Damages assessed on breach of collateral contract to grant a new term

In an earlier post I referred to two cases in which the operator of restaurants in the Melbourne Casino and Entertainment Complex succeeded in claims that they were entitled to additional 5 year terms despite their leases not containing such a term. See: Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown Melbourne Limited [2012] VCAT 225.

The tenants, who operated the restaurants “Waterfront” and “Cafe Greco”, succeeded in claims that Crown had breached a collateral contract that they would be granted an additional 5 year term after the expiry of the 5 year term provided for in their leases.

The tenants claimed that they were induced to spend millions of dollars on fit-outs because of a promise that there existing leases would be renewed. At the end of the intial 5 year term Crown refused to renew the leases and the area occupied by restaurants was leased to new tenants.

Crown denied the existence of any collateral contract. Damages and interest have now been assessed with the tenants being awarded a total of more than $2,000,000. See: Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown Melbourne Limited (VCAT, unreported, 8 February2013).