Ferrall Nominees Pty Ltd ACN 008 924 338 as Trustee for the B F TWADDLE Family Trust v Kidd Nominees Pty Ltd ACN 008 809 069 as Trustee for the Pill Superannuation Fund
[2004] WASC 155
•8 JULY 2004
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FERRALL NOMINEES PTY LTD ACN 008 924 338 as Trustee for the B F TWADDLE FAMILY TRUST v KIDD NOMINEES PTY LTD ACN 008 809 069 as Trustee for the PILL SUPERANNUATION FUND [2004] WASC 155
CORAM: MASTER SANDERSON
HEARD: 24 JUNE 2004
DELIVERED : 8 JULY 2004
FILE NO/S: CIV 1400 of 2004
BETWEEN: FERRALL NOMINEES PTY LTD ACN 008 924 338 as Trustee for the B F TWADDLE FAMILY TRUST
Plaintiff
AND
KIDD NOMINEES PTY LTD ACN 008 809 069 as Trustee for the PILL SUPERANNUATION FUND
Defendant
Catchwords:
Practice and procedure - Application to stay proceedings pending an arbitration - Whether arbitration provision of lease activated - Turns on own facts
Legislation:
Nil
Result:
Application for stay refused
Category: B
Representation:
Counsel:
Plaintiff: Mr D F Beere
Defendant: Mr I A Morison
Solicitors:
Plaintiff: Beere May & Meyer
Defendant: Michael J Hain
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Brunswick NL v Sam Graham Nominees Pty Ltd (1990) 2 WAR 207
Hammond v Wolt (1975) VR 108
Hampton Ores Australia Ltd v Boral Resources WA, unreported; SCt of WA; Library No 9503696; 20 June 1995
Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314
Paparone v Konstruct Holdings Pty Ltd, unreported; FCt SCt of WA; Library No 970209; 19 May 1997
MASTER SANDERSON: This is the defendant's application for a permanent stay of the proceedings. The application is brought under s 53 of the Commercial Arbitration Act 1985 ("the Act"). The defendant says that there is no sufficient reason why the matter in dispute should not be referred to arbitration and further that it (the defendant) was at all times, both before and since the proceedings were commenced, ready and willing to do all things necessary for the proper conduct of the arbitration.
The application arises in the context of a dispute between the plaintiff and the defendant as to the proper meaning of an option to purchase contained in the lease agreement. The facts are not in dispute. They can be summarised in the following way. The defendant is the registered proprietor of certain premises defined in the statement of claim (par 3) as the "the Demised Premises". By lease dated 2 June 1998 the defendant granted and the plaintiff took a lease of the Demised Premises for a period of 10 years, commencing on 10 August 1998. See affidavit of Dennis Frank Beere, sworn 24 May 2004, exhibit "A". Schedule Item 10(a) of the lease contained a first right of refusal. In essence, it required the defendant as lessor, if it decided to sell the Demised Premises to offer them first to the plaintiff. Pursuant to this right of first refusal, the defendant's solicitor wrote to the plaintiff offering to sell the Demised Premises at a sale price of $1,500,000.
The lease also contained the following Schedule Item 10(c). (Because of the importance of this clause will quote it in full):
"(c) Option to purchase
(1)If at any time after the expiration of the first 4 years of the Term or, if the Term is extended or renewed, during any extended or renewed term, the Tenant wishes to buy the Premises, the Tenant is to notify the Landlord in writing by registered post (Offer) of the proposed purchase price and of the other terms and conditions on which the Tenant proposes to buy the Premises.
(2)If:
(A)the purchase price in the Offer is equal to, or greater than the average of, 3 valuations of the market value of the Premises given by qualified valuers who are also members of the Institute of Valuers; and
(B)the Offer does not contain any unreasonable terms or conditions
then the Landlord is to give to the Tenant within 15 Business Days of receipt of the Offer written notice of his acceptance of the Offer.
(3)If the Landlord considers that the purchase price is less than that specified in sub‑clause 2(A) above or that any terms or conditions contained in the Offer are unreasonable, within 15 Business Days of receiving the Offer, the Landlord is to give written notice to the Tenant specifying:
(A)the purchase price which the Landlord considers is the market value of the Premises as at the date of the Offer; and/or
(B)specify all reasons or circumstances which render any terms or conditions contained in the Offer unreasonable.
(4)If the Landlord fails to respond to the Offer within the period of 15 Business Days of the giving of the Offer, the Landlord is to be regarded as having accepted the Offer.
(5)If the Landlord gives the Tenant a notice referred to in sub‑clause (3) above, the parties are to meet within 5 days thereafter with a view to reaching an agreement on the purchase price and/or terms and conditions of the purchase of the Premises.
(6)If the parties are unable to reach an agreement on a purchase price or terms and conditions of the purchase of the Premises within that time, either party within 10 Business Days thereafter is to refer the dispute to an arbitrator appointed by the President for the time being of the Institute of Valuers who shall determine the issues in dispute in accordance with the provisions of the Commercial Arbitration Act. Either party may be represented by lawyers in the arbitration. The costs of the arbitration shall be in the discretion of the arbitrator.
(7)If the Tenant determines for any reason that it does not wish to proceed with the purchase price of the Premises at any stage of the proceedings, including after any decision by the arbitrator, the Tenant shall not be required to proceed with the purchase of the Premises on the terms proposed by the arbitrator or the Landlord and shall not lose any right of first refusal contained in this Lease."
In February 2004 the plaintiff obtained three valuations from three qualified valuers who were members of the Institute of Valuers, as to the market value of the Demised Premises. The average of these three valuations was $1,087,333.30. By letter dated 3 March 2004 the plaintiff offered to buy the demised premises for a price of $1,087,400. The defendant has not accepted that offer, insisting that it is significantly below market value.
It is worth pausing at this point to consider the regime that is contained in Schedule Item10(c). It is not suggested by the defendant that the plaintiff is not entitled to trigger the option to purchase contained in subcl (1). That has been done by the letter of 3 March 2004. The plaintiff has obtained three valuations "of the market value of the Premises" and each has been given by a qualified valuer. It is not suggested that the offer made by the plaintiff contained any unreasonable terms. It is the plaintiff's position, then, that the defendant is required to accept the offer. That is to say, no matter what view the defendant may take of the market value of the premises, it is required to accept any offer put to it which complies with the provisions of subcl (2)(A). It is the plaintiff's position that subcl (3) only comes into effect if the offer is less than the average of three valuations of the market valuation of the premises, or if the offer contained unreasonable terms. That being the case, there is no basis for the operation either of subcl (5) or the arbitration provisions of subcl (6).
The defendant takes a different view. It says that on any proper reading of subcl (3), if the defendant considers that the price offered by the plaintiff is less than the market value, then the defendant can reject the offer, triggering the provisions of subcl (5) and eventually, (6). It is said that to construe Schedule Item 10(c) any other way is a nonsense. It would mean that the provisions of subcl (3) would only be activated if there was a mathematical error. Then, in the case of such an error, the comparatively elaborate provisions of subcl (5) and (6) would be activated. That, it is said, is inconsistent with the scheme of the clause.
It is clear that for the defendant's argument to succeed, it will be necessary to add something to subcl (3). In other words, it must either be the case that words have been inadvertently omitted, or something more is to be implied into subcl (3). Counsel for the defendant acknowledged as much during the course of his submissions. Counsel also submitted that it was open to the defendant to argue that the valuations of obtained by the plaintiff and used for the purposes of subcl (2)(A) were not, properly considered, "valuations of the market value of the premises". Once again, that submission appears to require the addition of some words to the subclause. For instance it may be necessary to include in the clause the word "proper" or "reasonable" before the word "valuations". But if such words are to be added, it will be necessary for the defendant to establish a basis upon which the clause can be varied.
Once the matter is put that way, it seems to me that this is not a case where I should stay the proceeding. To do so I would have to conclude that the defendant's argument is to be accepted. That is to say, that subcl (2) and (3) are to be read in a way contended for by the defendant. I am not in a position to make that assessment. It is a matter which must await trial. To adapt the principles applicable to summary judgment applications, I am satisfied that the plaintiff has a reasonably arguable case.
There is a further, perhaps collateral, reason why I would not stay this action. If the defendant's argument as to subcl (2)(A) is correct - that is to say, that the valuations obtained by the plaintiff must be "proper" or "reasonable" - and the valuations are found not to conform with this requirement, then there is no offer by the plaintiff to the defendant. That would mean that the arbitration provision in subcl (6) would not be activated. In other words, the issue of the meaning and content of subcl (2) must be determined before any arbitration can take place.
For these reasons I would dismiss the defendant's application. I will hear the parties as to the form of orders and as to costs.
0
0
1