Council of the City of Gold Coast, Re v Statham Qld Pty Ltd & Ors [1993] QSC 437

~--State Reporting Bu;;;~ TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown·.- Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND REVISED COPIES ISSUED Stata Reporting Bureau Date J () ·.J CIVIL JURISDICTION AMBROSE J 0 No 3390 of 1987 COUNCIL OF THE CITY OF GOLD COAST Plaintiff and STATHAM QLD PTY LTD First Defendant and 0 SALMEAD PTY LTD Second Defendant and GOLD COAST WATERWAYS AUTHORITY Third Party BRISBANE . . DATE 2 0 I 1 2 I 9 3 JUDGMENT \/ 1 4th Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 36 -- 201293 D.1 Turn 1 LAN/KHW (Ambrose J) HIS HONOUR: In this matter, I order that the Deed of Option, dated 14 March 1985; be rectified by amending the term of the lease appended thereto on the first page and accord with the relief sought in paragraph (a)(A) of the amended statement of claim delivered by the second defendant against the third ·party on 18 November 1993. In essence, in case there is any problem, the lease in respect of which the option has been exercised will expire in the year 2016 in lieu of the year 2006 appearing in the lease form appended to the Deed of Option. I declare as follows: (1) The second defendant has validly exercised the option contained in clause 4 of. the Deed of Option between it and the third party, dated 14 March 1985. 10 ~o 0 30 (2) The second defendant is now entitled to a lease upon 0 the conditions contained in the form of lease appended to that Deed of Option as rectified for the term of 30 years in respect of lot 492 on plan WD 5997 County of Ward, Parish of Nerang. (3) I order: (a) That the third party take all necessary steps, make all reasonable endeavours to obtain such Ministerial and other approvals and consents as may be necessary to grant the second JUDGMENT 2 40 0 50 -- 2 of 36 -- .. 0 0 0 201293 D.1 Turn 1 LAN/KHW (Ambrose J) defendant a lease in the terms of the lease appended to the Deed of Option of 14 March 1986 as rectified. (b) That the third party do all such acts and execute all such documents as may be reasonable and proper on its part to enable the second defendant, if necessary, to apply for or itself procure such Ministerial and other necessary approval and consent to become lessee from the third party in accordance with the terms of the lease document as rectified appended to the Deed of Option between the second defendant and the third party, dated 14 March 1986. I publish my reasons. () HIS HONOUR: I will make that formal order, then, that the costs of the issue of rectification between the second defendant and the third party to be taxed be paid by the second defendant to the third party. JUDGMENT 3 10 20 30 40 50 60 -- 3 of 36 -- 201293 D.1 Turn 1 LAN/KHW (Ambrose J) HIS HONOUR: If there is no objection, I will make an order staying for seven days the order that I made today, and I will indicate that if it is convenient and a further stay is required to be argued and so on, well, that can be dealt with next week some time, or at a later time, with little 10 inconvenience. 20~ HIS HONOUR: I will reserve the costs of the second defendant getting leave to join the third party and to take third party c=) proceedings against it. Subject to that, I order that the third party pay the second defendant's costs of and incidental 30 to the third party proceedings to be taxed, except for the - issue of rectification, upon which the third party succeeded. c=) 40 0 HIS HONOUR: I make the orders that I have indicated. 50 JUDGMENT 4 -- 4 of 36 -- 0 0 0 0 IN THE SUPREME COURT OF QUEENSLAND No. 3390 of 1987 Brisbane Before Mr. Justice Ambrose [Re: Council of the City of Gold Coast] BETWEEN: COUNCIL OF THE CITY OF GOLD COAST Plaintiff AND: STATHAM OLD PTY LTD First Defendant AND: SALMEAD PTY LTD Second Defendant AND: GOLD COAST WATERWAYS AUTHORITY Third Party REASONS FOR JUDGMENT - AMBROSE J. Judgment delivered 20/12/1993 CATCHWORDS: Construction of Contract exercise ofoption optionor to be satisfied of financial capacity of optionee - whether absence of satisfaction bona fide where optionor desires to avoid obligations under the option for a reason unconnected with financial capacity of optionee - whether satisfaction of optionor needs to be bona fide and/or based on grounds which are objectively reasonable. Counsel: Solicitors: Hearing Date(s): Mr Douglas Q.C. with him Mr Keim for second defendant Mr Lyons Q.C. with him Mr Hack for the thirdparty. Brown & Brown for second defendant Short Punch & Greatorex for third party 8/12/ - 9/12/1993 -- 5 of 36 -- 0 0 0 IN THE SUPREME COURT OF QUEENSLAND Brisbane Before Mr. Justice Ambrose [Re: Council of the City of Gold Coast] BETWEEN: -··----- .. ---- No. 3390 of 1987 COUNCIL OF THE CITY OF GOLD COAST Plaintiff AND: STATHAM OLD PTY LTD First Defendant AND: SALMEAD PTY LTD Second Defendant AND: GOLD COAST WATERWAYS AUTHORITY Third Party REASONS FOR JUDGMENT - AMBROSE J. (_) Judgment delivered : 20/12/1993 This is a trial of issues emerging from third party pleadings delivered between the secorid defendant and the third party in this action. On 28 July 1993, White J. ordered that the third party issues be tried separately from the other issues in the action and that ·the plaintiff and the defendants be bound by the determination. -- 6 of 36 -- 2 It is unnecessary to refer in ·any detail to the issues betwee~ the plaintiff and the second defendant. Stated very briefly, in 1983 the third party decided to call tenders for a development lease of a site on the western side of the broadwater near Southport for a term of 20 years. Prior to the tenders being called the third party discussed such a development with the plaintiff, which in December 1983 indicated that·the leasing proposal was satisfactory in its view and indicated its requirements with respect to car parking facilities necessitated by the proposed development. On 31 January 1984, the third party resolved to invite tenders for an option for the development lease with a condition that the tender be submitted with a sum for annual rental. This course was taken. Tenders were received by the third party but none was accepted. The third party then apparently decided that a lease for 20 years was not likely to attract suitable tenders and so resolved that fresh tenders be called for a lease for 30 years. This was done. ·Eventually in March 1985 a tender for an option for the lease was made by Mimi and Helen Poulos, who at that time conducted a restaurant at Pacific Fair Shopping Centre, Broadbeach. Mr and Mrs Poulos submitted a proposal for an option together with a good deal of supporting material which was received by the third party on 26 July 1985. In the supporting material was a statement of assets and liabilities; the value of current assets was stated to be $1.309 million and the amount of current liabilities was stated to be $1 . 299 million. Fairly 0 0 0 0 -- 7 of 36 -- ---~------ ---~---~------~----··- ------- 0 0 0 0 3 extensive details of the proposed development were provided and the estimated cost of construction as at 25 July 1985 by the architect-builder acting for Mr and Mrs Poulos was also attached. This cost was stated to be $1.111 million. The evidence does not disclose if plans for the building were attached although it does show that full particulars of materials to be used in various stages of the construction were given. Required estimates of gross receipts and a projected cash flow analysis that might be achieved upon completion of the construction of the proposed development, together with various other items of information required by the third party were also provided including the names, addresses and telephone numbers of the architects, structural, civil and hydraulic engineers, quantity surveyors and building cost consultants who had been retained to prepare information which were forwarded with the application for tender by Mr and Mrs Poulos. The fulls names and addresses and· telephone numbers of other persons it was proposed to involve in the development were also provided. By letter dated 2 August 1985, the third party requested accountants to "assess the proposal" and to advise whether they considered it to be a viable proposition. It is unnecessary to refer to various other steps that were taken between that time and 14 March 1986 when a deed of option was entered into between the second defendant, Salmead Pty Ltd and the third party. Salmead Pty Ltd was a company controlled by Mr and Mrs Poulos which they proposed would take the lease and undertake the development. -- 8 of 36 -- 4 Clearly this was well understood by the third party when the deed of option was executed. That understanding was recorded in a letter from the third party to the then solicitors for Mr and Mrs Poulos dated 8 November 1985 and the lease referred to in and attached to the option referred to the second defendant by name and a formal guarantee of performance by the second defendant of its obligations under the lease to be executed by two people was also attached. I infer upon the whole of the evidence that it was well understood and accepted by the third party that Mr and Mrs Poulos would control and finance the development proposal under·the lease indicated by plans of the upper and lower levels 0 of the facility proposed, which were also attached to the deed 0 of optioh. Between the time the proposal was submitted by Mr and Mrs Poulos to the third party on 26 July 1985 and the time when the deed of option was executed by the second defendant and third party on 14 March 1986 it had been decided by Mr and Mrs Poulos to enlarge the proposed development. The archi tee t for the second defendant advised the third party of this increase in size by letter dated 5 February 1986. It appears that the plaintiff, Gold Coast City Council at this time, in fact had no objection to the enlargement of the proposed development as such and on 24 February 1986 the third party resolved that the second defendant be advised that it was prepared to approve the amended plan as submitted on 5 February 1986. This approval was communicated to the architect builder acting for the second defendant by letter of the third party dated 25 February 1986. 0 0 -- 9 of 36 -- 0 5 The plaintiff however at some stage expressed the view that before building approval could be given, planning ·approval should be obtained from it and advised the agent of the second defendant to this effect by letter of 13 May 1986. The accountants retained by the third party to advise on the viability of the development proposed by the second defendant had done so by letters of 8 August and 29 August 1985. Reference to those reports indicates that the accountants checked with the manager of the bank used by Mr and Mrs Poulos when considering their capacity to fund the development they proposed at that time. After analysing information which they had obtained, the 0 accountants pointed out that failure of Mr and Mrs Poulos to liquidate existing assets for the sums contained in their assets and liabilities statement would affect the level of external borrowing and advised "we suggest you satisfy yourself on this point prior to the authority granting any option". The accountants also requested the third party to advise if it wished 0 to have this aspect of the application further pursued. There is 0 no evidence that it ever did. The accountants advised that the project cost estimates prepared by Mr Wittey had been supplied in detail but that if the option was granted it would be necessary for those costs "to be formalised into a bill of· quantities and checked against current building costs". The accountants advised that although they expressed no opinion as to the accuracy of the capital expenditure involved. it was. clear that professional consultants had in fact been involved in establishing the budget costs. The accountants observed that if 32 new car spaces had to be provided -- 10 of 36 -- 6 by an extension of existing car parking facilities it would cost $25,700, and indeed, if the council· could not be persuaded to have the car parking facilities extended a contribution might be demanded in the sum of $222,000. The report further dealt with the difficulty of making any estimate as to the financial viability of the proposed development. None of these comments was ever made known to the second defendants or their agents and in particular no request was ever made for any "formalised bill of quantities" for checking against current building costs. A good deal of correspondence passed between the accountants for Mr and Mrs Poulos and the third party. By their letter of 29 August 1985 its accountants advised the third party that it was expected that a balance of borrowed funds of only $100,000 would be needed to build the proposed development on the site of the lease. Looking at the terms of the second report one can only infer an intimation in guarded terms based on all the material then available to the accountants that the proposed development would be viable. There appears to have been no specific cost estimates provided by or on behalf of Mr and Mrs Poulos with respect to implementation of the altered plan; neither they nor their agents ever seem to have been asked explicitly what, if any, additional costs might be incurred by reason of the alterations. The altered plans for the development involved an increase in size of about 30 per cent of the original proposal. In its letter of 25 February 1986, the third party indicated that it was prepared to approve the amended plan but would require an increased annual rental proportional to the increased 0 0 0 0 -- 11 of 36 -- 0 0 0 0 7 size of the development. At the end of that letter of 25 February 1986 it is observed - "Should the documentation not be completed by March 15 1986 the authority will exerdise its right to reject the proposal and advertise for fresh tenders for the site." I infer that the "documentation" whatever that may have comprised was completed to the satisfaction of the third party by 15 March 1986 because it did in fact accept the proposal and grant the option on 14 March 1986. I would infer upon the whole of the evidence that the plans of the upper and lower levels of the proposed development on the site of the lease attached to the deed of option were plans showing the increased size of development which the third party indicated it would approve on 25 February 1986. After the deed of option had been executed on 14 March 1986 there became apparent a change of heart on the part of the plaintiff. By May 1986 the plaintiff was indicating the necessity for the second defendant to obtain its planning consent to the proposed development. While the plaintiff had apparently been enth~siasiic over the proposed development initially, for some reasond that attitude changed and thereafter it sought to prevent the development. It is unnecessary to embark upon an investigation of the reasons for the change of attitude on the part of the plaintiff except to the extent that it seems to have motivated a similar change in attitude in the third party. It is abundantly clear upon the evidence including the oral evidence given by the manager of the third party at the relevant time (Ms Staib) that the third party became willing, if indeed not anxious, to avoid whatever contractual obligation it might be -- 12 of 36 -- 8 under to the second defendant pursuant to the deed of option and it was motivated· to do this to a significant extent, if not entirely by the change of heart it perceived in the plaintiff which made at least one request ·in writing dated·3 December 1987 for assistance in preventing the development. It probably made earlier more· informal kinds of intimation not recorded in writing. In a letter of 3 December 1987, the Town Clerk for the Gold Coast City Council wrote to Ms Staib in the following terms "OPTION TO LEASE THE PIER PROJECT ADJACENT TO THE BROADWATER CAR PARK - NERANG STREET SOUTHPORT The Gold Coast City Council has taken out an injunction against the development of this project in view of the difference between the project proposed and the floating restaurant originally contemplated. It is understood that the .. ' option to lease the · seabed lease area for this development is to be taken up in the near future. Your assistance is sought in overcoming a development pgainst Council's planning intentions for the western side of the broadwater by not renewing the option lease of this site. Would you please advise when a decision has been made in relation to this matter by the Gold Coast Waterways Authority." At the time of writing this letter the plaintiff had in fact given building approval for the proposed development. Not surprisingly Ms Staib was cross-examined at some length on this topic. In the course of her evidence she said - "The Waterways Authority had taken a stance from the time of my appointment that local authorities were primarily responsible for land based strategic planning; that the role of the Waterways Authority in relation to that was a secondary role rather than a primary role and that no proposal that the Waterways Authority put forward would be appropriate if it was in conflict of the desires of the local authority" -- 0 0 · ........ 0 0 -- 13 of 36 -- 0 9 She was asked whether that was the attitude even if the desires ·'. of the local authority were totally unreasonable to which she replied - "I come back to the perspective the local authority had responsibility for land based strategic planning.'" It emerged in the course of evidence that the ground upon which the plaintiff refused to give building approval to the proposed development upon the lease, the subject of the option which the second defendant held from the third party, wa,s thought insupportable when the plaintiff was brought to the Local Government Court by the second defendant. In fact, before that c=) court in August- September 1987 the plaintiff consented to give building approval to the proposed development which it had declined to do after, for whatever reason, it had a change of heart in respect of the development. It was subsequent to that consent order, it seems, that the plaintiff approached the third party with a view to having it not c=) extend further the time limited by the option to take steps 0 necessary to acquire the lease. The reason there had been such delay in obtaining the lease was the obstructive conduct of the plaintiff which was not overcome until its appearance before the Local Government Court when it consented to grant the building approval that it had previously refused. It was on the basis of this difficulty in procuring building approval that the third party extended "the period of the option" to 31 December 1987 by letter dated 25 February 1987. Shortly after granting building approval as ordered, the plaintiff commenced the present action in which it seems one of -- 14 of 36 -- 10 the matters to be debated between the plaintiff and the second defendant will be the power of the plaintiff to permit persons to park cars in the parking area constructed on land which.the council holds as trustee under the Land Act for that purpose when those persons wish to go to the development proposed by the second defendant on the lease area rather than to go to other places, or indeed perhaps to merely sit in their parked car. Ms Staib said that before the third party ever received the letter from the plaintiff dated 3 December 1987, she thought that the Council "would have liked us" to stop the development in some fashion. 1987. She further continued on with her explanation that - "the Authority had entered into the deed of option - I have lost the word - with true intent to proceed and given the understanding the local authority was supporting the granting of the deed of option and proceeding to lease - proceeding to leasing - towards leasing as I understand it the position of the local authority shifted and the development itself changed in terms of content -the local authority's position had shifted and that put the Waterways Authority in a difficult position so that over a period of time the position evolved that if it was possible not to proceed with the development without penalty to the Gold Coast Waterways Authority then that may be the best possible action to take subject to legal advice." Ms Staib said that "we" took legal advice during December It is convenient at this stage to go back to letters written on behalf of the third party to the second defendant and its agents seeking for the first time in more than 12 months further specific information to which it asserted it was entitled "in accordance with condition 3G of the Deed of Option". It is helpful to set forth in detail the content of a letter dated 2 November 1987 which appears to have been the first one 0 0 0 0 -- 15 of 36 -- 0 0 0 0 11 written to the second defendant or its agents by Ms Staib as a manager of the third party. This· appears to have been written a month or so after the plaintiff Council consented at the door of the Local Government Court to grant the building approval it had refused for so long. The letter states "I refer to your letter dated 8 September 1987 and to your client's request that formal lease documentation be completed for the Themed Restaurant in accordance with the conditions of the Deed of Option signed on March 14, 1986. On September 29, 1987 you advised me by telephone that the Gold Coast City Council had commenced legal action against your clients to further restrain the construction of this project by refusing access to the site and use of the car park land held in trust by Council. At that time I advised you that in accordance with condition 3G of the Deed of Option your clients were· to provide GCWA with evidence that they could satisfactorily finance the development. That information was to have been provided within 15 days from the date of approval of working drawings. As working drawings were approved by GCWA on May 26 1986 that evidence should have been provided by June 10 1986. You have advised me that you considered. that the information provided with the original tender submitted to GCWA on July 26, 1985 would have been acceptable in respect of condition 3G. I now confirm that .it will be necessary to provide an update of that information for consideration by GCWA. In particular I would expect to receive from you the following: (a) Details on how Salmead Pty Ltd proposes to finance the construction and ongoing operating· expenses of the development. (b) Advice on whether there is to be any mortgage attached to the leasehold. If yes, full details concerning that mortgage should be provided. (c) Projected cash flows and financial statements for the first 5 years of operation and (d) Any other relevant information concerning asset backing and documentary evidence that any necessary finance is now in place. -- 16 of 36 -- 12 Please let me have this information and any other information you consider relevant by November 30, 1987 in order that an assessment may be made on the financial viability of the project. Please do not hesitate to contact me if you wish to discuss this matter further." By letter dated 27 November 1987 the solicitors for the second defendant replied to the third party and advised inter alia. "In respect of the requirements contained in your letter under reply we advise that we have been instructed by our clients that the information sought therein has already been provided and we enclose herewith photocopies of the projected cash flows and financial statements as prepared by Messrs Cannon Phillips and Dobbie, Public Accountants, for your information. In relation to our clients intentions for the financing of the construction and operating expenses of the development we advise that such funds will be derived from our clients' personal funds held by the ANZ Bank Pacific Fair and from a mortgage advance over which their property at Nerang will be offered as security. At this time it is not contemplated that it will be necessary to mortgage the leasehold in any way." 0 0 By a letter dated 30 November 1987 in reply (written by Ms 0 Staib as manager of the third party) the solicitors for the second defendant were informed - "As advised in our letter dated November 2, 1987 to Statham Qld Pty Ltd the information provided by your clients with their original tender on July 26, 1985 does not satisfy the provisions of clause 3G of the Deed of Option. GCWA also requires actual and detailed evidence that the finance for the development, construction and management of the ongoing operations is in place. You have again provided this information attached to your letter dated November 27, 1987 and it is NOT adequate. Updated figures at 1987 values must be provided. As this information has previously been requested from your client you are advised that if the information is 0 -- 17 of 36 -- -------------------------------------------------------------------------------- 0 0 0 not provided consider the Option." 13 by December 7, 1987 GCWA will requested extension of the Deed not of On 2 December 1987 the third party received a copy of a letter -whether forwarded to it by the solicitors for the second defendant is not clear - from the investment manager of the ANZ Bank to Mr and Mrs Poulos. The letter reads "Dear Mr and Mrs Poulos, Further to your recent inquiry we are happy to confirm continuation of our willingness to provide financ~ (if necessary) in terms of your application to hand to enable completion of your pier development project at Southport. Yours faithfully, D. wardrop Investment Manager CC Waterways Authority." While it is not entirely clear on the material whether this letter was forwarded by the solicitors for the second defendant or directly by the bank at the request of Mr and Mrs Poulos, whoever forwarded the letter it is clear that it was received by the third party on 2 December 1987. It must be considered in the () light of a letter from the manager of the same bank to the third party dated 22 March 1985 which said of Mr and Mrs Poulos: "Financially they are quite sound and could be relied upon to fulfil any undertaking within their financialcapacity to meet." Not surprisingly, Ms Staib was cross-examined at some length as to why if she was really motivated by a bona fide_ desire to obtain further particulars as to the financi~l capacity of the second defendant to pay the costs of the proposed development on -- 18 of 36 -- 14 the site of the lease, she did not indicate the nature of the material which she sought to consider. I must record that I·was quite unimpressed by the demeanour of Ms Staib when she explained precisely what further information she sought purportedly under cl. 3G of the Deed of Option, and why she had apparently taken no steps whatever to indicate either to .the second defendant or to its solicitors or to the first defendant as its agent, the nature of the material she sought. It emerged clearly that not merely did the third party not indicate to the second defendant or its solicitors what further 0 details were required, but it also failed to make any inquiry of the various persons who had provided what one might have thought 0 was information within the contemplation of cl. 3G both at the time of the initial proposal for the option and subsequent to the last request for further information. On its face the letter sent apparently directly from the ANZ Bank to the third party indicated that the bank was aware of the development which the second defendant proposed to undertake and was willing to provide 0 what finance might be needed by Mr and Mrs Poulos (their company being the second defendant) to complete that construction. 0 The third party was well aware of the increase in the size of the development which it had approved before the Deed of Option had even been executed on 14 March 1986 at a time when the plaintiff was not opposed to the development which it had initially approved. It is convenient at this stage to refer to cl. 3G of the Deed of Option, the construction and application of which is -- 19 of 36 -- 0 0 0 0 15 crucial to the determination of the issues in these third party proceedings. Clause 3G provides "3. This option may not be exercised until the following terms and conditions have been met: (A) (B) (C) (D) (E) (F) (G) Within fifteen ( 15) days after the optionor' s approval of working drawings but prior to exercise of the option the optionee shall submit to the optionor satisfactory evidence of the optionee' s ability to finance the cost of the development planned for the said demised land in accordance with the requirements of the lease. It the optionee plans to mortgage the leasehold as security for a . financial loan the optionee shall submit all documents proposed in the loan transaction along with a request and processing fees for the optionor's consent to the proposed mortgage. " · In my view, it is clear that the information requested by the third party on 2 November 1987 went far beyond that which the second defendant was obliged to provide under cl. 3G - even if it had not already met that obligation. There is nothing in cl. 3G that requires the provision of details of how the second defendant proposed to finance "ongoing operating expenses of the development" nor "projected cash flows and financial statements for the first 5 years of operation" nor "relevant information as to necessary finance being in place" - whatever that might mean if it was not satisfied by the letter from the ANZ bank, to which reference has already been made. -- 20 of 36 -- 16 Upon the whole of the evidence I am satisfied that the real reason or motivation for the demands made by the third party on 2 November and 30 November 1987 for further information was not the desire to be better able to assess the second defendant's financial ability under cl. 3G but rather the desire to make out a ground upon which it could rely to avoid its obligation under the Deed of Option should the second defendant exercise its right under it - which it purported to do of course by letter dated and received by the third party on 7 December 1987 -the last day to which time had been "extended for the provision of satisfactory 0 information". By letter dated 8 December 1987 the third party advised that 0 it was "taking legal advice" on "verbal advice" it had received from the solicitors for the second defendant that the defendant was "not in a position to provide the financial information requested in GCWA's letter dated 2 November 1987". The "verbal advice" followed the letter from the third party dated 2 November 1987, which required information which clearly 0 the second defendant was not obliged to provide under cl.3G of the Deed of Option. The solicitors for the second defendant in response to that letter however advised by letter dated 27 November 1992, inter alia: "You will'have already received correspondence from us dated 5th November 1987 requesting an extension of time in relation to our client's option. In respect of the requirements contained in your letter under -reply we advise that we have been instructed by our clients that the information sought therein has already been provided and we enclose herewith photocopies of the projected cash flows and financial statements as prepared by Messrs Cannon Phillips and Dobbie, Public Accountants, for your information. 0 -- 21 of 36 -- .17 In relation to our in clients' intentions for thefinancing of the construction and operating expenses of the development we advise that such funds will be derived from our clients' personal funds held by the ANZ Bank, Pacific Fair, and from a mortgage advance over which their house property at Nerang will be offered as security. At this time it is not contemplated that it will be necessary to mortgage the leasehold in any way." This reply was received by the third party at about the same time it received the letter from the ANZ Bank dated 30 November 1987 advising of the bank's continuation of its willingness to () provide all necessary finance to enable the second defendant to complete the development required upon the site of the lease the 0 0 0 subject of the option. I also found unimpressive Ms.Staib's attempt to support the third party's actions on the ground that she was not satisfied with the "accuracy" of the information she had been given by the solicitor for the second defendant by the letter of 27 November 1987 that funds required to finance the development would be provided out of the personal funds of the second defendant and by bank finance secured over the dwelling lease owned by Mr and Mrs Poulos, and it was not contemplated that it would be necessary to mortgage the lease from the third party in any way. I gained the distinct impression that the evidence she gave was directed to derive whatever support she could from her alleged dissatisfaction with the performance of its obligations under cl. 3 (G) by the second defendant in her attempt to justify the third party's repudiation of its obligations under the deed of option. The third party did not at any time indicate what precisely was the nature of the additional information it required - only -- 22 of 36 -- 18 that the information attached to the letter of 27 November 1987 was "NOT adequate" and that "updated figures at 1987 values must be provided" - whatever that was intended to convey in the context of requirements (a) to (d) for information expressed in the letter of 2 November 1987. Again not surprisingly Ms Staib was asked why if the third party had a bona fide desire for further information within the ambit of _cl. 3G, she did not indicate precisely what sort of additional , information was required. In the course of her evidence she dealt with this query as follows - " ( Q) Why didn't you get back to Mr Vockler and tell him whether the documentation regarding proposed funding an operation of the development was satisfactory in your view - (A) The answer to that question is that we had extended the time for the provision of satisfactory information from the period in June 1986 to 30 November 1987 and then again to 7 December 1987 -- That period had passed given the information that we had available we were taking legal advice-- I didn't respond at that point pending legal advice -- Salmead Pty Ltd had had a long period of time to provide the necessary information -- We needed to take legal advice to determine the best course of action at that point in time and given the implications of the decision that needed to be made one way or the other then I needed to be very careful about correspondence or contact at that point in time -- I had a legitimate concern about the usefulness of the information, the inadequacy of the information that had been provided and that was provided at the time during my tenure simply did not give me adequate grounds to suggest that the project was financially viable." I observe at this stage that there is nothing in cl. 3G in my view which required the second defendant to satisfy Ms Staib or the third party or anybody else (perhaps apart from the ANZ Bank that was financing the development) that "the project was financially viable". It is quite clear however that Ms Staib proceeded on the basis that the second defendant was required to 0 0 0 0 -- 23 of 36 -- 0 0 0 0 19 persuade her i.e. the third party- on the matter of financial viability of the project once completed and indeed this seems to be the only explanation for the demands mad~ iri her letter df 2 November 1987. With respect to the request for further information about the financial ability of the second defendant to complete the construction project the stand· was taken in court and very forcefully argued both by Ms Staib in the course of her evidence and by counsel for the third party that there had been the provision of no further information such as one might. expect if a bill of quantities had been produced for the development of the project contained in the Annexures to the Deed of Option~ The only information which· had been provided was that which accompanied the proposal in about July 1985. Ms Staib having admitted that in December 1987 "the position evolved that if it was possible not to proceed with the development without penalty to the Gold Coast Waterways Authority then that may be the best possible action to take subject to legal advice" was asked whether she had sought further information if she was dissatisfied with that provided on behalf of the second defendant prior to 7 December 1987. She said that there were specific things about which she would have liked to have had more advice when she received the letters from and on behalf of the second defendant in November 1987. When asked whether there were some specific pieces of information she would have liked, she replied "absolutely". She said however that she did not ask in a specific way for any further information but let things rest with the letters that she had written. -- 24 of 36 -- 20 I infer from the conduct of the. third party that it had firmly decided by the time the correspondence passed between it and the second defendant in November 1987 that it would do the best it could to comply with the request of the plaintiff and take what steps were legally available to avoid performance of any obligation under the Deed of Option which it had signed with the second defendant in March 1986. This.attitude was highlighted in the evidence of Ms Staib when she was asked why the third party had not replied to a letter from the solicitor for the second defendant dated 1 0 0 December 1987 asking, inter alia, "We would also appreciate your earliest advice of the current position relative to the extension of the .. , .. ·:~ le~.se option and preparation of the lease documents if the documentation provided regarded proposed funding and operation of the development is satisfactory". It must be kept in mind that the solicitors for the second defendant had on 7 December 1987 wisely purported to exercise the 0 option - perhaps by that stage having some reservations as to the intentions of the third party. Ms Staib said that no response was Q made to that letter of 10 December 1987. She said "my response at the time was to take legal advice. I did not respond." Upon the evidence I am well satisfied that the demands for further information made by the third party in November 1987 and the failure to take any reasonable steps to appraise the second defendant and its representatives of the nature of additional material sought simply reflects · that the third party had succumbed to the pressure put on it by the plaintiff to avoid whatever contractual obligation it might be under to the second defendant under the Deed of Option by making the best case out 0 -- 25 of 36 -- 0 0 0 0 21 which it could of a failure by the second defendant to meet its obligations under cl.3 - and in particular cl.3G- of the deed. I am satisfied that the letters of the third party dated 2 November and 27 November 1987 were written for the purpose only of laying a foundation which might arguably support the third party's refusal recorded in minutes of its meeting on 2 February 1988 to extend further ~he period of the option past 31 December 1988. Illuminatingly that resolution is recorded together with matters it considered in the following terms - "The Deed of Option expired on December 31 1987. GCWA's barrister has advised that the option has not been exercised properly by Salmead Pty Ltd and that GCWA is not obliged to extend the period of the option past December 31 1988 to allow the option is exercised properly. A request has also been received from the Gold Coast City Council that GCWA assist the Council inpreventing this development proceeding." Letters written by the plaintiff to the third party date~ 15 February and 18 February 1988 which were placed in evidence, are consistent with every effort being made by the plaintiff to inform the third party in an official way (that might easily be proved should the occasion arise) that "all Council's approvals for the proposed development have not been obtained". One might be forgiven for thinking that letters from the plaintiff to the third party dated 15 February and 18 February 1988 were drafted with the content of cl.3F in mind as was a letter from solicitors for the third party to the solicitors for the second defendant dated 1 March 1988. Indeed, this letter of 1 March 1988 which appears to have been the first letter written by legal representatives of the third party to the solicitors for the second defendant who had been to that time in regular -- 26 of 36 -- 22 correspondence with the third party might be thought to be the coup de grace for it reads "We act on behalf of the Gold Coast Waterways Authority. We refer to correspondence passing between yourselves and our client and in particular your letter of 7 December 1987. Investigations by our client have revealed that your client has failed to obtain approval from the relevant Fire Brigade Board as.provided for in clause 3E of the option agreement. It also appears that your client has not obtained from the Gold Coast City Council all necessary approvals and permits for the construction of the proposed development. Further our client does not consider that your client has provided adequate evidence to satisfy the provisions of clause 3G of the option agreement. In the circumstances our client does not consider your clients purported exercise of the option to be valid. Further since the term of the option expired as at 31 December 1987 our client considers the matter to be at an end." . I am satisfied that the letter from the solicitors of the third party dated 1 March 1988 was merely the culmination of a strategic course of conduct developed as a consequence of an arrangement entered into between the plaintiff and the third 0 0 party when all other efforts by the plaintiff to that time to () impede the development proposed by the second defendant had failed. Mr and Mrs Poulos, who control the second defendant, had incurred enormous expense and inconvenience acting upon the third party's invitation to seek a development lease which when they embarked upon the development exercise, was fully supported by the plaintiff. Indeed, it was still supported by both the plaintiff and the third party at a time when the Deed of Option was entered into. At that time no indication had been made by either the .. plaintiff or the third party that there was any problem with the proposed increase in size of the development. -- 27 of 36 -- 0 0 0 0 23 Mr and Mrs Poulos sold their restaurant, which they were operating profitably at Broadbeach when they embarked upon the development project to put them in funds to carry it out as required by the third party and approved by the plaintiff. I infer that to no small degree the amount of funds held by the bank explains partly at least why the bank continued to be willing to finance the development once it should start as it advised the third party at the end of November 1987. On behalf of the third party, not surprisingly, little attempt was made to strenuqusly support the behaviour of the plaintiff and third party, which is so clearly evidenced by the correspondence and the oral evidence of Ms Staib. contended strongly~however that - It was ( 1 ) Upon the proper construction of cl. 3G of the Deed of Option the second defendant was obliged to satisfy the third party and, in fact to keep it satisfied, by information it provided after the third party had approved the working drawings. It was contended that therefore the provision of information upon the submission of the proposal leading to the signing of the Deed of Option could not at law be relied upon as amounting to compliance in whole or in part. (2) The information provided in November 1987 when considered alone was not such as to be capable of meeting the second defendant's obligation to satisfy the third party under cl. 3G. (3) Even if the information provided on 26 July 1985 and the information provided in November 1987 were considered -- 28 of 36 -- ----~ --~------ 24 together that combined information upon its face viewed objectively when considered in the context of the written request by the third party for -information pursuant to cl. 3G, was insufficient to meet the second defendant's obligation to satisfy in fact (or even to be capable of reasbnably satisfying) the third party. (4) Whatever may have been the motivation of the third party in acting the way . it did in 1987, that motivation was completely irrelevant because upon a proper construction of cl.3G of the Deed of-Option the second defendant failed to comply with its obligations to reasonably satisfy the third party that it had the financial ability, if granted the .. ,;··, :-··· ,. lease, to complete th~ development required by that lease. ( 5) There was no evidence of the cost of the development proposed in the working drawing supplied in _April 1986. These working drawings presumably related to or perhaps 0 0 even included the drawings attached to the Deed of Option together with the proposed lease and guarantee to be 0 executed by Mr and Mrs Poulos. (6) The second defendant failed to comply with cl.3G and therefore was unable to exercise the op-tion as it had purported to do on 7 December 1987. Reliance was placed upon what said in United Dominions Trust (Commercial) Ltd v. The Eagle· Aircraft Services Ltd ( 1968) 1 WLR 7 4 and particularly by Lord Denning M.R. pp. 80 .::.. 81 where he observed - "It has been shown quite correctly that the agreement to repurchase was not an ordinary bilateral contract. It was a unilateral contract of a kind which does not become binding on both sides until a condition 0 -- 29 of 36 -- 0 0 0 () 25 precedent has been performed. It is like a lease in which the lessee is given an option to renew the lease for a further-term. Such a lessee usually covenants to keep the premises in repair during the term: and he is given an option to renew if he gives notice six months before the end of the term and duly performs all the covenants to repair. In order to exercise the option the lessee must give the notice in the specified time and he must fulfil the c6venants to repair according to their terms. He is not entitled to excuse himself by saying that the want of repair is trifling." In the course of his judgment, Edmund Davies L.J. at p.87, observed - "As I view it the proper interpretation and effect ofthe document is that (as Mr Ackner submitted), Eagle thereby made an irrevocable offer to repurchase the two aircraft subject to compliance by UDT with one or more conditions precedent. In the light of such decisions as Weston v. Collins, 12 LT. 4, Hare v. Nicholl (1966) 2 QB 130 and West Country Cleaners (Falmouth) Ltd. v. Saly (1966) 1 WLR 1485 cited to this Court but unfortunately not to the trial Judge, it is nothing to the point for UDT to urge as they have done that little or no benefit could enure to Eagle by compliance with those terms. Nor conversely would it be material to show that no detriment resulted to Eagle by non-observance by UDT of such conditions. As James LJ said in Finch v. Underwood [1876] 2 Ch D 310 at 315, where a tenant in breach of his covenant to repair was refused a renewal of hislease: "He (the tenant) is not entitled to excuse himself by saying that the want of repair is trifling. The answer to that is, no matter, your bargain was to leave the property in thorough repair "if he has not fulfilled his legal bargain he cannot sustain his claim for a lease". Strict compliance with the conditions was essential if UDT chose to exercise their right to call upon Eagle to repurchase. That compliance being absent the obligation of Eagle to repurchase never came intoexistence. I find no room for doubt that the irrevocable offer to ·Eagle to repurchase was conditional upon UDT calling upon them so to do within a reasonable time of determination of their hirepurchase with Orion. They allowed a period of some five months -- to elapse between those two events. Did they thereby unreasonably delay? The judge holding that three months was a reasonable time for thepurpose considered that they did." -- 30 of 36 -- 26 The matter of fact in issue in that case ·was whether the conduct of the appellants involved unreasonable delay where they did not do something within a period of three months. On the facts of this case the third party contends that prior to the time of the purported exercise of its option to take the lease on 7 December 1987, the second defendant had failed to comply with its obligation under cl. 3G of the Deed of Option in that it had not submitted to the third party "satisfactory evidence of .the optionee's ability to finance the cost of the development planned in accordance with the requirements of the proposed.lease". The short factual point then for determination is whether the information provided by the second defendant·to the third party prior to the exercise of the option, was, in all the circumstances of the case "satisfactory evidence of the second defendant's ability to finance the cost of the development". 0 0 In my view, it would not be correct to determine that factual issue merely by perusing, in vacuo, the terms of the 0 information actually provided at various times and in various ways to the third party. The information provided must be considered in the context of what had passed between the second defendant and its agent and the third party before and at the time the information.was required, and the wishes of both the plaintiff and the third party concerning the second defendants exercising any rights it might have under the Deed of Option. The letters of November 1987 from the third party to the second defendant purporting to seek further information must be considered in the light of the desire then held by the third 0 -- 31 of 36 -- 0 0 0 0 27 party to avoid its obligations under the Deed of Option if possible, and the failure of Ms Staib, the manager of the third party at the material time, to give any real indication of the sort of information that the third party still sought. Those are circumstances which must be considered when determining whether the information actually supplied was "satisfactory". A further circumstance is the execution of the Deed of Option by the third party on 14 March 1986. It clearly emerged prior to the exercise of the option, that the Broadbeach restaurant of Mr and Mrs Poulos had been sold - one would have thought for the obvious purpose of putting them in funds to meet the cost of the development - and the ANZ Bank manager had forwarded to the third party a letter quite unequivocal in its terms indicating that it would continue to provide whatever financial assistance was needed by the second defendant to complete the proposed development under the lease. I find that in the circumstances of this case the second defendant did prior to its exercise of the option on 7 December 1987 provided to the third party satisfactory evidence of its ability to finance the cost of the development required under the lease. In coming to this conclusion I find that the period within which the third party had to be satisfied - "within 15 days after the optionor' s approval of working drawings but prior to exercise of the option" - was the period of time leading up to a date 15 days after the optionor's approval of the working drawings or leading up· to such later date as might be indicated by the optionor. On the facts of this case the third party not having -- 32 of 36 -- 28 for a very long time, indicated any dissatisfaction with the evidence placed before it as to the financial atiility of the second defendant to comp~ete the development, cl. 3G seems to have been raised first at the end of September 1987 by Ms Staib. Assuming that it was open for the third party to do this at that time it thereafter clearly purported to extend time for compliance ~ith c~. 3G until 7 December 1987. In my view, upon a proper construction of cl. 3G it is necessary to consider all the information supplied concerning the second defendant's financial ability to complete the transaction prior to that date in determining whether the second defendant was in breach of cl. 3G. In this respect I refer to Back v. Don- Re~ Furniture Old (1981) 1 Qd R. 326 at p. 329G per Sheahan J. and Re Dallyn Investments Pty Ltd (1989) 1 Qd R. 121 at p. 125 1. 35 per Shepherdson J. I find that the evidence which the second defendant in fact provided to the third party prior to its purported exercise of the" option on 8 December 1987 was sufficient to reasonably satisfy the third party in the circumstances of this case of the financial ability of the second defendant to complete the development work required under the lease. It is unnecessary on the facts of this case on the findings which I have made concerning the motivation of the third party purporting to call in aid the provisions of cl. 3G to evade its obligations under the Deed of Option, to embark upon an examination of the authorities dealing with whether the third p_arty in this case was bound only to act. honestly or whether it was also boqnd to act reasonably. On the facts of this case the 0 0 0 0 -- 33 of 36 -- 0 0 0 0 29 third party did not act "honestly'' within the sense in which that term is used in the cases. It did not act for the purpose of ensuring that the facility to be constructed under the lease was within the financial capacity of the second defendant to construct. On the contrary, it acted for the purpose of avoiding the granting of any lease to the second defendant to comply with the request of the plaintiff. It acted to ensure that in fact the development facility was not constructed by the second defendant or by anybody else - irrespective of their financial ability to complete the development. In any event, on the facts of this case on any objective analysis of the circumstances and the terms of the letter from the ANZ Bank which it was given, the third party ought to have been reasonably satisfied of the financial capacity of the second defendant to perform its developmental obligations under the terms of the lease. I refer to the observations of Mason J. in Meehan v. Jones (1982) 149 C.L.R. 571 at p. 590 - 591. I find "no insuperable difficulty" in concluding on the facts of this case that the material as to its financial capacity which the second defendant placed in front of the third party prior to 7 December 1987 was indeed "satisfactory evidence" of its ability to finance the development costs. In this respect I refer only to the observations of Buckley J. in Sweden Maxwell Ltd v. The Universal News Services Ltd (1964) 2 QB 694 at p. 735. On the facts of this case not merely was the stand taken by the third party that the second defendant's financial capacity was not "satisfactory", not based upon any bona fide evaluation of the evidence placed before it to reach a state. of satisfaction, but was based upon an improper motivation to avoid -- 34 of 36 -- 30 its obligations under the Deed of Option as the result of requests made by the plaintiff for it to do so. I am satisfied on the whole of the material that the second defendant has complied with its obligations under the Deed of Option and that its purported exercise of that option on 7 December 1987 was valid and effective. On the facts as I find them it is unnecessary to consider the matters of waiver and election canvassed upon the hearing. By error of drafting the form of lease attached to the Deed of Option specified the duration of the lease to be a period of 20 years rather .than 30 years. This was clearly a mere clerical error as appears from the evidence of Mr Hamilton who at the material time was the manager of the Gold Coast Waterways Authority. He retired from that position in mid June 1987 -when he was replaced by Ms Staib. There is no issue really between the second defendant and the third party on this point and I therefore order that the Deed of Option dated 14 March 1985 be rectified by amending the term of th~ lease appended thereto on the first page in accord with the relief sought in para. (a)(A) of the amended statement of claim delivered by the second defendant against the third party on 18 November 1993. In essence the lease in respect of which the option has been exercised will expire in the year 2016 in lieu of the year 2006 appearing in the lease form appended to the Deed of Option. I do therefore declare - 0 0 0 0 -- 35 of 36 -- 0 0 0 (! ~/ 31 (1) The second defendant has validly exercised the option contained in cl. 4 of the Deed of Option between it and third party dated 14 March 1985. ( 2) The second defendant is now entitled to a lease upon the conditions contained in the form of lease appended to that Deed of Option (as rectified) for the term of 30~years in respect of lot 492 on Plan WD 5997 County of Ward, Parish of Nerang. (3) I order: (a) that the third party take all necessary steps make all reasonable endeavours to obtain such Ministerial and other approvals and consents as may be necessary to grant to the second defendant a lea~e in the terms of the lease appended to the Deed of Option of ~4 March 1986 (as rectified). (b) that the third party do all such acts and execute all such documents as may be reasonable and proper on its pa~t to enable the second defendant, if necessary, to apply for or itself procure such Ministerial and other necessary approval and consent to become lessee from the third party in accordance with the terms of the lease document (as rectified) appended to the Deed of Option between the second defendant and the third party dated 14 March 1986. -- 36 of 36 --