Smoothseas Pty Ltd v Lawloan Mortgages Pty Ltd
[2007] QCA 445
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- Notable Unreported Decision
- Appeal Determined (QCA)
- Smoothseas Pty Ltd v Lawloan Mortgages Pty Ltd[2007] QCA 445
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Smoothseas Pty Ltd v Lawloan Mortgages Pty Ltd[2007] QCA 445
Smoothseas Pty Ltd v Lawloan Mortgages Pty Ltd[2007] QCA 445
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | |
DELIVERED ON: | 19 December 2007 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 26 August 2007 |
JUDGES: | McMurdo P, Jerrard JA and Philippides J Separate reasons for judgment of each member of the Court, each concurring as to the orders made |
ORDER: | 1.Appeal dismissed 2.Costs to be assessed |
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – OFFER – OPTION FOR VALUABLE CONSIDERATION OR UNDER SEAL – EXERCISE OF OPTION – METHOD OF EXERCISE – where the trial judge declared that the appellant had failed to exercise an option granted to it by the defendant – where the judge ordered the appellant to remove a caveat lodged by it over real property – where the appellant purported to exercise the option by facsimile and letter – whether the contract stipulated a method of exercise – whether the appellant had exercised in accordance with that method Chongherr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA 167; Appeal No 10600 of 2006, 25 May 2007, considered Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823, considered Tallermann & Co Pty Ltd v Nathan’s Merchandising (Victoria) Pty Ltd (1957) 98 CLR 111, applied Tonitto v Bassal (1992) 28 NSWLR 564, considered Traywinds Pty Ltd v Cooper [1989] 1 Qd R 222, considered |
COUNSEL: | J A Griffin QC, with A P Trichardt, for the appellant R G Bain QC, with P D Tucker, for the respondent |
SOLICITORS: | Saunders Downing Hely for the appellant Hogan & Company Lawyers for the respondent |
[1] McMURDO P: The appeal should be dismissed with costs for the reasons given by Jerrard JA.
[2] I wish only to add the following observations. The plain words of cl 2 of the option required that, if it were exercised, it must be by the appellant's returning to the respondent by 13 November 2006 the completed contract and the deposit. In context "returning" does not equate to "sending" or "posting". The verb "return" is defined in the New Shorter Oxford Dictionary relevantly as "Bring back, convey back or restore to a … person". Merely posting the completed contract and deposit on 13 November 2006 without delivery that day (which is what the appellant did) was not sufficient to exercise the option because it did not satisfy the requirements of the plain language of cl 2.
[3] The appellant contends that in the factual matrix here it was the objective intention of the parties that the returning of the contract and deposit would have been by post so that cl 2 was met by the act of posting (not delivering) to the respondent the completed contract and deposit on 13 November 2006. While the appellant could well have exercised the option by using the post to return the documents to the respondent by 13 November 2006, it could equally have used one of the many courier services now commonly available or had an officer or agent personally deliver the completed contract and the deposit. The appellant did not comply with cl 2 by merely posting the documents rather than physically returning them to the appellant.
[4] JERRARD JA: This appeal is against a decision given in the Trial Division of this Court on 13 April 2007, in which the learned trial judge declared that the appellant plaintiff had failed to exercise an option granted to it by the defendant respondent, dated 13 September 2006. The judge ordered the appellant to remove a caveat lodged by it over certain real property by 4.00 pm on 26 April 2007. The learned judge also ordered that the appellant pay the respondent’s costs of and incidental to the respondent’s counter-claim, such costs to be assessed.
[5] The appellant contends that the judge erred in holding that it had not validly exercised the option given to it by agreement dated 13 September 2006, and that the judge ought to have held that the option had been validly exercised by the appellant, either by it sending a facsimile on 13 November 2006, or by it posting, on that date, documents referred to in the agreement of 13 September 2006. The appellant further contended that the learned judge had erred in holding that the option agreement required that, for the proper exercise of the option, the documents referred to in clause 2 of the option agreement be actually back in the hands of the respondent prior to the end of the option period. Finally, the appellant contended that the learned judge erred in holding that the words “may exercise the option” meant that the appellant could only exercise the option by performing the actions referred to in clause 2 of the agreement.
[6] The option relevantly read:
“1.The Grantor herby grants to and the Grantee hereby accepts an option for the Grantee to acquire the property known as Lot 20 on RP 748499 for a period of sixty (60) days from the date hereof (“the Option Period”).
2.The Grantee may exercise the Option hereunder by returning to the Grantor prior to the end of the Option Period the Contract annexed hereto completed as follows, together with the deposit:
(a) The Purchasers;
(b) The Purchase Price shall be $3,300,000.00;
(c) The Deposit shall be 2% ($66,000.00);
(d) The Completion Date shall be sixty (60) days from the date of the Contract;
(e) The Contract Date shall be the Date of Exercise;
(f) The Agent and Deposit holder shall be Sammut & Co.
3.The Grantee shall pay a non-refundable Option Fee of $10,000.00 which shall be credited to the Deposit if the Option is exercised.”
[7] The contract annexed to the Option Agreement, reproduced at AR 487, either left uncompleted, or read “See special conditions attached hereto”, in the spaces provided in respect of the topics specified in Clause 2(a) to (f) of the option.
[8] The option granted was to purchase 387.9 hectares of land at Clarkes Cove on the Whitsunday Coast, being Lot 20. The appellant company was represented in the negotiations by a Mr Stathopoulos, who met on 13 September 2006 in Brisbane with a Mr Harvey, a Director of the respondent company, and with the respondent’s solicitors. Mr Stathopoulos had wanted a due diligence period of 90 days, and a settlement period of 90 days, but after negotiations, a deed giving the option was entered into, which provided that the option was to be exercised within 60 days. It was common ground that that last day upon which it might be exercised was Monday 13 November 2006.
[9] On 13 November 2006 a Mr Bush, a financial advisor to Mr Stathopoulos, acting on the latter’s instructions, sent a facsimile to the respondent company at about 1.37 pm, which relevantly read:
“Smoothseas Pty Ltd has undertaken substantial measures in obtaining a satisfactory due diligence on the Clarkes Cove Property in the time frame allowed. It is Smoothseas intention to go unconditional on the purchase contract dated 13-9-06 and will settle on or before 13-01-07. Attached to this facsimile is a copy of the cheque deposit for the balance (2% of the Purchase Price) the deposit moneys that will be mailed to your office this afternoon. Once you have received the cheque could you please forward the receipt to the above mentioned Mail Box.”
[10] The learned primary judge accepted that on that same day, 13 November 2006, Mr Stathopoulos had posted the duly completed documentation referred to in clause 2 of the option deed, and a cheque for the deposit, by letter addressed to the registered office of the respondent company. Those documents were retrieved by the respondent from the post box on the morning of Friday 17 November 2006. Their delivery was apparently effected in the ordinary course of post.
[11] The appellant argued to the learned trial judge, and repeated on this appeal, that its faxed message of 13 November 2006 was a sufficient notice of the exercise of the option. That argument depended on the submission that clause 1 of the deed was a free standing clause, not subject to clause 2. Senior counsel submitted that action under it by the appellant constituted a valid notice of exercise of the option, the terms of the contract being attached to the deed. That submission made particular reference to the judgment of Kelly SPJ in Traywinds Pty Ltd v Cooper [1989] 1 Qd R 222 at 225, where the learned judge wrote:
“No particular form of words is necessary for the purpose of exercising an option provided that the statement by the option holder is unqualified and as Williams J pointed out in Ballas v Theophilos (No 2) (1957) 98 CLR 193, 204-205:
‘Options have been held to have been exercised, where the context is sufficient, although the document, instead of stating unequivocally that:
‘The optionee hereby exercises the option’,
or words to that effect merely states if he desires or intends or is prepared to exercise it: Mills v Haywood (1877) 6 Ch D 196; Nicholson v Smith (1882) 22 Ch D 640; Collingridge v Niesmann (1920) 37 WN (NSW) 224.’
In that case at first instance [1958] VR 576, 581, Smith J said:
‘But a purported exercise of an option should, I think, be fairly and not pedantically construed; compare Harris’ case (1872) 7 Ch App 587. One looks at the character of the document or other communication and the information that it conveys... and the appropriate question to be asked for the purpose of judging its sufficiency is, ‘what would anybody receiving it fairly understood to be the meaning of it?’’”
[12] The learned trial judge had referred to those decisions, remarking that where an option is concerned, one issue, and the critical issue in the particular case, was whether there was provision that the option must be exercised in a particular way, or whether any communication in a clear and unqualified way that it was being exercised was within the intention of the parties, objectively determined, as a sufficient means of exercising it. The judge concluded that the meaning of the phrase “return to the Grantor prior to the end of the Option Period” was at the heart of the matter. The appellant made the point that the phrase begins with “returning”, and not “return”; but nothing seems to follow from this misquotation in paragraph [22] of the reasons for judgment. The learned judge’s reasoning in the rest of the paragraph goes on to refer, correctly, to the word “returning”.
[13] The judge held that what had to be so returned under clause 2 was the contract annexed to the deed, completed in accordance with paragraphs (a) to (f), together with the deposit. The judge considered that the only reasonable and objective construction of that phrase was that it was necessary for the completed contract and the deposit to be back in the hands of the grantor, prior to the end of the option period. The judge concluded that commercial considerations, such as the importance to the grantor of having evidence that the option granted by it had been duly exercised, favoured that construction.
[14] In Tallermann & Co Pty Ltd v Nathan’s Merchandising (Victoria) Pty Ltd (1957) 98 CLR 93, Dixon CJ and Fullagar J wrote, in a joint judgment at CLR 111, that:
“The general rule is that a contract is not completed until acceptance of an offer is actually communicated to the offeror, and a finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is to be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act.”
Here, the parties contracted for a specific method of exercising the option, namely the return to the grantor of specified documents, not the posting of them. The appellant contended nevertheless that sending the fax on 13 November 2006 resulted in a binding contract. One problem with that submission was that the critical terms were all described in clause 2, and only partly referred to or repeated in the fax. For example, the purchaser is not expressly identified in the fax, and the price can also only be inferred.
[15] The judge went on to hold that the use of the words “may exercise the Option” were intended to mean that the grantee was permitted or authorised to exercise it only in the manner set out in clause 2. In that sense “may” was not discretionary or facultative, but mandatory as to the method to be used, once the grantee had decided to exercise it. The judge accordingly held that neither sending the facsimile of 13 November 2006, nor the fact of posting the documents on that same day, were effective as a means of acceptance. The learned judge accordingly found for the respondent.
[16] The appellant’s argument in this Court included that if clause 2 was the exclusive method of exercising the option, it had complied with that clause when Mr Stathopoulos posted the clause 2 documentation on 13 November 2006. It submitted that since the parties were based in different states, it was highly likely that the postal service would be utilised; and clause 2 should be understood as holding that the 60 day period would expire by reference to the date of posting, as opposed to the date of receipt, of the documents by the grantor. The appellant also contended that to the extent that the option indeed was ambiguous, it was relevant that it was drafted by the respondent, and the “contra proferentem” maxim ought to be applied, to the appellant’s advantage.
[17] I agree with the learned trial judge that the facsimile message was not an exercise of the option. A photocopy of a cheque is of very little value, and the message in the facsimile only described the asserted current intention of Smoothseas Pty Ltd. An answer to the question suggested by Smith J in Ballas v Theophilos, and approved as a question by Kelly SPJ in Traywinds Pty Ltd v Cooper, would be that anybody receiving that facsimile would fairly understand it to mean that Smoothseas then intended to go ahead with the purchase, and was in the process of posting a cheque. That is not quite the same as unequivocally exercising the option. In Chongherr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA 167, this Court held that, however ‘indulgent’ one may be of the informality which may attend the exercise of an option, it is essential that there be, in fact, an unequivocal expression of an intention to exercise the option. (At [26] per Keane JA, with whose reasons de Jersey CJ and Philippides J agreed).
[18] I also agree with the learned trial judge that the option deed provided, by clause 2, the only permitted or authorised manner in which the grantee was to exercise the option. That required the grantee to return to the grantor the completed document “prior to the end of the option period”. The affidavit evidence of a Mr Harvey Edwards, a solicitor acting for the respondent, was that he had pointed out to both Mr Stathopoulos and Mr Bush, on 13 September 2006, the need for them to return the contract by the conclusion of the option period, together with the balance of the deposit. It was not suggested in cross-examination of any witness that the respondent had agreed that posting the completed contract and deposit, at the end of the option period, without any other notice to the grantor, was an acceptable means of communicating notice of exercise of the option. In Tonitto & Anor v Bassal & Ors (1992) 28 NSWLR 564, Sheller JA wrote (at 574):
“It is generally accepted that effectual exercise of an option requires strict adherence to the method prescribed in the instrument creating the option:”
His Honour referred to textbook authority and to expert evidence led in that matter. As was later remarked by Beazley JA in Boreland v Docker & Ors [2007] NSWCA 94 at [31], giving the judgment of the court, there may remain a question of construction as to what those requirements are.
[19] Mr Bain QC submitted for the respondent that the appellant’s argument contemplated a mode of exercising the option in which the respondent was not required even to be notified by the appellant of the latter’s intention, within the 60 day period specified under the option. Mr Bain QC referred in that regard to the remarks of Gibbs CJ in Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823, where His Honour had remarked that:
“On that view, the clause would give rise to practical difficulties, since there would be obvious inconvenience in allowing an option to be exercised by means that do not bring the fact of the exercise to the knowledge of the grantor of the option.”
[20] The appellant is undoubtedly correct in the argument that the postal services, in all likelihood, would have been utilised for the purpose of returning the document or documents referred to in clause 2. But that does not change the agreement in that clause, that those would be returned to the grantor prior to the end of the option period. That was what was agreed and required, and that did not happen. Accordingly, I consider the appeal should be dismissed, with costs (to be assessed).
[21] PHILIPPIDES J: I agree for the reasons stated by Jerrard JA that the learned trial Judge correctly determined that the appellant had not validly exercised its option to purchase land from the respondent pursuant to the Deed dated 13 September 2006 and that the appeal should be dismissed with costs. The relevant clauses of the option provided:
“1.The Grantor hereby grants to and the grantee hereby accepts an option for the Grantee to acquire the property known as Lot 20 on RP 748499 for a period of sixty (60) days from the date hereof (‘the Option Period’).
2.The Grantee may exercise the Option hereunder by returning to the Grantor prior to the end of the Option Period. The Contract annexed hereto completed as follows, together with the deposit:
(a)the Purchasers;
(b)the Purchase Price shall be $3,300,000.00;
(c)the Deposit shall be 2% ($66,000.00);
(d)the Completion Date shall be sixty (60) days from the date of the Contract;
(e)the Contract Date shall be the Date of Exercise;
(f)the Agent and Deposit holder shall be Sammut and Co.
3.The Grantee shall pay a non-refundable Option Fee of $10,000.00 which shall be accredited to the Deposit if the Option is exercised.”