The foregoing guiding principles are more readily stated than applied in a way that produces but one answer. They contain within their words the necessities of evaluation and impression which typically make the conclusion reached in such cases argumentative.
22 The terms of the passage show that Kirby P's attention was directed to a supposed exercise of option. The passage concludes with recognition of the difficulty of the subject. The practical problem now under consideration is far removed from the practical problem before Kirby P.
23 Counsel particularly relied on the third principle and contended that Dr Chai when he received the letter would fairly have understood its meaning, in all the circumstance of its receipt including the terms of the lease, to be that it was an offer directed to Choice Services.
24 The difficulty in the path of concluding that Dr Chen, receiving the letter of 1 October 2002 would fairly have understood the meaning of it in all the circumstances of its receipt to be that Gicubo was offering to sell the building to Choice Services is that, in the plainest way, the letter is directed to someone other than to Choice Services, that is to Dr Chai, and the letter does not mention Choice Services. To treat the letter as an offer addressed to Choice Services is to introduce an altogether fictional element into the process of construction of the letter. The letter is directed to Dr Chai, with the salutation "Dear Thomas" and continues in its terms to claim Dr Chai's consideration and to address Dr Chai's position - "… We are offering you the right of first refusal … Please let us know your intention … We look forward to hearing from you. … if you have any questions."
25 What is offered is expressed in a confused way, but it is offered to Dr Chai. What is offered is "… The right of first refusal to purchase the property and as per your lease agreement." What would be required by cl.F subcl.(a) would differ from what is found in the letter in a number of respects. Clause F subcl.(a) requires an offer to sell the building, which is at best indistinctly recognisable in the reference to an offer of "The right of first refusal to purchase the property and as per your lease agreement." Whatever the right of first refusal is, Choice Services already had it, and offering the right of first refusal is an indication that the offer was not directed to Choice Services. An offer made under subcl.(a) would notify contract terms in writing; the letter does not do this, but says that Raine & Horne Seaforth have an "Agreement for Sale of Land" without saying what the terms were. An offer under Cl. F subcl.(a) would be directed to Choice Services; the letter plainly is not.
26 My view of the meaning of the letter when the principles referred to by Kirby P, including the third principle, are applied is as it happens borne out by the response made by Dr Chai through his solicitors; in two forcefully stated and carefully considered letters they put forward assertions about the rights arising from the letter wholly in terms of rights of Dr Chai, without mentioning Choice Services. By speaking in these terms they voiced what to my mind is the ordinary and natural understanding of the meaning of an offer directed to a named person; the offer is open to acceptance by that named person, not by anybody else. Apart from the ordinary meaning of language which supports that reading, centuries of practice in dealing with interests in real property formed around the Statute of Frauds and successor provisions such as Conveyancing Act 1919 s.54A reinforce habits of care in identifying, by name if at all possible, the parties to transactions in interests in real property. The need when one comes to enforce alleged agreements for a memorandum in writing signed by the party against whom they are to be enforced, and the need for advertence to the terms of any supposed memorandum, present themselves forcefully for consideration. The interpretation that Gicubo had entered into a binding engagement under s.54A to Choice Services by a memorandum signed on behalf of Gicubo which did not mention Choice Services, but was directed to another person, would be an impossible interpretation.
27 Other topics debated at the hearing cannot be determinative of the outcome but I will say something about them.
28 The plaintiff's counsel contended that Dr Seldon's letter to Dr Chai of 2 October 2002, received by Dr Chai on 3 October 2002, did not effectually operate as a withdrawal of the offer made on 1 October 2002. Although the letter of 2 October does not speak in terms of withdrawal of an offer, it communicates, in what to my mind is an entirely clear way, that any offer earlier made no longer had effect. In my opinion if the letter of 1 October 2002 should be understood as an offer to sell the building, that offer was effectually withdrawn on 3 October.
29 The substantial contention on the second topic was that the terms of cl.F produced the result that when an offer under subcl.(a) is made the lessor is disentitled from withdrawing it until the 21 days from receipt of the offer referred to in subcl.(a) has expired. Of course in plain language the words used contain no expression of any limit on the opportunity to withdraw. There is no expression in cl.F at any point of any requirement that the offer be kept open for 21 days, or of any limit on the opportunity of the lessor, having made an offer, to withdraw it before acceptance; and that is the ordinary entitlement of an offeror. In the absence of any necessary implication to the contrary which plainly arises on the whole terms of cl.F it is open to the lessor to withdraw an offer. The advantage which the terms of subcl.(a) make available to the lessor when he makes an offer is that the lessor will escape from the contractual undertaking not to sell or transfer the building, and, for the avoidance of absurdity, it must necessarily be implied in subcl.(a) that the restriction on selling or transferring the building applies unless not only an offer is made, but also the offer is kept open for 21 days or until earlier refused; an agreement under which the lessor could escape the restriction by making an offer and then withdrawing it soon afterwards would be absurd. However the absurdity is overcome completely by implying a requirement that the offer be held open for 21 days as part of the condition upon which the lessor may escape from the restriction. There is no need for the implication to extend further so as to prevent the lessor from withdrawing the offer at all; the arrangement makes perfect good sense if a lessor can make an offer, and then can withdraw it but continue to be subject to the restriction against selling or transferring the building. The period of 21 days referred to would be shortened by an express rejection of the offer.
30 Plaintiff's counsel contended that an implication that the offer may not be withdrawn arises from the whole terms of cl.F and particularly subcl.(d). In my view on a fair reading of subcl.(d) the time at which the right of first refusal referred to in subcl.(d) expires is not after the making of the first offer of sale, but after the completion of the process related to an offer indicated by earlier provisions of cl.F; in subcl.(d) the time "after the first offer of sale" is an abbreviated reference to the process of making an offer and then waiting until the lessee advises in writing that he accepts the offer, or until the lessee rejects the offer, or until 21 days pass and the offer is deemed to be rejected. The reference in subcl.(d) to the first offer cannot be simply the making of the first offer of sale; it cannot have been intended that the lessee's right would expire immediately after the offer was made. It would be absurd to suppose that subcl.(d) had the effect that the right expired if the process was interrupted by withdrawal of the offer; but the absurdity is overcome by an implication into subcl.(d) that the reference is to expiry after the first offer of sale from the lessor to the lessee has been fully available to the lessee.
31 The plaintiff's counsel also contended that the reference to the right of the lessee as "This right of first refusal" in subcl.(d) produces the result that an offer once made cannot be withdrawn. Counsel referred to decisions in two earlier cases relating to generally similar rights. One was State Authorities Superannuation Board v. Australian Safeways Stores Pty Ltd (1988) NSW ConvR 55-423 in which a decision of Needham J of 24 June 1988 was affirmed. In that case cl.171 provided:
If at any time during the term of this lease the lessor shall be desirous of selling the demised premises or any part thereof... the lessee shall have the right to purchase the demised premises or such part thereof upon the following conditions -
(a) the lessor shall first give notice in writing to the lessee specifying the part of the demised premises which the lessor desires to sell ("the subject premises") and with such notice there shall be delivered to the lessee, the form of contract for sale containing the terms and conditions upon which the subject premises are offered to the lessee for sale;
(b) the lessee, if it desires to purchase the subject premises upon the terms and conditions so offered, shall within one month after the receipt of such notice cause to be delivered to the lessor the said form of contract duly executed by the lessee together with the deposit or premium or any other moneys retired by the terms thereof to be paid upon the execution thereof and thereupon such contract shall be deemed to have been entered into;
(c) if the lessee shall not within the said period of one month accept in manner aforesaid the lessor's offer of sale of the subject premises (as to which time shall be of the essence) or if the lessee shall at any time within the said period of one month signify its irrevocable intention not to accept such offer, then the lessor shall be at liberty to sell the subject premises to any other person upon terms and conditions not more favourable to the proposed purchaser than those upon which the same were previously offered to the lessee.
32 Clause 171 has a quite different structure to cl.F in that cl. 171 expressly confers on the lessee the right to purchase the premises if the lessee shall be desirous of selling them; and cl. 171 goes on to state the manner in which that right is to be given effect. Thereafter the notice accompanied by a form of contract which the lessor is to give, although referred to incidentally in terms appropriate for an offer, does not function as part of the ordinary contract-formation mechanism of making an offer which is open for acceptance, but operates as a step which the lessor is obliged to take in the course of giving effect to what is already established to be the right of the lessee to purchase the demised premises. Subclause (c) concludes with a statement of circumstances in which the lessor shall be at liberty to sell the premises to any other person. The reasoning of Kirby ACJ upon the terms, meaning and effect of cl. 171 revolved around the terms of the clause, and those terms initially established that the subject matter was a right of the lessee, and the notice given by the lessor was mechanism for giving effect to that right.
33 Kirby ACJ, with whom Hope AP and Clarke JA concurred, marshalled the circumstances in which and the inferences from which there could not be an unrestricted right of the lessor to withdraw once the notice had been given. When addressing the meaning of the words used in their context the first consideration marshalled by Kirby ACJ was: "First, the umbrella clause refers to what is conferred on the lessee as a 'right to purchase'. It is not a mere opportunity or a facility, it is a 'right'. And it is so expressed." Kirby ACJ was of the view that the provisions of subcl.171(a) contemplated in terms that when the specific step was taken that the lessor gave notice in writing to the lessee, the lessee then had the right to purchase; and considerable attention was given to the circumstances in which that right to purchase arose. Kirby ACJ was further of the view that the language and structure of the clause suggested that the means of termination of the process indicated by the terms used in cl. 171 were intended to be the only means available. Kirby ACJ mustered a number of other considerations, and his reasoning was highly particular to the terms of cl. 171.
34 In Dorsman v. Castagna (1992) NSW ConvR 55-616 Waddell CJ in Eq. considered the terms of cl. 39 of the lease before him; cl. 39 was structured quite differently to cl. 171 in the State Authorities Superannuation Board case. Clause 39 read:
Lessee's Right of First Refusal 39. If the lessor wishes to sell:
(i) the freehold of the demised premises; or
(ii) a new lease of the demised premises commencing at or following the expiration hereof, and the lessor's fixtures contained therein then he will first offer by written notice to the lessee the said freehold or new lease of the demised premises and lessor's fixtures at a price and, upon such terms and conditions as offered to a prospective purchaser and the lessee may accept such offer in writing within twenty (sic) (21) days of the date of notice of offer and the lessor shall not sell the said freehold or new lease of the demised premises and lessor's fixtures to any other person at such or any other price or upon such or any other terms and conditions until the expiration of the said period of twenty one (21) days or the receipt by the lessor of written notice from the lessee that he does not desire to accept the said offer.
35 Clause 39 in Dorsman was markedly different to cl.F in that it expressly provided: "… the lessor shall not sell the freehold or new lease of the demised premises and lessor's fixtures to any other person … until the expiration of the said period of twenty-one days or the receipt by the lessor of written notice from the lessee that he does not desire to accept the said offer." There is no corresponding provision in this case. In Dorsman a decision that there was a right of the lessor to withdraw the offer could only be based on some implication which qualified this entirely explicit prohibition.
36 Waddell CJ in Eq. referred to the judgment of Needham J in State Authorities Superannuation Board; his Honour's attention does not appear to have been drawn to the decision on appeal. His Honour commented on the difference in structure in the two provisions. Clause 39 had a feature not present in the present case nor indeed in the State Authorities Superannuation Board case, that the terms and conditions must be those offered to a prospective purchaser. Waddell CJ in Eq. did not articulate the basis of his Honour's conclusion that "In my opinion, if the events mentioned have happened then, as a matter of contract, the lessee is at liberty to accept the offer within twenty-one days of notice of it having been received and the offer is not capable of revocation during this period" but that conclusion was little other than a restatement of what cl.39 provided for and the conclusion admitted of little in the way of supporting reasoning.
37 The clauses under consideration in both these earlier decisions were markedly different in terms and structure from the cl F now under consideration. In Dorsman there was an express prohibition against selling within 21 days. In State Authorities Superannuation Board there was an express conferral on the lessee of a right to purchase the premises, and the step to be taken by the lessor in the effectuation of that right, although referred to indirectly as if it were an offer, did not function in the general law of offer and acceptance.
38 Counsel pointed to the opening words of subcl.(d) which refer to "This right of first refusal". In my view the reference creates no useful analogy with the State Authorities Superannuation Board decision; there a right to purchase was expressly conferred; but in the present case the opening words of subcl.(d), an ancillary provision, are a mnemonic for the position of the lessee generally and cannot serve to establish what that position is. The heading of cl.F "Right of First Refusal" has no influence on the construction of subcl(d) or any part of cl F, having regard to cl. 1.4 of Memorandum W418497.
39 Defendant's counsel also referred me to In the matter of an application by Permanent Trustee Co. Ltd [1993] CCH Aust. and NZ Conveyancing Report 55, Dowsett J. That case related to whether, on a clause relating to pre-emption with some, although incomplete analogies with the present case, communications between the parties had in fact led to contract formation. In my view his Honour's observations do not touch on the problems before me.
40 The references to these cases have illustrated the dependence of any decision on close consideration of the terms of the relevant document.
41 No suggestion was made that any event had happened, by the time Dr Chai received the letter of withdrawal on 3 October, under which any estoppel against withdrawing the offer arose.
42 The parties debated the topic of authority and whether Raine & Horne Seaforth had the authority of Gicubo to make the offer contained in the letter of 1 October 2002; for the purpose of this part of my consideration it must be assumed (contrary to my opinion) that that letter was an offer, was an offer made to Choice Services, and has some part in the mechanism of cl.F. The plaintiff bears the onus of proof of agency authority. The evidence offered was the evidence of Dr Chai to the effect that Dr Seldon had stated or admitted that he had instructed Raine & Horne to write the letter; the admission was said to have been made in a telephone conversation with Dr Chai. Doctor Chai was challenged in cross-examination on this subject and his adherence to his earlier evidence was not altogether firm. In his affidavit Dr Seldon denied having made that statement; he was not cross-examined on this subject. The plaintiff's case is also supported by a more general consideration favouring regularity of proceedings; there are elements in the probabilities which favour an estate agent such as Raine & Horne not having written such a letter without authorisation. It is clear from the Sales Agency Authority that it did not confer such authority, but it could still have been conferred by some later express authorisation.
43 Exhibit 3, the dairy maintained in the office of Raine & Horne Seaforth, reads, in an entry which should be attributed to 24 September 2002 (although headed 24/8/02) what can be the only relevant instructions: "Rang Denzil regarding tenant's First Right of Refusal. We asked if we can send a letter to the tenant asking if they would like to purchase property. This is on the understanding that the tenant can not force Denzil to sell the property. Denzil confirmed with his solicitor the First Right of Refusal was only the tenant right to buy at lessor's price. If they did not like the price they could get 3 valuations. However Denzil did not have to sell at the average valuation price if he did not want to. They could not force him to sell. On this understand we agreed to send the tenant a letter." A letter within the authorisation thus diarised would be a letter to the tenant asking if they would like to purchase the property, quite a different subject to an offer complying with cl.F.
44 I am not satisfied on the balance of probabilities that Dr Seldon in fact gave Raine & Horne Seaforth any authority to write the letter of 1 October, nor am I satisfied that he told Dr Chai that he had done so. I find that Raine & Horne Seaforth did not have authority from Gicubo to make such an offer to sell the property as is contemplated by cl.F. As the letter of 1 October 2002 was not directed to Choice Services, and if it had been so directed did not constitute an offer such as it is contemplated by cl.F, this finding is not determinative.
45 On the fourth topic defendant's senior counsel presented an argument to the effect that the response made by Dr Chai to the letter of 25 September 2002 had the effect, under subcl.(d), of exhausting the rights created by cl.F. I do not accept these contentions because the letter of 25 September was not directed to Choice Services, could not be understood to be an offer to Choice Services, and hence could not have any part in the mechanism of the operation of cl.F, whether under subcl.(d) or at any other place.
46 For these reasons the proceedings should be dismissed.
47 ORDER: The proceedings are dismissed with costs.
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