Brannigan v Smith [2017] NSWSC 1201 | Case summary

Supreme Court of NSW|2017-08-29|Before: Darke J, Mr P

Introduction

These proceedings concern an agreement containing an option to purchase granted to the plaintiff by the defendants in respect of a one bedroom unit in Arcadia Street, Coogee.
The agreement provides for the option to be exercised by the service on the Grantor of a Notice of Intent to Purchase executed by the Grantee (or their assignee or nominee), at any time from 42 days after the date of the agreement until 5pm on the third anniversary of the date of the agreement. The plaintiff claims to have exercised the option on 2 June 2016.
Whilst it is common ground that a valid and binding option was entered into, there is a dispute about when that occurred, and thus the date of the agreement. The plaintiff contends that the option was entered into on about 7 June 2013. The defendants contend that it was entered into on 28 May 2013. On that basis, they contend that the option had expired before the plaintiff sought to exercise it. The plaintiff maintains an alternative claim that the defendants are estopped, by their conduct, from asserting that the plaintiff was not entitled to exercise the option after 28 May 2016.
There is also a dispute concerning service of the notice of exercise of option. The defendants contend that the plaintiff failed to properly serve the notice, which they say was required to be effected in accordance with s 170 of the Conveyancing Act 1919 (NSW). The plaintiff contends that service in accordance with s 170 of the Conveyancing Act is not required, and that in any event service in accordance with s 170(1)(b) was effected. The plaintiff further contends that service of the notice was validly effected by way of facsimile transmission upon the defendants' conveyancer.

Determination

It is first necessary to ascertain the period within which the option remained open for exercise. Clause 4 of the option agreement provides that the option may be exercised within a period that is defined by reference to "the date of this agreement". The opening words of the agreement are: THIS AGREEMENT is made on the _______ day of __20
It is evidently intended that the date of the agreement will be the date upon which the agreement is made. Further, given that the subject matter of the agreement is residential property such that Division 9 of Part 4 of the Conveyancing Act applies, the parties may be taken to have contemplated that the option agreement be created upon an exchange of counterparts. The conduct of Cordato Partners and Mr Ciampa is consistent with a contemplation that an exchange of agreements would take place. In these circumstances, the date upon which the agreement is made should be taken to be the date when the exchange occurred. Both parties conducted the case on that basis. The central point of the dispute concerned when the exchange should be held to have occurred.
Broadly, the defendants submitted that exchange occurred on 28 May 2013 in the manner described by Mr Ciampa; the plaintiff submitted that exchange occurred on (or perhaps shortly after) the delivery of the plaintiff's executed agreement to Mr Ciampa on 7 June 2013.
In the course of his cross-examination, Mr Ciampa gave evidence about the existence of an agreement with Cordato Partners concerning how the exchange would be effected. Mr Ciampa said that it was agreed that the documents that were emailed by the plaintiff on 28 May 2013 "were to be used for the exchange of the options". He said that it was his recollection that this was agreed in respect of both option agreements. Mr Ciampa also stated that it was agreed that, because the plaintiff was overseas, "we were going to accept the emailed copy of the signature pages to effect the exchange of the option". Later in his cross-examination Mr Ciampa said that it was agreed "that the option was to be dated on the date that we received the email signed execution papers".
I accept that Mr Ciampa was doing his best to recall the events of late May/early June 2013. However, and not surprisingly, Mr Ciampa did not seem to possess a good recollection of the detail of those events, or of the events of 2016 leading up to the plaintiff's attempt to exercise the option. I consider that there is a significant risk that the evidence given by Mr Ciampa in cross-examination about the agreement with Cordato Partners is, no doubt unconsciously, heavily reconstructed. It is noteworthy that in his affidavit of 10 October 2016 Mr Ciampa refers to his file note of his conversation with Ms Lowe, but does not otherwise depose to the contents of the conversation. When asked about any file note of the conversation about the dating of the option agreement, Mr Ciampa answered that he could not recall. In these circumstances I am unable to afford much weight to this aspect of Mr Ciampa's evidence. I do not consider it to be reliable.
The file note establishes that there was a conversation between Mr Ciampa and Ms Lowe at some time on 28 May 2013. It is likely that the note summarises, with reasonable accuracy, the substance of the discussion. In the absence of any testimony from Ms Lowe, and reliable testimony from Mr Ciampa, the file note stands as the best available evidence of the contents of the conversation. Counsel for the defendants did not make any suggestion to the contrary.
The file note does not record the time the conversation took place. The emails sent by the plaintiff on 28 May 2013 were apparently sent at 7:52am and 2:45pm in Dubai. Given the time difference, it is likely that the conversation occurred before the second email (which had a signed execution page attached) was received. The conversation may have occurred following receipt of the first email, but this is far from clear.
The file note refers to exchanging "options on emailed copy fr purchaser, with original to follow". The reference to options in the plural does not clearly pertain to options in respect of both properties, as opposed to option agreements in respect of one property. Whilst the presence of the file note on a document that relates to the Alfreda Street property provides some support for the latter view, I tend to think that Mr Ciampa's evidence to the effect that the conversation concerned "the mechanics of getting both transactions exchanged" is likely to be correct. There was no obvious reason to treat the transactions differently in that regard as at 28 May 2013. The plaintiff's error in executing only one set of documents did not emerge until 3 June 2013. I think that the conversation is more likely to have concerned both properties, not merely the Alfreda Street property.
However, I have difficulty regarding the reference to an emailed copy from the purchaser as pertaining only to an emailed copy of a signature page, as opposed to an emailed copy of an option agreement (including a signature page). To my mind, a statement about exchanging options on an emailed copy from the purchaser more naturally suggests effecting exchange using an emailed copy of the agreement rather than the original agreement as would customarily be the case. If the agreement was that exchange would be effected using an emailed copy of the plaintiff's signature, it is likely that the terms of the file note would include some reference to the signature, or the signature page.
I have not overlooked Mr Ciampa's evidence that in his experience option agreements can in certain circumstances be exchanged using electronic copies of signature pages with the originals to follow. Again, however, if such an arrangement was spoken of in this case, it is likely that the note would refer to signature pages or execution pages. Moreover, such an arrangement would still involve an exchange of counterpart agreements as envisaged by s 66ZG of the Conveyancing Act. Some arrangements would have to be made as to how that was to physically occur. There is nothing in the file note of that nature.
I do not accept that on 28 May 2013 an agreement was made between Mr Ciampa and Ms Lowe to the effect that exchange of the option agreements in respect of the Property could be effected by Mr Ciampa using a copy of a signature page emailed by the plaintiff. That is to say, I do not think that any agreement was reached that would authorise Mr Ciampa to effect the exchange in the manner he says he did, or date the option agreement on the date the emailed signature page was received.
In my view, Mr Ciampa and Ms Lowe should be taken to have agreed no more than that an exchange using an emailed copy of the purchaser's signed option agreement (with the original to follow) would be acceptable.
In reaching these conclusions I have proceeded on the basis that any evidence Ms Lowe may have been able to give would not have positively assisted the plaintiff's case (see Jones v Dunkel (1959) 101 CLR 298 at 320-1). She is a witness who would be expected to be called by the plaintiff. She would be likely to be able to give some evidence of her dealings with Mr Ciampa, including her conversation with him on 28 May 2013. I do not think that the failure to call her was adequately explained merely by her cessation of employment with Cordato Partners.
Nevertheless, the conclusions I have reached are supported to a degree by the absence of any suggestion in the documents after 28 May 2013 that Ms Lowe understood that exchange was to be effected in the manner suggested by Mr Ciampa. Ms Lowe's communications with the plaintiff after 28 May 2013 are consistent with her thinking that exchange had not yet taken place. So, too, are her letters to Mr Ciampa of 3 June 2013 (concerning Alfreda Street) and 7 June 2013 (concerning the Property) which enclosed original executed agreements "in readiness for exchange". Ms Lowe's email to the plaintiff on 7 June 2013 clearly proceeds on an understanding that the documents were to be taken by Mr Kelly to Mr Ciampa's office that afternoon "for exchange".
In my opinion, exchange did not take place prior to 7 June 2013. The likelihood is that the option agreement executed by the plaintiff was delivered to Mr Ciampa during the afternoon on that day. Mr Kelly's email of congratulations to the plaintiff, sent on 8 June 2013, is consistent with him having delivered the document to Mr Ciampa as arranged. Mr Ciampa accepted that document as the plaintiff's signed counterpart (albeit that he impermissibly dated it 28 May 2013). Mr Ciampa was already in possession of the defendant's signed counterpart. He appears to have retained that document, and failed to send it to Cordato Partners. This would appear to have been an oversight on Mr Ciampa's part. I note that on 17 June 2013 Mr Ciampa sent extracts of the option agreements signed by the plaintiff to Mr Kelly, describing them as "copies of exchanged options", and as already noted, both parties have since proceeded on the basis that exchange had occurred in respect of the option to purchase the Property. In these circumstances, notwithstanding the lack of a physical exchange by the parties of counterparts, an exchange of counterparts should be taken to have occurred, and hence the option agreement should be taken to have been made, on 7 June 2013.
The circumstance that the plaintiff's signed counterpart and the defendants' signed counterpart are not identical does not mean that there has been no exchange of counterparts. The evidence is clear as to what the parties intended the terms of the agreement to be, and if necessary the instruments could be rectified to bring them into conformity with the common intention of the parties (see Sindel v Georgiou (1984) 154 CLR 661 at 667).
For the foregoing reasons, the option agreement in respect of the Property was made on 7 June 2013, and thus the date of the agreement must be regarded as 7 June 2013. It follows that the option was open to be exercised by the plaintiff until 5pm on 7 June 2016. It is not necessary to deal with the plaintiff's estoppel claim which was raised in the alternative.
I turn now to consider whether the plaintiff validly exercised the option within the option period.
If the option is to be exercised, it must be effected by service of the requisite notice "on the Grantor". The plaintiff claims to have done so by sending the letter of 2 June 2016, together with its enclosures, to Mr Ciampa. The plaintiff submits that service upon a duly authorised agent of the Grantor is sufficient.
The Grantor is not defined in the option agreement otherwise than by the description of "Adam Douglas Smith and Heath David Jamieson of 6/37 Arcadia Street, Coogee in the State of New South Wales". The terms of the definition do not expressly preclude service of the notice upon an agent; neither do they expressly enable service of the notice upon an agent. The agreement does not provide a designated address for service upon the Grantor. Whilst the address of the Property forms part of the definition of the Grantor, the agreement provides for the plaintiff to take possession of the Property under a residential tenancy agreement, and it was contemplated that the lease might remain in existence for the duration of the agreement. Accordingly, I do not think that the address of the Property can itself be considered as the Grantor's address for service. I note that the form of Notice of Intent to Purchase does not include any address.
In these circumstances, I think that service of the requisite notice upon a duly authorised agent of the Grantor is service "on the Grantor" within the meaning of that expression. I can discern no good reason to construe the agreement so that such service would not be effective for the purpose of exercising the option (see Young v Lamb (2001) 10 BPR 18,553; [2001] NSWCA 225 at [36]; Stonewall Hotel Pty Ltd v Papantoniou [2017] NSWSC 964 at [19]).
It was not suggested that Mr Ciampa was not a duly authorised agent of the defendants. In any case, it is clear on the evidence that Mr Ciampa was acting for the defendants in the period from 11 April 2016 to 9 June 2016 in relation to the option agreement, including in relation to the exercise of the option. Mr Ciampa spoke to Ms Wade of Cordato Partners about that matter on 15 April 2016. He said something to the effect that it would be "OK to proceed with the contract". That is likely to be a statement to the effect that it would be acceptable for the plaintiff to use the existing form of contract when exercising the option. I am satisfied that Mr Ciampa had authority to receive a notice of exercise of option on behalf of the defendants (see Young v Lamb (supra) at [37]; Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) 17 BPR 32,645; [2006] NSWSC 1203 at [38]).
Mr Ciampa received the notice of exercise of option by facsimile on 2 June 2016, within the option period. The defendants contend, however, that service in accordance with s 170 of the Conveyancing Act was necessary and that service by facsimile, not being in accordance with the section, is insufficient.
I accept that s 170 of the Conveyancing Act applies to service of a notice of exercise of option under the option agreement (see s 170(2A), and Bressan v Squires [1974] 2 NSWLR 460 at 463). Section 170 applies only if and so far as a contrary intention is not expressed in the instrument, and has effect subject to the provisions of the instrument (see s 170(4); see also FAI General Insurance Company Ltd (in liquidation) v Parras (2002) 55 NSWLR 498; [2002] NSWCA 334 at [18]). No contrary intention is expressed in the option agreement in this case, and the agreement is silent as to the means of serving the notice.
It does not follow, however, that s 170 provides the only means by which service of the notice of exercise can be given. It has been held that s 170 is intended to extend or widen the circumstances which will amount to sufficient service and is not an exclusive code (see Ex parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454 at 456-7). The relevant instrument might, of course, provide for s 170 to be the exclusive code for service. Otherwise, save for the extent to which the operation of s 170 is excluded or limited by the terms of the instrument, the section operates alongside the general law (see FIA General Insurance Company Ltd (in liquidation) v Parras (supra) at [19] and [37]).
In my opinion, the option agreement in this case does not require the notice of exercise of option to be served in conformity with s 170 of the Conveyancing Act. Service in accordance with general law principles is in my view sufficient. Further, it is my view that service upon the duly authorised agent of the defendants by means of facsimile transmission amounts to service on the Grantor in accordance with the general law. The notice of exercise was thereby brought to the attention of the defendants' agent. Service in that manner upon Mr Ciampa on 2 June 2016 was sufficient service of the notice of exercise of option, within the option period. There was no suggestion that the form of the notice was in any way deficient.
For the foregoing reasons, I have concluded that the plaintiff validly exercised the option within the option period. It is not necessary to consider the plaintiff's alternative argument that service was in any event effected in accordance with s 170(1)(b) of the Conveyancing Act. I should record, however, that there is considerable force in the defendant's submission that in the circumstances the Property could not be regarded as "the last known residential or business address" of the Grantor.

Conclusion

Declarations should be made to the effect that the parties entered into the option agreement on 7 June 2013, and that the plaintiff validly exercised the option on 2 June 2016. Orders should also be made requiring the defendants to enter into a Contract for Sale of the Property in accordance with the option agreement, and for specific performance of the contract.
I direct the parties to consult and bring in Short Minutes of Orders, within 14 days, to give effect to these reasons. The Short Minutes should also deal with costs. Prima facie, the appropriate costs order would be that the defendants pay the plaintiff's costs of the proceedings.
In the event that the parties are unable to agree upon the orders to be made, the Court will consider whether it is necessary to re-list the matter for further argument.

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Brannigan v Smith

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