"Clearly enough, however, it was the business of the plaintiff to exercise the option. The clause contains no express provision saying how he is to do it and any definitive communication of an election would suffice. But it was necessary that the communication should express clearly and unequivocally the fact that the surviving partner, the plaintiff, then and there elected to acquire the deceased's interest upon the terms of the clause."
15 In Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, Kirby P picked up the above principle at point 1 and helpfully summarised the other applicable principles governing options, as being:
"1. The primary rule is that the purported exercise of the option must express clearly and unequivocally the fact that this is what is intended: see Dixon CJ in Ballas v Theophilos (No 2) … ; see also R Fox, "Options" (1950) 24 ALJ 7 at 11. However because clarity and lack of equivocation are matters of opinion and impression, because inflexible insistence on form could lead to plain injustice and because fact situations vary almost infinitely a number of elaborations of this primary rule have been developed by the Courts.
2. It is not necessary , for example, for the effective exercise of an option, that terminology conforming precisely to the terms of the option should be used: see Williams J in Ballas v Theophilos (No 2) … cf Gower-Chapman v Morris [1987] NSW Conv R No 55-341.
3. The appropriate question to be asked is what anybody who received the letter, subsequently said to amount to the exercise of the option, would fairly have understood to be the meaning of it, in all the circumstances of its receipt: cf Carter v Hyde (1923) 33 CLR 115 at 126; adapting Romer J in Jones v Daniel [1894] 2 Ch 332 at 335. The addition by Issacs J of the phrase "in the circumstances of its receipt", adds instruction that the consideration which will govern the meaning to be ascribed to the letter is not to be judged in isolation, weighing only the words used. It is to be judged against the background of the dealings between the parties: cf Braham v Walker (1961) 104 CLR 366 t 376 and Lamont v Heron (1970) 126 CLR 239. The parties did not dispute that this Court could look to those dealings, at lease up to the time for the exercise of the option had expired.
4. Although a notice may mis-state the terms of the option which it purports to exercise, it may nevertheless amount, depending on the circumstances, to an unqualified and unconditional exercise of the option: Quadling v Robinson (1976) 137 CLR 192 at 201. On the other hand, if the grantee of the option sets out an erroneous understanding of it and then purports to exercise the option as so understood, the exercise will, generally speaking be ineffective … see also Oliver v Oliver (1958) 99 CLR 20
5. Nonetheless, every case depends ultimately upon its own facts and the proper construction of the document which is in dispute. Accordingly care must be observed in laying down general rules suggested to be of inflexible operation: see Gibbs J in Quadling v Robinson … and cf Hope J in Johnson v Bones …
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."
16 Recently, the principle was restated in Young v Lamb [2001] NSWCA 225 at paras 22 and 24.
17 The first defendant's version will be disputed at trial. However, for the purposes of this application I have accepted the first defendant's evidence. It is that:
"On 16 July 2000 the service station premises was [sic] severely damaged by a fire. The building was largely gutted at the rear and there was extensive water damage throughout. I recall that on 18 July 2000 I had a discussion with Kel and Anne Vickers at their house about the fire. There was some discussion about insurance. I went to the site the next morning to meet with an insurance assessor. Darryl Parker was also there. Later in the morning Kel Vickers came over to the site. We had a conversation during which words to the following effect were said
Vickers: "Are you going to stay on? I though you would pull the pin and walk away"
Worland: "No, it is our option to stay on. We are here for the long haul".
I recall that there was then some discussion concerning the making of repairs to the buildings and the erection of a temporary shed.
Approximately 2 weeks later Kel Vickers again came over to the site and spoke to me. A conversation to the following effect took place:
Vickers: "I am really surprised you want to stay on after all this. I thought you would just sell the stock and give it away"
Worland: "No we are here for the long haul. We have some long term staff. We have obligations to them and we intend to follow through on that."
18 The defendants submitted that the option to take a renewed lease constituted a standing offer made by Murphy which was capable of acceptance by the lessees at any time prior to 21 August 2000. Whether the means of communicating acceptance of the offer was acceptable is a question of construction of the offer. As previously stated no mode of acceptance was prescribed or even contemplated. Accordingly, it was sufficient that acceptance of the offer be merely communicated to the offeror, particularly where the history of the dealings between the parties has been conducted with a high degree of informality. It is my view that it is arguable that the words "No it is our option to stay on. We are here for the long hall" state clearly and unequivocally that the defendant was exercising the option for a further five year lease. Clarity and lack of equivocation are matters of opinion and impression. It may be that anybody hearing the purported conversation would have understood the defendant to be saying that he intends to operate the service station for years to come. Indeed, in October 2000, after these words were uttered and one month before the lease expired, the plaintiff wrote a letter increasing the rent. It could be argued that the plaintiff understood that the defendants had exercised that option. The defendants' case cannot be said to be hopeless and it should go to trial. The notice of motion is dismissed.
19 Costs are discretionary. Costs should follow the event. The plaintiff is to pay the defendants' costs as assessed or agreed.