Booker Industries Pty Ltd v Wilson Parking

Booker Industries Pty Ltd v Wilson Parking - [1982] HCA 53 - HCA 1977 case summary — Zoe

[13]

It follows that at this stage an order could not be made for the specific performance of the agreement to grant a further lease: Brown v. Heffer [2] . However, in order to give business efficacy to cll. 4.01 and 3.05(b) it is necessary to imply a term that, once the conditions specified in cl. 4.01 have been performed, both parties will do all that is reasonably necessary to procure the nomination by the President of an arbitrator. If authority is needed for this proposition, reference may be made to such cases as Butts v. O'Dwyer [3] where it was held that if parties entered into an agreement to transfer land subject to a condition that it was not to become effective unless the Minister's consent had been obtained, there would be implied an obligation on the part of the person giving the transfer to do all that was reasonable on his part to the end that the Minister's consent might be obtained [4] , and Kennedy v. Vercoe [5] where a contract for sale of a business conducted in a shop of which the vendor was the lessee was subject to the purchaser being accepted by the landlord as tenant, and it was held that an implied obligation lay on the purchaser to do whatever might reasonably be required of him to enable the vendor to obtain the landlord's consent: [6] . In the recent decision of the House of Lords in Sudbrook Trading Ltd. v. Eggleton [7] a case concerning a lease which contained an option to purchase "at such price not being less than £12,000 as may be agreed upon by two valuers one to be nominated by the lessor and the other by the lessee and in default of such agreement by an umpire appointed by the valuers", Lord Diplock [8] said that an obligation on the parties to appoint their respective valuers would be a necessary implication to give business efficacy to the option clause. It may be that in the present case the President might nominate an arbitrator at the request of one of the parties, but he might decline to do so unless both parties requested him to act. Given an effective exercise of the option, both parties were under an obligation to request him to nominate an arbitrator, if such a request was reasonably necessary to procure the nomination.

[37]

To hold that a retrospective increase in rent may be validly imposed in accordance with the contract between landlord and tenant involves some modification of the landlord's right to distrain. It is not necessary in this case to examine the extent of that modification or to discuss whether a landlord is entitled to distrain for a minimum known amount of rent pending the ascertainment of a larger rent. Clause 4.01 provides that Wilson, having exercised the option, should be entitled to the grant of a further lease after the expiration of the first term at a rental ascertained as therein set out being no less than the rental payable in the last year of the first term. I would construe cl. 4.01 as providing for the ascertainment of a new rental for the entire further term which, when it is ascertained, should be paid as from the commencement of that further term. The premises are used commercially and part of the rental for the first term was calculable by reference to the gross annual revenue of Wilson's business. The context of cl. 4.01 suggests that rental under the lease is not intended to be recovered by distraining but rather is intended to be merely the contractual sum due, ascertainable and payable in accordance with the agreement of the parties. It follows that a further lease containing a clause drawn in conformity with cl. 4.01 would not be open to objection merely because the new rental might not be ascertained when the first payment falls due, and the fact that the rental was not ascertained either on the day after the expiration of the first term or at the date of the trial was and would be no impediment to the enforcement of Wilson's rental liability when ascertained. Wilson would be entitled to credit, of course, for the payment of such amounts as it might have paid by way of rental pending the ascertainment of the new rental. The first difficulty in the way of a decree of specific performance is without substance. A more formidable difficulty is the second.

[41]

In the case of Milnes v. Gery [28] , the agreement was for sale according to the valuation of two persons, one to be chosen by each side, or an umpire appointed by the two in case of disagreement. They differed in their estimate, and were not able to agree upon a third person, and in that case it was decided that the agreement could not be specifically performed. The ground is put thus by Sir William Grant in giving his judgment: "The only agreement into which the defendant entered was to purchase at a price to be ascertained in a specific mode. No price having ever been fixed in that mode, the parties have not agreed upon any price. Where then is the complete and concluded contract which the Court is called upon to execute?" Surely you may put the reason of that decision briefly thus: - The contract which the Court is called upon to execute is not a complete contract; but it is an agreement that a contract should be made. The Court cannot enforce an agreement that a contract should be made; the contract must be complete. Reference is also made to the case of Darbey v. Whitaker [29] , which is essentially the same as Milnes v. Gery. Those were the decisions upon which the case of Tillett v. Charing Cross Bridge Co. [30] proceeded. If the court were able to fix a price in the event of the contractual machinery failing, there would be no uncertainty in the contract and no obstacle in the way of specific performance. The court, being able eventually to fix the price itself if it should be necessary to do so, would so mould its decree of specific performance as to require the parties to do what was reasonably required of them to make their contractual machinery work and, if that machinery should nevertheless fail, the court would itself fix the price. But that course cannot be taken if the parties intend that the price should be fixed exclusively by their contractual machinery. Thus in George v. Roach [31] Starke J. said: There is no doubt that the provision for a valuation of the newspaper agency is an essential term of the agreement. And it is equally clear that in the case of an agreement to sell at a price to be fixed by some valuer the agreement is not enforceable unless the price has been so fixed; the agreement to sell is made subject to a condition precedent that the price shall be so fixed, and unless the condition be performed the agreement is not effective (Milnes v. Gery [32] ; Vickers v. Vickers [33] ). 1. (1881) 18 Ch.D. 670, at p. 688. 2. (1807) 14 Ves. 400 [33 E.R. 574]. 3. (1857) 4 Drew. 134 [62 E.R. 52]. 4. (1859) 26 Beav. 419 [53 E.R. 959]. 5. (1942) 67 C.L.R. 253, at p. 263. 6. (1807) 14 Ves. 400 [33 E.R. 574]. 7. (1867) L.R. 4 Eq. 529.

[49]

It is clear, however, that there are circumstances in which the courts have made exceptions, the most striking of which are cases such as Gregory v. Mighell [43] and Beer v. Bowden [44] . This exception may be expressed: Where an agreement which would otherwise be unenforceable for want of certainty or finality in an essential stipulation has been partly performed so that the intervention of the court is necessary in aid of a grant that has already taken effect, the court will strain to the utmost to supply the want of certainty even to the extent of providing a substitute machinery. And Lord Fraser of Tullybelton adopted this statement of the exception when Sudbrook Trading went to the House of Lords [45] . With the greatest respect, I doubt whether it is right to regard Gregory v. Mighell or Beer v. Bowden as exceptions to a rule applicable where the contract lacks certainty or finality in an essential stipulation. Rather, these cases tend to show that where the express terms of a lease reveal an hiatus in the machinery for fixing the rent, the court will lean towards a construction of the lease which treats the machinery merely as a means of ascertaining what is capable of being ascertained objectively as a fair and reasonable rent and which thus avoids an hiatus in an essential stipulation. The justification for that approach to the construction of a rent clause in a lease is manifest when the lessee has been in possession prior to the failure of the contractual machinery, for the parties cannot be taken to have intended that the lessee should have been entitled to rent-free possession if the machinery should fail to fix the rent. That intention may be imputed to them (in the absence of any contrary provision in their agreement) as well before as after the tenant is put into possession where the commencement of the term is not dependent on the prior fixing of the rent. Contracts for the sale of property may stand on a different footing where an obligation to convey or transfer would not arise until the price is fixed (cf. Hall v. Busst [46] ). Even in a contract for sale, however, the House of Lords in Sudbrook Trading has now chosen to construe a contract which requires the price to be fixed by a valuer as a contract for sale at a fair value to be ascertained by the valuer or, in default, by the court. Lord Fraser of Tullybelton said [47] : I recognise the logic of the reasoning which has led to the courts' refusing to substitute their own machinery for the machinery which has been agreed upon by the parties. But the result to which it leads is so remote from that which parties normally intend and expect, and is so inconvenient in practice, that there must in my opinion be some defect in the reasoning. I think the defect lies in construing the provisions for the mode of ascertaining the value as an essential part of the agreement. That may have been perfectly true early in the 19th century, when the valuer's profession and the rules of valuation were less well established than they are now. But at the present day these provisions are only subsidiary to the main purpose of the agreement which is for sale and purchase of the property at a fair or reasonable value. In the ordinary case parties do not make any substantial distinction between an agreement to sell at a fair value, without specifying the mode of ascertaining the value, and an agreement to sell at a value to be ascertained by valuers appointed in the way provided in these leases. The true distinction is between those cases where the mode of ascertaining the price is an essential term of the contract, and those cases where the mode of ascertainment, though indicated in the contract, is subsidiary and nonessential: see Fry on Specific Performance, 6th ed. (1921), pp. 167, 169, pars 360, 364. 1. [1983] 1 A.C., at p. 460. 2. (1811) 18 Ves. 328 [34 E.R. 341]. 3. [1981] 1 W.L.R. 522n. 4. [1983] 1 A.C., at p. 484. 5. (1960) 104 C.L.R. 206, at p. 222. 6. [1983] 1 A.C., at p. 483.

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Judgment (59 paragraphs)

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