Chipper v Octra Nominees Pty Ltd

Case [2006] FCA 1633

FEDERAL COURT OF AUSTRALIA

Chipper v Octra Nominees Pty Ltd [2006] FCA 1633

LEASE – Lessee granted first right of refusal – When first right of refusal must be offered – Triggering event – Contract for sale with third party – Contract not performed and subsequently varied to purchaser’s advantage – Whether lessee thereby entitled to be offered further right to refuse     

LEASE – Sub-lease in near identical terms – Lessee/sub-lessor not at arm’s length from lessor – First right of refusal to buy freehold contained in sub-lease – Nature of sub-lessor’s obligation to sub-lessee – Whether first right of refusal in lease held on trust for sub-lessee

TRUST – Lease and sub-lease of land both giving first right of refusal to buy freehold – Whether first right of refusal in lease held on trust for sub-lessee

EQUITY – Priority of equitable interests in  land – Interest arising from execution of contract for sale of land – Purchaser on notice of lessee’s first right of refusal in existing lease – Contract varied to purchaser’s advantage – Whether purchaser’s equitable interest superior to interest of lessee in being offered right to refuse

CONTRACT – Lessee of land given first right of refusal to buy freehold – When triggering event occurs – Execution of contract for sale with third party – Whether breach of contract by lessor – Whether lessee thereupon in position of grantee of option

SPECIFIC PERFORMANCE – Contract to give lessee first right of refusal to buy freehold – Lessor in breach by executing contract for sale with third party – Whether lessee in position of grantee of option – Whether lease entitled to call for transfer – Whether lessee’s rights superior to those of third party – Whether lessee ready and willing

Guardianship and Administration Act1990 (WA)

Bahr v Nicolay [No 2] (1988) 164 CLR 604
Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510
Bircham & Co Nominees (No 2) Ltd v Worrell Holdings Ltd (2001) 82 P & CR 34
Bob Jane T-Marts Pty Ltd v The Baptist Union of Victoria [1999] VSC 346
Goldmaster Homes Pty Ltd v Johnson (2004) 12 BPR 23, 167
Hunt v Luck [1902] 1 Ch 428
Jonns v Kim Seong Tan (1999) 9 BPR 17
Kling v Keston Properties Ltd (1985) 49 P & CR 212
Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57
Mackay v Wilson (1947) 47 SR (NSW) 315
Milmo v Carreras [1946] 1 KB 306
Morland v Hales (1910) 30 NZLR 201
Motor Works Ltd v Westminster Auto Services Ltd [1997] 1 NZLR 762
Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365
Pritchard v Briggs [1980] Ch 338
Ramlal v Chaitlal [2004] 1 P & CR 1
Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491
Sahade v BP Australia Pty Ltd (2004) 12 BPR 22
Speciality Shops Ltd v Yorkshire and Metropolitan Estates Ltd [2003] 2 P &…

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Details
AGLC
Chipper v Octra Nominees Pty Ltd [2006] FCA 1633
Case
[2006] FCA 1633
Decision Date

CaseChat Overview and Summary

The Chippers, as applicants, sought specific performance and other relief from Peter Smyth, who was the defendant, in relation to a contract for the sale of a farm. The case was heard in the Supreme Court of Western Australia. The applicants also sought orders against other respondents, including Octra Nominees Pty Ltd, but these parties did not participate in the trial. The primary legal issue was whether the applicants were entitled to specific performance of the contract for the sale of the farm. Secondary issues included the applicants' entitlement to a declaration regarding their rights under a sub-lease, damages for breach of contract, and whether certain contract provisions had become obsolete.

The court found that the applicants were entitled to specific performance of the contract as varied on 1 March 2006. The court considered the nature of the contract, the conduct of the parties, and the relief sought by the applicants. The court also noted that the applicants might need to consider the implications of their success in the specific performance claim on their other claims, such as the sub-lease and damages. The court directed the parties to address these matters and the mechanics of transferring the farm registration before making final orders. The court also invited submissions on costs, considering the non-participation of the fourth respondents.

The court issued orders for the applicants to file a minute of the proposed orders by 5 December 2006, and for the respondents to file their proposed orders by 7 December 2006. The court also invited submissions on costs, with deadlines set for 5 and 7 December 2006 for the applicants and respondents, respectively. The proceeding was listed for the making of orders on 13 December 2006.

Orders

Orders of the court

1. On or before 5 December 2006, the applicants file and serve a minute of the orders which they propose to dispose of the proceeding in accordance with the reasons of the court published this day.

2. Each respondent have leave to file and serve, on or before 7 December 2006, a minute of the orders (if any) which he or it proposes, in place of or in addition to the orders proposed by the applicants, to dispose of the proceeding in accordance with those reasons.

3. If any party desires to make a submission as to costs, he, she or it file and serve a brief statement of the grounds relied on in that behalf, in the case of the applicants on or before 5 December 2006, and in the case of the respondents on or before 7 December 2006.

4. The proceeding be listed for the making of orders at 2:15pm (WSDST) on 13 December 2006.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

JESSUP J
It follows that the Chippers should succeed on their claim for specific performance. The contractual obligations which Peter Smyth will be ordered to perform are those of the vendor under the contract between himself and Red Valley as varied on 1 March 2006.CONCLUSION In a number of respects, the parties should have the opportunity to address me on the terms of the orders which ought to be made in the light of my reasons as set out above. For their part, the Chippers might consider the impact of their success in their claim for specific performance upon their claim for a declaration as to their entitlement to the extended term under the sub-lease and upon their claim for damages. Both the Chippers and Peter Smyth might consider what should be done about any provisions in the contract which may have been, in effect, overtaken by the passage of time, such as the date for settlement. The Chippers should consider what they want to do about condition 10. There may be other matters of detail which need to be addressed. Both parties should turn their minds to the terms of the order for specific performance which would be appropriate. Subject to such submissions as are made, I would be disposed to specify a date by which Smyth will be required to take the action to which the order relates. Those parties should, of course, take into account the likely mechanics of a transfer of the registration of the farm from Smyth to the Chippers. I shall also give the parties an opportunity to address me on the question of costs. As I have said in these reasons, the fourth respondents did not participate in the trial. I expect to be addressed on the terms of any order proposed by, or against, those respondents.

Ratio Decidendi

Legal Principle Established

Established by: JESSUP J

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