Collateral contract not a disposition of an interest in land

Earlier today I referred to two recent cases in which tenants successfully claimed that they had entered into collateral contracts with the operator of the Melbourne Casino and Entertainment Complex that entitled them to a further 5 year term following the 5 year term provided for in the lease. See: Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown  Melbourne Limited (VCAT, unreported, 24 February 2012). I have been asked whether the collateral contracts were in writing and signed by Crown and, if no, why they were not caught by the Statute of Frauds. The collateral contracts alleged were oral. Crown alleged that the tenants could not succeed because there was nothing in writing signed by Crown as required by the Statute of Frauds (ie s.126 of the Instruments Act 1958). VCAT held that the oral contracts did not relate to a  disposition of an interest in land because all they required Crown to do was send a notice that it would renew the lease. The collateral contracts were effectively an option exercisable by the tenant: that is an offer to grant a further term which Crown was contractually precluded from withdrawing while the option remained exercisable; there was no disposition of an interest in land until the tenant exercised the option; if the tenant did not exercise the option there was no disposition of an interest in land. See: BS Stillwell & Co v Budget Rent a Car System [1990] VR 589 at 594. The cases contain an interesting discussion about the circumstances in which a collateral contract can be effective.

Tenants win claim for new 5 year term

Despite no mention being made of additional terms in their leases, the operators of two restaurants in the Melbourne Casino and Entertainment Complex have succeeded in claims that they were entitled to additional 5 year terms. In Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown  Melbourne Limited (VCAT, unreported, 24 February 2012) the tenants, who operated the restaurants “Waterfront” and “Cafe Greco” successfully contended that Crown had breached a collateral contract that they would be granted an additional 5 year term after the expiry of the 5 year term provided for in their leases. The prinicipal of both tenants, Nicholas Zampelis, claimed that the tenants were induced to spend millions of dollars on fit-outs because of a promise that there existing leases would be renewed for a further term of 5 years. At the end of the intial 5 year term Crown refused to renew the leases and the areas occupied by “Waterfront” and “Cafe Greco” were leased to new tenants. Crown denied the existence of any collateral contract. Damages are to be assessed. In an article published in the Sunday Age on 4 March 2012 a representative of Crown is reported to have said that Crown will appeal.

Michael Redfern

Michael Redfern died last Thursday night. Many readers will know Michael either personally or as one of Australia’s leading property lawyers. Michael had been ill for a number of years. Michael was a fine lawyer, a gentlemen, a mentor to many, generous and kind.  Any person who knew Michael could not help but like him. Apart from his many years as a solicitor, Michael made major contributions to the law in Australia as co-author of  ‘Australian Tenancy Practice and Precedents’, the author of many articles and the presenter of many seminars. Michael will be sadly missed.   Michael’s funeral will be held on Friday 9 March, 2:30pm at Le Pine, 1048 Whitehorse Rd Box Hill.