Laybutt v Amoco Australia Pty Ltd

(1974) 132 CLR 57

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(Judgment by: Menzies and Mason JJ)

Laybutt v Amoco Australia Pty. Ltd.

Court:

Judges:
Menzies and Mason JJGibbs

Judgment date: 15 NOVEMBER 1974

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Judgment by:
Menzies and Mason JJ

On 24th July 1972 Harold Laybutt granted an option to purchase certain land at Blacktown to the respondent Amoco Australia Pty. Limited for the sum of $42,000. The consideration for the grant of the option was expressed to be $10. (at p61)

Clause 1 of the option provided:

"1. This option may be exercised by you or your nominee by notice in writing handed to *me/one of us on or before 24th Oct 1972 (Insert actual date) date or within that time posted to *me/one of us by registered mail to the address shown below and by payment to the said Agent within the said time of the deposit mentioned below. *Delete words that do not apply and initial." (at p61)

Clause 2 of the option provided that upon exercise of the option there was to be created a contract for the sale of the property on the terms and conditions of the contract for the sale of land last issued under the approval of the Law Society of New South Wales and the Real Estate Institute of New South Wales. Although the option contained two spaces in which provision was made for the insertion of the name of the vendor's agent, the spaces were not filled in; indeed, a line was drawn through one space. Clause 2 (a) prescribed a deposit in an amount equal to ten per cent of the purchase price. (at p61)

There was an apparent inconsistency between cl. 1 of the option and cl. 1 of the form of contract incorporated by reference. The former stipulated payment of a deposit within three months as an element in the exercise of the option, whereas the latter provided for payment of a deposit to an agent as stakeholder only upon the signing of the contract for the sale of the land. (at p61)

Four days after the grant of the option Harold Laybutt died. Probate of his will was not granted to his executrix and sole surviving beneficiary, the appellant Lily May Laybutt, until June 1973. Having ascertained that the appellant was appointed executrix by the will, the respondent served notice of exercise of the option on Mrs. Laybutt on 23rd October 1972. (at p61)

In an attempt to overcome the difficulty constituted by the omission to name an agent in the option the respondent delivered a cheque for $4,200 to Messrs. Maurice Isaacs & Glass, the solicitors acting for the deceased's estate on the instructions of the appellant. The cheque was delivered on 24th October 1972; it was accompanied by a letter stating that the cheque was for the deposit to be held by the solicitors as stakeholder pending completion of the purchase under the option. (at p61)

The cheque was returned in January 1973 with an accompanying letter from the solicitors which stated that all negotiations in connexion with the sale of the land were terminated. The respondent commenced proceedings in the Equity Division of the Supreme Court of New South Wales in which declarations were made that the option had been properly exercised and that there was an enforceable contract, and an order was made for specific performance. It is from these declarations and the order that the appellant has appealed to this Court. (at p62)

Although the appellant argued that the option was void for uncertainty before the primary judge, the argument was not reiterated in this Court. The appellant submitted here, first, that the option had not been validly exercised because payment of the deposit was made to her solicitors, not to her, and, secondly, that the option was not capable of being exercised after the death of the grantor. Accordingly, the issue which arises on the arguments which have been put to this Court is not one of uncertainty but one of construction. However, it is evident from the terms of the option and the standard form of contract that the construction of the documents is closely associated with the underlying possibility that the option may be void for uncertainty. (at p62)

We begin with the inference drawn by the primary judge "that the parties deliberately omitted to name an agent", an inference which was correctly based on the failure to fill in the two spaces in the option in which appropriate provision was made for naming the agent and on the line which had been drawn through one of the spaces. His Honour went on to say, and this finding was not challenged, that it would be wrong to hold that "their agreement should fail for lack of an agent's name". There is nothing to suggest that the name of the agent was omitted so that it would become the subject of some later agreement between the parties. Apart from the provision that the deposit be paid to the agent, it was not a matter on which it was necessary for them to reach a consensus. In ordinary circumstances a vendor would have an agent of his choice acting for him but in this case the grantor had no reason to have appointed an agent or to appoint one in the future - that no doubt was the reason why the name was omitted, the parties overlooking the agent's role as a recipient of their deposit under cl. 1. (at p62)

For the respondent it was submitted that the option conferred on the grantor a right to name an agent in which event, but not otherwise, the provisions in the option and in the standard form of contract relating to the payment of a deposit came into operation. As neither the grantor nor the appellant had nominated an agent, no deposit became payable, although the amount of the deposit was properly to be regarded as forming part of the balance of the purchase price payable on completion. The reasons for rejecting this construction are manifold. The option provided for payment of a deposit, not to an agent to be nominated by the grantor, but to "the said Agent", that is, the agent named in the option. Apart from this consideration the provisions of the option and the contract emphasize that the payment of the deposit was an essential element in the bargain. The option stipulated that the payment was an element in the exercise of the option. The contract provided for payment of the deposit "on the signing of the agreement" - an obligation which would be satisfied on the option being exercised - and for its forfeiture in the event of default by the purchaser (cl. 16). Finally on this point it is not easy to read the contract as conforming to the view that the amount of the deposit was payable on completion. What was payable on completion was "the balance of the purchase price", an expression which means the purchase price less the deposit. (at p63)

An alternative submission was that, even if the omission to name an agent did not affect the operation of the provisions contained in the standard form of contract respecting the deposit, it had the consequence that payment of the deposit was not a necessary element in the exercise of the option. This view was based on the proposition that the stipulation for the payment of the deposit was tied to payment to the vendor's agent and that to dispense with the naming of the agent was to dispense with payment of the deposit as a means of exercising the option. However, it is one thing to say that the failure to name an agent shows that it was not intended that payment should be made to an agent and quite another thing to say that the parties did not intend the payment of the deposit to be an essential element in the exercise of the option. Clauses 1 and 2 (a) of the option made explicit provision in this regard. The omission of the agent's name enables one to conclude that references in the option and the contract to the agent should be disregarded and that payment was not to be made to the agent, but it does not justify a total disregard of the provision for payment of the deposit. There is here insufficient foundation for an inference that the parties intended that the option could be exercised by notice only, without payment of the deposit (cf. Fitzgerald v. Masters (1956) 95 CLR 420 ). (at p63)

What then is the effect of cl. 1 of the option and cl. 1 of the contract? Is the option void for uncertainty? Should the two clauses be read as requiring payment to the grantor, his successors and assigns, or to a person nominated as the appellant's agent by the respondent as his Honour held? We have already indicated that this is not a case in which the parties intended to agree on the identity of an agent in the future; nor was it a matter on which it was essential for the parties to agree, putting to one side the effect of cl. 1 of the option and cl. 1 of the contract. If the option is void for uncertainty it is because the provisions for payment of the deposit in the option and the contract are meaningless. The references to "the said Agent" in cl. 1 of the option and to "the Vendor's Agent herein named as stakeholder" in cl. 1 of the contract are meaningless, but this does not mean, as Denning L.J. pointed out in Nicolene Ltd. v. Simmonds (1953) 1 QB 543 , at p 551, that the whole option is a nullity. There the meaningless clause was rejected and the contract shorn of the clause was held to stand. The clause in question was an exempting condition but the principle then applied is not limited to conditions of that kind. It may be applied to words in a contract, at least when as here it appears that the parties intended to exclude them and they are severable. (at p64)

The question remains whether the meaning of the provisions contained in the two clauses can be determined with a reasonable degree of certainty. The primary judge, influenced by the presence of the words "as stakeholder" in cl. 1 of the contract, thought that the parties intended that payment should be made to a third person who nevertheless was intended to have the character of the vendor's agent. He held that the respondent could nominate a person to act as agent of the vendor, subject to a right (which in the event was not exercised) in the appellant to object to that nomination. (at p64)

There are to our minds various reasons why this approach cannot be supported. First, it rests on the view that the option and the contract contemplated, in the absence of an existing nomination of an agent, a subsequent nomination of such a person. However, the two documents must be read together. So read they refer to the payment of one deposit. Once this is accepted there is no basis for giving the expression "the Vendor's Agent herein named" in cl. 1 of the contract an effect different from that accorded to "the said Agent" in cl. 1 of the option. The deliberate omission to name an agent in the option relates to the contract as well as the option; in each case it indicates an intention to dispense with the notion of payment to an agent rather than an intention to reserve a right to nominate such a person at a later date. Secondly, we can find no support for the view that, in the absence of authority conferred in that behalf, it is permissible for a purchaser to appoint an agent for the vendor. The observations of Griffith C.J. in Christie v. Robinson (1907) 4 CLR 1338 , at p 1347, and Fenton v. Browne (1807) 14 Ves Jun 144 (33 ER 476) go, not to the appointment of an agent, but to the responsibility of one party in the event that a stakeholder, objected to by the other party, afterwards defaults. Thirdly, the qualification that the other party has a right to object to the nomination is productive of difficulties too numerous to be mentioned. (at p64)

For our part we would read the two clauses as making provision for the payment of the deposit to the grantor, his successors and assigns. The case, so it seems to us, is one in which there is a stipulation that a deposit shall be paid, but there is no identification of the person to whom it is to be paid. In such a case it is to be implied that payment will be made to the other contracting party, his successors and assigns, assuming that the option is not personal to the grantor. The words "as stakeholder" in cl. 1 of the contract are not an obstacle to this conclusion. They were intended to govern the character in which a vendor's agent would receive the money; they must be disregarded along with the words to which they relate. (at p65)

A payment made to A's solicitor for A may be said to constitute a payment made to A if the solicitor is authorized by A to receive the payment. In this case, by reason of the provisions of ss. 44 and 61 of the Wills, Probate and Administration Act, 1898 (N.S.W.), as amended, there is a question as to whether the option could be exercised by giving notice and paying the deposit to the Public Trustee in whom the grantor's estate was deemed to be vested pending a grant of probate or to the appellant on the footing that she was an executor de son tort and that her title by virtue of the subsequent grant related back to the date of death of the grantor. We shall assume, without answering this question, that the appellant was the person to whom in the circumstances notice was correctly given and payment should have been made, no suggestion having been made that the payment to the solicitors was made to them on behalf of the Public Trustee or that he had ever authorized them to receive such a payment. (at p65)

There is no evidence that Messrs. Maurice Isaacs & Glass, the solicitors appointed by the appellant to act for the estate in connexion with the grant of probate, were expressly authorized by her to receive the deposit on behalf of the estate. The retention for three months by the solicitors of the deposit might, however, be sufficient to found an inference that they had been so authorized. It is an issue to which the primary judge did not direct his attention as he took a different view of the case. Even so, a finding for the respondent on this issue would not be enough to carry the day in its favour for it is apparent on the evidence that the deposit was paid to the solicitors, not on terms that they were to account to the appellant or the estate, but that they were to hold it "as stakeholder, pending completion of the purchase under the said Option", to quote from the respondent's letter of 24th October 1972 to the solicitors. The payment, accordingly, was not a payment to the grantor, his successors and assigns, which in the view we take was what the option required. (at p65)

On this footing the respondent failed to exercise the option in accordance with cl. 1 of the option. (at p65)

On this ground, without expressing any opinion on the other questions which were argued, we would allow the appeal. (at p65)