QUESTION
Sunita Smart-Walla, an international student, was a very bright student who studied at TOP Educational Institute. Sunita topped her class in all her law exams and won a book and cash prize for her excellent academic results. Sunita performed really well, in particular, in the business law, company law and tax law courses. With her excellent knowledge in all of these legal areas, she is very keen to set up her own business as a tax consultant.
Sunita has just graduated and got her permanency residency visa for Australia. Sunita, however, has limited personal finances to cover all the start-up expenses for her new tax consultancy business. She knows that property in Sydney is very expensive to buy and also expensive to rent. She also knows that she will require some financial assistance to fulfil her career plan.
Sunita lives in Sydney with her uncle, Mr Property-Walla. Fortunately, her uncle is wealthy and says he is very happy to support his niece in whatever way he can. When Sunita told her uncle of her great academic results and business plans, he offers to help her. Mr Property- Walla owns a shop in Harris Park, Parramatta that has been vacant for a long time. He agrees to lease this shop to Sunita for 5 years at a cheap rent that is below the market rate. Sunita jumps at this opportunity and gratefully accepts the offer.
Sunita visited the shop at Harris Park and found that it was previously used as an Indian restaurant specialising in Bombay-Chinese cuisine, of which there are many similar restaurants in the area. The shops had lots of restaurant equipment fixed to the walls, like a large industrial stove and large stove extractor to get rid of the cooking smells. Anybody who saw the shop would know that it could only be used for one purpose, to run a restaurant, unless many alterations are made to convert the shop for use for other business purposes. Sunita quickly worked out that it will still be cheaper for her to renovate the rental shop and lease it than to seek another rental shop elsewhere.
Sunita asked her uncle for a copy of the lease document so that she could sign it and secure the rental shop for her use before she spent money on altering the premises. Meanwhile, Sunita gathered a few quotations from builders to find the cost to renovate the interior of the
shop so that it can be used to conduct a tax consultancy business. The average quote for the alterations received by Sunita was in the amount of $20,000. Luckily, she has just enough personal savings to pay for this large renovation expense.
Sunita reminded her uncle to give her a copy of the lease document to sign. Mr Property- Walla said to Sunita "You are my favourite niece. Go ahead and do what you have to do, my solicitor will email you the lease document for signature very shortly. I trust you." Sunita thereafter decided to select the cheapest quote for the alternations and then went ahead and paid the builder $18,500 after the alteration work at the rental shop was completed.
Two weeks later, after her conversation with her uncle and the completion of the alteration work, Sunita has still not received the lease document for her signature. Upon further enquiry, Mr Property-Walla told Sunita "there is no signed lease document, therefore there is no contract. I am going to offer this rental shop to another tenant who is prepared to pay me double the rent. Please hand back the keys of the shop immediately. See you later and have a good day."
Sunita is deeply upset at this news, at the loss of her business opportunity and at the fact that she had just spent $18,500 of her own money to renovate the rental shop which the builder now refuses to refund.
With reference to relevant principles of contract law and relevant precedents studied in this course, advise Sunita of her legal rights.
Textbook - Australian corporation Law - 6th edition by Jason harris, Anil Hargovan, Michael Adams