Hexbourne Pty Ltd v QM Properties Pty Ltd

[2001] QSC 120

SUPREME COURT OF QUEENSLAND

CITATION:              Hexbourne Pty Ltd v QM Properties Pty Ltd [2001] QSC 120

PARTIES:HEXBOURNE PTY LTD ACN: 010 648 165

(plaintiff/respondent)

v

QM PROPERTIES PTY LTD ACN: 010 716 935

(defendant/applicant)

FILE NO:                  S 9813/00

DIVISION:               Trial Division PROCEEDING:  Application DELIVERED ON:  26 April 2001

DELIVERED AT:     Brisbane

HEARING DATE:     23 April 2001

JUDGE:  Wilson J

ORDERS:1. That there be judgment for the defendant against the plaintiff;

2.  That  the  plaintiff  pay  the  defendant’s  costs  of  and incidental   to   the   application   for   judgment   on   the indemnity basis;

3. That the plaintiff pay the defendant’s other costs of and incidental to the proceeding on the standard basis.

CATCHWORDS:       CONTRACTS        –        GENERAL        CONTRACTUAL PRINCIPLES           –           CONSTRUCTION           AND INTERPRETATION OF CONTRACTS – where developer purported to exercise option to require marketing company to purchase   unsold   lots   in   development   estate   –   where marketing  company  refused  to  complete  sale  –  time  limit within which developer could exercise such option

COUNSEL:                RIM Lilley for the applicant defendant

CD Coulsen for the respondent plaintiff

SOLICITORS:          Quinn & Scattini for the applicant defendant

Bennett Carroll & Gibbons for the respondent plaintiff

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[1]     WILSON J:  This is an application by the defendant for summary judgment.

[2]     The plaintiff’s claim is for specific performance of an agreement dated 18 February

2000 for the sale by the plaintiff to the defendant of four lots of land in the Gracelands  Estate  at  Greenbank.    An  earlier  application  by  the  plaintiff  for summary judgment was dismissed.  No fresh material has been filed by either side apart from an affidavit by the defendant’s solicitor in relation to what happened on the hearing of the plaintiff’s application for summary judgment.

[3]     The plaintiff was the developer of the estate, and the defendant marketed it.  There were two agreements made between them on 18 February 2000 – a  “Marketing Agreement” and a “Put and Call Agreement”.  Clauses 2, 3, 4 and 5 of the Put and Call Agreement provided as follows:-

“2.  CALL OPTION

In  consideration  of  the  sum  of  One  Dollar  ($1.00)  paid  to  the Developer by QMP (the receipt of which is hereby acknowledged), the Developer hereby grants to QMP an option to purchase any of the lots specified in Schedule One which have not already been sold pursuant to the Marketing Agreement.

3.   PUT OPTION

In  consideration  of  the  sum  of  One  Dollar  ($1.00)  paid  by  the Developer to QMP (the receipt of which is hereby acknowledged), QMP hereby grants to the Developer an Option to require QMP to purchase any of the unsold lots specified in Schedule One which have  not  been  purchased  already  by  QMP  pursuant  to  the  Call Option or sold pursuant to the Marketing Agreement prior to the exercise of the Put Option in the following manner: -

(a)Six (6) Lots of QMP’s  choice  within  6  months  from  the Commencement Date less the number of Lots sold by QMP pursuant to the Marketing Agreement during such period;

(b)Six (6) Lots of QMP’s choice no earlier than six (6) months and    no    later    than    twelve    (12)    months    from    the Commencement Date less the number of Lots sold by QMP pursuant to the Marketing Agreement during such period;

(c)      All unsold Lots no later than eighteen (18) months from the

Commencement Date.

It is the intention of sub-clauses (a) and (b) that if, for example, QMP  sells  four  Lots  pursuant  to  the  Marketing  Agreement  or purchases four Lots pursuant to the Call Option during the relevant

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period  then  the  Developer  may  exercise  the  Put  Option  only  in relation to two Lots during the relevant period and if it sells six Lots during the relevant period pursuant to the Marketing Agreement then the Developer may not exercise the Put Option in relation to any Lots during the relevant period.

4.   EXERCISE OF OPTION

4.1The Option may be exercised by QMP at any time within the Option Period and as many times as QMP may choose within the Option Period.

4.2When the Grantee wishes to exercise the Option, it shall give  Notice  of  Exercise  of  Option  to  the  Grantor.    The Option  shall  be  deemed  to  be  exercised  at  the  time  the Notice of Exercise of Option is received by the Grantor.

4.3The Notice of Exercise of Option shall be substantially in the form set forth in Schedule Two and shall:

(a)       be  in  writing  and  signed  by  an  officer  of  the

Grantee;

(b)       be stated on its face as being irrevocable; and

(c)      specify  the  unsold  lots  in  respect  of  which  the

Option is exercised.

5.   CONTRACT

5.1Immediately upon the exercise of the Option, the parties shall be deemed to have entered into a contract upon the terms  and  conditions  set  forth  in  Schedule  Three  (“the Contract”) completed by inserting:

(a)       the name of QMP as the purchaser;

(b)the particulars of any unsold lots to which the Notice of Exercise of Option relates;

(c)the price being the  sum designated in Schedule One less   one   thousand   dollars   ($1,000.00)   per   Lot allowance to QMP in respect of stamp duty payable on the purchase of each of any unsold lots to which the Notice of Exercise of Option applies; and

(d)       the date for completion being on or before thirty

(30) days from the date of exercise of the Option;

5.2Without prejudice to the provisions of Clause 5.1 hereof, within seven (7) days of the date of exercise of the Option hereof (or within such further period as may be mutually agreed upon between them) QMP and the Developer shall

(as appropriate) duly and properly execute and exchange at least three (3) copies of the Contract.”

Clause 1.1 contained a number of definitions, including:-

“‘Commencement Date’ means the date of this agreement.

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‘Grantee’  means  QMP  in  relation  to  the  Call  Option  and  the

Developer in relation to the Put Option.

‘Grantor’ means the Developer in relation to the Call Option and

QMP in relation to the Put Option.

‘Option’ means the Put Option or the Call Option as the case may be.

‘Option Period’ means a period of eighteen months commencing on the Commencement Date.”

The Notice of Exercise of Option in Schedule Two was in the following form:-

“SCHEDULE TWO

NOTICE OF EXERCISE OF OPTION

To:

The  undersigned  Grantee  hereby  irrevocably  notifies  you  that  it wishes to exercise the Option contained in the Agreement dated the day of           1999 in relation to the following property:

This Notice is irrevocable.

DATED this        day of              1999

… … … … … … … … … … … … … … … …  .

For and on behalf of Hexbourne Pty Ltd/QM Properties Pty Ltd”

[4]     On 25 September 2000 the plaintiff purported to exercise the option by notice in the following terms: -

“Re:PUT AND CALL AGREEMENT DATED 18 FEBRUARY

2000

With reference to the above agreement, the undersigned Grantor hereby irrevocably notifies you that it wishes to exercise the Option contained in the Agreement dated 18 February 2000 in relation to the following property:

Lot 32 on SP 128051 Area 3.549 ha Lot 33 on SP 128051 Area 3.775 ha Lot 34 on SP 128051 Area 1.298 ha Lot 35 on SP 128051 Area 2.00 ha

This Notice is irrevocable.”

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The  defendant’s  counsel  submitted  that  this  should  be  treated  as  a  purported exercise of option under clause 3(a), principally because there was subsequently an exercise  of  option  under  clause  3(b).    The  plaintiff’s  counsel  did  not  make  a contrary submission, and so I shall proceed on that basis.

[5]     The defendant did not nominate any lots.  On 26 October 2000 the solicitors for the plaintiff wrote to the defendant saying (inter alia):-

“We  note  that  no  Contract  in  accordance  with  the  Put  and  Call Option has been produced for each of the four (4) lots contained in the Notice.

We enclose Contracts for execution and return today by close of business.

We note that settlement is due on the 30th October 2000…  ”

[6]     The defendant did not attend settlement on 30 October 2000, and on 10 November

2000 the plaintiff commenced this proceeding for specific performance.

[7]     The defendant’s submission was that the exercise of option is ineffective because upon the proper construction of the Put and Call Agreement, the put option for the lots had to be exercised by the plaintiff on or before 18 August 2000 and the plaintiff did not purport to exercise it on or before that date.  In the event that the defendant failed to choose lots, they would fall to be dealt with under clause 3(c).

[8]     The plaintiff’s submission was that the put option could be exercised at any time within the Option Period (18 months from the Commencement Date) in relation to any lots unsold at the end of 6 months from the Commencement Date.  The subject matter of the option could not be ascertained until the conclusion of the 6 month period, and accordingly the option could not be exercised before then.  Clause 4.2 sets no time limit for the exercise of the put option by the plaintiff – unlike clause

4.1 which expressly allows the defendant to exercise the call option at any time during the Option Period.

[9]     There is no warrant for interpreting clause 3(a) in such a way that the option might be exercised at any time during the Option Period.  That expression is used in clause 4.1 only in relation to the option which the defendant may exercise (the call option in clause 2); the time within which the plaintiff may exercise the put option is to be found within clause 3 itself.

[10]     Clause 3(a) provides for the exercise of the put option “within 6 months from the Commencement Date” and clause 3(b) provides for its further exercise “no earlier than six (6) months and no later than twelve (12) months from the Commencement

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Date”.  In my opinion the put option should be interpreted as follows.  At any time within  the  particular  6  month  period,  the  plaintiff  might  have  called  on  the defendant to purchase so many lots as would bring the number sold since the commencement of that period up to 6; the notice of exercise of option ought to have listed all the lots then unsold (clause 4.3(c)); it was up to the defendant to nominate the particular lots from those then unsold; had the defendant failed to make a nomination, it would have been in default under the put option and the plaintiff could  have  sought  specific  performance  in  relation  thereto.    The  words  “such period” in clause 3(a) refer to the period from the Commencement Date until the actual exercise of option, and the words “relevant period” in the last paragraph of clause 3 refer to –

(a)the period from the Commencement Date until the date of the first exercise of option;

(b)the  period  beginning  no  earlier  than  6  months  from  the Commencement Date and ending on the date of the second exercise of option.

[11]     Accordingly the purported exercise of the put option by the plaintiff was out of time and ineffective.  There should be judgment for the defendant.

[12]     The plaintiff’s counsel conceded that if the defendant’s application for summary judgment were successful, there should be an order for indemnity costs of the application in favour of the defendant.  Otherwise the costs of the proceeding should be awarded on the standard basis.

Orders:

-            that there be judgment for the defendant against the plaintiff;

-that  the  plaintiff  pay  the  defendant’s  costs  of  and  incidental  to  the application for judgment on the indemnity basis;

-that the plaintiff pay the defendant’s other costs of and incidental to the proceeding on the standard basis.