Butchart & Anor v Sinnamon & Ors

At issue in this case was whether the respondent had complied with a right of first refusal clause in a contract for the sale of land. Justice Dalton found that a “bare” right of first refusal clause required that the vendor provide the counterparties with a reasonable opportunity to purchase the adjoining land at a price he genuinely wanted before selling it to anyone else. On the facts, the first respondent had complied with his obligations under the clause.

Dalton J

16 December 2021

Mr Sinnamon owned land at Moggill which he subdivided into Lots 30 and 31. [1]. In 2019, he sold Lot 31 to Mr and Mrs Butchart, with the contract of sale containing the following term (special condition 5): [1]:

“The Seller, who also owns Lot 30, 330 Priors Pocket Road, Moggill Qld 4070, agrees to give the Buyer first right of refusal to purchase Lot 30, 330 Priors Pocket Road, Moggill Qld 4070 when the Seller is looking to sell at a future date.”

In February 2021, Mr Sinnamon advised Mr Butchart that he was planning on putting Lot 30 on the market in the middle of 2021 and indicated that he would speak to Mr Butchart about the property closer to when he was going to put it on the market. [5]. They had a further conversation around Easter time 2021, in which Mr Sinnamon advised Mr Butchart that the Butcharts should contact him before the end of June if they were interested in purchasing the Property. [5]. They did not do so. [5].

On 29 June 2021, Mr Sinnamon called Mr Butchart and asked if the Butcharts wanted to buy Lot 30. [6]. His evidence was that he told Mr Butchart he intended to sell Lot 30 for approximately $1.2 million. [5]. Mr Butchart’s reply was that they were interested in buying the land, but could only buy the property if payment were delayed by 12 months. [6], [8]. Mr Sinnamon then proceeded to market the property, selling it to the second respondents on 13 July 2021 for $1.17 million. [3].

After considering some evidentiary issues, Dalton J turned to the interpretation of special condition 5. Her Honour found that special condition 5 was given for consideration, and the parties agreed to be bound by it. [42]. Further, it was not void for uncertainty. [42].

Accordingly, her Honour’s attention turned to determining the precise obligations imposed by the clause.

Dalton J considered that, on a proper construction of special condition 5, Mr Sinnamon would satisfy his obligations if “he gave the Butcharts a reasonable opportunity to buy or refuse to buy the land at the price he genuinely wanted, at a time before he had contracted to sell it to anyone else.” [45]. Applying this test, her Honour found that Mr Sinnamon had not complied with his obligations under special condition 5 around Easter 2021 when he had informed the Butcharts that he was planning to sell Lot 30 and invited them to make an offer. [47]. However, her Honour found that in his conversation on 29 June 2021, he gave them the genuine price at which he was prepared to sell the land at the time, offered for them to purchase it and had not contracted to sell the land to anyone else. [49]. Her Honour took no account of Mr Sinnamon’s subjective views – that he had already discharged his obligations at that time – finding that they were irrelevant to determining whether or not he had satisfied the obligations under special condition 5. [48]. Ultimately, her Honour found that the Butcharts were given a “sufficiently clear opportunity to either refuse the land” at $1.2 million or agree to purchase it at that price. [50]. This price was sufficiently clear, notwithstanding the use of the word “approximately” by Mr Sinnamon. [50].

The Butcharts further submitted that when Mr Sinnamon decided to accept a price of $1.17 million for Lot 30, he was obliged to offer the property to them again, at that price. [56]. In assessing this submission, Dalton J considered that special condition 5 should be interpreted in the broader context of the relationship between the parties. [60]. Accordingly, her Honour distinguished the instant case from White Property Developments Ltd v Richmond Growth Pty Ltd [1998] FCA 26, where Madgwick J had construed a clause similar to special condition 5 as requiring the vendor to re-offer to the prospective purchaser in light of the assistance given by the prospective purchaser to the vendor in obtaining planning approval over the property. [58]-[59]. Dalton J further differed from Madgwick J’s reasoning by determining that Fullagar and Kitto JJ judgment in Woodroffe v Box (1954) 92 CLR 245, 257–258 does not require “the grantor of a bare right of refusal to give the grantee an opportunity to match terms and conditions offered by a third party purchaser or to give the grantee a subsequent opportunity to match conditions more favourable to the grantee if the grantee refuses the first opportunity to buy.” [66]. Her Honour also considered that dicta from Emmett AJA in Woolworths Ltd v About Life Pty Ltd [2017] NSWSC 1117 at [102] were contrary to Fullagar and Kitto JJ’s reasoning in Woodroffe and so should not be followed. [67].

In the result, Dalton J was satisfied that Mr Sinnamon had complied with his requirements under special condition 5 on 29 June 2021. [68]. It followed that the application was dismissed.

M Paterson