Stewart v Woolnough

[2000] NSWCA 7

NEW SOUTH WALES COURT OF APPEAL

CITATION:     Stewart v Woolnough [2000]  NSWCA 7

FILE NUMBER(S):
40069/99

HEARING DATE(S):           10 February 2000

JUDGMENT DATE:            10/02/2000

PARTIES:
Appellant: Alfred John Stewart and Daphne Gwendoline Stewart
Respondent: G & L Woolnough Pty Ltd

JUDGMENT OF:      Meagher JA Beazley JA Powell JA   

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):        4086/96

LOWER COURT JUDICIAL OFFICER:     Einstein J

COUNSEL:
Appellant: P Durack
Respondent:C M Simpson

SOLICITORS:
Appellant: Allen Allen & Hemsley
Respondent: P T Flower & Sons

CATCHWORDS:
Contract of sale
agreement on market value of property condition precedent
valuation of property misconstrued  
specific performance
no agreement if condition precedent not satisfied
no duty on parties to point out valuation had been misconstrued

LEGISLATION CITED:
Suitors Fund Act 1951
Real Property Act 1900

DECISION:
1. Appeal allowed
2. The decision of Einstein J be set aside.
3. The cross-appeal should be dismissed with costs.
4 Respondent to pay the appellant's costs and the plaintiff to pay the defendant's costs in the court below.However, the respondent to have a certificate under the Suitors Fund Act in respect of the costs of the appeal.
5. Judgement for possession of the property comprised in Folio Identifier 1/25/758707 ("the Property") on the Amended Cross-Claim.
6. The appellants' have leave to issue a writ of possession of the Property for 8 weeks from this date.
7. An order under s. 74 MA(2) of the Real Property Act 1900 that the respondent withdraw caveat number 2531310U lodged by the respondent on 14 October 1996 within 7 days of these orders.

JUDGMENT:

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40069/99

MEAGHER JA
  BEAZLEY JA
  POWELL JA

THUSDAY 10 FEBRUARY 2000

ALFRED JOHN STEWART AND DAPHNE GWENDOLINE STEWART v G & L WOOLNOUGH PTY LIMITED

JUDGMENT

1. MEAGHER JA:  This is a dispute about an option to purchase contained in a lease granted by the appellants, Mr and Mrs Stewart, to the respondent, Woolnough Pty Limited.  The action was commenced by a statement of claim from Woolnough Pty Limited seeking specific performance of a contract of sale alleged to have arisen out of the exercise of an option contained in the lease.  The lease did indeed contain provisions providing for an option to purchase.  That provision is clause 20 and it is necessary to set it out in its precise form:

   20.“The Lessor grants to the Lessee an option to purchase the demised premises exercisable within a three month period immediately prior to the expiration of the term hereby granted upon the following terms and conditions:-          
   (a)      This option is binding on the Lessor its executors successors and assigns.

   (b)      This option is personal to the Lessee.

   (c)       The consideration to be paid for the demised premises pursuant to this option shall be market value and shall be determined in the following manner:-

   i) By agreement between the parties but if the agreement cannot be reached within one month of the date of exercise of this option then

   ii) market value shall be determined by the mean value of two valuations by the registered valuers, being members of the Australian Institute of Valuers, one obtained by and at the expense of the Lessor and one obtained by and at the expense of the Lessee, such valuations to be made not more than two weeks apart from each other.

   (d)      This option may be exercised by delivery of a written notice which may be delivered personally or forwarded by prepaid post to the Lessors at their last known address whereupon exercise of the option the Lessors’ solicitors shall cause to be prepared and forwarded to the Lessee for execution a formal Contract and the parties on behalf of themselves and their legal personal representatives successors and assigns covenant to execute a formal Contract and return it to the other party promptly provided that the execution of a formal Contract shall not affect the substance of the parties’ obligations as Vendor and Purchaser bound by the option to sell and purchase exercised upon delivery of the notice of exercise pursuant hereto”.

2. The first question which this appeal raises is the proper construction of clause 20.  Did clause 20 call for a valuation of the fee simple, or a valuation of the reversion, that is the fee simple subject to the lease?  The matter was debated extensively before his Honour Einstein J, who came to the conclusion at paragraph 226 of his judgment:

   "To my mind, the proper construction of the option to purchase clause required that the freehold property be valued rather than that the valuation be subject to the existing lease."

1. With respect, if I may say so, his Honour was clearly right in that conclusion.

2. The oddity really about the appeal is, having come to that conclusion, he then seems to have disregarded it for practical purposes.

3. Unfortunately, the respondent purchaser's valuer adopted the view that the reversion had to be the subject matter of the valuation, that is he set about valuing the fee simple minus the lease.  He came up with a figure of $175,000.

4. The appellants' valuer adopted the correct construction and valued the fee simple, arriving at a figure of $290,000.

5. As I have said, the respondent lessees brought this action for specific performance of a contract to purchase the land pursuant to the exercise of the option.  Their contention was and still is that a binding contract came into existence whereby the respondents were entitled to purchase the land for $230,000.  That figure is in fact the mean between $175,000 and $290,000.  The contention of the respondent therefore is that it is the "mean value" referred to in clause 20(e)(2) but the "mean value" referred to in clause 20(e)(2) must refer to the "mean value" of two valuations of the same kind, two valuations valuing the same property.  It cannot refer to the "mean value" between one valuation of the reversion and another valuation of the fee simple.

6. The unhappy consequence of this is that the parties, if they have reached an agreement, have reached an agreement on everything except the purchase price to be paid for the property.  In other words, there is no agreement at all and the plaintiffs, the present respondents, are therefore entitled neither to specific performance nor to damages.

7. In this regard, it seems to me and I say so with some reluctance, that the appeal must succeed.

8. The respondent, Woolnough Pty Limited, in relation to a cross-appeal requested his Honour Einstein J to grant leave to amend its pleadings so as to advance a claim that the present appellants, Mr and Mrs Stewart, had waived their rights to advance the claim which I have already described, or alternatively, had elected not to pursue those claims.

9. His Honour refused to grant any amendment to this effect.  In my view, his Honour was perfectly correct and there is no reason to think his Honour fell into error.

10. I do not see how any case of waiver can be made out against the appellants, unless one finds that there was at some stage a duty on the appellants to draw to the respondent's attention the fact that they had misconstrued the lease and proceeded to value the wrong item of property.  I cannot see why such a duty exists.  Absent that duty there can be no waiver.

11. As far as election is concerned, despite the skilful advocacy of Mr Simpson on behalf of the respondent, I cannot see but what were alternative rights which the Stewart’s, the present appellants, were said to have available to them.  For these reasons I think his Honour was correct.

12. In my view, the following orders should be made:

    1.        Appeal allowed.

    2.        The decision of Einstein J be set aside.

    3.        The cross-appeal should be dismissed with costs. 

    4.        As far as the costs of the appeal is concerned, the respondent should pay the appellant's costs and the plaintiff should pay the defendant's costs in the court below.  However, the respondent should have a certificate under the Suitors Fund Act in respect of the costs of the appeal.

    5.        Judgement for possession of the property comprised in Folio Identifier 1/25/758707 (“the Property”) on the Amended Cross- Claim.

    6.        The appellants’ have leave to issue a writ of possession of the Property for 8 weeks from this date.

    7. An order under s.74MA(2) of the Real Property Act 1900 that the respondent withdraw caveat number 2531310U lodged by the respondent on 14 October 1996 within seven days of these orders.

1. POWELL JA:  I agree.

2. BEAZLEY JA:  I agree.

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LAST UPDATED:    22/02/2000