Hills Central Pty Ltd v Anthony Gerard Hagerty as Executor of the Estate of the late Gladys Delores Hagerty & Anor [2019] HCATrans 53 (22 March 2019)

Last Updated: 26 March 2019

[2019] HCATrans 053

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S267 of 2018

B e t w e e n -

HILLS CENTRAL PTY LTD (ACN 605 975 942)

Applicant

and

ANTHONY GERARD HAGERTY AS EXECUTOR OF THE ESTATE OF THE LATE GLADYS DELORES HAGERTY

First Respondent

CATHERINE ELIZABETH HAGERTY AS EXECUTOR OF THE ESTATE OF THE LATE GLADYS DELORES HAGERTY

Second Respondent

Application for special leave to appeal

KIEFEL CJ
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 22 MARCH 2019, AT 10.39 AM

Copyright in the High Court of Australia
MR N.C. HUTLEY, SC: If your Honours please, I appear with my learned friends, MR C.S. WARD, SC and MS J.K. MEE, for the applicant. (instructed by Blackstone Waterhouse Lawyers)

MR B.A.J. COLES, QC: If your Honours please, I appear with MR G.N.H. FARLAND for the respondents. (instructed by Lamrocks Solicitors)

KIEFEL CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honours. The facts of the case are not in dispute. The applicant was entitled to exercise an option to purchase land, being the corner block in a proposed large subdivision. Clause 2 of the option deed set out the mechanism for exercise of the option and the applicant – and I will come to the detail of this in due course – provided to the respondent each of the documents and things required of it by the option deed for its exercise.

The applicant raised the question of legal and commercial significance. In our respectful submission, the Court of Appeal failed to focus on the mandated documents of exercise and instead gave to some precatory words in a covering letter a significance equal to the mandated option exercise documents themselves. Those precatory words were phrased in terms of a request and the meaning attributed to them in accordance with proper principle had to proceed from their relation to the documents of exercise, namely, external to them and subsidiary. We say uncertainty will be brought in relation to commercial dialogue in the delicate area of option exercise if the Court of Appeal’s judgment is uncorrected by this Court.

The starting point must be the terms of the option and your Honours will find those set out at page 61 in the application book. The relevant clauses, your Honours, are 2.1.1 which specifies the required materials, together with 2.1.3 which dealt with what was to occur in the event that a nominee was to be identified. As I said, it was found that each of those requisite items were delivered, and your Honours will find that at application book page 64, paragraph14. Importantly, a signed form of the nomination notice was delivered, and your Honours will see the terms of that at application book page 15, paragraph 24, and importantly the first paragraph:

“TAKE NOTICE . . . exercises the Option granted by you . . . under the Deed of Call Option dated

So there was in effect unequivocal affirmation of exercise in the mandate, together with the delivery of the four mandated documents. As your Honours will appreciate, the executed contract as delivered left blank the completion date, and your Honours will see that from application book 64, paragraph 15. Absent consideration of the covering letter, that was something of no moment because the completion date was definitively determined by clause 9 of the option deed, being 42 days. The court at first instance found that the applicant could:

validly exercise the option without specifying a Completion Date on the front page of the Contract.

That is application book 21, paragraph 42. The Court of Appeal did not find it necessary to determine that, and your Honours will see that at application book 76, paragraph 52. However, Justice Leeming would have found in any event that, absent the covering letter, the fact that the date for completion was left blank was not itself a material noncompliance as the vendors would impliedly be authorised to insert the date to which they were contractually bound by the operation of clause 9.2. That is application book 75, paragraph 50.

KIEFEL CJ: It is just the effect of the covering letter that we are concerned with.

MR HUTLEY: Quite, and that gets to the – the error of principle we say appears in the Court of Appeal by giving to the request in the covering letter enclosing the prescribed option exercise documents a significance equal to the unambiguous option exercise documents themselves. Your Honours can see that from application book 78, paragraph 58 in the judgment of Justice Leeming, and further, if your Honours drop down to paragraphs 61 and 62. Your Honours can see the terms of the covering letter relevantly at application book 63, paragraph 12, which were in these terms:

We request that you exchange the contracts and that you enter the Completion Date on the front of the contract to be 192 days –

et cetera. To return to the judgment of Justice Leeming later, the reasoning, could I take your Honours to application book 78, paragraph 59, where his Honour made observations on the capacity of the word “request” to be more than a simple expression of a desire and obviously that can be the case. But we say authority in this Court, properly understood, requires that the focus of attention be upon the terms of the act of acceptance and whether the option identified as such has been accepted. Those authorities make clear that even errors or misdescriptions in their required documents will themselves not invalidate its exercise.

Your Honours have a little bundle of authorities and could I take your Honours shortly to what was said by Justice Higgins in Carter v Hyde, which is the first judgment. There, your Honours, there was a letter exercising the option and the terms of the letter of exercise of the option is at page 119 at about point 6 on the page, “Dear Sir,—In reference”, and that document insofar as it referred to the inventory was erroneous. It was not part of the option. This point was addressed by the Court by Justice Higgins at page 133 and if your Honours go to the paragraph “But it was urged”, being the second paragraph, and read that, your Honours will see particularly at about point 5 when referring to the words said to be contrary to the exercise, his Honour said:

But they do not occur in the acceptance of the option, as a qualification or condition thereto; they are a mere misdescription –

et cetera. To similar effect were the observations of the Chief Justice at page 122 at about point 2, “In my opinion”, et cetera. To similar effect, that is

KIEFEL CJ: Their Honours are speaking about what is conveyed.

MR HUTLEY: Quite, but what is conveyed, we say, by the terms of – one starts at the terms of acceptance. That is what is mandated, we say.

BELL J: Here the deed was, on its face, incomplete with respect to the date of completion and accompanied by a letter which, as I understand it, you tendered, and which requested a date that was well in excess of that.

MR HUTLEY: I wholly accept that, your Honour, and we say principle would say one starts with the notice of exercise.

KIEFEL CJ: What you are really saying is that the person receiving the notice of exercise and the letter should ignore the letter, that they would be commercially unrealistic.

MR HUTLEY: No, with respect, we would say the letter is in precatory terms of request and the significance of those precatory terms has to take account of the fact that they are not in the documents of exercise. If one was making a true counter offer what one would have done is fill in the 192 days in the contract, which was one of the mandated documents, and the error of principle, we say, and the important error of principle by the Court of Appeal was not

KIEFEL CJ: It is not a question of counter offer though, is it? The deed with its terms has been settled. We are not talking about counter offers. We are talking about something which, on its face, is inconsistent with the contractual term in the context where that part of the notice of exercise has been left blank. The only thing which can fill it in from the recipient’s point of view is what appears in the letter.

MR HUTLEY: With respect, if the recipient had declined the request and the recipient had said, “I am standing by the 42 days under the contract”, it would be a pretty hard call for my client to have said, “I have never exercised the option”, which would be the logic of the finding of the Court of Appeal. Let us assume my client had a road to Damascus and decided that he did not want to buy it, but the other side said, “We are filling in 42 days, we can, and it means 42 days, as Justice Slattery found, and we decline your request”. On the Court of Appeal’s construction the result would have been our client could say, “We never exercised the option”, and we say that is manifestly absurd, but it must

KIEFEL CJ: Well, it seems unnecessarily complicated. They are fairly simple facts.

MR HUTLEY: With respect, that must be the logic of the position taken by the Court of Appeal, that if they had said, “We decline your request. We want the option at 42 days”, we could have turned around and said, “Well, we have never exercised an option”. That must be the logic of the position and we say that points up the necessity and the point of principle is that one focuses first on the documents of exercise and they, as Justice Slattery felt, were complete in themselves without the filling in of the 42 days because of the operation of the contract, and the Court of Appeal in effect accepted that. What we say the authorities in this Court say is one looks at the words of exercise first and then other words which, as it were, are penumbral to that have to be viewed in the context of the words of exercise and then, importantly, if one approaches it with that principle, the words of request take their full character; that is, “I am asking you will you agree to an extension of the time of exercise”?

KIEFEL CJ: If one is speaking about logical inferences, so the recipient of the letter rings the person exercising and says, “Did you make a mistake in your letter? It is 42 days”. The person who has just written a letter saying it is 192 days would say, “Yes, of course, it is 42 days”.

MR HUTLEY: With respect, if the person rang, the response would be, “We are only requesting it”. If it was other than that, the logical thing to do was to fill it in and then we would say, properly analysed, it is the very gap plus the request which shows that it was of truly character to be precatory and proper

KIEFEL CJ: They did not request consideration of a change of the time period. They requested that they insert the 192 days into the contract, did they not?

MR HUTLEY: Quite, yes, and your Honour, that

KIEFEL CJ: Well, it could not be clearer, surely.

MR HUTLEY: With respect, we say “request” means “request”. It is not a demand. Secondly, if it was a demand, there was the obvious thing to do to put the 192 days into the contract. We say that the authority in this Court says one starts, as the Court of Appeal did not, at the documents of exercise and that, we say, is the approach followed by the trial judge at particularly paragraphs 60 and following of his judgment, and if I could your Honours through them, at 59 and 60 at application book 26, and we say he approached the question in the proper principled way. He started at the document of exercise, asked them – the question is do they effect on their terms an exercise? He said yes, and that does not seem to be in dispute because even the Court of Appeal would say those documents were complete as a matter of contract to effect execution.

KIEFEL CJ: Mr Hutley, was the request actually open, given that the terms of the option were settled and any exercise of it had to be strictly in terms? Could you have a notice – what purports to be a notice of exercise with a request for a change in terms?

MR HUTLEY: You could, with respect. If I send an exercise and I said, “Look, would you entertain – I request that you

KIEFEL CJ: You are not committing yourself – the point is you are not committing yourself to an exercise of the option strictly in its terms. If that had been the case you would have put the 42 days in the notice of exercise of option and then otherwise requested that they extend it. That would have been how to exercise the option but negotiate for an extended period.

MR HUTLEY: Your Honour, with respect, if one was negotiating – if one was demanding it, you put it in the contract. That was the only way you had the capacity to do it. It was the obvious thing to do. If I am only exercising upon condition that the 192 days is in, you put it in.

KIEFEL CJ: Is not the only inference available from the recipient’s point of view when the 42 days is not inserted in the notice of exercise that they do not want to exercise the option on that basis?

MR HUTLEY: With respect, the notice says, as I took your Honour to it, “We hereby exercise”, and that is what they say. And as Justice Slattery and the Court of Appeal.....they put the 42 days in. That would have been effective to – if it had been left blank, they had the power to put it in. Justice Slattery found – and we say clearly correctly – there was no
requirement to put the 42 days in because the contract determined that. What we say is one has to approach the words of request in a way

KIEFEL CJ: Yes, but that is to ignore the letter that accompanies it, which throws it into doubt.

MR HUTLEY: With respect

KIEFEL CJ: Yes, you have made your point.

MR HUTLEY: Anyway, your Honour, I am just repeating myself.

KIEFEL CJ: So am I.

MR HUTLEY: What we say is that the predicate to a request means request in a circumstance where there is a formal compliance with the exercise and, if not, documents, we say, the process of negotiation, a legitimate negotiation, around contracts of this variety where there are mandated questions of exercise becomes unclear. In circumstances where it has been found that the form of exercise was strictly complied with, these words should have as a matter of principle been construed as what they were, that is, an invitation to treat, i.e. “Will you agree” – “We request that you put in 192 days. If you do not” – and if they declined not to, they were perfectly entitled to say, “We decline not to. We will have the 42 days”. And we could not have turned around and said, “Sorry, we did not exercise the notice. We did not exercise the option”. In other words, your Honours, objectively we say we exercised. Those are our submissions, if the Court pleases.

KIEFEL CJ: We do not need to trouble you, Mr Coles.

This application for special leave raises no new question of principle. There is no reason to doubt the correctness of the decision below. Special leave is refused with costs.

MR HUTLEY: May it please the Court.

MR COLES: If the Court please.

AT 10.58 AM THE MATTER WAS CONCLUDED