Carter v Hyde [1923] HCA 36;

Carter v Hyde [1923] HCA 36; - HCA 1923 case summary — Zoe

[5]

On 1st February 1921 the appellant, in consideration of £1 paid to him by George Hyde, signed a document in the following words, namely: - "In consideration of £1 paid to me by Mr. George Hyde I hereby place under offer to him the lease licence furniture and goodwill of hotel premises known as the Lord Cardigan Hotel for the sum of £1,500. And I further agree that this offer shall not be revoked by me for a period of three calendar months from this date. Also any money spent by me in repairs to building during above period to be refunded. - Dated this first day of February 1921. - (Signed) W. Carter. - (Witness) B. M. Platt." At this time the appellant was in occupation of the hotel under an agreement with George Hyde, dated 13th May 1920, for a lease for five years. George Hyde died on 15th March 1921 without having executed any lease of the hotel to the appellant and without having accepted this offer. The respondents, who are executrices of his will, on 22nd April 1921 caused to be delivered to the appellant a letter signed by them which is in the words following, namely: - "22nd April 1921. - Dear Sir, - In reference to the option dated 1st February 1921 given by you to the late George Hyde to sell to him the lease licence goodwill and furniture as per inventory dated the 22nd day of April 1921 of the Lord Cardigan Hotel, Darby Street, Newcastle, for the sum of £1,500, we the undersigned being the executrices appointed under the will of the late George Hyde do hereby accept such option to purchase and will pay to you the sum of £1,500 on transfer to our nominee of the whole of the above specified items. We will arrange to have the transfer put through immediately we obtain a tenant for the hotel. - Yours faithfully, S. L. Hyde, V. M. Delaney - Executrices under the will of the late George Hyde." On the same day the persons who delivered this letter took an inventory of the furniture, &c., in the hotel in the presence of the appellant, who objected that certain articles were not included in the option and ought not to be put in the inventory, and subsequently refused to sign the inventory because a cash register, which was in the bar, was included in it. The option expired on 1st May 1921, and on 2nd May the appellant's solicitor wrote to the respondents informing them that, the contract not having been completed within the time expressed in the option, the property was no longer for sale to them. To this the respondents' solicitor replied on the same day, claiming that the contract became complete by the acceptance of the option by the letter of 22nd April, and threatening proceedings unless the appellant should forthwith proceed to carry out the contract, insisting that the respondents were entitled to specific performance or damages for breach of contract. Negotiations with reference to the terms of the lease which George Hyde had agreed to grant to the appellant followed, extending over some months, and on 15th September 1921 the respondents' solicitor served on the appellant a notice calling upon him to complete the sale and threatening proceedings for specific performance, and on 7th February 1922 proceedings were commenced.

[7]

The question raised by the first ground turns on the meaning and effect of the document of 1st February set out above. It is what is generally described as an option, that is, an offer made for valuable consideration. In effect it amounts to an agreement by the appellant to sell the lease, &c., for £1,500 to Hyde if within three months the latter signifies his assent to purchase. The benefit of such an offer may be personal to the offeree or may be assignable by him in equity. Whether it is the one or the other must depend on the subject matter of the offer, on the terms in which it is expressed and on the circumstances. Prima facie the benefit is assignable unless the terms of the offer or the subject matter or other circumstances show that it was intended only to be open to acceptance by the offeree personally (see Buckland v. Papillon[1]; Tolhurst v. Associated Portland Cement Manufacturers[2]). If the option is personal to the offeree, if, for instance, the agreement offered calls for the exercise of his personal skill or discretion, it can, of course, be accepted only during his lifetime and lapses on his death. Or it may be that the option, though not personal to the offeree in the sense of calling for his personal services or qualifications, on its true construction expressly or by necessary implication requires acceptance by him personally. The benefit of such an option could not pass to the executors of the offeree because it must be accepted if at all by the offeree personally. But, if the option be not personal to the offeree and do not expressly or by necessary implication stipulate for acceptance by him personally or limit the time for acceptance to his lifetime, I think the result of the authorities is that the benefit of the option is an ordinary assignable chose in action which on the death of the offeree passes along with his other property to his personal representative. In the present case I can find nothing, either in the terms of the document or in the nature of the property or in the circumstances, tending to show an intention either that the offer was open for acceptance only by George Hyde personally or that the time for acceptance was limited to expire on his death. It follows, in my opinion, that the benefit of the option passed on the death of George Hyde to the respondents as his personal representatives. The decision in Hyde v. Skinner[3], referred to by my brother Isaacs during the argument, supports the conclusion at which I have arrived.

[15]

The nature of the right, then, being an irrevocable offer which Hyde himself could, had he lived, have accepted during the stipulated time, the question of transmissibility arises. Mr. Flannery urged that no offer of whatsoever nature was transmissible. A bare offer, retractable at any moment, creates no interest; until acceptance no obligation arises either legal or equitable. But when an irrevocable offer is created, a situation arises which is entirely different. The very word "irrevocable" imports a right in the other party to hold the offeror to his offer and to have the benefit which acceptance linked with the offer would confer. Whether the right is transmissible depends on the nature of the offer properly construed. If when properly construed it is found to be limited to purely personal relations, it terminates with the death of either. If it is found to confer a right with respect to property, it may or may not be transmissible. There is only one universal rule for such a case; and that is, the instrument creating the right must be construed for the purpose according to recognized principles of construction applicable to such instruments. In re Cousins; Alexander v. Cross[7], was the case of a will. An option was given by the will of the testator to his son to purchase an hotel. A question arose whether this option was a right personal to the son or could be exercised after his death by his executors. It was held to be personal. The subsequent value of a decision is in the reasoning which guides it. Brett M.R. began by saying that in the case of a contract you have to consider the views of both parties, in the case of a will the views of one only, and therefore, in the case before him, he had only to rely on the rules applying to the construction of wills. He recognizes that the will gives the son "an option"[8] which amounts to a power over a business, that is, property, but holds that it is "a personal advantage." On a full consideration of the circumstances he concludes[9] that "this was a mere personal option." Cotton L.J. recognizes the gift as "an option"[10], and, after saying "undoubtedly an option may be valuable, and in one sense it is property," adds: "although this is property, is it such a property as can be made valuable at any time after the son's death?" He holds it cannot, but he so holds on a construction of the will and its application to the circumstances. Lindley L.J. says[11]: "The question is, whether it was only an option which the son personally was entitled to exercise, or whether it was exercisable by his executors, administrators, or assigns." He concludes upon reading the will that it is "an option personal to the son." One observation of the learned Lord Justice is important. He holds that, even if it were not exclusively personal to him but were in the nature of property which would pass to assignees in bankruptcy if he became bankrupt, that would not determine the question. The question before the Court was whether it passed to executors. I regard that case, both from the eminence of the Judges and from the fundamental way in which the question was examined, as a valuable and leading case.

[17]

(2) The second question is whether the option was properly exercised. It was objected that, because in the written notice of acceptance given on 22nd April 1921 the option of 1st February 1921, being otherwise fully and unmistakably described, was referred to as an option "as per inventory dated the 22nd day of April" (that is, the date of acceptance), the acceptance was void, since it added another term to the offer. The communication of that acceptance was by personally handing it to the appellant accompanied with verbal intimation of acceptance of his offer; and, after reading the document, the appellant said "I suppose it is all right," and an inventory was proceeded with. The appellant certainly raised objections, but only to the inclusion of certain items on the ground that their exclusion had been verbally agreed to between Hyde and himself. No other objection was raised. In those circumstances the appropriate question is that of Romer J. in Jones v. Daniel[14], namely, "Now, what would anybody when he received that letter fairly understand to be the meaning of it?" I add, of course, "in the circumstances of its receipt." His own attitude shows that he understood it, and I think reasonably understood it, as adding nothing to the conditions. Ordinary practice for evidentiary purposes involves an inventory, and the addition of the word is only an indication of what the respondents understood the offer to import. His attitude is, in effect, an admission of that. The appellant's attitude was unaltered even in his solicitor's letter of 22nd April. The learned primary Judge has found, as a fact, that the objection on the ground of agreed exclusion was not well founded. Reference to an inventory on 22nd April is therefore innocuous, unless substantially the sale was to be of the property as on 1st February and not as it stood on 22nd April. The reasoning of Eve J. in Goffin v. Houlder[15] is, however, in point, and is in my opinion correct. The objection has no substance in it and fails.

[18]

(3) The third objection is laches. This is founded on the fact that the action was not instituted until 7th February 1922, that is to say, ten months after acceptance. The interim was occupied by communications, partly of dispute as to whether a contract had been effectively made, partly of completing the bargain to give Carter a lease for five years, and partly, from the middle of September, of demands by the respondents for completion of the contract constituted by the acceptance of 22nd April. Abandonment is not pleaded; simply laches. The doctrine of laches is definitely settled by the Privy Council in Lindsay Petroleum Co. v. Hurd[16] in the following terms: - "Now the doctrine of laches in Courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy." Their Lordships, after referring to the relevant circumstances, say: "The situation of the parties having, therefore, in no substantial way been altered, either by the delay or by anything done during the interval, there is in these circumstances nothing to give special importance to the defence founded on time." The same may be said of the position here. True, the lease was a wasting asset, and so was the licence, but that was all to the advantage of the appellant who received a fixed price. Nor do the facts, in my opinion, show that the respondents, after binding themselves definitely to accept, were gambling with the chances of the property falling below the value of the price they had bound themselves to pay. I think that Owen J. took an accurate view of the facts of this branch of the case, and the defence resting on laches also fails.

[24]

There are several more recent cases which show that the executors or other assignees of the person to whom the option is given may exercise the option. In Buckland v. Papillon[21] Romilly M.R. had to deal with such an option in an agreement to let. The agreement did not mention "assigns" or executors. The person who held the option had become bankrupt; and it was held that the assignee in bankruptcy could sell the agreement, and that the vendee could exercise the option. This was under the Bankruptcy Act of 1849, which vested in the assignee in bankruptcy all the "personal estate and effects present and future" of the bankrupt. The option, the Master of the Rolls said, is part of the interest contained in the agreement; and it could be assigned by the assignee unless an intention to the contrary can be collected from the contents of the agreement itself. This case was accepted by Lord Lindley in Tolhurst v. Associated Portland Cement Manufacturers[22] as establishing that "an agreement for a lease, and even an option to require a lease or a renewal of a lease, is assignable in equity even although there is no mention of executors, administrators, or assigns." It is true that in most of the cases "assigns" or "executors or administrators" are mentioned as persons who may acquire the lease or renewal of lease, or the fee simple; but, as Lord Lindley says, the absence of these words makes no difference for the purpose now in question. This was also the view of Lord Coke and Gawdy J. in Anon.[23]. In In re Adams and Kensington Vestry[24] one C.A. was selling to the Vestry certain land; and the Vestry raised the objection to the title of C.A. unless he got the concurrence of the next-of-kin. Under a lease for sixty years from 1819, Smith to Ralph Adams, Smith had covenanted with R.A. that if R.A. "his executors administrators or assigns" should give notice of desire to purchase the fee simple Smith would sell it for £1,200. C.A. was administrator of R.A., and in 1877 gave notice of desire to purchase; and the fee simple was conveyed to him, not as administrator of R.A., but in his personal capacity. The question was, so far as material, had C.A. the right to purchase for himself. It was held by the Court of Appeal that he had not, and that the objection was good. "The person who is to exercise it" (the option) "after" (R.A.'s) "death is his administrator, and no one else"[25]. No one suggested that the administrator had no such right.

[26]

As I have already stated, no one denies that an option may be so framed as to limit its exercise to the holder of the option in person. Where a testator gave T. an annuity during the life of the testator's wife "on condition he behave himself civilly to her," the executors of T. were held not to be entitled to the annuity on T.'s death as the privilege was clearly personal (Neal v. Hanbury[27]). An instance of such an option of a personal nature is found in In re Cousins; Alexander v. Cross[28], a case of a will. There an estate was given by will to trustees to pay out of the rents annuities to the widow and the sister, and to divide the rest of the rents among the four children; and after the decease of the widow and the sister, a son named was to have the option of purchasing a certain hotel for £10,000; but if he should decline to purchase at that price within six months after their decease the trustees were to sell the hotel, and put the purchase-money into residue. A codicil of the will showed, by a recital, that the testator, a hotelkeeper, had given to the son his business of hotel-keeper. The son died a few days after the father, leaving executors. When the widow and sister had died, the executors of the son (within the six months) purported to exercise the option; but it was held that the option was a right personal to the son, and could not be exercised by his executors. Brett M.R. pointed out the differences between the construction of wills and of contracts; and all the members of the Court of Appeal concurred in dismissing the action. The option given by the will was construed to be a peculiar privilege granted to the son, a power of control very important to hotelkeepers and limited to the son. The position may be regarded in either of two aspects - contract and property; and in either aspect the result is the same, that the executors may sue. In Williams on Executors (11th ed., p. 606) the learned author says that with respect to such personal actions as are founded upon any obligation, contract or other duty, the general rule established from earliest times is that the right of action on which the testator might have sued in his lifetime is transmitted to his executor or administrator; and (p. 663) the executor is also in many cases entitled to sue on a contract made with the testator without naming his executors, although the right of action does not accrue till after the death of the testator. An executor can redeem a pawn made by a testator (p. 665). Moreover, the interest of the testator in an option is a contingent or executory interest in the estate, and as such it is transmissible to the executors of the holder of the option if he die before the contingency occur. That it is an executory interest is made clear in London and South-Western Railway Co. v. Gomm[29]. There the railway company, in conveying some superfluous land, had obtained an option from the purchaser to buy it back at any time. "The only case in which a contingent future interest is not transmissible" (to executors) would seem to be "where the being in existence" (that is, the person holding the interest being in existence) "when the contingency happens is an essential part of the description of the person who is to take" (per Kay J. in In re Cresswell; Parkin v. Cresswell[30]). In other words, the instrument conferring the option must show in itself that the option is personal only. From the nature of the case these purely personal options are found more frequently in options given by will than in options given by contract.

At a glance

Court

Decision date

Before

Source

Judgment (47 paragraphs)

Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115 (16 August 1923)

Parties

Cases Cited (1)