Foster v Archer
[2012] TASSC 5
•19 March 2012
[2012] TASSC 5
COURT: SUPREME COURT OF TASMANIA
CITATION: Foster v Archer [2012] TASSC 5
PARTIES: FOSTER, Robert John
v
ARCHER, Geoffrey Lyndon by his litigation
Guardian Pamela Ann Archer
FILE NO/S: 1045/2009
DELIVERED ON: 19 March 2012
DELIVERED AT: Hobart
HEARING DATE: 13, 14 March 2012
JUDGMENT OF: Blow J
CATCHWORDS:
Conveyancing – Options – Exercise of – Place of service of notice – Interpretation of agreement granting option to purchase.
Aust Dig Conveyancing [1008]
REPRESENTATION:
Counsel:
Plaintiff: W A Ayliffe, R A S Baker
Defendant: D J Barclay
Solicitors:
Plaintiff: Baker Wilson Lawyers
Defendant: Page Seager
Judgment Number: [2012] TASSC 5
Number of paragraphs: 33
Serial No 5/2012
File No 1045/2009
ROBERT JOHN FOSTER v GEOFFREY LYNDON ARCHER
by his litigation guardian Pamela Ann Archer
REASONS FOR DETERMINATION BLOW J
19 March 2012
This action relates to an option for the purchase of some properties in Elizabeth Street, Hobart from the defendant, Mr Archer, for $3.3 million. The plaintiff, Mr Foster, contends that he exercised the option, but that is disputed by the defendant. The plaintiff has sued for specific performance of a sale agreement, and for damages for breach of contract. On 16 November 2011 Holt AsJ ordered that the question whether the plaintiff validly exercised the option was to be determined before any other issue in the action. I have conducted a trial of that issue alone.
The defendant is the owner of the relevant properties and has been at all material times. In May 2009 he granted a call option for the purchase of the property to the plaintiff and an architect named Garry Raymond Forward. Mr Forward has never been a party to this action. On 12 August 2009 the plaintiff purported to exercise the option by signing a document headed "Call Option Exercise Notice" and delivering it to the office of the defendant's solicitors together with a bank cheque for a deposit of $30,000.
The defendant contends that the option was not validly or effectively exercised, on the following bases:
· He contends that the option expired at 5pm on 11 August 2009, the day before the plaintiff purported to exercise it.
· He contends that the notice by which the plaintiff purported to exercise the option was defective, in that it was not given by or on behalf of both grantees, and did not make it clear who was purporting to exercise the option.
· He contends that the option agreement required the notice and the accompanying cheque to be delivered to his home address, with the result that their delivery to his solicitors' office was of no effect.
The time issue
It is common ground that the option agreement originally operated for 60 days, and that all parties agreed to it being extended for an additional 30 days. However there is a dispute as to when time began to run. It is common ground that no binding agreement existed between the parties until 14 May 2009, but the option agreement provided for the option to be exercised within "60 days from the date of this Agreement", and the defendant contends that its date was 13 May 2009. The plaintiff, however, contends that the words "the date of this Agreement" should be interpreted as referring to 14 May 2009. It is common ground that the first day must not be included in the calculation of time: Lamont v Heron (1970) 126 CLR 239. If the plaintiff's contention is correct, he does not have a time problem since the day he purported to exercise the option, 12 August 2009, was the ninetieth day after the date of the agreement. If the defendant's contention is correct, the plaintiff was a day too late.
The option agreement was prepared by a firm of solicitors engaged by Mr Forward. The defendant and Mr Forward both signed the agreement on 13 May 2009. The defendant's signature was witnessed by his wife, who wrote "13th May 09" next to her signature. Mr Forward's signature was witnessed by his wife. Each of them wrote "13/5/09" next to their signatures. The agreement had a cover page, on which was printed, "Dated:". To the right of that, Mr Forward wrote "May 13 2009". However the next page, page 1 of the agreement, had a space for a date immediately above the names and addresses of the parties, and nobody filled in that date. The word "Date" appeared, as did the year "2009", but the space before the year was left blank at all material times.
The plaintiff was away from Hobart on 13 May, and did not sign the document until the following morning. Later on 14 May Mr Forward gave a copy of the signed agreement to the defendant's accountant, Mr Clark, together with his cheque for an option fee of $1 that was payable pursuant to the option agreement. Since the signing of the document by the last of its parties and the exchange of counterparts did not occur until 14 May, it is clear that there was no binding agreement until that date.
The time for the exercise of the option was governed by cl 3.1 of the agreement, which read as follows:
"3.1 Time for exercise of the Call Option
The Call Option may be exercised by the Grantee at any time before 5.00 pm on the Call Option Expiry Date. Time is of the essence of the exercise of the Call Option. The Call Option lapses and is of no effect if the Grantee does not exercise the Call Option within the time permitted by this clause."
The term "Call Option Expiry Date" was defined in cl 1.1 to mean "60 days from the date of this Agreement or such other date as the parties may agree".
The parties to the agreement met on 10 July 2009. It was agreed that the operation of the option agreement would be extended for a further 30 days. On page 8 of the original agreement, below the signatures of the parties, the defendant's accountant wrote "i hereby agree to extend this call option agreement for a further 30 days". The defendant, Mr Forward and the plaintiff signed below that. The defendant's signature was witnessed by his wife. The grantees' signatures were witnessed by the defendant's accountant, Mr Clark. There is no evidence of any other agreement to change the call option expiry date.
In my view it was the intention of the parties that the option agreement was to bear the date on which it was made. The defendant signed the agreement and gave it to Mr Forward with that date left blank, both on page 1 and on the cover sheet. I am satisfied that Mrs Archer, Mr Forward, and his wife wrote the date of signing against their signatures intending to do no more than record the date on which they had each signed the document. I am satisfied that they were not then purporting to date the agreement. I infer that, when the document was given to Mr Forward, the defendant gave him implied authority to date the agreement, but only by writing in the date of the making of the agreement, and not by writing in any other date or a date of his choice.
In my view the front cover did not form part of the agreement, with the result that the date written on it did not become the date of the agreement. Counsel for the defendant submitted that the agreement was already dated 13 May, both on the cover page and three times alongside three signatures, when the plaintiff signed it on 14 May; that those dates were still there when he endorsed it on 10 July; and that he must therefore be taken to have acquiesced to its date being 13 May. I disagree. In my view the date on the cover page was not intended by anyone to have any contractual effect; the dates against the signatures were no more than records of when three individuals signed the document; the document remained undated at all material times; and the plaintiff cannot therefore be taken to have acquiesced to anything.
For these reasons, I hold that the date of the agreement, for the purposes of the definition of "Call Option Expiry Date", was 14 May 2009, and that the time for the exercise of the option expired at 5pm on 12 August 2009. The plaintiff purported to exercise the option before that hour on that day. The defendant's contentions as to the time issue must therefore be rejected.
The Call Option Exercise Notice
Counsel for the defendant submitted that the Call Option Exercise Notice was defective in a number of respects. He based his submissions on the following:
· The notice was not signed by Mr Forward, but was signed by the plaintiff alone.
· At the top of the notice, there was a letterhead that read as follows:
"Waratah Park trading as
R & K Foster Partnership
Australian SuperFine MerinoABN: 97669433590"
· Mr Forward was not mentioned anywhere on the notice.
· 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."
· The notice did not state to whom the word "we" referred.
The plaintiff contends 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.
In order for the delivery of a document to constitute a valid exercise of an option, the document must express clearly and unequivocally the fact that that is what is intended: Ballas v Theophilos (No 2) (1957) 98 CLR 193 per Dixon CJ at 196; Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 per Kirby P at 677, Samuels JA at 681, and McHugh JA at 683. Although the notice did not refer to the addresses of the properties or to Mr Forward, it is clear enough that it purported to be an exercise of the option granted by the defendant over a number of properties, in respect of which the plaintiff was a grantee. I am satisfied that the notice clearly and unequivocally expressed the intention that the option granted to the plaintiff and Mr Forward was to be exercised. But by whom? When one looks at the document in isolation, that is by no means clear.
The plaintiff gave evidence to the effect that he and his wife carried on business in partnership using the names "R & K Foster Partnership" and "Waratah Park". He gave evidence that they used another letterhead bearing the words "waratah developments builders & developers" with the same ABN number.
There was evidence that Mr Forward made arrangements with the plaintiff in July 2009 to reduce his involvement in a project that they had been planning for the properties in question. The plaintiff was a developer and, as I have said, Mr Forward is an architect. They had signed the option agreement as equals. Subject to the availability of funding, they proposed to acquire the defendant's Elizabeth Street 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 plaintiff that he should reduce his involvement in their proposed project; that his services as an architect should be charged for, contrary to their earlier arrangement; and that he should continue to contribute, without charge, by liaising with the relevant authorities as to the use of heritage buildings. The plaintiff was agreeable. Their new arrangement was documented in the form of a letter from Mr Forward to the plaintiff dated 28 July 2009, which the plaintiff signed the following day for the purpose of agreeing to its terms. It read as follows:
"I have thought through our discussions about our relationship on the project and have come to the viewpoint that it would be of benefit to all concerned that I relinquish my direct and financial involvement with the purchase of the property and is [sic] subsequent development.
The consideration for doing so would be one apartment transferred, at no cost, to my name at the end of the project.
If this is acceptable to you, please accept this as a 'Heads of Agreement' whereafter we should determine which apartment is to be identified together with any other details of our transactions."
There was discussion at the trial as to whether, at that stage, there was an assignment by Mr Forward to the plaintiff of his interest as a grantee under the option agreement, and as to whether that interest was assignable without the permission of the defendant. Clearly the document does not purport to effect any such assignment. The proposed outcomes were that the plaintiff would fund and control the development, and that Mr Forward would get an apartment. Those outcomes could be achieved without an assignment of Mr Forward's interest as a grantee. They could be achieved by the two grantees exercising the option and then nominating the plaintiff or an entity of his choice to take title to the properties as purchaser. The option agreement included a form of contract for sale which was deemed to come into existence upon the option being exercised, and that contract contained a nomination clause, pursuant to which a different purchaser could be substituted.
Since the document signed by Mr Forward and the plaintiff did not purport to effect an assignment of Mr Forward's interest as a grantee, and since such an assignment was not a necessary consequence of the implementation of their agreement, I think it must follow that their agrement did not effect an assignment of Mr Forward's interest to the plaintiff. There was no evidence of such an assignment being effected in any other way at any time. Mr Forward therefore remained a grantee on 12 August 2009 when the plaintiff purported to exercise the option.
In order to determine whether the notice was defective in failing to make clear who was purporting to exercise the option, it is necessary to consider what its recipient would fairly understand its meaning to be, in the circumstances of its receipt: Jones v Daniel [1894] 2 Ch 332 at 335; Carter v Hyde (1923) 33 CLR 115 per Isaacs J at 126; Prudential Assurance Co Ltd v Health Minders Pty Ltd (above) per Kirby P at 677, and Samuels JA at 681. It is therefore necessary to consider the evidence as to the circumstances in which the notice was delivered and received.
The evidence establishes that in August 2009 a Hobart legal firm, Messrs Page Seager, were acting for the defendant. On 10 August Mr Crisp of that firm phoned the plaintiff and left an answering machine message suggesting that he contact his solicitor "about the Archer option"; expressing the view that there was no option to be exercised; and suggesting a number of views as to when the option had to be exercised, if there was one. Counsel for the defendant objected to the tender of a disc containing a recording of that message. I admitted it de bene esse. I now hold that that disc was admissible, since its contents related to the circumstances in which the notice was received, and were therefore potentially relevant to the interpretation of the notice.
The plaintiff spoke to Mr Crisp the next day, 11 August. On the afternoon of 12 August, Mr Crisp sent the plaintiff's solicitor an email in which he said:
"… on a number of occasions in the past 24 hours Foster [the plaintiff] had said, to me included, it was his and his partner's intention to exercise what he said was an option they held …".
I interpret the words "his partner" to be a reference to Mr Forward. He was the plaintiff's "partner" in the sense of being the co-grantee of the option. There is no evidence of any suggestion that the plaintiff's wife had acquired an interest in the option by assignment or otherwise. There is no reason why the plaintiff would have referred to his wife as his "partner", even though they had a partnership. My assessment of the plaintiff is 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.
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.
Service of the notice
The defendant relies on cl 4.2 and cl 11 of the option agreement. Clause 4.2 reads as follows:
"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."
Clause 11 of the option agreement reads as follows:
"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 of 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 an other mode or place of service required, permitted or authorised by an applicable law."
On 12 August 2009 the plaintiff knew that the option agreement would expire if the appropriate notice was not served by 5pm; 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. After he had put those arrangements in place, someone from his bank phoned to say that the signatories who signed bank cheques were absent, and that the bank cheque could not be issued until later in the day. As a result, the plaintiff told Mr Sparks to deliver the notice to 306 Sandy Bay Road without the bank cheque. Mr Sparks went there. The front gates were locked. He could not get access to the property. He did not make contact with anyone inside the property. He left the notice in the letter box. That would have been sufficient service if the bank cheque had been with it, but it was not. Counsel for the plaintiff conceded that the delivery of that notice to 306 Sandy Bay Road was of no effect.
The plaintiff obtained a 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 that notice and the bank cheque to the office of Page Seager at about 2.44pm on 12 August 2009.
The plaintiff contends that that amounted to effective service of the notice by reason of cl 11.2 of the option agreement. If one looks at the second sentence of that clause in isolation, one might think that delivering the notice to the legal firm was sufficient: "A Notice that is given to the lawyer for a party is taken to have been given to that party".
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".
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.
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.
Conclusion
The question that I am required to determine is, "Did the Plaintiff validly exercise the Call Option which is referred to in paragraph 6 of the Statement of Claim?" For the reasons stated, I determine that the answer to that question is, "No".
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