Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd

Case •

[2010] WASC 108

•

25 MAY 2010

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

CITATION:   WHITEGUM PETROLEUM PTY LTD -v- BERNADINI PTY LTD [2010] WASC 108

CORAM:   BEECH J

HEARD:   12 MAY 2010

DELIVERED          :   25 MAY 2010

FILE NO/S:   CIV 1006 of 2010

BETWEEN:   WHITEGUM PETROLEUM PTY LTD

Plaintiff

AND

BERNADINI PTY LTD
Defendant

Catchwords:

Real property - Lease - Option of renewal - Whether lessee effectively exercised option - Whether alleged notice of exercise clearly and unequivocally manifested intention to thereby exercise option - Turns on own facts

Legislation:

Nil

Result:

Plaintiff's claim dismissed
Defendant's counterclaim for possession upheld

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J A Thomson

Defendant:     Mr B Dharmananda

Solicitors:

Plaintiff:     Holborn Lenhoff Massey

Defendant:     Gadens Lawyers

Case(s) referred to in judgment(s):

Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd [2006] NSWSC 902; (2006) 202 FLR 435

Ballasv Theophilos (No 2) [1957] HCA 90; (1957) 98 CLR 193

Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177

Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749

Nicholson v Smith (1882) 22 Ch D 640

Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85

Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673

Traywinds Pty Ltd v Cooper [1989] 1 Qd R 222

Turner v Bulletin Newspaper Co Pty Ltd [1974] HCA 25; (1974) 131 CLR 69

Young v Lamb [2001] NSWCA 225

BEECH J: 

Introduction

  1. The plaintiff is the lessee of premises owned by the defendant.  The plaintiff (the lessee) claims to have exercised an option to renew the lease.  The defendant (the lessor) denies that the lessee effectually exercised the option of renewal. 

  2. The lessee claims that its letter of 26 August 2009 constituted an effective exercise of its option of renewal.  Whether that is so involves the proper construction of that letter, viewed in the context of the circumstances known to the parties, and measured against the terms of the lease.

  3. I begin by outlining the circumstances, before turning to the relevant legal principles.

The facts

  1. The facts are not in dispute.  The only evidence in the case was a statement of agreed facts.  The following facts emerge from admissions in the pleadings and from the statement of agreed facts. 

  2. In 1997 the lessee entered into a lease with Bongiovanni Nominees Pty Ltd, which was then the owner of the land.  When the lessor became the owner of the land it became bound by the lease.

  3. The lease was for an initial term of seven years, commencing on 1 December 1997 and expiring on 1 December 2004.  The lease provides for three further option periods of five years each.  Clause 5.10 provides the options of renewal and sets out the terms upon which and the manner in which the option of renewal may be exercised.  Clause 5.10 is in the following terms:

  4. Clause 5.10 - Option of Renewal

    (a)That the Lessee, not being of any of the covenants and conditions on the Lessee's part herein contained at the time of the giving of the Notice of Intention as hereinafter provided, shall have the option of renewing this lease for a further term of five (5) years from the expiration of the term on the same terms covenants and conditions herein contained (save and except this option of renewal but with the further option of renewal contained in paragraph (b) below as follows:

    (i)if the Lessee intends to exercise this option of renewal it shall give to the Lessor not less than (3) months' and not more than six (6) months' notice in writing of its intention (hereinafter called 'the Notice of Intention');

    (ii)for each year of the renewed term, the annual rental shall be determined at a rate established by multiplying the then current annual rental by the relevant Variation Factor (as hereinbefore defined); provided further that the rent so determined shall not be less than the rent payable by the Lessee for the then current term of the Lease.

    (iii)if following the giving of the Notice of Intention and not less than twenty one (21) days prior to the date which is three (3) months' prior to the expiration of the term of this Lease, the Lessor and the Lessee agree in writing the annual rental which would be payable for the first year of the renewed term then the Lessee shall be deemed to have exercised this option of renewal;

    (iv)subject to the provisions of paragraph (iii) above, whether or not the rental which would be payable for the first year of the renewed term has then been determined in accordance with paragraph (ii) above, for this option of renewal to be validly exercised the Lessee must give notice in writing of its exercise of the option to the Lessor not less than three (3) months prior to the expiration of the term of this Lease in which case the annual rental payable for the first year of the renewed term shall be the amount determined in accordance with paragraph (ii) above.

    (b)That the Lessee, having exercised the first option of renewal contained in the preceding sub‑paragraph hereof and not being in breach of any of the covenants and conditions on the Lessee's part herein contained at the time of the giving of the Notice of Intention as hereinafter provided, shall have the option of renewing this lease for a further term of five (5) years from the expiration of the first renewed term on the same terms covenants and conditions herein contained (save and except any option of renewal) as follows:

    (i)if the Lessee intends to exercise this option of renewal it shall give to the Lessor not less than (3) months' and not more than six (6) months' notice in writing of its intention (herein called 'the Notice of Intention');

    (ii)for each year of the renewed term, the annual rental shall be determined at a rate established by multiplying the then current annual rental by the relevant Variation Factor (as hereinbefore defined); provided further that the rent so determined shall not be less than the rent payable by the Lessee for the then current term of the Lease.

    (iii)if following the giving of the Notice of Intention and not less than twenty‑one (21) days prior to the date which is three (3) months' prior to the expiration of the term of this Lease, the Lessor and the Lessee agree in writing the annual rental which would be payable for the first year of the renewed term then the Lessee shall be deemed to have exercised this option of renewal;

    (iv)subject to the provisions of paragraph (iii) above, whether or not the rental which would be payable for the first year of the renewed term has then been determined in accordance with paragraph (ii) above, for this option of renewal to be validly exercised the Lessee must give notice in writing of its exercise of the option to the Lessor not less than three (3) months prior to the expiration of the term of this Lease in which case the annual rental payable for each year of the renewed term shall be the amount determined in accordance with paragraph (ii) above.

    (c)That the Lessee, having exercised the second option of renewal contained in the preceding sub‑paragraph hereof and not being in breach of any of the covenants and conditions on the Lessee's part herein contained at the time of the giving of the Notice of Intention as hereinafter provided, shall have the option of renewing this Lease for a further term of five (5) years from the expiration of the first renewed term on the same terms covenants and conditions herein contained (save and except any option of renewal) as follows:

    (i)if the Lessee intends to exercise this option of renewal it shall give to the Lessor not less than three (3) months' and not more than six (6) months' notice in writing of its intentions (herein called 'the Notice of Intention');

    (ii)for each of the renewed term, the annual rental shall be determined at rate established by multiplying the then current annual rental by the relevant Variation Factor (as hereinbefore defined); provided further that the rent so determined shall not be less than the rent payable by the Lessee for the then current term of the Lease.

    (iii)if following the giving of the Notice of Intention and not less than twenty‑one (21) days prior to the date which is three (3) months' prior to the expiration of the term of this Lease, the Lessor and the Lessee agree in writing the annual rental which would be payable for the first year of the renewed term then the Lessee shall be deemed to have exercised this option of renewal;

    (iv)subject to the provisions of paragraph (iii) above, whether or not the rental which would be payable for the first year of the renewed term has then been determined in accordance with paragraph (ii) above, for this option of renewal to be validly exercised the Lessee must give notice in writing of its exercise of the option to the Lessor not less than three (3) months prior to the expiration of the term of this Lease in which case the annual rental payable for each year of the renewed term shall be the amount determined in accordance with paragraph (ii) above.

  5. The lessee exercised its first five‑year option.  The first option period expired on 1 December 2009. 

  6. This case is about whether the lessee exercised its second option; consequently, par (b) is the relevant paragraph of cl 5.10.

  7. On 25 August 2009 the lessee sent a letter (the First Letter) to the lessor in the following terms:

WHITE GUM PETROLEUM PTY LTD
ACN 074 507 074
Level 2, 10 Ord Street
WEST PERTH  WA  6005

PO Box 417, WEST PERTH  WA  6872

Phone:   (08) 9366 4700    Fax:   (08) 9366 4704

25th August 2009

Bernadini Pty Ltd  By Post and Fax:  9274-5030
Lakeside Corporate
Unit 16,
24 Parkland Road
OSBORNE PARK  WA  6018

Attention:  Mark Quackenbush

Dear Mark,

RE:   SERVICE STATION,
       390 NICHOLSON RD (CNR ARMADALE RD), FORRESTDALE

RENEWAL OF SECOND OPTION COMMENCING
    1ST DECEMBER 2009

We refer to previous discussions and the lease over the above named premises and hereby give notice, in accordance with Clause 5.10, of our intention to exercise our second option for a term of five (5) years commencing 1st December 2009.

We will contact you shortly to discuss the preparation of renewal documentation.

Please have signed and return a copy of this letter attached, to facsimile 9366‑4701.

Should you have any queries please do not hesitate to contact the undersigned directly on 9366‑4727.

Yours sincerely
White Gum Petroleum Pty Ltd

[Signed]

Brenton Tieleman
Business Manager - Property

  1. Attached to this letter was an identical copy of the letter with a section at the bottom for a signature on behalf of Bernadini Pty Ltd and the date.

  2. The lessor received the First Letter on 25 August 2009.

  3. On 26 August 2009 the lessee sent a letter (the Second Letter) to the lessor in the following terms:

WHITE GUM PETROLEUM PTY LTD
ACN 074 507 074
Level 2, 10 Ord Street
WEST PERTH  WA  6005

PO Box 417, WEST PERTH  WA  6872

Phone:   (08) 9366 4700    Fax:   (08) 9366 4704

26th August 2009

Bernadini Pty Ltd  By Person, Post and Fax: 9274-5030
Lakeside Corporate
Unit 16,
24 Parkland Road
OSBORNE PARK  WA  6018

Attention:  Mark Quackenbush

Dear Mark,

RE:   SERVICE STATION,
       390 NICHOLSON RD (CNR ARMADALE RD), FORRESTDALE

RENEWAL OF SECOND OPTION COMMENCING
    1ST DECEMBER 2009

We refer to previous discussions and the lease over the above named premises and hereby give notice, in accordance with Clause 5.10, of our intention to exercise our second option for a term of five (5) years commencing 1st December 2009.

We will contact you shortly to discuss the preparation of renewal documentation.

Yours sincerely
White Gum Petroleum Pty Ltd

[Signed]

Brenton Tieleman
Business Manager - Property

  1. The lessor received the Second Letter on 27 August 2009

  2. In a nutshell, the lessee claims that the First Letter constituted notice of intention to exercise the option under cl 5.10(b)(i) of the lease and the Second Letter constituted notice of exercise of option under cl 5.10(b)(iv).  The lessor denies the second of these propositions.

Legal principles

  1. The test of whether a party to a lease has exercised an option of renewal is whether the purported exercise clearly and unequivocally manifests an election thereby to do so, that is, to enter into the further lease in accordance with the terms of the option:  Ballas  v Theophilos (No 2) [1957] HCA 90; (1957) 98 CLR 193, 196; Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, 677, 681, 683; Young v Lamb [2001] NSWCA 225 [22]; Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85 [70].

  2. In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 the same point was made. A contractual notice must be sufficiently clear to leave the recipient in no reasonable doubt as to what was intended: Mannai (768), (772 ‑ 773).  However, it is not absolute clarity or absolute absence of any possible ambiguity that is required:  Mannai (782); Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 [25].

  3. The reason for the requirement of unequivocality of intention in the exercise of an option is apparent.  By its nature, an exercise of option unilaterally creates new rights and obligations for both parties.  Consequently, both parties must be left, in an objective sense, with no reasonable doubt as to whether a document exercises the option.

  4. Notices in relation to options, like other contractual notices, are construed by reference to the reasonable recipient:  Would a reasonable recipient fairly understand the option to be exercised?  The process of construction is viewed objectively from the perspective of a reasonable recipient with knowledge of the terms of the relevant contract and taking into account the surrounding circumstances:  Prudential Assurance v Health Minders (677), (681), (683); Mannai (767 ‑ 768), (772 ‑ 773), (774 ‑ 780); Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd [2006] NSWSC 902; (2006) 202 FLR 435 [40]; Finishing Services [18], [25].

  5. A reasonable recipient of a notice under a contract has the terms of the contract firmly in mind:  Mannai (768); Finishing Services [25].

  6. It is not necessary for the effective exercise of an option that the words used conform literally and precisely to the terms of the option:  Ballas (205); Prudential Assurance (677).

  7. Every case turns on its own context and, in particular, the terms of the contract in question:  Prudential Assurance (677).

The proper construction and understanding of the Second Letter; is its intent unequivocal?

  1. The lessee submits that the scheme of cl 5.10 may be summarised in the following way.  The notice of intention must be provided in advance of a decision by the lessee of whether or not to exercise the option.  The reason for this can be deduced from the further provisions in cl 5.10(b)(ii) to (iv).  These provisions set out the regime for how the rent of any further term is to be determined.  In summary, rent will be as is agreed, if agreement is reached not less than 21 days before the date three months prior to the expiry of the current term.  Absent an agreement, rent will be the higher of the current annual rental or current annual rent increased in accordance with the national consumer price index.

  2. This did not seem to be in dispute and I accept it.

  3. However, it is clear from the terms of cl 5.10 that it is permissible for the first notice to be less than 21 days before the date three months prior to the expiration of the term, so that there is no opportunity for agreement under par (iii).  In such circumstances, two notices are nevertheless required.

  4. It is clear and common ground that cl 5.10(b) relevantly contemplates two notices.  The first, under par (i), is the notice of intention to exercise the option; the second is the notice under par (iv) of the exercise of the option.  A reasonable recipient of the Second Letter would have this scheme firmly in mind. 

  5. As is emphasised in the lessor's submissions, both letters are expressed in the terms of a notice under par (i):  notice of intention to exercise the option.

  6. To my mind, there are two key questions in this case:

    (a)would a reasonable recipient of the First Letter, dated 25 August 2009, and then the Second Letter, dated the following day, understand that the lessee had sent two par (i) notices of intention on consecutive days, or that the Second Letter was, notwithstanding the language 'intention to exercise', meant as a notice of exercise under par (iv); and

    (b)would the reasonable recipient be left in reasonable doubt in this regard, or was the intention revealed by the Second Letter unequivocal? 

  7. The lessee requires favourable answers to both these questions in order to succeed in its claim.

  8. The lessee submits that the Second Letter of 26 August 2009 was sent in the context of:

    (a)a similar but not identical letter the previous day;

    (b)the First Letter evidently being a notice of intention under cl 5.10(b)(i);

    (c)the need for a decision to be made by the lessee by 1 September 2009 whether or not to exercise the second option;

    (d)the dual requirements of cl 5.10 that there be a notice of intention followed by a notice of exercise;

    (e)the fact that there was no prospect of a negotiated rental payment due to the timing of the notice of intention to exercise; and

    (e)the existence of a mechanism providing certainty as to the applicable rental in the absence of an agreement.

  9. I agree that those matters are all part of the context in which the Second Letter is to be understood by the reasonable recipient.

  10. In those circumstances, the lessee submits that the Second Letter would be understood by a reasonable recipient as a notice of the lessee's decision to exercise the option under par (iv) of cl 5.10.

  11. The lessor emphasises that the two letters are in materially identical language.  Each gives notice of the lessee's intention to exercise the second option.  The lessor submits that the same words used in two letters on consecutive days should not be construed to have materially different meanings.

  12. Next, the lessor correctly points out a difference between the First Letter and the Second Letter.  The First Letter requests the lessor to sign and return a copy of the letter by facsimile.  The Second Letter sent and dated the next day does not contain any such request.  The lessor submits that a reasonable recipient of the two letters may have seen this difference as explaining why two notices under part (i) were sent on consecutive days.  The lessor submits a reasonable recipient of the Second Letter, which uses the language of 'intention to exercise', may have surmised as follows.  The lessee must have realised that there was no requirement in cl 5.10(b)(i) for the lessee to sign and return a notice of intention and, accordingly, must have decided to give a further notice of intention to exercise without a request for the signature and return of the letter.  Consequently, the lessor submits, there is an alternative reasonable interpretation of the Second Letter to that advanced by the lessee.

  13. (For completeness, I note that there is another difference between the two letters.  The First Letter includes a concluding sentence that 'should you have any queries, please do not hesitate to contact the undersigned…'.  The Second Letter does not include such a sentence.)

  14. The lessor submits that it cannot be said that a reasonable recipient in the position of the lessor would have been left in no reasonable doubt about what was intended by the Second Letter.

  15. I will mention a possible third hypothesis later in these reasons.

  16. The lessee correctly points out that there are many cases where it has been accepted that an option grantee has effectively exercised an option by stating an intention to exercise the option.  The lessee submits that those cases indicate that the words 'intention to exercise' in the Second Letter do not provide a satisfactory basis for inferring that the plaintiff did not intend to exercise the option by the Second Letter. 

  1. In my opinion, the cases referred to by the lessee are of limited assistance to the construction of the Second Letter.  That is because of a material difference between the terms of the instrument creating the option in those cases, and the terms of cl 5.10(b) in the present case.

  2. In the cases referred to by the lessee, the terms of the instrument creating the option required only one notice.  Further, in those cases, the terms of the relevant instrument meant that to construe a document that stated an intention to exercise the option as a statement of intention, rather than an exercise of the option, meant that the document would have no operative effect.  Consequently, in those cases, there was no other reasonable interpretation of the document stating an intention to exercise the option.  The only reasonable interpretation was that it was intended to effect the exercise of the option.

  3. This can be illustrated by reference to some of the cases relied on by the lessee:

    (a)In Traywinds Pty Ltd v Cooper [1989] 1 Qd R 222 the terms of the lease provided that the lessee had an option of renewal if the lessee gave notice in writing of its intention (223);

    (b)In Nicholson v Smith (1882) 22 Ch D 640 the lease contained a covenant that the lessor would, at any time before expiry, whenever required by the lessee, grant a renewed lease for 21 years (643);

    (c)In Prudential Assurance the clause provided for an option if the lessee desired to have a further lease for a further term and gave notice in writing to that effect (675).

  4. By contrast, cl 5.10(b) in the present case provides for two notices, one of which is a notice of intention to exercise the option, the other notice of exercise.  That contractual context provides an alternative interpretation of a statement of intention to exercise an option.  Such a statement may be notice under par (i), rather than notice of exercise under par (iv).  No such alternative was available in the cases relied upon by the lessee.  For these reasons those cases seem to me to be of very limited assistance.

  5. The lessee points to the heading of the Second Letter which included 'Renewal Of Second Option'.  The lessee also points to the concluding statement in the Second Letter that the lessee would contact the lessor shortly to discuss the preparation of renewal documentation.  These, the lessee submits, are firm indications in the Second Letter that the intention of the lessee was to thereby exercise the option.

  6. To my mind, the force of this submission is limited by the fact that the First Letter contained the same heading and the same reference to contact to discuss preparation of renewal documentation.  Had the statement that the lessee would contact the lessor to discuss preparation of renewal documentation only been made in the Second Letter, and not in the First Letter, it would have provided considerable assistance to the lessee's contention.  However, as the First Letter contained those same elements, their inclusion in the Second Letter seems to me to be  equally consistent with a view of the Second Letter as a replacement of the earlier notice under par (i) of cl 5.10(b).

  7. The lessee responded to the lessor's submission that a reasonable recipient of the Second Letter would surmise that the lessee had decided to give a further notice of intention to exercise without including the unnecessary request for signature and return of the letter.  The lessee submitted that that was an implausible view to ascribe to the reasonable recipient, for two reasons.    First, the lessee emphasised the absence of a reference in the Second Letter to the First Letter. Counsel submitted that if the lessee had intended the Second Letter to replace the First Letter, the Second Letter would have said so in terms, or at the least, would have referred to the First Letter.  To my mind, the absence of reference in the Second Letter to the First Letter cuts both ways.  The Second Letter was written only one day after the First Letter.  The Second Letter did not state that it was 'further to the First Letter' or otherwise say that it was intended to have an effect different from the First Letter.  It used materially identical language to the First Letter.

  8. Secondly, the lessee points out that First Letter did not require that the copy be signed and returned as a condition of its efficacy.  Rather, it merely requested the return of a signed copy of the document with the evident purpose of avoiding any dispute about whether service had occurred.  The lessee submits that that would make it unlikely that the lessee would have felt the need to send a fresh letter to replace the First Letter. 

  9. There seems to me to be some force in this submission.  A reasonable recipient would think it less than likely that the lessee had felt it imperative to send another notice under par (i) to ensure its efficacy.  However, people may act from an abundance of caution. 

  10. If the question turned on which is the preferable or more likely interpretation of the Second Letter, I would answer the question in favour of the lessee.  However, that is not the question.  Rather, the question is whether the Second Letter unequivocally manifests an intention to thereby exercise the option.  That returns attention to whether there is an alternative reasonable interpretation of the Second Letter.

  11. The lessee submits that the same words used in the Second Letter can be construed as having a different meaning than those words in the First Letter because of the different contexts.  The difference is that the Second Letter was written in the context of the First Letter having already been sent.  I agree that the letters were written in different contexts in this way.  However, the question is whether that different context supports a conclusion that the same words when used in the Second Letter unequivocally manifest a different meaning to the meaning conveyed by those words when used in the First Letter, one day earlier.  I am not persuaded of that.  To my mind, taking into account the considerations I have mentioned, the reasonable recipient would have been left in some reasonable doubt.  Essentially for the reasons submitted by the lessor, I am not persuaded that the Second Letter clearly and unequivocally manifests an election thereby to exercise the option.

A third interpretation?

  1. It might be thought that another (third) interpretation of the First Letter and the Second Letter was possibly open.  That is that the sending of the First Letter and the Second Letter arose through administrative error so that two versions were sent of what was intended to be one letter.

  2. This possible hypothesis was not raised in the parties' written or oral submissions.  After the hearing the parties were invited to address submissions to this possible hypothesis.

  3. In its supplementary submission, in response to the court's invitation, the lessee submits that whether this third hypothesis was reasonably open to the reasonable recipient should be considered in the light of (among other things) certain conversations between officers of the lessee and lessor.  The lessee submits that:

    (1)it is admitted that an officer of the lessor discussed the First Letter with an officer of the lessee on 25 August 2009 and with the signatory of the two letters on 26 August 2009 (referring to par 18 of the statement of claim and par 2 of the defence); and

    (2)consequently, the lessee was, by the time it sent the Second Letter, aware that the lessor had received the First Letter.

  4. I do not accept the first proposition.  Paragraph 18 of the statement of claim is admitted in par 2 of the defence.  Paragraph 18 pleads that the lessee received the First Letter on 25 August 2009.  The conversations between officers of the parties are referred to only in the particulars under par 18.  The admission of par 18 of the statement of claim is not an admission of anything in the particulars of that paragraph.  A defendant must plead to the material facts pleaded in the statement of claim, not to the particulars:  Turner v Bulletin Newspaper Co Pty Ltd [1974] HCA 25; (1974) 131 CLR 69, 80.

  5. Consequently, there is no admission in relation to any conversation between any officers of the parties on 25 August 2009 or 26 August 2009.  Nor is there any evidence of any such conversation.  Even if I were wrong about this, the fact of a conversation, without any evidence of its content, does not seem to me to assist in assessing the possible hypotheses.  It is clear that there is no admission or evidence about the content of any conversation.

  6. The lessee objects to this third possible hypothesis being relied upon, at least unless the lessor is prepared to admit a factual matter about the timing of a conversation referred to in the particulars under par 18 of the statement of claim.  The lessee submits, correctly, that the lessee did not plead or raise the allegation that an available hypothesis was that the Second letter was sent by an administrative error.  Consequently, the lessee submits, the lessor should not be permitted to rely on this possible hypothesis.

  7. I am not convinced of the force of the lessee's objection.  The lessor did not plead the hypothesis that the Second Letter was a deliberate choice to redraft the First Letter.  I do not think the lessor was required to plead the administrative error hypothesis.  In order to demonstrate that the Second Letter unequivocally manifested an intention to thereby exercise the option, it was incumbent on the lessor to exclude all other reasonable hypotheses about the Second Letter and to select what evidence it led accordingly.

  8. However, it is not necessary to express a concluded view on this point, or on whether the reasonable recipient of the Second Letter might have understood it in accordance with the third hypothesis.  That is because, as I have explained, I have come to the conclusion invited by the lessor in its submissions at the hearing.   The Second Letter did not unequivocally convey the intention thereby to exercise the option.  The reasonable recipient would have been left in doubt whether the Second Letter was to be understood as an intended replacement of the First Letter, rather than as a notice under par (iv).

Conclusion

  1. For these reasons, I would dismiss the lessee's claim for a declaration that it exercised its second option of renewal by the Second Letter.  It is not in dispute that, consequently, the lessor's counterclaim for possession of the land should be upheld.

  2. I will hear from counsel as to the precise form of orders and as to costs.

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Cases Cited

7

Statutory Material Cited

1

Ballas v Theophilos (No 2) [1957] HCA 90
Young v Lamb [2001] NSWCA 225
Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85