Hobhouse v Mount Gilead Pty Ltd

The parties to these proceedings are parties to a Deed of Settlement and Release made on 22 February 2021 (the Deed). The Deed resolved proceedings in this Court between members of the Macarthur-Onslow family, to whom I shall refer without any disrespect by their given names. Although all necessary parties had been joined in these proceedings, the active protagonists were the present plaintiff (Katrina) and her brother, the present third defendant (Lee).

The arrangements under the Deed are complex and involve significant property assets, conferring a number of options to purchase different properties on each of Katrina and Lee. As part of those arrangements, Lee was given a 60 day option to purchase an apartment in Yarranabbe Road, Darling Point, New South Wales. In the Deed (and in what follows in this judgment) the apartment was referred to as the Yarranabbe Road Apartment and the option as Lee’s Yarranabbe Road First Call Option. The 60 days ran from the date of the Deed’s execution.

The combined effect of cll 5.6 and 8.1(d) of the Deed was that the purchase price for the Yarranabbe Road Apartment under Lee’s Yarranabbe Road First Call Option was the midpoint of two valuations to be obtained “promptly following the execution of the Deed”. Clause 12.2(d) required any option conferred by the Deed to be exercised by the giving of a written notice accompanied by an executed contract in a specified form, together with a cheque for the 10% deposit.

The present dispute has arisen because Lee’s Yarranabbe Road First Call Option was to expire on 23 April 2021. He purported to exercise it by a notice given on 22 April 2021 in circumstances where only one of the two valuations had been obtained. The issue before the Court was whether, on the proper construction of the Deed, Lee’s Yarranabbe Road First Call Option could be exercised before the purchase price had been determined in accordance with the Deed.

It was contended for Katrina that for several reasons, but most potently because of the requirement under cl 12.2(d) to provide a completed contract and the deposit cheque (both of which would require the purchase price to be known at the time of exercise), Lee’s Yarranabbe Road First Call Option could not be validly exercised in accordance with the Deed unless the purchase price had been determined in accordance with cl 8.1(d) at the time of exercise.

Katrina’s Summons sought a declaration that Lee had not validly exercised Lee’s Yarranabbe Road First Call Option and consequential relief. The matter was heard urgently because the Deed gave Katrina a 60 day option to purchase the Yarranabbe Road Apartment if Lee had not exercised Lee’s Yarranabbe Road First Call Option. A second valuation has now been obtained and Katrina’s option, which she wishes to exercise if Lee has not validly exercised Lee’s Yarranabbe Road First Call Option, expires on 22 June 2021. Katrina’s interests were represented by Mr B Coles of Queen’s Counsel with Mr M T Keene of Counsel. Lee’s interests were represented by Mr D B Studdy of Senior Counsel with Mr J A Brezniak of Counsel.

The Court has concluded that Lee validly exercised Lee’s Yarranabbe Road First Call Option because on its proper construction (determined by reference to a number of background and textual considerations) the Deed does not require the purchase price to have been determined at the time the option was exercised. However, when that option was exercised without the purchase price being known, the result of the plain language of cl 12.2(d) was to create an unworkable situation. The Court therefore has also accepted that a term should be implied into cl 12.2(d) to the effect that an executed contract and cheque for the deposit were only required for the valid exercise of an option under the Deed (in addition to a written notice exercising the option) if, at the time of the option’s exercise, the purchase price had been determined.

Setting aside the question of what matters the Court can take into account by way of background circumstances (see further at [42] below), and given the Court’s conclusions, there are only three material facts, none of which were in dispute.

First, the parties entered into the Deed. To facilitate the readability of these reasons, all of the terms of the Deed which the Court considers to be relevant are set out in full as an annexure to these reasons.

Second, on 22 April 2021, Lee purported to exercise Lee’s Yarranabbe Road First Call Option by serving this notice (the Notice):

Attached to the Notice were:

The form of the Notice and the authority to Mr Rogers (the Accountant) had obviously been drawn to allow for the fact that, as at the date of the Notice, only one valuation of the Yarranabbe Road Apartment had been obtained. This was for $4,250,000 to $4,500,000. Lee’s cheque for the deposit was for 10% of the midpoint of that valuation.

Before turning to the parties’ specific submissions, it is convenient to set out some basic legal principles about which there was no disagreement.

A convenient and oft-cited summary of the Court’s role in construing a contract is provided by the decision of the plurality in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7:

Next, it is fundamental that the Court must give primacy to the contractual text. In Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295, the Court of Appeal decided that ambiguity was not a precondition to the admissibility of evidence of surrounding circumstances known to both parties which may be relevant of the construction of a contract. In the leading judgment of Leeming JA (with whom Gleeson and White JJA agreed), his Honour said this about the primacy of the text, in a passage which I respectfully adopt and will apply:

Insofar as options are concerned, the valid exercise of an option requires strict compliance with the contractual terms governing that option: Tonitto v Bassal (1992) 28 NSWLR 564 at 474-475 (per Sheller JA; Handley JA and Hope AJA agreeing).

On the issue of the implication of a term, the well-known test in BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 180 CLR 226 (BP Refinery) at 282-283 is applicable. Any implied term must satisfy these conditions:

On the question of whether a term is necessary to give business efficacy, I respectfully adopt and apply this summary in J D Heydon, Heydon on Contract (Thomson Reuters, 2019) (citations omitted):

Without disrespect to the careful way in which the parties’ submissions were put, they can be summarised as follows.

Mr Coles QC submitted for Katrina that Lee had not validly exercised Lee’s Yarranabbe Road First Call Option.

He contended that cll 12.2(a) and (b) provide that the grant of an option is an irrevocable offer at the price “as determined in this deed”. He submitted that on the natural meaning of the words, the determination of the price in accordance with cl 8.1(d) is a condition precedent to the grant of Lee’s Yarranabbe Road First Call Option. If the 60 day period elapses before the price is determined, an offer has not been made and Lee’s Yarranabbe Road First Call Option is not available for exercise. A purported exercise of Lee’s Yarranabbe Road First Call Option before the price is determined would at its highest be a counteroffer to purchase at a yet-to-be-determined price: Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122 at 123. Mr Coles QC submitted that the parties had made provision in cl 8.1(e) for the event in which the price was not determined during either option period for the Yarranabbe Road Apartment.

He submitted that only by performing the conditions prescribed in cl 12.2(d), which required the price to have been determined, could Lee exercise Lee’s Yarranabbe Road First Call Option. He contended that cll 12.2.(d), (e) and (f) indicate that a valid exercise of Lee’s Yarranabbe Road First Call Option must result in complete and immediately enforceable contractual relations.

Mr Coles QC contended that his construction was consistent with the language of the Deed and its objects and purposes, which in his submission included speed and certainty.

In reply, Mr Studdy SC submitted for Lee that the words “the price as determined in this deed” in cl 12.2(a) simply refer to the mechanism in cl 8.1(d), and do not make the mechanism in cl 8.1(d) a condition precedent to the grant or exercise of Lee’s Yarranabbe Road First Call Option.

Mr Studdy SC submitted that Katrina’s construction would be contrary to the structure and purpose of the Deed, which in his submission were to grant Lee and Katrina symmetrical rights — equivalent and successive option periods — over the Yarranabbe Road Apartment and the Homestead Lot.

He contended that cll 12.2(a) and 5.6 provide for a contract to come into existence on the exercise of Lee’s Yarranabbe Road First Call Option with the price to be determined later by the mechanism in cl 8.1(d): Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604-605; [1982] HCA 53 (Booker Industries). He submitted that this is not precluded by cl 12.2.

Finally, Mr Studdy SC submitted that cl 8.1(e) provided for the event in which neither party chose to exercise their option to purchase the Yarranabbe Road Apartment, and not for the event in which the price failed to be determined during either option period.

Mr Studdy SC’s primary submission was that Lee had validly exercised Lee’s Yarranabbe Road First Call Option. He advanced two arguments in support of this submission.

Mr Studdy SC first submitted that on its proper construction, Lee’s Yarranabbe Road First Call Option was exercisable before or after the Accountant determined the price in accordance with the steps in cl 8.1(d). If the price had been determined before Lee’s Yarranabbe Road First Call Option was exercised, strict compliance with cl 12.2(d) was required. If the price had not been determined, part or all of cl 12.2(d) was inapplicable and exercising the option required only communication of absolute and unqualified acceptance of the offer during the 60 day period: Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 195; [1957] HCA 90; Jong v Advanced Dental Services Pty Ltd [2019] NSWCA 318 at [47]-[49]. Mr Studdy SC submitted that the Notice complied with this requirement.

He contended that being able to exercise Lee’s Yarranabbe Road First Call Option without knowing the price was not a commercially odd result in circumstances where Lee is familiar with and has a right of occupancy over the Yarranabbe Road Apartment. In support of his argument that cl 12.2(d) would be inapplicable when the price had not been determined, Mr Studdy SC drew to attention that cl 12.2(d) applies to all options under the Deed, including options granted at specified prices.

Mr Studdy SC submitted that requiring strict compliance with cl 12.2(d) would remove the right that the Deed intended to confer on Lee where the Accountant was unable complete the tasks required by cl 8.1(d) during the 60 day period. He submitted that the Court should prefer an interpretation which avoids that outcome: Bowman v Durham Holdings Pty Ltd (1973) 131 CLR 8; [1973] HCA 55. He again drew to attention the intended symmetry between Lee and Katrina’s call options over the Yarranabbe Road Apartment and the Homestead Lot.

Mr Coles QC submitted in reply that there is no textual basis for treating cl 12.2(d) as inapplicable where the price has not been determined during Lee’s Yarranabbe Road First Call Option period: Metropolitan Gas Company v Federated Gas Employees’ Industrial Union (1925) 35 CLR 449 at 455 (Isaacs and Rich JJ). He contended that the Lee’s construction argument would impermissibly contradict the express language of the Deed: Arnold v Britton [2015] AC 1619 at [76]; Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 at [27]-[38] (Basten JA).

In the alternative, Mr Studdy SC submitted that a term should be implied into the Deed to the effect that Lee’s Yarranabbe Road First Call Option was exercisable before the price had been determined by giving written notice only, and that in accordance with this implied term, Lee had validly exercised the option. I have set out the implied term contended for by Mr Studdy SC in [71] below.

He submitted that the implied term would give effect to the parties’ presumed intention in circumstances where the parties failed to consider and make explicit provision for the particular eventuality: Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 346; [1982] HCA 24 (Mason J).

In reply, Mr Coles QC submitted that the implied term would be inconsistent with cl 12 in its entirety. He also observed that even where an implied term does not directly conflict with an express term, it still will not be implied if the parties contemplated the issue and deliberately omitted it, or otherwise intended to exhaustively set out their obligations in the terms of the Deed: Darin Nominees Pty Ltd v Franklin’s Selfserve Pty Ltd [1999] NSWCA 209 at [35]; Biki v Chessells [2004] VSCA 70 at [25]-[26]. He submitted that cll 14, 18-21 demonstrate that the provisions of the Deed were intended to be an exhaustive code. He further contended that the parties had contemplated the timing of the valuations, because the option scheme in cl 9.1 for other properties under the Deed prescribes that those option periods commence at the time of receipt of those valuations.

In response to a question from me, Mr Coles QC submitted that even if the term were implied, Lee would still not have validly exercised Lee’s Yarranabbe Road First Call Option because of the reasons identified in [21] and [22] above.

If the Court did not accept that Lee had validly exercised Lee’s Yarranabbe Road First Call Option, Mr Studdy SC submitted that Lee should be granted relief against forfeiture. Mr Studdy SC submitted that relief against forfeiture is available for an option: Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd [2000] NSWSC 459 at [20]-[22] (Young J). He acknowledged that the contrary view has been expressed: for example, in In the matter of Qatar No 2 and Qatar No 3 Pty Ltd [2015] NSWSC 2088 (Qatar) at [26]-[27] (Brereton J).

He submitted that an option confers equitable rights and interests insofar as the grantee can obtain relief in equity against the grantor: Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd [2017] NSWCA 99 at [95]-[109] (Ward JA; McColl and Gleeson JJA agreeing); Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2018] NSWCA 114 at [49] and [56] (Bathurst CJ; Beazley P and Payne JA agreeing).

He submitted that relief against forfeiture should be granted, relying on the special head of accident for the Accountant’s failure to obtain both valuations: In the matter of Prismex Technologies Pty Ltd; Taggert v Matyear [2013] NSWSC 292 at [52]-[59] (Brereton J); Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [25], [58], [66]-[67]; RHG Mortgage Securities v BNY Trust Co [2009] NSWSC 1432 at [110]-[112], [138] (McDougall J).

Mr Coles QC submitted in reply that if the Court finds that Lee’s Yarranabbe Road First Call Option was not validly exercised, relief against forfeiture cannot be granted because an option only gives rise to an equitable interest in property once the option is exercised: Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at 76; [1974] HCA 49 (Gibb J); Helby v Matthews [1985] AC 471 at 478-80; West London Syndicate v Inland Revenue Commissioners [1898] 1 QB 226 at 238. Until its exercise, an option is a contingent equitable interest, which is not a proprietary interest that can be specifically enforced: Qatar at [26].

In [14] and [15] above I referred to the legal principles in relation to the relevance of surrounding circumstances in construing a contract. A contract does not come into existence in a vacuum. However, in this case, the parties provided the Court with no evidence of what any relevant surrounding circumstances might be. Nevertheless, some fundamental surrounding circumstances (and all of what might be referred to as such in what follows in these reasons) can be divined from the terms of the Deed itself. The parties did not wish to be heard against this approach.

The fundamental surrounding circumstances are these. The Deed settles a complex family dispute involving large sums of money and valuable property interests between Lee and Katrina, who are brother and sister. Approaching the scheme evidenced by the Deed with a very broad brush, it is apparent that the parties have agreed upon the settlement of their legal dispute on the basis that Lendlease Corporation Limited (Lendlease) is obliged to make a very substantial payment towards the purchase of certain land adjacent to what the Deed refers to as the Homestead Lot. The commercial purpose of the Deed, apparent from its provisions, is to give Lee and Katrina the opportunity to purchase various properties with the benefit of the payment from Lendlease, made available to them through trusts and corporate structures which it is not necessary for me to describe in any detail.

Against that overall background, it is necessary to identify the constructional choice which these proceedings invite the Court to make. That choice involves the interaction of cll 5.6 and 8.1(d):

The precise issue of construction concerns the words “at the midpoint market value as set out in clause 8.1(d)” in cl 5.6.

The parties accepted that the words “as set out” were literally inapt because cl 8.1(d) did not set out the midpoint market value, but rather set out how that value was to be determined. They further accepted that, in those circumstances, “as set out in” was equivalent to saying “as determined in accordance with” cl 8.1(d). That approach is supported by the Deed itself, which in cl 5.7 confers a subsequent option on Katrina to purchase the Yarranabbe Road Apartment “at the price determined under clause 5.6”, which in turn refers back to cl 8.1(d).

The constructional choice is temporal. Mr Coles QC submitted that on its proper construction “as set out in” should be understood to mean “as has been determined in accordance with” cl 8.1(d) (my emphasis). In other words, Lee’s Yarranabbe Road First Call Option could only be validly exercised once the midpoint market value had been determined in accordance with cl 8.1(d).

On the other hand, Mr Studdy SC submitted that the proper construction of those words in cl 5.6 did not have a temporal element, and did no more than point to the method by which the midpoint market value was to be ascertained. In other words, Lee’s Yarranabbe Road First Call Option could be exercised at any time within the 60 days for which the Deed expressed it to be open for exercise, irrespective of whether at the time it was exercised the midpoint market value had been determined.

In support of his position, Mr Coles QC submitted that to the extent it could be said that there was ambiguity in the words “as set out in clause 8.1(d)”, that ambiguity was resolved by cl 12.2 of the Deed, and in particular cl 12.2(d), which provided (emphasis added):

Mr Coles QC also submitted that one could not have “an irrevocable offer” of the kind referred to in cl 12.2(b) because for there to be “a binding agreement’ of the kind referred to in that sub-clause, the exercise price of the relevant option had to be known.

In my respectful view, the terms of cl 12.2(d) would be the determinative factor in favour of Mr Coles QC’s construction of cl 8.1(d) in the absence of textual and circumstantial considerations sufficient to overcome that conclusion. The Court has concluded that there are seven such matters which point conclusively against the construction propounded by Mr Coles QC and in favour of the construction of cl 5.6 put to the Court by Mr Studdy SC. I will deal with each of these in turn.

First, there is what might be referred to as the overall scheme of the Deed. As is to be expected in a document recording the settlement of complex commercial litigation, it reflects a careful balancing of Katrina and Lee’s interests and evinces a primary commercial purpose of maintaining symmetry or equality between their respective positions.

That balance is acutely present when one considers the Deed’s provisions in relation to their respective rights to purchase the Yarranabbe Road Apartment and the Homestead Lot.

The combined effect of cll 3.8, 3.10 and 3.11 gives Katrina 60 days from the date of the Deed to purchase the Homestead Lot (and which pending the exercise of various rights under the Deed, Katrina is given a right to occupy under cl 3.1). If she does not exercise her call option to purchase the Homestead Lot at a price of $40,000,000 within 60 days from the date of the Deed, cl 3.11 gives Lee an option for the next 60 days to purchase the Homestead Lot at that price.

Clause 3.19 provides for further equality between the positions of Katrina and Lee in relation to the Homestead Lot if neither of them exercises their respective options to purchase the Homestead Lot.

At the same time as the options in relation to the Homestead Lot are running, cl 5.6 gives Lee 60 days from the date of the Deed to purchase the Yarranabbe Road Apartment (which is the property the Deed gives as Lee’s address and from which cl 5.5 permits Katrina to remove her personal belongings). If Lee does not exercise Lee’s Yarranabbe Road First Call Option within 60 days from the date of the Deed, cl 5.7 gives Katrina a corresponding call option to purchase the Yarranabbe Road Apartment for the next 60 days.

As I develop in [62] below, it would be contrary to the symmetry or equality demonstrated in the drafting of the provisions in relation to the respective options to purchase the Homestead Lot and the Yarranabbe Road Apartment to interpret cl 5.6 in a way in which means that Lee would have fewer than 60 days in which to exercise Lee’s Yarranabbe Road First Call Option.

The second contextual matter is that insofar as Lee and Katrina make any acquisitions pursuant to the Deed, it appears that those purchases are to be funded by vendor finance, set offs and in specie distributions, all intended to minimise (if not eliminate) the amount to be actually paid by Lee and Katrina, as it were, out of their own cash resources. As I have already noted, it appears that the funds are substantially to come from Lendlease’s payment for land identified in the Deed. Provisions of the kind to which I have just referred also include further provision for the equal treatment of Lee and Katrina. The matters referred to in this paragraph appear from cll 3.12, 4.3, 4.4, 4.5, 8.1(a), 8.1(g), 9.1(f) and 9.1(g), noting especially that cll 8.1(a) and (g) relate to the circumstance of either Lee or Katrina purchasing the Yarranabbe Road Apartment in accordance with their respective call options.

The presence of all of these provisions points to the conclusion that it is not essential to know the midpoint market value for the Yarranabbe Road Apartment at the time of the exercise of either Lee’s Yarranabbe Road First Call Option or Katrina’s option in relation to the Yarranabee Road Apartment because the actual settlement of funds is to occur through a much more complicated process that clearly would take longer than the 42 day settlement period provided for in the standard contract for sale of land to be entered into upon exercise, for example, of Lee’s Yarranabbe Road First Call Option.

The third matter arising from the text of the Deed is that it makes express provision in relation to three types of option or first right to purchase:

The fact that the parties have established three different regimes for different call options or first rights to purchase supports the conclusion that, insofar as the call options for the Yarranabbe Road Apartment do not specify a purchase price in the Deed and do not have the option period connected to when the purchase price has been determined (unlike the other regimes), the parties did not contemplate that it was necessary for the midpoint market value of the Yarranabbe Road Apartment to have been calculated when either Lee or Katrina exercised their options in relation to that property.

It is convenient at this point to note that I have not overlooked that it might be said to be unusual for an option to be exercisable when the purchase price is unknown. I accept that observation would have considerable force in an arm’s length commercial transaction. However, the Court accepts Mr Studdy SC’s submission that this is not such a case. The Yarranabbe Road Apartment is a family asset. As I have already observed, the Deed lists the Yarranabbe Road Apartment as Lee’s address, grants Lee a right of occupancy (cl 5.1) and provides for Katrina to remove her personal belongings (cl 5.5). Considerations of price are likely to be of less significance because any decision to exercise the option is likely to be driven by other factors at least in addition to price. It might be assumed that both Lee and Katrina would have some idea of the value of the Yarranabbe Road Apartment to the extent their decision was impacted by the issue of price rather than a desire to own a family asset.

The fourth textual matter is that the combined effect of cll 5.6 and 8.1(d) is that there must be a period from the date of the Deed while the mechanism prescribed by cl 8.1(d) was put into effect. On Katrina’s construction, Lee would not be able to exercise Lee’s Yarranabbe Road First Call Option during that period. Such a construction runs contrary to the equality or symmetry of treatment of Lee and Katrina which I have identified as a fundamental commercial purpose of the Deed generally and, in particular, in relation to how their respective options for the Homestead Lot and the Yarranabbe Road Apartment have been drafted.

As I have already observed, because the price for the Homestead Lot is specified in the Deed, Katrina could exercise her option to purchase the Homestead Lot at any time during the 60 days from the date of the Deed, whereas on Katrina’s construction, Lee would not be able to exercise Lee’s Yarranabbe Road First Call Option until the midpoint market value is calculated in accordance with cl 8.1(d).

This inequality as to the length of time within which their respective options could be exercised, which runs contrary to a fundamental commercial purpose of the Deed, is not cured by Mr Coles QC’s acceptance that Katrina would be similarly shut out from exercising her option to purchase the Yarranabbe Road Apartment if, by the time the second 60 days from the date of the Deed had begun, the midpoint market value had not yet been determined. The possibility of such a consequence, especially if the hypothesis becomes that the midpoint market value is not determined for 120 days from the date of the Deed so that neither of them can exercise their option in relation to the Yarranabbe Road Apartment, demonstrates the lack of commerciality of the construction propounded on behalf of Katrina. It runs completely counter to the careful architecture erected by the Deed that what are clearly important rights to the parties could be vitiated by the happenstance of when the midpoint market value for the Yarranabbe Road Apartment was actually able to be calculated in accordance with cl 8.1(d).

The fifth contextual matter is that cl 5.6 includes the words: “(or receive it by way of a distribution in specie on a winding up of Kalemon with Katrina receiving an equivalent cash distribution)”. Again, no commercially informed reading of the Deed could possibly contemplate that a distribution in specie on a winding up of Kalemon could occur within 42 days (the settlement period under the applicable contract for sale) of Lee having exercised Lee’s Yarranabbe Road First Call Option, even if he were to do so as late as 59 days after the date of the Deed. This is again a strong indicator that the actual purchase price for the Yarranabbe Road Apartment was not contemplated by the parties as something that had to be known at the time Lee exercised Lee’s Yarranabbe Road First Call Option or, for that matter, if Katrina exercised her option in the event Lee had not exercised his.

The sixth textual matter, drawn to attention by Mr Studdy SC, is that nothing in cl 8.1(d) links the determination of the midpoint valuation to the term of either Lee or Katrina’s options in relation to the Yarranabbe Road Apartment. The only provisions in relation to time in cl 8.1(d) are that the Accountant is to obtain the two current valuations “promptly following the execution of this Deed” and that “once obtained” he is to determine the midpoint valuation of the properties and provide copies of the valuations to Lee and Katrina (this determination and provision presumably to take place, on ordinary principles of contractual interpretation, within a reasonable time from when the two current market valuations had been obtained).

The seventh textual matter is that the provisions of cl 12.2 in relation to the grant of options or rights of first refusal in the Deed generally, are plainly generic provisions intended to apply to the three different types of option or first right to purchase contained in the Deed (as to which see [59] above). If it appeared from the express terms of cl 12.2(d) that the parties had turned their minds to the application of that provision to Lee and Katrina’s options to purchase the Yarranabbe Road Apartment under cll 5.6 and 5.7, it would be more difficult to conclude as a matter of construction or implication that cl 12.2(d) did not apply to the exercise of those options. Nor was there any evidence that the parties had considered and deliberately omitted dealing with the possibility that has now become a reality. It is clear that cl 12.2 is an omnibus provision and the parties had not turned their minds to the possibility which has given rise to these proceedings. This last conclusion is inferred from the terms of cl 12.2 and the absence of contrary evidence.

As is developed in [71] and following below, it is therefore open to the Court to imply the term set out in [71] precisely because there is no express provision relating cl 12.2(d) to the exercise of either option to purchase the Yarranabbe Road Apartment.

It follows from the seven textual matters which I have set out above that the Court concludes that a reasonable business person would have understood that cl 5.6 of the Deed did not require the midpoint market value to have been determined before Lee’s Yarranabbe Road First Call Option (or for that matter, Katrina’s option in relation to the Yarranabbe Road Apartment) could be exercised.

Up to this point of the analysis, the Court has accepted Mr Studdy SC’s submissions on construction and does not accept that the determination of the purchase price is a condition precedent to the exercise of either Lee or Katrina’s options to purchase the Yarranabbe Road Apartment. However, I do not consider that, as a matter of construction, it is then open to the Court to construe away the plain words of cl 12.2(d). “Any such option” relates to any grant of an option under the Deed — “[a]ny such option” being an option of the kind referred to in cll 12.2(a) and (b), which must include the options in relation to the Yarranabbe Road Apartment. The text must be given primacy and the Court does not accept Mr Studdy SC’s construction of cl 12 as recorded in [29] above.

However, when that is understood, it becomes apparent on its plain meaning that cl 12.2(d) is unworkable if the price for the Yarranabbe Road Apartment has not been determined at the time of exercise of an option in relation to it. It is for this reason, in accordance with the principles set out in [17] and [18] above, that the Court concludes that it is necessary to imply into cl 12.2(d) the words “, and if the price has been determined in accordance with this Deed,” those words to be inserted as follows:

In reaching this conclusion, the Court is satisfied that the five conditions set out in BP Refinery have been satisfied:

In relation to this last point, Mr Coles QC submitted that that requirement for implication of the term was not satisfied. He contended that it contradicted the whole of cl 12. I do not agree. The proposed implication limits the circumstances in which the whole of cl 12.2(d) operates, but does not eliminate the operation of cl 12.2(d) in its entirety.

Furthermore, if Mr Coles QC’s submission were correct, it would be an answer to most, if not all, examples of an implied term when the implication modifies the operation of an existing term. His submission is circular because it suggests the implied term contradicts the existing terms simply because it is not already express. Nor does cl 14, the “entire agreement” clause, also called in aid by Mr Coles QC, prevent the implication of a term, because an implied term is no less a term of the agreement from its outset than an express term.

Nor do I accept Mr Coles QC’s submission that Lee’s exercise of Lee’s Yarranabbe Road First Call Option in accordance with cl 12.2(d) including the implied term would not give rise to a binding contract or be no more than a counteroffer. A binding contract to purchase would still come into existence because the option had been exercised in accordance with its terms. The terms of the contract would still be those specified in cl 12.2(a) and the date of entry into the contract would still be determined by cl 12.2(e).

Clause 12.2(a) specifies that the grant “is a grant at the price as determined in” the Deed and any contract is “subject to any terms and conditions specifically referred to in such grant”. No further agreement as to the price is required because the parties, including Kalemon Investments Pty Ltd, have agreed to a mechanism for the Accountant to determine the price. It therefore cannot be said the agreement which arises on exercise of the option is incomplete: Booker Industries at 604-605. To the extent further contractual compulsion may be required to execute documents or do anything else once the purchase price was determined, this is provided by the further and better assurance provisions in cll 12.1 and 21.

The Court accepts Mr Studdy SC’s submission that, on the assumption the implication referred to in the preceding paragraphs is made (as it has been by the Court), the Notice complies with the Deed. It is a “written notice of exercise of option … signed by the Grantee” for the purposes of cl 12.2(d). It follows that the Court finds that, by giving the Notice, Lee has validly exercised Lee’s Yarranabbe Road First Call Option.

Because the price of the Yarranabee Road Apartment had not been determined in accordance with cl 8.1(d), on the Court’s construction of cl 12.2(d) it was not necessary for Lee to provide a cheque or an executed contract with the Notice. However, the fact that he has done so, including giving the Accountant authority to insert the purchase price, does not vitiate the efficacy of the Notice. He has done no more than volunteer something that was not required for strict compliance with cl 12.2(d) as construed by the Court. If the result of the second valuation means that a higher deposit than the cheque already proffered is required, provision of a further amount or any other steps to complete the contract for sale can be required by any party to the Deed pursuant to either or both of cll 12.1 and 21.

Finally, because of the conclusion which the Court has reached, it is not necessary to determine the issue of the availability of relief against forfeiture raised on behalf of Lee. As was apparent from the parties’ thorough and nuanced submissions on this question, the issue is complex and unresolved at the appellate level, with distinguished judges taking contrary views. Furthermore, the debate attending these issues means that, in circumstances where this decision has had to be delivered with some urgency, I have concluded that it would be neither wise nor helpful to express tentative obiter dicta on whether relief against forfeiture is available.

Subject to hearing from the parties if they wish to contend for a different form of orders, the Court proposes that the Summons should be dismissed with costs.