Trustees, Executors & Agency Co Ltd v Peters

[10]

No notice of exercise of the option was given before 1st February 1956, but shortly before that date, namely on 23rd January 1956, Chislett and Mullins being then the plaintiff and the defendant respectively in a partnership suit pending in the Supreme Court, Chislett, Mullins and the respondent executed a deed the operative provisions of which were as follows: "1. Subject to Clause 8 hereof the said Suit shall stand adjourned generally to a date to be fixed by Counsel and approved by the Court. 2. This Deed is without prejudice and without admissions of any kind and in particular that there is now a valid and exercisable option in an alleged Lease between the Plaintiff and the Defendant as Lessees and Peters as Lessor bearing date the Twenty-seventh day of April One thousand nine hundred and fifty-one. 3. Peters agrees that the time for exercising the alleged option if any and if now exercisable shall be and is hereby extended until the expiration of thirty days notice in writing from Peters to the Plaintiff and the Defendant or their respective Solicitors such notice not to be given prior to the First day of March One thousand nine hundred and fifty-six. 4. The Defendant agrees that the execution of this Agreement or its existence is not to be disclosed or used by him in any proceedings in which any party hereto or his assigns is a party or interested whether by pleading or offering the same in evidence in examination or cross-examination of any witness or otherwise. Peters is not to plead this Deed as alleging that the exercise of the Option after the date specified in the Lease is out of time. 5. It is agreed that if the Plaintiff is successful in the said suit on the issue that a partnership now exists between him and the defendant the said option if any shall be and is hereby agreed to be cancelled and void and not exercisable. 6. In the event of the Defendant being successful in the said Suit on the issue of dissolution of partnership raised by him then the Plaintiff agrees that he will for conformity enter into the exercise of the said Option which shall be without any admission by him of the validity thereof or of his right to join in such exercise immediately after the Defendant has indemnified him in the form and to the extent as shall be agreed upon between the parties to the Suit or shall be found and approved by the Master in Equity and the Plaintiff agrees that he will consent in the said Suit to an Order in the terms of this paragraph. 7. In the event of the Defendant being successful as aforesaid and the Plaintiff and Peters or either being a party to any proceedings by or against the Defendant or his assigns arising out of or connected with the aforesaid Option its exercise or enforcement the Defendant and his assigns will not plead or raise the question of laches acquiescence and delay on the part of the Plaintiff or Peters. This shall not apply to laches acquiescence or delay existing prior to the date hereof. 8. The Plaintiff agrees that he will consent to the Defendant making application to bring the Suit on for hearing as a matter of urgency and to consent to such application so as to enable its determination before the expiration of the time limited by any notice which may be given by Peters under Clause 3 hereof".

[17]

Another ground of defence was that there was to be discovered in the deed an implication that even if the respondent should not give a notice bringing the time for exercising the option to an end the time should nevertheless be limited to the period of the lease, or alternatively to the period during which the relation of landlord and tenant should subsist between the respondent on the one hand and Chislett and Mullins on the other. In my opinion such a limitation of time is not a necessary or proper implication in the deed. I do not rely so much upon the fact that the land to which the option related included land of which Chislett and Mullins were never lessees, for it was nevertheless as lessees of portion of the land included that they got the option, and it was as lessees of that portion that they dealt with the respondent over the matter of the extension. But in the deed, as in the memorandum of lease, the parties made express provision as to the duration of the option, and the provision they made had no reference or specific relation of any kind to the continuance of the lease or of the landlord and tenant relationship. The deed, moreover, was made at a time so close to the end of the five year term that the decision of the parties to let the lessor fix the duration of the option subject to a specified minimum period suggests a deliberate choice not to tie the option to the lease. Whatever probability there might have been in the opposite view if the deed had been executed in the circumstances of a different age, it is hard to see any probability about it when one remembers that if the parties had adverted at all to the duration of the lease, or of their landlord and tenant relationship, they would almost certainly have been struck by the need either to include or to exclude by express provision any period during which the lessees might be in enjoyment of statutory rights superadded to their contractual rights. Moreover, the pending suit was to stand adjourned generally (cl. 1), and the parties must have realized that it might well not come on for hearing until after the end of the lease and any period of holding over. Yet cls. 5, 6 and 8 show that the parties contemplated the option being still exercisable after the suit had been disposed of. It seems to me that everything points to their having intended their stipulation as to the duration of the option to be definitive.

[23]

Paragraph (b), it will be remembered, provides that the sale shall be on and subject to "such of the usual terms and conditions of sale of the Real Estate Institute of New South Wales as shall be applicable to sales of land of like tenure under the like circumstances". The first point to observe is that the reference is not to such of the terms and conditions of sale of the Real Estate Institute as are usual. The paragraph makes the assumption that the Real Estate Institute has some terms and conditions of sale which are its usual terms and conditions of sale. The assumption was true at the date when the memorandum of lease was signed, 14th May 1951, for there was then in existence a form of terms and conditions, which had been well known since 1920 as the form approved by the Institute. By the time the option was exercised, in 1956, the form had been superseded by another, issued in 1953. To my mind the application of par. (b) must be to one or other of these forms. There is room for argument, no doubt, as to what the parties meant. But it seems very unlikely that they were binding themselves in the dark by whatever terms and conditions might be evolved by the Institute before the exercise of the option. The more natural conclusion from the words used seems to me to be that the parties had in mind, when they put the option clause in the memorandum of lease, a set of terms and conditions which they knew as being the usual terms and conditions of the Institute, and that they intended to refer to those terms and conditions and no other. The use of the future tense, "shall be applicable", in the words describing which of those terms and conditions should apply, shows only, in my opinion, that the question of applicability was to be decided in relation to each of those terms and conditions by reference to the circumstances which should be found to exist at the time of the exercise of the option. Accordingly I am of opinion that the proper course is to turn to the Institute's form of 1920, delete any of its provisions which are inapplicable to a sale for cash of an estate in fee simple in land under the provisions of the Real Property Act, and treat the rest as the terms and conditions of the sale. It is true that when one looks at the form one finds that one clause, number 11, contains a blank. It reads: "The vendor shall be entitled to the rents and profits, and shall pay or bear all rates, taxes and outgoings up to the date of (c)______________from which date the Purchaser shall be entitled to or shall pay or bear the same respectively, and any necessary apportionment thereof shall be made and adjusted on completion". In the margin opposite the blank appear the words "Contract or Completion". The respondent contends that because the parties failed to agree whether the blank should be treated as filled up with the word "contract" or with the word "completion" it ought to be held that the exercise of the option did not bring about a concluded contract. I am unable to agree. The blank in cl. 11 shows that it is one of the usual terms and conditions of the Real Estate Institute that the benefit of the rents and profits and the burden of the rates, taxes and outgoings are to pass together. But it also shows that there is no usual term or condition of the Institute as to whether they shall pass on the date of contract or on the date of completion. This is not a case in which the parties have shown that they are agreed on one or other of those dates but have not enabled the Court to ascertain which date that is. It is simply a case in which the parties have adopted a form containing no provision as to the date, and have left the date to be supplied by the general principles of the law: see Carrodus v. Sharp [1] , Barsht v. Tagg [2] , Myers v. Witham [3] .

[27]

The respondent, being the owner of land at Forbes comprised in two Crown Grants (that registered in vol. 4227 fol. 128 and that registered in vol. 3317 fol. 142), by a lease dated 27th April 1951, leased part of this land to Mullins and Chislett for a term of five years from 14th May 1951, i.e. to expire on 14th May 1956. This document contained an option to purchase the whole of the land comprised in the two Crown Grants. It was in these terms: "The Lessees shall have the right at any time prior to the first day of February, 1956, by giving three months written notice to the lessor to that effect, to purchase the whole of the land and improvements comprised in the two said Crown Grants, for the sum of three thousand pounds (£3,000 0s. 0d.) in which case the following provisions shall apply: (a) With the notice of exercise of option the lessees shall pay a deposit of three hundred pounds (£300 0s. 0d.) and the balance shall be paid in cash on completion of sale which shall take place at the expiration of the said period of three months notice, but not before 1st July 1952. (b) Such sale shall be on and subject to such of the usual terms and conditions of sale of the Real Estate Institute of New South Wales as shall be applicable to sales of land of like tenure under like circumstances." At the time the lease was granted, Mullins and Chislett were partners and they carried on their partnership business upon the land so leased to them, but in 1955 Chislett commenced a suit against Mullins in which it was eventually determined by a decree dated 26th September 1956, that the partnership was dissolved as from 22nd October 1951. While this suit was pending, and seemingly because the differences between Mullins and Chislett made the immediate exercise of the option impossible, a deed was executed on 23rd January 1956, by Chislett (called the Plaintiff), Mullins (called the Defendant) and Peters. Clause 3 of this deed was as follows: "Peters agrees that the time for exercising the alleged option if any and if now exercisable shall be and is hereby extended until the expiration of thirty days notice in writing from Peters to the Plaintiff and the Defendant or their respective Solicitors such notice not to be given prior to the First day of March One thousand nine hundred and fifty-six." Peters never gave any notice pursuant to this clause but on 25th June 1956, he did give Mullins and Chislett a notice to quit expiring on 27th July 1956. This notice to quit was given pursuant to s. 62 (5) (g) (ii) of the Landlord and Tenant (Amendment) Act 1948-1954 on this ground, "that the premises - not being a dwelling house - are reasonably required for occupation by the lessor". As to this, Myers J. made the following finding: "The defendant has established that ground before me, and therefore it follows that on the expiration of the notice to quit any relationship of landlord and tenant which may have existed between the parties came to an end." This finding was, I think, justified by s. 67 of the Landlord and Tenant (Amendment) Act: Read v. Morris [1] . On 26th September 1956, Mullins and Chislett, describing themselves as lessees, gave the respondent a notice purporting to exercise the option and tendered a sum of £300. The respondent refused to treat this as an effective exercise of the option, and it was to enforce the contract of sale which the appellants claimed to have been constituted thereby that this suit for specific performance was brought. Before the suit was brought, the balance of purchase money, namely £2,700, was tendered to and rejected by the respondent.

[32]

Where the option granted is not to renew a lease but to buy the freehold, it has been said that it is "outside of the terms which regulate the relations between the landlord as landlord and the tenant as tenant" (per Peterson J. in In re Leeds & Batley Breweries and Bradbury's Lease; Bradbury v. Grimble & Co. [1] and "is not itself one of the incidents of a tenancy strictly speaking" (per Sargant L.J. in Sherwood v. Tucker [2] . In Rider v. Ford [3] Russell J. decided that an option in a lease to purchase the freehold without any limitation as to time exists so long as a relationship of landlord and tenant continues and could be exercised notwithstanding that the original lease had run out; in Shearer v. Wilding [4] , Harvey J. took a different view and decided that an option to purchase the freehold contained in a lease could be exercisable only during the currency of the lease. He said: "It is contended that in this respect the terms of the proviso are free from ambiguity, and that there is nothing to justify the Court in inferring that the option can only be exercised during the currency of the lease. In my opinion the proper conclusion is that the parties to the lease intended that the option should only be exercised during its currency. There is nothing to show that it was intended to give Dooley more than an option of purchase as incident to his lease. I think that from the reference to the subject-matter of the option as "the said demised premises" the Court is justified in holding that the subject-matter of the purchase which the parties had in contemplation was the land while still subject to the demise. It appears to me to be unreasonable to suppose that it was intended that Dooley should have an option of purchase which could be exercised at any time during his lifetime, when the parties were dealing at arms length and negotiating in the character of prospective lessor and lessee. I think that prima facie the intention was that the option should only be exercised during the currency of the lease" [5] . For the reason I have already given, it is not necessary in these proceedings to determine which of these views should be preferred, but I may perhaps say that my own inclination is towards the view taken by Harvey J. The important point for present purposes is that in both Shearer v. Wilding [4] and Rider v. Ford [3] , cases where there was no express limitation of the time in which an option to purchase given in a lease was to be exercised, a limit was inferred, in the former during the currency of the lease, and in the latter during the relationship of landlord and tenant. In each case, the implication of a time limit rested upon the commonsense principle that general words may be limited by the character of the instrument in which they appear and that a provision in a lease is prima facie concerned with the period of the lease or the period during which the relationship of landlord and tenant continues.

[36]

Next there is the question whether, in the circumstances, the giving of a notice exercising the option created a binding contract. Some of the difficulties are patent upon the face of the option clause; others are latent and appear only when it is attempted to apply the option clause to the facts. As I understand the option clause, the giving of a notice and the payment of £300 was intended to result in a sale of the land upon some terms and conditions, but unless those terms and conditions can be ascertained by the application of the provisions of the lease to the facts without any further agreement of the vendor and purchasers, no binding contract could result. The terms and conditions are described as some of "the usual terms and conditions of sale of the Real Estate Institute of New South Wales". This I regard as a reference to such terms and conditions comprised in one or more documents. The words used are wide enough to cover terms and conditions in existence at the time when the option comes to be exercised but perhaps the reference is more naturally to terms and conditions in existence at the time of the lease. With deference to the contrary view taken by the learned trial judge, I think the word "usual" means ordinary terms and conditions as distinct from special terms and conditions and is not the equivalent of "commonly used". The terms and conditions to be taken from the document ascertained as aforesaid are those "applicable to sales of land of like tenure under like circumstances". This requires some elucidation. From the lease itself, it appears that the land is land under the Real Property Act and what is being sold is an estate in fee simple. So the tenure is ascertained. The circumstances are that the sale is a cash sale - £300 payable as a deposit and £2,700 payable upon completion in three months (unless the notice was given before 1st April 1952, when the date of completion is fixed as 1st July 1952). I infer, moreover, that the fee simple is to be free from encumbrances, liens and interests other than such reservations as there may be in Crown Grants. This follows from (1) the description of the respondent's title in the beginning of the deed where Peters is described as "being registered as the proprietor of an estate in fee simple in the land hereinafter described, subject, however, to such encumbrances, liens, and interests, as are notified by memorandum underwritten or endorsed hereon"; (2) the memorandum of encumbrances at the end of the lease which is confined to "Reservations (if any), in relevant Crown Grants"; and (3) the description of the special matter of the sale as "the whole of the land and improvements comprised in the two said Crown Grants". I have not been able to determine from the option understood in its context as part of the lease whether it was the obligation of the purchaser to give vacant possession. The provisions to which I have just referred may well justify the conclusion that no third person could be left with a right to possession which would amount to an encumbrance, lien or interest, but whether it was intended that the vendor should give vacant possession is something which I do not think can be derived from the document itself. It follows that on this point a sale under like circumstances is one where no stipulation has been made in the contract itself about vacant possession.

Trustees, Executors & Agency Co Ltd v Peters - [1960] HCA 16 - HCA 1960 case summary — Zoe

At a glance

Court

Decision date

Before

Source

Judgment (46 paragraphs)

Parties

Cited By (3)