Choice Services P/L v Gicubo P/L - [2003] NSWSC 314

No judgment structure available for this case.

Reported Decision:
(2004) NSW ConvR 56-082

Supreme Court

CITATION: CHOICE SERVICES P/L v. GICUBO P/L [2003] NSWSC 314

HEARING DATE(S): 03/04/2003

JUDGMENT DATE:
17 April 2003

JURISDICTION:
EQUITY

JUDGMENT OF: Bryson J at 1

DECISION: No contract of sale, proceedings dismissed [47]

CATCHWORDS: LANDLORD and TENANT - Option and Agreement to Purchase - right of first refusal - whether offer to tenant was made - whether when made it could be withdrawn - decision on terms of lease.

LEGISLATION CITED: Conveyancing Act 1919 s.54A

CASES CITED: Prudential Assurance Co. Ltd v. Health Minders Pty Ltd [1987] 9 NSWLR 673
State Authorities Superannuation Board v. Australian Safeways Stores Pty Ltd (1988) NSW ConvR 55-423
Dorsman & Anor v. Castagna (1992) NSW ConvR 55-616

PARTIES :
Choice Services Pty Limited - Plaintiff
Gicubo Pty Limited - Defendant

FILE NUMBER(S): SC 5125 of 2002

COUNSEL: D.H. Murr S.C. - Plaintiff
F. Lever S.C. - Defendant

SOLICITORS: Nicholas G Pappas & Co. - Plaintiff
Dibbs Barker Gosling - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

THURSDAY 17 APRIL 2003

5125/02 CHOICE SERVICES P/L v. GICUBO P/L

JUDGMENT

1 HIS HONOUR: These proceedings arise out of a provision in Lease 6661410N relating to offering to sell the building to the tenant. The lease dated 28 February 2000 between the defendant Gicubo Pty Ltd as lessor and the plaintiff Choice Services Pty Ltd as lessee created a term of three years from 8 October 1999 to 7 October 2002 of dental surgery premises which are part of the building at 323 Sydney Road, Balgowlah; the building is the land in Folio Identifier 5/9335. Doctor Thomas Vui Chung Chai is a director of Choice Services; he carries on a dental practice in the leased premises and is the principal figure in Choice Services. Doctor Denzil Seldon, who also practices as a dentist, is a director of Gicubo and he is the principal figure in its affairs.

2 The lease contains provisions under the clause heading “Right of First Refusal” in cl.F in these terms:

If, during the term of this Lease, any holding-over hereunder, extension or renewal thereof the Lessor wishes to sell the building at 323 Sydney Road, Balgowlah (“The Building”) in which the premises are situate;

(a) The Lessor shall not sell or transfer to any person or corporation without first offering to sell to the Lessee the Building on contract terms and at a price to be notified in writing to the Lessee by the Lessor at which the Lessor desires to sell the same and if, within 21 days from the receipt of such offer of sale, the Lessee in writing advises the Lessor that he accepts the offer, then the Lessor shall sell the Building to the Lessee at such price and on such contract terms;

(b) In the event that the Lessee wishes to purchase the building but does not agree with the Lessor that the price notified by the Lessor in writing pursuant to the notice referred to in (a) above is the true market value of the Building, the Lessor agrees that the purchase price in the offer will be amended to the mean figure of three valuations (“the valuations”) as to the market value of the building submitted to the Lessor by the Lessee within 21 days from the receipt of the Lessor’s offer referred to in (a) above. The valuations will be carried out by three (3) independent Real Estate Valuers nominated at the request of the Lessee by the President for the time being of the Australian Institute of Valuers Inc. (NSW) (or should that institute cease to exist the President or other principal officer for the time being of such body or association as serve substantially the same objects as that Institute) and each Valuer shall be a full member of the Australian Institute of Valuers Inc. (NSW) of not less than five (5) years standing and shall hold a licence to practise as a Valuer of the kind and premises demised by this Lease. The fees and costs of the said Valuers in providing the valuations will be paid by the Lessee;

(c) If the Lessee does not accept the Lessor’s offer within the said twenty-one (21) days closing at 4.00pm on the 21st day, the Lessee will be deemed to have rejected the offer allowing the Lessor to sell or transfer the Building to any other person or corporation without notice to the Lessee on what other terms the Lessor may wish;

(d) This right of first refusal is a once only right and expires for all time after the first offer of sale from the Lessor to the Lessee.

3 The lease incorporated Memorandum W418497, in which cl.1.4 provides:

Clause headings are intended only to facilitate the reading of this document and shall be of absolutely no effect whatsoever in relation to the interpretation of this Lease or of any of the covenants expressed or implied herein.

4 A basic assumption of the evidence and the conduct of the proceedings throughout has been that Gicubo has not sold, agreed to sell or transferred the building to anybody else.

5 On 23 August 2002 Gicubo entered into a Selling Agency Agreement (Exhibit 1) with Raine & Horne Seaforth which contained instructions for the agent for the sale of the property. Exhibit 1 referred at several places to the terms of a contract, meaning a contract which was to be prepared by Gicubo’s solicitors. Exhibit 1 said that the price at which the property was to be offered was $1,000,000. It contained provisions in a standard form conferring agency authority on Raine & Horne Seaforth but as is usual, indeed almost invariable, the authority related to introducing a purchaser who subsequently entered into a binding contract, and did not extend to making a binding contract on behalf of Gicubo. Clause 5 said: “The agent is not authorised to enter into or sign a contract for sale on behalf of the Principal.” Exhibit 1 did not confer authority on Raine & Horne Seaforth to make an offer on behalf of Gicubo in such terms as to be open to creation of a binding contract by acceptance. To do so would be outside the usual or ostensible authority of a real estate selling agent. Any authority to do so must be established by evidence in these proceedings.

6 About 4 September 2002 Mr James Hopkin and Mr Guildea who were representatives of Raine & Horne Seaforth attended at the premises, and in a conversation with Dr Chai, Mr Guildea told Dr Chai that Dr Seldon had appointed Raine & Horne Seaforth his agent and had asked Raine & Horne to evaluate the rental of the property for the lease and to see if Dr Chai was interested to buy the property. Doctor Chai said to the effect that he was definitely interested but it depended on the price.

7 Mr Hopkin had a further conversation with Dr Chai about 12 September; Mr Hopkin, according to evidence of Dr Chai which is not challenged, said that he had evaluated the building to be $1,000,000 but Dr Seldon wanted $1,100,000; Dr Chai said the price was too much and asked that Dr Seldon send him a formal letter of offer. Mr Hopkin told Dr Chai “Denzil is serious this time and he is preparing a contract of sale and has signed an agency agreement with us.”

8 On 25 September 2002 Mr Hopkin on behalf of Raine & Horne Seaforth wrote a letter addressed to Mr Michael Chen at 323 Sydney Road, Balgowlah, and posted the letter by registered post. The reference to Mr Michael Chen has not been explained but it must be some mistake as no person called Mr Michael Chen has any known connection with the lease or the parties’ affairs. Omitting formal parts the letter said:

Re: Sale of 323 Sydney Road, Balgowlah

Further to our recent conversation, we confirm our listing of 323 Sydney Road for sale.

We now have an ‘Agreement for Sale of Land’ and will be soon actively marketing the property. On the direction of Denzil Seldon (Gicubo Pty Ltd), we are offering you the right of first refusal to purchase the property and as per your lease agreement. Please let us know your intention within 21 days.

The “For Sale” price is $1,100,000.

We look forward to hearing from you. Jason Guildea or myself can be contacted on 9948 2020 if you have any questions.

9 Doctor Chai received a notice from the Post Office asking him to call to collect the registered letter. He first thought that the card related to some misdirected mail, so he disregarded it. Raine & Horne rang on 30 September to ask whether he had received the letter, so he went to the Post Office and collected it, with some difficulty; the Post Office required him to show identifying material, which would have included his address. When he saw the letter he recognised it as some sort of offer to sell the property of part of which he had a lease. He assumed that the letter was intended for him, and in the evidence he agreed that on its terms he knew that it was. He obtained legal advice and then wrote a letter to Dr Seldon; his letter was dated 1 October 2002 and said:

I am writing to inform you that I have received a letter from Raine & Horne, Seaforth, dated 25/9/02. A photocopy of this letter is enclosed.

This letter is addressed to someone named Michael Chen instead of me.

My solicitor advised that you must personally or your authorized solicitor write to me stating your intention to sell the property at 323 Sydney Road, Balgowlah, 2093 and the asking price in that letter in order for me to legally exercise my right of first refusal to purchase this property, as agreed in the lease.

I will disregard the letter from Raine & Horne, Seaforth 25/9/02. as it is not addressed to me and not legally effective.

10 On 1 October 2002 Raine & Horne sent Dr Chai a letter in exactly the same terms as the letter addressed to Mr Michael Chen on 25 September. This letter was posted by registered post on 1 October and received by Dr Chen on 2 October. Before he had responded in writing he received a letter from Dr Seldon dated 2 October, but delivered on 3 October, which said:

This is to let you know that the property is currently OFF themarket. We are letting Raine & Horne, Seaforth do a property assessment, as to its development possibilities, so we can assess further lease prospects and other opportunities If the property should come back onto the market you will of course be offered your right of first refusal as per the current lease. We are still getting rent evaluations for the new lease and will let you know as soon as we can the new rental value.

11 On 9 October 2002 solicitors representing Dr Chai wrote letters to Dr Seldon and to Raine & Horne Seaforth. The letter to Dr Seldon said:

We act for Dr Thomas Chai who leases the above premises from you.

Dr Chai has handed us a copy of a letter dated 1 October 2002 addressed to him from your selling agents, Raine & Horne Seaforth copy of which is attached. The letter gives notice that the property is to be sold but offers Dr Chai right of first refusal to purchase the property 323 Sydney Road, Balgowlah pursuant to the terms of the lease and advises him that an Agreement for Sale of Land has been prepared.

Dr Chai has advised us he subsequently indicated to you, your selling agents and your Solicitor Julian Peters, that he wishes to purchase the property but does not agree with the proposed price of $1.1 million. Accordingly, pursuant to the Cl.F(b) of the lease, Dr Chai is currently obtaining 3 independent valuations of the property.

We have also been handed a copy of your letter dated 2 October 2002 and consider the withdrawal of offer not effective. Accordingly, we require you or your selling agents to forward us a copy of the Agreement for Sale of Land referred to in your agents’ letter within 48 hours; that is by 5:00pm on Friday 11 October 2002. The Contract can be mailed to our Post Office Box 12 Bondi Junction 1355 or delivered to Dr Chai’s surgery at 323 Sydney Road, Balgowlah if more convenient. We have also notified your selling agents, Raine & Horne Seaforth, of this requirement today.

12 The letter to Raine & Horne, Seaforth, was generally similar.

13 Doctor Chai did not see the Agreement for Sale of Land (which according to the terms of Raine & Horne Seaforth’s letter of 1 October 2002 the agents then had) until the hearing and did not know what was in the document.

14 Doctor Chai in the name of Choice Service followed up the procedure of obtaining three valuations and obtained valuations of $720,000, $675,000 and $650,000 the average of which is $681,667.00, which the plaintiff maintained is the price at which it is entitled to buy the property.

15 Choice Services issued a Summons commencing these proceedings on 16 October 2002 and claimed orders to these effects:

(1) A declaration that the letter of 1 October 2002 from Raine & Horne Seaforth constitutes an offer for sale to Choice Services within subcl.(a) of the Lease.

(2) A declaration that Gicubo has not validly withdrawn the offer of sale; and

(3) An order for delivery of the agreement for sale of land referred to in the letter of 1 October 2002.

16 On the first return of the Summons on 18 October the proceedings were adjourned pursuant to an arrangement between the parties recorded in these terms:

Upon the defendant, by its counsel undertaking to the Court that,

in the event that the letter referred to in subcl.(a) of Annexure A of the lease referred to therein and it is held that the offer of sale has not been validly withdrawn, the 21 day period referred to in that clause will not commence to run until the contract terms are provided by the defendant to the plaintiff

17 Issues debated at the hearing related to four topics;

(1) whether the letter from Raine & Horne Seaforth to Dr Chai dated 1 October 2002 was an offer to sell the building to Choice Services under and in accordance with cl.F subcl.(a) of the Lease;

(2) if it was, whether Gicubo could revoke the offer by the letter of 2 October 2002, delivered on 3 October 2002, and whether the letter had had that effect;

(3) logically anterior to (1) and (2), whether Raine & Horne’s letter of 1 October 2002 had been sent to Dr Chai with the authority of Gicubo;

18 It will be seen that the plaintiff Choice Services is not mentioned by name, and is not referred to indirectly in the terms of either of the letters which come under consideration as possible offers to sell the building, and was not mentioned at all in any document passing between the parties about this controversy, including the letters of demand of 9 October 2002; they all speak in terms appropriate for Dr Chai dealing with Gicubo. The first communication between the parties in which there was an assertion to the effect that Choice Services was involved or had any rights appears to have been the Summons issued on 16 October 2002.

19 I turn to make some observations on what is found in cl.F subcl.(a) and what it says about the offer. The offer spoken of is to be an offer to sell the building to the lessee, that is to Choice Services. The offer spoken of is to be an offer to sell the building to the lessee on contract terms and at a price to be notified in writing. The offer is to be notified in writing to Choice Services by Gicubo.

20 In the workings of cl.F the material dealing with the offer to sell is contained in an exception to a contractual obligation that the lessor shall not sell or transfer the building to any person or corporation. Conceivable claims for enforcement include a claim by the lessee to restrain the lessor from selling or transferring the building; in such a claim, and leaving aside questions of onus of proof, it would be the lessee’s case to establish that no offer complying with cl.F subcl.(a) had been made, and that any purported offer did not comply with cl.F subcl.(a); while it would be the lessor’s case that any offer did comply with cl.F subcl.(a). A test of whether a supposed offer complied with cl.F subcl.(a) would be to consider whether the lessor could rely on it as an answer to a claim by the lessee in that hypothetical situation. The meaning and effect of a supposed offer do not alter according to who it is who is relying on it.

21 In aid of a reading of the letter of 1 October 2002 favourable to the plaintiff’s case, senior counsel for the plaintiff referred me to the table of legal principles to be applied to resolve differences in the construction of a supposed exercise of option given in the judgment of Kirby P in Prudential Assurance Co. Ltd v. Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677. The passage is as follows:

Applicable principles governing options:

The legal principles to be applied to resolve the differences in the construction of the respondent’s letter were not in dispute. Relevantly, the include;

1. The primary rule is that the purported exercise of the option must express clearly and unequivocably the fact that this is what is intended: See Dixon CJ in Ballas v Theophilos (No 2) (ibid at 196); see also R Fox, “Options” (1950) 24 ALJ 7 at 11. However because clarity and lack of equivocation are matters of opinion and impression, because inflexible insistence on form could lead to plain injustice and because fact situations vary almost infinitely a number of elaborations of this primary rule have been developed by the courts.
2. It is not necessary, for example, for the effective exercise of that option, that terminology conforming precisely to the terms of the option should be used: see Williams J in Ballas vTheophlis (No 2) (ibid at 205): cf Gower- Chapman v Morris [1987] NSW Conv R No 55-341.
3. The appropriate question to be asked is what anybody who received the letter, subsequently said to amount to the exercise of the option, would fairly have understood by the meaning of it, in all circumstances of its receipt: cf Carter v Hyde (1923) 33 CLR 115 at 126; Adapting Romer J in Jones v Daniel [1894] 2 Ch 332 at 335. The addition by Isaacs J of the phrase “in the circumstances of its receipt”, adds instruction that the consideration which will govern the meaning to be ascribed to the letter is not to be judged in isolation weighing only the words used. It is to be judged against the background of the dealings between the parties: cf Braham v Walker (1961) 104 CLR 366 at 376 and Lamont v Heron (1970) 126 CLR 239. The parties did not dispute that this Court could look to those dealings, at least up to the time for the exercise of the option had expired.
4. Although a notice may mis-state the terms of the option which it purports to exercise, it may nevertheless amount, depending on the circumstances, to an unqualified and unconditional exercise of the option: Quadling v Robinson (1976) 137 CLR 192 at 201. On the other hand, if the grantee of the option sets out an erroneous understanding of it and then purports to exercise the option as so understood, the exercise will, generally speaking, be ineffective (ibid at 201): see also Oliver v Oliver (1958) 99 CLR 20.
5. Nonetheless, every case depends ultimately upon its own facts and the proper construction of the document in dispute. Accordingly care must be observed in laying the general rules suggested to be of inflexible operation; see Gibbs J in Quadling v Robinson (ibid at 201) and cf Hope J in Johnson v Bones (at 37).

22 The terms of the passage show that Kirby P’s attention was directed to a supposed exercise of option. The passage concludes with recognition of the difficulty of the subject. The practical problem now under consideration is far removed from the practical problem before Kirby P.

23 Counsel particularly relied on the third principle and contended that Dr Chai when he received the letter would fairly have understood its meaning, in all the circumstance of its receipt including the terms of the lease, to be that it was an offer directed to Choice Services.

24 The difficulty in the path of concluding that Dr Chen, receiving the letter of 1 October 2002 would fairly have understood the meaning of it in all the circumstances of its receipt to be that Gicubo was offering to sell the building to Choice Services is that, in the plainest way, the letter is directed to someone other than to Choice Services, that is to Dr Chai, and the letter does not mention Choice Services. To treat the letter as an offer addressed to Choice Services is to introduce an altogether fictional element into the process of construction of the letter. The letter is directed to Dr Chai, with the salutation “Dear Thomas” and continues in its terms to claim Dr Chai’s consideration and to address Dr Chai’s position – “… We are offering you the right of first refusal … Please let us know your intention … We look forward to hearing from you. … if you have any questions.”

25 What is offered is expressed in a confused way, but it is offered to Dr Chai. What is offered is “… The right of first refusal to purchase the property and as per your lease agreement.” What would be required by cl.F subcl.(a) would differ from what is found in the letter in a number of respects. Clause F subcl.(a) requires an offer to sell the building, which is at best indistinctly recognisable in the reference to an offer of “The right of first refusal to purchase the property and as per your lease agreement.” Whatever the right of first refusal is, Choice Services already had it, and offering the right of first refusal is an indication that the offer was not directed to Choice Services. An offer made under subcl.(a) would notify contract terms in writing; the letter does not do this, but says that Raine & Horne Seaforth have an “Agreement for Sale of Land” without saying what the terms were. An offer under Cl. F subcl.(a) would be directed to Choice Services; the letter plainly is not.

26 My view of the meaning of the letter when the principles referred to by Kirby P, including the third principle, are applied is as it happens borne out by the response made by Dr Chai through his solicitors; in two forcefully stated and carefully considered letters they put forward assertions about the rights arising from the letter wholly in terms of rights of Dr Chai, without mentioning Choice Services. By speaking in these terms they voiced what to my mind is the ordinary and natural understanding of the meaning of an offer directed to a named person; the offer is open to acceptance by that named person, not by anybody else. Apart from the ordinary meaning of language which supports that reading, centuries of practice in dealing with interests in real property formed around the Statute of Frauds and successor provisions such as Conveyancing Act 1919 s.54A reinforce habits of care in identifying, by name if at all possible, the parties to transactions in interests in real property. The need when one comes to enforce alleged agreements for a memorandum in writing signed by the party against whom they are to be enforced, and the need for advertence to the terms of any supposed memorandum, present themselves forcefully for consideration. The interpretation that Gicubo had entered into a binding engagement under s.54A to Choice Services by a memorandum signed on behalf of Gicubo which did not mention Choice Services, but was directed to another person, would be an impossible interpretation.

27 Other topics debated at the hearing cannot be determinative of the outcome but I will say something about them.

28 The plaintiff’s counsel contended that Dr Seldon’s letter to Dr Chai of 2 October 2002, received by Dr Chai on 3 October 2002, did not effectually operate as a withdrawal of the offer made on 1 October 2002. Although the letter of 2 October does not speak in terms of withdrawal of an offer, it communicates, in what to my mind is an entirely clear way, that any offer earlier made no longer had effect. In my opinion if the letter of 1 October 2002 should be understood as an offer to sell the building, that offer was effectually withdrawn on 3 October.

29 The substantial contention on the second topic was that the terms of cl.F produced the result that when an offer under subcl.(a) is made the lessor is disentitled from withdrawing it until the 21 days from receipt of the offer referred to in subcl.(a) has expired. Of course in plain language the words used contain no expression of any limit on the opportunity to withdraw. There is no expression in cl.F at any point of any requirement that the offer be kept open for 21 days, or of any limit on the opportunity of the lessor, having made an offer, to withdraw it before acceptance; and that is the ordinary entitlement of an offeror. In the absence of any necessary implication to the contrary which plainly arises on the whole terms of cl.F it is open to the lessor to withdraw an offer. The advantage which the terms of subcl.(a) make available to the lessor when he makes an offer is that the lessor will escape from the contractual undertaking not to sell or transfer the building, and, for the avoidance of absurdity, it must necessarily be implied in subcl.(a) that the restriction on selling or transferring the building applies unless not only an offer is made, but also the offer is kept open for 21 days or until earlier refused; an agreement under which the lessor could escape the restriction by making an offer and then withdrawing it soon afterwards would be absurd. However the absurdity is overcome completely by implying a requirement that the offer be held open for 21 days as part of the condition upon which the lessor may escape from the restriction. There is no need for the implication to extend further so as to prevent the lessor from withdrawing the offer at all; the arrangement makes perfect good sense if a lessor can make an offer, and then can withdraw it but continue to be subject to the restriction against selling or transferring the building. The period of 21 days referred to would be shortened by an express rejection of the offer.

30 Plaintiff’s counsel contended that an implication that the offer may not be withdrawn arises from the whole terms of cl.F and particularly subcl.(d). In my view on a fair reading of subcl.(d) the time at which the right of first refusal referred to in subcl.(d) expires is not after the making of the first offer of sale, but after the completion of the process related to an offer indicated by earlier provisions of cl.F; in subcl.(d) the time “after the first offer of sale” is an abbreviated reference to the process of making an offer and then waiting until the lessee advises in writing that he accepts the offer, or until the lessee rejects the offer, or until 21 days pass and the offer is deemed to be rejected. The reference in subcl.(d) to the first offer cannot be simply the making of the first offer of sale; it cannot have been intended that the lessee’s right would expire immediately after the offer was made. It would be absurd to suppose that subcl.(d) had the effect that the right expired if the process was interrupted by withdrawal of the offer; but the absurdity is overcome by an implication into subcl.(d) that the reference is to expiry after the first offer of sale from the lessor to the lessee has been fully available to the lessee.

31 The plaintiff’s counsel also contended that the reference to the right of the lessee as “This right of first refusal” in subcl.(d) produces the result that an offer once made cannot be withdrawn. Counsel referred to decisions in two earlier cases relating to generally similar rights. One was State Authorities Superannuation Board v. Australian Safeways Stores Pty Ltd (1988) NSW ConvR 55-423 in which a decision of Needham J of 24 June 1988 was affirmed. In that case cl.171 provided:

32 Clause 171 has a quite different structure to cl.F in that cl. 171 expressly confers on the lessee the right to purchase the premises if the lessee shall be desirous of selling them; and cl. 171 goes on to state the manner in which that right is to be given effect. Thereafter the notice accompanied by a form of contract which the lessor is to give, although referred to incidentally in terms appropriate for an offer, does not function as part of the ordinary contract-formation mechanism of making an offer which is open for acceptance, but operates as a step which the lessor is obliged to take in the course of giving effect to what is already established to be the right of the lessee to purchase the demised premises. Subclause (c) concludes with a statement of circumstances in which the lessor shall be at liberty to sell the premises to any other person. The reasoning of Kirby ACJ upon the terms, meaning and effect of cl. 171 revolved around the terms of the clause, and those terms initially established that the subject matter was a right of the lessee, and the notice given by the lessor was mechanism for giving effect to that right.

33 Kirby ACJ, with whom Hope AP and Clarke JA concurred, marshalled the circumstances in which and the inferences from which there could not be an unrestricted right of the lessor to withdraw once the notice had been given. When addressing the meaning of the words used in their context the first consideration marshalled by Kirby ACJ was: “First, the umbrella clause refers to what is conferred on the lessee as a ‘right to purchase’. It is not a mere opportunity or a facility, it is a ‘right’. And it is so expressed.” Kirby ACJ was of the view that the provisions of subcl.171(a) contemplated in terms that when the specific step was taken that the lessor gave notice in writing to the lessee, the lessee then had the right to purchase; and considerable attention was given to the circumstances in which that right to purchase arose. Kirby ACJ was further of the view that the language and structure of the clause suggested that the means of termination of the process indicated by the terms used in cl. 171 were intended to be the only means available. Kirby ACJ mustered a number of other considerations, and his reasoning was highly particular to the terms of cl. 171.

34 In Dorsman v. Castagna (1992) NSW ConvR 55-616 Waddell CJ in Eq. considered the terms of cl. 39 of the lease before him; cl. 39 was structured quite differently to cl. 171 in the State Authorities Superannuation Board case. Clause 39 read:

35 Clause 39 in Dorsman was markedly different to cl.F in that it expressly provided: “… the lessor shall not sell the freehold or new lease of the demised premises and lessor’s fixtures to any other person … until the expiration of the said period of twenty-one days or the receipt by the lessor of written notice from the lessee that he does not desire to accept the said offer.” There is no corresponding provision in this case. In Dorsman a decision that there was a right of the lessor to withdraw the offer could only be based on some implication which qualified this entirely explicit prohibition.

36 Waddell CJ in Eq. referred to the judgment of Needham J in State Authorities Superannuation Board; his Honour’s attention does not appear to have been drawn to the decision on appeal. His Honour commented on the difference in structure in the two provisions. Clause 39 had a feature not present in the present case nor indeed in the State Authorities Superannuation Board case, that the terms and conditions must be those offered to a prospective purchaser. Waddell CJ in Eq. did not articulate the basis of his Honour’s conclusion that “In my opinion, if the events mentioned have happened then, as a matter of contract, the lessee is at liberty to accept the offer within twenty-one days of notice of it having been received and the offer is not capable of revocation during this period” but that conclusion was little other than a restatement of what cl.39 provided for and the conclusion admitted of little in the way of supporting reasoning.

37 The clauses under consideration in both these earlier decisions were markedly different in terms and structure from the cl F now under consideration. In Dorsman there was an express prohibition against selling within 21 days. In State Authorities Superannuation Board there was an express conferral on the lessee of a right to purchase the premises, and the step to be taken by the lessor in the effectuation of that right, although referred to indirectly as if it were an offer, did not function in the general law of offer and acceptance.

38 Counsel pointed to the opening words of subcl.(d) which refer to “This right of first refusal”. In my view the reference creates no useful analogy with the State Authorities Superannuation Board decision; there a right to purchase was expressly conferred; but in the present case the opening words of subcl.(d), an ancillary provision, are a mnemonic for the position of the lessee generally and cannot serve to establish what that position is. The heading of cl.F “Right of First Refusal” has no influence on the construction of subcl(d) or any part of cl F, having regard to cl. 1.4 of Memorandum W418497.

39 Defendant’s counsel also referred me to In the matter of an application by Permanent Trustee Co. Ltd [1993] CCH Aust. and NZ Conveyancing Report 55, Dowsett J. That case related to whether, on a clause relating to pre-emption with some, although incomplete analogies with the present case, communications between the parties had in fact led to contract formation. In my view his Honour’s observations do not touch on the problems before me.

40 The references to these cases have illustrated the dependence of any decision on close consideration of the terms of the relevant document.

41 No suggestion was made that any event had happened, by the time Dr Chai received the letter of withdrawal on 3 October, under which any estoppel against withdrawing the offer arose.

42 The parties debated the topic of authority and whether Raine & Horne Seaforth had the authority of Gicubo to make the offer contained in the letter of 1 October 2002; for the purpose of this part of my consideration it must be assumed (contrary to my opinion) that that letter was an offer, was an offer made to Choice Services, and has some part in the mechanism of cl.F. The plaintiff bears the onus of proof of agency authority. The evidence offered was the evidence of Dr Chai to the effect that Dr Seldon had stated or admitted that he had instructed Raine & Horne to write the letter; the admission was said to have been made in a telephone conversation with Dr Chai. Doctor Chai was challenged in cross-examination on this subject and his adherence to his earlier evidence was not altogether firm. In his affidavit Dr Seldon denied having made that statement; he was not cross-examined on this subject. The plaintiff’s case is also supported by a more general consideration favouring regularity of proceedings; there are elements in the probabilities which favour an estate agent such as Raine & Horne not having written such a letter without authorisation. It is clear from the Sales Agency Authority that it did not confer such authority, but it could still have been conferred by some later express authorisation.

43 Exhibit 3, the dairy maintained in the office of Raine & Horne Seaforth, reads, in an entry which should be attributed to 24 September 2002 (although headed 24/8/02) what can be the only relevant instructions: “Rang Denzil regarding tenant’s First Right of Refusal. We asked if we can send a letter to the tenant asking if they would like to purchase property. This is on the understanding that the tenant can not force Denzil to sell the property. Denzil confirmed with his solicitor the First Right of Refusal was only the tenant right to buy at lessor’s price. If they did not like the price they could get 3 valuations. However Denzil did not have to sell at the average valuation price if he did not want to. They could not force him to sell. On this understand we agreed to send the tenant a letter.” A letter within the authorisation thus diarised would be a letter to the tenant asking if they would like to purchase the property, quite a different subject to an offer complying with cl.F.

44 I am not satisfied on the balance of probabilities that Dr Seldon in fact gave Raine & Horne Seaforth any authority to write the letter of 1 October, nor am I satisfied that he told Dr Chai that he had done so. I find that Raine & Horne Seaforth did not have authority from Gicubo to make such an offer to sell the property as is contemplated by cl.F. As the letter of 1 October 2002 was not directed to Choice Services, and if it had been so directed did not constitute an offer such as it is contemplated by cl.F, this finding is not determinative.

45 On the fourth topic defendant’s senior counsel presented an argument to the effect that the response made by Dr Chai to the letter of 25 September 2002 had the effect, under subcl.(d), of exhausting the rights created by cl.F. I do not accept these contentions because the letter of 25 September was not directed to Choice Services, could not be understood to be an offer to Choice Services, and hence could not have any part in the mechanism of the operation of cl.F, whether under subcl.(d) or at any other place.

46 For these reasons the proceedings should be dismissed.

47 ORDER: The proceedings are dismissed with costs.

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Last Modified: 04/22/2003

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Citations

Choice Services P/L v Gicubo P/L [2003] NSWSC 314

Most Recent Citation

R v Stenberg [2013] NSWSC 1858

Cases Citing This Decision

1

R v Stenberg [2013] NSWSC 1858

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6

Statutory Material Cited

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Ballas v Theophilos (No 2) [1957] HCA 90

Carter v Hyde [1923] HCA 36

Braham v Walker [1961] HCA 7

CITATION:	CHOICE SERVICES P/L v. GICUBO P/L [2003] NSWSC 314
HEARING DATE(S):	03/04/2003
JUDGMENT DATE:	17 April 2003
JURISDICTION:	EQUITY
JUDGMENT OF:	Bryson J at 1
DECISION:	No contract of sale, proceedings dismissed [47]
CATCHWORDS:	LANDLORD and TENANT - Option and Agreement to Purchase - right of first refusal - whether offer to tenant was made - whether when made it could be withdrawn - decision on terms of lease.
LEGISLATION CITED:	Conveyancing Act 1919 s.54A
CASES CITED:	Prudential Assurance Co. Ltd v. Health Minders Pty Ltd [1987] 9 NSWLR 673 State Authorities Superannuation Board v. Australian Safeways Stores Pty Ltd (1988) NSW ConvR 55-423 Dorsman & Anor v. Castagna (1992) NSW ConvR 55-616
PARTIES :	Choice Services Pty Limited - Plaintiff Gicubo Pty Limited - Defendant
FILE NUMBER(S):	SC 5125 of 2002
COUNSEL:	D.H. Murr S.C. - Plaintiff F. Lever S.C. - Defendant
SOLICITORS:	Nicholas G Pappas & Co. - Plaintiff Dibbs Barker Gosling - Defendant