Sun Property and Investment Pty Ltd v Elmasri

In the case of Sun Property and Investment Pty Ltd v Elmasri, the plaintiff, as the prospective purchaser, entered into a deed of put and call option with the defendants, who were the owners and prospective vendors, as well as the cross-defendants, who were the guarantors. The plaintiff had paid a call option fee of $600,000 to the defendants in accordance with the terms of the deed. The deed specified that the put option was granted by the plaintiff to the defendants in consideration for the call option and a put option fee of $1.00. Additionally, the deed provided that the call option fee would be retained absolutely by the defendants if neither option was exercised. The proposed contract for sale of land attached to the deed did not include particulars of the purchase price. Before the expiration of the period during which the plaintiff could exercise the call option, the plaintiff issued a notice of rescission of the deed, relying on section 66ZI of the Conveyancing Act 1919 (NSW).

The primary legal issue the court had to determine was whether the statutory right of rescission under section 66ZI entitled the plaintiff to rescind the deed ab initio. The court needed to examine the terms of the deed, the nature of the put and call options, and the effect of the statutory right of rescission on the agreement. The court also had to consider the implications of the notice of rescission on the distribution of the call option fee and the enforceability of the put option.

The court examined the terms of the deed and the statutory provision in question. It found that the statutory right of rescission under section 66ZI did not permit the plaintiff to rescind the deed ab initio. Instead, the court held that the rescission under section 66ZI allowed the plaintiff to rescind the deed, but only prospectively, meaning that the deed was rescinded from the date of the rescission notice onwards. The court further held that the call option fee of $600,000 was to be returned to the plaintiff, as the deed was rescinded prospectively and the fee was not expressly forfeited in the deed. The court determined that the put option remained valid and enforceable, as it was not affected by the rescission of the deed.

The court ordered that the deed be rescinded prospectively from the date of the rescission notice, and that the call option fee of $600,000 be returned to the plaintiff. The put option remained valid and enforceable.