Adams and Staff Pty Ltd v Bennett

[1995] QCA 81

IN THE COURT OF APPEAL	[1995] QCA 081
SUPREME COURT OF QUEENSLAND	Appeal No. 252 of 1994
Brisbane
Before	Fitzgerald P. Davies J.A. Byrne J.

[Adams & Staff P/L v. Bennett]

BETWEEN:

ADAMS & STAFF PTY LTD

(Plaintiff) Respondent

AND:

JACK BENNETT

(Defendant) Appellant

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 04/04/1995

By a lease dated 28 July 1993, the appellant leased land at 335-339 Mulgrave Road, Cairns to the respondent for a term expiring on 14 July 1997. Part 22 of the lease was as follows:

" PART 22

OPTION TO PURCHASE

22. The Lessor grants to the Lessee an option to
purchase the demised premises to be exercised
by the Lessee at any time after the 15th of
July 1994, but before the 14th July 1997.
The option may be exercised by the Lessee
giving a written notice to the Lessor to
determine the purchase price. The purchase
price shall be determined by mutual agreement
between the Lessor and the Lessee and in the
event of no agreement it shall be determined
by the mean value of two valuations obtained
from independent Valuers in Cairns to be
nominated and agreed upon by both parties and
failing such agreement, as appointed by the
Real Estate Institute of Queensland. The
mean of the two valuations shall be the
purchase price. The value shall be
calculated on the basis that the property
shall be used for the purpose set out herein
and operating as a 'going concern' less the
value of the Lessee's interest in the
property (if any).

Once the purchase price has been determined the Lessor shall give written notice to the Lessee of such purchase price. Should the Lessee desire to exercise the option to purchase after the purchase price has been determined and notified the Lessee shall deliver a written notice of exercise of option to the Lessor within 35 days after receiving the said notice of the purchase price together with a bank cheque for ten per cent of the purchase price by way of a deposit in favour of the Lessor. The sale shall be due for completion 30 clear days after deilvering of such notice to the Lessor and payment of the deposit. If either party bound hereunder requires the execution of a formal contract that party shall prepare and execute a form of contract in duplicate (as used by the R.E.I.Q. [Real Estate Institute of Queensland] at that time) and forward it for execution to the other party and both parties shall sign same provided that that contract shall not affect the substance of the parties' obtligations under this clause."

The respondent duly gave the appellant "a written notice ... to determine the purchase price", but the appellant refused to proceed.

On 6 December 1994, the Chamber Judge made an order for specific performance in favour of the respondent pursuant to R.S.C. O. 18A. In substance, he ordered the appellant to authorise the valuation of the premises on the basis provided for in Part 22 of the lease and that after the determination of the purchase price as the "mean of the two valuations", the appellant proceed "if a notice of exercise of option is given by the [respondent] to the [appellant] together with the deposit provided for by Part 22". His Honour also ordered that, in that event, there be an enquiry as to the damages suffered by the respondent by reason of the appellant's delay in performing its obligations.

The appellant accepted that a contract to buy and sell the property at a price determined in accordance with Part 22 would be valid and enforceable, as is clearly correct: see, for example, Godecke v. Kirwan (1973) 129 C.L.R. 629; Booker Industries Pty Ltd v. Wilson Parking (Qld.) Pty Ltd (1982) 149 C.L.R. 600; cf. Sudbrooke Trading Estate Ltd v. Eggleton [1983] 1 A.C. 444. Nonetheless, it was submitted by the appellant that the purchase price was still to be agreed, because the respondent's "agreement to or acceptance of such price" was still necessary. That is plainly incorrect; the "mean of the two valuations" will become the purchase price and be binding on both parties in the sense that the respondent cannot exercise the option by reference to any other amount and, if the option is exercised, must be paid by the respondent and accepted by the appellant. The appellant's reliance upon a passage in the judgment of Barwick C.J. in Stocks & Holdings (Constructors) Pty Ltd v. Arrowsmith (1964) 112 C.L.R. 646 at 650-3 as "precisely in point" fails to appreciate the difference between a contract of sale, which was there spoken of, and an option, which is here in issue.

The appellant further argued that the respondent had a discretion not to accept the purchase price, and reference was made to a number of cases, including Thorby v. Goldberg (1965) 112 C.L.R. 597; Stocks & Holdings (Constructors) Pty Limited; and Placer Development Ltd v. The Commonwealth (1969) 121 C.L.R. 353. However, the appellant's submission again misses the point. Such cases are concerned with discretions with respect to the performance, or non- performance, of contractual obligations. Here, the respondent has no discretion as to the amount to be paid, it merely has a right to purchase at the "mean of the valuations". It is beyond dispute that such a right is enforceable: Laybutt v. Amoco Australia Pty Ltd (1974) 132 C.L.R. 57, 76.

The next submission for the appellant, who left no stone unturned, was that the orders made below should not have extended beyond ordering him to participate in the valuation process and, in particular, should not have ordered him to proceed further in the event that the respondent exercises the option. No authority was cited to support this submission, and I cannot identify any basis for it in principle. Such an order is not uncommon: cf. Butts v. O'Dwyer (1952) 87 C.L.R. 267.

The notice of appeal and the appellant's written outline of argument included a contention that specific performance should not have been ordered because there is a triable issue, namely whether there is an enforceable option agreement. There is no substance in this argument if, as I think, the enforceability of the option agreement is beyond doubt.

The appellant also argued that an order should not have been made for an enquiry as to damages. The foundation for this submission was that, although there was evidence before the Chamber Judge that the respondent will suffer loss as a result of the appellant's delay because interest rates have risen and it will have to pay more for funds it will need to borrow, such a loss was not in reasonable contemplation of the parties at the time the lease was entered into; it was submitted that interest on moneys borrowed do not arise naturally in the ordinary course of things on an unconditional contract to purchase land. It is unnecessary to consider the assumption underlying this argument for the appellant, namely, that an enquiry as to damages can only be ordered where there is evidence of recoverable loss. There is evidence that the appellant considers that the land is worth $1.5 million. I am quite satisfied that, in these circumstances, borrowing by the respondent would certainly have been in the contemplation of the parties.

The appellant's other submissions related to costs and, in the circumstances, need not be considered.

The appeal must be dismissed, and the appellant must pay the costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	Appeal No. 252 of 1994
Brisbane [Adams & Staff P/L v. Bennett]
BETWEEN:

ADAMS & STAFF PTY LTD

(Plaintiff) Respondent

AND:

JACK BENNETT

(Defendant) Appellant

FITZGERALD P.
DAVIES J.A.

BYRNE J.

Judgment delivered 04/04/1995

REASONS FOR JUDGMENT - THE COURT

APPEAL DISMISSED.

APPELLANT TO PAY TAXED COSTS OF THE APPEAL.

CATCHWORDS:	LAND CONTRACTS - leases - option to purchase - purchase price
Counsel:	K. Copley Q.C. for the Appellant D.B. Fraser Q.C. for the Respondent
Solicitors:	R.G. Kilner & Black t/a for Murray Lyons & Co. for the Appellant Macdonnells for the Respondent

Date/s of Hearing: 29 March 1995