HOW THE QUESTION ARISES
5 While there is no significant dispute between the parties as to the facts and circumstances which give rise to the construction issue, given the complexity of the factual context we set out the background and findings of fact made by his Honour in terms similar to those employed in the judgment below.
6 Mr Smyth is the registered proprietor of Glen Oban Farm, located in York, Western Australia. The farm comprises approximately 1,200 acres, and is contained in five separate certificates of title. From about 1996, the farm was leased to a family which has no connection with this proceeding, but in early 2002 their lease was coming to an end, and they decided not to renew. The Chippers were farmers in the area. By agreement with Mr Smyth and his wife, and with the then lessees of the farm, the Chippers operated the farm for about the last year of that lease.
7 In about March 2002, Mr Chipper had a number of conversations with Mr Smyth, in which he said that he and his wife were interested in taking a lease of the farm. During one of these conversations, Mr Smyth told Mr Chipper that he would lease the farm for a rent of $25,200 per annum. There was some discussion about the rent, but Mr Smyth was not prepared to negotiate, and the parties eventually agreed on that rent. The conversation ended with Mr Smyth saying that he would ask a farm management consultant based in York, Mr Ken Sevenson, to prepare a lease document.
8 On 29 April 2002, Mr Sevenson met with Mrs Smyth. Mrs Smyth said that a lease of the farm had been agreed with the Chippers. She said that her husband was having health issues, and they wanted the lease to be 'secure'. Mr Sevenson contacted Mr Chipper, and made an arrangement to inspect the farm. The inspection took place on 1 May 2002, on which day Mr Sevenson spoke to the Smyths about the lease, including the proposed term of the lease, an extension to the lease, and a proposed right of first refusal. On 6 May 2002, Mr Sevenson had a further conversation with Mr Chipper, in which he obtained both the Chippers' details for insertion into the lease agreement. As a result of these conversations, Mr Sevenson drafted a lease agreement between Mr Smyth and the Chippers. The agreement was in standard form, and contained a provision for the lessee to have a right of first refusal to buy the freehold. Mr Sevenson did not keep a copy of that draft lease.
9 A little later in May 2002, Mr Sevenson spoke to Mrs Smyth, who told him that there may be a GST issue with the lease, and suggested that he contact the Smyths' accountant, Mr Hall. On 24 May 2002, Mr Sevenson spoke with Mr Hall, and during that conversation Mr Hall said that, rather than having a lease between Mr Smyth and the Chippers, the lease should be structured so that there was a lease between Mr Smyth and Octra, and then a sub-lease between Octra and the Chippers. Octra was and is a private company owned by the Smyths, and the trustee of the Peter Smyth Family Trust. Mr Hall said that the rent payable under the lease between Mr Smyth and Octra would be nominal, and that the rent payable under the sub-lease between Octra and the Chippers would be a commercial rent. Mr Hall said that this would be tax efficient. As a result of that discussion, Mr Sevenson prepared two documents, a lease and a sub-lease, as instructed by Mr Hall.
10 On 5 June 2002, Mr Smyth and Octra executed a lease of the farm at a rent of $100 per annum. The common seal of Octra was affixed to the lease in the presence of the Smyths. On the same day, Octra executed a sub-lease of the farm to the Chippers at a rent of $25,200 per annum. Again, the affixation of the seal was witnessed by the Smyths. On 24 June 2002, the sub-lease was executed by the Chippers.
11 By the lease, Mr Smyth leased the farm to Octra for a period of 4 years commencing on 1 May 2002, and granted to Octra an option of a further 4-year term commencing on 1 May 2006. Clause 6(d)(ii) of the lease provided as follows:
'If at any time during the lease period (which is inclusive of the optional lease period, if one is written into in this lease agreement), the Lessor wishes to sell the freehold of the Property subject to this lease agreement, the Lessor must first give notice of the intention to sell the Property to the Lessee one month prior to advertising the Property for sale. Prospective purchasers of the Property will be able to inspect the Property if the Lessor gives the Lessee notice. The Lessee will have the first right of refusal to purchase the land for the same consideration and conditions as the Property is offered for sale to any other proposed purchaser.' (Emphasis added)
By the sub-lease, Octra leased the farm to the Chippers for a period of 4 years commencing on 1 May 2002, and granted to the Chippers an option of a further 4-year term commencing on 1 May 2006. Clause 6(d)(ii) of the sub-lease provided as follows:
'If at any time during the Sub-Lease period (which is inclusive of the optional Sub-Lease period, if one is written into in [sic] this Sub-Lease agreement), the Sub-Lessor wishes to sell the freehold of the Property subject to this Sub-Lease agreement, the Sub-Lessor must first give notice of the intention to sell the Property to the Sub-Lessee one month prior to advertising the Property for sale. Prospective purchasers of the Property will be able to inspect the Property if the Sub-Lessor gives the Sub-Lessee notice. The Sub-Lessee will have the first right of refusal to purchase the land for the same consideration and conditions as the Property is offered for sale to any other proposed purchaser.'
12 The Chippers occupied the farm, and little which is presently relevant occurred for more than 2 years. The one event in that period which is relevant was that, as a result of Mr Smyth's infirmity, his affairs were placed under the joint administration of his son David Smyth and one Robert Avery by order dated 6 May 2003 under the Guardianship and Administration Act 1990 (WA). From that time forward, and for the purposes of all subsequent relevant events, it was David Smyth who effectively represented, and made decisions for, his father, although Mr Avery's participation was necessary for any act of Mr Smyth to have legal effect. Notwithstanding his infirmity, it appeared that Mr Smyth remained conscious of the events which later became relevant in this proceeding, and that David Smyth made important decisions on his behalf only after discussion with him.
13 In late 2004, Mr Smyth decided to put the farm up for sale. Once he learnt of his father's intentions in this regard, David Smyth effectively took over responsibility for the arrangement of the sale. On 17 November 2004, he and Mr Avery appointed agents for the sale, Elders Real Estate of York. The sale was handled by their Branch Manager, Brian Woolcock. Thereafter, the Smyths dealt with the Chippers as though the latter had a right of first refusal to buy the freehold. They dealt with the Chippers in exactly the same way as would have been appropriate if the farm were leased directly to the Chippers, without the interposition of Octra.
14 On 8 November 2004, David Smyth informed Mr Chipper of the intended sale of the farm. On 23 December 2004, David Smyth confirmed that in writing, and told Mr Chipper that the price being sought by the vendor was $1,450,000, or about $1,200 per acre. The Chippers regarded that price as excessive. In February 2005, they signed an open offer to purchase the farm for the price of $1,100,000. This was rejected by David Smyth, who countered with a price of $1,445,000. The Chippers increased their offer to $1,200,000, but David Smyth would not move from the price he last nominated. In all of the discussions, the Chippers left David Smyth (and Mr Woolcock) in no doubt that they considered the asking price of $1,445,000 excessive.
15 Nothing material happened in relation to the proposed sale of the farm between about February and about August 2005. During that time, the farm continued to be listed with Elders. It was in August that Red Valley came into the picture. Red Valley was (and is) a company controlled by Warren Anderson, and of which he and his wife were directors. Mr Anderson had been a farmer and a property developer for many years, although, since the early 1990's, not actively involved in the latter. Red Valley was used by Mr Anderson to own properties in which he was interested. Mr Anderson gave evidence that, in about early 2005, a farming property near York owned by Red Valley was given to his sister. However, he was concerned that the property might be too small to support her, her husband and their three sons. Mr Anderson was looking for a further property which his sister could use as pasture, and possibly for one of her sons to use as his own farm. He asked Colin King, a friend and an estate agent with L J Hooker of York, to look out for properties close to the one which Red Valley had given to his sister. In August, Mr King told Mr Anderson that he had located a reasonably priced property which was 'just what you're after'. Mr Anderson was interested, and asked Mr King to arrange an inspection. Mr King contacted Mr Woolcock, and an inspection was arranged.
16 Mr Woolcock gave evidence before the primary judge that, during the inspection, he told Mr Anderson that the farm was under lease, and that there was a further 4-year option, and that the lessee had a right of first refusal. He said that Mr Anderson said that he would have preferred to have had access to the property as at 30 April 2006, but that such access was not vital. Mr Anderson said that, at or about the time of the inspection, Mr King said to him:
'Warren, there's a problem. Smyth, the owner, has leased the farm to Mr and Mrs Chipper until April next year and they have an option for another four years. But I think they will surrender the lease if you pay them a reasonable amount. They're not running much of a farm and can't be making much money out of it. They might accept a buy-out of the lease but it won't cost much. If they're not sensible about it, I can always get you out of the property. It's on 6 titles and I can sell the separate lots to Investors from Perth who are after a country property which they might use as a hobby farm in the future.'
Mr Anderson was given a copy of the lease and sub-lease, but did not read them at that stage.
17 In anticipation of an offer to buy the farm being made by Red Valley, on 27 August 2005 David Smyth told Mr Chipper that he expected such an offer to be made, and asked him to indicate if he was interested in purchasing the farm.
18 On 29 August 2005 Red Valley offered to buy the farm for a price of $1,400,000, and subject to various conditions set out in the offer. On 2 September 2005, David Smyth countered with an offer to sell for $1,445,000, together with certain adjustments to the conditions proposed. Red Valley agreed to pay the higher price, but rejected one of the adjustments to the conditions. On 16 September 2005, David Smyth accepted the most recent amendments proposed by Red Valley and signed the contract. Mr Avery signed on 19 September 2006.
19 As a result of those signatures, on 19 September 2005 there came into existence a binding contract for the sale of the farm to Red Valley. Apart from the agreed price of $1,445,000, some of the conditions in the contract are material to the present case. The contract provided for a deposit of $140,000, of which $10,000 was payable immediately and the balance, $130,000, was payable within 60 days. Settlement was to be 12 months from acceptance (i.e.: 19 September 2006). In addition to the conditions printed on the standard form, the contract contained the following conditions:
'10. This offer is subject to the vendor completing the subdivision application 120216 creating 6 locations as shown on Annexure 'A' attached to this contract and this shall be completed prior to settlement.
11. The purchaser is aware and accepts the current lease arrangements on the said property.
12. See Annexure 'B'
13. See Special Conditions Addendum
14. See Annexure 'C'
15. This contract is subject to and conditional upon the purchaser being satisfied with the terms & conditions of the existing lease. Such satisfaction or otherwise to be confirmed in writing to the vendor or his agent within 28 days of acceptance of this contract.'
The farm was on five separate certificates of title. There was, apparently, a proposal to create a sixth, but, at the time of trial, this had not been completed and the farm remains on five titles. As to condition 11, by the time of the execution of the contract, Mr Anderson had received a copy of the lease and sub-lease. At the time he executed the contract, he had not had an opportunity to consider the lease and sub-lease, and Mr King suggested to him that it become a condition of the offer to buy the farm that Red Valley be satisfied with the terms and conditions of the existing lease. Mr Anderson agreed with the suggestion, Mr King drafted condition 15, and that was accepted by David Smyth. As to conditions 12, 13 and 14, they are presently relevant only for the fact that they existed as annexures (or the like) to the written contract. Why they are relevant will appear shortly.
20 In the period immediately following the execution of the contract, Mr Anderson used Mr King to speak to the Chippers on the question whether they would be prepared to be bought out of the sub-lease, including the optional term. Mr King told him that the Chippers had named the price of $50,000 a year, down to the end of the optional term, to be bought out. Mr Anderson was not prepared to pay such a sum.
21 Towards the end of September 2005, Mr Anderson read the lease and sub-lease for the first time. He noted the clauses giving the Chippers a right of first refusal, and was unsure whether that affected the contract which Red Valley had signed. He told Mr King to make sure that Mr Smyth offered the farm to the Chippers, adding 'I don't want this to become bogged down in another court fight'. Mr King said that he would speak to Mr Woolcock about the matter. The first instalment of the deposit under the contract, $10,000, which was due upon execution, had not been paid.
22 The Chippers were informed of the proposed sale of the farm to Red Valley, but they did not then take any step to buy the farm under their right of first refusal. Mr Woolcock provided the Chippers with a blank pro-forma confirmation by which they were invited to indicate that they wished, or did not wish, to exercise their right of first refusal to purchase the farm at the cash price of $1,445,000. By this stage, the only details of the Red Valley contract which had been provided to the Chippers consisted of the first page of that contract (which included the price and the deposit terms, but not the special conditions). On 28 September 2005, Mrs Chipper's brother, Mr Stevenson (a legal practioner), wrote to Mr Woolcock advising him that there had not been proper compliance with the lessor's obligation to give the Chippers an opportunity to exercise their right of first refusal. He asked Mr Woolcock to provide the Chippers with 'proper documentation for their consideration'. This was apparently not promptly forthcoming, at least to the Chippers' satisfaction.
23 The 28-day period within which, under condition 15 of the contract, Red Valley had the opportunity to withdraw if it was not satisfied with the terms and conditions of the existing lease expired on 17 October 2005. As this date approached, Mr Anderson still had not resolved his concerns about the lease and so he asked Mr King to obtain an extension of time for the operation of condition 15. Mr King spoke to Mr Woolcock about the matter, and on 17 October 2005 Mr Woolcock prepared a written form of variation to the contract which would have done two things: first, extend the period referred to in condition 15 to 15 December 2005, and secondly, provide for the deposit to be paid in full within 7 days of that condition being satisfied (i.e.: by 22 December 2005 at the latest).
24 Two days later, on 19 October 2005, David Smyth telephoned Mr Chipper. He asked why the Chippers had not signed the form indicating that they did not wish to buy the farm at the price of $1,445,000. He said that their failure to do so was delaying the sale. Mr Chipper said that he had still not been shown the whole contract, which he required before exercising his right of first refusal one way or the other. On 20 October 2005, Mr Woolcock visited the Chippers' farm, and spoke to Mrs Chipper. He gave her a memorandum addressed to the Chippers and signed by Mr Smyth, in the following terms:
'We thank you for your attention to this matter, and the other matters in terms of the sale of the farm.
The Owner Peter Smyth of the above farming property, of which you are the current Sublessee, wishes to advise that further to earlier advice to you that the property is for sale, he has now received a cash offer to purchase the entire farming property at the full listed price of $1,445,000.00.
Thus in accordance with Clause 6 item d(ii) of your lease, he is extending to you the first right of refusal to purchase the property on the same terms, for the same cash consideration. A copy of the terms are attached for your information.
We note the purchaser has received a copy of the lease agreement.
As per your discussion with David Smyth please confirm your intention not to purchase the property, (or purchase) by signing the copy of this letter and sending to us by return by 27/10/05. If we do not receive a reply by this date we will assume you do not wish to exercise your right.'
The memorandum concluded with a prepared statement, to be signed by the Chippers, to the effect that they did not wish to exercise their right of first refusal to buy the farm for the cash price of $1,445,000. They did not sign that statement.
25 It seems that, by the end of October 2005, the Chippers had been provided with a copy of the Red Valley contract, but not with the annexures or the addendum referred to in conditions 12, 13 and 14. On their behalf, on 7 November 2005, Mr Stevenson wrote to Mr Woolcock protesting about those omissions. Mr Woolcock immediately brought the complete contract, including the annexures and the addendum, to the Chippers' attention. Having perused these documents, the Chippers decided that they did not wish to purchase the farm for the consideration and on the conditions specified in the Red Valley contract. On 16 November 2005, Mrs Chipper delivered a notice, signed by both herself and her husband, to Mr Woolcock in the following terms:
'Christopher John Chipper and Melody Jane Chipper of Jimbin Farm, Mokine Road, York hereby give notice to Octra Nominees Pty Ltd of 2 Avon Place, Northam that they do not wish to exercise their right of first refusal to purchase the farming property the subject of the sub-lease agreement dated 1 May 2002 ("the Sub-lease") on the basis that the farming land the subject of the agreement is purchased, and only purchased, by Red Valley Pty Ltd ("the Purchaser") on the terms and conditions set out its offer and acceptance dated 2 September 2005 ("the Offer and Acceptance").
And further take notice that Christopher John Chipper and Melody Jane Chipper have relied upon the representations made to them by David Smyth and Brian Woolcock at various times that the Purchaser is aware of the Sub-lease and agrees to be bound by the terms and conditions of the Sub-lease and that the farming property will only be sold to the Purchaser on the terms and conditions set out in the Offer and Acceptance.'
Mr Woolcock notified Mr King of this communication, who then notified Mr Anderson.
26 The variation to the contract between Mr Smyth and Red Valley which had been prepared by Mr Woolcock at Mr King's request on 17 October 2005 was executed by both parties in the days following the delivery of the above Chippers' notice. It was executed by Mr Anderson on behalf of Red Valley on 17 November 2005, and by David Smyth and Mr Avery on behalf of Mr Smyth on 22 November 2005. It bore the date 17 October 2005.
27 In a finding of fact, his Honour concluded that Mr Smyth did not inform the Chippers of Red Valley's request for an extension of time allowed under condition 15 of the contract. At about mid-November 2005, there was an extension of the time for the payment of the deposit under the contract, and there was no suggestion before the primary judge that the Chippers were told about that at any time before they signed off on their right of first refusal.
28 In December 2005, Mr Anderson travelled overseas. While in Moscow, he received a phone call from Mr King, who told him that the time on the condition in the contract of sale was about to expire, and asked him what he was going to do about it. This was a reference to the fact that the time for Red Valley to express its satisfaction (or otherwise) under condition 15 had been extended to 15 December 2005. Mr Anderson asked Mr King whether the Chippers were going to accept 'a sensible offer on their lease', by which he referred to earlier proposals for Red Valley to buy the Chippers out from the remaining term of the lease, including the extended term. Mr King said that he had heard nothing from the Chippers, adding: 'if you buy it I can on-sale the blocks for a profit. And you never know, Chipper might still come to the party.' Mr Anderson said, 'put it in motion', and left it up to Mr King.
29 Mr Woolcock was also concerned that 15 December 2005 was approaching. Apparently after contact with and at the request of Mr King, he drafted a further variation to the contract on 12 December 2005 to the effect that a first instalment of the deposit of $90,000 would be paid within 7 days, and the balance of $50,000 would be paid on 31 March 2006. At the same time as he prepared that draft variation, Mr Woolcock also prepared a draft waiver of condition 15, to be signed on behalf of Red Valley. However, Mr King was unable to have Mr Anderson execute this variation and the waiver in December 2005. Although Mr Anderson returned from overseas shortly before Christmas, Mr King was still unable to contact him. Eventually, Mr King advised Mr Woolcock to contact Mr Anderson directly. On 30 December 2005 Mr Woolcock prepared a 3-page facsimile which was addressed to Mr Anderson. The cover sheet contained the following memorandum:
'Warren please find copies of variation and waiver forms for your signing. Also deposit of $90,000 is payable to Elders Trust account and post it to our office at Box 178 York. Thanks.'
The second page of the facsimile was the draft variation which Mr Woolcock had prepared on 12 December 2005, and the third page was the draft waiver. The facsimile was sent to Mr Anderson at about the end of December 2005. However, Mr Woolcock had no greater success than Mr King in prompting Mr Anderson to execute the variation and waiver. As it appeared to Mr Woolcock, Mr Anderson was simply unavailable.
30 As mentioned above, in December 2005 Mr Anderson still held on to the prospect that the Chippers might agree to be bought out of the remaining term of their lease. That he was, in his words, 'still attempting to sort out the lease', was a reason why he requested that there be a split in the deposit. He said that he was not going to commit himself for anything until 'any arrangements had been made about the lease'. From this point, his evidence in cross-examination before the primary judge was as follows:
'And you were deciding throughout that period from December up until 22 February 2006 whether or not you would proceed?‑‑‑Well, the whole - the whole situation was in limbo, because there was so many ifs and buts about the contract and about the lease and it was a over a period - the Christmas period and I didn't just apply myself to it.
But can I just get a short answer to my question, you were deciding whether or not to proceed over that period?‑‑‑Yes, you could say that.
And it wasn't until 22 February … that you did decide to proceed?‑‑‑That's correct.
And that was subject … to having seven days to complete your due diligence with regard to the lease term?‑‑‑Yes, that's correct.
So you didn't finally commit until 1 March, when you served the notice which waived that term?‑‑‑That's correct, yes.'
His Honour did not accept Mr Anderson's evidence that the reason he did nothing about the variation and waiver proposed in December 2005 was simply that he did not apply himself. His Honour found that, from about the first half of December until at least the beginning of February, Mr Anderson's failure to respond to Mr Woolcock was no accident. Mr Anderson's original idea of buying the farm as an additional resource for his sister was being frustrated by the Chippers' refusal to consider being bought out of the lease on Mr Anderson's terms. From the outset, Mr King had proposed, as a fall-back position, the sale of individual lots to third parties. Unless Mr Anderson could achieve either his preferred position, or Mr King's fall-back position, the purchase of the farm would have been pointless. His Honour considered that Mr Anderson's conscious objective at around this time was to avoid committing Red Valley to the purchase until one of those positions had been achieved.
31 His Honour rejected any suggestion that Red Valley's failure to pay the deposit, and its failure to come to terms with the variation and waiver which had been drafted by Mr Woolcock, was due to absent-mindedness, preoccupation or even incompetence. He found that these failures were the result of decisions consciously taken by Mr Anderson on Red Valley's behalf.
32 In early February 2006, certain events occurred which, it seems, renewed Red Valley's interest in executing the variation and waiver prepared by Mr Woolcock in December 2005. At the time, Mr Woolcock knew nothing of these developments. On 4 February 2006 Mr King received a written offer for so much of the farm as was contained on Lots 97 and 99. The receipt of these offers caused Mr Anderson to decide that he would proceed with the purchase of the farm. In cross-examination before the primary judge, Mr Anderson gave the following evidence:
'Now, the thing that caused you to commit was the fact that Mr King had told you that he had managed to on sale two or three blocks of Glen Oban Farm, wasn't it?‑‑‑Yes, that's correct.'
33 Mr King contacted Mr Woolcock with a view to arranging for the execution of the variation and waiver. The variation was executed by Mr Anderson on 22 February 2006, by David Smyth on 28 February 2006, and by Mr Avery on 1 March 2006. It contained the following term:
'The vendor agrees to the deposit of $140,000 being paid in two instalments being $90,000 within 7 days of this request and the balance of $50,000 to be paid on 31 May 2006.'
On 22 February 2006 Mr Anderson, on behalf of Red Valley, signed a form of waiver in the following terms:
'The purchaser requires 7 days from the signing of this waiver form to complete his due diligence with regard to the lease term and should he be satisfied with this this clause shall be waived.'
On 1 March 2006, Mr Anderson notified Mr Woolcock in writing that he was satisfied with his inquiries regarding the lease as shown in clause 15 of the contract, thereby waiving that condition. Red Valley paid the first deposit instalment on 9 March 2006.
34 The above events involving Red Valley and the non-performance of its contract with Mr Smyth were originally unknown to the Chippers. In January 2006, Mr Chipper happened upon Mr Woolcock in the street in York, and asked him if the contract with Red Valley had been finalised. Mr Woolcock said that the deposit was 'in the mail' and that Mr Anderson's trip to Russia was holding things up. Mr Chipper said that people were driving over the farm, and that he assumed that they were considering a purchase from Red Valley. He told Mr Woolcock that had to stop, but Mr Woolcock said that it was not his problem. Also in January 2006, or possibly in early February, and possibly also as a result of the conversation with Mr Woolcock, Mr Chipper spoke to David Smyth about the purchase of the farm by Red Valley. This was in the course of a conversation otherwise concerned with the negotiation of the rent for the 4-year extension of the sub-lease. David Smyth told Mr Chipper that he was still waiting on Red Valley 'to finish on concluding the deal'. According to Mrs Chipper's evidence before the primary judge, 'in or about February 2006' she asked Mr Woolcock whether Red Valley had paid the deposit under the contract, and Mr Woolcock said that the deposit had not been paid because Mr Anderson was overseas. According to Mrs Chipper, she told Mr Woolcock that she considered that, if the deposit had not been paid, 'there had to be a different contract'. Mr Woolcock disagreed with that, and said that the Red Valley contract had been 'finalised'.
35 At about this time, the Chippers were reconsidering their original refusal to pay $1,445,000 for the freehold of the farm. According to Mr Chipper, having found out that Red Valley had not paid the deposit under the contract, he 'presumed the contract was void'. He discussed the position with his wife, and they decided to make an offer to purchase the farm for the sum of $1,445,000, and otherwise on the same terms as contained in the Red Valley contract (as then known to them). Mr Chipper gave evidence that he called David Smyth on his mobile phone, and left a message for him to call back. Mr Chipper said that a couple of days later, David Smyth telephoned him, at which time he asked whether Red Valley had paid the deposit, and was told that it had not. He said that he and his wife could purchase the farm for the price being offered by Red Valley, and that David Smyth responded that he did not care who bought the farm - he just wanted it sold.
36 David Smyth, for his part, gave evidence before the primary judge that it was not until 12 March 2006 that Mr Chipper first told him that his circumstances had changed and that he could then afford to purchase the farm. According to his evidence, Mr Chipper referred to the new increased rent which they would be paying under the extended sub-lease, and said they might as well buy the farm if it was still available. David Smyth replied that he would need to check with Elders to see if the deposit had in fact been paid. He said that, on 13 March 2006, he rang Mr Woolcock, and was told that Red Valley had paid the first instalment of the deposit, $90,000, by the due date. He said that he then rang the Chippers, and spoke to Mrs Chipper, telling her that the farm had been sold and that 'it was the original contract to Red Valley … it was the same price … and the same people'. According to David Smyth, Mrs Chipper said that she and her husband were aware of the variation to the Red Valley contract and of the fact that the deposit had not been paid.
37 In the meantime, Mr King was continuing his efforts to sell the lots constituting the farm to third parties. As noted above, he received offers for two of those lots in the first week of February 2006. On 17 March and 21 March 2006, he also received written offers for Lot 203 and Lot 202 respectively. The four offers were all accepted by Red Valley on 21 March 2006. Each contract thus coming into existence was subject to settlement with Mr Smyth. In each case there was an acknowledgement by the purchaser that settlement would be without vacant possession because of 'a long term lease' and that the purchaser had previously received a copy of each of the lease and the sub-lease.
38 In late March 2006, Mrs Chipper asked Mr Woolcock for a copy of the then current contract of sale between Mr Smyth and Red Valley. She did not receive the contract, and again asked Mr Woolcock for a copy of it in early April 2006. She visited Mr Woolcock in his office in York on 10 April 2006, and was provided with a copy of the contract, together with a copy of the variation (but not of the waiver) executed on 1 March 2006.
39 The Chippers consulted Mr Stevenson about these developments. On 16 April 2006, he spoke to David Smyth. He said that he had been informed about the variation to the contract and, according to David Smyth, 'wanted to sort it out'. David Smyth said that he told Stevenson that he had been more than happy to sell the farm to the Chippers, but they had declined to purchase it. He said that Mr Stevenson replied that he had told the Chippers to pay the full amount for the farm, but that they had not wanted to do so.
40 Over the ensuing five weeks or thereabouts, the Chippers took legal advice. On 5 May 2006, they lodged a caveat over the farm to protect what was said to be an 'option to purchase and/or right of first refusal pursuant to lease agreement dated May 1 2002'. On 26 May 2006, the Chippers' solicitors wrote to Octra, with a copy to Mr Smyth, referring to the variation to the contract with Red Valley which had recently come to their clients' attention. They asserted that, in relation to the deposit, the contract had been renegotiated and was now 'substantially more favourable to the purchaser'. They said that the Chippers wished to exercise the 'right of pre-emption over the freehold of the property' on the terms of the contract, as varied. They sought an acknowledgement of the Chippers' right to purchase the freehold on the terms of the contract as varied, and asked that Red Valley be informed thereof. The solicitors added that they were preparing a form of contract for the purchase of the property, which would shortly be sent, together with the Chippers' cheque for the deposit of $140,000. A similar letter was sent to Red Valley.
41 On 30 May 2006, the Chippers' solicitors again wrote to Octra, enclosing a copy of a form of contract for the sale of land executed by the Chippers as purchasers, together with a trust account cheque in the sum of $140,000. The form of contract purported to be on the same terms and conditions as the contract made between Mr Smyth and Red Valley in September 2005 as amended on 1 March 2006, save that the deposit of $140,000 was payable forthwith. The form of contract also contained a waiver of condition 15 in the original contract.
42 On 13 July 2006 the Chippers commenced this proceeding against Octra, Mr Smyth and Red Valley to restrain the sale to Red Valley amongst other relief.
43 On 10 August 2006, the Chippers' bank, National Australia Bank Ltd, advised them in writing that they had unconditional approval for a $1.3 million finance package for the funding of the purchase of the farm, subject to their execution of the bank's standard security and loan documentation.