CIA Cailleri Industries Australia P/L v Kevin Howard Investments P/L [2005] QSC 328

SUPREME COURT OF QUEENSLAND CITATION: CIA Camilleri Industries Australia P/L v Kevin Howard Investments P/L [2005] QSC 328 PARTIES: CIA CAMILLERI INDUSTRIES AUSTRALIA PTY LTD (ACN 074 430 238) (applicant) v KEVIN HOWARD INVESTMENTS PTY LTD (ACN 010 823 435) (respondent) FILE NO/S: BS 8451 of 2005 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Brisbane DELIVERED ON: 10 November 2005 DELIVERED AT: Brisbane HEARING DATE: 24 October 2005 JUDGE: McMurdo J ORDER: It will be declared that by the letter dated 13 September 2005 from McKays to South and Geldard, the applicant duly exercised the option granted by the option agreement made between the parties and dated 1 October 2003 CATCHWORDS: LANDLORD AND TENANT – RENEWALS AND OPTIONS – EXERCISE OF OPTION – VALIDITY OF EXERCISE – where the applicant leased land from the respondent for a period of two years – where the respondent granted to the applicant an option to purchase the land – where the applicant purported to exercise the option by a letter from its solicitors – where the letter referred to “our client” as being both the applicant company and Mr and Mrs Camilleri – where the land contract attached to the letter showed the purchasers as Mr and Mrs Camilleri – whether the option was validly exercised by the applicant or purportedly by Mr and Mrs Camilleri Property Law Act 1974 (Qld), s 199 Carter v Hyde (1923) 33 CLR 115, cited David Jones Ltd v Lunn (1969) 91 WN (NSW) 468, cited Lord v Trippe (1977) 14 ALR 129, referred to Re Pellick’s Transfer [1987] 1 Qd R 73, referred to -- 1 of 6 -- 2 COUNSEL: G Handran for the applicant P Dunning for the respondent SOLICITORS: McKays Solicitors for the applicant South & Geldard for the respondent [1] McMURDO J: The question for determination is whether the applicant duly exercised its option to purchase certain land from the respondent. [2] The land is held by the respondent under a Special Lease from the Crown and its address is 1 Brahman Street, Middlemount in Central Queensland. Until 2003 the respondent there conducted a crane hire business. It sold that business to the applicant under a contract dated 2 September 2003 for a price of $1,775,000. The applicant became the owner of the business on 30 September 2003. It was a term of that contract that the applicant would lease the land from the respondent for a period of two years from that date, although the applicant could choose to vacate the premises after one year, i.e. on 30 September 2004. There was no provision for the renewal of the lease beyond 30 September 2005. [3] By a further term of the contract, the respondent granted to the applicant an option to purchase the land in these terms: “1. Option for lessee to purchase the land and all fixed improvements either at 30 September, 2004 for a price of $115,000.00 (plus GST) or at 30 September, 2005 for a price of $110,000.00 (plus GST) (*option exercisable at purchaser’s discretion) 2. If the lessee does not wish to lease the premises for the second lease year, then the lessee may give written notice of termination to the lessor to take effect at the expiry of the first lease year.” [4] But the parties signed a further agreement on 1 October 2003, by which the respondent (again) granted to the applicant an option to purchase the land. To the extent that there is an inconsistency between it and the option granted within the business contract, this later document should prevail. For an expressed consideration of $11, an option was granted on these terms: “Price as follows: (a) If the Option is exercised on or before the 30th September, 2004, the Purchase Price is to be the sum of ONE HUNDRED AND FIFTEEN THOUSAND DOLLARS ($115,000.00) (plus GST); or (b) If the Option is exercised on or before the 30th September, 2005, the Purchase Price is to be the sum of ONE HUNDRED AND TEN THOUSAND DOLLARS ($110,000.00) Plus GST). • The option granted is irrevocable by the Owner. -- 2 of 6 -- 3 • The option may finally be exercised any time until and including the 30th day of September, 2005, PROVIDING HOWEVER that the Grantee is still leasing the Property from the Grantor. In the event that the Grantee terminates the Lease effective from the 30th September, 2004, this Option will lapse at that time. • The option may be exercised by the Grantee notifying the Owner in writing personally or by post or by facsimile of the exercise of the option. • Upon exercise of the option and within seven (7) days thereof, the Grantee will deliver to the Owner a signed contract in the form attached with a bank cheque payable to the stakeholder to cover the deposit. • Notice to the Owner may be given either at the address in this agreement or care of their solicitors South & Geldard, 128 Victoria Parade Rockhampton. • Forthwith upon the contract being delivered to the Owner the Owner will sign the contract and return the original to the Grantee. • The contract, however, is deemed to come into effect upon exercise of the option and the date of the contract is the date of the exercise of the option.” The option agreement attached a form of contract which showed the name of the purchaser as the applicant and the date for completion as “30 days from the date of this Contract”. [5] The applicant says that it exercised its option to purchase by a letter from its solicitors to the respondent’s solicitors dated 13 September 2005. The respondent admits that the letter was sent and received, but says that it was not in terms which effected an exercise of the option. The parties agree that this argument can and should be determined now. The applicant’s alternative claim is that the respondent is estopped from denying that the applicant has duly exercised the option. That would involve factual questions which would have to be tried and could not be determined within this judgment. [6] It is necessary to set out this letter in full: “Dear Sir Our Client: Charlie and Cecilia Camilleri as trustees – Purchase from K and M Howard Investments Pty Ltd Property: 1 Braham Street, Middlemount We refer to previous correspondence when our client (CIA Camilleri Industries Australia) purchased your client’s crane business at Middlemount. Pursuant to the option agreement dated 1 October, 2003, our client has instructed us to hereby give notice exercising the option to purchase the land. -- 3 of 6 -- 4 We enclose the following:- 1. Land Contract (two copies duly signed by our client); 2. Our client’s cheque payable to South and Geldard Trust Account in the sum of $10,000.00 being the deposit monies; 3. Form 1 Transfer together with Form 24; 4. Draft settlement statement (we are currently waiting for our rates searches). Would you please have your client sign and date the contract and transfer document and return them to our office as soon as possible. We undertake to hold the transfer document for stamping purposes only pending settlement. Please provide us with your trust account receipt for the deposit monies. Pursuant to Clause 7.7 of the Standard Commercial Conditions, would you please produce all unregistered documents relating to the property and full and proper particulars of all unregistered dealings. Noting Clause 4 of the Standard Commercial Conditions (particularly Clause 4(i, j and k), would be please ensure that your client has these documents ready to hand over at settlement. Would you please advise if you are agreeable to acting as our unpaid town agent for settlement in Rockhampton. Our client will have the National Australia Bank providing settlement monies. Would you please apply to the Department of Natural Resources now to obtain the Minister’s Consent to the transfer of the crown lease and provide us with that consent together with a copy of the rental clearance certificate as soon as possible. If you have any queries please telephone either Mr Mark McGrath or Mr Sean Diljore. Yours faithfully” The contract document which was enclosed showed the purchasers as Mr and Mrs Camilleri and not the applicant company. [7] The respondent argues that it was only the applicant which was entitled to exercise the option, and that the due exercise of the option required that the party which became contractually bound as the purchaser be the applicant. The respondent says that this was not an exercise of the option by the applicant, but a purported exercise of the option by Mr and Mrs Camilleri. The letter was in terms, the respondent says, whereby the contract would not be between the respondent and the applicant, but between the respondent and Mr and Mrs Camilleri. This being the only purported exercise of the option within the option period, the respondent says that the applicant has not duly exercised its option, with the consequence that it has no right to occupy, as it still does, this land and to conduct its business there. -- 4 of 6 -- 5 [8] An option to purchase is assignable by the grantee unless otherwise provided by its terms: Carter v Hyde (1923) 33 CLR 115; David Jones Ltd v Lunn (1969) 91 WN (NSW) 468, 477-480. It is assignable as a legal chose in action pursuant to s 199 of the Property Law Act 1974 (Qld). But in the present case, there is no evidence of an assignment from the applicant to Mr and Mrs Camilleri, apart from the letter of 13 September itself. And the applicant does not argue its case upon the basis that the option was assigned. It is the applicant, and not Mr and Mrs Camilleri, who has brought this application, seeking a declaration that the applicant has duly exercised its option. It is unnecessary then to consider the respondent’s submission that this option was not assignable. [9] How then should the letter be understood? The respondent submits that the letter was the act not of the applicant, but of Mr and Mrs Camilleri. It says that this was an offer by them to purchase on the same terms under which the applicant could have purchased. As a mere offer, unaccepted by the respondent, it had no contractual effect. I do not accept that characterisation. The letter is expressly written on behalf of the applicant company, as well as on behalf of the Camilleris. There was no apparent error by the solicitors in that respect; both the applicant company and the Camilleris were interested in the purchase because the company held the option and the Camilleris were to be the transferees. The connection between the company and the Camilleris was obvious and must have been understood by the respondent. One reason for that was that Mr Camilleri had guaranteed the applicant’s performance of the business sale contract. He had signed the option agreement, as well as that contract, expressly as the applicant’s director. [10] The applicant’s argument emphasises the solicitors’ reference to “our client” in some places as Mr and Mrs Camilleri. But they also referred to “our client” in other parts of the letter as the applicant company. Absent an assignment of the option, it was the applicant which had to exercise it. The critical statement then that “our client has instructed us to hereby give notice exercising the option to purchase …” should be understood as referring to the client who was able to do so. Undoubtedly, that was the same party referred to as “our client” in the immediately preceding sentence. [11] What of the enclosure of the contract document showing the Camilleris as the purchasers and signed by them? That was inconsistent with the option having been exercised by the applicant, because in that event it was the party obliged to complete the purchase and it should have been the purchaser named in the contract document. But as the party bound to complete, it was entitled to require that the respondent transfer to a third party. In general, a vendor is obliged to execute a conveyance to the purchaser or as the purchaser directs, even absent an express term to that effect: see the many authorities cited in Re Pellick’s Transfer [1987] 1 Qd R 73, 74-75, to which may be added Lord v Trippe (1977) 14 ALR 129 at 143 per Mason J. An apparent intention that the land be conveyed to the Camilleris then was not inconsistent with an intention by the applicant to exercise the option and to itself become bound to complete. [12] In my conclusion, the letter should be understood as an unqualified exercise of the option according to the terms of its grant, notwithstanding the mistaken specification of the Camilleris as the purchasers. The evident intention was to enforce the grantee’s right by an exercise of the option by the grantee, but to the ultimate end of the land being conveyed to Mr and Mrs Camilleri. That end was -- 5 of 6 -- 6 achievable by an exercise of the option according to its terms because of the purchaser’s implied right to nominate a transferee. There was no apparent reason why the applicant company would wish to be divorced from the transaction, by not being the purchaser contractually bound to the respondent. Given the connection between the applicant company and, at least, Mr Camilleri, as known to the respondent, it would be artificial to suppose that the company had some shyness about becoming contractually bound. The enclosure of the contract documents signed by the Camilleris should be seen as a mistaken understanding of what was required of the applicant, rather than an indication of an unpreparedness by the applicant as distinct from its shareholders, to be bound to a contract according to the option agreement. [13] The signing and presentation of the form of contract was not necessary for the exercise of the option to be effective. It was something required in the event of a valid exercise of the option. On the way this application has been argued, it is unnecessary to explore whether it assists the respondent’s position that the applicant did not submit a form of contract signed by it within the seven days stipulated by the option agreement. The present question is whether the option was duly exercised, and not whether the contract which thereby resulted is affected by what did or did not subsequently occur. Conclusion [14] It will be declared that by the letter dated 13 September 2005 from McKays to South and Geldard, the applicant duly exercised the option granted by the option agreement made between the parties and dated 1 October 2003. -- 6 of 6 --