The sale notices
99 In my view Palmer J was correct to conclude that the Sale Notices were premature.
100 The consequence of the service of a Sale Notice was to require Peppers to elect which of two courses it would pursue. The election process required Peppers to evaluate the competing benefits of otherwise procuring the Lessee of the relevant Property to surrender the lease in return for compensation, an estimate of which was contained in the Sale Notice: cl 3.4(b). Alternatively, it had to determine whether it would consent to the sale on the basis of the purchaser taking the Property subject to a new lease to either Peppers or a Peppers Company on commercial terms or a Management Agreement with Peppers or a Peppers Company on terms satisfactory to Peppers for a term equivalent to the remaining term (including any option period) of the Lease in respect of the Property. It had fourteen days to give the Election Notice notifying the Manager of its decision: cl 3.4(c). If it failed to give that Notice within fourteen days it was deemed to have elected to procure a surrender of the Lease: cl 3.4(f).
101 Once it elected in fact or was deemed to have elected to procure a surrender of the lease Peppers was required to procure that surrender in fact. That step had to take place on the completion of the sale of the relevant property which could not be earlier than ninety days after the date of the election or deemed election: cl 3.5.
102 Although the Master Agreement did not say so in terms, the consequence of Peppers electing or being deemed to have elected to surrender the relevant lease was to leave the Trustee and the Manager free to enter into the agreement or arrangement to sell the relevant estate or interest in the Property.
103 The focus of cl 3.3 is the disposition of "any estate or interest in a property". That language is used in relation to the subject of the agreement or arrangement the Trustee and Manager are precluded from entering until Peppers has made its election decision: cl 3.4(a). It is only when the Trustee and the Manager wish to enter into such an agreement that they are required first to obtain Peppers' decision in relation to its election: cl 3.4(a).
104 The words "any estate or interest in a property" identify the option of which Peppers has the benefit for the purposes of cl 3.3. It is the same "estate or interest in a property" which is to be the subject of the agreement referred to in cl 3.4(a). The phrase used is one of precision. That that is so is emphasised both by the reference in cl 3.3 to the fact that the Trustee "wishes … to sell" and the reference in cl 3.4(a) to the prohibition on the Trustee and the Manager from entering into any "agreement or arrangement to sell" the relevant estate or interest.
105 Thus, in my view, the language of clauses 3.3 and 3.4 make it plain that the clauses are, at all times, talking about one estate or interest in a property. It is that estate or interest which the Trustee and Manager wish to enter into an agreement or arrangement to sell which must be notified to Peppers to enable it to determine what course it will take to exercise its election option.
106 It is clear from cl 3.4 that the subject of the Sale Notice must be the sale or interest in a Property which is to be the subject of the (temporarily precluded) agreement or arrangement under cl 3.4(a)).
107 In my view, Palmer J was correct to conclude that before HCP was entitled to give a Sale Notice, it must have more than a "nebulous wish" to sell an unspecified estate or interest in a Property upon terms not yet discussed with a proposed purchaser let alone agreed in principle.
108 HCP submitted that the "triggering event to Peppers right of election is HCP's wish to sell any estate or interest in a property". It referred to the Macquarie Dictionary definition of "wish" as meaning "to want; desire; long for" and "a distinct mental inclination towards the doing, obtaining, attaining etc of something; a desire, felt or expressed".
109 HCP's submissions placed undue weight on the dictionary meaning of "wish" without setting that word in context. Placed in the context of the agreement as a whole it is, in my view, plain that the "wish" to which cl 3.3 refers is the wish to enter into the agreement or arrangement in cl 3.4(a). In other words the clauses contemplate that the Trustee and the Manager have identified the estate or interest in the property they wish to sell, have negotiated a conditional sale with the prospective purchaser and have triggered the giving of the Sale Notice in compliance with cl 3.4 to enable Peppers to notify which of the two courses available to it under cl 3.3 it proposes to pursue. The fact that the Master Agreement contemplates a high level of agreement at least as to the subject of the sale as between the Trustee and the Manager and the prospective purchaser is borne out of the fact that cl 3.4(a) provides, parenthetically, that the Trustee and the Manager may enter into an agreement or arrangement to sell an estate or interest in a Property prior to obtaining Peppers' election under cl 3.3 if that agreement or arrangement is subject to a condition precedent that all of the requirements of cl 3.4 are duly complied with.
110 The cases upon which HCP relied do not assist. As Peppers submitted, in both Sterns Trading Pty Limited v Shteinman and Rummery v Dorsman, the terms of sale (meaning, as I understand Peppers' submission in this respect, the subject of the sale) were certain. All that was necessary for the right of first refusal to arise was for the lessor to form a desire to sell the identified property.
111 It might be noted in any event that in Sterns Trading Pty Limited v Shteinman, Kearney J (at 57,791 - 57,792) expressed some doubt as to whether the relevant "desire" to sell was sufficiently evidenced by an oral understanding but had no doubt the relevant "desire" existed at the time a formal option to purchase the subject property was granted to a third party.
112 Handley JA's remarks in Rummery v Dorsman that the offer to a prospective purchaser "may be an informal one" turned upon the terms of the clause his Honour was considering. In Rummery v Dorsman the landlord's obligation as to make the "first offer" to the lessee. The clause provided that that first offer must be "upon such terms and conditions as offered to a prospective purchaser". Handley JA observed (BC9301938 at 16) that the "offer" to the prospective purchaser could not "be a true offer because then the offer to the tenant would not be the 'first offer'". It was in such circumstances that his Honour concluded that "the offer to the prospective purchaser may be an informal one".
113 The requirement that the Trustee had identified the estate or interest in a Property it wished to sell before a Sale Notice could be given is also borne out by the fact that if after Peppers gave an Election Notice it did not within ninety days thereafter give a Notice of Agreement to the Trustee, it was, again, deemed to have elected to surrender the lease: cl 3.4(f). As Peppers submitted, if negotiations as between HCP and, in this instance, Toga, were inchoate, that might contribute to uncertainty in the negotiations between Peppers and Toga. The ninety day negotiating period prescribed by cl 3.4(e) was non extendable. The effect, therefore, Peppers submitted, might be that the negotiating period expired before negotiations between Toga and HCP had advanced to the point that the terms of any proposed sale had acquired sufficient certainty for Toga in turn to be able to negotiate and reach agreement with Peppers for a new lease or a new Management Agreement. In that event, notwithstanding that the failure to reach agreement could not be laid at Peppers' feet, it would nevertheless be deemed to have elected to accept compensation in accordance with cl 3.3(a). Peppers submitted, in effect, that the parties could not have intended that the Master Agreement should operate in such an unreasonable manner. I would also accept this submission.
114 Palmer J also held that the Sale Notice was premature because, in his Honour's view, in the inchoate state of HCP's negotiations with Toga, it could not properly "estimate" the compensation payable under cl 3.3(a). HCP strongly challenged that conclusion, submitting that there had been no issue before Palmer J that the compensation estimated in the Sale Notice was genuine. I do not need to consider this aspect of his Honour's reasons as, in my view, the conclusion that the Sale Notices were premature can be sustained by reference to the matters which I have already explained.