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Cranitch v Cranitch QSC 42
SUPREME COURT OF QUEENSLAND
Cranitch v Cranitch & Ors  QSC 42
CARMEL GRACE CRANITCH
CATHERINE RUTH CRANITCH AS THE EXECUTOR OF THE ESTATE OF MARGARET CRANITCH, DECEASED
CATHERINE RUTH CRANITCH
THOMAS ANTHONY CRANITCH, PETER JAMES CRANITCH, MARGARET MARY CRANITCH, MARY THERESE CRANITCH, FRANCES MARY PUTS, LEONARD THOMAS JOSPEH CRANITCH, MATTHEW LAWRENCE CRANITCH AND CAITLIN CRANITCH
No 1321 of 2019
1 March 2019
19 February 2019
(a)I declare that:
(b)I will hear the parties on the question of costs.
SUCCESSION – CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITION – TESTAMENTARY DISPOSITIONS GENERALLY – OPTIONS AND RIGHTS OF CHOICE OR PRE-EMPTION – whether the testamentary option was exercised within time – whether the testamentary option was properly exercised
Allardyce v Roebuck  3 All ER 754, cited
Hyde v Wrench (1840) ER 132, cited
Legione v Hateley (1983) 152 CLR 406, cited
O'Neill v O'Connell (1946) 72 CLR 101, cited
Re Chilcott; Chilcott v Chilcott  TasSR 230, cited
Re Gardiner (deceased);Gardiner v Gardiner  2 NSWLR 494, cited
Re Gray (deceased);  3 All ER 754, cited
The Perpetual Executors and Trustees Association of Australia Ltd v Commissioner of Probate Duties  VR 91, cited
R T Whiteford for the applicant
R Cumming for the first respondent
CRH Law for the applicant
Carthew Chau & Co for the first respondent
- By her last will, Margaret Cranitch (Margaret) gave her daughter, Catherine Ruth Cranitch (Catherine) an option to purchase her property at 104 Jubilee Terrace, Bardon (the house). Catherine has purported to exercise the option but another of Margaret’s daughters, Carmel Grace Cranitch (Carmel) seeks:
“Pursuant to Section 6 Succession Act 1981declarations that, upon the proper construction of the Will of Margaret Cranitch deceased dated 25 March 2011 and in the events which have occurred:
- (a)the Second Respondentdid not duly exercise the option to purchase the property situated at 104 Jubilee Terrace, Bardon contained in clause 6 of the said Will of the deceased; and
- (b)the property at 104 Jubilee Terrace, Bardon forms part of the deceased’s residuary Estate to be distributed pursuant to the provision of clause 4.2 of the said Will.”
The terms of the will
- Margaret appointed Catherine and one of her sons, Patrick John Cranitch (Patrick) as her executors and trustees. Patrick pre-deceased Margaret so probate of the will was granted to Catherine as the sole surviving executor.
- Personal items were to be distributed by the executors in accordance with the terms of a letter deposited with the will. The balance of the estate formed the residuary estate which, after payment of debts and expensesis to be divided equally between Margaret’s ten children. As presently mentioned, one of the children, Patrick, pre-deceased Margaret. His share passes to his children,of which there is one, Caitlin Cranitch (Caitlin).
- Clause 6 of the will then provides:
“6. FREEHOLD PROPERTY – 104 JUBILEE TERRACE, BARDON
I direct my executors and trustees as soon as possible after my death to offer an option to purchase my freehold property situated at 104 Jubilee Terrace, Bardon and more particularly described as Lots 31 and 32 on Registered Plan 20768 County of Stanley Parish of Enoggera and being the whole of the land contained in Certificate of Title No 15583242 to my daughter CATHERINE RUTH CRANITCH at a price to be determined by my trustees at their absolute discretion in consultation with two real estate agents who shall provide a written market appraisal of the value of the property at the time of my death and I further direct that my said daughter shall be required to notify my trustees in writing whether or not she accepts such option within a period of two (2) months after such option is communicated to her and I declare that the decision of my trustees with respect to the purchase price shall be final and binding on all persons beneficially interested under this my Will and I further direct that the said Option to Purchase shall be personal to my said daughter and shall not be assignable or transmissible to her executors or administrators for the benefit of her estate and I further direct that the said option shall be exercisable in respect of the said property as a whole.”
- Therefore, if Catherine exercises the option to purchase the house for the price determined by her (as sole executor) the sum she pays then falls for distribution as part of the residuary estate. If she does not exercise the option then the house is sold on the open market and the sale proceeds then pass to the residuary estate. Perhaps inevitably, disputes have arisen as to the value of the house. That, it seems, is the motivation for the challenge to the validity of the exercise of the option.
- Margaret and her husband had ten children. Margaret survived her husband and one of her children, Patrick.
- Margaret died on 9 September 2018, and her only asset of real financial value is the house.
- There is a good deal of evidence about when Catherine became aware that the will granted her the option to purchase the house. For reasons later explained, that is a false issue.
- Upon Margaret’s death, Catherine instructed solicitors and sought advice. Her first consultation with her solicitors was on 8 October 2018.
- One of Catherine’s brothers, Thomas Anthony Cranitch (Tom) also instructed solicitors and his solicitors enquired as to the exercise of the option. Catherine’s solicitors then replied:
“While we note that Ms. Cranitch stands in the shoes as both the beneficiary of the Option and as the executor of the estate, we are of the opinion that the Option could not have been considered as having been effectively communicated until she had received legal advice – as the executor – on the operation of the Option. This legal advice was provided on 8 October 2018, and accordingly we calculate that the Option will expire on 7 December 2018.”
- Tom’s solicitors responded:
“Option to Purchase 104 Jubilee Terrace
Your comments are noted. Our client is agreeable with the calculation of dates, and also agrees to the option expiry date now being 7 December 2018.”
- Questions arose as to Margaret’s capacity to make the will. That then raised issues as to the terms of a former will which also gave Catherine an option.
- Probate of the will was granted to Catherine on 19 November 2018.
- On 28 November 2018, Catherine purported to exercise the option by written notice to herself. The notice was in these terms:
“NOTICE OF EXERCISE OF OPTION
Pursuant to clause 6 of the will dated 25 March 2011, I CATHERINE RUTH CRANITCH give notice to the trustees of the estate of the late MARGARET CRANITCH that I exercise the option to purchase the property located at 104 JUBILEE TERRACE, BARDON (the “Property”), on the following terms:
- Purchase Price $675,000.00
- Deposit: $1,000.00
- Settlement Date: 28/2/2019
- Other Conditions: 14 DAY FINANCE
I agree that I will execute the Contract of Sale for the purchase of the Property on the terms set out above, and request that the executor and trustee forward same to me as soon as possible.
I acknowledge that the exercise of this option may not be revoked by me.”
- On 4 December 2018, Catherine as executor for the estate (as seller) and Catherine as purchaser entered into a written contract to sell the house for $675,000.00 subject to various conditions including:
3.1 This contract is conditional on the Buyer obtaining approval of a loan for the Finance Amount from the Financier by the Finance Date on terms satisfactory to the Buyer.
3.2 The Buyer must give notice to the Seller that:
- (1)approval has not been obtained by the Finance Date and the Buyer terminates this contract; or
- (2)the finance condition has been either satisfied or waived by the Buyer.
3.3 The Seller may terminate this contract by notice to the Buyer if notice is not given under clause 3.2 by 5pm on the Finance Date. This is the Seller’s only remedy for the Buyer’s failure to give notice.
3.4 The Seller’s right under clause 3.3 is subject to the Buyer’s continuing right to give written notice to the Seller of satisfaction termination or waiver pursuant to clause 3.2”
- The “Finance Date” for the purposes of clause 3 of the contract was “14 days from Contract Date”. The “Financier” was specified as “buyer’s choice” and the amount to be borrowed was “sufficient to complete.” Settlement of the sale was due under the contract on 28 February 2019.
- All of Margaret’s surviving children were given notice of the application as was Caitlin. Neither Leonard Thomas Joseph Cranitch, nor Caitlin chose to appear either personally or through lawyers. Catherine as executor was represented by Mr Cumming of counsel and Carmel by Mr Whiteford of counsel. All the other surviving siblings were in court and told me that they intended to observe the proceedings but did not wish to be heard.
The positions of the parties
- In support of the making of the declaration, Mr Whiteford made two submissions:
- (i)the option was not exercised within time;
- (ii)even if the purported exercise was within time, the purported exercise was not a proper exercise of the option under the terms of the will.
- As to the first issue, Mr Whiteford submitted that a testamentary option is sourced in the will itself; an equitable estate in the donee arises upon exercise of the option, and independently of any contractual arrangements which might follow.Therefore, when clause 6 of the will speaks of the “option” being “communicated” to Catherine that communication occurs when she becomes aware of the terms of the will which of course contains the option.
- Catherine knew, so submitted Mr Whiteford, of the contents of the will, and therefore the existence of clause 6, by the date of death of Margaret. Therefore, he submitted that the two months for acceptance of the option by Catherine ran from the date of Margaret’s death and expired on 9 November 2018. It follows then that the purported exercise of the option on 28 November 2018 is some nineteen days too late.
- Mr Cumming submitted that clause 6 prescribed a process, so that time ran once the purchase price was ascertained and communicated. Catherine, he submitted was well within time.
- Alternatively, Mr Cumming submitted that if Catherine is out of time she should get relief from forfeiture given that she acted upon the understanding held by her solicitors and at least Tom’s solicitors that the relevant date for exercise of the option was 7 December 2018. She, of course, purported to exercise the option well before that date. She relies on the principles explained in Legione v Hateley.
- With his second argument Mr Whiteford submitted that wills are construed so that the terms of exercise of a testamentary option must be strictly observed or the right is lost. Mr Whiteford relied on O'Neill v O'Connell,Re Gardiner (deceased); Gardiner v Gardiner,Re Chilcott; Chilcott v Chilcott,and Allardyce v Roebuck.
- Mr Whiteford submitted that the exercise of the option “subject to finance” is a conditional exercise and therefore, not acceptance at all. Mr Cumming submitted that on a proper construction of the will, it was a proper acceptance.
Was the purported exercise of option within time?
- There can be no doubt about the legal principles upon which Mr Whiteford relies. The rights which flow to Catherine are sourced in the will. However, the issue here is not so much “what is the nature of the right or interest”, but rather “how is the right exercised?”
- The will itself does not make any offer or “option” which could be accepted immediately by Catherine upon Margaret’s death. Clause 6 operates in this way:
- (i)Margaret dies;
- (ii)that triggers obligations upon the executors;
- (iii)the executors must “offer” an option to purchase to Catherine;
- (iv)that “option” is not a bare offer to purchase and with the price to be determined later; but
- (v)the executors must consult with real estate agents, receive written market appraisals, fix the price and then offer the property to Catherine at that price. It is the offer to Catherine at the price determined in accordance with clause 6 that is the “option” described in the phrase “[the] option is communicated to her.”
- The option was not communicated to Catherine when she received a copy of the will. At that point, she became aware that she had rights under clause 6. However, the “option” which triggers the two months’ time limit is the offer at the price fixed by the executors in consultation with the real estate agents.
- As Mr Whiteford rightly submitted, Catherine is both the sole executor and the donee of the option so there is a certain artificiality about her communicating the option to herself. There is no direct evidence from Catherine as to exactly when she settled on the purchase price. However, it must have been sometime between receiving the last of the appraisals (26 November 2018) and signing the notice of exercise of the option on 28 November 2018.
- There is no need for her to formally communicate the offer to herself. On a proper construction of the will, time began to run once she had settled on the price. At that point, she could accept the option.
- Catherine therefore had a period of two months from 26 November 2018(at the earliest) to accept the option. She did so on 28 November 2018 and was therefore clearly within time.
- Given that over two months elapsed between the date of Margaret’s death and the receipt of the last real estate agent’s appraisal, interesting questions could arise as to whether the offer was made “as soon as possible after [Margaret’s] death” and if not, whether that failure by Catherine adversely affected her rights under clause 6 of the will.
- Mr Whiteford did not take that point. He was, with respect, right not to. Given the potential challenge to the will and the fact there was an earlier will, it was reasonable for Catherine to take advice and not instruct the real estate agents until mid-October. Catherine was not challenged on her affidavit where she swore that the appraisals did not arrive until between 20 and 26 November 2018. In all those circumstances, Mr Whiteford was right not to submit that Catherine had failed to offer the option “as soon as possible.”
- I conclude that the purported exercise of the option by Catherine was made within time.
- That conclusion renders Mr Cumming’s alternative argument that Catherine should have relief from forfeiture as irrelevant. That argument though faced various significant difficulties. There was no basis for Catherine’s solicitors to assert that time ran from her first consultation with them and no basis for Tom’s solicitors to concede that was the case. In any event, Tom’s solicitors did not act for the other surviving beneficiaries and could hardly bind them. I need say no more about that issue.
Was the option properly exercised?
- On a proper construction of clause 6, there is a period of two months after the price is determined for Catherine to contemplate whether she should purchase the house for that sum. There is nothing in clause 6 to suggest that acceptance by Catherine could be conditional upon approval of finance. Indeed, clause 6 strongly suggest to the contrary.
- The executors are to act “as soon as possible.” Catherine is to have two months to decide. Clearly, Margaret’s intention was that upon the expiry of the two months, the executors would be free to administer the estate free of the option. A conditional acceptance could extend that date presumably by whatever period Catherine determined was appropriate for her to apply for and obtain finance. That is not what was contemplated.
- The contract is now unconditional, but that doesn’t matter for two reasons. Firstly, the will on its proper construction put Catherine to her election; a one off opportunity to accept the option and it does not contemplate Catherine having a right to make different decisions over that two month period. The conditional acceptance was in reality a counter offer.She did not unconditionally accept the option and has therefore lost the right. Secondly, even if it could be said that the option was validity exercised when the contract became unconditional as to finance, there is no evidence that occurred before 28 January 2019, being two months from the latest date that Catherine could have set on the price.
- Mr Cumming did not submit that the terms of the declarations sought were inappropriate in the event that I concluded that the option has not been properly exercised by Catherine.
- The orders are:
- (a)I declare that:
- (i)the second respondent did not duly exercise the option to purchase the property situated at 104 Jubilee Terrace, Bardon contained in clause 6 of the will of the deceased; and
- (ii)the property at 104 Jubilee Terrace, Bardon forms part of the deceased’s residuary estate to be distributed pursuant to the provision of clause 4.2 of the will.
- (b)I will hear the parties on the question of costs.
 Which expressly grants jurisdiction to the Court to hear and determine “testamentary matters”.
 Clause 4.1.
 Clause 4.3.
 Affidavit of Catherine Ruth Cranitch CDI 10 exhibits page 38.
 Affidavit of Catherine Ruth Cranitch CDI 10 exhibits page 43.
 Affidavit of Catherine Ruth Cranitch, sworn on 19 February 2019 and filed by leave; paragraphs 4-5.
 Affidavit of Catherine Ruth Cranitch CDI 10 paragraph 51.
 Affidavit of Catherine Ruth Cranitch CDI 10 exhibits page 70.
 Transcript 1-2 to 1-3.
 O'Neill v O'Connell (1946) 72 CLR 101 at 120-121.
 (1983) 152 CLR 406 at 429, 449-450.
 (1946) 72 CLR 101 at 130. Re Gray (deceased);  3 All ER 754 at , .
  2 NSWLR 494 at 498.
  TasSR 230 at 234.
  3 All ER 754 at , .
 See, for example The Perpetual Executors and Trustees Association of Australia Ltd v Commissioner of Probate Duties  VR 91 at 98.
 Date of receipt of the last appraisal.
Hyde v Wrench (1840) 49 ER 132.
- Published Case Name:
Cranitch v Cranitch & Ors
- Shortened Case Name:
Cranitch v Cranitch
 QSC 42
01 Mar 2019
|Event||Citation or File||Date||Notes|
|Primary Judgment|| QSC 42||01 Mar 2019||Application for declaratory relief as to the proper construction of an option to purchase real property under the terms of a will; declaratory relief granted: Davis J.|