Monday, 5 March 2012

Collateral contract not a disposition of an interest in land

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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 not, 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.

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Author: Robert Hays Barrister subject to copyright under DMCA.

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