Wallville Pty Ltd v Liristis Holdings Pty Ltd

[2001] NSWSC 894

CITATION:	WALLVILLE PTY LTD v. LIRISTIS HOLDINGS PTY LTD [2001] NSWSC 894
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 4140/2001
HEARING DATE(S):	8/10/2001
JUDGMENT DATE:	16 October 2001
PARTIES :	Wallville Pty Ltd - Plaintiff Liristis Holdings Pty Ltd - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	R.J. Powell - Plaintiff L.J.W. Aitken - Defendant
SOLICITORS:	Bowring Stone Lawyers - Plaintiff Marsdens Solicitors - Defendant
CATCHWORDS:	LESSOR AND LESSEE - option to renew - exercise of option by notice in writing - on the facts it was found that notice had not been given - exercise of option by posting notice - consideration whether posting notice is sufficient if not received or not received within available time for exercise - consideration of operation of s.170 Conveyancing Act 1919.
LEGISLATION CITED:	Conveyancing Act 1919 s.170
CASES CITED:	Cushing v. The Lady Barkly Gold Mining Co. (1883) 9 VLR (Eq) 108 McCaul (Aust) Pty Ltd v. Pitt Club Limited (1959) SR NSW 122 Holwell Securities Limited v. Hughes [1973] 1 WLR 757 (Templeman J) [1974] 1 WLR 162 (CA) Bressan v.Squires [1974] 2 NSWLR 460 Levitt v. Illawarra Seafood Pty Ltd (No. 2) [1983] 3 BPR [97165] Lolly Pops (Harbourside) Pty Ltd v. Werncog Pty Ltd [1998] 9 BPR [97719]
DECISION:	Declaration that option not exercised - See para [38] for Orders.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

4140 OF 2001
BRYSON J.
TUESDAY 16 OCTOBER 2001

WALLVILLE PTY LTD v. LIRISTIS HOLDINGS PTY LTD

Judgment

: The lessor disputes the lessee’s claim to have duly exercised an option to renew a lease. The lessor is the plaintiff and commenced the proceedings by Summons before expiry of the previous lease, claiming a declaration that the lessee had not exercised the option. The lessee has not claimed or has not yet claimed specific performance of an obligation to grant a renewed lease.

2 The lessor’s title is itself leasehold as lessee from the State of New South Wales in Special Lease No. 1988/2 for the Metropolitan Land District. The lessor has a Special Lease from 9 September 1989 to 31 December 2013 over land on the foreshore and on the bed of Gunnamatta Bay at Cronulla, accessible from Tonkin Street Cronulla, composing 5513 sq metres, largely under the waters of Gunnamatta Bay, for the purpose “for waterfront business (marina)”. There are improvements including a two-storey building, a slipway, a concrete apron, and walkways giving access to the Marina and moorings. The sub-lease relates to the land in Certificate of Title 1224/729324 and is registered. The plaintiff granted sub-lease registered 5686670U to Cronulla Marine Services Pty Ltd for a term of five years from 1 October 1996 to 30 September 2001 over part of the land in the Special Lease and in 1999 the sub-lease was assigned and transferred to the defendant. The lessor has a licence for some moorings in Gunnamatta Bay. In association with the sub-lease the lessor allowed the lessee to use the moorings.

3 The sub-lease contained cl.15 under which the lessee had an option of renewal for five years. The relevant provisions of cl.15 were as follows:

15. THE Lessor covenants with the Lessee that if the Lessee desires to have a further Lease of the premises granted to the Lessee for the term of Five (5) years after the expiration of the term of this Lease and gives the Lessor not less than four (4) months and not more than six (6) months notice in writing to that effect prior to the expiration of the term of this Lease then provided that at the date of exercise of option and at the date of expiration of this Lease there has been no breach by the Lessee of the covenants terms conditions and provisions herein contained the Lessor will grant to the Lessee at the cost of the Lessee a Lease of the premises for the said term of Five (5) years commencing on the day following the date of expiration of the term of this Lease years commencing on the day following the date of expiration of the term of this Lease upon and subject to the same covenants conditions terms and provisions contained in this Lease except that: …

The exceptions are not important for the present dispute.

4 Clause 7 of the sub-lease contained a number of provisions of various kinds regulating the relationship including subcl.7(k) in these terms:

(k) Any notice or request hereunder may be served in manner mentioned in Section 170 of the Conveyancing Act 1991-1954 as amended and may be signed on the behalf of the lessor (if a company) by a Director, Manager, Assistant Manager or Secretary of the lessor and any notice so signed shall be conclusive evidence as to its execution and of the authority of the person whose name appears therein to sign the same.

5 Section 170 of the Conveyancing Act 1919 was in these terms in 1996 (and still is):

170 Regulations respecting notices
(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 the name of the lessee or mortgagor, 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.

6 In essence, the lessee’s case is that it exercised the option to renew by a letter to the lessor which was posted at Cronulla Post Office about 3 pm on Friday 25 May 2001. The lessor’s position is that it did not receive any Notice of Exercise of the Option by 31 May 2001, or at any other time which could be effective. To establish this position the lessor set out to establish that in fact the lessee did not post Notice of Exercise of Option to the lessor. The lessor also contended that actual written notice of exercise, received by the lessee within the contractual period, is essential for due exercise, and that if the letter had been posted posting the notice would have been insufficient without actual delivery on or by 31 May.

7 The lessor as plaintiff bears the onus of proof of all facts necessary to ground entitlement to the declaratory order claimed; the lessee has not made any cross-claim or other claim, and does not bear any onus of proof. As each party embarked fully on proving what it claimed were the facts and adducing evidence in support of it, the onus of proof is of little significance.

8 The Notice of Exercise of Option on which the lessee relied is a letter on a printed letterhead used by the lessee which gives its name and place of business, and a description of its business. The typed portion of the letter is in these terms:

25th May 2001
Mr Bob Grounds
Wallville Pty Ltd
16-18 Parraweena Road
Taren Point NSW 2228
Re Option
Dear Mr Grounds,
Please find below execution to our rights to exercise its option under the current lease.
Liristis Holdings Pty Ltd would like to exercise its option for another five years.
Please send any necessary paperwork to Marsdens Attention Dean Alcorn.
Thanking you in advance.
Kind Regards
(signature) Tony Liristis Managing Director
(signature) Maria Liristis Secretary
Witness (signature) Phyllis Munoz

9 If notice was given in those terms at the right time it complied with the requirements of cl.15; the meaning is unmistakable. This was not disputed. In his affidavit Mr Tony Liristis referred to earlier litigation between the same parties in proceedings 3318 of 2000. He said that during the hearing of the earlier proceedings he had many occasions to read documents including the sub-lease, he was told on 24 May 2001 that Barrett J would deliver his judgment on 25 May, he was present when the judgment was delivered, read a copy of the judgment and the orders and understood that the defendant “… was a tenant and as such the option needed to be exercised in accordance with the sub-lease.” Earlier, on or about 23 May, he caused to be prepared in draft an exercise of option which he intended to send to the lessor subject to the decision of Justice Barrett. Following the decision he signed the exercise of option and saw Maria Liristis (who is his wife) sign the option and Phyllis Munoz witness the signatures. Ms Munoz is Maria Liristis’ sister and she worked and works as a Secretary in the lessee’s office. Mr Liristis instructed Ms Munoz to go to Cronulla Post Office and send the exercise of option. He anticipated that he would receive documents from the lessor before 30 September 2001.

10 In August 2001 much of the attention of Mr and Mrs Liristis was taken by the fact that their son who had Leukaemia fell into a relapse and was hospitalised in about the first week of August, and Mr Liristis did not attend work for about three weeks. The next action Mr Liristis took which was relevant arose from receipt of a letter from the lessor’s solicitors dated 8 August 2001 which required vacant possession on the expiry of the lease on 30 September and asserted “Liristis has not exercised the option to renew the sub-lease. No written notice, nor indeed any notice, of exercise of the option has been given to Wallville”. Mr Liristis instructed his solicitors Marsdens to reply, and they replied on 9 August and stated “Notwithstanding what you say in paragraph 3 of your letter, I am instructed that my client exercised the option on 25th May, 2001. I have asked my client to provide me with a copy of the Notice of Option given by him and will provide a copy to you as soon as it is to hand.” It was through this that, according to Mr Grounds, the lessor first knew that the lessee claimed to have exercised the option. The lessee sent its solicitors a copy of the document dated 25 May 2001 by a fax message from Ms Munoz to the solicitors on 31 August 2001; Ms Munoz said in that message “I am Sorry it took so long to get this copy to you because I have had all Mr Liristis files and was putting them all in folders, and I have been off work for a while, please accept my apologies. I had Mr and Mrs Liristis sign the option and then had it witnessed. I had sent this document to Mr Bob Ground at 3.00 pm on Friday the 25th of May 2001, after Mr Liristis instructed me to do so.” Messrs Marsdens sent a copy of the notice to the lessor’s solicitors on 3 September 2001; it is the lessor’s case that this was its first knowledge of the contents of the notice. In the meantime the lessor had commenced these proceedings on 27 August.

11 The business of the lessor all relates to the Special Lease and the mooring licences and to sub-leases of parts of the premises to Liristis Holdings Pty Ltd and other tenants. This is its sole activity. It has a registered office at the office of an accounting firm in North Sydney but in substance its activities are conducted by Mr Grounds, who is its directing mind and the principal figure in its affairs. The location at which the business of Wallville Pty Ltd is managed is the office premises in a business unit at 16-18 Parraweena Road Taren Point. The affairs of Wallville Pty Ltd are only a small part of the business conducted there, where several other businesses associated with Mr Grounds are carried on. Five persons were usually in attendance on business days in May. Affairs of Wallville Pty Ltd were and are attended to by Mr Grounds and by Mr McKenna, who is employed as an accountant in the various enterprises conducted there and also functions as Office Manager.

12 Mr Grounds maintains a Post Office Box 233 at Caringbah Post Office. The practice in May 2001 was that Mr Grounds and Mr McKenna each had a key to the Post Office Box, but no one else did. Mr Grounds gave evidence of his daily routine which includes clearing the Post Office Box when he goes by car to a sandwich shop nearby, then returning to the office and parking his car virtually alongside the letter box and checking the letter box; then having his lunch. The practice of Australia Post and its delivery staff for many years has been that letters addressed to Mr Grounds or to his enterprises at 16-18 Parraweena Road Taren Point were not taken to the premises in Parraweena Road by postal delivery staff, but were placed in the Post Office Box. Mr Grounds has never given Australia Post a direction to put all the letters in PO Box 233. The great majority of letters directed to Mr Grounds or his enterprises at Parraweena Road were actually placed in the Post Office Box, whether or not the address on the envelope mentioned the Post Office Box. In a small number of cases however delivery staff brought letters to the premises at Parraweena Road and placed them in the readily accessible letter box at the front of the premises, illustrated in the photograph Exhibit B. It is rare for mail delivered by Australia Post to be placed in the letter box.

13 Mr Grounds spends some of his time in Queensland where he has a house, but he was in Sydney and attended the business premises at Parraweena Road Taren Point on Friday 25 May 2001 and on each business day after that until and including Thursday 31 May. His evidence shows that he followed his routine on those days, and attended at least once every business day at the Caringbah Post Office and collected all mail in Post Office Box 233. His evidence also showed that he inspected the letter box at the premises on each of those days and collected any mail which he found there. Mr McKenna who also had a key followed a similar routine in which he collected any letters from Post Office Box 233, every day, and cleared the letter box at the premises whenever he saw some material in it, normally twice a day and at least every day. It was rare to find postal articles in the letter box and the usual material in it was advertising flyers.

14 The evidence of Mr Grounds and also of Mr McKenna was, in each case, that he did not receive the lessee’s letter of 25 May 2001. Mr Grounds has made inquiries of everyone else who works in the office about whether the letter was received there, with negative results. Their evidence was tested in cross-examination, both as to whether the routines which they described were followed, and as to the sufficiency of office practices to bring to Mr Grounds’ notice any letter which was received. I have confidence in Mr Grounds’ evidence and in my finding it is clear that Mr Grounds did not have notice of an intention of the lessee to exercise the option of renewal on or before 31 May 2001, that he did not receive the letter of 25 May 2001 either by 31 May or at any other time, and that he did not know of the lessee’s claim to exercise the option until it came to his knowledge through solicitors’ correspondence in August, soon after which he commenced these proceedings. I regard Mr McKenna’s evidence as reliable and I accept that he did not receive the letter of 25 May at any time. It has been established to a high degree of probability that the letter did not ever reach the premises at 16-18 Parraweena Road Taren Point.

15 The evidence of Mr Liristis, Mrs Maria Liristis and Ms Munoz all supported the lessee’s position that the letter was signed on 25 May by all three of them. Mr Liristis’ evidence was that he prepared the notice and that his solicitors did not tell him what the notice should contain except that he was to exercise the option and to write to Mr Grounds and say that the lessee wanted to exercise its option; the solicitor said there was no formal paper work. The solicitor told him that the document had to be witnessed. Mr Liristis did not report to his solicitors that he had given the Notice of Exercise or send them a copy before August.

16 Ms Munoz’ evidence shows that she put the letter in a stamped envelope, took it to Cronulla Post Office and posted it at Cronulla Post Office that day. Her evidence was that she did this after Mr Liristis had told her in terms “Post it to Wallville, it must go today.” A curiosity of the evidence, in particular of Ms Munoz’ evidence, is that it does not directly deal with what address was written on the envelope. In her affidavit she says “On 25 May 2001 at about 3.00 pm I put the exercise of option in a stamped envelope and sent to the address of Wallville, where we normally send our rent cheques and I then went to the Cronulla Post Office and posted the exercise of option. I told Tony that I had done that when I returned to the Marina that day.” She did not say to what address they normally sent their rent cheques. It may have been intended that I should understand that the address on the envelope was the same as the address on the letter namely:

“Mr Bob Grounds
Wallville Pty Ltd
16 – 18 Parraweena Road
Taren Point NSW 2228”
No evidence showed whether there was a return address on the back of the envelope. There was no suggestion in the lessee’s case that the envelope had been returned undelivered, and of course the envelope itself was not produced in evidence nor was a copy.

17 Ms Munoz refers to the address of Wallville “where we normally send our rent cheques” but does not say what address that was. Although rent cheques were sometimes posted, it was not normal to send them through the post. They were often handed to Mr Grounds. Sometimes they were hand-delivered to the premises at Parraweena Road by Mr Liristis or by Mrs Liristis. Mr Grounds’ evidence was that, apart from rent cheques, the lessee and Mr Liristis have never, during their dealings with Mr Grounds since January 1998, posted a letter or business communication either addressed to the premises or addressed to the Post Office Box; communications had been by telephone, by fax messages and by personal visits or by solicitors’ correspondence.

18 In July there was some difficulty about delivery of a rent cheque. The lessee produced (Exhibit 2) an envelope in which a rent cheque had been forwarded; but the cheque was not received by the lessor, and was later replaced with another cheque. That envelope had a return address on the back. On its face it was addressed to “Wallville Pty Ltd, 16-18 Parraweena Road, Taren Point 2228” in Ms Munoz’ handwriting. It was not delivered by Australia Post but returned to sender marked “Refused” in a post office note dated 5 July.

19 Circumstances relating to Exhibit 2 received some attention in the hearing, as I understand it in support of a suggestion that the lessor’s evidence that the letter of 25 May was not received was unsatisfactory and that that letter, or letters generally, may have been refused in the mail. There is no support for this possibility in the evidence. Events affecting Exhibit 2 are no more than an illustration of the obvious possibility that postal articles may not be duly delivered. One matter that consideration of Exhibit 2 did raise is that, as appears by an extract from a map book (Exhibit C) Parraweena Road runs for several kilometres, the eastern part where the premises 16-18 Parraweena Road are situated is in Taren Point and served by Caringbah Post Office with Post Code 2229, but the western part is served by Miranda Post Office with Post Code 2228. This points, but not in any definite way, to the possibility that mail addressed to an address in Parraweena Road with Post Code 2228 might not be delivered in the ordinary course of post for a postal article with a correct post code, and might go astray in some way. However this raises no more than consideration of possibilities and does not point to any definite conclusion. The fact that the address was not correct, or was not completely correct, has a bearing on the application of s.170 of the Conveyancing Act 1919. When s.170 is addressed in a literal way it has not been complied with. Assuming that the address in the letter was the address written on the envelope, it should of course be found that 16-18 Parraweena Road Taren Point was the last known business address of the lessor, but in the postal context the business address included the post code and the post code was wrongly stated.

20 There are some anomalies in the lessee’s evidence relating to the notice and in the probabilities bearing on whether it was prepared and posted as alleged. One relates to the time of preparation. The proceedings before Barrett J were heard on 4, 5 and 6 April when judgment was reserved and judgment was delivered on 25 May. Mr Liristis said that he was told on 24 May that judgment would be delivered on 25 May, and also says that he caused the exercise of option to be prepared on or about 23 May and that he intended to send the exercise of option to Wallville subject to any decision in the other litigation. It was appropriate to turn his attention to exercise of the option as the end of May approached, but it is not possible to see why he explained his attention in terms of delivery of judgment when his attention went to drafting the notice the day before he learnt that judgment was to be delivered. It is difficult to understand why he did not entrust exercising the option, or entrust it fully, to the solicitors who were then acting for him in the other litigation. He gave different accounts at different points about the part taken by the solicitors in advising him on what the option should say. It seems remarkable that in such an important matter he did not get solicitors to prepare it. In retrospect it is particularly unfortunate that there was no significant involvement of solicitors in its preparation as that would have provided material corroborating his claim that the document in fact was prepared, and perhaps that it was delivered. Another anomaly is that although he says he had gone through the sub-lease and documents, and he knew of the importance of time in the exercise of the option, he directed the document to be posted late in May, at a time when it would have been relatively simple to give it to Mr Grounds personally, or to take it to the business premises and deliver it. For a matter as important as the renewal of a lease for five years the time for which was expiring, few people would trust the post when means to make the delivery of notice completely clear were readily available. By way of example, it would have required only a small diversion on his ordinary homeward journey for Mr Liristis to deliver a notice to the premises himself. The history of earlier conflict and litigation should have prompted vigilance.

21 There are strange anomalies in the circumstances of swearing the defendant’s affidavit evidence. Mr Liristis’ affidavit bears the typed date 14 September 2001 as the date of swearing. The Registrar’s note on the affidavit shows that it was filed on 21 September. There are four sheets annexed to the affidavit, two bear annexure notes dated 30 September and two bear annexure notes dated 20 September. It is very unlikely that Mr Liristis’ affidavit was actually sworn on 14 September. These anomalies suggest that the affidavit may not have been read carefully or otherwise may not have had appropriately close attention when it was sworn. The affidavit of Maria Liristis bears the type-written date of swearing as the 12 September 2001 but refers to Mr Tony Liristis’ affidavit and to an annexure to it, although his affidavit could not have been sworn then. The affidavit of Ms Munoz bears the date of swearing 14 September 2001 and also refers to Mr Liristis’ affidavit. Ms Munoz’ affidavit refers to an Annexure A to her affidavit although there is no such annexure. These relatively slight indications that the affidavits may not have received appropriately close attention acquire some significance when the affidavits are involved in a credit issue in which the lessor wholeheartedly challenges the basic facts and propositions that the notice bearing date 25 May 2001 was actually signed and posted on that day. The cumulative affect of small inexactitudes is adverse to confidence in the whole body of evidence.

22 Ms Munoz made entries in the lessee’s business diary for 25 May 2001; her entries record a number of attendances including phone calls, courier attendances and other small business and these records appear to relate to posting articles.

Sent letter to Bob Grounds
Sent proposal to J. Smith

This is not a clear or satisfactory piece of corroboration of the claim that the letter in question was posted.

23 The lack of involvement of solicitors who were ready to hand in an important piece of business in a conflictual situation, the lack of any instructions to them to pursue the claim for a renewed lease until August and the further delay in furnishing them with the copy of the Notice of Exercise when they expressly asked for it have contributed to a general sense of the improbability of the lessee’s claim that a notice was duly given. Mr Liristis has explained, in a reasonably adequate way, his lack of attention from early August onwards in terms of the illness of his son, which engaged the attention of himself and Mrs Liristis, but this explanation does not relate to earlier events, while Ms Munoz explained to the lessee’s solicitors her delay in producing a copy by attention she was giving to ordering the files.

24 There is no basis for any finding that Mr Grounds or anyone else on behalf of the lessor deliberately rejected or refused to accept the letter. It is extremely improbable that the letter did arrive at the business premises but was inadvertently discarded. In my finding it is clearly established that the letter was not ever delivered in the post, and the probability, which is well short of a certainty, that the postal system would operate in a regular way supports a finding that because the letter was not delivered, it is probable that it was not posted.

25 Counsel referred me to the following observation of Holroyd J in Cushing v. The Lady Barkly Gold Mining Co. (1883) 9 VLR (Eq) 108 at 122:

The presumption that a letter properly addressed, stamped and posted, and which is not returned to the writer, arrived at its destination, is conclusive if not denied, and so strong that mere non-recollection would be insufficient to outweigh it.

26 This observation was presumably based on knowledge of the functioning of the postal system in 1883 and is somewhat stronger than my experience of later times would support. The observation could be modified from a statement of a presumption and a conclusive result, which might be thought to express a legal principle to a statement of reasoning about factual probabilities, and if so modified it appears to me to be good reasoning. As it happens, in the present case the letter was not properly addressed in the respect that the post code was wrong, and the evidence about what the address was is not altogether clear, and there is distinct evidence of non-receipt. A corollary of Holroyd J’s proposition is that non-receipt is a basis on which it can be inferred that the document was not posted.

27 When I take into account matters which in my view make the lessee’s case an improbable one and review the impressions arising from the evidence of the lessee’s witnesses and their manner in giving it, their affirmations have not displaced the overall view that the lessee’s case is very unlikely to be true. Although none of the anomalies and grounds for concern affecting the evidence in support of the lessee’s case is conclusive, when they are taken together and the evidence is considered as a whole I do not have any confidence in the body of evidence. My finding, based on my view of the probabilities, is that the lessor has established that no notice in the form alleged by the lessee was sent to the lessor by post on 25 May 2001.

28 On the facts as found the lessor is entitled to succeed. I should however express views on submissions made by the lessor to the effect that actual notice of the exercise of the option within the available time for exercise is necessary for effectual exercise.

29 It will be recalled that cl.15 of the Lease makes it a condition of entitlement to a renewed lease that the lessee “… gives the lessor … notice in writing … to the effect that the lessee desires to have a further lease of the premises …” The plain and natural meaning of these words requires that the lessor receive the written notice within the time available. On the form of the sub-lease and particularly of cl.15 it is in my opinion clear, as is usually clear in the case of renewals of leases, that it is incorrect to view the sub-lease as granting, at the time when the sub-lease was entered into, an interest in land during the renewal period, subject to fulfilment of a condition; it is only if the conditions including giving notice are fulfilled that the lessee has any interest relating to the renewal period and there is no room for any reasoning or for the application of any principles based on the view that non-compliance with notice provisions produces a forfeiture against which there is some room for equitable relief. The position rather is as the lease in that case was seen to be in Gilbert J. McCaul (Aust) Pty Ltd v. Pitt Club Limited (1959) SR NSW 122; see 125.

30 The lessee’s counsel relied on the words “and shall be sufficiently served” in the opening passage of subs.(1). The opening passage including these words appeared in the earlier form of s.170, and in the corresponding English section, and was not regarded in earlier decisions as producing this result. Courts have taken the view that actual communication of notice of exercise of an option to the lessor within the contractual period is essential and that there is no room for the application of reasoning, referred to by counsel for the lessee as the Postal Acceptance Rule, in which placing an acceptance of an offer in the post operates as acceptance of an offer to form a contract. On the terms of cl.15 the events in which there is to be a right to a renewed lease are not open to simple analysis as offer by the lessor and acceptance; clause 15 constitutes a contractual offer in a contractual relationship which was already formed (and on which after assignment the lessee could rely): compare McCaul at 123. If the lessee fulfilled stated conditions there was an entitlement to a renewed lease; yet otherwise there was no such entitlement. Courts have declined to apply the reasoning relating to acceptance by post to renewal of options and in my view that reasoning does not have general application to the renewal of options, and could only be applied if the agreement which created the contractual offer was made in terms or in circumstances which in some way indicated that lodgement in the post was a means of fulfilling the condition for exercise, whether or not the notice was delivered and whether or not it was delivered in time. There is nothing in practices relating to the exercise of options, in the dealings between these parties or in the terms of cl.15 which could detract from or qualify the expressed requirement to give the lessor notice in writing.

31 The significant authority supporting the lack of effect of posting without actual notice is Holwell Securities Limited v. Hughes [1973] 1 WLR 757 (Templeman J) and [1974] 1 WLR 155 (Court of Appeal); the sufficiency of the act of posting was rejected by Russell LJ at 158 and Lawton LJ at 161. In Bressan v.Squires [1974] 2 NSWLR 460 Bowen CJ in Eq reached a similar conclusion. See too Levitt v. Illawarra Seafood Pty Ltd (No. 2) [1983] 3 BPR [97165] at 9140 (Kearney J). This subject was considered and some American authorities were reviewed in the judgment of Young J in Lolly Pops (Harbourside) Pty Ltd v. Werncog Pty Ltd [1998] 9 BPR [97719] at 16370 to 16372; however on the facts of that case the issue was not determinative.

32 When Bowen CJ in Eq decided Bressan v. Squires s.170 of the Conveyancing Act 1919 was not in its present form and in its former state gave more countenance to the argument that placing a letter in the post brought about deemed service than it now does. At that time subs.170(1) included this provision:

(1) Any notice required or authorised by this Act to be served shall be in writing, and shall be sufficiently served – (a) …
(c) If sent by post in a registered letter addressed to the person to be served, by name, as his aforesaid place of abode or business, and if that letter is not returned through the post office undelivered; and such service shall be deemed to be made at the time when the registered letter would in the ordinary course be delivered ;
(d) …”

33 I have added some emphasis. Section 196(4) of the Law of Property Act 1925 (United Kingdom), on which Holwell Securities Limited v. Hughes was decided, contained a similar provision dealing with time at which service was deemed to be made.

34 Section 170 was amended and its terms largely recast by the Real Property and Conveyancing (Amendment) Act 1991, so that at present it contains no provision dealing with a time at which service is deemed to take place when service is effected by post. By contrast, when service is effected by document exchange the same amendment which repealed the deeming provision in relation to service by post inserted a deeming provision in relation to service by document exchange. See subs.1(A). Clearly there was no legislative intention to make any provision, expressly or by implication, establishing a time at which delivery by post is deemed to have taken place. It appears even more clearly in the present form of s.170 than it did earlier that the operation of the section in relation to the post is to authorise service by post and make service by post sufficient, but not to create any artificial presumption that notice was given or is to be deemed to have been given when it has not in fact been given. Where s.170 is expressly incorporated as it is in this sub-lease, service of notice by post is an authorised means of service, but service is not effective unless a written notice is actually given to the lessor, and unless that event happens within the time required by clause 15.

35 The provisions of s.170 simply have no impact on finding when service of notice takes place if the notice is served by post in the manner provided for. Reliance could be placed on the ordinary course of Australia Post business to raise a probability and base a finding about when delivery took place; but in this case there was no such evidence. Reliance could also be placed on the Court’s taking notice of the ordinary course of Australia Post business; the Court may be able to do this where the time allowed wide margins, but it is not possible for me to know or take notice of the ordinary course of delivery of a document posted at Cronulla Post Office for delivery at a street address in Taren Point but with the wrong post code on the envelope. That could well take more than six days; I do not know, and the question is academic because it is reliably established elsewhere in the evidence that the document was not delivered at all.

36 The 1991 amendment also removed the requirement for it to be shown, as part of a showing that a notice was sufficiently served, that the letter had not been returned through the post office undelivered. As it happens, the lessee’s evidence does not literally deal with whether or not the letter was returned through the post office undelivered; the question was not examined in any way and it seems to have assumed at the hearing that it had not been returned undelivered.

37 For these reasons I conclude that the lessee has not exercised the option and the lessor is entitled to the Declaratory Order claimed.

38 Order:-

(1) Declare that the defendant has not exercised the option to renew the sub-lease registered 5686670U of a marina and moorings at Gunnamatta Bay being part of the land in Special Lease 1988/2 Metropolitan Land District Torrens Title Reference 1224/729324.

(2) Order that the defendant pay the plaintiff’s costs of the proceedings.
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Last Modified: 10/22/2001