Hadco Constructions v McIntosh

[2003] NSWSC 689

CITATION:	Hadco Constructions v McIntosh [2003] NSWSC 689
HEARING DATE(S):	16 July 2003
JUDGMENT DATE:	30 July 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
DECISION:	Order for specific performance
CATCHWORDS:	VENDOR AND PURCHASER - Agreement for option to purchase property - agreed prior to exchange of agreement that option be granted to purchaser 'or nominee' - agreement as exchanged omitted 'or nominee' - after exchange of agreement 'or nominee' added by agreement - whether addition of words by way of agreed variation or by way of rectification - provision in agreement for extension of six months in certain events - whether new agreement required for extension of term of existing option - whether option for purchase of residential property could be valid if exercised by nominee who did not sign the option agreement
LEGISLATION CITED:	Conveyancing Act 1919 s66ZG, s66ZH, s66ZI, s66ZJ, Division 9 Pt 4
PARTIES :	Hadco Constructions Pty Limited (Plaintiff) Robert James McIntosh (First Defendant) Kathleen Jane McIntosh (Second Defendant)
FILE NUMBER(S):	SC 5514 of 2002
COUNSEL:	Mr D Warren (Plaintiff) Mr G R Waugh (First Defendant)
SOLICITORS:	Macquarie Lawyers (Plaintiff) Sorenson & Brown (First Defendant) Mikelis Strikis (Second Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

WEDNESDAY 30 JULY 2003

5514/02 HADCO CONSTRUCTIONS PTY LIMITED V ROBERT JAMES MCINTOSH & ANOR

JUDGMENT

1 The question for decision is whether or not an option to purchase property, 281 Mona Vale Road, St Ives (the property) has been validly exercised.

Facts

2 The defendants, Mr and Mrs McIntosh (the grantors) are the registered proprietors of the property which is the land in Folio Identifier 3/19088.

3 By agreement dated 30 March 2001, in consideration of the sum of $9,000 they granted an option to Arthur Haddad (the grantee) to purchase the property for the sum of $900,000. Clauses 4, 5, 6, 9, 11 and 12 of the option agreement are as follows:

4. This option may be exercised by the Grantees by written notice delivered on or before 5 pm on 30th March 2002 to 281 Mona Vale Road, St Ives or to the offices of the Grantors’ solicitors named in the contract or notified before the exercise of the option by the Grantors or any solicitor purporting to act for the Grantors accompanied by:-
(a) A cheque which is $9,000 less than the deposit shown in the contract in favour of the deposit holder named or ascertained under the contract; and
(b) A contract in the form of the contract annexed hereto duly executed by the Grantees as purchasers and with the addition of copies of the following material in the contract:
(i) Computer Folio search 3/19088
(ii) DP 19088;
(iii) Section 149 Certificate for the property, copies of which are annexed hereto.
5. The contract executed by the Grantees shall be dated on the date of delivery to the address stated in Clause 4 or the offices of the Grantors’ solicitor of the documents referred to in Clause 4 above.
6. The exercise of the option shall created a contract between the Grantors and the Grantees.
…
9. The Grantors agree that during the term of this option granted by them the Grantees may at their own expense and in their own names make such development or, if appropriate, building applications to the relevant local government authority or to any other appropriate authority for all necessary approvals for the development of a minimum of five three bedroom villas, units or townhouses on the land. The Grantors shall upon request sign any consent to any such application so far as they affect or may affect the property.
…
11. The Grantees covenant and agree to lodge the application referred to in Clause 9 above within two months of the date of this Option Agreement.
12. If consent to the application envisaged in Clause 9 above has not issued from all relevant authorities within twelve months of the date of this Option Agreement and provided the Grantees have promptly performed all of their obligations hereunder and have pursued the application diligently. The Grantors hereby agree to grant an extension of six months to this Option Agreement provided that the purchase price of the property shall increase to Nine hundred and ten thousand dollars ($910,000) and an additional option fee of One hundred dollars ($100) shall be paid by the Grantees.

4 A copy of the draft contract was annexed to the option agreement.

5 Prior to exchange of the option agreements there were negotiations pursuant to which it was agreed that the option would be granted to Arthur Haddad “or nominee”. There is no doubt that this was agreed. Equally there is no doubt that the document as exchanged did not include those words although they were added subsequently. There is an issue as to whether they were added by way of agreed variation or by way of rectification. Once the alteration was made the agreement was expressed to be between the grantors and “Arthur Haddad of 9 Auburn Street Parramatta or nominee (hereinafter called the grantees)”.

6 The original option period expired on 30 March 2002. Pursuant to the terms of clause 12 it was extended for an additional six months, namely to 30 September 2002.

7 By nomination dated 20 September 2002 Arthur Haddad nominated Hadco Constructions Pty Limited as grantee to exercise the option. Notice of exercise was executed on that date by that company and on 23 September 2002 notice of exercise of option was given to the grantors by serving (1) notice of nomination; (2) notice of exercise executed by the plaintiff company; (3) cheque in favour of L J Hooker & Co for $82,000; (4) contract for sale in the form annexed to the option agreement, other than it being amended so as to show the purchaser as being the plaintiff company.

8 The $82,000 was calculated as follows:

Purchase price of the option with the
additional Clause 12 amount $ 910,000
10% of that figure $ 91,000
Less consideration for the option $ 9,000
Balance $ 82,000

9 The additional sum of $100 required to be paid and which was paid pursuant to clause 12 was not brought into account in these figures.

10 Shortly after the documents were received by the solicitors for the grantors, it was claimed that the option was not validly exercised. That was because the purchase price on the copy of the contract for sale signed by the plaintiff was shown to be $900,000. In other words the increase to $910,000 was not reflected. On the other hand the cheque for the deposit did reflect the proper purchase price. Later on the grantors or at least Mrs McIntosh claimed that if contrary to their contention the option had been properly exercised then it was terminated by them for breach. On that basis on the hearing the second defendant filed a cross-claim seeking a declaration as to valid termination.

11 This was a matter in the short notice list and it became evident during the first few minutes that it was an action which really had required pleadings. In spite of this it proceeded. From the plaintiff’s point of view it needed pleading if rectification of the document as originally executed was sought. From the point of view of the defendants and so that the plaintiff would have some idea as to the arguments it needed pleading because the defences articulated at the commencement of the hearing by counsel for the first defendant and the solicitor for the second defendant were defences which could not possibly have been thought to arise on the affidavit evidence filed. The defendants were separately represented, although their interests were the same. It seems that their marriage has broken up which was the reason for the separate representation. The defences raised by the first defendant were (a) that the agreement to include the nominee was made by way of alteration not rectification and therefore required a new option agreement to be signed to comply with the requirements of the Conveyancing Act; (b) the option agreement was not signed by the nominee and was therefore void pursuant to s66ZG(1)(a) of the Conveyancing Act 1919; (c) that clause 12 of the agreement required, if there were an extension for six months, there to be a new agreement to bring this about. There was an additional argument raised by the solicitor for the second defendant which related to the admission into evidence of the nomination document and the contract document and also the option agreement as altered on the basis that the inclusion of the nominee was a dutiable transaction.

12 This outline shows the dangers of actions proceeding by way of summons and points to the necessity of the legal representatives of the parties informing the court at the time when matters are placed in the short notice list of unidentified issues which it is intended to raise which may bring about some application for adjournment when they are raised. Luckily that did not happen with the present case and the parties were prepared to argue all the issues raised. I only say this because on the evidence filed the only issue which appeared to be raised was the question of whether or not the failure to alter the purchase price in the copy contract executed by the nominee of the grantee, meant that there had been no exercise of the option.

13 I will now deal with these matters, not necessarily in order.

Inclusion of the words “or nominee”

14 It is clear that the original option agreement, and the copy of the contract annexed to it, as exchanged did not include these words. The grantee had asked that they be included and there was agreement as to this which is clear from correspondence. The grantor’s solicitor said that when he received the document signed by Mr Haddad he noticed that there was no mention of nominee and assumed that this was no longer sought. On that basis he crossed out the words “or nominee” on the copy signed by the vendor but did not do so on the draft contract annexed. Option agreements were exchanged on the wording of the document as signed by the grantee. There does not seem to be any basis for the assumption which was made. It is true that the alteration to the document was not made for many months after exchange and after some correspondence between the solicitors for the parties. If it is necessary to decide it I hold that the alteration was to bring the written document into line with the agreed terms. It would I consider be within the authority of the solicitors to make the alteration if it encompassed the agreement which had been made. It follows that the stamp duty argument – which would have required an amendment – was not made out. If I were wrong in this I would hold that the inclusion of the words at a later date by the solicitors on instructions from their client, was not an alteration which required re-execution by grantor and grantee under s66ZG(1)(a) of the Conveyancing Act 1919.

Was a new agreement for extension required?

15 The question is whether the words “the parties hereby agree to grant an extension of six months of this option agreement” required a new agreement or whether in the event of the condition being fulfilled and the $100 paid there was an extension of the period within which the option could be exercised without more. The parties by their conduct obviously accepted the latter construction. I do not consider the wording of the clause required a new agreement be executed. Rather an extension of time was allowed in certain circumstances for exercise of the option otherwise within all terms of the agreement. By letter of 10 April 2002, the solicitor for the grantors said inter alia “we are instructed to acknowledge that the option has been extended”. That is a sensible construction. I do not think it was ever the intention to enter into a new agreement.

The question of the purchase price

16 There can be no doubt that the intention was that the purchase price in the circumstances, which had arisen by reason of the six months’ extension, was $910,000. The amount forwarded by way of deposit made that clear, even though the additional $100 paid for the six months’ extension was overlooked. Obviously enough the name of the purchaser under the contract needed to be amended if there were a nominee. This was done. Equally obviously the purchase price would need to be increased if clause 12 was activated. That was overlooked. I do not accept the argument of counsel for the plaintiff that the plaintiff had to chose between the requirements of clause 4 and any changes required by the activation of clause 12 and to select one. There is no evidence this was ever considered. It is perfectly clear that there was a mistake and that the purchase price intended was $910,000. The documents were stamped on that basis. The irrevocable offer was to sell for $910,000. That offer was accepted by the notice which was in correct form together with the forwarding of an executed contract which had an error in it as to the purchase price. So far as rectification was required there could be rectification, but as the mistake was obvious I do not consider rectification was necessary. Had the price been altered to $910,000 the grantors, who obviously wished to escape the consequences of the option, are likely to have mounted much the same argument from a different flank. It is perfectly clear that any transfer consequent upon the contract would have required a consideration of $910,000. This argument fails.

Options in favour of grantee or nominee

17 The question which arises here is whether or not there can be a valid option for purchase of residential property to a grantee or nominee if the option purports to be exercised by the nominee. Section 66ZG(1)(a) of the Conveyancing Act which is included in Division 9 of Part 4 of that Act and which division deals with options for purchase of residential property is as follows:

66ZG Option void in certain circumstances
(1) An option granted for the purchase of residential property is void:

(a) unless it is granted by way of exchange of counterparts, one of which is signed by the purchaser and the other signed by the vendor, or
(b) if it is exercisable within 42 days after it is granted or, if a different period is prescribed, within that period.

(1A) Subsection (1) (a) does not render an option void if it was granted, without an exchange of counterparts, before the commencement of the amendment made to this section by the Conveyancing Amendment Act 1997 and it was signed in duplicate by both parties.

18 Section 66Z which is in that Division sets out definitions applicable to that Division. The definitions of “purchaser” and “vendor” are as follows:

purchaser includes a prospective purchaser, and also includes a grantee or prospective grantee of an option.
vendor includes a prospective vendor, and also includes a grantor or prospective grantor of an option.

19 If the argument of the defendant is correct namely that s66ZG(1)(a) requires a nominee to sign then there could never be a valid option for sale and purchase of residential property if there were a right in a named grantee to nominate a purchaser if that nominee was not in existence or not known at the time of the grant of option.

20 The question is whether the nominee is a prospective grantee of the option and if so whether s66ZG requires such nominee to sign the option. The fact that a definition of “purchaser” includes a grantee or prospective grantee of an option does not, I consider, mean that s66ZG must be interpreted so as to make it impossible to have an option exercisable by a nominee of the grantee. That definition would have use in the cooling off provisions or the rescission provisions of s66ZH, s66ZI and s66ZJ. I think it is clear that the counterpart of the option signed by the grantee who has the right to exercise or to nominate another person to exercise is sufficient for the purposes of s66ZG, which should not be interpreted in a way inconsistent with sense.

Cross Claim

21 The basis of the cross-claim is that if the option had been properly exercised so that a contract came into existence then the purchaser under that contract is in default through not having forwarded requisitions in accordance with the contract and not having submitted a transfer. First the purchaser does not have to submit requisitions. Second, a vendor, having refused to acknowledge the existence of a contract, is not in a position to rely on the terms of the contract, and thirdly if this were not enough then failure to forward a transfer within a certain time does not give any ground for termination unless time is made essential. There is no possible basis for the cross claim, which therefore must be dismissed.

22 It follows from this that the purchaser is entitled to a declaration as to valid exercise of option and an order for specific performance of the contract. The cross-claim will be dismissed. The defendants must pay the costs of the plaintiff.

Orders

23 Declaration as sought in paragraph 1 of the summons.

24 Declaration as sought in paragraph 2 of the summons with the addition of the words “but with the purchase price amended to $910,000 – and the deposit amended to $91,000”.

25 Declaration as sought in paragraph 3 of the summons.

26 Order as sought in paragraph 4 of the summons.

27 Order that the defendants pay the plaintiff’s costs of the summons.

28 Order the cross-claim be dismissed.

29 Order the cross-claimant pay the costs of the cross-defendant of the cross claim.

30 Exhibits may be returned.

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Last Modified: 08/12/2003