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[2025] NSWSC 859
General information, not legal advice.
Supreme Court of NSW
2025-08-07
Williams J
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Sun Property and Investment Pty Ltd v Elmasri [2025] NSWSC 859
Hearing dates: 1 August 2025
Date of orders: 7 August 2025
Decision date: 07 August 2025
Jurisdiction: Equity - Real Property List
Before: Williams J
Decision: See orders at [47].
Catchwords: LAND LAW — Option to purchase residential property — Where plaintiff (as prospective purchaser), defendants/cross-claimants (as owners and prospective vendors) and cross-defendants (as guarantors) entered into deed of put and call option — Where plaintiff paid a call option fee of $600,000 to the defendants in accordance with the deed — Where the deed stated that the put option was granted by the plaintiff to the defendants in consideration for the call option and a put option fee of $1.00 — Where deed provided that the call option fee would be retained “absolutely” by the defendant in the event that neither option was exercised — Where the proposed contract for sale of land attached to the deed did not include particulars of the purchase price — Where, prior to the expiry of the period in which it could exercise the call option, the plaintiff issued a notice of rescission of the deed, relying on s 66ZI of the Conveyancing Act 1919 (NSW) — Whether the statutory right of rescission under s 66ZI entitled the plaintiff to rescind the deed ab initio
Legislation Cited: Conveyancing Act 1919 (NSW), Pt 4 Divs 8, 9, ss 66ZE, 66ZI, 66ZK
Cases Cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41
BP7 Pty Ltd v Gavancorp Pty Ltd (2021) 104 NSWLR 359; [2021] NSWSC 265
Cockburn v GIO Finance Ltd (No. 2) (2001) 51 NSWLR 624; [2001] NSWCA 177
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Evolution Living Property Management Pty Ltd v CSP Australia Pty Ltd [2010] NSWSC 65
Payne v Timility [2021] NSWSC 986
Sieve Storm Pty Ltd as trustee for Affordable Property Trust v Murphy [2016] NSWSC 1800
Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47
United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618; [2009] NSWCA 177
Texts Cited: J D Heydon, Heydon on Contract (The General Part) (2019, Lawbook Co) at [3.480], [31.430].
Category: Principal judgment
Parties: Sun Property and Investment Pty Ltd (ACN 654 377 910) (Plaintiff)
David Elmasri (First Defendant/Cross-Claimant)
Nibal Elmasri (Second Defendant/Cross-Claimant)
Varinder Kaur (First Cross-Defendant)
Nitika Khanna (Second Cross-Defendant)
Representation: Counsel:
N Condylis (Plaintiff/First Cross-Defendant)
G M McGrath (First and Second Defendants/Cross-Claimants)
No appearance for Second Cross-Defendant
Solicitors:
Madison Marcus Law Firm (Plaintiff/First Cross-Defendant)
D'Agostino Solicitors (First and Second Defendants/Cross-Claimants)
No appearance for Second Cross-Defendant
File Number(s): 2024/380493
Publication restriction: N/A
These proceedings arise out of a Deed of Put and Call Option entered into on 23 December 2021 between Sun Property and Investment Pty Limited (the plaintiff), David Elmasri and Nibal Elmasri (the defendants and cross-claimants) and Varinder Kaur and Nitka Khanna (the cross-defendants) in respect of a residential property at 393-395 Fifteenth Avenue, Austral, New South Wales, being the land in Lot 365 in Deposited Plan XXXX (the Deed and the Property).
Pursuant to clause 2.1 of the Deed, the defendants (who are referred to in the Deed as “the Grantor”) granted to the plaintiff (referred to as “the Grantee”) an option to purchase the Property for the purchase price of $12,000,000 stipulated in the schedule to the Deed on the terms of the contract for sale of land attached to the Deed (the Call Option).
Clauses 3.1, 8.4 and 9 of the Deed, read together with the schedule, provided that the Call Option was exercisable by the plaintiff during the period commencing at 9:00am on the day occurring 43 days after the date of the Deed and expiring at 5:00pm on the date that is 24 months from the commencement date. Calculating the 24-month period as excluding the commencement date, the period within which the plaintiff was entitled to exercise the Call Option expired at 5:00pm on 5 February 2024.
Clause 2.1 of the Deed expressly stated that the Call Option was granted in consideration for payment of the Call Option Fee, which was a sum of $600,000. Clause 4.1 of the Deed required the plaintiff to pay the Call Option Fee to the defendant on or before signing the Deed, and provided that it was “irrevocably released” to the defendants immediately upon payment. Clause 4.2 required the Call Option Fee to paid to the defendants’ nominated account. Clauses 4.3 and 4.4 provided:
“4.3 Call Option Fee and the Deposit
The parties acknowledge that the Call Option Fee forms part of the Deposit payable under the Contract if the Grantee or its Nominee exercises the Call Option, or the Grantor exercises the Put Option in accordance with this Deed.
4.4. Release of Call Option Fee
4.4.1 The Grantor and the Grantee agree that in the event that the Call Option is not exercised by the Grantee or its Nominee and the Put Option is not exercised by the Grantor, then any amount paid being part of the Call Option Fee shall be forfeited to the Grantor absolutely.
4.4.2 If the Grantee breaches this Agreement in an essential respect, then the Call Option Fee is forfeited to the Grantor.”
Clause 2.2 of the Deed provided that, in consideration for the defendants granting the Call Option and the defendants paying a fee of $1.00, if the plaintiff did not exercise the Call Option, the plaintiff granted to the defendants an option to require the plaintiff to purchase the Property for the purchase price of $12,000,000 stipulated in the schedule to the Deed on the terms set out in the contract for sale of land annexed to the Deed (the Put Option and the Put Option Fee).
Clause 3.2, read together with the schedule to the Deed, provided that the Put Option was exercisable by the defendants during the period commencing at 9:00am on the day that is 7 days after the expiry of the period for exercise of the Call Option (being 12 February 2024) and expiring 14 days from that commencement date (being 26 February 2024).
As I have already mentioned, the schedule to the Option Deed identified the purchase price for the Property as $12,000,000. That purchase price was not specified in the contract for sale of land attached to the Deed as the contract that was to be entered into in the event that the plaintiff exercised the Call Option or the defendants exercised the Put Option.
Clauses 5 and 6 of the Deed set out the steps required to be taken by the plaintiff if it wished to exercise the Call Option, and by the defendants if they wished to exercise the Put Option, respectively. In each case, the required steps included that the party exercising the option was to serve on the other party the contract for sale of land attached to the Deed executed by that party. Clauses 7.1 and 7.2 relevantly provided that the contract for sale of land attached to the Deed would become binding on the parties if the plaintiff exercised the Call Option in accordance with clause 5 (clause 7.1) of if the defendants exercised the Put Option in accordance with clause 6 (clause 7.2).
By clause 13.3 of the Deed, the cross-defendants unconditionally and irrevocably guaranteed to the defendants the plaintiff’s compliance with its obligations in connection with the Deed, including obligations to pay money.
The cross-defendants also gave an indemnity in favour of the defendants in terms of clause 13.4 of the Deed, which relevantly provided:
“13.4.1 The Guarantor indemnifies the Grantor against any liability or loss arising from, and any costs it incurs if:
(a) the Grantee does not, or is unable to, perform an obligation it has (including an obligation to pay money) in accordance with this Deed of the Contract; or
(b) an obligation the Grantee would otherwise have under this Deed or the Contract (including an obligation to pay money) is found to be void, voidable or unenforceable; or
(c) an obligation the Guarantor would otherwise have under clause 13.3 is found to be void, voidable or unenforceable; or …”
Clause 13.8 of the Deed provided that the cross-defendants agreed to pay or reimburse the defendants on demand for the defendants’ costs in making, enforcing and doing anything in connection with clause 13, including legal costs on the higher of the indemnity basis and the solicitor and own client basis.
Clause 17.4 of the Deed provided:
“17.4 Severability
If any provision of this Deed offends any law applicable to it and is as a consequence illegal, invalid or unenforceable then:
(a) where the offending provision can be read down so as to give it a valid and enforceable operation of a partial nature it must be read down to the extent necessary to achieve that result; and
(b) in any other case the offending provision must be severed from this Deed and the remaining provisions of the Deed operate as if the severed provision had not been included.”
The plaintiff paid the Call Option Fee within the time required by clause 4.1 of the Deed.
The plaintiff did not exercise the Call Option.
On 23 January 2024, the plaintiff served on the defendant a document addressed to the defendants and dated 22 January 2024 entitled “Rescission Notice”.
The Rescission Notice stated:
“1. By deed of put and call option deed dated 23 December 2021 (Deed), David Elmasri and Nibal Elmasri (Grantor) granted Sun Property and Investment Pty Ltd or its nominee (Grantee) a call option to purchase the property located at 393-395 Fifteenth Avenue, Austral NSW 2179 (Property) on the terms contained in the Deed and the contract for sale annexed to the Deed (Contract).
2. The Grantor has failed to comply with s66ZI(2)(a) of the Conveyancing Act 1919 (Act) as the Contract fails to specify the purchase price.
3. By reason of the above, the required documents (as defined in s66ZI(2) of the Act) were not attached to the Deed, thereby entitling the Grantee to serve a written notice to the effect that it rescinds the Deed.
4. In addition, the Contract refers to a completion date of 42 days after the contract date whilst the Deed refers to a completion date of 90 days (which are conflicting with one another).
5. Take notice that the Grantee hereby rescinds the Deed in accordance with section 66ZI(1) of the Act.
6. As per section 66ZI(3)(b) of the Act, the Grantee is entitled to the whole of the deposit being repaid to it. The Grantee therefore requests that the Grantor repay the Call Option Fee in the sum of $600,000 to the Grantee within fourteen (14) days to the following account …”
Divisions 8 and 9 of Part 4 of the Conveyancing Act 1919 (NSW) contain provisions concerning the sale of residential property and options for the purchase of residential property. Section 66ZI, on which the plaintiff relied in serving the Rescission Notice, falls within Division 9.
In Division 8, s 66R requires a vendor who advertises residential property for sale or offers to sell or invites an offer to purchase residential property, or who offers to grant an option to purchase or invites an offer to take an option to purchase residential property, to make “the required documents” available for inspection by any prospective purchaser. The required documents are: (1) a copy of the proposed contract for sale (excluding particulars of the purchaser and purchase price); (2) the documents required by s 52A of the Act to be attached to the contract before execution by the purchaser; (3) in the case of an offer or invitation relating to an option, a copy of the proposed option document; and (4) in the case of an off-the-plan contract, a copy of the proposed disclosure statement.
Sections 66S and s 66U provide that, subject to s 66T, there is a cooling off period for every contract for the sale of residential property, during which the purchaser may rescind the contract by written notice to the vendor. Section 66T provides that there is no cooling period in specified circumstances including, relevantly, if the contract for sale is made in consequence of the exercise of an option to purchase the property (other than an option that is void under s 66ZG by reason of having been exercisable within 42 days after it was granted).
In Division 9, ss 66ZB to 66ZF provide for cooling off rights in respect of options to purchase residential property. Section 66ZH requires an option to purchase residential property to contain a prescribed form of statement relating to the cooling off period, in the absence of which either party may rescind the option by written notice to the other party.
As I have already mentioned, s 66ZQ provides that an option to purchase residential property is void under s 66ZG if it is exercisable within 42 days after the grant of the option.
Section 66ZI provides:
66ZI Annexure of proposed contract for sale of land
(1) If an option to purchase residential property is granted and the required documents are not attached to the option document at the time it is granted, either party may serve a written notice to the effect that the party rescinds the option or (if the option has been exercised) the contract resulting from the exercise of the option.
(2) For the purposes of this section, the required documents are—
(a) a copy of the proposed contract for the sale of the property (excluding particulars of the purchaser, but including particulars of the purchase price), and
(b) the documents required by section 52A to be attached to the contract before signature by the purchaser.
(3) On service of an effective notice of rescission under this section, section 66ZE or (if relevant) section 66V applies, except that—
(a) the purchaser is not liable to the forfeiture provided for under those sections, and
(b) those sections have effect as if they both provided that the whole of the consideration paid in relation to the option and the whole of any deposit paid in relation to the purchase of the property are payable to the purchaser.
(4) The notice may be served at any time during the period commencing when the option was granted and ending when the option is exercised or ceases to be exercisable or (if relevant) during the period commencing when the option is exercised and ending at 5 pm on the fifth business day after the day when the option is exercised.
(5) The notice is ineffective if served after completion of the resulting contract.
Section 66ZJ requires a notice of rescission under s 66ZI to be signed by the purchaser or the purchaser’s solicitor, and served on the vendor or the vendor’s solicitor.
The effect of s 66ZI(3), read together with s 66ZE, is that, on service of an effective notice of rescission in accordance with s 66ZI: (1) the option is taken to be rescinded ab initio; and (2) the whole of the consideration paid in relation to the option, and the whole of any deposit paid in relation to the purchase of the property, are payable to the purchaser.
Section 66ZK(4) provides that a provision of an option or any other agreement or arrangement is void if, but for s 66ZK, the provision would have the effect of excluding, modifying or restricting the operation of Division 9.
The plaintiff served the Rescission Notice on the defendants within the period in which the Call Option was exercisable. It was therefore served within the period permitted by s 66ZI(4) of the Conveyancing Act, assuming that the plaintiff had a right of rescission under s 66ZI in the circumstances.
The defendants have not refunded the Call Option Fee of $600,000 to the plaintiff.
None of the factual matters to which I have referred above are the subject of any dispute between the parties.
By its Amended Statement of Claim, the plaintiff claims: (1) a declaration that, by serving the Rescission Notice on 23 January 2024, the plaintiff validly rescinded the Deed ab initio, and that the plaintiff is entitled to payment of $600,000 (being the amount of the Call Option Fee paid) in accordance with ss 66ZE and 66ZI(3) of the Conveyancing Act; (2) a declaration that any provision of the Deed that has the effect of excluding, modifying or restricting the operation of ss 66ZE and 66ZI of the Conveyancing Act (including clause 4.4, clause 13.4, clause 13.8 and/or clause 17.4 of the Deed) is void and unenforceable by reason of s 66ZK(4) of that Act; and (3) an order requiring the defendants to pay the plaintiff the sum of $600,000 together with pre-judgment interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW).
The defendants contend that the Recission Notice clearly and unequivocally purported to terminate the Deed as a whole, encompassing the Call Option, the Put Option (which is not an “option to purchase residential property” within the meaning of s 66ZI), and the guarantee and indemnity. The defendants deny that the plaintiff is entitled to the relief sought on the basis that: (1) the Deed did not create an “option to purchase residential property” within the meaning of s 66ZI of the Conveyancing Act because, by providing for both the Call Option and the Put Option, the Deed created ; (2) if the Call Option created by the Deed was an within the meaning of s 66ZI, then s 66ZI was not enlivened in respect of the Call Option because, although the purchase price was not specified in the contract for sale of land attached to the Deed, the purchase price was specified in the Deed itself; and (3) s 66ZI conferred on the parties a right of rescission only in respect of the Call Option, and the Rescission Notice in respect of the Deed in its entirety was therefore not authorized by s 66ZI and was of no effect.
**********
Payne v Timility [2021] NSWSC 986 at [32] (Darke J) (“Payne v Timilty”).
See Evolution Living Property Management Pty Ltd v CSP Australia Pty Ltd [2010] NSWSC 65 (Barrett J, as his Honour then was); BP7 Pty Ltd v Gavancorp Pty Ltd (2021) 104 NSWLR 359; [2021] NSWSC 265 (Darke J) (“BP7”).
BP7 at [39]-[57] (Darke J).
As to the objective approach to the construction of commercial contracts, see Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ); Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [78]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16].
See United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618; [2009] NSWCA 177 at [90]-[95] (Allsop P, Ipp and Macfarlan JJA agreeing) and the authorities there referred to; J D Heydon, Heydon on Contract (The General Part) (2019, Lawbook Co) at [3.480].
[2010] NSWSC 65.
Applicable at the time the Deed was entered into, and subsequently replaced by the Conveyancing (Sale of Land) Regulation 2022.
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41 at [47] (Hayne, Heydon, Crennan and Kiefel JJ).
[2016] NSWSC 1800 at [8].
Payne v Timility at [31]-[32] (Darke J).
Cockburn v GIO Finance Ltd (No. 2) (2001) 51 NSWLR 624; [2001] NSWCA 177 at [37]-[46] (Mason P, Davies AJA agreeing); J D Heydon, Heydon on Contract (The General Part) (2019, Lawbook Co) at [31.480].
amendment on coversheet correcting date
Sun Property and Investment Pty Ltd
Elmasri [2025] NSWSC 859
(2009) 239 CLR 27
(2021) 104 NSWLR 359
(2001) 51 NSWLR 624
(2017) 261 CLR 544
(2014) 251 CLR 640
(2016) 260 CLR 85
(2009) 74 NSWLR 618
I reject the defendants’ submission that, by creating the Call Option and the Put Option, the Deed created “an effective agreement for the sale and purchase of the Property”. No agreement for sale and purchase of the Property would arise unless and until either the Call Option or the Put Option was exercised. [1] Moreover, as the plaintiff submitted, the courts have recognised that, where a deed creates both a call option and a put option, the call option is “an option to purchase residential property” to which the provisions of Divisions 8 and 9 of the Conveyancing Act apply. [2]
As the defendants submitted and the plaintiff accepted, neither the Put Option nor the guarantee and indemnity provided for by the Deed is an “option to purchase residential property” within the meaning of s 66ZI of the Conveyancing Act. [3] It follows that s 66ZI(1) conferred on the parties a right to rescind the Call Option if the required documents identified in s 66ZI(2) were not attached to the Deed at the time it was entered into. Contrary to the defendants’ submissions, I do not consider that the question whether the plaintiff exercised that right by serving the Rescission Notice falls to be determined solely on the basis of the words of that notice which did not state that the Call Option was rescinded, but stated that the Deed was rescinded. In my opinion, the question must be determined as a matter of substance, and those words in the Rescission Notice raise the question whether the Call Option was capable of being rescinded other than by rescinding the Deed as a whole. That depends on the application of s 66ZI, properly construed, to the Call Option created by the terms of the Deed. As the plaintiff submitted, the application of s 66ZI in this case is informed by whether the Call Option was severable from the other provisions of the Deed.
In my opinion, the Call Option is so connected with the Put Option, the guarantee and indemnity and the other provisions of the Deed as to form an indivisible whole. In particular, the Call Option forms part of the consideration for the grant of the Put Option. The only other consideration for the Put Option is the nominal consideration of the Put Option Fee of $1.00. The Call Option cannot be rescinded, leaving the balance of the Deed standing, without effectively creating a new bargain which is materially different from that which the parties agreed to enter into. I do not consider that the reasonable businessperson, reading the terms of the Deed as a whole, would have understood the parties to have intended that, if the Call Option were rescinded ab initio, so that the plaintiff is treated as never having been entitled to exercise it and the defendants are treated as never having been bound by it, the defendants would nevertheless be entitled to exercise the Put Option and the plaintiff would be bound to purchase the Property without having received the consideration of the Call Option. Nor would the reasonable businessperson have understood the parties to have intended that the cross-defendants would be bound to indemnify the defendants against any liability or loss arising from any non-performance by the plaintiff of obligations in respect of the Put Option if the plaintiff had not received the benefit of the Call Option. [4] For those reasons, the Call Option is not severable from the other provisions of the Deed. [5]
The defendants submitted that it is evident from the text and context of Divisions 8 and 9 of Part 4 of the Conveyancing Act, and from the second reading speech of the Bill by which those provisions were introduced, that the purpose of the provisions is to provide protection for both parties to option contracts, including by providing for greater transparency in requiring the “required documents” to be attached to the option document and by providing in s 66ZI for a right of rescission exercisable by either party if those documents are not attached. The defendants’ submissions did not identify any basis for attributing to the legislature an intention that a party entitled to exercise that right of rescission would thereafter be bound by provisions of the option document other than the call option provisions in circumstances where the call option provisions are so connected with the other provisions of the option document as to form an indivisible whole.
In support of their contention that any right of rescission under s 66ZI of the Conveyancing Act applied only to the Call Option, and did not entitle the plaintiff to give notice of rescission in respect of the Deed as a whole which would be taken to have rescinded the Deed ab initio, the defendants relied on the judgment of Barrett J, as his Honour then was, in Evolution Living Property Management Pty Ltd v CSP Australia Pty Ltd. [6] In that case, the parties had entered into a deed which conferred a call option on the plaintiff purchaser and a put option on the defendant vendor. The deed identified the vendor’s payment of the put option fee as the consideration for the purchaser granting the put option. Unlike the Deed in the present case, the call option granted by the vendor was not described as part of the consideration for the put option. The call option in Evolution Living was void by reason of s 66ZG(1) of the Conveyancing Act, which operated of its own force without any party taking any step to rescind the call option. The question that arose for determination by Barrett J was whether or not the put option, which had been created by the same deed as the call option, was void merely by reason of the operation of s 66ZG(1) on the call option. His Honour held that the put option was not void, construing the deed as entitling the vendor to exercise the put option within a stipulated time period if the call option had not earlier been exercised, irrespective of the reason why it had not been exercised.
Thus, the outcome in Evolution Living turned on the proper construction of the deed in that case, the terms of which were materially different from the Deed in the present case. As I have explained above, the Call Option in the present case is not only of temporal relevance to the timing of any exercise of the Put Option. The Call Option is the only consideration for the grant of the Put Option other than the nominal Put Option Fee of $1.00. To accept the defendants’ submission that s 66ZI did not permit the plaintiff to rescind the Call Option by rescinding the Deed as a whole in the present case would be to countenance severing part of the consideration for the Put Option, leaving the defendants with the benefit of the Put Option having provided only nominal consideration for it. In my opinion, the reasonable businessperson would have not understood the parties to have intended the parties’ rights and obligations under the Deed to continue to apply in that piecemeal fashion in the event that the Call Option were rescinded so that it was taken never to have been granted.
Clause 17.4 of the Deed, on which the defendants also relied, does not support any different conclusion. Contrary to the defendants’ submissions, the Call Option was not illegal, invalid or unenforceable as a consequence of offending a law applicable to it. No provision of Division 9 of the Conveyancing Act or the Conveyancing (Sale of Land) Regulation 20**17 [7] obliged the parties to include particulars of the purchase price in the contract attached to the Deed. The failure to include those particulars did not “offend” (that is, contravene) any law or taint the Call Option with illegality. As explained below, the consequence of that failure was that s 66ZI of the Conveyancing Act conferred on each of the parties a right to rescind the Call Option. Unless and until one of the parties exercised that right, the Call Option remained valid and enforceable. Clause 17.4 of the Deed does not, in terms, apply to the scenario in which a party exercised a right to give notice rescinding the Call Option, following which it was taken never to have been granted.
In summary, the right of rescission of the Call Option conferred on the parties by s 66ZI of the Conveyancing Act if the required documents identified in s 66ZI(2) were not attached to the Deed was exercisable by rescinding the Deed as a whole because the Call Option was not severable from the balance of the Deed and could therefore only be rescinded by rescinding the whole of the Deed.
I return to the question about whether or not the required documents identified in s 66ZI(2) were attached to the Deed at the time it was entered into. I reject the defendants’ submission that the required documents were attached to the Deed because the purchase price was specified in the schedule to the Deed and that this was sufficient to achieve what the defendants submitted was the legislative purpose of Division 9, being to achieve “transparency” between the parties to an option to purchase residential property. That submission erroneously relies on the suggested purpose of Division 9 as displacing the clear words of s 66ZI, which distinguish between the option document and the contract for sale to be attached to it and expressly require the particulars of the purchase price to be included in the attached contract. [8] I do not consider that construing s 66ZI in accordance with the clear meaning of the language of the section is contrary to any legislative intention discernible from the text of s 66ZI, from Division 9 of Part 4 of the Conveyancing Act, or from the extrinsic materials to which the defendants referred. Moreover, that construction is consistent with the manner in which Emmett JA interpreted s 66ZI in Sieve Storm Pty Ltd as trustee for Affordable Property Trust v Murphy. [9] As the defendants submitted, no contrary construction was advanced in that case. His Honour appears to have regarded it as obvious from the language of s 66ZI that the proposed contract for sale of land attached to an option deed does not meet the criteria for “required documents” in s 66ZI(2) unless the purchase price is specified in that proposed contract. I respectfully agree. I accept the defendants’ submissions that, in construing the terms of the Deed, the language of the attached contract may be taken into account. [10] However, it does not follow that the specification of the purchase price in the schedule to the Deed overcomes the consequences under s 66ZI of the parties’ failure to specify the purchase price in the attached contract itself.
Because the Rescission Notice was effective to rescind the Deed ab initio for the reasons I have explained above, the provisions of clause 4.4 did not apply and the Call Option Fee is not forfeited to the defendants pursuant to that clause. Even if I had held that the Call Option was severable from the balance of the Deed, that the Rescission Notice was effective to rescind the Call Option only and that clause 4.4 continued to apply following rescission of the Call Option, I would have held that s 66ZK(4) of the Conveyancing Act rendered clause 4.4 void because it would otherwise have the effect of excluding, modifying or restricting the operation of s 66ZI(3) in conjunction with s 66ZE which require the Call Option Fee to be repaid to the plaintiff.
A further consequence of the rescission of the Deed ab initio is that the defendants’ cross-claim for declaratory relief in respect of the effect of the indemnity provided for in clause 13.4.1 of the Deed, damages for alleged breach of that indemnity, and costs on the indemnity basis pursuant to clause 13.8 of the Deed, must be dismissed.
Even if I had held that the Call Option was severable from the balance of the Deed, that the Rescission Notice was effective to rescind the Call Option only and that clause 13.4.1 continued to apply following rescission of the Call Option, I would have upheld the contention of the plaintiff and the first cross-defendant that the statutory obligation of the defendants/cross-claimants under s 66ZI(3) and 66ZE of the Conveyancing Act to pay the amount of the Call Option Fee to the plaintiff was not a “liability or loss” to which clause 13.4.1 applied. The statutory obligation to pay to the purchaser the whole of the consideration that it paid for the option to purchase the residential property restores both parties to the option document to their pre-contractual positions following rescission of the option to purchase ab initio. It is not properly characterised as a loss suffered by one party or a liability incurred by one party to the option document. [11]
For all of those reasons, the plaintiff is entitled to the declarations sought to the effect that, by serving the Rescission Notice on 23 January 2024, it validly rescinded the Deed ab initio, and that it is entitled to payment of the Call Option Fee of $600,000 in accordance with ss 66ZE and 66ZI(3) of the Conveyancing Act. The plaintiff is also entitled to an order for payment of that sum, together with pre-judgment interest.
In circumstances where I have upheld the plaintiff’s primary contention that the Deed was rescinded ab initio, the further declaration sought by the plaintiff to the effect that clauses 4.4, 13.4, 13.8 and 17.4 of the Deed are void by reason of s 66ZK(4) of the Conveyancing Act lacks utility and I decline to make that declaration.
As I have already mentioned, the cross-claim must be dismissed.
No party indicated that they would wish to be heard separately in relation to the costs of the proceedings, and there is no reason why costs should not follow the event.
The declarations and orders of the Court are as follows:
DECLARE that the notice of rescission issued by the plaintiff to the defendants on 23 January 2024 was effective to rescind the Deed of Put and Call Option dated 23 December 2021 between the plaintiff (as grantee), the defendants/cross-claimants (as grantor) and the cross-defendants (as guarantors) (the Deed) pursuant to s 66ZI(1) and (2) of the Conveyancing Act 1919 (NSW), and that the Deed is therefore taken to have been rescinded ab initio pursuant to s 66ZI(3)(b) and s 66ZE(1) of that Act.
DECLARE that the Call Option Fee of $600,000 paid by the plaintiff to the defendants under the Deed is payable by the defendants to the plaintiff following the rescission of the Deed pursuant to s 66ZI(3) and s 66ZE of the Conveyancing Act 1919 (NSW).
ORDER that the defendants are to pay to the plaintiff the sum of $600,000 pursuant to s 66ZI(3) and s 66ZE of the Conveyancing Act 1919 (NSW).
ORDER that the defendants are to pay interest to the plaintiff on the sum in order 3 pursuant to s 100 of the Civil Procedure Act 2005 (NSW) calculated from 23 January 2024.
ORDER that the cross-claim is dismissed.
ORDER that the defendants/cross-claimants are to pay the costs of the plaintiff and the cross-defendants of these proceedings on the ordinary basis as agreed or assessed.