Parras v FAI General Insurance Company Ltd (Prov Liq apptd)

[2001] NSWSC 1077

Reported Decision: (2003) NSWConvR 56-037

New South Wales

Supreme Court

CITATION:	Parras & Ors v FAI General Insurance Company Ltd (Prov Liq apptd) [2001] NSWSC 1077 revised - 30/11/2001
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 2775/01
HEARING DATE(S):	05/07/01, 06/07/01, 10/07/01, 23/07/01, 02/08/01
JUDGMENT DATE:	23 November 2001
PARTIES :	Michael Alfred Parras and Daphne Maria Parras (First Plaintiffs) Constantine Nicholas Savas and Elizabeth Savas (Second Plaintiffs) FAI General Insurance Company Ltd (Provisional Liquidator appointed) (ACN 000 327 855) (Defendant)
JUDGMENT OF:	Santow J

COUNSEL :	A W Street, SC/ S Kaur-Bains (Plaintiffs) B A J Coles, QC/ R G McHugh (Defendant)
SOLICITORS:	A C Comino & Associates (Plaintiffs) Abbott Tout (Defendant)
CATCHWORDS:	PROPERTY - Lease - Option to exercise - Notice - Was option validly exercised in accordance with its terms - Section 170 of Conveyancing Act 1900 with respect to service of notice - Section 76-7 of the Interpretation Act (NSW) 1987 - posting notice to a company - Construction of lease.
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) s170
CASES CITED:	Alexander v Stocks and Holdings Limited [1975] VR 843 Bressan v Squires [1974] 2 NSWLR 460 Burrell v Cameron (SCNSW, Windeyer J, 4 April 1997, unreported) Capper v Thorpe (1998) 194 CLR 342 Carradine Properties Ltd v Aslam [1976] 1 WLR 442 Canon Brewery Co Limited v Signal Press Limited (1928) 139 LT 384 Curtice v London City and Midland Bank Limited [1908] 1 KB 293 Diakogiannis v Johnson (1989) NSWConR 55?472 Eaglehill Limited v J Needham Builders Limited [1973] AC 992 Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) 59 SR(NSW) 122 Helby v Matthews [1895] AC 471 Hillier v Goodfellow [1988] VicConvR 54?310 Holwell Securities Ltd v Hughes [1974] 1 WLR 155 In Re 88 Berkely Road NW9 [1971] 1 Ch 648 In re McGrath; Ex parte Official Receiver (1890) 24 QBD 466 Integrated Computer Services Pty Limited v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 Kodros Shipping Corporation of Monrovia v Empresa Cubana De Fletes (The Evia) (No2) [1983] 1 AC 736 Latec Finance Pty Limited v Knight [1969] 2 NSWR 79 Laybutt v Amoco Australia Pty Limited (1974) 132 CLR 57 Lollypops (Harbourside) Pty Limited v Werncog Pty Limited (1998) 9 BPR 16,361 Mannai Limited v Eagle Star Association Company Ltd [1997] 2 WLR 945 National Mutual Life v Windsor (1991) 28 FCR 214 NM Superannuation Pty Limited v Hughes & Ors (1992) 10 ACLC 477 N V Stoom Maats de Maas v Nippon Yusen Kaisha (The Pendrecht) [1980] 2 Lloyd's Rep 56 Oscar's Town Centre Restaurant Pty Limited v Port Shores Pty Limited (1987) NSWConvR 55?331 Rex v Westminster Unions Assessment Committee [1917] 1 KB 832 Spiro v Glencrown Properties Limited [1991] Ch 537 Tenax Steamship Co Limited v The Brimnes (Owners) [1975] 1 QB 929 Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 Tonitto v Bassal (1992) 28 NSWLR 564 Wallville Pty Ltd v Liristis Holdings Pty Limited ([2001] NSWSC 894 Bryson J, 16 October 2001, unreported) Young v Lamb ([2001] NSWCA 225, 13 July 2001, unreported)
DECISION:	Option validly exercised.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SANTOW J

No. 2775/01

Michael Alfred Parras and Daphne Maria Parras
First Plaintiffs
Constantine Nicholas Savas and Elizabeth Savas
Second Plaintiffs

FAI General Insurance Company Ltd (Provisional Liquidator appointed) (ACN 000 327 855)
Defendant


Judgment ( revised 30 November 2001 )
23 November 2001

INTRODUCTION

1 Was an option to extend a lease exercised in time, in conformity with such requirements of the lease as were mandatory?

2 As a general rule and traditionally, an option must be exercised in strict compliance with the requirements set out for such exercise (that is, strictly within the time and in the form stipulated, with the grantee having met any conditions precedent imposed). Thus Tonitto v Bassal (1992) 28 NSWLR 564; “in the sphere of options it is a cold hard world” (Burrell v Cameron (SCNSW, Windeyer J, 4 April 1997, unreported).

3 As Goulding J said in Carradine Properties Ltd v Aslam [1976] 1 WLR 442 at 446:

“In an option clause the requirement is that a party must strictly comply with the condition for its exercise. If the condition includes the giving of a particular notice, it seems to me that the logical first approach is to interpret the notice, looking at the words and applying legal principles to their construction, and then ask whether it complies with the strict requirements as to the exercise of the option.”

4 More recently, however, there has been some signs of relaxation of this strict approach, though by reference primarily to ordinary principles of construction. This has been allowed incipiently and tentatively for minor time infractions (for example, Hillier v Goodfellow [1988] VicConvR 54-310), and the trend still remains the other way (see for example, Bressan v Squires [1974] 2 NSWLR 460; Diakogiannis v Johnson (1989) NSWConR 55-472). But significantly, in construing notices with some inaccuracy, obvious error or looseness of formal expression, the House of Lords recently simply asked, how would the recipient, as a reasonable commercial person, be taken to have understood the intent of the notice: Mannai Limited v Eagle Star Association Company Ltd [1997] 2 WLR 945. That this “commercial” approach has manifested itself so far in cases dealing with a notice to terminate a lease — so called “break clauses” — does not preclude the future application of that approach to option cases. This is demonstrated by the juxtaposition, without discrimination, of those two categories in Carradine Properties Ltd (supra) at 446, though in the context of the more stringent approach. Thus I would, consistent with authority, tend to such a commercial construction of the notice and indeed of the clause providing for such mandatory notice. That said, proper compliance with the notice clause, so construed remains a condition precedent to valid exercise of the option in cases such as the present.

5 I turn now to the relevant factual circumstances.

NARRATIVE OF AGREED FACTS AND ISSUES and DRAMATIS PERSONAE

6 The Defendant company is registered under the Real Property Act, 1900 as the registered proprietor of the whole of the premises known as 244-248 Pitt Street, Sydney (“the Property”).

7 By a written lease agreement executed on 29 October 1996 the Defendant, as lessor, and a company called C F & S P Pty Ltd, being then the lessee, entered into a commercial lease (“the Lease”). The Lease provided that the lessee was entitled to occupy the basement of the property for the term commencing 17 July 1996 to 16 July 2001.

8 By a written deed of assignment dated 31 March 2000 the Lease was assigned with the consent of the Defendant to the four individual Plaintiffs, such deed also amending the lease. By cl 10 of that deed the Plaintiffs and the Defendant the parties acknowledge “In all other respects the Lease is confirmed”. By cl 6 of that deed, provision is made for “any notice or other document to be delivered, given or served pursuant to this Deed by the Lessor”; there is no counterpart provision for service by the Lessee in the Deed.

9 The Lease included an option to renew the lease for a further term of 5 years from 16 July 2001 and then a second option to renew the lease for a further period of 10 years.

10 Item 1 of the Second Schedule to the Lease provided that :-

“ if the Lessee intends to take a new Lease of the premises for a further term of the number of years (if any) specified in item 5 from the expiration of the Term of this Lease and prior to such expiration gives to the Lessor not less than 3 nor more than 6 months’ notice in writing of that intention and shall have during the first Term duly and punctually paid the Annual Rent and the Lessee’s Proportion of the Outgoings and the Turnover Rent reserved by this Lease at the proper times and shall not, at the time of exercise of this option be in default under this Lease then subject to the provisions of this clause the Lessor will at the cost of the Lessee grant to the Lessee a renewed Lease of the premises for a further terms of the number of years specified in Item 5…” [emphasis added]

11 Clause 31(14) provides that:

“Any notice required to be served on the Lessor under this Lease shall be served personally or by sending the same by pre-paid registered post to the Lessor’s registered officer (if a company) or (if a natural person) to the address of the Lessor set forth in this Lease or at such other address as the Lessor shall from time to time by notice in writing to the Lessee nominate and any notice required to be served on the Lessee or any Guarantor shall be sufficiently served if served personally or in the case of the Lessee if left addressed to the Lessee on the premises or in the case of either the Lessee or the Guarantor if forwarded by pre-paid post to the last known place of business or abode of the Lessee or the Guarantor (as the case may be) and any notice sent by post shall be deemed to be given at the time when it ought to be delivered in due course of post.”

12 The definitions in clause 35 are introduced by the words “unless the contrary intention appears”. Clause 35(10) then provides that:

“ ‘ Lessor’ means and includes the Lessor and its successors and assigns and where not repugnant to the context its servants and agents”

13 Clause 35(18) provides (with the same introduction) that:

“Where pursuant to this Lease the day on or by which any act matter or thing is to be done is a Saturday Sunday or public holiday that act matter or thing may be done on the next succeeding day which is not a Saturday Sunday or public holiday.”

14 On Wednesday 11 April 2001 the Plaintiffs each signed a document headed “Notice of Exercise of Option” (and dated 10 April 2001). There is no issue that the terms of the Notice were such as to indicate the requisite intention to exercise the option to renew.

15 Mr Comino, the solicitor for the Plaintiffs late in the afternoon of 11 April 2001, a Wednesday, placed the Notice of Exercise of Option together with a covering letter in an envelope which was addressed to:-

“The Secretary
FAI General Insurance Limited
C/- FAI Property Services
8th Floor 77 Pacific Highway
NORTH SYDNEY NSW 2060”

16 That envelope was not sent by registered post. The Plaintiffs contend that the letter was posted by ordinary post by following the Plaintiff’s solicitor’s usual practice (as attested to by his secretary Ms Xygalas) of posting, by placing the letter in a mail box in the city (opposite David Jones Ladies Store and in front of Armani in Market Street) after 4.15 pm and likely to have been just before 5 pm. That contention is not admitted by the Defendant. It also contends that the necessary notice was never received. The evidence pertaining to these competing contentions is set out later, including expert evidence from Australia Post on behalf of the Plaintiffs. Level 8, 77 Pacific Highway, North Sydney was not at any material time the registered office of the Defendant. FAI Property Services Pty Ltd at all material times occupied Level 8, 77 Pacific Highway, North Sydney (its registered office being Level 42, 50 Bridge Street, Sydney). FAI Property manages and administers the leasehold property owned by companies, including the Defendant, within the FAI Group of Companies. The Defendant’s own registered office at all material times was 50 Bridge Street, Sydney.

17 It is accepted that the Plaintiffs were not in breach of any covenants of the Lease. In any case the Defendant did not and does not rely on any breach of covenant of the Lease and no notice was served under s133E(2) of the Conveyancing Act 1919.

18 The Plaintiffs are ready, willing and able to enter into a renewed lease in accordance with the terms of the Lease.

19 The 13 April 2001, a Friday, was a public holiday such that, according to the Plaintiffs (but disputed by the Defendant), this fact, in combination with the terms of the lease, extended the last day for exercise from 16 April 2001 (item I of the Second Schedule to the Lease) to 17 April 2001 (see cl 35(18) of the Lease).

20 It is convenient that I now set out the names of the parties and principal witnesses:

Dramatis Personae
Plaintiffs and Witnesses
Michael Parras First Plaintiff
Daphne Parras Second Plaintiff
Constantine Savas Third Plaintiff
Elizabeth Savas Fourth Plaintiff
Colin Parras Manager
Anthony Comino Plaintiffs’ solicitor
Andrea Banic Legal secretary of Plaintiffs’ solicitor
Filanthi Xygalas Secretary of Plaintiffs’ solicitor
Paul Pierce Manager North Sydney Delivery Centre
Colin Edward McKenzie manager Performance Measurement and Analyst Branch for Australia Post

Defendant and Witnesses
FAI General Insurance Company Ltd the Defendant lessor and grantor of the lease option.
Robert McElroy Property Manager employed by HIH Insurance Limited, providing property management services to FAI Property Services Pty Limited which latter company manages and administers the leasehold property owned within the FAI group including the Defendant.
Harvey Rubenstein Managing Director FAI Property Services Pty Limited
Ilse Dittes office assistant FAI Property Services Pty Limited
Karen Garner office assistant FAI Property Services Pty Limited
David Ogilvie sales manager FAI Property Services Pty Limited
Frederick Lowe company secretary of the Defendant FAI General Insurance Company Limited, the lessor.
Nanette Petersen accountant at the Defendant’s premises
Rabinowitz sales manager at Defendant’s premises

QUESTIONS FOR RESOLUTION

21 There are the following questions for resolution.

Did the Plaintiffs validly exercise the option to take a new lease under the Lease, by their notice of exercise of option dated 10 April 2001, in the events that happened? In particular:

(a) was such notice given in conformity with the express provisions of the Lease
(i) by service on the Defendant in time, or alternatively,
(ii) on the basis that FAI Property was the Lessor’s agent and service was validly effected on it on behalf of the Lessor, or


(b) was there an implied term arising as a matter of construction or alternatively implied by law, namely that notice given in accordance with s170 of the Conveyancing Act 1919 (NSW) would comply with the lease and, if so, did the notice given comply with s170, or

(c) in the circumstances, is the Defendant estopped from denying that service was validly effected by sending the Notice to “care of FAI Property Services Pty Ltd, 8th Floor, 77 Pacific Highway, North Sydney”

22 The Plaintiffs are the Lessee, by virtue of the deed of assignment. Paragraph 1 of the Second Schedule to the lease earlier quoted confers an option upon the Lessee to take a new lease. It is useful to commence by considering the juristic nature of the option so conferred in order to ascertain what exercising an option to renew means in that context.

23 The Australian cases have characterised the juristic nature of an option in two distinct ways. In Laybutt v Amoco Australia Pty Limited (1974) 132 CLR 57 at 70-76 Gibbs J characterised the option there in question as a conditional contract of sale, conditional upon the exercise of the option in accordance with its terms within the period prescribed. In those terms one may substitute for “conditional contract of sale” the description “conditional agreement for lease”. That is to a degree artificial, when these are parties to an existing lease with a renewal clause, who are already in a contractual relationship. On this characterisation those conditions, when satisfied, bring about a renewed lease. It is tacked on to the previous lease, with further terms identified by reference in paragraph 1 of the Second Schedule to that lease.

24 The alternative characterisation is as an irrevocable promise to keep an offer to grant a lease open for the designated period. So in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) 59 SR(NSW) 122 at 123 the Full Supreme Court (Owen J, Roper CJ in Eq and Herron J) delivered a joint judgment which characterised the option in these terms (at 123-4):

“In the present case the lessor irrevocably offered to grant a lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions precedent could it be accepted and result in an agreement for a lease. A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality be a counter offer by the original offeree requiring acceptance by the original offeror if an agreement were to result.”

It too suffers from the artificiality earlier noted.

25 Thus when one turns to paragraph 1 of the Second Schedule of the lease, which does not fully conform to either characterisation, one appreciates the wisdom of the observations of Hoffman J (as he then was) in Spiro v Glencrown Properties Limited [1991] Ch 537 in explaining Helby v Matthews [1895] AC 471. He concluded that these two alternative characterisations of an option operated only by analogy. Neither fully explains the nature of an option, which “is not strictly speaking either an offer or a conditional contract” (at 544). “It does not have all the incidents of the standard form of either of these concepts. To that extent it is a relationship sui generis. But there are ways in which it resembles each of them. Each analogy is in the proper context a valid way of characterising the situation created by an option. The question in this case is not whether one analogy is true and the other false, but which is appropriate to be used in the construction of s2 of the Law of Property (Miscellaneous Provisions) Act 1989.”

26 So I must identify the context in which the present question arises. That context is the construction not of a statute but of a pre-existing agreement. It is necessary then to identify its mandatory requirements, either as to required mode of acceptance of the supposed irrevocable offer or the qualifying pre-conditions for a renewed contract. These can either be treated as terms for acceptance of a supposed offer, or conditions precedent for the supposed renewed contract.

27 That in turn requires the construction of clause 31(14) of the lease to identify what requirements are mandatory and whether there is any latitude, but only in terms of their proper construction. I refer particularly to the notice provisions. This is in order to identify which of its terms apply in mandatory terms, with no latitude. By mandatory I mean that any other mode of giving notice would not satisfy the designated mode of acceptance, if such it be, or satisfy the pre-condition for the renewed contract to arise, if such it be. In either case, if it be concluded that on a proper construction of the lease notice conforming to clause 31(14) is not the only way in which paragraph 1 of the Second Schedule of the lease can be satisfied, then a result favouring the Lessee may follow. If on the other hand, it is a mandatory requirement leaving no scope in its proper construction for a less stringent regime, then a result favouring the Lessor may follow.

28 But the degree of stringency attending fulfilment of a condition precedent may be marginally greater than for fulfilling the requirements for acceptance of an offer. Thus as was said in Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 by Samuels JA at 704-5: “… a condition precedent is strictly construed. So where a provision lays down an act by one party as a condition precedent to the existence of an obligation on the part of the other party, the condition precedent will not be fulfilled until the former party does an act that strictly matches that described in the contract.” Samuels J went on to observe (at 705) that “it seems to me to follow from [Aknar (1987) 162 CLR 549] that it is meaningless to speak of the substantial performance of a condition precedent. Either it has been performed or it has not. If it has not the obligation does not arise.”

29 As against fulfilling a condition precedent, there is inherently greater latitude when it comes to complying with a mode of acceptance laid down by the supposed offeror. Thus J W Carter and D J Harland “Contract Law in Australia” (Butterworths,1991) at 41-2:

“However, in most cases an offeror in indicating that acceptance may be made in a particular manner will not be taken to have insisted that that is the exclusive method of acceptance. In such cases any alternative method of acceptance which is as prompt as, and no less advantageous to the offeror than, the prescribed method will suffice.134 Therefore an offer requesting a reply ‘by return of post’ will normally be regarded as indicating merely a requirement of a prompt reply rather than as stipulating that acceptance must be by letter and no other means. Consequently a reply by telegram or by some other means, received no later than a letter by post would normally reach its destination, would comply with the terms of the offer.135 If an offeror wishes the prescribed method of acceptance to be the only method permissible, this intention must be made quite clear. But if this is done, the direction is effective and any purported acceptance which does not comply is at best a counter offer, which the original offeror is then free either to accept or reject.136”
134 Tinn v Hoffman & Co (1873) 29 LT 271; Batt v Onslow (1892) 13 LR(NSW) Eq 79; White v Trucks Pty Ltd v Riley (1948) 66 WN(NSW) 101; Manchester Diocesan Council v Commercial & General Investments Ltd [1970] 1 WLR 241; George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387; Yates Building Co Ltd v R J Pulleyn & Sons (York) Ltd [1976] EG 123; Spectra Pty Ltd v Pindari Pty Ltd [1974] 2 NSWLR 617.
135 Tinn v Hoffman & Co (1873) 29 LT 271. It would be otherwise if the offeror’s stipulation should be read as partly motivated by a desire to receive clear written evidence of the acceptance so as to avoid the risk of mistakes occurring in the transmission of a message by, eg, telegram or telephone: see Treitel, The Law of Contract , 7th ed, 1987, pp 25-6.
136 Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) 59 SR(NSW) 122; Bowman v Durham Holdings Pty Ltd (1973) 131 CLR 8. But contrast Manchester Diocesan Council v Commercial & General Investments Ltd [1970] 1 WLR 241 at 246.

30 Moreover, as was observed in Integrated Computer Services Pty Limited v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 at 11,117-11,118 McHugh JA observed that:

“It is often difficult to fit a commercial arrangement into the common lawyers’ analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of ‘offer’, ‘acceptance’, ‘consideration’ and ‘intention to create a legal relationship’ which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship … Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled.”

31 So it is to the question of construction that I first turn. I do so, adopting as the more apposite analogy that of an irrevocable promise to keep the offer open for a designated period, with modest latitude, not to be overstated, inherent in that characterisation. However the result which I later find, does not depend on that characterisation; it would follow equally from the condition precedent analogy.

32 The first point to notice is that the option in question is contained in the Second Schedule to the lease. There what is required to be communicated is merely manifestation of the Lessee’s “intention” to take a new Lease, such that if the Lessee wishes to exercise the option it “gives to the lessor not less than three nor more than six months’ notice in writing of that intention”.

33 The notice clause said to provide an exclusive mode of acceptance is really adjectival. It appears not in the exercise clause itself but in the body of the lease. It does so under the heading “miscellaneous”. There reference is made to “any notice required to be served on the Lessor under this Lease” which “shall be served personally or by sending the same by pre-paid registered post to the Lessor’s registered office (if a company) …” [emphasis added]. The balance of cl 31(14) provides then for a less stringent regime for the Lessor to give notice; that is to say, in a case where there is “any notice required to be served” on the Lessee or any guarantor. Here service is sufficient if merely forwarded by pre-paid post to the last known place of business or abode of the Lessee. There is then yet a further deeming provision for the Lessor only, that any notice sent by post shall “be deemed to be given at the time when it ought to be delivered in the due course of post.”

34 At first blush, the comparative leniency of the requirements upon the Lessor in terms of notice, aided by its deeming provisions, reinforce that interpretation of the notice clause as an exclusive mode of acceptance (or as the only way the condition precedent for exercise of the option can be fulfilled).

35 However, there is a distinction capable of being drawn between cl 31(14) which prescribes what is required for service of a notice, and the actual option conferring clause, which speaks rather of giving a notice of intention. The latter imposes no express requirements formally to serve that notice as distinct from giving it in some way, suggesting that it includes those modes of service in cl 31(14), but not only those modes.

36 However, to this it can be said that ordinarily there is no distinction between the “serving” and “giving” of notice. Thus in the case of In Re 88 Berkely Road NW9 [1971] 1 Ch 648, in a context where notice of severance of a joint tenancy had been sent, Plowman J observed that where one is considering a notice in writing there can be no difference between “serving” the notice and “giving” the notice. Those observations were adopted by Lush and Crockett JJ in Alexander v Stocks and Holdings Limited [1975] VR 843 at 854 where notice of default was posted by the vendor by way of registered post to the address of the purchaser as shown in the contract pursuant to a condition in the Victorian Transfer of Land Act. While Gillard J dissented, relying upon the two different verbs “give” and “serve” being used to bring about different emphases, Lush and Crockett JJ preferred the view expressed by Plowman J.

37 Citing Plowman J’s observations, Heerey J concluded in National Mutual Life v Windsor (1991) 28 FCR 214 that there was no relevant distinction between the “giving” and the “serving” of notice in the case of a requisition for a general meeting, where notice is required by s247(4) of the Corporations Law to be served on members.

38 However, all of these decided cases ultimately must depend upon the proper construction of the relevant clauses in the context in which they appear, or of the relevant statute. Here, the same Second Schedule to the Lease as confers the option and contains reference to “giving” the relevant notice in writing in order to exercise it also contains clause 5. Clause 5 sets out terms of the second renewed lease. These terms include how rent is to be assessed, where the same distinction is drawn between “serving” a written notice and “giving” a written notice. Its significance is enhanced because it arises in the context of the actual renewed lease here in question and concerns how its rent is to be assessed. Thus clause 5(1)2 provides that the Lessor may, at any time after a Market Review Date, or the exercise or purported exercise by the Lessee of any option for renewal, “serve a written notice” upon the Lessee (advising the amount which the Lessor considers to be the current annual open market rental of the premises). That language applicable only to the Lessor is apt to pick up the indulgence or latitude reserved for the Lessor in serving notice upon the Lessee; see clause 31(14). Whereas, under the ensuing clause 5(1)3, reference is now made to the Lessee and to giving a notice. Thus within a period of twenty-one days after receipt of the Review Notice from the Lessor it is open to the Lessee to “give a written notice” being the “Dispute Notice” to the Lessor “stating that the Lessee does not agree that the amount nominated by the Lessor is the Current Rent”. Time is expressed to be of the essence. Clause 5 goes on to provide that if “the Lessee does not give the said notice within the time and in the manner referred to in this clause then the amount nominated by the Lessor in its notice shall be the current rent” [emphasis added]. I consider that the contrast between “service” of notice and “giving” notice is deliberate in the two contiguous sub-paragraphs. Moreover, clause 5(1)3 is self-contained and does not contain any cross-reference to clause 31(14) dealing with the service of notice. I consider it quite deliberately refers to “give a written notice” rather than “serve a written notice”. Clause 5(1)(3) appears largely self-contained, just as is clause 1, containing the option exercise clause. In particular there is no need to resort to the separate notice clause (cl 31(14)) when it comes to the “giving” of notice as distinct from its service.

39 Moreover, when one turns to clause 31(14), so far as notice upon the Lessor is concerned, it proceeds on the hypothesis that it is a notice “required” to be served. In contrast, exercising the option in the Second Schedule in clause 1 contemplates an election to exercise or not with no requirement for the service of anything. Clause 1 simply contemplates that if there is a manifestation of intention to take a new lease, it must satisfy clause 1 and thus simply be given in writing to the Lessor within the designated period. No doubt service in one of the designated modes in cl 31(14) would suffice. But if the notice is otherwise “given” then I am satisfied that that too suffices. Such an interpretation is really a common sense commercial one; see 4 above.

40 A further argument may be put in support of that common sense interpretation, though it does not depend on that argument.

41 Suppose there was non-compliance with cl 31(14) but only in failing to use the mandated registered post for the notice, in circumstances where the notice was in fact received in time (or would have been in the ordinary conduct of the Lessor’s business). The Defendant Lessor’s argument that cl 31(14) is mandatory and exhaustive of the modes of giving notice would then produce the absurd result that the option must be taken not to have been exercised for lack of registered post. This is save as s76(1)(a) of the Interpretation Act (NSW) 1987 may be called in aid in excusing registered post, though it may be doubted that the draftsman had its dispensation in mind.

42 It may be argued that such informality in favour of the Lessee “giving” notice does not comport with the clear favouring of the Lessor over Lessee in mode of service under cl 31(14). But it should not be overlooked that the Lessor may, on an occasion of falling rent, have an interest in the Lessee having the benefit of that latitude for giving notice. This is to ensure that the Lessee is effectively bound by any earlier manifestation of an intention to take a new lease and cannot later shelter behind the strict modes of service required to satisfy cl 31(14) to escape an onerous renewed lease.

43 Once it be the case that the Lease, as I conclude it does, draws a distinction between the giving of notice in writing for the purpose of exercising the option, and service of notice in other contexts, the Lessee is able to take such advantage of s170 of the Conveyancing Act as it allows. This is in the requirements it lays down for what is there deemed to be sufficient service. It must be remembered though, that the weight of authority currently is that s170 does not operate where the notice was not in fact given; see most recently Bryson J in Wallville Pty Ltd v Liristis Holdings Pty ltd ([2001] NSWSC 894, Bryson J, 16 October 2001, unreported), though by way of dicta (as Bryson J was not satisfied postage occurred at all). Section 170(4) provides that “this section applies only if insofar as a contrary intention is not expressed in any instrument, and shall have effect subject to the provisions of such instrument.” However, it is well settled that the section applies to an option agreement; see Bressan v Squires [1974] 2 NSWLR 460; Holwell Securities Ltd v Hughes [1974] 1 WLR 155. Here, the Lease does not in express terms contain the expression of a contrary intention, because cl 31(14) is not mandatory when it comes to giving a notice of exercise of option. A Court should not be astute to seek to imply such a contrary intention where the language does not produce that result.

44 Section 170 is in the following terms,

“ 170 (1) Any notice required or authorised by this Act to be served shall be in writing, and shall be sufficiently served
(a) if delivered personally;
(b) If left at or sent by post to the last known residential or business address in or out of New South Wales of the person to be served;
(b1) in the case of a mortgagor in possession or a lessee, if left at or sent by post to any occupied house or building comprised in the mortgage or lease;
(b2) in the case of a mining lease, if left at or sent by post to the office of the mine;
(c) if delivered to the facilities of a document exchange of which the person on whom it is to be served is a member; or
(d) in such manner as the Court may direct.
(1A) In the case of service by delivery to the facilities of a document exchange, the notice is, unless the contrary is proved, to be taken to have been served on the second business day following the day of delivery of the notice to those facilities.
(2) Any notice required or authorised by this Act to be served on a lessee or mortgagor shall, if served otherwise than by post, be sufficient although addressed to the lessee or mortgagor by that designation only, without his name, or generally to the persons interested, without any name, and notwithstanding that any person to be affected by the notice is absent, under disability, unborn, or unascertained.
(2A) The provisions of this section extend to notices required to be served by any instrument affecting property (including any dealing under the Real Property Act 1900) executed, made or coming into operation after the commencement of the Conveyancing (Amendment) Act 1930, unless a contrary intention appears in the instrument or dealing or in the Real Property Act 1900.
(3) This section does not apply to notices served in proceedings in any court.
(4) This section applies only if and so far as a contrary intention is not expressed in any instrument, and shall have effect subject to the provisions of such instrument.
(5) In this section, “business day” means any day except Saturday or Sunday or a day that is a public or bank holiday throughout the State.”

45 Turning to the facts and evidence in the present case, if the evidence on the balance of probabilities is sufficient to satisfy the Court that the relevant notice was “sent by post to the last known residential or business address in or out of New South Wales of the person to be served” one may then call in aid s77 of the Interpretation Act 1987 which deems service by post as sufficient, though it be by ordinary post.

46 Moreover s76(1) of the Interpretation Act (NSW) 1987 provides that “if an act or instrument authorises or requires any document to be served by post (whether the word “serve”, “give” or “send” or any other word is used), service of the document:

(a) may be effected by properly addressing, prepaying and posting a letter containing the document; and

(b) in Australia or in an external territory is, unless evidence sufficient to raise doubt is adduced to the contrary, taken to have been effected on the fourth working day after the letter was posted …”

47 “Working day” defined in subsection 2 of s76 as meaning “a day that is not: (a) a Saturday or Sunday, or (b) a public holiday or a bank holiday in the place to which the letter was addressed.”

48 I do accept the evidence of the Plaintiffs that the letter was posted with a pre-paid stamp before 5 pm on 11 April 2001. The evidence of Mr Comino’s secretary (Mr Comino being the solicitor for the Plaintiffs) given in her affidavit of 20 June 2001 was not shaken in cross-examination, It attests to her usual practice with outgoing mail as well as her recollection of typing the relevant envelope; see paragraphs 6 to 9 of her affidavit. I have no reason to doubt that she followed her usual procedure with regard to the posting of the envelopes and would have placed the envelopes in the mail box just before 5 pm and that she did not receive the letters returned and marked “not received”, or “not at this address”. There can be no doubt from the annexure to her affidavit, EX3, that a copy of the relevant letter was prepared and typed by her and addressed as earlier set out. Moreover her evidence is consistent with that of Mr Comino in his affidavit of 21 June 2001 where he describes at paragraphs 23 and following the process that he followed in preparing the notice; see paragraphs 23 to 34. That part of his evidence was not shaken in cross-examination either.

49 The question that then must be addressed is whether the address upon the envelope constituted “the last known business address” of “the person to be served”.

50 I am satisfied on the evidence that FAI Property Services carried on the Property Division business of the Defendant Lessor at 77 Pacific Highway, North Sydney. It is an agreed fact that at all material times FAI Property Services occupied Level 8, 77 Pacific Highway North Sydney. Thus it is clear enough from the evidence that FAI Property Services carried on not just an independent business of its own but business on behalf of its principal, FAI General Insurance. That would include, the essentially non-discretionary steps attendant on renewal of a lease by the exercise of an option, even if there be some scope for adjustment of rent for later renewal. The evidence of Mr Rubenstein, Managing Director of FAI Property is expressly to the effect that “FAI Property manages and administers the leasehold property owned by companies within the FAI group of companies”; see clause 5 of Mr Rubenstein’s affidavit of 3 July 2001.

51 Furthermore, at paragraph 9 of the same affidavit it is stated that FAI Property Services administers the relevant property. When it comes to exercising the present option over that property for the purpose of renewing a lease, clearly enough FAI Property Services has no discretion about that exercise such as to require reference back to FAI General Insurance. There is not even here the occasion for negotiating a renewed figure for annual rent, in contrast to the “Second Renewed Lease”; see Second Schedule, clauses 1 to 4 inclusive.

52 The evidence further supports the agency role of FAI Property Services, in that all negotiations in relation to the lease occurred with either Mr Rubenstein or Mr McElroy. The latter was a property manager employed by HIH Insurance Limited but providing property management services to FAI Property; see Mr McElroy’s affidavit of 2 July 2001, paras 1 to 4 and the description of his dealings with the Plaintiffs at paras 5 to 10.

53 In regard to the evidence of Mr Rubenstein, it is clear that he carried on the Property Division business (T, 59.35 - 49, 60.5). Whilst he reported to the board or company secretary of FAI General Insurance (T, 60.40 – 61.5, 62.30) there were no formal board meetings (T, 63.10) nor any profit and loss accounts or balance sheets (T, 63.15) nor any contract evidencing their relationship (T, 63.24) nor remuneration or payment for services (T, 63.30) nor employees (T, 63.44), but operated from premises at Level 8 77 Pacific Highway North Sydney (T, 63.50) with the business carried on that address (T, 63.55). In so carrying on business income was earned from rental properties (T, 64.20 - 64.55, 66.20) under the FAI logo for the past ten years (T, 65.40). Moreover, he confirms that he received notices of exercise of options (T, 1.410 – 1.437) and clearly had substantial discretion (T, 67.9 – 67.13) giving instructions to solicitors for leasing/assignment (T, 68.35 – 68.44). Again it could not be said with any justification that any exercise of discretion was here involved in receiving the relevant notices of exercise of option. Certainly so doing can be treated as within the agency authority of FAI Property Services exercised through Messrs Rubenstein and McElroy.

54 In so concluding, there is no necessity to go further and characterise the relationship between FAI Property and FAI General Insurance as one in which the former was alter ego for the latter.

55 It is thus nothing to the point for the Defendant to refute such a relationship since the Plaintiffs on the interpretation of the Lease that I consider correct do not have to establish that the relationship went to that extremity. Nor is it to the point to question the extent of the agent’s authority in the present context. This is when it is appreciated that, as McLelland J said in Oscar’s Town Centre Restaurant Pty Limited v Port Shores Pty Limited (1987) NSWConvR 55-331, “the management of property leased to tenants would ordinarily embrace the receiving of a notice from a tenant exercising an option for renewal of his lease, and the managing agent of such property would in the absence of proof of some relevant limitation to his authority be presumed to have authority to receive such notice”.

56 There is here no proof of any relevant limitation to his authority. But the authority of FAI Property Services went further than that and covered the broad range of property activities to which I have earlier made reference.

57 Importantly, the lease itself defines “Lessor”, though “subject to contrary intention” in these terms: “ ‘Lessor’ means and includes the lessor and its successors and assigns and where not repugnant to the context, its servants and agents”.

58 Thus I am satisfied notice could be “given” to the business address of FAI Property Services, acting as agent for the Lessor. It received the relevant notice as agent for the Lessor under the lease clothed with its agency responsibilities as regards its renewal. I conclude that must satisfy s170(1)(b) of the Conveyancing Act insofar as the relevant sending by post must be to the last known “business address … of the person to be served”. This is provided it was so communicated in time, as I conclude it was, for reasons elaborated later. Here, the person to be served is under the terms of the Lease either the Lessor or its agent. There is no repugnancy in the context, nor any contrary intention as would preclude the lessor in this context including FAI Property Services as agent for purposes of such service.

59 I do not accept that clause 31(14) of the lease made mandatory that the notice should be served only upon the Lessor and only in the manner there set out. The answer to that contention is to be found in my earlier conclusion, namely that clause 31(14) does not operate exclusively in the context of clause 1 of the Second Schedule when it comes to exercising an option. It is merely adjectival and does not preclude any other effective “giving” of notice. As I conclude later, clause 31(14) in any event does not preclude what would otherwise constitute service upon a company at common law. In saying that, I do not doubt that the notice given in accordance with clause 31(14) would comply with the lease. But that is because I consider that under that more stringent regime (though not only that regime), clause 1 of the Second Schedule would in fact be satisfied. In saying that, I again emphasise that clause 1 would also be satisfied by compliance with s170 of the Conveyancing Act. In that sense, the circumstances in the present case is on all fours with that in Young v Lamb ([2001] NSWCA 225, 13 July 2001, unreported). There, the conclusion was available that the express terms of the lease did not exclude the giving of notice to the agent, so equally here. Indeed the terms of the lease permit that course by reason of the definition of “Lessor” earlier referred to.

60 I now turn to the expert evidence given in regard to the ordinary course of post. I have concluded, for reasons I now elaborate, that, on the balance of probabilities, the notice did reach Level 8, 77 Pacific Highway, North Sydney in fact. This is despite the fact that if one accepts the Defendant’s evidence it did not come to anyone’s attention. However, even if that be accepted, it does not follow that it was not sufficiently “given”, if, as I conclude, it did in fact arrive at that office. This is so, though it be then overlooked by those employed by the Lessee or its agent. Evidence which is particularly cogent is contained in affidavit evidence from two officers from Australia Post. The first, Mr C E McKenzie, the Manager Performance Measurement and Analysis Branch for Australia Post, swore three affidavits dated 21 June 2001, 2 July 2001 and 9 July 2001. The second officer, Mr Pearce, was the Manager of the North Sydney Delivery Centre and swore an affidavit dated 9 July 2001.

61 Mr McKenzie deposed to the practice that would generally be followed in relation to a letter addressed in the manner of the letter enclosing the option in the present case assuming the same was posted in Market Street, Sydney. Mr McKenzie’s evidence was that as a matter of general practice the letter would have been delivered to the North Sydney Delivery Centre on the evening of 11 April 2001 and in the morning of 12 April 2001 before 5.20am. In the course of evidence at 130 Mr McKenzie said that the letter so addressed should have been delivered on the morning of 12 April 2001. Mr McKenzie referred in his first affidavit to an understanding that the mail was in fact placed in a locked bag which clearly emanated from Exhibit PX3. However, that does not in any way undermine the credibility of his evidence as to the general practice. More significantly, Mr McKenzie gave evidence as to an independent monitoring of Australia Post. He refers to KPMG’s figures of 93.7% achievement of delivery of mail on time by next day, which in this case would have been on 12 April 2001 and a 98.2% result of delivery on time plus one further day which would, in the present case, have been on or before 17 April 2001.

62 Mr Pearce deposed to the procedure that would be followed in relation to a standard envelope addressed in the manner of the letter enclosing the option in the present case. According to his evidence, the same would have been received at the North Sydney Delivery Centre on the morning of 12 April 2001 and would have been delivered to the 8th Floor, 77 Pacific Highway North Sydney by the postal delivery officer in the morning of 12 April 2001.

63 Mr McKenzie expanded in evidence in chief upon his affidavit of 9 July 2001 detailing his substantial experience over 22 years at a number of different delivery centres and as to the practice that would have been followed in delivery of a letter posted before 5.00pm on 11 April 2001 in the manner of the letter enclosing the option in the present case. Mr Pearce gave evidence to the effect that if posted before 6.00pm, in conformity with the notation on the mail box, it would have been delivered on 12 April 2001, T, 123.26. Ms Xygalas gave evidence as to what was on the mail box at T, 157.25 which was recorded on Exhibit on PX6.

64 The cross examination of Mr McKenzie did not shake that evidence. Mr Pearce also gave evidence in relation to the results of the monitoring of mail by KPMG and the significant achievement of 93.7% of delivery on time. Mr Pearce also gave evidence that he was not aware of any delivery problems in April 2001. It was apparent from the evidence of Mr McKenzie at (T, 127) that the sorting was done by machine, being a Multi Optical Character Reader prior to loading into a unit loading device, UDL, which in turn is divided into 48 different trays. The cross-examination did not elicit any particular stage where there was much likelihood of human error.

65 But in any event, as I have said, s76 of the Interpretation Act (NSW) 1987 may be called in aid. It is clear that this is a case where no evidence “sufficient to raise doubt is adduced to the contrary” of its deeming that the relevant service was “effected on the fourth working day after the letter was posted”.

66 That fourth working day would therefore be 17 April 2001, as the preceding 13 April 2001 was a public holiday being Good Friday as was Monday 16 April 2001, and postage occurred on the earlier Wednesday 11 April 2001.

67 Clause 35(18) may then be called in aid under the Lease. It provides as follows: “Where pursuant to this Lease the day on or by which any act matter or thing is to be done is a Saturday, Sunday or public holiday that act matter or thing may be done on the next succeeding day which is not a Saturday, Sunday or public holiday.”

68 Thus, relying upon clause 35(18), the last day for exercise of the relevant option is extended by one day from 16 April 2001 to 17 April 2001.

69 The Defendant attempted to argue that the terms of the option clause precluded the application of clause 35(18). This is because it is said that clause 1 of the Second Schedule does not prescribe any “day” on or by which any matter or thing is to be done but rather identifies a period within which a notice may be given. The Defendant further relies upon the fact that the option period is defined in terms of “months” rather than in terms of “days”. It refers to the fact that months, by the terms of clause 35(23) of the lease, is a reference to a calendar month and therefore could not be sensibly construed as meaning “a calendar month plus another day”.

70 I consider that such an interpretation is highly artificial and does not give effect to the evident intention of clause 35(18). A day can be defined by reference to a month or calendar month, or a period, simply on the basis that a day is then defined by a reference to a minimum or maximum period. It is nonetheless a “day on or by which any act matter or thing is to be done”.

71 The Defendant’s final argument is that clause 35(18) can only operate to the extent that no contrary intention is apparent and that the explicit terms of the option clause preclude the addition of a further day to the month in question. That however begs the question whether clause 35(18) is intended to apply as I conclude it does, to clause 1 of the Second Schedule. Once it be accepted that clause 31(14) does not exhaustively state permissible modes of giving notice, that argument could not be sustained.

72 Finally, I turn to whether notice was given or served at common law as it applies to a company, here the Lessor.

Service by the Lessee at Common Law

73 Was service effected at common law, and thus notice given, on the basis that cl 31(14) of the Lease does not preclude this being sufficient service? I start with whether service at common law was effected and then turn to the effect of cl 31(14).

74 On the basis of affidavit evidence given by Mr Comino, the solicitor for the plaintiffs, and Ms Xygalas, Mr Comino’s legal secretary (21 June 2001 paras 17-31; 20 June 2001 paras 9-10) I am prepared to find that on the afternoon of Wednesday 11 April 2001, Mr Comino placed the Notice of Exercise of Option together with a covering letter in an envelope with a pre-paid stamp which was addressed to:

“The Secretary
FAI General Insurance Limited
C/- FAI Property Services
8th Floor 77 Pacific Highway
NORTH SYDNEY NSW 2060”

75 Based on the evidence, I am satisfied that there was a reliable and consistent office procedure for dispatch of outgoing mail. I also find that in accordance with that system, the letter dated 11 April 2001 together with notice of the exercise of the option was duly posted by Ms Xygalas before 5:00pm on 11 April at the mail box located in Market Street opposite the David Jones Ladies Store in the City. Moreover, accepting as I do the earlier expert evidence of Messrs Pearce and McKenzie, I consider that on the balance of probabilities the letter and notice of exercise of option were received at the 8th Floor, 77 Pacific Highway, North Sydney premises on 12 April 2001.

76 As a general principle of the law of contract, any acceptance of an offer, including the exercise of an option, must ordinarily be communicated to the offeror; Latec Finance Pty Limited v Knight [1969] 2 NSWR 79 at 81. However, the alternative basis raised by the Plaintiffs raises the question whether at common law this principle applies to a company, and more particularly whether the notice purporting to exercise the option could be served simply by delivery to FAI’s premises, without coming to the attention of an officer of that company.

77 In Eaglehill Limited v J Needham Builders Limited [1973] AC 992 a clerical mistake led to a notice of dishonour being posted early. This had the consequence that it arrived at the office of the acceptor on the same day as the related bill of exchange was received by post by the Bank and was dishonoured. This raised the issue whether a notice of dishonour of a bill of exchange was given when it was sent or received. In considering the time of dishonour and the time of the receipt of the notice of dishonour, Lord Cross of Chelsea (with whom Lords Reid, Diplock and Simon agreed) observed that while he did not think that a notice of dishonour was “received” as soon as it was put into the drawer’s letter box either by the postman or a private messenger, he considered that it was the duty of the drawer, if he was absent from his place of business or residence, to see that there was someone there to receive notice on his behalf. Accordingly, Lord Cross concluded that

“such notice is received when it is opened in the ordinary course of business or would be so opened if the ordinary course of business was followed.”

78 This case suggests that actual awareness of the notice is unnecessary to constitute service if, assuming the notice exercising the option had been received in FIA’s mailroom, in the course of business on that day it would ordinarily have been opened. However, it might be said in the circumstances of that case that a notice’s non-receipt may be a consequence of the lack of diligence of the officer concerned. Thus the case may in fact say little about the failure of a document to come to the attention of that officer, when the officer concerned is competently occupying his or her post. Accordingly, one is mindful of Cohen J’s observation in NM Superannuation Pty Limited v Hughes & Ors (1992) 10 ACLC 477 (at 485) that Eaglehill did not purport to establish a general rule as to when documents are deemed to be received.

79 In N V Stoom Maats de Maas v Nippon Yusen Kaisha (The Pendrecht) [1980] 2 Lloyd’s Rep 56 the owners let their vessel under a time charter to charterers who caused the vessel damage. On the Friday prior to the expiry of the period in which the owners could bring an action they sent a telex claiming arbitration to the charterers. However, the telex was only received by the charterers after office hours on that day. Through no fault of their own it did not come to the notice of any responsible employee until the office re-opened on the Monday. The charterers contended that the claim made by the owners was statute barred because the claim had not been served in time.

80 In considering the issue as to when arbitration was commenced, Parker J observed (at 66) that delivery of a letter completed service under s27(3) of the Limitation Act. This was because, if the purpose of the notice was to stop time running it would defeat the Act’s intention if the party serving could be deprived of part of the period because all the employees of the opposite party were absent on holiday or otherwise. Accordingly, he concluded that a telex notice under s27(3) of the Limitation Act was served on a company when it was received at the registered office, whether or not this was in the normal business hours or at a time when for some other reason the registered office was closed. This case still stands as authority for the proposition relating to service despite other aspects of the case being over-ruled in Kodros Shipping Corporation of Monrovia v Empresa Cubana De Fletes (The Evia) (No2) [1983] 1 AC 736. Nonetheless, it is founded on the construction of specific statutory provisions. Consequently, it may be, as Young J acknowledged in Lollypops (Harbourside) Pty Limited v Werncog Pty Limited (1998) 9 BPR 16,361 at 16,372, that the case bears little upon the common law principles of service by post upon a corporation.

81 Nevertheless, The Pendrecht supra was successfully relied upon by the plaintiffs in NM Superannuation Pty Ltd v Hughes & Ors (supra). In that case the defendants were employees of a company and members of a superannuation fund, who resigned from the company. At around the same time, the Secretary of the company on the Chairman’s direction had purported to fax a notice to the trustee of the superannuation fund to terminate it. The entitlement of the defendants to payouts from the fund depended on the respective timings of their employment ceasing and the receipt of the notice by the trustee. In considering the issue of service of the notice, Cohen J observed (at 485) that The Pendrecht indicated that where modern forms of communication are used and equipment is kept available for the receipt of messages, then service by that medium is sufficient even though the document may arrive outside normal business hours. However, in the case before him there was no evidence that the trustee’s employees were not in its office at the time the fax was received. Accordingly, Cohen J found that the notice was received prior to the defendants ceasing to be employees of the company. This finding was not based on statutory construction but still suggests that actual notice at the time of service is not necessary.

82 In In re McGrath; Ex parte Official Receiver (1890) 24 QBD 466 a receiving order was made against a bankrupt on a creditor’s petition, and a copy of the order sent to the bankrupt by registered post addressed to him at an address subsequently confirmed by him as his residence. A further notice of the time and place appointed by the Court for public examination of the bankrupt was sent to this address, however, the bankrupt did not attend. In considering whether there had been effective service, Cave J observed that the rules did not say that the order ought to be personally served, but simply that it must be served on the debtor. The Bankruptcy Rules provided that all documents for which no special mode of service was directed could be served by pre-paid post letter to the last known address of the person to be served. Accordingly, Cave J concluded that delivery of the notice was sufficient to constitute service. Although this case turned on the provisions of the Bankruptcy Rules, in Capper v Thorpe (1998) 194 CLR 342 at 352 importantly the High Court cited this case as authority for the proposition that, unless a statute says otherwise, a document may be “served” although it is not personally served, and thus may be served by posting it to the person required to be served. The High Court made no qualification to this proposition such as requiring actual receipt, or actual or constructive knowledge of the posted document.

83 In In re 88 Berkeley Road NW9 [1971] 1 Ch 648 the plaintiff and the deceased owned and lived in a freehold house which was vested in them as joint tenants. In order to sever the joint tenancy the deceased had her solicitors send the plaintiff, by recorded delivery, a notice of severance. The Post Office records showed that this letter had been accepted by the deceased during the plaintiff’s absence from the house. In subsequently claiming entitlement to the deceased’s half share of the property the plaintiff did not acknowledge receipt of the letter and claimed that she never received it. In considering s196(4) of the Law of Property Act 1925, a provision deeming service to be sufficient if a notice was sent by registered post addressed to the lessee and it was not returned through the post as undelivered, Plowman J drew upon earlier reasoning in respect of the Valuation (Metropolis) Act 1869 in Rex v Westminster Unions Assessment Committee [1917] 1 KB 832. In the Valuation Act service was deemed to be made at the time at which the registered letter would in the ordinary course be delivered. Viscount Reading CJ had held (at 838) that the provision applied where notice in fact had not been received, otherwise it had no meaning. Accordingly, in the present case, Plowman J concluded that the notice of severance, even though never received by the plaintiff, was in fact sufficiently served for the purposes of the Law of Property Act. However, one should be wary about extrapolating the reasoning from these cases to a general principle of service, given that in both cases the legislation deemed service to have occurred, upon delivery in the ordinary course.

84 In Tenax Steamship Co Limited v The Brimnes (Owners) [1975] 1 QB 929 the owners’ agents sent a notice by telex to the charterers of their vessel purporting to withdraw the vessel on the ground of the late payment of the hire which was due the previous day. On that same day the charterers by telex instructed their bankers to credit the owners’ account. One issue among others raised by the facts was the time of receipt by the charterers of the notice of withdrawal. In considering this point Megaw LJ observed that if a notice arrives at the address of a person to be notified, at such a time and by such a means of communication that it would in the normal course of business come to the attention of that person on its arrival, that person cannot rely on some failure of himself or his servants to act in a normal businesslike manner in respect of taking cognisance of the communication so as to postpone the effective time of the notice until some time later when it in fact came to his attention. Accordingly, the fact that the evidence indicated that an employee of the charterers had been present in the office when the telex arrived, even though she claimed not to have seen the telex, was sufficient to constitute service. I consider those circumstances apply equally to the present case, save that it did not involve telex or fax.

85 In contrast to this line of authority sanctioning in effect constructive notice is Curtice v London City and Midland Bank Limited [1908] 1 KB 293. In that case the plaintiff drew a cheque on his bankers, the defendants, and on the same day, after business hours, he telegraphed to countermand payment of this cheque. The telegram was delivered on the evening of the same day by the Post Office, and, it being after office hours, was placed in the letter-box of the bank. By an oversight on the part of the defendant’s employees this telegram was not brought to the manager’s notice until the day after the cheque had been presented and paid. The Court of Appeal held that while the bank might be liable in negligence, there could be no such constructive countermand in a commercial transaction of this kind, for if mere receipt of a letter or telegram were sufficient countermand, the position of a banker in a large business would be most difficult should a large midday post arrive with so many letters that it took some time to open them. However, it may be that this case can be distinguished from the earlier authorities discussed above. This would be on the basis that that case looked only at mere receipt by the bank as a reference point determining service and does not account for the expected time at which notice might in the ordinary course of business come to the attention of the officer.

86 The most recent consideration of the issue of service in respect of a company is to be found in Lollypops (Harbourside) Pty Limited v Werncog Pty Limited (supra). That case involved the purported exercise of an option to renew a lease conveyed to the defendant landlord. The plaintiff claimed that it had delivered a notice to exercise the option into the mail room of the shopping centre where the defendant had set up a room containing a set of mailboxes, one for each of the tenants. Under the lease the exercise of the option was governed by a clause that provided that all notices might be served by being left at the address specified as the party’s address and that any such notice if posted should be deemed served at the expiry of 3 business days after posting.

87 After reviewing the authorities on s170 of the Conveyancing Act and analogous English provisions Young J found that delivery into the postbox was sufficient to constitute service and that it was unnecessary for the notice-giver to prove that it actually came to the attention of the addressee. Nonetheless, Young J was of the view that, even if this were wrong, in the case of a company the rule that communication of acceptance is required is satisfied when the relevant letter is opened “in the ordinary course of business or would have been so opened if the ordinary course were followed”(citing Eaglehill supra).

88 In support of his view, Young J drew parallels between Eaglehill and the Canon Brewery Co Limited v Signal Press Limited (1928) 139 LT 384. In Canon Brewery the defendants were in possession of the premises by themselves as under-lessees by way of mortgage. Under the lease there was a proviso for re-entry for the breach of any lessee’s covenant. In seeking to exercise the right of re-entry the defendant purported to serve on the plaintiff a notice of dilapidation, by handing the notice to a forewoman of the firm in occupation of the premises. In considering s196 of the Law of Property Act 1925 (counterpart to s170 of the Conveyancing Act), which provided that a notice may be served if affixed or left for the lessee on the property comprised in the lease, Humphreys J observed that this would include the case of a notice which is left in the hands of some person who is in fact on the premises, and in regard to whom there is reasonable ground for supposing that he or she will hand it to the lessee, if the lessee should be available for that purpose.

89 Accordingly, Young J concluded that when one is giving a notice which needs to be left at the office, then it will have been served when the relevant letter would in the ordinary course of business be opened. This conclusion preceded Young J’s observation that the relevant clause in the lease also provided that the risk of non-receipt of any notice lay on the recipient rather than the sender, although he acknowledged that this made it easier to infer that any accident that befell a notice after it had left the sender’s hands was at the cost of the recipient (at 16,372).

Conclusion re common law service

90 I conclude that this traverse of authority supports the proposition that a document sent by post to a company which , it can be inferred, was earlier received by that company, or should have been if the ordinary course of business was followed, is therefore served for the purposes of the common law. Likewise, that notice can be taken to have been “given” as required by Item 1 of the Second Schedule to the lease, in circumstances where cl 31(14) is not to be taken as laying down an exclusive regime. Accordingly, actual notice by the officer concerned is not necessary once it is accepted that the notice exercising the option was delivered to the offices of the addressee and should ordinarily have come to the attention of the relevant officer. I therefore conclude in the present circumstances that the notice was given at common law to the Lessor, as required to exercise the relevant option. That result is not precluded by cl 31(14), as it is not exhaustive of modes of giving notice so as to preclude common law service.

CONCLUSION

91 The option was validly exercised in conformity with the lease.

92 Having concluded, at common law, and in the events that happened, that service was effected on the company, what follows in terms of the exercise of option under the Lease?

93 First, based on my conclusion, (that cl 31(14) is not as a matter of construction, exhaustive of the ways in which the Lessee “gives to the Lessor … notice in writing” of intention to take a new lease) then it follows that common law service suffices for that notice to have been given. That provides an alternative to relying upon s170 of the Conveyancing Act coupled with s76(1) of the Interpretation Act to achieve that result.

OVERALL CONCLUSION, ORDERS AND COSTS

94 The Plaintiffs succeed such that they are entitled to the declarations sought and can be taken to have received, nunc pro tunc, the necessary leave pursuant to s471B of the Corporations Act. I direct the parties to produce orders giving effect to this judgment within ten days. Ordinarily costs should follow the event and be awarded to the Plaintiffs, though I give leave to the parties to address me on costs if they so wish.

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Last Modified: 12/03/2001