_Elderslie Property Investments No 2 Pty Ltd v Dunn & Anor_

Supreme Court of Queensland|2007-07-31|Before: Daubney J

[1] DAUBNEY J: The defendants are the registered proprietors of Lots 3 and 6 on Registered Plan 114765 ('Lot 3' and 'Lot 6' respectively). These lots, which are situated in Rochedale, are in close proximity to:

(a) Lot 1 on Registered Plan 114765, owned by Robert Moxon;

(b) Lot 2 on Registered Plan 114765, owned by Nathan and Sonya Rollason; and

[2] The plaintiff is a property developer. In mid-2005, the plaintiff and these property owners had some discussions with a view to the plaintiff acquiring the properties. At least part of the impetus for these discussions seems to have been the release by the Brisbane City Council in February 2005 of the draft Rochedale Master Plan for public comment.

[3] Ultimately, the defendants and the plaintiff entered into Deeds of Put and Call Option dated 21 December 2005 for each of Lot 3 and Lot 6 ('the Lot 3 Deed' and 'the Lot 6 Deed'). The terms of each deed are identical, save for some differences in clause numbering. The parties have argued the matter, and are content for me to decide, on the terms of the Lot 3 Deed, and accept that my determination in respect of that deed will apply identically to the Lot 6 Deed.

[4] By its further amended statement of claim, the plaintiff relevantly seeks:

(a) a declaration that the plaintiff has a right to exercise a call option pursuant to the Lot 3 Deed;

(b) a declaration that the plaintiff has an equitable interest in Lot 3 as the grantee of an option to purchase in the Lot 3 Deed;

(c) a declaration that the plaintiff has a caveatable interest in Lot 3, being an equitable interest as grantee of an option to purchase an estate in fee simple; and

(d) in the alternative to (c), an injunction to restrain the defendants from dealing with Lot 3 in such a way as to prejudice the plaintiff's ability to exercise its right as grantee of the option.

[5] The defendants having filed a notice of intention to defend, the plaintiff now applies for summary judgment on all of these claims pursuant to Uniform Civil Procedure Rules 1999 (Qld) (UCPR), 292. Rule 292(2) provides:

(2) If the court is satisfied that-

(a) the defendant has no real prospect of successfully defending all or a part of the plaintiff's claim; and

(b) there is no need for a trial of the claim or the part of the claim,

the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff's claim and may make any other order the court considers appropriate.

[6] Since Deputy Commissioner of Taxation v Salcedo,[1] it is firmly established that UCPR 292 is to be applied according to its tenor, and the 'no real prospect of successfully defending' test contained in UCPR 292(2)(a) is to be applied according to its own terms and not according to the considerations relevant under the previous rules for summary judgment. But it is, nevertheless, necessary for the court to adopt a careful approach in an application for summary judgment. The court needs to be satisfied not only that the defendant has no real prospect of successfully defending all or a part of the claim, but also that 'there is no need for a trial of the claim or the part of the claim'. As Atkinson J said in Deputy Commissioner of Taxation v Salcedo:[2]

The goal of just resolution of the real issues is protected by the necessity to satisfy the requirements of both paras (2)(a) and (b) and the residual discretion the court has to refuse summary judgment even when the requirements of paras (2)(a) and (b) are satisfied.

[7] As this is the plaintiff's application, the burden of satisfying the court of the matters referred to in UCPR 292(2)(a) and (b) rests on the plaintiff: see Qld Park Pty Ltd v Lott;[3] as his Honour observes there, this approach is consistent with that under the former rules. As under the former rules,[4] where a plaintiff leads evidence to make out a prima facie entitlement to judgment, the evidentiary onus shifts to the defendant: see Qld Park Pty Ltd v Lott.[5]

[8] The overall burden of proof in an application under UCPR 292, however remains on the plaintiff. True it is that in many cases the evidence required for the plaintiff to make out its prima facie entitlement will be relatively straightforward, such as in the case of proving a debt due and owing, and the evidentiary shift means that the real focus will be on determining whether the defendant has put on material sufficient to persuade the Judge that the court should not be satisfied that the defendant has no real prospect of defending the claim. But, as will appear below, this is not such a case.

[9] Central to this plaintiff's case is the proposition that it has an extant right to exercise the call option over Lot 3. The plaintiff's primary submission is that it currently has this right because, on a proper construction of the Lot 3 Deed, the period during which the call option could be exercised was some two years after the date of the deed (21 December 2005). The plaintiff's alternative submission is that, if the period for exercise of the call option was, by the terms of the Lot 3 Deed, only for 12 months, the plaintiff had an entitlement to extend, and has extended, that period such that the right to exercise the call option presently exists.

[10] The call option was granted by clause 2 of the Lot 3 Deed in the following terms:

2.1 Call Option

In consideration of payment of the Call Option Fee by the Grantee to the Owner, the Owner grants a Call Option to the Grantee to purchase the Property.

2.2 Exercise of call option

The Grantee may, at any time during the Call Option Period, exercise the Call Option by delivering to the Owner or its solicitor:

(a) the Call Option Notice duly signed by the Grantee (or if has nominated some other person or entity pursuant to clause 8.15 hereof the Call Option Notice must be signed by the Grantee's nominee instead of the Grantee) and;

(b) if the Grantee has nominated some other person or entity pursuant to clause 8.15 hereof, a duly signed Nomination Notice (which may be delivered at any time prior to or contemporaneous with but not later than, when the Call Option Notice is delivered); and

(c) the Contract, signed in, duplicate, by the Grantee (or, if the Grantee has nominated some other person or entity pursuant to clause 8.15 hereof, with the name of the nominee inserted as Buyer, and signed by that nominee).

(d) PAMD Forms.

[11] Clause 3 of the deed contained a put option, which enabled the defendants, in specified circumstances, to require the plaintiff to purchase the property.

[12] Many of the terms used in clauses 2 and 3 are defined in clause 1.1:

1.1 Definitions

In this Deed, unless the context otherwise requires:

(a) Contract means the contract for sale which is Annexure A to this Deed;

(b) Deed means this Deed and any document that varies or supplements it;

(c) Call Option means the option to purchase the Property granted in clause 2.1;

(d) Call Option Fee means $10.00;

(e) Call Option Notice means a notice substantially in the form set out in Schedule 1;

(f) Call Option Period means the period commencing after the date of this Deed and ending at 5 pm on that day which is 14 days from the date the Grantee receives a notice from the Owner or the Owner's solicitor under clause 18.16 hereof;

(g) Nomination Notice means a notice in the form set out in Schedule 3;

(h) Property means the property described in the Contract;

(i) Put Option means the option to purchase the Property granted in clause 3.1;

(j) Put Option Fee means $10.00;

(k) Put Option Period means the period commencing on that day which is the expiry date of the Call Option Period and ending 5 pm on that day which is 14 business days from the expiry date of the Call Option Period;

(l) Put Option Notice means a notice substantially in the form set out in Schedule 2; and

(m) Supply means any supply as that term is defined under the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

[13] The plaintiff submits that the Lot 3 Deed gave 'the developer a 24 month period to exercise an option to call for the sale of [Lot 3] to the developer or in the Dunn's case a 12 month period with the ability to extend that call option for up to another 12 months to 21 December 2007.' That, with respect, does not seem to me to be the scheme contemplated by the Lot 3 Deed. Rather, even on the face of the definitions it would appear that it was contemplated that:

(a) the plaintiff would have an option to purchase Lot 3 up to the conclusion of a 14 day period after receipt of a notice under clause 8.16; and

(b) if the plaintiff did not exercise its option to purchase during the 'Call Option Period', the defendants then had a 14 day 'Put Option Period' during which they could require the plaintiff to purchase the property. Hence the specification that the 'Put Option Period' commences 'on that day which is the expiry date of the Call Option Period'.

[14] It is immediately apparent that there is a difficulty with the drafting of the definition of 'Call Option Period'. On its face, the Call Option Period commenced on 21 December 2005, and the period will continue, apparently indefinitely, unless and until a notice under clause 8.16 is received by the plaintiff and the requisite 14 day period elapses. The plaintiff answered this difficulty by pointing to the form of contract annexed to the deed, being the contract of sale which the parties would be required to enter into upon the option being exercised. Special condition 2(a) of that contract has the effect that the contract of sale has to be settled by no later than two years from the date of the Lot 3 Deed, ie by 21 December 2007. By reference to that end-date for settlement, the plaintiff argued that the Call Option Period enured from 21 December 2005 until 'shortly prior' to 21 December 2007 - the reference to 'shortly prior' was an acknowledgement that there would be some 'brief' period after the exercise of the option leading up to settlement of the contract.

[15] Regard also needs to be had to clause 8.16 of the Lot 3 Deed:

8.16 Amendment to the Planning Scheme

(a) Within 7 days after the gazettal of the Amendment to the Planning Scheme, the Owner or its solicitor must notify the Grantee and its solicitor of the gazettal. If the Amendment to the Planning Scheme will not facilitate the Development Approval, then the Put Option granted to the Owner pursuant to clause 3 hereof shall be deemed never to have been granted and as such the Owner agrees the Put Option may not be exercised by it.

(b) In this 8.16, 'Amendment to the Planning Scheme' means an amendment to the Brisbane City Council Planning Scheme advertised in the Queensland Government Gazette that will enable the Brisbane City Council to issue a Development Approval for the Property and Adjoining Land (as that term is defined in clause 4.1) to be developed in a manner consistent with the development outlined in Annexure B hereto.

(c) If the Amendment to the Planning Scheme has not been gazetted by the Approval Date determined in accordance with clause 8.16(d), the Put Option granted to the Owner pursuant to clause 3 hereof shall be deemed never to have been granted and as such the Owner agrees the Put Option may not be exercised by it.

(d) The 'Approval Date' shall be the date which is 12 months after the date of this Deed provided however that if on the date 12 months after the date of this Deed the Amendment to the Planning Scheme has not been gazetted then the Grantee may extend the Approval Date (on one or more occasions) by a cumulative maximum of 12 months and in this case the extended date shall become the 'Approval Date'.

(e) In this clause 8.16 'Development Approval' means the development approval for the development outlined in Annexure B hereto.

[16] It is not in issue that the 'Amendment to the Planning Scheme' referred to in clause 8.16(b) has not been made or gazetted at this point in time. That fact draws attention to sub-clauses 8.16(c) and (d) which, on their face at least, regulate the Put Option. Read alone, the effect of these clauses is to limit the Put Option by reference to the 'Approval Date' - if the Amendment to the Planning Scheme is not gazetted by the Approval Date, the Put Option is deemed extinct. The 'Approval Date' is 12 months after the date of the deed, with the grantee, ie the plaintiff, given the right to extend the Approval Date by up to a further 12 months.

[17] The plaintiff's primary contention is that the Call Option is not limited by reference to the 'Approval Date' referred to in clause 8.16(c) and (d), but simply enures for (almost) the period of two years from 21 December 2005. Far from being satisfied that this is the correct construction of the document, I consider it far more likely that, on a proper construction of the Lot 3 Deed as a commercial document, the Call Option Period is temporally limited by reference to the 'Approval Date'. The plaintiff's primary contention leads to an undesirable tension in the document - the scheme contemplated under the deed is for the Put Option Period to follow the Call Option Period. Yet the primary construction advanced by the plaintiff would, in the event of continuing non-gazettal of the 'Amendment to the Planning Scheme', see the plaintiff with the benefit of the Call Option for (almost) two years while the Put Option (for the benefit of the defendants) was deemed extinct after 12 months unless the plaintiff extended the 'Approval Date'. That simply does not make sense.

[18] Other difficulties associated with the primary construction advanced by the plaintiff include:

(a) the intractable tension which arises between the definition of 'Call Option Period' and 'Put Option Period' by the latter being defined to commence on the expiry of the former; and

(b) the lack of precision of the term of the Call Option Period on the plaintiff's argument; it is not at all clear to me how much 'shortly prior' to 21 December 2007 the expiry date of the Call Option Period, is alleged to be.

[19] Accordingly, I am not satisfied that the defendants have no real prospect of persuading a trial judge that the deed should not be interpreted according to the primary construction advanced by the plaintiffs.

[20] Even if I am considered to be wrong in my rejection, for present purposes, of the plaintiff's primary construction argument, the defendants in any event have satisfied me that they are not without some real prospects of persuading a trial judge that the deed should be rectified so as to render the Call Option expressly subject to expiration by reference to the 'Approval Date' as defined in clause 8.16(d). The defendants point to the following facts:

(a) the negotiations of the deeds involved Mr Marriage, who also spoke on behalf of the defendants. In the course of pre-contractual negotiations, the plaintiff's representative, Mr Bowman, is alleged to have agreed with Mr Marriage that the Call Option would exist for 12 months, subject to a power to extend it for up to a further 12 months;

(b) during the course of drafting the deeds, the defendants' solicitors wrote to the plaintiff's solicitors noting that the options would exist for 12 months, subject to a power to extend for a further 12 months; and

(c) the defendants say, through Mr Dunn, that they believed and intended that the Call Option expired after 12 months, subject to the ability to extend for another 12 months.

[21] These matters alone, in my view, are sufficient to enable me to conclude that the defendants are not without some real prospects of persuading a trial judge that:

(a) the plaintiff and the defendants shared a common belief that the deeds would operate so as to impose these expiry dates on the Call Option; or

(b) the plaintiff knew that the defendants entered into the deeds on this basis and, having contributed to the defendants holding that view, stood by and allowed the defendants to execute the deeds in their current form,

and that consequently there should be rectification of the deeds to reflect the basis on which they were entered into.

[22] The plaintiff's alternative submission is that, even if the Call Option Period was limited to 12 months by reference to the 'Approval Date' provision in clause 8.16(d), the plaintiff has extended the 'Approval Date' thereunder such that the Call Option Period is still on foot. This extension is said to have occurred by a letter from the plaintiff's solicitors to the defendant's solicitors dated 8 February 2007, in which it was said:

Our client has extended the Approval Date under the option deed to the maximum period permitted, which is 21 December 2007 ...

[23] The defendants contend that notice of any extension by the plaintiff of the Approval Date needed to be given within a reasonable time after the initial 12 month period. This proposition seems to be accepted by the plaintiff, which contends nevertheless that the notice constituted by the letter of 8 February 2007 was given within a reasonable time. For their part, the defendants:

(a) dispute whether the letter of 8 February 2007 was a sufficient notice for the purposes of clause 8.16(d), and

(b) say in any event that such notice was not given within a reasonable time.

[24] Both of these issues raise matters which are not amendable to resolution on a summary basis. At the very least, resolution of what is a 'reasonable time' in the circumstances of this case requires investigation into those circumstances.

[25] Accordingly, as to this aspect of the case, I am not satisfied that the defendants have no real prospect of defending the claim based on the plaintiff's alternative argument, nor am I in any event satisfied that there is no need for a trial of the issues relating to 'reasonable notice' in the circumstances of this case.

[26] The application for summary judgment will therefore be dismissed.

[27] These proceedings were commenced by claim and statement of claim filed on 23 February 2007. The defendants notice of intention to defend and defence were filed on 16 April 2007, and a reply was filed on 8 May 2007. On 16 July 2007, the plaintiff filed the present application. On 25 July 2007 (one clear day before the return date of the application) the defendants filed and served an amended defence which abandoned many of the matters previously pleaded and raised, for the first time, significant matters of defence, including the construction and rectification arguments to which significant attention was focused in argument.

[28] In these circumstances, I will order that the costs of and incidental to this application be reserved.

[3] [2003] QCA 271, 41 (Jones J).

[4] As to which see, for example, ANZ Banking Group Ltd v Barry [1992] 2 Qd R 12, 19 per Derrington J.

[5] [2003] QCA 271, 41 (Jones J).

Civil Procedure Rules 1999

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Judgment (49 paragraphs)

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