Background
The Supreme Court of Queensland case of GPP Arundel Pty Ltd v Basford Pty Ltd [2025] QSC 165 involved the lease of a commercial property in Arundel, Queensland.
The landlords were Basford Pty Ltd and Wisely Pty Ltd (landlord), companies associated with the United Petroleum Group. The original tenant was GPP Arundel Pty Ltd (tenant), a company associated with national pharmacy business Good Price Pharmacy Warehouse.
The landlord had leased the premises to the tenant under a 2010 commercial lease that was due to expire in August 2025.
In 2023, representatives of the landlord and tenant – now including another pharmaceutical company, Walton Pharm Pty Ltd, as a proposed lessee – started negotiations about a new lease. The negotiations were primarily conducted by agents on behalf of the parties.
The landlord’s agent was a property consultant who worked for an associated entity within the United Petroleum Group and assisted in managing the United Petroleum Group’s real property leasing portfolios across Australia. From the outset, the landlord’s consultant advised the tenant’s agent that any new leasing deal would be subject to the landlord’s approval.
By around June 2023, the respective agents had reached an in-principle agreement on the terms for a new lease. In late June 2023, the tenant’s leasing agent sent a draft letter of offer (with proposed terms), which specifically included the special condition that the offer was ‘subject to the lessor’s acceptance’. The landlord’s consultant understood this to mean that the letter of offer was subject to approval by the landlord.
The landlord’s consultant made some slight changes to the letter of offer and signed it, adding the words ‘on behalf of’ next to the ‘Lessor’s Acceptance’ signature block. He then sent it back to the tenant’s agent as an attachment to an email that contained no further comment. The letter of offer had not been put before the landlord’s directors at the time of signing, nor had they considered the proposal.
The deal was considered by the landlord’s director in September 2023. At that time, the director rejected the deal on the grounds that the rent was too low. The rejection was then communicated to the tenant’s representatives.
The tenant did not accept the rejection and sued the landlord in the Supreme Court of Queensland for orders that there was a binding lease deal.
Court’s decision
By the time of the hearing, there was no dispute that the landlord’s consultant did not have actual authority to bind the landlord. The Court also accepted that the landlord’s usual process was to allow leasing agents to negotiate an in‑principle deal that would be subject to director approval.
The case therefore turned on the question of whether the landlord’s consultant had ostensible authority to bind the landlord and whether the leasing agent’s actions in this case were sufficient to establish ostensible authority.
The tenant relied on principles derived from a number of court authorities from England and other jurisdictions outside Australia, arguing that the landlord’s consultant should be found to have ostensible authority because he had authority to communicate acceptance on behalf of the principal. This line of authority has not received extensive consideration in Australian courts.
The tenant argued that the following factors meant that the landlord’s agent had ostensible authority:
- the agent was the sole point of contact between the tenant and the directors
- the agent communicated that acceptance was subject to directors’ approval
- as part of his ordinary role, the agent was often instructed to communicate approval by the directors
- the agent had communicated approval in this case by signing next to the words ‘lessor’s acceptance’ and returning the letter of offer
- by reason of the above, the landlord had clothed their agent with ostensible authority to bind them by communicating their acceptance.
The first three submissions were not in dispute. The Court also accepted the fourth submission; that is, by signing next to the words ‘lessor’s acceptance’ and sending that signed document to the tenant’s agent, the landlord’s agent had communicated that the directors of the landlord had accepted the proposed terms.
However, in relation to the fifth submission, the Court found that a key question was whether the agent had ostensible authority to actually do the act that communicated the acceptance – in this case, signing the letter of offer. The Court found that he did not, on the basis that:
- empowering an agent to negotiate lease terms did not mean the agent had authority to bind the principal to a lease (as stated by his Honour: ‘reaching consensus, in a non-binding way, on such terms is not the same thing as striking the bargain with a lessee’[1])
- there was no evidence that a person holding the position of ‘property consultant’ at an associated company would have authority to bind the other companies to a new lease (instead there was only evidence to the contrary by way of expert evidence called by the United Group)
- in any case, the agent made express disclaimers on multiple occasions that any agreement would be subject to the United Petroleum Group’s approval.[2]
Ultimately the Court found that the landlord had not clothed the agent with ostensible authority to bind the landlord by communicating acceptance through the unauthorised signing of a document on their behalf.[3]
The agent’s role in this case was simply to reach non‑binding agreements on leasing terms, including to inform the tenant whether the landlord had accepted proposed terms.
Accordingly, this could be distinguished from the other cases relied upon by the tenant where the agent had more broadly been tasked with conducting the company’s business. The Court also emphasised that the agent had clearly communicated to the tenant his express disclaimer of any authority to contract on behalf of his principal. As a result, the ultimate finding of the Court was that no binding agreement had been made.
The Court also briefly considered whether the tenant had relied on any alleged representation by the landlord as to the agent’s authority. To establish ostensible authority, it is usually necessary to show that the other party relied upon a representation as to that authority.
The Court found that the tenant failed to provide evidence that:
- they had identified, or even turned their mind to, whether the agent had authority by communicating acceptance
- they actually inferred from any conduct from the United Group that the agent had authority
- they actually relied on any representation when deciding the letter of offer was binding
- a reasonable person would have acted on the representation in circumstances where the agent had expressly written that the letter of offer was subject to directors’ approval.
This further supported the Court’s decision that the application should be dismissed.
Comments
Commonly, commercial lease negotiations are conducted by agents on behalf of principals, and often those agents have authority to communicate acceptance of a deal.
This case demonstrates that an agent’s authority to communicate acceptance can lead to uncertainty as to whether a concluded and binding agreement has been reached.
For landlords, the case illustrates the risks associated with potentially becoming bound to a deal by placing an agent in the position to communicate acceptance even though the agent does not have actual authority to agree to the terms. The key to avoiding this risk is clear communication on the agent’s role, authority and the procedures required for the landlord to approve the terms.
For tenants, the case illustrates that it is important not to assume that an agent has authority to bind the landlord to a deal, particularly where an agent has previously indicated that the deal is subject to approval. To avoid the risks of a deal falling over, tenants should always check the actual authority of the agent. This may include insisting on evidence directly from the landlord that the deal has been approved or that the agent has authority to approve it.
Cooper Grace Ward’s disputes team successfully acted for the landlord in this case. If you would like to discuss any aspects of this case or property disputes more generally, please get in touch with one of our key contacts.
