Absolute precision in the description of “premises” is not required for a valid lease

J & H West Nominees Pty Ltd v Twenty Four Outdoor Australia Pty Ltd [2021] VSCA 337

Background

The appellant (J & H West) was the proprietor of land on Chapel Street which comprised a three-storey commercial building, a car park and roadways. The respondent (Twenty Four Outdoor) conducted a business of leasing billboard advertising space to outdoor media companies.

In March 2016, Twenty Four Outdoor approached J & H West regarding a proposal for the display of a single sign on the east-facing wall of the building. The parties subsequently entered into an Agreement to Lease (AFL), which described the “premises” as: “That part of the roof, east facing wall and airspace on the Property being used for the Sign, the support/attachment of the Sign and its supporting structure or electrical/data connections” (Premises). The terms “Property” and “Sign” were defined. Property was defined as: “6-10 Chapel Street, Windsor, VIC 3181, Australia – Volume 9119 Folio 566 and Volume 10342 Folio 126”. Sign was defined as: “One exclusive illuminated promotional advertising sign and supporting structure measuring approximately 19m wide x 4.6m high or smaller at 24 Outdoor’s discretion as approximately shown in the attached photo montage”.

The term of the AFL was 10 years, with an option to renew of one further 8-year term.

In November 2017, J & H West provided a draft lease to Twenty Four Outdoor which reflected the terms of the AFL. Twenty Four Outdoor then signed the lease but J & H West refused to sign it.

In December 2018, J & H West informed Twenty Four Outdoor that it was only prepared to enter into a lease that would terminate on 31 January 2027 with no further option to renew. There was no mention of any uncertainty in relation to the description of the Premises.

Twenty Four Outdoor issued proceedings seeking (amongst other things) specific performance of the AFL. J & H West alleged, by way of defence, that the AFL did not take effect as an agreement for lease and was uncertain because it did not grant a right of exclusive possession of any geographically specific part or section of the building’s roof or east facing wall or the Land’s appurtenant airspace and did not contain a commencement date.

The County Court was required to decide three issues between the parties. First, whether the AFL was, as a matter of construction, an immediately binding agreement. Second, if the AFL was immediately binding, whether it satisfied the requirements for an enforceable agreement for lease. Third (and alternatively) whether the AFL was a mere licence.

At first instance, Judge Ryan held that the AFL was binding and that Twenty Four Outdoor was entitled to an order for specific performance. Her Honour held that the description of the Premises in the AFL was sufficiently certain. Her Honour considered that the area of the Premises was sufficiently defined such that exclusive possession could be granted to Twenty Four Outdoor. Her Honour concluded that the use of the word “approximately” in describing the location of the sign did not render the description of the Premises uncertain.

J & H West sought leave to appeal to the Court of Appeal. The sole ground of appeal was whether the trial judge erred in finding that the description of the “Premises” to be leased in the AFL was sufficiently certain.

Submissions on Appeal and Reasoning

In a joint judgment, having considered the relevant authorities, Kyrou, McLeish and Sifris JJA held at [59], in respect of the required description of premises of a lease, that:

These cases show that absolute precision is not required in the description of premises to be leased, in order for an agreement to lease (or a lease) to be effective and support an order for specific performance. The description needs only to be sufficient to convey with reasonable clarity, as a matter of construction of the agreement, the subject matter of the demise.

J & H West submitted on appeal that the description of Premises referred to “part of the roof, east-facing wall and airspace of the Property”, but that the failure to identify the precise part of the wall rendered the description of the premises uncertain. The Court of Appeal did not accept that submission because Twenty Four Outdoor was entitled to use any part of the east facing wall. The Court concluded at [60] that: “The Agreement to Lease is not uncertain because an approximate location is given and the respondent has the ability to select the precise location and dimensions […] of the Sign.”

J & H West had further submitted that the absence of the specific dimensions of the supporting structure, the attachment structure and the airspace in the AFL made the description of the Premises uncertain and that it was not clear how far, or to what extent, a sign placed on the east facing wall would project into the airspace on the side of the building and how far above the parapet the structure could extend. The Court held that the absence of specific dimensions relating to the attachment and support structure and the airspace did not create any relevant uncertainty. The Court of Appeal also held that this issue was not sufficiently raised in the County Court and that the submission represented an attempt to create uncertainty where there was none.

The Court of Appeal noted that the parties themselves had no issue with the description of the premises as recorded in the AFL and that the same description in the AFL had been recorded later in the draft lease. The Court further noted that J & H West had not refused to execute the lease because of uncertainty in the description of the Premises. Whilst this was not determinative, it was held to support the conclusion that the description of the Premises was sufficiently certain.

The Court of Appeal concluded that the sole ground was arguable and therefore leave to appeal was granted. However, the appeal was dismissed.

Conclusion

This case is an important reminder that courts will endeavour to uphold the contractual bargain that parties have struck and that absolute precision in the description of premises in an agreement to lease or lease (whilst desirable) is not necessarily required.