Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd
[2008] QSC 177
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Appeal Determined (QCA)
- Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd[2008] QSC 177
- Add to List
Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd[2008] QSC 177
Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd[2008] QSC 177
SUPREME COURT OF QUEENSLAND
CITATION: | Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2008] QSC 177 |
PARTIES: | MOFFATT PROPERTY DEVELOPMENT GROUP PTY LTD ACN 130 155 181 |
FILE NO: | 4789 of 2008 |
DIVISION: | Trial Division |
PROCEEDING: | Civil hearing |
ORIGINATING COURT: | Supreme Court of Queensland |
DELIVERED ON: | 1 August 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 22 July 2008 |
JUDGE: | Chesterman J |
ORDER: | Declare that: 1.The letter dated 8 April 2008 constitutes a valid and binding agreement between plaintiff and defendant with respect to the sale and purchase of the land described as Lot 2 on Registered Plan 177389 County of Canning, Parish of Mooloolah, Title Reference 16371056. 2.The agreement of 8 April 2008 should be specifically performed and carried into execution. 3.The parties should prepare minutes of the order, including a decree for the execution of the Put & Call contract, required by the agreement and the preparation and execution of a consent caveat or a mortgage. |
CATCHWORDS: | EQUITY – EQUITABLE REMEDIES – SPECIFIC PERFORMANCE – PARTICULAR CONTRACTS – SALE OF LAND – whether contract for the sale of land specifically enforceable Legislation A New Tax (Goods & Services Tax) Act 1999 (Cth), Section 9-5 Land Title Act 1994, s 126(1)(b) Property Law Act 1974, s 59 Cases Ballas v Theophilos (1957) 98 CLR 193 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 Masters v Cameron (1954) 91 CLR 353, cited Godecke v Kirwan (1973) 129 CLR 629 G Scammell and Nephew Ltd v Ouston [1941] AC 251 Marek v Australasian Conference Association Pty Ltd [1994] 2 Qd R 521 May and Butcher v The King [1934] 2 KB 17 Niesmann v Collingridge (1921) 29 CLR 177 Pagnan SPA v Feed Products Ltd (1987) 2 Ll LR 601 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Barwick CJ said (436-7) |
COUNSEL: | Mr A Shah for the plaintiff Mr FG Forde for the defendant |
SOLICITORS: | Thompson McNichol for the plaintiff Herbert Geer for the defendant |
- The plaintiff is a property developer. The defendant owns land at 5 Owen Creek Road, Forest Glen on the Sunshine Coast, more fully described as Lot 2 on Registered Plan 177389 in the County of Canning, Parish of Mooloolah, Title Reference 16371056. The land is 20 acres in extent and is improved with a dwelling; it is rural residential land.
- The sole director of the defendant is Mrs Kim Edwards whose husband, Mr Peter Edwards, was active in the management of the company. In or about July 2007 Mr Edwards approached a real estate agent, Mr Muldrew, and asked him to find a buyer for the land. Mr Muldrew thought that the plaintiff might be interested in acquiring the property and spoke to one of its directors, Mr Prebble, who did express interest. Not long afterwards Mr Edwards told Mr Muldrew that he was dealing with another prospective purchaser and, in effect, withdrew Mr Muldrew’s authority to find a buyer.
- In March 2008 Mr Edwards told Mr Muldrew that the defendant had not sold the land and that he ‘could try and sell it if (he) could.’ Mr Muldrew spoke again to Mr Prebble who had retained his interest in acquiring the property.
- On 4 April 2008 Mr Prebble wrote a letter on the plaintiff’s letterhead to Mr Muldrew:
‘As discussed we are interested in purchasing the block of land located on the corner of Mons Road and Owens Creek Road, Forest Glen, Sunshine Coast and would appreciate you putting the following offer to the vendor on our behalf:
- Purchase price $3,000,000.00
- $300,000 non refundable deposit released when vendor signs contract
- Contract will be unconditional in the form of an Put & Call
- Settlement 12 Months from date of contract
- The vendor to remain responsible for the insurance of the property until settlement
A couple of matters that you may wish to pass on to your vendor are; From the vendors point of view a Put & Call is good because it will defer his capital gains tax.
If we release that sort of money on deposit then to protect ourselves we need to take one of the following actions:
The first is a consent caveat and that prevents him from selling the property from under us. If there is a mortgage then the bank will have to give consent to the caveat.
If we can’t achieve a caveat then we need a mortgage on the property, we would obviously need to know if there is a first mortgage, if there is then we need to take a second mortgage and also need to ascertain there is enough value left to protect us in the second mortgage, bearing in mind the value of the deposit.’
- Following receipt of the letter Mr Muldrew spoke to Mr Edwards and in the course of the next day or two he ‘was involved in the exchange of several offers to sell and buy between’ plaintiff and defendant.
- On 8 April 2008 Mr Prebble wrote again to Mr Muldrew:
‘As discussed out latest unconditional offer for the block of land located at 5 Owen Creek Road, Forest Glen, Sunshine Coast, L2 RP177389 Parish Mooloolah is our final offer to purchase and we would appreciate you putting that offer to the vendor once again on our behalf:
- Purchase price $3,000,000.00
- $500,000.00 non refundable deposit released when vendor signs contract
- Contract will be unconditional in the form of an Put & Call
- Settlement 12 Months from date of contract
- The vendor to remain responsible for the insurance of the property until settlement
We do require a security over the land to ensure that our deposit is secured in the form of a caveat or mortgage. If the vendor accepts this offer, please have him sign off the letter of offer as accepted and we will instruct our Lawyer to prepared the contract documentation.
Regards
Myles Prebble
Ph 0405572100
I, KIM MAREE EDWARDS of Hebron Park Pty Ltd acknowledge acceptance of the above offer for the land located at 5 Owen Creek Road, Forest Glen, Sunshine Coast being L2 RP177389 Parish Mooloolah.
SignedK Edwards
Dated9th April 2008’
- This letter, too, was written on the plaintiff’s letterhead which included the words ‘Moffatt Property Development Group’, the plaintiff’s address and email address, its telephone and facsimile numbers, and its ACN. Omitted from the plaintiff’s name were the letters ‘Pty Ltd’.
- The words ‘Kim Maree Edwards’ are written in hand as is the date ‘9th April’ and, of course, Mrs Edwards’ signature. From its appearance the form of acceptance was included in Mr Prebble’s letter. Mrs Edwards completed it by writing in her full name, the date and signing it.
- Mr Muldrew took Mr Prebble’s letter of 8 April 2008 to Mr and Mrs Edwards’ home in Emerald. He advised them that the offer was ‘genuine’ and asked them to ‘ensure that they ... fully understood the nature and effect of the offer ...’. Mr Edwards said ‘We need to sell something’. Mrs Edwards signed the acceptance which appears at the foot of the letter.
- On 9 April Mr Muldrew advised Mr Prebble that the defendant had accepted the offer and informed him of the identity of the defendant’s solicitors who would act in the transaction. He sent a copy of the letter, signed by Mrs Edwards, to the plaintiff.
- On 14 April 2008 Mr Edwards told Mr Muldrew that he had received a better offer for the land. He asked Mr Muldrew to ascertain whether the plaintiff wished to proceed with the purchase. Having ascertained that it did Mr Muldrew informed Mr Edwards of the fact. Mr Edwards then asked ‘whether ... the (plaintiff) would be willing to let the deal go if he paid their costs.’
- The plaintiff was not willing to ‘let the deal go’. On 23 May 2008 it commenced proceedings seeking a declaration:
‘That on or about 8 April 2008 the applicant and respondent entered into a valid and binding written agreement in respect to the sale and purchase of land ... described as Lot 2 on RP 177389 ...’
and an order for specific performance of the agreement.
- The defendant resists the claim on three grounds:
(1)That the letter of 8 April 2008 does not amount to a concluded binding agreement between the parties who intended only to be bound when they executed the ‘contract’ referred to in the letter.
(2)That the asserted agreement of 8 April is uncertain.
(3) That there is no sufficient written memorandum of the agreement to satisfy s 59 of the Property Law Act 1974.
- The argument in support of the three bases overlap and are to some extent interrelated, especially those with respect to grounds (1) and (2). A substantial argument advanced by the defendant in support of its first ground, that the parties did not intend to be bound by the letter of 8 April 2008, was that the terms of the letter were incomplete, thereby making any agreement contained in it uncertain and showing that the parties did not then intend to commit themselves to a sale and purchase. The suggested uncertainty is also relied upon as a separate ground of invalidity.
- Mr Shah, who appeared for the plaintiff, submitted that the case is in the second category described in Masters v Cameron (1954) 91 CLR 353. Mr Forde, who appeared for the defendant, submits that it is in the third category. It will be remembered that the High Court described the categories in these terms (360-361):
‘Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of the negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a form of contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not ...; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. ... Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own ...’.
- The defendant submitted there cannot be a concluded bargain until the parties ‘have settled everything that is necessary to be settled between (them)’ and the letter of 8 April 2008 leaves unsettled the terms of the ‘Put & Call’. (The reference is to a passage in the judgment of Lord Wright in G Scammell and Nephew Ltd v Ouston [1941] AC 251 at 269, which in turn quoted from the judgment of Lord Dunedin in May and Butcher v The King [1934] 2 KB 17 at 21n). The following factors were said to show the inconclusiveness of the letter:
- It contemplated that the parties would be bound not by the letter but by a different contract, the ‘Put & Call’.
- The deposit was not to be paid on the signing of the letter but upon the execution of the ‘contract’.
- Settlement was to occur 12 months from the date of execution of the ‘contract’, not from the date of execution of the letter.
- The defendant relies upon the judgment of Cooper and Byrne JJ (with which McPherson SPJ agreed) in Marek v Australasian Conference Association Pty Ltd [1994] 2 Qd R 521 at 527-8:
‘The usual expectation of parties in negotiations of the sale of land is that they will not be taken to have made a concluded bargain unless and until a formal contract is executed. In this State real estate is ordinarily agreed to be sold by the execution by vendor and purchaser of a form of contract adopted by the Real Estate Institute of Queensland and approved by the Queensland Law Society ... . This notorious fact largely explains why these days in land sales the “expectation is strong that the parties did not intend to be bound until a formal contract is executed”: ... . Exceptionally, the conduct of the parties may reveal an intention to make a binding agreement concerning land before a formal contract is signed. ... However such cases are rare. Where solicitors are to assist in the preparation of a contract for the sale of real estate, that factor tends to make it less likely that the parties desire to be finally committed before the contract’s execution. In Carruthers v Whittaker [1975] 2 NZLR 667 Richmond J, McCarthy P and Woodhouse J concurring ... said:
“... When the parties instructed their respective solicitors they all had in mind only one form of contract ... a formal agreement ... to be prepared and approved by the solicitors. When parties in negotiation ... act in this way then the ordinary inference from their conduct is that they ... intend to contract by document which each will be required to sign. It is unreasonable to suppose that either party would contemplate that anything short of the signing of the document by both parties would bring finality to their negotiations.” ’
- This passage is commonly cited as authority for the proposition it contains. That proposition is emphatically expressed but, with respect, it must be observed that it is one of fact and not of law. Whether parties intend to be bound by a particular document, or form of agreement, is a question of fact in the particular case. It is not a rule of law that parties negotiating the sale of land are not bound to buy or sell, as the case may be, until a formal contract in an approved form is executed.
- This was the approach taken by a subsequent decision of the Court of Appeal, Sheehan v Zaszlos [1995] 2 Qd R 210 in which the Court (213):
‘The respondent sought to call in aid ... a line of New Zealand cases which appear to hold that in commercial contracts or contracts for the sale ... of land for commercial purposes, where the parties contemplate the execution of a formal contract, the “natural inference” is that the parties are not to be bound until at least the contract have been formally executed on each side: Carruthers v Whittaker ... . No doubt where parties intend to contract in accordance with a common practice it may be readily inferred that they did not contemplate the coming into existence of a binding contract except in accordance with that practice ... . But in the absence of any such common practice we think that any such “natural inference” is inconsistent with the view expressed in Masters that the question in which of the three classes there identified a case will fall “depends on the intention disclosed by the language the parties have employed” ...; to which we would add “or inferred from their conduct”.’
- In my respectful opinion this is the accurate statement of the law. Marek was not referred to but the authorities on which it depended were disapproved.
- I approach the question, whether the agreement falls into the second or third category defined by Masters, on the basis that it is one of fact.
- The form of the document, to use a neutral term, of 8 April 2008 suggests it was meant to give rise to a binding agreement. It was addressed to the defendant’s agent and set out the plaintiff’s latest, ‘final’, offer to purchase the defendant’s land. The letter in express terms required the defendant to sign the letter if it accepted the offer. The defendant, by its director, duly signed and dated the letter below an express ‘... acceptance of the ... offer ...’, which had been included for that purpose, and to have that effect.
- The defendant’s signature is very significant. It is difficult to see what it was intended to do, if not to bind the defendant to the contract which came into existence upon its acceptance of the plaintiff’s offer. The significance of signature by both parties to negotiation was what was said to be necessary to end negotiations and bring a contract into existence in the cases which underlay Marek. This appears from the passage in the judgment in Carruthers. It was there thought ‘unreasonable to suppose that either party would contemplate that anything short of the signing of the document by both parties ...’ would bring a contract into existence.
- There is in this case a document signed by both parties and signed, from the terms of the letter itself, on the basis that by signing the defendant accepted the plaintiff’s offer.
- The course of negotiations tends to reinforce the conclusions that the parties intended to bind themselves to the terms set out in the letter. The plaintiff had been interested in buying the property 12 months earlier. Its interest was terminated by the defendant’s dalliance with another prospective purchaser. That suit having cooled the defendant again invited an approach from the plaintiff which, when made, resulted in counter-offers. It is not surprising that the plaintiff should have wanted finality and wanted the defendant to commit itself to sell the land. It chose a form of words appropriate to obtaining commitment should the defendant decide to sell on the proposed terms. The defendant indicated its acceptance in the form designated by the plaintiff to obtain that commitment.
- When one considers whether the parties intended to be bound by the letter it is relevant to regard what the parties said and did. Mr Edwards’ asked Mr Muldrew whether the plaintiff would ‘let the deal go’ if the defendant paid its costs, incurred, no doubt, with respect to the negotiations and agreement. It is an obvious inference from the question that Mr Edwards thought he had undertaken some obligation to the plaintiff which could only be abrogated at a price. The only source of the obligation is the letter of 8 April 2008 which the defendant signed.
- The conclusion is not affected by the fact that the deposit was payable upon the execution of the Put & Call contract, or that settlement would occur 12 months from the date of the execution of that contract or that there was to be a Put & Call contract. Those consequences flowed from the agreement the parties made by the making and acceptance of the written offer. The agreement they made contained those terms. The existence of those terms is no basis for concluding that they did not make an agreement.
- The case has some similarity to Niesmann v Collingridge (1921) 29 CLR 177 in which a written document signed by the defendant gave the plaintiff ‘the firm offer’ of some land at a specified price payable ‘on the signing of a contract’ and specified dates thereafter. Sixpence was paid for the option. The plaintiff verbally accepted the offer and thereby exercised the option. The defendant refused to sell. His suit for specific performance succeeded. Knox CJ said (182):
‘... The document ... contains (1) the names of the parties; (2) a sufficient description of the property; (3) the amount of the purchase money, and (4) the terms of payment. It is expressed to constitute a “firm offer” of the property, and it is supported by valuable consideration. Any reference to a contract as an independent document is in the provision fixing the dates for payment of the purchase money – in other words “the signing of the contract” is referred to only as fixing a point of time. The offer made is not expressed to be “subject to” or “conditional upon” the execution of a formal contract. It does, however, necessarily import that it was in the contemplation of both parties that a formal contract should be signed ... and ... the meaning of the parties was that acceptance of the offer should be followed by the execution by both ... of a written contract.’
- Rich and Starke JJ said (184-5):
‘... The parties did conclude an agreement in the terms of the offer. The plaintiff made a firm offer, for a small consideration, in which all the essential terms of the bargain were stated, and it was not expressed to conditional or subject to acceptance in writing or the execution of a contract in writing, simply that the purchase money should be paid at or within certain times from the date of signing a contract. This unconditional offer the plaintiff duty accepted, and so concluded the agreement. The provision for payment of the purchase money on the signing of the contract was ... a “term of the bargain”. Thus, the purchaser could not be compelled to pay the purchase money unless the contract was signed. It was a condition of the obligation to pay. But, when the parties had concluded such an agreement, the necessary implication is that each of them will sign a contract in accordance with the terms of the agreement.’
- In Godecke v Kirwan (1973) 129 CLR 629 Walsh J (with whom Mason J agreed) held that because the document in question provided for the acceptance of the offer therein set out, and it was duly accepted, the parties intended to make a bargain, which was to take effect immediately. The fact that neither offer nor acceptance was expressly stated to be ‘subject to’ the signing of a further contract similarly pointed to that conclusion (640).
- These features are present in the letter of 8 April 2008. The absence of an expression indicating that the agreement is subject to, or conditional upon, the execution of further, fuller, documents was thought significant in Niesmann as well as Godecke.
- I therefore conclude that the agreement constituted by the letter is in the second category.
- The defendant’s second objection is that any agreement constituted by the letter is uncertain because incomplete. This constitutes a separate ground of defence to the claim but is also advanced as a ground for concluding that the parties cannot have intended to be bound by the letter. It is convenient to discuss the point as a separate ground of invalidity.
- In my opinion an antecedent question should be addressed. The question is: what does the agreement constituted by the letter of 8 April mean? What is its proper construction? The task of construing the letter will reveal whether or not it has a certain meaning.
- In this exercise it is well to remember the admonition of high authority. In Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Barwick CJ said (436-7):
‘But a contract to which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts ... decide is its proper construction: and the court ... will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. ... So long as the language employed by the parties ... is not “so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention”, the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.’
- The Chief Justice referred to Lord Wright’s judgment in Scammell (G) & Nephew Ltd v Ouston (1941) AC 251 as an authority in point. In that case Lord Wright said (268):
‘The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted.’
It is only where:
‘... the language used was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention’
that the court will conclude there was no contract.
- The first point made by the defendant is that the ‘contract’ referred to in the letter is unidentified as to type or terms. The submission continues that the contract may be an option agreement, or a contract for the sale of the land, or such a contract to be entered into upon the exercise of the option. There is no basis for choosing one rather than the other of these types of contract, and no means of knowing what terms the parties intended, or would have intended to include.
- The submission cannot be accepted. The letter itself makes it clear what is meant by ‘contract’. That term appears in the second, third and fourth bullet points. The deposit is to be paid (‘released’) when the vendor signed the contract; and settlement was to occur 12 months after the contract was executed (‘dated’). The third bullet point describes the type of contract: it was to be a ‘Put & Call’. It is, I think, obvious that when ‘contract’ is used in the three phrases it means the same thing, and the second phrase defines what it is.
- There remains the point that the letter says nothing about the terms of the ‘Put & Call’ contract. The defendant was, I thought, prepared to assume that what is meant by the designation is an option agreement, but pointed out that nothing is said about the consideration for the grant of the option; or the identity of grantee and grantor; or the time when the option was to be exercised; or the manner in which it was to be exercised.
- The words ‘Put & Call’ themselves define the necessary terms of the contract. They are descriptive of options, and it is perfectly apposite to describe an option as a contract, at least if the option is granted for valuable consideration. The words ‘Put’ and ‘Call’ may have no defined legal meaning but they are well understood. There is nothing unintelligible, or meaningless, about a ‘Put & Call contract’.
- The Australian Encyclopaedia of Forms and Precedents, 3rd ed, vol 10 para 510 says:
‘... A Put option is an option to sell the subject matter of the option, while a Call option is an option to buy the subject matter of an option. Each option ... has a taker and a writer. Accordingly, upon the exercise of a Put option by the taker, the taker is under an obligation to sell, and the writer is under an obligation to buy. On the other hand, upon the exercise of a Call option by the taker, the taker is under an obligation to buy, and the writer is under an obligation to sell.’
- In this State it is more common to refer to the parties to an option agreement as grantor and grantee.
- What the letter meant was that the parties were to enter into a contract by the terms of which the plaintiff was given an option to buy the land and the defendant was given an option to sell it, both for the price of $3,000,000 with settlement to occur 12 months after the option contract was signed and a deposit of $500,000 was to be paid on the signing of the contract by the defendant.
- It remains to consider the defendant’s three particular points of objection: that the letter did not identify the consideration for the grant of the option rights, nor specify when or how the rights were to be exercised.
- Consideration was provided by the parties’ mutual conferral of rights and assumption of obligations. The plaintiff’s ‘Call’ option was consideration for the defendant’s ‘Put’ option. The consideration for the right conferred on the plaintiff to buy the land was the right it conferred on the defendant to sell it.
- There is an alternative approach. The consideration for the grant of an option need be no more than a peppercorn. One commonly sees options of this type granted in consideration of the payment of $1. When the parties agreed, as in my opinion these parties did, that they should execute a Put & Call option agreement their presumed intention must have been that the agreement was to be binding, which would require valuable consideration. It would be an appropriate case in which the law would imply a term that each party would give sufficient consideration, e.g. $1 to the other to make the contract binding. The implication of such a term is necessary to give business efficacy to the agreement, and is so obvious as to go without saying. As well, such a term is reasonable, capable of clear expression, and does not contradict any express term of the contract. The five conditions for the implication of terms as described in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 at 347, are satisfied.
- The answer to the point that nothing is said as to the mode by which the option was to be exercised is that any form of notice would have been sufficient. In the absence of the specification of a particular manner of giving notice the parties must have been presumed to intend that any notice which came to the attention of the other would suffice. Dixon CJ explained things thus in Ballas v Theophilos (1957) 98 CLR 193 at 196:
‘... It was the business of the plaintiff to exercise the option. The clause contains no express provision saying how he is to do it and any definitive communication of an election would suffice. But it was necessary that the communication should express clearly and unequivocally the fact that the surviving partner, the plaintiff, then and there elected to acquire the deceased’s interest ...’.
- There remains the point that the clause did not specify when the option was to be exercised. In the absence of a stipulated time the law is that it was to be exercised within a reasonable time and what is reasonable depends on all the circumstances relevant to the exercise of the option. See Ballas at 197; Niesmann at 183.
- Settlement of the contract, that is conveyance of the land, was to occur on the first anniversary of the date of execution of the Put & Call contract. This is the clear import of the term ‘settlement 12 months from date of contract’ which immediately follows the description of the contract as one ‘in the form of a Put & Call’.
- The option or options therefore had to be exercised in sufficient time to allow the other party to convey the property on the one hand; and to pay the purchase price on the other. As long as notice was given in sufficient time before the first anniversary of the execution of the contract to allow for conveyance on that anniversary the option would have been exercised within a reasonable time. In other words the options could have been exercised at any time between the execution of the option agreement and that moment after which the parties could not have got ready for settlement on the due date.
- It should be observed that either or both parties could have exercised the option. The plaintiff could have given notice requiring the defendant to sell the land, or the defendant could have given notice requiring the plaintiff to buy the land or both plaintiff and defendant could have given notice. The Put & Call contract was unconditional: there were no prerequisites to the exercise of the options. It was not a case, as one sometimes sees, where the vendor’s option was to be exercised only in the event that the purchaser had not exercised its option within a specified time.
- The parties may have included more terms, or more specific terms in their ‘put and call contract’ but to the extent that they did not specify all the terms that might have been inserted in such an agreement the case is covered by the fourth, fifth and sixth propositions distilled from the authorities by Lloyd LJ in Pagnan SPA v Feed Products Ltd (1987) 2 Ll LR 601 at 619:
‘(4)... The parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled ...
(5)If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.
(6)... It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. ... There is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later ...’
- The defendant advanced a submission based upon the failure of the parties to agree upon the terms of any contract for sale and purchase which would come into existence upon the exercise of the option. The submission depends for its efficacy upon the assumption that upon the exercise of the option, by plaintiff or defendant or both, the parties were obliged to execute a contract for the sale of the land. Option agreements of this kind are often seen. They usually require the parties, upon the exercise of their option, to execute a contract in the standard REIQ form. But that is a question of convenience. It is not necessary to the existence of a binding option agreement, and it was not the form which this agreement took. It was not necessary that upon the exercise of either option the parties sign a further contract. Their respective obligations were to convey the property and to pay the purchase price. There was no need for an intermediate contract. Once the option was exercised the defendant could prepare its conveyance and the plaintiff count out its money. Conveyance in exchange for the money would effect the settlement without the need for any further document or contract.
- The defendant’s next point was that there is an irreconcilable inconsistency in the agreement between a ‘non-refundable deposit’ and an obligation to secure the repayment of the deposit or, at least, to ‘secure’ the deposit. A subsidiary point was argued, namely, that by proposing that the form of the security be either a caveat or a mortgage, there was a further element of uncertainty in the contract.
- The meaning of the words:
‘We do require a security over the land to ensure that our deposit is secured in the form of a caveat or mortgage.’
is made clear by the earlier letter of 4 April 2008. There, Mr Prebble explained that if the deposit were paid to the vendor the plaintiff would require protection against the chance that the defendant might sell the land to a third party in breach of the agreement to sell it to the plaintiff. In that eventuality the plaintiff would have neither the land nor the money paid by way of deposit. The protection sought was a consent caveat so the land could not be sold to a third party, or a mortgage securing the repayment of the deposit in the event that the land was sold to a third party.
- It is, I think, reasonable to construe the letter of 8 April in the light of the explanation given in the earlier correspondence.
- The deposit when paid would have the normal attributes of a deposit, an earnest to bind the plaintiff to perform the contract, and part payment of the purchase price. It would be dealt with in accordance with the usually applicable legal principles. They are that the plaintiff could not recover the deposit except in the event the defendant defaulted in the performance of its obligations and the plaintiff did not or could not obtain specific performance of the agreement: or that neither party exercised its option. It was the possibility of that eventuality which underlies the requirement for security. The plaintiff would be protected if either the defendant could not convey the land to a third party, or secured the repayment of the deposit in the event that it was repayable. A caveat lodged with the defendant’s consent pursuant to s 126(1)(b) of the Land Title Act 1994 would achieve the former, and a mortgage securing the contingent debt of the return of the deposit would achieve the latter.
- The description of the deposit as ‘non-refundable’ has to be understood in the context of the letter itself which by necessary implication shows that in some circumstances it was to be refundable or repayable. Those circumstances are the ones I have described. Those exceptions apart, the deposit when paid to the vendor, could be kept. It was in this sense that the deposit was described as ‘non-refundable’.
- The letter is thus to be seen as containing a term that the defendant give his consent to a caveat protecting the plaintiff’s interest in the land as purchaser, or grant a mortgage to secure the repayment of the deposit in the event it was repayable. The offer of alternative modes of performance of a contract does not make it void for uncertainty. The offeree, the defendant in this case, is allowed to choose between the two modes of performance. See TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 150-6; The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92-93.
- There is thus no inconsistency or uncertainty in this part of the agreement.
- The defendant submitted there was one other respect in which the agreement was incomplete. The submission was that the term that the deposit was to be ‘released when vendor signs contract’ meant that the plaintiff was required to pay the deposit to Mr Muldrew, the agent, who would then ‘release’ it when the vendor signed the contract. Mr Forde submitted that the failure of the letter to address in detail that obligation meant that it was uncertain. This overlooks the point that the defendant, or at least its counsel, was able to fully understand the obligation from the terms of the letter, without the elaboration of further terms.
- The agreement does not say that the deposit is to be first paid to the agent who was to release it when the vendor signed the contract. The term is that the deposit would be released when the vendor signed the contract. ‘Release’ must mean ‘pay’. There is nothing in the agreement about a prior payment to the agent and subsequent payment (or release) by the agent to the defendant. As a matter of practicality the payment may have been effected in that manner but the agreement did not require it. Payment was to be made to the vendor, or the vendor’s agent who could be required to remit it to the defendant, the contract not requiring the agent to hold as stakeholder.
- The defendant’s third ground is that there is an insufficient memorandum in writing to satisfy s 59 of the Property Law Act. That section, of course, provides:
‘No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised.’
- Paragraph 9 of the defence identifies nine ‘essential terms’ which are absent from the 8 April letter which is therefore alleged to be an insufficient memorandum. The terms are:
(a)The identity of the purchaser;
(b)The terms of the contract that will apply;
(c)The form of ‘Put & Call’ that will apply;
(d)Whether or not the price includes or excludes GST;
(e)Whether or not the GST margin scheme was intended to apply;
(f)Whether or not the ‘contract’ referred to regarding payment of the ‘deposit’ was an option agreement, or the contract that will come into existence if and when an option is exercised, so that the time for payment of the deposit (or option fee as the case may be) is unspecified;
(g)The Call option period;
(h)The Put option period;
(i)The method of exercising an option;
(j)The date for settlement;
(k)Whether settlement is due 12 months after the date of the option, or the date the contract will come into existence if an option period is exercised; and
(l)Whether the buyers’ (or option holders) rights are to be protected by a caveat or mortgage and in either case the terms thereof.
- All but points (a), (d) and (e) have been addressed in my consideration of the earlier grounds of opposition to the claim. To the extent that I have not dealt specifically with some of them, I do so now. The date for settlement is incontestably clear. It is that date 12 months after the date on which the Put & Call contract is executed by the parties. I do not understand how there could be any doubt about this. The word ‘contract’ where it appears in the fourth bullet point of the letter is undoubtedly the same contract referred to in the third bullet point, the ‘Put & Call’ contract.
- The alleged deficiencies (b), (c), (f), (g), (h), (i), (j), (k) and (l) are not omissions from the letter but an asserted incompleteness, or uncertainty, in the terms which do appear. In fact there is no incompleteness. When properly construed the terms of the contract are clear and the confusion detected by the defendant arises from a misreading, or misunderstanding, of the agreement and with the insertion of doubts that are unwarranted. For example the confusion said to arise from the use of the word ‘contract’ is misconceived. The meaning of the word is clear from its context. This imputed confusion gives rise to deficiencies (b), (f), (j) and (k).
- The contention that the purchaser’s identity does not clearly emerge from their letter is puzzling. It was the plaintiff who wrote the letter. Its name, admittedly without the designation showing it to be a proprietary limited company, appears at the head of the letter. The fact that it is a company is apparent from the ACN printed in large letters and numerals at the foot of the letter. A company search reveals, as exhibit 2 shows, that company number attaches to Moffatt Property Development Group Pty Ltd. The point is without substance.
- The next point is that the letter does not specify whether the price of $3,000,000 includes or excludes GST. The short answer is that the parties agreed upon a price and said nothing about the incidence of GST. The consequence is that whether the tax is payable, and by whom, will be determined by the provisions of the applicable legislation as it applies to the contract the parties made. In the absence of agreement that GST should be payable otherwise than in accordance with the Act any liability to pay the tax will be fixed by the Act. The same is true of the ‘GST margin scheme’. It either applies or it does not to the bargain the parties made.
- Section 9-5 of A New Tax (Goods & Services Tax) Act 1999 (Cth) provides that a supply of goods or services is not taxable for the purposes of the Act if it is ‘input taxed’. By s 40-65 the sale of real property is input taxed if the property is residential premises which are to be used predominantly for residential accommodation. As I mentioned the land is rural residential and is improved with a dwelling. The sale may not attract GST. If it does it will presumably do so because it was sold for development, not residential accommodation. The point does not have to be resolved in this litigation.
- Mr Prebble gave evidence that the plaintiff was ready, willing and able to perform the agreement, exercise the option and be bound by the contract.
- Lastly I should notice a point taken by the defendant which is that the plaintiff did not pay the deposit on 8 April. I am not sure what the point is because the time for payment has not yet arisen. It was to be paid (released) when the defendant signed the contract which, as I have explained, meant the Put & Call contract. That has not been prepared or signed because of the defendant’s anticipatory breach of contract.
- The plaintiff has made out its claim to relief. It is entitled to a declaration that the letter dated 8 April 2008 constitutes a valid and binding agreement between plaintiff and defendant with respect to the sale and purchase of the land described as Lot 2 on Registered Plan 177389 County of Canning, Parish of Mooloolah, Title Reference 16371056. It is also entitled to a decree for the specific performance of the agreement of 8 April 2008. The parties should prepare minutes of the order. In the first instance it will not be a decree for the sale and purchase of the land but the execution of the Put & Call contract, in the terms I have described, required by the agreement. In the preparation of the Put & Call contract the parties may agree on ‘fuller or more precise’ terms, not different in effect to those I have described. See Masters at 360. The minutes should provide for the preparation and execution of a consent caveat or a mortgage.