The term first refusal " is not a technical term, and a mere promise to give the " first refusal' prima facie confers no more than a pre-emptive right. The justification for this interpretation is to be found in the word " first' ", but its prima facie significance may be displaced where the right of " first refusal " is to be given on a fixed future date or on the happening of a specified event (whether it be one that may never happen or must eventually happen) and in such circumstances the promise may be construed as meaning that an offer offer will be made to anyone else in the meantime. In every case regard must be had to the whole of the contract, and in the light of that whole it must be determined whether the parties have or have not indicated an intention that an immediate offer is being made or is to be made.

By a contract under seal between M., who was the owner of business premises, and W., the lessee of the premises, M. covenanted that his executors will upon the death of the survivor of the owner and his wife give to the tenant or his executors or administrators or at his or their requests to him or them conjointly with the tenant's son the right of first refusal to purchase

premises for thirteen thousand pounds or should there then be in existence any statutory limitation of the price at which real estate may be bought or sold then at the said price of thirteen thousand pounds or the maximum price for the said premises allowable by such statutory limitation whichever is the lower." M. predeceased his wife. After the death of M.'s

92 CLR 246

widow the executors of M.'s estate refused to convey the property to W. and retained it for the beneficiaries under M.'s will. W. contended that the executors were bound in accordance with the covenant in the agreement to convey the property to him for £13,000.

Held, by Fullagar and Kitto JJ. (Webb J. dissenting), that on the true construction of the agreement M.'s executors were bound, on the death of the survivor of M. and his wife, to offer the property to W.--or at W.'s election to W. and his son-for the price of £13,000

Held, further by Fullagar and Kitto JJ., that in equity cl. 1 of the agreement operated on the death of the survivor of M. and his wife as an offer capable of being accepted by W. or by W. and his son SO as to create an open contract for the sale of the property for £13,000.

County Hotel &Wine Co. Ltd. v. London &North-Western Railway Co. (1918) 2 K.B. 251; (1919)…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Woodroffe v Box

Details

AGLC: Woodroffe v Box [1954] HCA 22
Case: [1954] HCA 22
Decision Date: 4 May 1954

CaseChat Overview and Summary

This case concerned a dispute between Frank Woodroffe, the lessee of business premises, and the executors of the estate of James Murdoch MacLennan, the deceased owner of those premises. Woodroffe sought to enforce a covenant in an agreement under seal, which stipulated that MacLennan's executors would, upon the death of the survivor of MacLennan and his wife, grant Woodroffe the right of first refusal to purchase the premises for £13,000. The executors contended that the covenant only obliged them to offer the property to Woodroffe if they decided to sell it, and that as they did not wish to sell, they were under no duty to him. The matter was heard in the High Court of Australia on appeal from the Supreme Court of Tasmania.

The central legal issue before the High Court was the construction of the phrase "right of first refusal" within the context of the specific agreement. Specifically, the court had to determine whether the covenant imposed a binding obligation on the executors to make an offer to sell the property to Woodroffe at the stipulated price upon the death of the survivor of MacLennan and his wife, or merely a pre-emptive right to refuse an offer should the executors decide to sell to a third party. The court also considered whether the timing of the covenant, tied to a specific future event, and the inclusion of a fixed purchase price, altered the prima facie meaning of a "right of first refusal."

The High Court, by majority, held that the covenant imposed an obligation on the executors to offer the property to Woodroffe. The court reasoned that while "right of first refusal" is not a technical term and prima facie confers only a pre-emptive right, this presumption could be displaced by the contract's context. In this instance, the covenant was to be performed at a fixed future date (the death of the survivor of MacLennan and his wife), and a specific price was stipulated. The court found that these factors, along with the consideration paid and the structure of the agreement, indicated an intention to create an immediate and effective right for Woodroffe to purchase the property at that specified time, rather than a mere negative obligation on the executors. In equity, the covenant was deemed to operate as an offer capable of acceptance by Woodroffe upon the specified event occurring.

The appeal was allowed, the order of the Supreme Court of Tasmania was discharged, and it was ordered that the first question posed in the originating summons be answered in the affirmative, with the plaintiff's costs of the summons to be paid by the defendants.

Orders