Bowman v Durham Holdings Pty Ltd

131 CLR 8
2 ALR 193

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(Judgment by: Stephen J)

Between: Bowman
And: Durham Holdings Pty Ltd

Court:

Judges: Barwick CJ
Menzies J

Stephen J

Subject References:
CONTRACT
Option
Extension
Statute of Frauds
Part performance
Notice of exercise of option

Hearing date: 7 November 1973
Judgment date: 26 November 1973

Sydney

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Judgment by:
Stephen J

This is an appeal from the judgment and order of the Supreme Court of New South Wales, Equity Division. In a suit in which the plaintiff sought a declaration that it had validly exercised an option to purchase the defendants' interest in reversion in certain deposits of coal and their interest in other minerals lying under the surface of the respondent's land at Singleton, Helsham J. made the declaration sought and granted injunctive relief accordingly.

The option, conferred by a deed dated 11th September 1969, was granted for an initial period of six months from that date and provided that by the giving of notice within time and the payment of specified amounts the respondent might procure the extension of its term for two further periods of twelve months each. It contained provision for the exercise of the option by notice in writing and provided for the giving of such notice either personally to the grantors or by post in a variety of ways.

The appellants contend not only that the option was not duly exercised, because the purported notice of exercise in March 1972 was given too late, but also that the purported exercise was ineffective because it was not accompanied by payment of the balance of purchase price due under the deed. They further contend that in any event at the time of purported exercise the option was no longer on foot, the respondent having failed effectively to secure the extension of its term for the second period of twelve months; it was at the very end of that period, if at all, that the respondent had exercised the option.

I set out cll. 1, 2, 5, 6, 18 and 19 of the deed by which the option was conferred upon the respondent.

"1.

THAT subject as herinafter provided in consideration of the sum of One dollar ($1.00) paid by the Grantee to the Grantors (the receipt whereof the Grantors hereby acknowledge) the Grantors hereby grant to the Grantee the sole and exclusive right and option to purchase the whole of the Grantors' right title and interest in reversion in and to the coal in and under the said mining property and the Grantors' right title and interest in and to the other minerals therein subject to the outstanding estate in the said coal as hereinbefore recited (hereinafter called 'the option').

2.

THE period of the option shall be six (6) months from the date hereof and the Grantee shall have the following rights of extension of the option:

(a)

If by notice in writing to the Grantors accompanied by payment by bank cheque in favour of the Grantors' Solicitors Messrs. Dibbs Crowther & Osborne of $12,500.00 it notifies them of its desire for an extension the Grantors shall extend the said option for a further twelve (12) months commencing at the expiration of the first six months for the consideration of $12,500.00.

(b)

If the Grantee notifies the Grantors of its desire for a further twelve (12) months extension after expiration of the first twelve months as conferred in (a) above and gives notice in writing to the Grantors accompanied by payment by bank cheque in favour of the Grantors' Solicitors Messrs. Dibbs Crowther & Osborne of a further $25,000.00 the Grantors shall extend the said option for a further twelve (12) months commencing at the expiration of the first twelve months for the consideration of $25,000.00.

In either case (a) or (b) notice by the Grantee shall be given within two (2) weeks prior to the expiration of the then current option period.

...

5. UPON the exercise by the Grantee of its right to extend the period of the option for a second twelve months pursuant to Clause 2(b) hereof the Grantee undertakes to expend in addition to the amounts referred to in Clauses 3 and 4 the sum of $100,000.00 on a work programme comprising exploration for coal inspection and evaluation of the mining property such sum of $100,000.00 to be expended wholly or in part upon such work programme on the mining property or wholly or in part on the work programme on the areas commonly known as 'Bayswater' and 'Narama'.

6. UPON the exercise of the option (whether before or after the cesser of the outstanding estate or interest) by the Grantee during the period of the option the Grantee shall pay to the Grantors by bank cheque in favour of the Grantors' Solicitors Messrs. Dibbs Crowther & Osborne the sum of $100,000.00 such sum to be reduced by the total of all payments which at the date of exercise of the option shall have been made by the Grantee to the Grantors (including all legal costs of the Grantors which the Grantee shall have paid on behalf of the Grantors). Upon such exercise of the option and upon payment of the said sum of $100,000.00 (reduced by the aforesaid amounts) the Grantors shall transfer and convey their respective right title and interest in and to the minerals (including coal) lying in on or under the mining property to the Grantee and execute all such proper documents of assurance to enable such title to be registered in the name of the Grantee and the Grantors and all persons claiming under or in trust for them shall at all times hereafter at the cost of the person requiring the same execute and do all such assurances and things for further or more effectually assuring the said minerals in manner aforesaid as shall be reasonably required.

...

18. AT any time during the periods of the option but only after the 31st December 1970 the Grantee may exercise the option by giving notice in writing to the Grantors of its intention to do so.

19. ANY notice or writing to be given or any payment to be made herein shall be deemed duly given or made:

(a)

If sent in a prepaid envelope addressed in the case of the Grantors to the Grantors in care of the said Ian Hunter Bowman 'Granbalang' Singleton or his Solicitors, Messrs. Dibbs Crowther & Osborne, 16 Barrack Street, Sydney or in the case of the Grantee to its registered office and in any such case the same shall be deemed to have been given or made at the time when such envelope would in the ordinary course of post be delivered; or

(b)

If delivered personally to the said Ian Hunter Bowman or in the case of the Grantee if left at the Company's registered office."

As to the purported exercise of the option, what occurred was that, the option being due to expire on Saturday, 11th March 1972, no steps were taken for its exercise until Friday, 10th March 1972. On that date on copy of a duly executed notice of exercise in proper form was delivered by hand to the appellants' solicitors, together with a bank cheque for what is agreed to be the proper amount calculated in accordance with cl. 6 of the deed, and a covering letter. That letter stated that the bank cheque was thereby tendered and called for delivery, in exchange, of proper documents of assurance executed by the appropriate appellants. When the bearers of the notice, letter and cheque attended at the offices of the appellants' solicitors the person there attending to the matter was found to be absent and they saw a Mr. Koroknay who stated that he was not dealing with the appellants' affairs, had not been involved in the matter, had no documents of title available and that, in any event, the respondent was not entitled to them at that point of time. In the outcome the bank cheque was not left with him and remained in the respondent's possession.

The covering letter to which I have referred also stated that a notice had also been sent by post to the appellants. It was posted at the General Post Office, Sydney, before 5.00 p.m. on Friday, 10th March, and was addressed to the appellants in care of the appellants' solicitors and in a manner which, it was agreed, complied with cl. 19 (a). The letter was sent by registered post and was not in fact delivered to the office of the appellants' solicitors until the morning of Monday, 13th March 1972. This particular purported exercise of the option was clearly out of time unless the respondent can take advantage of the deeming provisions of cl. 19 (a), so that the giving of the notice may be deemed to have occurred on Saturday, 11th March, which was the last day for its exercise.

The evidence discloses that letters, whether ordinary or registered mail, posted at the time and place that this letter was, would have been delivered to the appellants' solicitors' offices in the city of Sydney on the morning of the following day, Saturday, had those offices and the building in which they are situate been open on that day. In fact the appellants' solicitors did not open for business on Saturdays and the postmen responsible for deliveries in that area on Saturday mornings were said to be aware of this fact; the building in which those offices were situated was itself closed to the general public but with a caretaker in attendance and it seems that the practice of postmen on the relevant delivery round was therefore not to attempt to effect delivery of registered mail to offices in that particular building on Saturday mornings, leaving it instead at the post office rather than taking it with them on their rounds; on the other hand, ordinary mail would be taken by the postmen and handed to the caretaker of the building.

When cl. 19 (a) refers to "the ordinary course of post" it is not, I think, concerned with the particular idiosyncracies of a particular addressee but rather with the general delivery practices of the postal service. It does not concern itself with particular circumstances of an addressee which may, if known to the postman on his round, deter him from attempting to effect delivery to a particular addressee; for instance the fact that the postman is aware in advance that that addressee's premises will be closed so that he will be unable to effect delivery of a registered letter in accordance with appropriate regulations. As was said by Lord Esher M.R. in Kemp v Wanklyn, ^[F2] in dealing with the meaning of "in the ordinary course of post":

"The Post Office is the authority which, under its statutory powers, determines the ordinary course of the post - that is to say, how the letters shall be carried, and at what time they shall, as a general rule, be delivered within any particular district to the persons taken as a body who reside in that district. It appears to me that all the objector has to do under s. 100 is to look at the Post Office regulations, and to see whether a letter posted at the place, from which he proposes to send the notice, would, according to the ordinary course of post, be delivered to any person resident within the district to which he is posting the notice, as to whom there is no exceptional mode of delivering letters, on or before August 20. He is not bound to inquire whether within the district there may be some people who, by some special arrangement with the Post Office officials there, made either with or without the authority of the Post Office, have their letters delivered in an exceptional manner. Such a special arrangement would be, not the ordinary, but an extraordinary, course of post."

In the present case the evidence is that there was within the city of Sydney a Saturday morning delivery both for ordinary mail and for registered mail posted, as was this notice, before 5.00 p.m. on the preceding day.

That, in my view, establishes the ordinary course of post and it follows that, if a "prepaid envelope" addressed in accordance with one of the methods contemplated by cl. 19 (a) of the deed is posted before 5.00 p.m. on the Friday in question, cl. 19 (a) deems that notice to have been given on the following Saturday morning. It is irrelevant that the particular circumstances of the addressee's business and the postman's knowledge of those circumstances results in no delivery in fact, just as, in Hudson v Louth, ^[F3] FitzGibbon L.J. thought it irrelevant that, where no deliveries were made from a local country post office, an addressee might in fact fail to call at reasonable intervals for any mail waiting there for him; that was "his own fault" and did not affect the ordinary course of post, and see also Doogan v Colquhoun, ^[F4] especially per Palles C.B. ^[F5] and per FitzGibbon L.J. ^[F6]

The ordinary course of post is not dependent upon the habits of the addressee, whether or not known to the postal employees concerned with letter deliveries; nor is the concept inapplicable in the case of a letter which is sent by registered post. That the phrase has meaning in its application to registered letters, just as it has in the case of the ordinary post, is clear from the several decisions concerned with appeals from revising barristers in electoral roll cases, some of which I have cited above. In T.O. Supplies (London) Ltd v Jerry Creighton Ltd, ^[F7] Devlin J. saw no reason, in a particular statutory context, for distinguishing between registered and ordinary mail, each was included within the "ordinary course of post"; the provisions of cl. 19 of the deed appear to me likewise to be applicable to both.

It follows that, in my view, the option was exercised within time.

The appellants further contended that the exercise of the option, to be effective, had to be accompanied by payment of a sum calculated in accordance with cl. 6 of the deed. Since this was not done it was said that there was no effective exercise.

Clause 18 of the deed does nothing to aid this submission; it speaks of exercise of the option simply "by giving notice in writing to the Grantors". Clause 6, upon which the appellants chiefly rely, refers to payment of the relevant sum occurring "upon the exercise of the option". "Upon" may mean "before", "simultaneously with" or "after" the act done to which it relates and will take its intended meaning from its context: Ex parte Lesiputty, per Jordan C.J. ^[F8] Koon Wing Lau v Calwell ^[F9] provides an instance of this. Later in cl. 6 the two events, exercise and payment, are referred to as separate events each of which must occur before the grantors of the option are obliged to transfer and convey title. Where, as in cl. 2(a) and 2(b) of the deed, it was intended that a payment was to be made simultaneously with the giving of a notice by the grantees the deed so provides; in each of these subclauses the words "accompanied by payment by bank cheque" is used and the absence of any such language in relation to the moneys payable on exercise of the option provides a striking contrast. There is, I think, in this deed no requirement that payment should occur simultaneously with exercise of the option. It follows that the respondent's failure to make an unconditional tender of the necessary bank cheque on or before 11th March does not detract from the effectiveness of its exercise of the option.

In the light of these conclusions it is unnecessary for me to consider whether or not the delivery, on 10th March 1972, at the offices of the appellants' solicitors of a notice of exercise was in itself sufficient to constitute an exercise of the option; without reliance upon that, I conclude that there was a good exercise of the option by the posting of the notice to the appellants' solicitors' offices on that date.

There remains only the question whether the option still subsisted after March 1971 or whether, as the appellants contend, the respondent having failed to take the appropriate steps to procure the extension of the term of the option beyond its first period of extension of twelve months, it had come to an end in March 1971.

The appellants contended that the notification by the respondent of its desire that there should be a further twelve months' extension after the expiration of the first extension of the term of the option was defective both because the notification was given to the appellants' solicitors and not to the appellants themselves and because it was given too soon, being given before the period described as "within two (2) weeks prior to" the end of the then current term of the option - see cl. 2 of the deed.

Assuming, but without so deciding, that these submissions are correct, the respondent was, in my view, none the less entitled in March 1972 to require the appellants to convey to it their rights to the coal and minerals in question. The learned trial judge took a like view. He referred to the fact that the appellants retained, and, for that matter, still retains, the sum of $25,000, which the respondent forwarded to the appellants' solicitors in February 1971 when it purported further to extend the option. His Honour concluded that there was a clear case of waiver by the appellants.

It appears clearly enough from the lengthy correspondence between the parties in late 1971 and early 1972 which is in evidence that each party regarded the option as then still on foot; it may also, I think, be inferred from that correspondence that during the period of twelve months after the first extension of the term of the option the respondent, who would, under the terms of the deed, have been obliged to spend a further $100,000 on exploration work on the property had a further extension of the option been effected, in fact complied with that obligation.

In these circumstances the appellants cannot, in my view, deny that in March 1972 there existed an option which was open for exercise by the respondent. The appellants rely upon Gilbert J. McCaul (Aust.) Pty Ltd v Pitt Club Ltd ^[F10] and the authorities and texts to which the Full Court there referred and contend that the doctrine of waiver is wholly inapplicable; there was, they say, no obligation binding upon the respondent which the appellants might be said to have waived, instead there was only a right available to the respondent, the right to purchase by exercise of the option, and this right it might retain for a further twelve months but only by the observance by it of certain conditions which it failed to fulfil. The absence of any obligation resting upon the respondent means, it was said, that there was nothing capable of being waived by the appellants; accordingly there was nothing upon which the doctrine of waiver might operate. Assuming this submission to be correct, as I think it is, nevertheless, the appellants cannot in my view now deny to the respondent the right to exercise an option over the coal deposits and minerals in question, and this without recourse to doctrines of estoppel, promissory or otherwise.

Granted that the respondent in 1971 failed to exercise at the proper time and in the specified manner its right to have the original option extended for a further twelve months, nevertheless by its letter of 23rd February 1971, by which it purported to do so, it clearly communicated to the appellants its desire that it should have, for the next twelve months, the option rights which it had previously enjoyed. The appellants not only accepted and retained the sum of $25,000 which the respondent tendered as the price payable for the grant of continued option rights for the next twelve months but thereafter, as the correspondence in evidence clearly shows, they conducted themselves in their dealings with the respondent on the footing that the latter did in fact enjoy those rights.

In August 1971 representatives of the parties apparently met in conference and discussed the most recent results of the respondent's investigation of the coal deposits and the appellants were told that the respondent was considering abandonment of the "option". In September the appellants' solicitors asked for the results of the respondent's testing and other data acquired "during the period of the option" and referred to the option agreement as entitling them to this information. The respondent was quick to point out that no notice of abandonment of the option had been given and later in September the appellants' solicitors wrote saying that they "did not intend to imply that you had formally given any notice under" the option agreement abandoning it but repeated their request for geological information. Thereafter negotiations continued between the parties, apparently necessitated by what was said to be the barely marginal profitability of the coal deposits revealed by exploration on the appellants' land; as late as 9th February 1972 the appellants' solicitors wrote to the respondent referring to discussions between them that day as to the latter exercising its option to purchase and as to what would then occur so far as concerned actual working of the coal deposits and the appellants' interests in a company to be formed to operate those deposits. This letter concludes with a threat of litigation unless, if the option be exercised, the respondent proceeded "diligently and punctually with the formation of the operating company" and thereafter caused that company actively to proceed with work.

It is unnecessary to pursue further the course of correspondence, which continued in the same vein until well into March 1972. What it reveals quite clearly is that, if the respondent's purported extension of the option in February 1971 was ineffective in terms of the deed, at least the parties continued, for the next year, to regard the respondent as entitled to acquire the appellants' coal deposits by exercise of an option.

In the light of this correspondence and of the appellants' retention of the sum of $25,000, which, by its letter of 23rd February 1971, the respondent tendered as the price of an option for a further twelve months, it follows, in my view, that the appellants are to be regarded as having accepted the offer which that letter made. That letter, if ineffective to extend the term of the original option pursuant to cl. 2(b) of the deed, nevertheless operated as an offer either to accept a new option upon identical terms or, alternatively perhaps, to extend the term of the original option for a further twelve months independently of the right to do so conferred by cl. 2(b).

In Goodwin v Temple ^[F11] in the joint judgment of Dixon C.J., McTiernan J. and Kitto J., their Honours said:

"When a vendor sells land the consideration which the contract secures for him is payment of the purchase money for which he stipulated. It is indeed a legal incongruity for the vendor to receive and retain the whole of the purchase money and then complain that conditions of the contract operating pending completion have not been performed and on that ground claim to be relieved of his obligation to transfer the land."

In the present case the appellants' retention of the sum of $25,000 coupled with their contention that no option existed in March 1972 to my mind presents no less of a legal incongruity. Whichever view of the effect of the foregoing facts be adopted the result is that, on 10th March 1972, there existed an enforceable option capable of exercise by the respondent and which I have already concluded that it duly exercised.

In Bruner v Moore, ^[F12] Farwell J., in not wholly dissimilar circumstances, held that notwithstanding the expiration of the term of an option the conduct of the parties thereafter, when they believed, mistakenly as it transpired, that the option was still subsisting, sufficed to demonstrate an agreement between them that the term of the option be extended; there was sufficient "evidence of consensus ad idem, namely, that the option should extend to" a later date than its actual date of termination. See also Morrell v Studd & Millington. ^[F13] In Bruner v Moore, ^[F14] his Lordship relied not only upon the making of an agreement for extension of the term but also, in the alternative, upon the doctrine expressed in Hughes v Metropolitan Railway Co, ^[F15] the decision which has since been seen as providing the foundation for the doctrine of promissory estoppel.

In the present case there is, I think, no need to have recourse to that doctrine; the respondent may rely instead upon conventional rules of offer and acceptance and the existence of valuable consideration. Nor will the absence of written acceptance by the appellants prove any obstacle; although the form which the proceedings took before Helsham J. renders difficult any investigation at this stage of acts of part performance sufficient to overcome any defence based upon the Statute of Frauds, it is, I think, to be inferred from the correspondence between the parties which is in evidence that there were such acts on the respondent's part after the purported further extension of the option, these taking the form of further exploration for coal on the appellants' lands and its inspection and evaluation, all at great expense to the respondent and carried out in compliance with that term of the new agreement corresponding to cl. 5 of the deed.

Alternatively, viewing the matter from another aspect, it may be that no question here arises at all of the Statute of Frauds. As a result of what occurred in February 1971, the appellants may be regarded not as accepting an offer but rather as having, at the respondent's invitation, made to it an offer to sell. That offer then remained open for acceptance by the respondent until in fact accepted by its exercise of option in March 1972. In such a case no question will then arise concerning the evidencing in writing of any contract made in February 1971. The respondent need prove no such contract; since no question of revocation by the appellants arises the respondent will be content to establish no more than a bare offer by the appellants incorporating all the terms, so far as applicable, contained in the original deed, which offer it accepted in March 1972 when, for the first time, a contract came into existence.

For these reasons I conclude that the respondent was, after the happening of the events of March 1972, in a position to require the appellants to convey to it their interests in coal and other minerals which were the subject of the deed of 11th September 1969.

I would accordingly dismiss this appeal.