Foster v Archer

[2012] TASFC 4

[2012] TASFC 4

COURT:  SUPREME COURT OF TASMANIA (FULL COURT)

CITATION:                 Foster v Archer [2012] TASFC 4

PARTIES:  FOSTER, Robert John
  v
  ARCHER, Geoffrey Lyndon
  by his litigation guardian
  ARCHER, Pamela Ann

FILE NO:  215/2012
JUDGMENT

APPEALED FROM:  Foster v Archer [2012] TASSC 5

DELIVERED ON:  20 November 2012
DELIVERED AT:  Hobart
HEARING DATE:  22 August 2012
JUDGMENT OF:  Crawford CJ, Tennent and Porter JJ

CATCHWORDS:

Conveyancing – Options – Notice exercising option – Validity of exercise of option – Means of service of notice – Sufficiency of notice – Interpretation of provisions of agreement granting option to purchase.

Aust Dig Conveyancing [1008]

REPRESENTATION:

Counsel:
             Appellant:  P Santamaria SC, W A Ayliffe
             Respondent:  D J Barclay
Solicitors:
             Appellant:  Baker Wilson Lawyers
             Respondent:  Page Seager

Judgment Number:  [2012] TASSC 4
Number of paragraphs:  63

Serial No 4/2012
File No 215/2012

ROBERT JOHN FOSTER v GEOFFREY LYNDON ARCHER
BY HIS LITIGATION GUARDIAN PAMELA ANN ARCHER

REASONS FOR JUDGMENT  FULL COURT

CRAWFORD CJ (Dissenting in part)
TENNENT J
PORTER J
20 November 2012

Orders of the Court

1. Appeal allowed.

2. Cross-appeal dismissed.

3. Judgment set aside.

Serial No 4/2012
File No 215/2012

ROBERT JOHN FOSTER v GEOFFREY LYNDON ARCHER
BY HIS LITIGATION GUARDIAN PAMELA ANN ARCHER

REASONS FOR JUDGMENT  FULL COURT

CRAWFORD CJ
20 November 2012

1. The action, appeal and cross-appeal concern an agreement for an option for the appellant and Garry Raymond Forward to purchase properties in Elizabeth Street, Hobart from the respondent for $3.3m.  The appellant contends that he exercised the option.  The respondent contends that the purported exercise of the option was ineffective. 

1. The appellant sued for specific performance of the sale contract he claimed had been entered into as a result of his exercise of the option, and he also claimed damages for breach of contract.  In the action, it was ordered that the question of whether the appellant validly exercised the option was to be determined before any other issue in the action. 

1. Blow J conducted a trial of that issue alone.  His Honour determined that the appellant's exercise of the option was not valid.  Foster v Archer [2012] TASSC 5. The respondent obtained a judgment dismissing the appellant's action.

1. The appellant appealed to this Court.  The respondent cross-appealed against a determination of the learned judge, but not against the outcome of the action.  Put simply, the ultimate question for this Court is whether the learned judge was correct in determining that the appellant did not validly exercise the option. 

1. The option agreement was made on 14 May 2009.  It was entitled "Call Option".  In consideration of a payment of $1, the respondent granted an option to the grantees, the appellant and Mr Forward, to purchase the properties in accordance with the option agreement and a sale agreement that was attached to it. 

1. By cl 3.1, the grantees had until 5pm on the "Call Option Expiry Date" to exercise the option.  Time was declared to be of the essence for the exercise of the option and the option was to lapse if it was not exercised by that time.  The learned judge found that time expired at 5pm on 12 August 2009.  Neither party challenges that finding.  It is the appellant's case that the option was exercised on that day and before 5pm.  It is the respondent's case that although the events relied upon by the appellant occurred on that day and before 5pm, they did not amount to a valid exercise of the option.

The appeal

1. The learned judge found that the written notice of exercise of the option relied upon by the appellant was not delivered as required by the agreement and therefore the option was not validly exercised.  It was delivered to the office of the respondent's solicitors, Page Seager.  His Honour held that cl 4.2(a) of the option agreement required it to be delivered to the respondent's address at 306 Sandy Bay Road, Sandy Bay.  That determination is attacked by the appellant.

1. The appellant's notice purporting to exercise the option was in writing.  It did not expressly state that it was being exercised on behalf of both the appellant and Mr Forward, and although it was signed by the appellant, it was not signed by Mr Forward.  The cross-appeal raises an issue arising out of those aspects and I will deal with it later.

1. On 12 August 2009, the appellant believed that the option agreement would expire if the appropriate notice was not served by 5pm that day; that leaving the notice at 306 Sandy Bay Road in accordance with cl 11.1 was an appropriate method of service; that it had to be accompanied by a bank cheque for the amount of the deposit in accordance with cl 4.2(d); and that the deposit specified in the sale agreement was $30,000.  He contacted his bank to arrange for the issue of the required bank cheque, and instructed an employee of his named Sparks to collect the bank cheque and deliver it and the notice to 306 Sandy Bay Road.  However, after he put those arrangements in place, someone from the bank telephoned to say that the signatories for bank cheques were absent, and that the bank cheque could not be issued until later in the day.  As a result, the appellant told Mr Sparks to deliver the notice to 306 Sandy Bay Road without the bank cheque.  Mr Sparks went to that address.  The front gates were locked and he could not gain access to the property.  He did not make contact with anyone inside.  He left the notice in the letter box.  That would have been sufficient notice if the bank cheque had been with it, but it was not.  Counsel for the appellant conceded to the learned judge that the delivery of the notice to 306 Sandy Bay Road was of no effect for that reason. 

1. The appellant obtained the bank cheque once the required signatories became available.  He printed and signed another copy of the notice, identical to the one delivered to 306 Sandy Bay Road.  He delivered it and the bank cheque to the office of the respondent's solicitors, Page Seager, at about 2.44pm on 12 August 2009. 

1. I will quote the material clauses of the option agreement.  I will leave in the headings of the clauses for the convenience of readers.  However, cl 1.3(a) provided that headings do not affect the interpretation of the option agreement.  The material clauses are:

"1.       Definitions and interpretation

1.1      Definitions

In this Agreement, unless the context otherwise requires:

…

Notice means a notice or other communication for the purposes of this Agreement.

…

4.        Exercise of Call Option

4.1      Procedure

If the Grantee wishes to exercise the Call Option it must give notice (Call Option Exercise Notice) in writing to the Grantor exercising the Call Option and that notice must be given to the Grantor before 5.00 pm on the Call Option Expiry Date.

4.2      Call Option Exercise Notice requirements

A Call Option Exercise Notice:

(a)       must be delivered to the Grantor's address for the receiving of Notices;

(b)       must state that it is a Call Option Exercise Notice;

(c)       must be given on a Business Day during normal business hours;

(d)must be accompanied by a bank cheque for the amount of the Deposit (less any credit for the Call Option Fee); and

(e)       subject to this clause 4.2, must otherwise comply with clause 11.

…

11.      Notices

11.1     Place for giving Notice

Subject to clause 11.2, the addresses and facsimile numbers of the parties for the service of any Notice are as set out below or as specified from time to time by the party receiving the Notice to the party giving the Notice.

Grantor:         306 Sandy Bay Road, Sandy Bay in Tasmania

Grantee:         83 Salamanca Place Hobart in Tasmania

11.2     Service of Notices by and on lawyer

The lawyer for a party may give a Notice on behalf of the party for whom the lawyer acts.  A Notice that is given to the lawyer for a party is taken to have been given to that party.

11.3     Service of Notices

A Notice may be served by: delivering it by hand to the addressee; leaving it at the addressee's address for service; sending it by facsimile transmission to the addressee's facsimile number; or sending it by prepaid ordinary post to the addressee's address for service.

11.4     Date of receipt of Notices

A Notice is deemed to have been received by the intended addressee:

(a)if hand delivered to the addressee, when delivered to the addressee;

(b)if left at the addressee's address for service, when left;

(c)if sent by facsimile transmission to the addressee's facsimile number (provided that the sending facsimile machine produces a print out of the time, date and uninterrupted transmission record of the sending of the Notice), upon completion of sending;

(d)if sent by post to the addressee's address for service on the fifth Business Day after the day of posting.

11.5Notice requirements

A Notice must be in legible writing in the English language.  The execution of a Notice is effective in the case of any party that is a corporation, if it is signed by a director or secretary of that party.  A printed or copied signature is sufficient for the purposes of sending any Notice by facsimile transmission.

11.6     Other modes of service

Nothing in this Agreement prejudices or excludes any other mode or place of service required, permitted or authorised by an applicable law."

1. The appellant's contention is that the notice and cheque delivered to the respondent's solicitors amounted to effective service by reason of cl 11.2 of the option agreement.  The learned judge observed that the second sentence of that clause in isolation might give the impression that notice to the legal firm was sufficient for it provided that "A Notice that is given to the lawyer for the party is taken to have been given to that party".  Nevertheless, his Honour found against the appellant for reasons that are attacked by the appeal.  The reasons were:

"[30]     But cl 11 is a provision that relates to notices in general, whereas cl 4.2 is a specific provision in relation to a Call Option Exercise Notice.  Generalia specialibus non derogant.  General things do not derogate from special things.  Clause 4.2(a) requires a Call Option Exercise Notice to be 'delivered to the Grantor's address for the receiving of Notices', and that was his home address, as specified in cl 11.1.  Clause 4.2 listed four specific requirements relating to a Call Option Exercise Notice, and then went on to provide, in par(e), that such a notice 'subject to this clause 4.2, must otherwise comply with clause 11'.  Paragraph (e) must have been put there for a purpose.  Its purpose must have been to give cl 4.2(a) to (d) precedence over any inconsistent provisions in cl 11.  It follows that, although notices in general could be given, for the purposes of the agreement, by giving them to a party's lawyer in accordance with cl 11.2, that requirement was superseded by the specific provision in cl 4.2(a) in relation to a Call Option Exercise Notice, which could only be validly given if it was delivered to 'the Grantor's address for the receiving of Notices'.

[31]     This interpretation would not result in cl 11 not having any effect.  In cl 1.1, 'Notice' was defined to mean 'a notice or other communication for the purposes of this Agreement'. The agreement imposed a number of obligations that could have resulted in a need for one party to give notice to the other, or to write to the other.  Under cl 7.3, the defendant was obliged to assist the grantees in making any application to a Government body in relation to the proposed use or development of the property, including an application for a development approval, a planning permit, and/or an approval to carry out works.  Clause 7.3 also required him to provide information, within limits, in connection with such an application.  Clause 8 required him to provide the grantees with reasonable access to the property 'on reasonable notice in writing' for certain purposes. 

[32]     I therefore hold that cl 11.2 did not apply to the service of a Call Option Exercise Notice because it was superseded by cl 4.2(a).  The only effective manner of serving a Call Option Exercise Notice was to deliver it to the defendant's 'address for the receiving of Notices'.  The notice delivered to that address was ineffective because it was not accompanied by a bank cheque.  The notice delivered to the solicitors' office was ineffective because it was not delivered to the correct address.  It follows that the option was not validly exercised."

1. Counsel for both parties agreed that it is settled law that an option for the purchase of property must be exercised strictly in accordance with its terms.  Hare v Nicoll [1966] 2 QB 130 at 141, 148; United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 WLR 74 at 81; Holwell Securities Ltd v Hughes [1974] 1 WLR 155 at 159; McLachlan-Troup v Peters [1983] VR 53 at 63.

1. It was accepted by counsel for the appellant that for the purposes of cl 4.2(a), the "Grantor's address for the receiving of Notices" was the address specified in cl 11.1.  However, it was submitted that cl 11.1 had to be read in its entirety and that its opening words, "Subject to clause 11.2", meant what they said and had to be given full and equal weight.  It was submitted that in the light of what was stated in cl 11.2, a Call Option Exercise Notice could be served validly either by delivering it to the respondent's address stated in cl 11.1 or by delivering it to the respondent's lawyer in accordance with cl 11.2. 

1. My first impression was that there was merit in that submission and that the learned judge must have overlooked the opening words of cl 11.1.  Certainly, he did not mention them.  However, after further thought, I have concluded that his Honour was correct in his conclusion. 

1. Clause 4.2(a) was imperative in its requirement that the Call Option Exercise Notice had to be delivered to the Grantor's address for the receiving of Notices.  But cl 4.2(a) did not require compliance with cl 11.1.  If it had done so, there would be merit in the submission of the appellant's counsel that all of what it said had to be given full and equal weight.  What cl 4.2(a) required by the use of the word "must" was that the notice in question had to be delivered to the respondent's address, which was to be found in cl 11.1. 

1. Clause 11.2 did not specify the address of the respondent's lawyer or any other address.  It's authority that notices to which it applied could be given to a party's lawyer was authority to give it to a person or persons, whoever came within the description of the party's lawyer.  Delivery to that lawyer's address might have complied with it, but delivery to the lawyer personally wherever he or she might have been at the time of delivery, whether at the lawyer's address or not, would also have complied with cl 11.2. 

1. Where a contract prescribes a procedure to be followed in dealing with a particular subject matter, it implies that the subject matter is not to be dealt with otherwise than in accordance with the procedure prescribed.  In ABB Power Plants Ltd v Electricity Commission (NSW) (1985) 35 NSWLR 596 at 599, Handley JA said: "It has long been established that contractual or statutory provisions prescribing in positive terms a procedure to be followed necessarily imply that the same matter will not be dealt with under a different procedure. In King v Wallis (1949) 78 CLR 529 at 550, Dixon J said: 'This accords with the general principles of interpretation embodied in the maxim expressum facit cessare tacitum and in the proposition that an enactment in affirmative words appointing a course to be followed usually may be understood as importing a negative, namely, that the same matter is not to be done according to some other course.'"  Approval for that proposition is to be found in PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 per Toohey and Gummow JJ at 321 – 322. In Saraswati v R (1991) 172 CLR 1 at 23, when dealing with a statute, McHugh J said that there "is the rule that, when a statute specifically deals with a matter and makes it the subject of a condition or limitation, it excludes the right to use a general provision in the same statute to avoid that condition or limitation." Toohey J agreed at 16.

1. With respect, I generally agree with what was said by the learned judge about the matter.  I would dismiss the appeal. 

The cross-appeal

1. If I am correct in my determination of the appeal, the outcome of the action will not be affected by the outcome of the cross-appeal.  Nevertheless, I will deal with it.

1. The option was granted to the appellant and Mr Forward.  The option agreement was signed by both of them.  Counsel for the respondent submitted to the learned judge and to this Court that the notice purportedly exercising the option was defective and inoperative because:

·     it was not signed by Mr Forward, but was signed by the appellant alone, and under his signature was printed "Robert J Foster";

·     at the top of the notice, there was a letterhead which read as follows:

"Waratah Park trading as
R & K Foster Partnership
Australian SuperFine Merino

ABN: 97669433590"

·     the text of the notice did not state with precision who was purporting to exercise the option, but read as follows:

"Persuant [sic] to the call option granted over the properties owned by Geoffrey Lyndon Archer with reference to Clause 4.2 and Clause 11 of the Call option we hereby provide the Call Option Exercise Notice."

·     there was no mention of Mr Forward in the notice; and

·     the notice did not state to whom the word "we" referred.

1. The appellant contended that the notice was given by him on behalf of Mr Forward and himself, and that the word "we" in the text of the notice clearly referred to both of them – the two grantees – and not to anyone else.  The learned judge agreed that the notice was given on behalf of both the appellant and Mr Forward, that its recipient would fairly have understood its meaning to be that those two men were exercising the option granted to them by the respondent; and therefore that the notice was not defective in form.  In its terms, the sole ground of the cross-appeal only attacks the determination that the recipient of the notice would have understood that meaning, for Page Seager received the notice and not the respondent, the point made being that the question that needed to be determined concerned what the respondent would have understood to be the meaning of the notice, and not what Page Seager would have understood.  However, the cross-appeal was argued on a broader basis than that and no point was taken by the appellant concerning inadequacies in the ground.

1. To consider the cross-appeal, it is necessary to state some additional evidence.  Relevant to the letterhead on the notice, the appellant's unchallenged evidence was that he and his wife carried on business in partnership using the names "R & K Foster Partnership" and "Waratah Park".  It was also his evidence that they used another letterhead bearing the words "WARATAH DEVELOPMENTS BUILDERS & DEVELOPERS" with the same ABN number. 

1. Mr Forward made arrangements with the appellant in July 2009 to reduce his involvement in the project they had been planning for the properties in question.  The appellant was a developer and Mr Forward was an architect.  They had signed the option agreement as equals.  Subject to the availability of funding, they proposed to acquire the respondent's properties and develop them.  But, after signing the option agreement, Mr Forward began negotiations with a view to ceasing to be a principal or director in his architectural practice, and continuing as a consultant.  As a result, he proposed to the appellant that he should reduce his involvement in their project; that he should charge his services as an architect, contrary to their earlier arrangement; and that he should continue to contribute, without charge, by liaising with relevant authorities as to the use of heritage buildings.  The appellant was agreeable. 

1. Their new arrangement was documented in the form of a letter from Mr Forward to the appellant dated 28 July 2009, which the appellant signed the following day for the purpose of agreeing to its terms.  In summary it provided that in consideration of one apartment being transferred to Mr Forward, at no cost, at the end of the project, he relinquished his direct and financial involvement in the purchase of the properties and their subsequent development.  It was agreed that the letter they both signed would be a "Heads of Agreement" and that afterwards they would determine which apartment was to be identified together with any other details of their transaction.

1. The learned judge determined that as the jointly signed letter did not purport to effect an assignment of Mr Forward's interest as grantee, and as an assignment was not a necessary consequence of the implementation of their agreement, the agreement did not in fact effect an assignment of Mr Forward's interest to the appellant.  For those reasons, the learned judge found that Mr Forward remained a grantee at the time of the purported exercise of the option.

1. As noted earlier, Page Seager were acting for the respondent.  Based on the following information, it may be inferred that the firm was instructed to act for the respondent concerning a  possible exercise of the option by the appellant and Mr Forward.  At about 4.15 pm on 10 August 2009, Mr Crisp of that firm telephoned the appellant and left an answering machine message for him in which firstly, he suggested that the appellant contact his solicitor "about the Archer option"; secondly, he asserted that on one view there was no option to be exercised; thirdly, he stated that if there was an option it was arguable that it was exercisable by 5.00 pm that night; and fourthly, he added that it was only on the most favourable view of the documentation that the option was available to be exercised by 5.00 pm on 13 August.  Mr Crisp left his telephone number. 

1. The appellant's evidence, which was not contradicted, was that on the following day, 11 August, he spoke to Mr Crisp and told him that he and Mr Forward intended to exercise the option and Mr Crisp responded that he was awaiting instructions from the respondent. 

1. On the afternoon of 12 August, Mr Crisp sent the appellant's solicitor an email in which he said, "… on a number of occasions in the past 24 hours Foster [the appellant] had said, to me included, it was his and his partner's intention to exercise what he said was an option they held …".  The learned judge interpreted the words "his partner" to be a reference to Mr Forward, and that interpretation is not attacked by the respondent.  The learned judge found that Mr Forward was the appellant's "partner" in the sense of being the co-grantee of the option.  His Honour made the point that there was no evidence of any suggestion that the appellant's wife had an interest in the option by assignment or otherwise.  His Honour concluded that there was no reason why the appellant would have referred to his wife as his "partner", even though they had a partnership.  His Honour stated that it was his assessment of the appellant "that he is not the sort of sensitive new age developer who would have referred to his spouse as his partner, rather than as his wife".

1. In concluding that the notice exercising the option was, and would have been understood to mean that it was, written on behalf of the appellant and Mr Forward and therefore not defective in form, the learned judge gave the following reasons:

"[24]     The plaintiff is not a lawyer.  Non-lawyers are sometimes sloppy in their use of letterheads, and in what they write.  Making allowance for that fact, I think it must have been clear to the recipient of the notice, ie the legal firm Page Seager, that it was intended to be an exercise of the option granted by the defendant, not by the plaintiff alone, and not by the plaintiff on behalf of himself and his wife, but by the plaintiff acting on behalf of himself and Mr Forward.  It would have been a good idea if the notice had not included the letterhead referring to 'Waratah Park trading as R & K Foster Partnership'; and if it had expressly stated that it was given by the plaintiff on behalf of Mr Forward and himself, or that the two of them were exercising the option.  In fact it would have been a good idea if the plaintiff, having already engaged a solicitor to act in relation to a proposed $3.3 million transaction, had instructed her to draw the notice.  However, for the reasons stated, I am satisfied that the notice was given on behalf of both the plaintiff and Mr Forward; that its recipient would fairly have understood its meaning to be that those two men were exercising the option granted to them by the defendant; and that it was not therefore defective in form."

1. It was submitted by counsel for the respondent that the learned judge was in error when he considered what the respondent's lawyers would have thought about the identity of the persons who purportedly had exercised the option.  The question, he submitted, was what the respondent would have thought.    

1. It was also submitted by counsel for the respondent that the literal meaning of the notice exercising the option revealed that it was being exercised on behalf of Waratah Park trading as R & K Foster Partnership, for that was on the letterhead on the notice and it was signed only by the respondent and not by Mr Forward.  There was nothing in it to indicate that the "we" to whom it referred as exercising the option were the respondent and Mr Forward. 

1. Both counsel accepted that as the learned judge said, in order for the delivery of the notice to constitute a valid exercise of the option, it had to express clearly and unequivocally the fact that that was what was intended.  Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 196. The appropriate question to be asked is what anybody who received the notice would fairly have understood to be the meaning of it, in all the circumstances of its receipt. Carter v Hyde (1923) 33 CLR 115 at 126; Ballas v Theophilos (No 2) (supra) at 210. The meaning 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. Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677, 681.

1. The respondent and his solicitor, Mr Crisp, must have known that the option was only exercisable by the appellant and Mr Forward and that it was not exercisable by the appellant alone or by the appellant and someone other than Mr Forward.  Mr Crisp had been told by the appellant that he and Mr Forward intended to exercise the option.  Mr Crisp was acting for the respondent in connection with the possible exercise of the option.  It should be concluded that Mr Crisp's knowledge of what had been said to him by the appellant was the respondent's knowledge also.  It is a basic principle of the law of principal and agent that where, in the course of a transaction in which an agent is employed on a principal's behalf, the agent acquires knowledge or receives notice of any fact material to the transaction, under circumstances where it is the agent's duty to communicate it to the principal, the principal may be taken to have received or known it.  See Halsbury's Laws of Australia, Agency par[15-285] and the cases cited. 

1. In all the circumstances, it should be found that the respondent would have understood that the option was being exercised by the appellant and Mr Forward and the notice was not defective.  The learned judge did not err when he found that the notice was not defective in form. 

1. For these reasons, I would dismiss the cross-appeal. 

   File No 215/2012

ROBERT JOHN FOSTER v GEOFFREY LYNDON ARCHER
BY HIS LITIGATION GUARDIAN PAMELA ANN ARCHER

REASONS FOR JUDGMENT  FULL COURT

TENNENT J
20 November 2012

1. I have had the benefit of reading in draft form the reasons of Crawford CJ. With respect, while I agree with his conclusions in respect of the cross-appeal and would also dismiss that appeal, I do not agree, for the reasons which follow, with his conclusions in respect of the validity of service of the Call Option Exercise Notice.

1. For the purpose of my reasons, I accept the matters outlined by Crawford CJ in pars[1] to [14] and [18] of his reasons and do not repeat them.

1. Clause 4 of the Call Option agreement to purchase land  ("the Agreement") deals with the exercise of the call option. Clause 4.1 requires the giving of what is called a Call Option Exercise Notice. Such a notice is referred to in the definition section of the relevant agreement, but that does no more than say it is a notice provided for in cl 4.1. The term "Notice" is defined in the Agreement to mean "a notice or other communication for the purpose of this Agreement". It must follow that a Call Option Exercise Notice is a Notice for the purpose of the Agreement and, subject to any other specific provision relating to such a notice, cl 11 applies.

1. Clause 4.2 deals with the requirements to be met in relation to a Call Option Exercise Notice. There are five requirements, and all are expressed to be mandatory. Clause 4.2(a) provides that the relevant notice "must be delivered to the Grantor's address for the receiving of Notices". There is no definition in the Agreement of the phrase, "the Grantor's address for the receiving of Notices". There is no such address for the grantor set out in cl 4. Instead, recourse must be had to cl 11.1 to find an address for the grantor, and, even then, it is not defined as "the Grantor's address for the receiving of Notices". Clause 11.1 provides:

"Subject to clause 11.2, the addresses and facsimile numbers of the parties for the service of any Notice are set out below."

The grantor's home address then appears.

1. Clause 4.2(e) provides that, subject to cl 4.2 generally, any notice must "otherwise comply with clause 11". Were cl 4 to contain the grantor's address, it would be clear that the clause was self-contained, and that no regard would need to be paid to cl 11, save in relation to any other aspect of service not inconsistent with cl 4.2. However it is not and, as is obvious, recourse is needed to cl 11 to find an address for the grantor. As cl 11.1, where the grantor's address is found, is stated to be subject to cl 11.2, it is difficult in my view to see how both cl 11.1 and 11.2 should not be considered for the purpose of determining what is and what is not valid service. Clause 11.2 relevantly provides:

"A Notice that is given to the lawyer for a party is taken to have been given to that party."

In the present case the evidence was that a notice and bank cheque were given to the respondent's lawyer.

1. Blow J took the view that the purpose of cl 4.2(e) was to give cl 4.2(a) to (d) precedence over any inconsistent provisions in cl 11. In principle, I agree with that statement. However, I do not agree that there is an inconsistency between cl 4.2(a) and cl 11 insofar as they relate to service of notices. They are in my view complimentary. Were, as I have already said, the grantor's address to have appeared in cl 4, or were there to be a definition of the term "the Grantor's address for the receiving of Notices", there would be no doubt that cl 4.2(a) would prevail because regard would not need to be had to cl 11 for the purpose of finding an address, and the opening words of cl 11.1 would not come into play. In this case however, there is no alternative but to have regard to cl 11 to find an address and, in my view, that means regard must be had to the opening words.

1. There are a number of other aspects of cl 11. If any of those produced an inconsistency with cl 4.2, then cl 4.2 would prevail in respect of that inconsistency.

1. I am of the view that service on the respondent's lawyer was effective service. I would allow the appellant's appeal.

File No 215/2012

ROBERT JOHN FOSTER v GEOFFREY LYNDON ARCHER
BY HIS LITIGATION GUARDIAN PAMELA ANN ARCHER

REASONS FOR JUDGMENT  FULL COURT

PORTER J
20 November 2012

1. I have read the reasons for judgment of Crawford CJ.  I respectfully adopt his Honour's outline of the facts and the details of the proceedings.  However, for the reasons which follow I do not agree with his Honour's conclusion as to the outcome of the appeal.  I do though, agree with what his Honour has said as to the cross-appeal.  I would allow the appeal and dismiss the cross-appeal. 

1. The relevant clauses of the agreement are set out in the Chief Justice's judgment and there is no point in me setting them out again.  The issue of construction depends on the intention of the parties to be determined objectively.  That is to say, the intention is to be ascertained from the words used and the structure of the agreement.  The inquiry requires consideration, not only of the text, but also the purpose and object of the transaction. More particularly, the objective inquiry seeks to determine the interpretation according to the view of a reasonable person in the position of the party to whom the words were addressed: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at 461 – 462 [22]; ABC v XIVTH Commonwealth Games Ltd (1988) 18 NSWLR 541 per Gleeson CJ at 549 (Hope and Mahoney JJA agreeing).

1. In these reasons I will use the words and terms as they appear in the Call Option Agreement.  The entire purpose of the Agreement was to provide to the appellant – defined in the Agreement, along with Mr Forward, as the Grantee – an option to purchase the land.  The option is given the term the "Call Option", and the "Call Option Exercise Notice" is defined as having "the meaning in clause 4.1".  It is quite clear that the critical part of the agreement is cl 4, and that cl 4.1 unequivocally imposes a requirement that if the Grantee wishes to exercise the call option, "it must give notice (Call Option Exercise Notice) in writing to the Grantor exercising the Call Option and that notice must be given to the Grantor before 5.00 pm" on the expiry date. 

1. Clause 4.2(a) does not require delivery by hand to the Grantor.  Clause 4.2(a) does not require delivery to a specified address, nor require delivery "to the Grantor's address" in those terms.  It is explicit when it says that the Call Option Exercise Notice "must be delivered to the Grantor's address for the receiving of Notices".  The Agreement defines "Notice" as meaning "a notice or other communication for the purposes of this Agreement".  The "Grantor's address for the receiving of Notices" is not defined or explained.  The only provision in the agreement in which the Grantor's address can be found is cl 11.1.  That sub-clause is expressed to be subject to cl 11.2.  Clause 4.2(a) makes no reference to cl 11 and does not, of itself, confine or limit the search for the Grantor's address as it may be found elsewhere in the agreement. 

1. Leaving aside cl 4.2(e), cl 4.2 imposes the following requirements in respect of the Call Option Exercise Notice:

·     it must state that it is a Call Option Exercise Notice;

·     it must be given on a Business Day [as defined] during normal business hours, and

·     it must be accompanied by a bank cheque for the relevant amount.

1. Clause 4.2(e) provides that the Call Option Exercise Notice "subject to this clause 4.2, must otherwise comply with clause 11".  The learned trial judge said:

"Paragraph (e) must have been put there for a purpose.  Its purpose must have been to give cl 4.2(a) to (d) precedence over any inconsistent provisions in cl 11.  It follows that, although notices in general could be given, for the purposes of the agreement, by giving them to a party's lawyer in accordance with cl 11.2, that requirement was superseded by the specific provision in cl 4.2(a) in relation to a Call Option Exercise Notice, which could only be validly given if it was delivered to 'the Grantor's address for the receiving of Notices'."

1. The appellant argues that this approach wrongly assumes that cls 4.2 and 11 are inconsistent.  He says that the two provisions operate not only in harmony, but also in tandem.  This it is said, is emphasised by the words "must otherwise comply with clause 11".

1. The appellant makes the points that:

·     cl 11 says nothing about content or format of the Notice, whilst cl 4(b) does;

·     cl 11 says nothing about the need for delivery during business hours, which cl 4(c) does;

·     cl 11 does not address the question of any necessary accompanying documents or things, whilst cl 4(d) does.

1. Following on from those points, the appellant argues that given that any Notice issued under cl 4.1 must otherwise comply with the several requirements specified in cl 4.2, cl 4.2(e) is consistent with, and does not derogate from, cls 11.1 and 11.2.  Accordingly, he says that the effect of cl 4(e) is not to override or "trump" cl 11, but "to ensure that a party serving the Notice in accordance with clause 11 must otherwise satisfy sub-clauses (a), (b), (c) and (d)".

1. The respondent submits that:

·     cl 11.2 is subject to cl 4;

·     the "special over general" rule applies, but in any event, cl 4.2(e) requires compliance with cl 11, subject to cl 4.2 – (the Notice being delivered with the bank cheque to the Grantor's address for the receiving of notices);

·     there would be inconsistency between cls 4.2 and 11 if it were a requirement that the Notice be delivered to the Grantor's address for the service of notices and it was permissible to serve it on the Grantor's lawyer, and,

·     for that reason the Agreement specifically gives cl 4 precedence.      

1. I am not able to accept that cl 4.2(e) specifically or impliedly provides that cl 4.2 takes precedence over cl 11 for all purposes so that as a consequence, in relation to cl 4.2(a), no recourse is to be had to cl 11.2.  What cl 4.2(e) states is that subject to what cl 4.2 says, the Notice must otherwise comply with cl 11.  I accept that cl 4.2(e) does contemplate that pars(a) to (d) would override or modify cl 11 to the extent of any inconsistency.  At the same time, it also contemplates that cl 11 has a role to play.  The relationship between cls 4.2 and 11 may provide assistance as to the impact of cl 4.2(e), but the real question is whether the wording of cl 4.2(a) produces an inconsistency with cl 11.1 being made subject to cl 11.2. 

1. Clause 11.1 is definitively informative as to the addresses and facsimile numbers of the parties for the service of "any Notice" under the Agreement.  It is expressly made subject to cl 11.2.  Clause 11.3 is enabling and permits the service of notices by way of delivery by hand, leaving it at an address for service, sending it by facsimile transmission to the addressee's facsimile number, or sending it by prepaid ordinary post to the addressee's address for service.  In this respect, cl 4.2(a) restricts the manner of service to "delivery to the Grantor's address for the receiving of Notices".

1. Clause 11.4 would operate in respect of the Call Option Exercise Notice by deeming the time when the notice was left as the date of receipt, but in that there is nothing inconsistent with cl 4.2.  Nor would anything in cl 4.2 modify the operation of cl 11.4.

1. Clause 11.5 would apply to the extent that the Call Option Exercise Notice must be "in legible writing in the English language".  Otherwise it has no application to the particular Notice.

1. On a strict literal interpretation, when cl 4.2(e) speaks of the Notice otherwise complying with cl 11, it could only be cl 11.5 to which reference is made.  This is because it is only that clause which actually imposes particular requirements, as distinct from being informative, permissive or enabling.  However, I think a broader view may be accepted, and that "compliance'' in cl 4.2(e) refers not only to the terms of the Notice itself but also to what must be done with it. 

1. Even on that approach, I do not see that there is an inconsistency between cls 4(a) and 11.  Proper service on the Grantee's lawyer is not inconsistent or non-compliant with cl 4.2(a).  Compliance with cl 4.2(a) requires delivery, and it requires delivery to an address.  That address is explicitly stated to be "the Grantor's address for the receiving of Notices".  That compendious term means the Grantee's address for the receiving of Notices under the Agreement generally.  That address is to be found in the combined operation of cls 11.1 and 11.2. The requirement for delivery to the Grantor's address for the receiving of Notices only confines or modifies the operation of cl 11 to the very limited extent in relation to cl 11.3 as I have outlined.  That is, the manner of service is restricted to, in the terms of cl 11.3, leaving a Notice at an address. 

1. I am not able to accept that a reasonable person in the Grantee's position would read cls 4.2(a) and 4.2(e) as meaning that when looking for the Grantor's address, the introductory words of cl 11.1 should be ignored, with no recourse permitted to be had to cl 11.2.  I am persuaded that cl 4.2 should not be given that interpretation.  If it was intended that cl 4.2 required delivery only to the Grantor's address as such, it would have been a very simple task to set out in cl 4.2(a) the address which is set out in cl 11.1.  As I have indicated, there is no objective basis for an interpretation which would restrict the search for the Grantee's address to that specified in cl 11.1, by compelling the introductory words of cl 11.1 to be ignored and cl 11.2 to be completely disregarded. 

1. I do not overlook the fact that cl 11.2 speaks of giving Notice to a person rather than leaving it at or delivering it to an address, but delivering a Notice to the address of the Grantor's lawyer would fall within the terms of cl 11.2.  I note that the respondent did not seek to argue that the appellant's action in delivering the Notice and the bank cheque to the respondent's solicitor, did not comply with cl 11.2.  The argument on the cross-appeal was concerned with the form and content of the Notice. 

1. It follows from my views of the appeal and of the cross-appeal, that I consider the appellant validly exercised the Call Option in accordance with the Call Option Agreement.  I would set aside the judgment.  The question posed for the trial judge was "Did the Plaintiff validly exercise the Call Option … ".  That question should be answered in the affirmative, subject to hearing from counsel.