Woodroffe v Box

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.