An email by an existing licensee to the licensor asking whether it would be ‘stretching the friendship” to ask for a new licence for a further term was held to be no more than a “polite enquiry” as to the licensor’s intention.  It was not sufficient to constitute an offer to contract for a further licence capable of acceptance by the licensor.  If a contracting party intends to convey an offer to contract for a further term, it should ensure that such offer is expressed clearly in its correspondence with the counterparty.

Mr Anthony, through his company, operated a photography business from a room of the Holme Building at the University of Sydney. Since 1991, Mr Anthony had executed 3 written 5 year licence agreements with the University of Sydney Union (USU). The then current licence agreement provided that if Mr Anthony continued to occupy the premises beyond expiry on 31 March 2012, he would do so under a monthly licence terminable on 1 month’s notice.

Six months prior to the expiry of the then current licence agreement, Mr Anthony emailed the managing agents asking “would it be stretching the friendship to ask for a 5+5 with a further option to renew, at the end of the time period?”  The managing agents replied by email that “USU are happy to offer you a new licence but are unable to offer a term past 2017”.  There was no further written communication until shortly after the expiry of the then current licence when Mr Anthony followed up about the new licence. USU eventually responded that it could not commit to a new licence (as the Holme Building was undergoing a space and design review) and the managing agents advised Mr Anthony that he would remain on a month to month basis for the time being.  On 4 September 2013, Mr Anthony was given 1 month’s notice purportedly terminating his licence.

In considering whether a legally binding agreement for a new licence had arisen, Stevenson J in the Supreme Court of New South Wales found that:

  • Mr Anthony’s email was no more than a polite enquiry as to USU’s attitude and accordingly, the managing agents’ email reply was not an acceptance by USU of any offer that might have been implicit in Mr Anthony’s email;
  • the managing agents’ email reply was no more than an “invitation to treat” and could not be characterised as an offer by USU (either for a 5 year term or a 5+5 year term) particularly given that it did not nominate a term or fee for any future licence.  In fact the parties had been discussing the possibility of re-locating Mr Anthony and as such, Stevenson J rejected the argument that the fee would be the same as the then current licence as ‘mere speculation’; and
  • no agreement arose from the conduct of the parties after the email exchange, with Mr Anthony continuing to request a new licence without asserting that USU had already made an offer which he had accepted.

Stevenson J also found that Mr Anthony failed to establish estoppel by representation based on the managing agent’s email response.  The lack of mention of a term or fee meant that the alleged representation was not clear or unequivocal and Mr Anthony’s continued attempts to negotiate for a new licence meant he could not establish reliance on the alleged representation.  However, Stevenson J did find that subsequent discussions between the parties about potential relocation of Mr Anthony, the month to month arrangement being for the time being and an assertion that USU would not consider a CPI increase for “this year only”, evidenced that the parties conducted their relationship on the basis of an assumed fact that, pending USU’s consideration of the proposed use and development of the Holme Building, Mr Anthony’s occupation would not be disturbed without reasonable notice.  His Honour found that 1 month notice, without any indication or warning, was unreasonable, oppressive and unconscionable.

See the case.