Booker Industries Pty Ltd v Wilson Parking

By a lease dated 3 October 1977 Wilson Parking (Qld) Pty. Ltd. ("Wilson") leased premises in Brisbane from Booker Industries Pty. Ltd. ("Booker") for a term of three years from 1 August 1977.

By cl. 4.01 of the lease it was provided as follows:

If the Lessee shall at all times during the term hereof have duly and punctually paid the rent and other monies payable hereunder to the Lessor at the times appointed for the payment thereof and shall have otherwise strictly observed and performed the terms, covenants and conditions on the part of the Lessee hereunder and if the Lessee shall have given notice in writing of its intention in that behalf to the Lessor not less than three (3) months prior to the expiration of the term hereof the Lessee shall have the right to be granted a further lease of the demised premises for the term of three (3) years commencing on the day after the expiration of the term hereof upon the same terms and conditions as are hereincontained save and except that the rental to be paid by the Lessee during such renewed term shall be such rental as may be mutually agreed between the Lessor and the Lessee and failing agreement then such rental as may be fixed by an arbitrator nominated in accordance with the provisions of Clause 3.04(b) but in any event the rental shall not be less than the rental payable in the last year of the first term. It is common ground that the reference to cl. 3.04(b) is a mistake; it should be cl. 3.05(b). That clause provided for the appointment of a single arbitrator to be nominated by the President for the time being of the Queensland Law Society Incorporated ("the President"). Not less than three months prior to the expiration of the term, Wilson purported to exercise the option. However, Booker refused to recognize as effective the purported exercise of the option and required Wilson to vacate the premises on 31 July 1980. Wilson remained in possession and issued a writ seeking specific performance "of an agreement contained in a lease for the renewal thereof" and other relief. Booker retaliated by issuing its own writ claiming recovery of possession.

By agreement the two actions were tried together by Andrews J. His Honour found that Wilson had validly exercised the option. He declared in substance that cl. 4.01 of the lease ought to be specifically performed and that, to that end, Booker was bound to do whatever may be reasonably required of it by Wilson to obtain the nomination by the President of a person to fix the rental. He awarded Wilson its costs of the action. Booker's action for recovery of possession was dismissed with costs.

Booker appealed from both decisions to the Full Court of the Supreme Court of Queensland (Wanstall C.J., Douglas and Matthews JJ.). The appeals were heard together. Matthews J., with whose reasons the other members of the Court agreed, confirmed the finding of the learned trial judge that Wilson had validly exercised the option. However, he held that the relief granted was too wide. There could be no order for specific performance of an agreement to lease until the rent was fixed; nor was Booker under any obligation either to agree a rent to apply to the new term or to join in any application to the President to appoint a person to fix the rent. The Court set aside the declarations made by Andrews J. and awarded Booker its costs of the appeal in that action. With regard to Booker's appeal in the action for recovery of possession, the Full Court dismissed the appeal on the ground that, having validly exercised the option, Wilson was entitled to remain in possession. No costs were awarded in respect of that appeal, and it was resolved that neither party should receive its costs of the trial.

Both actions are now the subject of appeal to this Court. Wilson (in appeal No. 21 of 1981) seeks the restoration of the declarations made by the learned trial judge, or alternatively a declaration that it validly exercised the option. Booker (in appeal No. 20 of 1981) appeals against the dismissal of its appeal in the action for recovery of possession. Both parties cross appeal with respect to the costs of each action.

Mr. Pincus, counsel for Booker, in opening the appeal abandoned the attack on the validity of the exercise by Wilson of its option to renew the lease, and we therefore need not consider that matter. The only issue of substance which now arises for decision is whether the renewal agreement contained in the lease is a concluded agreement. The answer to that question will resolve the questions arising under both appeals.

It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future. Consequently, if the lease provided for a renewal "at a rental to be agreed" there would clearly be no enforceable agreement. On the other hand, it is also well established that the parties to a contract may leave terms - even essential terms - to be determined by a third person: see the cases cited in Godecke v. Kirwan [1] . In the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required of the parties. It is true that if they do agree upon that rental, then there is no occasion to resort to the independent mechanism that the lease provides. But, there being no such agreement, all that is required is that the President name a person to fix a figure being not less than the minimum rental operative during the original term. No formality is required to effect the necessary appointment. Either party may request the President to facilitate the fulfilment of the agreement. It may be assumed that if he declines to do so, or if the person nominated declines to carry out the task assigned to him, then the renewal cannot be effected, and that Wilson's exercise of the option will have been fruitless. Nevertheless, in the circumstances as they stand at present, there is a valid agreement for the renewal of the lease subject to the fixation of a rental for the new term. The fixation of that rental is a condition precedent to the performance of the agreement.

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.

1. (1967) 116 C.L.R. 344, at p. 350. 2. (1952) 87 C.L.R. 267. 3. (1952) 87 C.L.R., at pp. 279-280. 4. (1960) 105 C.L.R. 521. 5. (1960) 105 C.L.R., at pp. 526, 529. 6. [1983] 1 A.C. 444. 7. [1983] 1 A.C., at p. 477.

In those circumstances there should be a limited decree for specific performance of the kind made in Butts v. O'Dwyer and Kennedy v. Vercoe. The Full Court, in holding that Wilson was not entitled to a decree, relied on a line of authorities including Darbey v. Whitaker [9] and Tillett v. Charing Cross Bridge Co. [10] , as supporting the principle that where one of the essential elements of an agreement (such as the price or rent) has not been ascertained at the date of trial, equity will not decree specific performance. Certainly some of those authorities did hold that the courts would not decree specific performance of an agreement to name an arbitrator to fix the amount of a purchase price. The decision of the House of Lords in Sudbrook Trading Ltd. v. Eggleton, which was given after judgment was pronounced in the present case, shows that that is no longer the law of England. However, even before that decision, the earlier English authorities could not have been fully accepted in Australia, consistently with such decisions as Butts v. O'Dwyer and Kennedy v. Vercoe. If a lessor agrees to renew a lease at a rent to be fixed by a third party, and agrees (expressly or impliedly) to do all that is reasonably necessary to ensure that the rent is so fixed, it is not right to say that there is no concluded contract until the rent is fixed. There is a contract which immediately binds the lessor to perform his obligation to do all that is reasonably necessary to ensure that the rent is fixed, although the performance of the further obligation to renew the lease is conditional on the rent being fixed. There is no reason in justice or in law why the court should not make an appropriate order for specific performance in such a case, that is, an order that the lessor should do whatever is reasonably necessary to ensure that the rent is fixed, and, if the rent is fixed, should renew the lease.

1. (1857) 4 Drew. 134 [62 E.R. 52]. 2. (1859) 26 Beav. 419 [53 E.R. 959].

There was a suggestion during the hearing that it may have been a proper construction of the lease to regard the reference to a minimum rental which could be fixed for the renewed term as itself establishing that element of the arrangement. But cl. 4.01 cannot be given that construction. The phrase "but in any event the rental shall not be less than the rental payable in the last year of the first term" is no more than a condition controlling the fixation of a new rental. It does not itself fix a rental. See George v. Roach [11] .

It follows that the appeal by Booker in the recovery of possession action (No. 20 of 1981) must fail. Wilson's cross appeal to recover its costs should succeed. The appeal by Wilson in the action for specific performance (No. 21 of 1981) should be allowed and the cross appeal by Booker dismissed. The order of the learned trial judge in the latter action (No. 3048 of 1980) should be affirmed subject to the insertion of a further order in the following terms:

Order that upon the rental being so fixed, the defendant do specifically perform the said clause and grant to the plaintiff a further lease of the premises for a term of three years in accordance with cl. 4.01.

Wilson should have the costs of the proceedings both of the trial and of the appeals to the Full Court and of the appeals to this Court.

Booker Industries Pty. Ltd. ("Booker") is the registered proprietor of an estate in fee simple in parcels of land with frontages to Charlotte Street and Mary Street in Brisbane. It leased buildings constructed on that land to Wilson Parking (Qld) Pty. Ltd. ("Wilson") for use as a car park and service station. The term of the lease was three years commencing on 1 August 1977 at a base rental of $49,500 per annum payable monthly in advance together with a variable annual sum, called a percentage rental, payable as rental within sixty days of the end of the rental year. The percentage rental was calculable by reference to "the gross annual revenue" which I take to be the gross annual revenue of the car parking and service station business to be carried on by the lessee upon the leased premises. The lease contained a covenant for the delivery up of possession at the expiration of the term (cl. 6(c)), but there was a covenant relating to renewal (cl. 4.01). Wilson gave a notice purporting to exercise an option to be granted a further lease in accordance with that clause. It was common ground in the argument on this appeal that the condition governing Wilson's right to give a notice of exercise of the option had been fulfilled and that the notice given by Wilson had complied with the requirements of cl. 4.01.

Nevertheless Booker adopted the view that even if Wilson had duly exercised its option under cl. 4.01, the clause was not effective to confer a right to be granted a further lease. Its view rested on the fact that no rental for the further term had been agreed or fixed. Accordingly, Booker refused to grant Wilson a further lease after the first term expired on 31 July 1980.

Wilson sued in the Supreme Court of Queensland for specific performance claiming, inter alia,

(a) A declaration that Clause 4.01 of the lease dated the 3rd day of October, 1977 ought to be specifically performed and carried into effect;

(b) An order that the Defendant do grant to the Plaintiff a lease of the said premises for a period of three years from the 1st day of August, 1980, upon the same terms and conditions as the said lease save for the condition as to rental and at a rental to be determined in accordance with Clause 4.01 aforesaid;

In a separate action, Booker sought recovery of possession of the demised premises. The two actions were heard together by Andrews J. Because the rent to be paid by the lessee during the renewed term had not been agreed between the parties or fixed by an arbitrator pursuant to cl. 4.01, Andrews J. did not order Booker to grant a lease as prayed by Wilson, but his Honour made three declarations. The first declaration was that cl. 4.01 "ought to be specifically performed and be carried into execution". The second declaration was - that to that end the Defendant was and is bound to do whatever may be reasonably required of it on the part of the Plaintiff to obtain the nomination by the President for the time being of the Queensland Law Society Incorporated of a person to fix a rental which shall be not less than the rental payable in the last year of the first term, unless the Plaintiff and Defendant within a reasonable time mutually agree upon such rental. (The reference to the nomination by the President of the Queensland Law Society Incorporated of a person to fix the rent is to be explained by the provisions of cl. 3.05(b), which prescribes the manner of nomination of an arbitrator under the lease. Clause 4.01 requires that the person to fix the rental under that clause be nominated in accordance with the provisions of cl. 3.05(b)). The third declaration was - that in the event that the said President of the Queensland Law Society should refuse to nominate a person to fix the said rental, as aforesaid or that such person having been so nominated should refuse to fix the said rental, in either case for reasons not brought about by the act or default of the Defendant, the said clause [i.e. cl. 4.01] is not further specifically enforceable and the Court may give such relief to the parties consistently with this Order as may be just. His Honour dismissed Booker's action for recovery of possession.

Booker appealed against both judgments to the Full Court. Matthews J., with whom Wanstall C.J. and Douglas J. agreed, held that, as the rent had not been determined in accordance with cl. 4.01, a decree of specific performance should not be made. Matthews J. stated that the relevant principle was "that where one of the essential elements of an agreement or contract has not been ascertained at the date of trial, equity will not decree specific performance". The Full Court allowed the appeal in Wilson's action, making no order or declaration with respect to Wilson's rights. However, the appeal in Booker's action was dismissed. Matthews J. said that Wilson's exercise of its option was sufficient to entitle it to remain in possession. Thus Wilson and Booker each failed to obtain relief against the other. Appeals are brought to this court against both judgments.

Clause 4.01 purports to confer on Wilson, if it should have given a notice of exercise of option in accordance with that clause -

the right to be granted a further lease of the demised premises for the term of three (3) years commencing on the day after the expiration of the term hereof upon the same terms and conditions as are hereincontained save and except that the rental to be paid by the Lessee during such renewed term shall be such rental as may be mutually agreed between the Lessor and the Lessee and failing agreement then such rental as may be fixed by an arbitrator nominated in accordance with the provisions of Clause 3.04(b) but in any event the rental shall not be less than the rental payable in the last year of the first term. The "right to be granted a further lease" is not expressed to be conditional or contingent upon the rental for the further lease being agreed by the parties or being fixed by an arbitrator. The right purportedly conferred was a right to be granted a demise of the premises from the commencement of the further term. No other right to possession after expiration of the first term was expressly conferred upon Wilson. Clearly the parties intended that, if Wilson should have validly exercised its option, it would be entitled to possession immediately after the expiration of the first term under a lease for the term specified in cl. 4.01, and there is thus no room to imply a right in Wilson to be in possession otherwise than under the promised lease. Wilson's right to possession on the expiration of the first term thus depends upon its right at that time to the grant of a lease. If Wilson be entitled to a decree that Booker specifically perform its covenant to grant the further lease, Wilson is entitled to remain in possession (Walsh v. Lonsdale [12] ), but if it is not entitled to such a decree, it has no other right to possession which can prevail against the demand of the lessor. 1. (1882) 21 Ch.D. 9.

The difficulties in the way of upholding the effectiveness of cl. 4.01 to confer a right to the grant of a lease upon the expiration of the first term are twofold: first, the rule that rent must be certain at the time when it becomes due for payment, and secondly, the rule that the court will not decree specific performance of a supposed contract where an essential term is awaiting settlement by a third party whom the contract appoints as the person to settle that term. The two rules are distinct; both have received recent judicial examination.

It has long been held that the reservation of rent should be certain as to the amount and the time when it is payable: Parker v. Harris [13] . It was said to be sufficient, however, if the rent could be ascertained with certainty at the time when payment became due: Greater London Council v. Connolly [14] . And so it was held in In re Essoldo (Bingo) Ltd.'s Underlease; Essoldo Ltd. v. Elcresta Ltd. [15] that rent could not be effectually charged under a lease if the amount had not been ascertained on the due date for payment. If the further lease contained a clause drawn in conformity with cl. 4.01, the clause would not ensure that the new rental would be ascertained either before the first year's rental was due or before the first monthly instalment of rental was due. As the parties agreed that the new rental should apply during the entire term of the further lease, it is arguable that it was necessary to provide for the ascertainment of the rental before the first payment was due. In fact no new rental has been ascertained.

1. (1692) 1 Salk. 262 [91 E.R. 230]. 2. [1970] 2 Q.B. 100. 3. (1971) 23 P. & C.R. 1.

Such an argument is not supportable if the character of rent is that expressed by Lord Denning M.R. in C. H. Bailey Ltd. v. Memorial Enterprises Ltd. [16] in a passage which has since commanded the assent of a majority of the House of Lords. His Lordship quoted [17] Holdsworth: A History of English Law (vol. VII (1925), p. 262):

in modern law, rent is not conceived of as a thing, but rather as a payment which a tenant is bound by his contract to make to his landlord for the use of the land . and continued - The time and manner of the payment is to be ascertained according to the true construction of the contract, and not by reference to out-dated relics of medieval law. 1. [1974] 1 W.L.R. 728; [1974] 1 All E.R. 1003. 2. [1974] 1 W.L.R., at p. 732; [1974] 1 All E.R. at p. 1007.

In United Scientific Holdings Ltd. v. Burnley Borough Council [18] the majority of the House of Lords assented to this view [19] . Rightly, in my opinion. There were two leases under consideration in that case, each of which contained a clause providing for a review of rent. The question was whether those clauses were effective to impose retrospectively a liability upon the respective lessees to pay an increased rent in accordance with the determination made on the review. Lord Fraser of Tullybelton said [20] :

The main argument against retrospection was based upon the proposition that rent must be certain in amount at the time when it is payable, and that a payment which is uncertain because it depends on the result of an arbitration or valuation could not be rent: see In re Essoldo (Bingo) Ltd.'s Underlease [21] and Greater London Council v. Connolly [22] . That proposition applies to rent in the strict sense, that is rent which can be recovered by distraining, but the word "rent" in modern usage can and often does mean simply a sum of money which the tenant has contracted to pay to the landlords for the use of the premises let: see Foa's General Law of Landlord and Tenant, 8th ed. (1957), p. 101: "prima facie rent is the monetary compensation payable by the tenant in consideration for the grant, however it be described or allocated. It is submitted that nevertheless the landlord's common law right to levy distress is confined to rent in its mediaeval or strict sense." The question in each case to determine the sense in which the word is used. If it is used not in the strict sense but in the sense merely of the contractual sum due, then it need not be certain at the date on which it becomes payable: C. H. Bailey Ltd. v. Memorial Enterprises Ltd. [23] . In the present case where the rents are for large commercial premises I see no reason why the prima facie meaning of rent as contractual rent should not prevail as it seems unlikely that the landlord had in view the use of distraint against the tenant. I would therefore hold that the rents fixed by the valuation will by payable retrospectively from the respective review dates. 1. [1978] A.C. 904. 2. [1978] A.C., at pp. 935, 947, 956, 964. 3. [1978] A.C., at pp. 963-964. 4. (1971) 23 P. & C.R. 1. 5. [1970] 2 Q.B. 100. 6. [1974] 1 W.L.R. 728; [1974] 1 All E.R. 1003.

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.

Clause 4.01 provides machinery for the fixing of the rental by an arbitrator in default of agreement by the parties, but it is possible that that machinery might fail. That machinery would fail if the President of the Queensland Law Society Incorporated were to decline to make an appointment for the purposes of cl. 4.01 or if the appointee were to decline to fix a rental. And thus, if Booker were ordered specifically to perform its covenant to grant a further lease, a covenant in that lease drawn in conformity with cl. 4.01 would not ensure by its express terms that a new rental would be fixed. Uncertainty as to whether a new rental would be fixed is fatal to an application for specific performance. Sir Richard Kindersley V.C. in Darbey v. Whitaker [24] said that it was clear that the court has "no power to decree specific performance of a contract for sale or purchase at a price to be fixed by arbitration, unless the arbitrators have actually fixed the price". The basis of that decision, followed in Tillett v. Charing Cross Bridge Co. [25] (cited by Matthews J.) was explained by Sir John Romilly M.R. in Baker v. Metropolitan Railway Co. [26] :

If the contract itself is uncertain in its terms, as if the contract be for such a sum as some other persons shall name, the Court will not specifically enforce that contract, because that is not a matter which it can determine and the Court has no means of carrying it into effect. 1. (1857) 4 Drew. 134, at p. 140, [62 E.R. 52, at p. 55]. 2. (1859) 26 Beav. 419 [53 E.R. 959]. 3. (1862) 31 Beav. 504, at p. 507 [54 E.R. 1234, at p. 1235].

The obstacle in the way of specific performance is not a mere discretionary bar: it is a consequence of the view that there is no concluded contract to be performed. That was explained by Kay J. in Hart v. Hart [27] :

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.

The effect of the settled line of authority going back to Milnes v. Gery [34] and Agar v. Macklew [35] was accurately expressed by Templeman L.J. in Sudbrook Trading Estate v. Eggleton [36] when that case was in the Court of Appeal:

The principles which emerge from the authorities may be summarised thus: first, in ascertaining the essential terms of a contract, the court will not substitute machinery of its own for machinery provided by the parties, however defective that machinery may prove to be. Secondly, where machinery is agreed for the ascertainment of an essential term, then until the agreed machinery has operated successfully, the court will not decree specific performance, since there is not yet any contract to perform. Thirdly, where the operation of the machinery is stultified by the refusal of one of the parties to appoint a valuer or an arbitrator, the court will not, by way of partial specific performance, compel him to make an appointment.

All three of these principles stem from one central proposition, that where the agreement on the face of it is incomplete until something else has been done, whether by further agreement between the parties or by the decision of an arbitrator or valuer, the court is powerless, because there is no complete agreement to enforce: see Kay J. in Hart v. Hart [37] .

1. (1881) 18 Ch.D. 670, at p. 689.
   1. (1807) 14 Ves. 400 [33 E.R. 574].
   2. (1825) 2 Sim. & St. 418 [57 E.R. 405].
   3. [1983] A.C., at pp. 459-460.
   4. (1881) 18 Ch.D. 670, at p. 689.

However, these principles have no application where, upon its true construction, the parties had agreed to sell not at a price idiosyncratically fixed by a third party but at a fair and just price - a figure ascertainable objectively - even if the contracting parties had appointed a third party to ascertain it. In Milnes v. Gery itself, the Master of the Rolls had said [38] : "The case of an agreement to sell at a fair valuation is essentially different." And so, in Gregory v. Mighell [39] where the plaintiff and defendant had entered into an agreement for a lease for twenty-one years "at a fair and just annual rent, to be fixed and ascertained by two indifferent persons, the one to be chosen by the Plaintiff, the other by the Defendant, with liberty to the arbitrators in case of their differing to chose one or more umpires" [40] , the court decreed specific performance. In that case the plaintiff had gone into possession before the rent was fixed. The defendant refused to sign the arbitration bonds, the arbitrators refused to proceed, and the plaintiff sought specific performance. Sir William Grant M.R. said [41] :

The non-payment of rent is accounted for by the circumstance, that the rent was not fixed in the manner stipulated by the agreement. After it was known, that the arbitrators had not fixed any rent, and that none of the other means, provided by the agreement, were resorted to, the Defendant still acquiesced in the Plaintiff's retaining possession of these lands. That is a case in which the failure of the arbitrators to fix the rent can never affect the agreement. It is in part performed; and the Court must find some means of completing its execution; as I have already said, the Plaintiff is not to be considered a trespasser. Some rent he must pay: the amount must be fixed in some other mode; and it seems to me, that it should be ascertained by the Master, without sending it to another arbitration; which might possibly end in the same way. 1. (1807) 14 Ves. 400, at p. 407 [33 E.R. 574, at p. 577]. 2. (1811) 18 Ves. 328 [34 E.R. 341]. 3. (1811) 18 Ves., at p. 328 [34 E.R., at p. 341]. 4. (1811) 18 Ves., at pp. 333-334 [34 E.R., at p. 343].

Gregory v. Mighell has been said to be an exception to the general rule flowing from Milnes v. Gery. Templeman L.J. in Sudbrook Trading said [42] :

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.

It is not necessary to consider whether the law in Australia should be redefined in the light of the speeches in the House of Lords in Sudbrook Trading which was decided after the argument in this case was completed and to which Mr. Pincus drew out attention. Nothing in that case impairs the authority of Gregory v. Mighell or warrants the rejection of an approach which would construe cl. 4.01 as providing for a fair and just rental to be ascertained by the appointed arbitrator or, in default, by the court.

Clause 4.01 clearly does not contemplate the rental to be fixed according to the idiosyncratic view of a nominated third party: the personality of the "arbitrator" is immaterial for he may be any person selected by the President of the Queensland Law Society Incorporated. The parties may be taken to expect that the rental would be fixed by reference to the ordinary considerations with which conveyancers are familiar, and that a fair and just rental would be fixed accordingly.

It follows, in my opinion, that neither the synallagmatic contract which came into existence upon the exercise of the option nor the lease to be granted in performance of that contract is uncertain. If the contractual machinery for fixing the rental were to fail, the rental would be fixed by the court. There is therefore no impediment to granting a decree of specific performance of the contract and requiring Booker to grant to Wilson a lease containing a clause relating to the fixing of the rental drawn in conformity with cl. 4.01. Such a lease would be valid, for if the machinery for fixing the rent should fail, the court's machinery will be available to fix it: certum est quod certum reddi potest.

I should add that if the obligation to grant the lease contemplated by cl. 4.01 did not arise until the parties had agreed upon a rental or an arbitrator had fixed a rental, that obligation would now be incapable of discharge according to its tenor - the lease would be required to be granted after the commencement of the term. The grant of a lease after the commencement of the term is a commonplace when the parties have earlier bound themselves by agreement for the grant of that lease or where the intending tenant is let into possession on a periodic tenancy or tenancy at will pending the settling of the terms of the lease. But that is not the present case. If Wilson did not acquire the right to the grant of a further lease on the expiration of the first term, it had no right to remain in possession in expectation that in time it might become entitled to a demise of the premises.

In my opinion, this is not a case of an obligation (to grant a further lease) conditioned or contingent upon the occurrence of a future event (the fixing of the rental). If that were the nature of the synallagmatic contract, then it would have been appropriate to declare, as Andrews J. declared, that Booker should do what was reasonably required of it to fulfil the relevant condition and then, if the condition were fulfilled, to perform its ultimate obligation. Kennedy v. Vercoe [48] and McWilliam v. McWilliams Wines Pty. Ltd. [49] provide illustrations of the terms of a decree which is apt to secure performance of conditional or contingent obligations. The principle on which such decrees are moulded was explained in Brown v. Heffer [50] , namely, that it is only when the condition is fulfilled or the contingency occurs that there arises the ultimate obligation which is to be specifically performed. But here the obligation is to grant a lease for a term commencing on the day after the expiration of the first lease, and once the option was exercised that obligation was neither conditional nor contingent.

1. (1960) 105 C.L.R. 521. 2. (1964) 114 C.L.R. 656. 3. (1967) 116 C.L.R. 344, at p. 350.

If it be right to conclude, as I do, that that obligation was susceptible of immediate and effective performance, the fact that the rental was not then fixed gave Booker no grounds for refusing to discharge its obligation. Wilson was entitled to a decree for specific performance in terms of par. (b) as well as par. (a) of its prayer. The first declaration made by Andrews J. was appropriate, but the other declarations are not. No harm is done by the second declaration relating to the nomination of an arbitrator for an arbitrator may effectively fix the new rental (see Axelsen v. O'Brien [51] ; Godecke v. Kirwan [52] ), and Booker may be compelled to do what is reasonably required of it to secure the appointment of the arbitrator. But in strictness Wilson's right to relief in respect of the appointment of an arbitrator depends not upon cl. 4.01 but upon a corresponding provision to be inserted in the lease. The final declaration made by Andrews L is erroneous, for the obligation to be performed is the grant of the lease whether or not the rent has been fixed. The third declaration is, in truth, inconsistent with the first. It is not appropriate where the obligation to be performed is not conditional or contingent or where there is no question of a frustrating event supervening.

1. (1949) 80 C.L.R. 219, at pp. 225-226. 2. (1973) 129 C.L.R. 629, at p. 645.

In the appeal (No. 21 of 1981) arising out of Wilson's action (No. 3048 of 1980), Wilson seeks the allowing of the appeal, the setting aside of the order of the Full Court, the affirming of the order of Andrews J. and a declaration that it had validly exercised the option. For the reasons given, that relief is not wholly appropriate, and in my opinion only the first two declarations made by Andrews J. should be affirmed. The declaration that Wilson had validly exercised its option should not be made. The point was conceded in argument in this Court, making a declaration unnecessary. Relief must be granted on the footing that the concession was rightly made, but if the concession had not been made, the answer to the question as to the validity of the exercise of the option would not have been self evident. As Wilson was entitled to a decree of specific performance, the appeal (No. 20 of 1981) from the judgment in the Supreme Court dismissing Booker's action (No. 3061 of 1980) should be dismissed.

Wilson should have its costs of appeal and in the courts below.