions of a proposed lease. Clause 40 of the Lease Proposal is in the following terms:

I note in passing that Realm places considerable reliance upon the references to “Lessor’s Board approval” and “satisfactory legal documentation being entered into by the parties”.

Both parties retained solicitors to act for them in respect of the proposed lease. Aurora retained DLA Piper, solicitors; Realm retain Maddocks, solicitors.

On 27 June 2017 DLA Piper sent a form of sublease to Maddocks. The covering email was in the following terms:

The reference to the attached Heads of Agreement is a reference to the Lease Proposal referred to above. The form of sublease contained detailed provisions extending over more than 50 pages. It provided for a 5 year term commencing on 1 September 2017. Provision was also made for Realm to have access to the premises under a licence prior to the Commencement Date of the lease (1 September 2017) in order to undertake fitout works.

On 5 July 2017 Maddocks sent a marked up version of the proposed lease provisions to DLA Piper showing various changes, and including various comments. The covering email stated that the attached lease was “subject to any further comments my client may have”. A response from DLA Piper was sought.

Maddocks sent a further email to DLA Piper on 12 July 2017, attaching a version of the proposed lease that showed further suggested changes. The covering email stated that the lease “remains subject to any further comments Realm Resources may have”. Maddocks again sought a response from DLA Piper.

On 16 July 2017 Maddocks sent a further email to DLA Piper seeking a response. It was stated in the email that Realm was “keen to finalise this matter as soon as possible”.

DLA Piper responded by email on 20 July 2017. The email included the following:

Maddocks sent an email in response on 27 July 2017. The email included the following:

On 28 July 2017 DLA Piper sent an email to Maddocks in the following terms:

I note, in relation to the bank guarantee, that on 1 August 2017 DLA Piper informed Maddocks that the amount of the guarantee was $280,506.

On 14 August 2017 Maddocks sent an email to DLA Piper that attached the form of sublease as signed by a director of, and the secretary of, Realm. However, the form of sublease had not been signed in the manner set out in the DLA Piper email of 28 July 2017 in that pages 58 to 60 had not been signed. The email from Maddocks was in the following terms:

Clause 12.2 of the form of sublease was concerned with the licence to be granted to Realm to enable it to carry out the fitout works.

Also on 14 August 2017, Maddocks sent a letter by courier to DLA Piper enclosing the bank guarantee and a cheque for lease registration fees. The letter stated that the original leases signed by Realm would be sent by courier “as soon as they have been fully executed”.

On 15 August 2017 Maddocks sent a letter by courier to DLA Piper in the following terms:

I infer that the copies of the leases sent on 15 August 2017 had been “fully executed” by Realm as foreshadowed in the email from Maddocks dated 14 August 2017. The Court Book copy of the sublease that sits behind the 15 August 2017 letter is not signed on pages 58 to 60, but there is another version of the sublease in the Court Book that is so signed. It is likely that this latter version (although not at that stage signed by Aurora) was sent by Maddocks on 15 August 2017.

On 16 August 2017 DLA Piper sent an email to Maddocks in the following terms:

The reference to certificates of currency would seem to be to the Tenant’s obligation under cl 5.3 of the sublease to provide written evidence of the currency of certain insurance policies before the earlier of the Access Date (the date from the which the Tenant can have access for fitout works) and the Commencement Date (1 September 2017).

Later on 16 August 2017 Maddocks responded by email. The email was in the following terms:

Maddocks sent a further email to DLA Piper on 18 August 2017 in the following terms:

Shortly thereafter, DLA Piper responded in the following terms:

DLA Piper then sent a further email on 18 August 2017 in the following terms:

On 23 August 2017 Maddocks sent an email to DLA Piper which attached a certificate of currency of insurance. This appears to be a certificate in respect of Business and Public Liability insurance dated 23 August 2017.

On 24 August 2017 Maddocks sent an email to DLA Piper that attached a letter in the following terms:

The reference to “heads of terms” was plainly intended as a reference to the Lease Proposal that was at other times referred to as the Heads of Agreement.

DLA Piper responded by email sent late in the evening of 24 August 2017. This email is in the following terms:

In fact, the sublease had not yet been signed by or on behalf of Aurora. That did not occur until some time during the morning of 25 August 2017. The sublease was signed on behalf of Aurora by Ms Astrid Beemster, a partner of DLA Piper, pursuant to a Power of Attorney. It further seems that the Landlord’s works had not started by 24 August 2017, although there is evidence that a contractor (Valmont Group Ltd) had been engaged, and had been permitted to put some gear in the premises pending the provision of a required bank guarantee and a complying development certificate.

Early on 25 August 2017, Maddocks sent an email to DLA Piper requesting that scanned copies of “the fully executed lease” be provided as soon as possible, and that confirmation be given as to exactly when the lease was signed by Aurora. As noted above, the signing occurred at some time during the morning of 25 August 2017. At 12:11pm on that day, Ms Riley of JLL sent an email to Maddocks that attached scanned copies of various documents including the executed sublease. Ms Riley stated that the sublease was in the process of being registered.

Later on 25 August 2017, Maddocks sent another email to DLA Piper (copied to Ms Riley) seeking confirmation as to exactly when the lease was signed by Aurora and when it was lodged for registration. Ms Riley then responded by email to Maddocks in the following terms:

Maddocks sent a further email to DLA Piper on 25 August 2017 in the following terms:

By that time the parties were clearly in dispute as to whether Realm was bound by the sublease. The solicitors for the parties thereafter engaged in debate about the situation that had arisen. DLA Piper sent a letter by email on 1 September 2017 to which Maddocks replied on 12 September 2017. DLA Piper sent a further letter on 19 September 2017. That letter raised the argument, now at the forefront of Aurora’s case, that Realm was bound because the sublease was a deed and Realm had executed it and delivered it to Aurora on 15 August 2017. Maddocks replied to that letter on 22 September 2017.

Following some further correspondence, the proceedings were commenced by Realm on 18 December 2017. By its Summons it seeks a declaration to the effect that it did not enter into a binding sublease with Aurora, and an order that Aurora return the bank guarantee in the sum of $280,506.

Aurora filed a Cross Summons by which a declaration was sought to the effect that a valid and binding sublease had been entered into. However, that relief is no longer sought in circumstances where Aurora has purported to terminate the sublease due to default on the part of Realm. Aurora therefore now seeks to recover an amount of $735,000 for unpaid rent, and damages.

An order was made by consent under Uniform Civil Procedure Rules 2005 (NSW) r 28.2 for all questions arising on Realm’s Summons to be decided separately from, and before, all other questions in the proceeding.

The parties made detailed submissions, both in writing and orally. At this point it is only necessary to summarise the essence of each party’s case. The respective cases are dealt with in more detail later in these reasons under the heading Determination.

Aurora submitted that Realm became bound by the terms of the sublease it executed, in three ways. The first argument advanced was to the effect that:

The second argument advanced by Aurora was to the effect that:

The third argument advanced by Aurora was to the effect that:

Realm took issue with those contentions. In particular, Realm submitted that the sublease was not a deed. It was put that aside from cl 19.20, all other relevant indicia pointed to an intention that the sublease was to operate as a simple contract rather than a deed.

However, the main thrust of Realm’s case that it did not become bound was that cl 40 of the Lease Proposal (or Heads of Agreement) had the effect that the parties thereafter negotiated on the basis that the proposed sublease would not be binding until:

Realm submitted that on 24 August 2017, before either of those events had taken place, it withdrew from the sublease (as it was entitled to do) by requesting Aurora to not sign the sublease and to hold the sublease in escrow pending further communication.

I will deal first with the question whether Realm became bound to the sublease as a result of a delivery of the sublease as a deed. This question involves several elements that are not entirely distinct. It is necessary to consider whether it was intended by the parties that the sublease would operate or take effect as a deed. It is necessary to consider whether the formal requirements for a deed are satisfied. It is also necessary to consider whether Realm evinced an intention to be immediately bound by the sublease such that it is taken to have been delivered as a deed.

As stated in B Edgeworth, Butt’s Land Law (Lawbook Co, 7th Edition, 2017) at [12.350]:

It has been said that this question of intention “is to be decided principally by reference to the contents of the instrument under consideration” (see 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] 2 Qd R 302; [2010] QCA 245 (“400 George Street”) at [32]). The submissions of the parties accorded with that approach.

Aurora pointed to cl 19.20 of the sublease which states:

It was submitted that it can be inferred from cl 19.20 that the parties were aware of s 36(11) of the Real Property Act 1900 (NSW) which provides that, upon registration, a dealing has the effect of a deed duly executed by the parties who signed it. It was further submitted that this showed that the word “deed” in cl 19.20 was being used advisedly and in the technical sense of the word. Aurora pointed to other provisions of the sublease where “deed” is used (see, for example, cll 7.1.5, 7.1.6, 7.3 and 11.10). It was submitted that the subject matter of those provisions again suggests that “deed” was used advisedly and in its technical sense.

Aurora submitted that there were good reasons for the parties to want the sublease to be a deed. Reference was made to provisions which conferred powers of attorney upon Aurora, including cll 15.3 and 18.5. Clause 15.3 contains an irrevocable authority and direction by the Tenant to the Landlord to “complete and deliver the Lease and Exhibit 1” once the Premises had been measured (as provided for in cl 15.1 at or about the completion of the Landlord’s Works under cl 12.6). It was put that cl 15.3 envisaged that Exhibit 1 would be completed pursuant to that authority after the sublease had come into existence and then, together with the sublease, would be delivered as a separate deed.

Realm submitted that apart from cl 19.20 all other relevant indicia pointed to an intention that the sublease was to operate as a simple contract rather than a deed. It was submitted that:

The third point raised by Realm is incorrect as a matter of fact. The last point seems to me to be more directed to the question whether the sublease was delivered as a deed by Realm. In any case, for the reasons which are set out below at [81]-[95], I do not accept that the communications evince an objective intention to the effect of that advanced by Realm.

Where, as here, the Court is confronted with conflicting indications in an instrument, it is appropriate to proceed towards ascertainment of the relevant intention by balancing those indications (see 400 George Street (supra) at [20]).

In my view, the matters advanced by Aurora, in particular cl 19.20 itself, strongly point to an intention that the sublease would, as an instrument, operate as a deed rather than a simple contract. Clause 19.20 is a clear statement of what the sublease is. It should not be overlooked that the terms of the sublease were the subject of negotiations carried out through the solicitors for the respective parties. The first draft, submitted by DLA Piper to Maddocks on 27 June 2017, contained cl 19.20 in its present form. Various amendments were thereafter suggested by Maddocks, but not in respect of cl 19.20, which remained unchanged throughout. Clause 19.20 is more than a mere description of the instrument. It is a substantive provision, chosen by the parties, that is directly concerned with the nature and manner of operation of the sublease. Further, I agree with the submission that the word “deed” was there used advisedly and in its technical sense, as it was in other places in the sublease. The terms of the sublease, including cll 15.3 and 18.5 (and also cl 9.11 which contains a power of attorney), suggest that there were sound reasons for the parties to declare that the sublease is a deed. Their choice in that regard cannot be dismissed, or minimised in its significance, on the basis that it seems anomalous.

Against that, it is true that the instrument is not described in its title as a deed. This is of little weight in circumstances where the front page is a standard form sublease, suitable for registration, to which the detailed provisions are annexed. So, too, is the tenor of the language employed throughout the sublease. In my opinion it is as apt for parties to a deed to express themselves in terms of agreement rather than covenant, as it is for parties to a simple contract. It is correct that the execution pages make no reference to the instrument being a deed, and do not include language traditionally associated with the execution of deeds such as “signed, sealed and delivered”. However, this is not of great significance in circumstances where the formalities for the execution of deeds have been relaxed by the passing of legislation (see Conveyancing Act 1919 (NSW), s 38; Corporations Act, s 127), and the instrument contains an express statement that it is a deed. This point is discussed further below.

Viewing the matter overall, I think that the indications that the parties intended that the sublease would operate or take effect as a deed clearly outweigh the indications to the contrary.

I turn now to consider whether the formal requirements for a deed have been satisfied.

The controversy here centres upon whether Realm executed the sublease as a deed for the purposes of s 127(3) of the Corporations Act. Section 127(3) provides:

There seems to be no doubt that Realm executed copies of the sublease in accordance with s 127(1); that is, without using a common seal, it signed by a director and company secretary. The issue is whether the sublease is expressed to be executed as a deed for the purposes of s 127(3).

Counsel for Aurora referred the Court to Gibbons v Pozzan (2007) 209 FLR 233; [2007] SASC 99, a decision of the Full Court of the Supreme Court of South Australia. In that case, an issue arose as to whether a loan agreement, that had been signed for a company by its sole director and secretary in accordance with s 127(1), was expressed to be executed as a deed for the purposes of s 127(3). Duggan J (with whom Gray and White JJ agreed) rejected an argument that s 127(3) required the words “executed as a deed” to be stated in the document. His Honour stated at [30]:

After referring to the decision of the Full Court of the Supreme Court of Western Australia in Dean v Lloyd (1991) 3 WAR 235, concerning s 9 of the Property Law Act 1969 (WA), Duggan J continued at [33]-[34]:

The loan agreement in Gibbons v Pozzan (supra) was described as a Deed, including at its commencement, in a recital, and in the testatum (see at [35]-[37]), whilst in the body of the document it was described as both a deed and, more commonly, an agreement (see at [40]). The testimonium referred to sealing (see at [38]). However, the attestation clauses themselves contained no indication that the document was a deed (see at [39]).

Duggan J stated at [41]:

An application for special leave to appeal from the decision in Gibbons v Pozzan (supra) was refused: [2007] HCATrans 422.

Aurora submitted that as cl 19.20 of the sublease executed by Realm states in terms that the sublease is a deed, it should be held to be expressed to be executed as a deed within the meaning of s 127(3). I agree. It is distinctly stated in cl 19.20 that the sublease is a deed. The statement is not contradicted by any other provision. The sublease, read as a whole, clearly indicates that it is a deed. In those circumstances, and in conformity with the reasoning in Gibbons v Pozzan (supra), which recognises that a purpose of s 127 was to reduce formalities and look to substance and intention, the sublease is expressed to be executed as a deed for the purposes of s 127(3).

In my opinion, when Realm executed the copies of the subleases in accordance with s 127(1), it executed the sublease as a deed within the meaning of s 127(3). Realm did not specifically address this issue in its submissions, but I did not understand it to have abandoned the point.

The subleases, as executed by Realm, were provided to Maddocks. The subleases were then sent by Maddocks to DLA Piper on 15 August 2017. The next matter to consider is whether in these circumstances there has been a delivery of the deed by Realm.

It is not necessary, for delivery of a deed, that there be a physical delivery of the executed instrument. Equally, a physical delivery of an executed deed does not necessarily amount to a delivery. In this context, delivery depends upon the intention of the executing party. As stated by Sackville AJA (with whom Allsop P and Campbell JA agreed) in Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,235; [2012] NSWCA 253 at [58]:

The intention is to be ascertained objectively, by reference to the words and conduct of the executing party and the circumstances surrounding the execution of the deed (see Segboer v AJ Richardson Properties Pty Ltd (supra) at [59]-[60] and [73]; see also Mirzikinian v Tom & Bill Waterhouse Pty Ltd [2009] NSWCA 296 at [33]-[34]). If such an intention is found to exist, the executing party is taken to have delivered the deed and thereby become bound by it, such that the deed cannot be recalled (see Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80 at 87-8); that is so even if the deed is taken to have been delivered in escrow (see Segboer v AJ Richardson Properties Pty Ltd (supra) at [72]).

In some cases, the requisite intention is found to be lacking because the parties have conducted themselves on the basis that they would not be bound until all parties are bound. 400 George Street (supra) is an example. Realm submitted that the facts of that case are very similar to those here.

400 George Street (supra) concerned a proposed lease of a number of floors in a building to be constructed in central Brisbane. In April 2008, at an early stage in the negotiations, the proposed lessor issued a Letter of Offer to the proposed lessee, and requested the proposed lessee to sign it and return it. The Letter of Offer included the following:

The proposed lessee made some changes to the Letter of Offer, including to cl 37, such that it read:

The proposed lessee then signed the letter and returned it to the proposed lessor.

On 7 October 2008, solicitors for the proposed lessor sent copies of an Agreement for Lease and a Lease to the solicitors for the proposed lessee for execution. The documents were executed by the proposed lessee on 9 October 2008. On 15 October 2008 the solicitors for the proposed lessee sent the executed documents to the proposed lessor under cover of a letter that included statements that the documents were in order for execution by the proposed lessor, and that the solicitors looked forward to receipt of the executed documents in due course.

Muir JA (with whom Fraser JA and Mullins J agreed) held that the Agreement for Lease was a deed that had been executed by the proposed lessee. However, Muir JA held that the Agreement for Lease had not been delivered by the proposed lessee so as to become bound by it. After referring to the Letter of Offer, and to the trial Judge’s findings to the effect that nothing had occurred to suggest that the proposed lessee’s position had altered from the amended terms of the Letter of Offer, Muir JA stated at [53]-[57]:

In the present case, cl 40 of the Lease Proposal signed by the parties in June 2017 provided:

The opening words seem to me to signify that the proposed lease is subject to satisfaction of the three matters identified. The first two matters are solely within the province of Aurora and should be regarded as conditions for its benefit. The third is a matter that involves both Aurora and Realm. It is a condition that the proposed lease is subject to the parties entering into satisfactory legal documentation. I would take that to mean a legal document (or legal documents) that both parties find satisfactory. Whilst cl 40 is in its own terms not binding on the parties, it is a statement to the effect that a lease binding on both parties would come into effect only if the three matters were satisfied.

Clause 40 thus sets out some principles that the parties stated would apply to their negotiations towards a binding lease. It should be noted, in relation to the third requirement, that it is not prescriptive as to the manner in which the parties would enter into the satisfactory legal documentation, or the form the documentation may take.

The first draft of the sublease was sent by DLA Piper to Maddocks on 27 June 2017. The covering email made it clear that there was no legal obligation on the part of Aurora until it had obtained “all relevant board approvals”, and Realm had duly executed and returned the sublease and met certain specified requirements, including the provision of an unconditional bank guarantee.

On 5 and 12 July 2017, Maddocks informed DLA Piper that Realm wanted various changes made to the terms of the sublease. Some of the changes were accepted by Aurora. A revised form of sublease was sent by DLA Piper to Maddocks on 20 July 2017. Subject to one matter, the revised form of sublease was acceptable to Realm. On 28 July 2017, DLA Piper informed Maddocks that the proposed amendment was not agreed by Aurora. The form of sublease which, as previously noted, was at all times stated in terms to be a deed, was submitted by DLA Piper to Maddocks for execution by Realm. It was again stated that there was no legal obligation on the part of Aurora until it had obtained all relevant board approvals, Realm had duly executed and returned the sublease, and Realm had met certain specified requirements.

It appears from the communications sent by Maddocks on 14 August 2017 that Realm was then in the process of completing its execution of the sublease, and was proceeding towards satisfaction of the specified requirements. By 15 August 2017 Realm had provided executed copies of the sublease to Maddocks.

On 15 August 2017 Maddocks sent two executed copies of the sublease to DLA Piper. The covering letter included requests that arrangements be made for Aurora to sign the subleases, that the sublease be registered, and that a fully executed version of the sublease be returned to Maddocks for safekeeping. It may be presumed that the letter accorded with Realm’s instructions.

In my opinion, the provision by Realm of the executed copies of the sublease to Maddocks, and the sending of those subleases by Maddocks to DLA Piper on 15 August 2017, when viewed objectively in the light of all of the circumstances including the terms of the Lease Proposal, evinces an intention on the part of Realm to be bound immediately. The sublease had been executed as a deed, and provided to the solicitors for the other party to the sublease. It was not stated that Realm was free to withdraw unless and until certain things occurred, or would not be bound unless and until certain things occurred. The tenor of the letter which accompanied the executed subleases was that it was open to Aurora to immediately proceed to execute the sublease and attend to its registration.

I agree that the provision of the executed subleases has to be viewed in its context as part of the dealings between the parties, including in the light of cl 40 of the Lease Proposal. Further, it may be accepted that the parties did not, in the course of their dealings, abrogate or abandon cl 40 of the Lease Proposal. Accordingly, if Aurora was not able to make the premises available, or if it did not obtain its Board approval, it would not be bound to proceed to enter into a binding sublease. Further, it was necessary, in order for a sublease binding on both parties to come into effect, that both parties enter into satisfactory legal documentation.

As noted earlier, neither the manner in which the parties would enter into satisfactory legal documentation, nor the form the documentation may take, was prescribed. Those matters were left to the parties to work out in the course of their dealings. It is not a case where the parties have dealt with each other in such a way that a particular mode of binding was intended, such as by way of exchange of executed documents (see, for example, Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 at 114F-G, 117F, 118C-F and 121A-B). That mode, whether effected physically or electronically, is commonly employed in a conveyancing context, including in relation to leases. However, it does not appear to have been expressly adverted to in the present case. Of course, the exchange of executed documents is only one possible method of binding parties to a lease.

From the time the first draft of the sublease was submitted it contained cl 19.20 which states that the sublease is a deed. Realm must be taken to have been aware of the provision. The form of sublease was evidently the subject of detailed consideration by its solicitors. In the communications between the solicitors that followed, DLA Piper made it clear that Aurora would have no legal obligation until certain things occurred. No such reservation was sought to be made by Maddocks for Realm. It appears to have been envisaged that “execution versions” or “execution copies” of the sublease would be submitted for Realm to sign first, and then return to Aurora. No statement was made to the effect that neither party would be bound unless and until both had executed the sublease.

The third matter referred to in cl 40 of the Lease Proposal is not a statement expressed in those terms. It refers to satisfactory legal documentation being entered into by the parties. The form of sublease may be regarded as a satisfactory legal document for that purpose. Its terms were negotiated between the parties, and consensus was reached that the terms were acceptable. Both parties found the form of sublease to be satisfactory.

Realm executed the sublease as a deed, and its solicitors provided the deed to Aurora’s solicitors on terms that envisaged the parties being bound without any further act on the part of Realm, or indeed any further notice to Realm. All that remained to occur was for Aurora (either having obtained all relevant board approvals or being content to waive the condition) to execute and deliver the sublease. The terms of the sublease (notably cl 19.19.2) made it clear that registration was not required in order for it to be binding on the parties. To my mind, the conduct of Realm objectively evinces an intention to be immediately bound by the sublease as a deed. That is so even if Realm also intended that the sublease not take effect unless and until it was executed and delivered by Aurora. Realm either intended to be immediately bound unconditionally, or (much more likely) intended to be bound subject only to satisfaction of a condition that Aurora execute and deliver the sublease. In either case, the intention is sufficient to constitute delivery of the deed, and Realm thus became unable to recall the deed.

This conclusion is not inconsistent with cl 40 of the Lease Proposal, which I interpret as a statement to the effect that a lease binding upon both parties would come into effect only if the three identified matters are satisfied. The sublease as a deed would only become effective and binding upon both parties when the second party executes and delivers it. Pending such execution and delivery, the first party to execute is bound in the sense of not being able to recall the deed. Once the second party (Aurora) executes and delivers, a sublease, binding upon both parties, would come into effect, as envisaged by cl 40 of the Lease Proposal. In those circumstances, satisfactory legal documentation would have been entered into by the parties, and the other two matters referred to in cl 40, which are conditions for the benefit of Aurora, would be taken to have been satisfied. That may be regarded as the “further ceremony” the parties contemplated in order to bring about a sublease binding upon both of them (see Glass JA in Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 97093 at 9175-6; see also Long v Piper (2001) 10 BPR 19,289; [2001] NSWCA 342 at [54]-[55] per Giles JA).

I agree that the present case bears a similarity to 400 George Street (supra). I note, however, that unlike cl 37 of the Letter of Offer in that case, cl 40 of the Lease Proposal does not use the expression “mutually agreed” which Muir JA evidently regarded as important. His Honour stated that those words are not referable to an instrument binding on one party but not on the others (see at [54]). Moreover, in circumstances where:

The decision of the parties to proceed towards execution of the sublease as a deed, the manner in which it was contemplated that the sublease would be executed by the parties, the execution of the sublease as a deed by Realm, the provision of the executed sublease to Maddocks, and the terms of the letter from Maddocks to DLA Piper of 15 August 2017, together support the conclusion that the conduct of Realm evinced an intention to be bound immediately, whether unconditionally or (much more likely) subject only to satisfaction of a condition that Aurora execute and deliver the sublease (compare the conclusion reached in 400 George Street (supra) at [56]).

Insofar as conduct after 15 August 2017 is relevant to this question of intention, it seems to me that the communications sent on behalf of Realm are, until 24 August 2017, consistent with an understanding on the part of Realm that it was bound to the sublease subject only to satisfaction of a condition that Aurora bind itself. For example, on 16 August 2017 Maddocks, after indirectly referring to cl 40 of the Lease Proposal, made a request through DLA Piper for a Aurora to sign the sublease “or otherwise provide us with confirmation that it considers that the lease is in effect”. On 18 August 2017 Maddocks made a request that it be informed as soon as possible when Aurora will sign the sublease. It was not until 24 August 2017 that a statement was made by Maddocks that was inconsistent with the notion that Realm was bound. In the email sent on that day, it was stated that “neither party is bound unless and until a formal lease has been executed by both the landlord and the tenant”. However, it can be inferred from the terms of the email that Realm was by that time having second thoughts about the desirability of the sublease. The parties quickly fell into dispute, and little weight can be given to the communications from that point.

For the above reasons I have concluded that Realm delivered the deed, and thereby became bound by it such that it could not be recalled. Insofar as the email sent by Maddocks on 24 August 2017 was an attempt to recall the deed, it was ineffective. The deed, binding upon both parties, came into effect on 25 August 2017 when it was executed on behalf of Aurora and delivered. (Any question about Ms Beemster’s authority to sign on behalf of Aurora is overcome by Aurora’s ratification on 31 October 2018 – see [102]-[104] below.) There was no additional need for sealing of the deed (see s 38(3) of the Conveyancing Act). Further, delivery was effected even though Exhibit 1 had not been completed. The completion of Exhibit 1 was not required in order that the sublease become binding and effective. Clause 15.3 of the sublease makes it clear that Exhibit 1 is to be completed after the premises had been measured, as required by cl 15.1. Aurora has succeeded in making out its first argument that Realm became bound to it on the terms of the sublease.

That is sufficient for Aurora to defeat the claims for relief made by Realm in its Summons. It is thus not strictly necessary to deal with the second and third arguments raised by Aurora. Nevertheless, I will briefly summarise my views about those arguments.

The second argument was to the effect of that set out at [42] above. Had it been necessary to deal with it, I would not have accepted it. Even if the email sent by DLA Piper on 28 July 2017 was regarded as an offer capable of acceptance by Realm so as to bring a binding contract into existence, I do not think that it was established on the evidence that Realm had accepted the offer by 23 August 2017 as alleged. In particular, I would not have been satisfied that Realm had provided certificates of currency in respect of the insurance policies required to be maintained under cl 5 of the sublease.

A certificate of currency was provided by Realm’s solicitors on 23 August 2017. The certificate reveals the existence of cover for Property-Contents ($125,000), General Property ($25,000), Glass (Replacement Value), and Public Liability ($20m). However, cl 5.1.4 of the sublease also requires Industrial Special Risks insurance to be maintained in respect of the tenant’s equipment. At least in that regard it was not shown that Realm had provided a certificate of currency.

The third argument was to the effect of that set out at [43] above. Had it been necessary to deal with it, I would have accepted it. If Realm had not executed and delivered the sublease as a deed by 15 August 2017, the letter sent by Maddocks on that day could be regarded as an offer capable of acceptance by Aurora so as to bring a binding contract into existence. In those circumstances, Aurora could have accepted the offer by executing the sublease and communicating its acceptance to Realm. If that occurred, the three matters referred to in cl 40 of the Lease Proposal would have been satisfied or taken to have been satisfied. I do not think that acceptance of the offer would have required either the registration of the sublease or the return of a registered version of the sublease.

The email sent by Maddocks on 24 August 2017 would not have been effective to withdraw the offer. The terms of the email fail to clearly convey that the offer was withdrawn, or that Realm no longer wished to proceed (see Financings Ltd v Stimson [1962] 1 WLR 1184 at 1188 and 1190; IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 at [26]). The language of the email is ambivalent in that regard. It contains a request to Aurora’s solicitors to not arrange for Aurora to sign the sublease “at this stage”, and to hold the sublease signed by Realm in escrow pending further communication. The email seems to do no more than request that Aurora pause while Realm further considers its position. It would have been a simple matter to state, in effect, that any offer was withdrawn, but the email failed to do so.

Accordingly, it remained open to Aurora to accept the offer by executing the sublease and communicating its acceptance to Realm. Subject to one matter, Aurora did this on 25 August 2017.

The qualification is that it was not in my view shown on the evidence that the execution of the sublease on behalf of Aurora by Ms Beemster was authorised. The Power of Attorney she relied upon requires an instruction to the attorney “from a representative of the Manager” pursuant to a certain Asset Management Agreement. Under that agreement the Manager was CIM Global Asia LLC together with its affiliates. There is evidence that in December 2015, pursuant to a Deed of Novation, the Manager became Carlyle Australia Real Estate Advisors Pty Ltd (“Carlyle”). Whilst there is some evidence (in the email sent by Ms Riley of JLL to Maddocks on 25 August 2017) that on about 23 August 2017 Aurora authorised execution of the sublease under power of attorney, there does not seem to be any evidence of an instruction from Carlyle as the Manager to Ms Beemster as the attorney. Neither Mr James Kim (the Managing Director of Carlyle) nor Ms Beemster gave evidence to that effect in their affidavits.

On 31 October 2018 Aurora ratified Ms Beemster’s signing of the sublease. However, there is no doubt that in the meantime Realm clearly indicated that it did not wish to proceed (see, for example, the 12 September 2017 letter from Maddocks to DLA Piper). In these circumstances, a question would arise as to whether the ratification would operate so that the sublease is treated as having been executed by Aurora on 25 August 2017.

The general rule is that where a principal ratifies the earlier act of a person acting as agent without authority, the ratification relates back to the date of the unauthorised act, and the principal is bound as if the agent had had authority at the earlier time (see Bolton Partners v Lambert (1889) 41 Ch D 295 at 306, cited with apparent approval in Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [20]; see also Hewlett-Packard Australia Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670; [2004] FCA 135 at [40]). Nevertheless, a number of authorities were cited by counsel for Aurora which suggest that the law may be unsettled or that the general rule might not operate where the other party to the alleged contract withdraws prior to the ratification (see, for example, Bennett v Strauss [2016] NSWCA 324 at [55], where reference is made to the criticism of Bolton Partners v Lambert (supra) by Isaacs J in Davison v Vickery’s Motors Ltd (in liquidation) (1925) 37 CLR 1 at 14-17). Had it been necessary for me to decide the question, I would have held that the general rule did apply in the present case. Realm did not submit that the ratification did not occur within a reasonable time, or that Realm was in some way prejudiced. Further, no third party rights have intervened. In these circumstances, I can discern no good reason to depart from the general rule, recently described by the High Court as well settled, in a case such as this, involving acts purportedly undertaken by an agent in accepting an offer so as to bring a binding contract into existence. Bolton Partners v Lambert (supra) was itself a case of that kind.

For the foregoing reasons, Realm’s Summons must be dismissed. The Court will further order that Realm pay Aurora’s costs of the proceedings to date. The Court will appoint a directions hearing to facilitate the management of the balance of the proceedings.