Thus, in the instant case, even though there were breaches, the landlord did not give any notice under s 133E. The breaches are thus not a complete bar to the tenant succeeding, they are merely matters which the court takes into account in its discretion as to whether to grant specific performance.
26 The result of this survey is that there is a disagreement among members of the court as to the proper construction of s133E. It is therefore most unfortunate that it is necessary for me to give another decision at first instance on this question. It would be far better fixed by legislative amendment setting out an appropriate procedure to be followed if a lessor wished to rely on breach of a provision of the lease between the date of notice of intention to exercise option and the date of expiry of the original lease, and requiring the prescribed notice to be given within 14 days of notice if the lessor wished to rely on breaches up to the time of the notice from the lessee. However, I am required to consider the matter myself giving proper weight and consideration to the decisions to which I have referred, comity not being possible.
27 As the second reading speeches in the Legislative Assembly and Legislative Council on the Conveyancing (Amendment) Bill, 1972 have been referred to and relied upon to some extent by each side in the case before me and by Young J in Lolly Pops, I set out the relevant passages from the speech of Mr Maddison, the Minister for Justice in the Assembly on 23 February 1972 and the Honourable F.M. Hewitt, Minister for Labour and Industry in the Council on 8 March 1972:
28 Mr Maddison:
Proposed sections 133c and 133g introduce the principle that a lessee should be relieved from forfeiture of his option in any case where the court, after considering all circumstances, determines that such protection is reasonable. The amendment attempts to meet all combinations of contingencies and for that reason is lengthy and complex. In essence it provides, in paragraph (b) of proposed section 133c, a definition designed to distinguish the undertakings of a lessee which would normally be found in a lease, whether or not that lease contained an option to review or to purchase, and, on the other hand, terms of a lease which are referable only to such an option. The legislative scheme is that, where a lessee who has committed some breach of his undertakings to the lessor attempts to exercise such an option, the lessor, if he wishes to treat the lessee's conduct as precluding him from exercising his option, must serve notice upon the lessee to that effect. Thereupon, the lessee may approach the court for relief against forfeiture on his option and the court, after taking into consideration various matters specified in subsection (3) of proposed section 133F - notably the relative hardship as between lessor and lessee - may make such orders as it thinks fit for the purpose of granting the relief sought, or may refuse to grant that relief.
Proposed section 133G is basically intended to preserve the lessee's rights until the court makes its determination and, if the latter favours the lessee, for such further time as may prove necessary to enable him to obtain from the lessor an appropriate instrument of disposition. Unfortunately the provision cannot be drafted as simply as that, because of the numerous permutations of contingencies, such as the lease expiring before or after the date of the court proceedings, the possibility that an option to purchase may be exercisable outside the term of the lease, and a number of other factors. Provision for the various possibilities necessarily makes the amending legislation appear quite complex.
29 Mr Hewitt:
The second case is a decision in 1957 of the Supreme Court of New South Wales, reported as Gilbert J. McCaul (Australia) Proprietary Limited v Pitt Club Limited , which was concerned with the right of a tenant to exercise an option for renewal set out in a clause of his lease. The option was made conditional upon the tenant's compliance with the covenants of the lease, one of which was a covenant to pay rent at specified intervals. In fact both landlord and tenant treated this clause rather casually, with the result that the rent was paid irregularly by the tenant without the landlord's raising any objection. However, when the tenant purported to exercise his option, the landlord treated the breach by the tenant of his undertaking to pay the rent punctually as ground for refusing to grant a new lease, and the court upheld his right to so forfeit the tenant's option.
The Government feels that in such cases, where considerable hardship would fall upon the tenant without any corresponding hardship to the landlord, the court should be enabled to give relief from forfeiture of an option either to renew the lease or to purchase the reversion. Therefore, new sections 133C to 133G provide procedure whereby in such cases a court, upon consideration of the relative hardship as between landlord and tenant, together with any other material factors, may relieve the tenant from forfeiture of his option to purchase or renew.
30 While it is clear that is was sought to cover the various possibilities and that this intention ought to be given effect to in case of doubt, the question is whether s133E bears on the facts in this case. What is at issue is "the purported exercise of the option". In McCaul it must be remembered the breaches relied upon by the lessor were breaches prior to notice of exercise or intention to exercise. The court in McCaul discussed the position which arose where an offer is not accepted in accordance with its terms so that the acceptance amounts to a counter offer. At page 124 the following passages appear:
If a conditional offer is made and the offeree without performing the condition purports to accept it, that is to say makes a counter offer and that counter offer is accepted, it is a loose although not uncommon use of language to say that the original offeror has waived performance of the condition which was prescribed by his offer as being the manner of accepting it. In contemplation of law the original offeror has done no such thing. What he has done is to accept a counter-offer and in the result an agreement is made but it is not an agreement consisting of the original offer and an acceptance of that offer. …
The American Law Institute's Restatement of the Law of Contract (Vol. 1, s. 61) states the position clearly and concisely:
Acceptance of Offer Which States Place, time or Manner of Acceptance.
If an offer prescribes the place, time or manner of acceptance its terms in this respect must be complied with in order to create a contract …
The author's note is:
If the offeror prescribes the only way in which his offer must be accepted, an acceptance in any other way is a counter-offer.
In many and perhaps most cases, this may be of little or no practical importance. In the present case, however, it may be of considerable importance. The plaintiff's purported exercise of the option was not an acceptance of the offer made in cl. 4, but was a counter-offer and the question whether that counter-offer was later accepted was not raised and has not been litigated, and it must be remembered that the agreement which would result from an acceptance of that counter-offer is one of a type which the law requires to be evidenced by writing.
31 It will be noted that twice in this passage the court refers to purported exercise of the option by notice. So did the Minister in the Legislative Council. I do not consider the intention contended for by the plaintiff is plain from the speeches in the Legislature.
32 Judges in this Division are assumed to have a basic knowledge of conveyancing practice; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 435. Thus I can say that I know from long experience that solicitors generally consider their option problems are over when a valid notice of exercise is sent, even if in some instances this is more properly called "notice of desire for a new lease". I do not think that matters. I have little doubt that in everyday usage in legal offices the words "where the lessee purports to exercise the option" would be seen as referring to the sending of notice and to have nothing to do with compliance from then on with the lease. I agree with Bryson J on this. It is a strange view of language to think that a lessee is purporting to exercise an option by conforming to the covenants of the prior lease. The language of s133G I think, supports my view. That section makes provision for an extension of the term of a lease, which includes the option, for periods necessary to enable notice to be given by the lessor after exercise and a claim for relief to be made by the lessee. But on their plain wording, those provisions do not bring about a renewal of a term which is already ended before notice. Yet on the reasoning in Nessmine the position is that notice can be given up to fourteen days after the term ends, which situation is not addressed by s133G. It is necessary to remember that if the "purported exercise of option" requires giving notice plus performance of the covenants up to the end of the term, then no tenant would know his or her position as to a new term, until after possession ought to be given up to the landlord not only because McCaul requires performance of covenants but also because there is usually a covenant to deliver up the premises to the landlord in good repair: see Short form 5 Schedule IV Conveyancing Act. And in the same way no landlord would know whether there was an entitlement to grant a new lease for the period between termination and fourteen days thereafter. It should not be assumed that such uncertainty was a legislative intention. I should add that in Caltex Properties Pty Ltd v Pittard (1991) ANZ ConvR 612 a case in Western Australia dealing with similar legislation in that State, White AJ quite clearly considered that service of the notice was the purported exercise of the option. There are many cases where the term "purported exercise of the option" is used, although obviously in different factual situations, but they all assume service of notice is purported exercise: see for example MacDonald v Robins (1954) 90 CLR 515 at 528; Sperry Rand Australia Ltd v Arrandale Properties Pty Ltd [1979] VR 409 at 411 (a clause similar to that here) and Spectra Pty Ltd v Pindari Pty Ltd [1974] 2 NSWLR 617 at 619
33 In the result I conclude that s133E does not bear upon breaches of covenant after notice. It follows that a condition precedent to the entitlement to a new lease has not been fulfilled so that unless there is some other general relief against forfeiture available the plaintiff's claim must fail. No strong argument was addressed by the plaintiff on this question. That is not surprising as the law is clear that relief against forfeiture will not be granted in respect of loss of a new term, where the loss arises through non-fulfilment of a condition precedent to grant. See Finch v Underwood [1876] 2 ChD 310; B.S. Stillwell & Co Pty Ltd v Budget Rent-a-Car System Pty Ltd [1970] VR 589 at 595. If relief had been available, s133E would not have been necessary. It follows from this that the summons should be dismissed and an order for possession made. The parties asked that in the event of this conclusion they have the opportunity to address or agree upon the time when possession should be required to be given.
34 I conclude by saying I have found it necessary to embark on such a detailed consideration of the problem in deference to the competing views. It is clear that in this case a substantial amount of money is involved in this determination. At least for the future in the absence of appellate decision clear legislation should be enacted as quickly as possible.