Background
In October 2023, Ms Stephanie Doyle — an experienced hospitality entrepreneur who had operated mini-golf and bar venues under the “Birdies” brand — caused two special purpose vehicles, Pheonix A Pty Ltd and Pheonix B Pty Ltd, to enter into agreements for lease with Spring UT Pty Ltd, trustee for the Spring Unit Trust and part of the Pelligra Group. The agreements covered multiple floors of 85 Spring Street, Melbourne, with Pheonix A taking ground-floor and lower-level premises and Pheonix B taking Level 12. The intended use was hospitality, and holding a liquor licence was fundamental to the viability of both tenancies.
Each agreement for lease contained a “Design Condition” (clause 2.1) making the agreement and its related lease conditional on both the landlord and tenant agreeing on the scope and design of their respective plans and specifications within 90 days (Agreement A, deadline 9 January 2024) or 60 days (Agreement B, deadline 10 December 2023). Clause 2.3 permitted either party to terminate by notice if that condition remained unsatisfied after the deadline. Despite months of correspondence and meetings, the tenant companies submitted only indicative floorplans and never delivered a complete, compliant set of tenant’s plans and specifications. On 21 February 2024, Spring UT’s lawyers served notice terminating both agreements and their related leases on the basis that the Design Condition had not been satisfied.
Pheonix A and Pheonix B commenced proceedings claiming damages for wrongful termination, arguing alternatively that the condition had in fact been agreed by 11 October 2023 or by a 15 November 2023 email exchange, that Spring UT was estopped from denying satisfaction of the condition, that Spring UT had breached its cooperation obligations, and that Spring UT had acted unconscionably under ss 20 and 21 of the Australian Consumer Law (ACL). Spring UT and Ross Pelligra cross-claimed, alleging the tenants had made misleading representations about the competence of their consultant Mr David Walls and had concealed liquor licence conditions imposed on him following problems at the Birdies Forest Hill venue, and sought declarations that both agreements were void ab initio.
The Court’s Holding
Moshinsky J dismissed the tenants’ originating application in its entirety. His Honour found that at no point before 21 February 2024 did the parties agree on the scope and design of the Tenant’s Plans and Specifications as required by clause 2.1. The tenants’ contention that agreement had been reached at the time the agreements were signed on 11 October 2023 was rejected; so too was the argument that Ms Doyle’s email of 15 November 2023 constituted agreement on the tenant’s plans — the court found that email was understood by both parties as confirmation only that the Landlord’s Plans had been approved by the tenant, not that the entire Design Condition had been satisfied. Accordingly, the condition in clause 2.1 remained unsatisfied at the time of termination and Spring UT was entitled to exercise the contractual termination right under clause 2.3.
The estoppel claim failed on the same factual basis: because no common understanding that the condition was satisfied ever arose, there was no assumption that could ground an estoppel. The allegations that Spring UT had breached its reasonable-endeavours obligation (clause 2.2(b)) and its assistance obligations, or had breached an implied duty to cooperate, were also not made out on the evidence. The unconscionable-conduct claims under ss 20 and 21 of the ACL were rejected, the court finding nothing in Spring UT’s conduct that crossed the threshold of statutory unconscionability.
On the cross-claim, Moshinsky J found that Pheonix A and Pheonix B had made representations that Ms Doyle and Mr Walls were competent, professional and capable of running licensed venues, and that both would be involved in operations — representations that were materially false given undisclosed licence conditions imposed on Mr Walls at Birdies Forest Hill that barred him from any financial interest in, or even physical entry onto, licensed premises. This non-disclosure amounted to misleading or deceptive conduct within s 18 of the ACL. However, because the agreements had already been validly terminated, the statutory preconditions in ss 237 and 243 of the ACL for granting declaratory relief (voiding the agreements ab initio) were not satisfied, and the cross-claim was therefore also dismissed.
Key Takeaways
- A contractual Design Condition requiring agreement on plans and specifications is not satisfied merely by exchanging indicative floorplans; a complete and compliant set of tenant’s plans must be submitted and approved before the deadline for a landlord’s termination right under such a condition to be forestalled.
- An email confirming approval of the landlord’s plans only confirms that one limb of a bilateral Design Condition is met — it does not establish a common assumption that the entire condition is satisfied, and will not ground an estoppel against the landlord’s exercise of its termination right.
- Where a tenancy is fundamentally dependent on holding a liquor licence, pre-contractual non-disclosure of regulatory conditions that would disqualify a key proposed operator from involvement in the licensed business is capable of constituting misleading or deceptive conduct under s 18 of the ACL, even if the landlord does not ask about licensing history.
- A cross-claimant seeking to have agreements declared void ab initio under ss 237 and 243 of the ACL must satisfy the court that such relief is warranted in light of current circumstances; where the agreements have already been validly terminated by other means, the court may decline to grant that declaratory relief.
Why It Matters
This decision provides important guidance for commercial landlords and tenants negotiating agreements for lease that include design-approval conditions. Courts will give effect to clear contractual termination rights where a tenant has failed to progress plans to the requisite level of completeness, and a tenant who relies on an informal email exchange to argue that a multi-limbed condition has been satisfied entirely will face a high evidentiary burden. The case underscores the importance of clear written records when parties claim that a condition precedent has been satisfied.
The misleading-conduct findings also carry a practical warning for prospective tenants in the hospitality sector: material licensing history — particularly regulatory conditions that go to the fitness of key personnel to operate licensed premises — must be proactively disclosed before entering into a lease where a liquor licence is central to the proposed business. Silence in circumstances where disclosure is reasonably expected can constitute conduct that is misleading or deceptive under the ACL, regardless of whether the landlord made a direct inquiry.