Jet Development Pty Ltd v Denning
[2007] QCA 55
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- Notable Unreported Decision
- Appeal Determined (QCA)
- Jet Development Pty Ltd v Denning[2007] QCA 55
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Jet Development Pty Ltd v Denning[2007] QCA 55
Jet Development Pty Ltd v Denning[2007] QCA 55
SUPREME COURT OF QUEENSLAND
PARTIES: | JET DEVELOPMENT PTY LTD ACN 107 913 762 |
FILE NO/S: | SC No 4879 of 2006 |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | |
DELIVERED ON: | 2 March 2007 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 23 February 2007 |
JUDGES: | Williams, Keane and Holmes JJA Separate reasons for judgment of each member of the Court, each concurring as to the orders made |
ORDER: | 1. Appeal dismissed 2. Appellant to pay the costs of the respondents including reserved costs if any 3. Order number 1 of Chesterman J of 5 December 2006 in Supreme Court proceedings 4879 of 2006 be substituted with the following order: “There be specific performance of the sale contract for the sale by the appellant to the second respondent of the freehold property described as Lot 2 on Registered Plan 208074 County Churchill Parish North, being the land contained in title reference 16889109, with completion to take place on Thursday 8 March 2007 at the offices of Morgan Conley Lawyers at Level 5, 160 Edward Street, Brisbane” |
CATCHWORDS: | CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - OTHER MATTERS - where appellant granted first respondent option to buy land - where contract provided first respondent could nominate another person to exercise the option "before" the buyer exercises the option - where first respondent sought to nominate second respondent to exercise option and second respondent sought to exercise option - whether nomination of the second respondent occurred "before" the exercise of the option - whether appellant had legitimate ground to refuse to complete sale |
COUNSEL: | P J Favell for the appellant J W Peden for the first and second respondents |
SOLICITORS: | Morgan Conley for the appellant Flower & Hart Lawyers for the first and second respondents |
[1] WILLIAMS JA: I agree with the reasons of Keane JA and with the orders proposed.
[2] KEANE JA: By a contract between the appellant and the first respondent, the appellant granted the first respondent an option to buy a parcel of land at Fernvale. The contract provided that the first respondent might nominate another person to exercise the option "before the Buyer exercises the … option". Prior to the last date for the exercise of the option, the respondents' solicitors delivered, under cover of one letter, a notice by the first respondent nominating the second respondent as the person to exercise the option and a notice by the second respondent purporting to exercise the option. The appellant refused to complete the sale of the property on the ground, inter alia, that the second respondent had not been nominated to exercise the option "before" it purported to exercise the option.
[3] Proceedings brought by the respondents for specific performance of the contract of sale were determined in favour of the respondents. The learned trial judge rejected the appellant's ground for refusing to complete the sale. The challenge to his Honour's conclusion in this respect is the principal basis of the appeal to this Court.
[4] The respondents defend the learned trial judge's conclusion, and contend, in addition, that the decision below may be supported on the basis that a later precautionary nomination and exercise of the option was effective by reason of an agreed variation of the date for the exercise of the option.
[5] I shall set out the relevant terms of the agreement and a brief statement of the course of events before turning to a discussion of the issues raised on appeal by the parties.
The option agreement
[6] The appellant and the first respondent entered into the "put and call" option agreement on 24 June 2005. The call option created in favour of the first respondent was exercisable after 24 June 2005 and expired on 30 April 2006.
[7] The terms of the option agreement which are relevant for the purposes of the appeal are as follows:
"2.GRANT OF CALL OPTION
2.1 Payment of Call Option Fee
The Buyer must pay the Call Option Fee to the Seller on execution of this Agreement. The Call Option Fee is the Seller's property absolutely.
2.2 Grant of Call Option
In consideration of payment of the Call Option Fee, the Seller grants to the Buyer an option to purchase the Property on the terms and conditions contained in this Agreement and the Sale Contract.
- EXERCISE OF CALL OPTION
- Exercise
The Call Option may only be exercised by delivery to the Seller or their Solicitor during the Call Option Period of:-
(a)a written notice generally in the form contained in Schedule 2; and
(b)two copies of the Sale Contract signed by the Buyer or the Nominee.
3.2Failure to exercise
The Call Option lapses if it is not exercised strictly in accordance with clause 3.1.
3.3Effect of exercise
On exercise of the Call Option, the Seller and the Buyer are immediately bound to respectively sell and purchase the Property in accordance with the Sale Contract. The Sale Contract will be taken to have been entered into on the date of exercise of the Call Option, regardless of whether the Sale Contract is signed by the Buyer of [sic] the Seller.
- BUYER'S NOMINEE
- Buyer may nominate
The Buyer may at any time before the Buyer exercises the Call Option by written notice to the Seller nominate a person to exercise the Call Option. On receipt of that notice any reference in this Agreement to the Buyer will be construed as a reference to the Nominee.
4.2 Nominee may include Buyer
The Nominee may be more than one person and may include the Buyer.
…
- NOTICES
- In writing
Any notice, claim, demand or other communication ('notice') under or in connection with this Agreement, must be in writing and may be given or posted by registered letter or sent by facsimile transmission to:-
(a)the addresses of the parties set out on the execution page of this Agreement; or
(b)another address as notified by a party to the other(s) by not less than seven days notice given in accordance with this clause.
9.2Receipt
A notice will be deemed to have been received, in the case of delivery by:-
(a)hand, on the handing of the notice to the other party, or where that party is not an individual, to a person working at the address specified, if delivered on a Business Day within ordinary business hours in that place, but if not, then at 8.30am on the following Business Day in that place;
(b)registered post:-
(i)within Australia, on the third Business Day after the date of posting; and
(ii)internationally, on the fifteenth Business Day after the date of posting;
(c)facsimile transmission (providing the sending facsimile machine produces a print out of the time, date and uninterrupted transmission of the message), immediately on completion of transmission if within ordinary business hours on a Business Day in the place where the addressee's facsimile machine is located, but if not, then at 8.30am on the following Business Day in that place.
9.3General
In respect of notices served under this clause:-
(a)a notice to any corporation is served when served on any director or secretary of that corporation;
(b)a notice will be properly served if actually received by a party or that party's solicitor, or if delivered to and left at that party's registered office in accordance with the requirements for delivery by hand in clause 9.2;
(c)a notice may be signed by a party or on its behalf by any director, secretary, manager, other authorised person or that party's solicitor.
…
11.4 Time
Time is essential under this Agreement.
…
11.6 Variation
Any variation to this Agreement must be in writing and signed by the Buyer and the Seller to be effective.
…
SCHEDULE 2
Call Option Exercise Notice
(clause 3.1)
To:ROYALIN MARGARET DENNING
TAKE NOTICE that JET DEVELOPMENT PTY LTD ACN 107 913 762 [or its nominee in accordance with clause 4 of the Put and Call Option Agreement] exercises the option granted to it by the Put and Call Option Agreement dated ............. to purchase the Property described in that Agreement.
Dated: ………………………..
___________________________________________
For and on behalf of JET DEVELOPMENT PTY
LTD ACN 107 913 762"
The course of events
[8] On 26 April 2006, the appellant, by letter from her solicitors, purported to terminate the option agreement on the basis that confidentiality provisions of the agreement had been breached by the first respondent or its agents. The issue as to whether the appellant was entitled to terminate the option agreement on this ground was agitated at trial and was resolved against the appellant. The appellant initially included a challenge to this aspect of the decision below in her grounds of appeal, but this ground was not pursued by her.
[9] On 27 April 2006, the respondents' solicitors delivered a letter to the appellant's solicitors. It was received by the receptionist at the office of the appellant's solicitors. The letter said relevantly as follows:-
"We enclose the following:-
1.Notice of nomination given in accordance with clause 4.1 of the put and call option dated 24 June 2005;
2.Notice of exercise of option given in accordance with clause 3.1(a) of the put and call option dated 24 June 2005;
3.Two copies of the sale contract signed by the nominee given in accordance with clause 3.1(b) of the put and call option dated 24 June 2005."
[10] Each of the notices referred to in the letter was addressed to the appellant and was signed on behalf of the relevant respondent. They were in the following terms:
"TAKE NOTICE that JET DEVELOPMENT PTY LTD … hereby nominates Fernvale Project Pty Ltd … to exercise the option granted to it by the Put and Call Option Agreement dated 24 June 2005 to purchase the Property described in that Agreement."
"TAKE NOTICE that FERNVALE PROJECT PTY LTD … (as nominee of Jet Development Pty Ltd) exercises the option granted to it by the Put and Call Option Agreement dated 24 June 2005 to purchase the Property described in that Agreement."
[11] No suggestion has been made that the documents were not, in their terms, sufficient to comply with the provisions of the option agreement. The appellant's case is, and always has been, that the second respondents' purported exercise of the call option was ineffective because the second respondent was not "nominated" under the option agreement before it purported to exercise the option to buy the property.
[12] On 19 July 2006, the first respondent purported again to "nominate" the second respondent as Buyer, and, on 20 July 2006, the second respondent purported to exercise the option to buy the property. The appellant contended that this precautionary exercise by the respondents was ineffectual because the option exercise date had expired. The respondents contended that the option agreement had been varied in correspondence in March and April 2006 to extend the option exercise date to 1 September 2006. The appellant contended that this correspondence did not reach a concluded agreement, and that, in any event, it did not conform to the requirements of cl 11.6 of the option agreement. At trial, these issues were resolved against the appellant.
[13] As is apparent, it would only be necessary to consider the issues in relation to the variation of the option agreement if the appellant's principal contention is resolved in her favour. I turn then to a consideration of this contention.
Discussion
[14] The appellant's principal contention is that the nomination of the second respondent did not occur before the exercise of the option. The appellant argues that the word "before" means "earlier than the time in question". On the appellant's behalf, it was said that "before", in its ordinary and natural meaning, means "previously to the time when" or "up to the time when".[1] On the appellant's behalf, it was submitted that the relevant time is the time "the Buyer exercises the call option" under cl 3.1 of the option agreement. Accordingly, so it is said, the nomination of the second respondent did not occur before the delivery of the notice of exercise of the option by the second respondent because the notice of nomination was received at the same time as the notice of exercise of the option. In this regard, the appellant sought to rely upon cl 9 of the option agreement as having deemed the notices to have been received by the receptionist at the appellant's solicitors office at the same time.
[15] The learned trial judge rejected these contentions. His Honour said:[2]
"The documents were taken by a young solicitor to the defendant's solicitors and duly handed to the receptionist who, as requested, wrote an acknowledgment of service on the notice of nomination and notice of exercise of option. She dated them both '27/04/06 3.10pm'.
The defendant's point is that clause 3 of the option agreement, which had to be complied with strictly, required the nomination to occur prior to the exercise by the nominee of the option. The delivery of the documents at the same time means, it was submitted, that the nomination and exercise had occurred simultaneously, not sequentially, and thus in a manner not permitted by the agreement.
This is nonsense. The defendant's counsel was forced to agree that if the shortest imaginable period of time had elapsed between the delivery of the notice of nomination and the delivery of the notice of exercise of option, clause 3.1 would have been satisfied. A split second between delivery of the two documents would comply with the agreement but the delivery of the documents in the form adopted would not. Interests in property are not to be determined by such niceties. The documents enclosed with the plaintiffs' solicitor's letter, and that letter itself, make it clear that the first plaintiff had nominated the second plaintiff as purchaser as permitted by clause 4 of the option agreement prior to the second plaintiff exercising the option to purchase the land. There was a sequential delivery of notices. The letter itself provided for it and was physically arranged so that the notice of nomination would come to the defendant's solicitor's hands before the notice of exercise of option. It would not have mattered if that were not the case. Any adult intelligence would realise from the delivery of the documents in whatever order that they were meant to take effect in the order they were in fact presented.
The second plaintiff has made out its entitlement to a decree for the specific performance of the contract of sale between it and the defendant."
[16] It must be acknowledged, I think, that the appellant's approach to the construction of the contract is not apt to conserve any identifiable interest of the appellant under the option agreement. Any lapse of time – even a second – between the notice of nomination and the notice of exercise of the option will not afford the appellant the occasion to take any steps to advance or protect her interests under the contract. It is not as if, for example, the option agreement afforded the appellant any right to veto a nominee proposed by the Buyer. Thus, the interpretation of the option agreement for which the appellant contends is apt to defeat the exercise of the option for no purpose which might be gleaned from the option agreement. It is well-established that the court should "endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient".[3]
[17] The respondents submit that there is textual support in the option agreement for the view advanced by the respondents that the exercise of the option may be effected in conformity with cl 3.1 pursuant to a nomination made in the same bundle of correspondence. Clause 3.1(b) refers to "the Sale Contract signed by the Buyer or the Nominee". Clause 3.1(b) contemplates that the draft contracts of sale submitted to the Vendor there under as part of the process of exercising the option may be signed by a nominee who has not previously been notified to the Vendor so as to have become the Buyer by virtue of the second sentence of cl 4.1 of the option agreement. In this way, it may be said that cl 3.1(b) contemplates simultaneous nomination and exercise of the option by the nominee.
[18] In the end, the fatal difficulty for the appellant, it seems to me, is that, even if it be accepted that the nomination notice and the option exercise notice were received by the appellant simultaneously (rather than sequentially as his Honour found),[4] it remains the case that the nomination of the second respondent as Buyer occurred before the exercise of the option by the first respondent as Buyer. The second respondent was nominated before the first respondent exercised the call option, in the sense that the first respondent – the "Buyer" in the first sentence of cl 4.1 - never exercised the option at all.
[19] That this is the correct construction of cl 4.1 is apparent whether one addresses the issue in terms of textual analysis or, more broadly, in terms of commercial purpose. The first sentence of cl 4.1 proceeds on the basis that "the Buyer" has not yet made a nomination; and so the deeming effected by the second sentence of cl 4.1 has not yet occurred. In the first sentence of cl 4.1, the person nominated by the Buyer has not yet become the Buyer. The consequence of receipt of a nomination by the Vendor is that the Buyer ceases to be the Buyer, and, in conformity with the second sentence of cl 4.1, the nominee becomes the Buyer for the purposes of the other provisions of the option agreement including cl 3.1. Once the nomination is made, the nominee has the right to exercise the option as Buyer. If the original Buyer has not exercised the option before that time, then the exercise of the option by the nominee is the exercise of the option by the Buyer. That this is so is confirmed by the language of cl 3.1(b). In the upshot, the first respondent had not exercised the option before it nominated the second respondent to be the "Buyer" in its stead.
[20] The same conclusion follows if one looks at the issue in terms of the commercial interests of the parties. As I have observed, the commercial purpose of the first sentence of cl 4.1 of the option agreement is not to impose a temporal condition on the power of nomination, ie it is not concerned to insist upon a lapse of time between the delivery of the nomination notice and the documents exercising the option as a condition of the due exercise of the option. The evident purpose of cl 4.1 is, rather, to ensure that there be only one person to whom the Vendor is responsible as Buyer under the contract of sale created by the exercise of the option. The Vendor should not be confronted by the possibility of two purchasers each claiming to enforce the contract of sale. That concern was met in this case, in that it was made clear to the appellant that the second respondent was to be the only Buyer under the contract of sale to be brought into existence by the exercise of the option. In this sense, which is the commercial sense with which the option agreement was concerned, the first respondent nominated the second respondent as Buyer before the first respondent exercised the call option.
[21] In my respectful opinion, the learned trial judge correctly rejected the appellant's principal argument. It is, therefore, unnecessary to consider the other contention advanced by the respondents in support of the learned trial judge's decision, or to affirm his Honour's finding that the notices were received sequentially.
Conclusion and orders
[22] The decision of the learned trial judge was correct.
[23] The appeal should be dismissed.
[24] The appellant should pay the costs of the respondents including reserved costs if any.
[25] HOLMES JA: I agree with the reasons of Keane JA and with the orders he proposes.
Footnotes
[1] See Evers v Evers [1985] 2 NZLR 209 at 211.
[2] Jet Development Pty Ltd & Anor v Denning [2006] QSC 357, SC No 4879 of 2006, 5 December 2006 at [25] – [28].
[3] Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313 – 314.
[4] See Eaglehill Ltd v J Needham Ltd [1973] AC 992 at 1006, 1011 – 1012.