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Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Bankruptcy - Appeal against dismissal of application by bankrupt to restrain transaction by trustee - Whether concluded agreement as to payment of Crown rents, price, subject matter of option - Whether option unenforceable for uncertainty - Whether Ministerial approval obtained - Whether sublease executed by respondents as trustee for company - If so, whether sublease invalid - Whether just and equitable for appellant to prevent exercise of option.Bankruptcy Act 1966 (Cth.) s.212A
Land Act 1962-1978 (Qld.) ss.23(4), 91, 274, 296.
Property Law Act 1974-1978 (Qld.) ss.11, 59.
HEARING
SYDNEYORDER
1. The appeal be dismissed.2. The appellant pay to the respondents their costs of the appeal and of the proceedings before Mr. Justice Fitzgerald.
DECISION
On 15 May 1979 Filizzio Di Felice ("the appellant") executed a Deed of Assignment pursuant to Part X of the Bankruptcy Act 1966 under which Everett Thomson Bent ("the first respondent") was appointed controlling trustee.On 14 August 1981 the appellant commenced proceedings in the Supreme Court of Queensland (exercising federal jurisdiction in bankruptcy) against the first respondent seeking a number of orders designed to prevent the first respondent from entering into an agreement to sell to Vincent Samuel Huttley and Maureen Mavis Huttley two perpetual lease selections in the Cairns district of which the appellant was lessee.
The proceedings were transferred to this Court pursuant to s.35 of the Bankruptcy Act and on 7 April 1982 were dismissed.
The appellant has appealed against the order of the learned trial Judge. After the appeal was instituted Mr and Mrs Huttley died and their respective estates are represented by the second respondents.
The facts and circumstances out of which the issues between the parties arose are complex and are set out at length in the judgment of the learned trial Judge.
The appellant had been the lessee of the two selections for many years prior to December 1978. In October and November 1978 negotiations took place between the appellant and Mr and Mrs Huttley and their respective solicitors with a view to the appellant sub-leasing the selections to the Huttleys or their family company, V. & M. Huttley Pty. Limited. These negotiations culminated in the solicitor for Mr and Mrs Huttley (Mr Smith) having a deed of sub-lease and a deed of variation thereof, in which they were named as sub-lessees, executed in triplicate, by his clients. These documents were sent to the appellant's solicitor by letter dated 8 December 1978.
On 10 December 1978, Mr and Mrs Huttley went into possession of the property. At the time they did so the appellant, to their knowledge, had not signed the documents. They did not pay any rental until some time later.
At this stage the documents, as signed by Mr and Mrs Huttley had a number of blanks in them. The deed of variation was, in fact, a document which varied a draft sub-lease previously forwarded by the appellant's solicitor.
The sub-lease as submitted provided for a lease of the selections for a term of three years (commencing on a date not specified) at a rental of $25,000 per year. Clause 8 had contained a provision under which the lessor agreed to sell to the lessee certain equipment specified in a second schedule for $10,000 but it was struck out. Clause 9 contained an option to the lessee to purchase the land free from encumbrances and certain equipment specified in its third schedule for $289,000. The option was exerciseable by writing and within 14 days of exercise the parties agreed to execute an agreement in accordance with the document in the fourth schedule. In that document provision was made for a purchase price of $289,000 payable as to $3,000 by way of deposit on the execution of the agreement and the balance on completion.
The deed of variation however, contained provisions amending the deed of
sub-lease and its schedules. Of particular relevance was
clause 3 which
amended the document in the fourth schedule by deleting therefrom the clause
as to price (clause 2) and substituting
a provision which altered the purchase
price to $299,000 payable as to $3,000 on execution of the agreement, $100,000
on completion
and the balance as follows:-
"The balance, namely, the sum of One hundred and ninety six thousand
dollars ($196,000) within a period of ten years from
the date of
completion of the sale by instalments of approximately Thirty thousand
dollars ($30,000) together with interest
thereon at the rate of 8% per
annum on the balance of purchase moneys from time to time owing, such
interest to be calculated
from the date of completion of the sale on daily
rests. The Purchaser shall, at his cost, execute a Mortgage in duplicate
and deliver the same to the Vendor or his Solicitors to secure payment of
the unpaid instalments and interest as aforesaid
- such Mortgage to be
prepared and registered by the Vendor's Solicitors at the expense of the
Purchaser and to contain the usual
terms and conditions appropriate to
such Mortgages provided that execution by the Vendor of a Memorandum of
Transfer as herein
provided shall be subject to the execution by the
Purchaser of the said Mortgage."
This provision is important because ultimately it was the purported exercise of this option by the Huttleys that gave rise to these proceedings and some of the issues between the parties.
Obviously, as at 10 December 1978, there were loose ends to the transaction. Apart from the blanks in the document the sub-lease was subject, by law, to the consent and prior approval in writing of the Minister for Lands, Forestry and Water Resources pursuant to s.274 of the Land Act 1962 (Q) as amended. Because the property was then subject to a mortgage it was also necessary to obtain the consent of the mortgagee.
On 2 March 1979 the appellant's solicitor wrote to the Secretary of the Land Administration Commission on the appellant's behalf enclosing what he described as "a photocopy of the proposed Sub-lease and Deed of Variation of that Sub-lease" asking whether the transaction would be approved. On the copy documents so forwarded appeared the photocopy of the signatures of Mr and Mrs Huttley and the appellant. He had by then signed the duplicate sub-lease and deed of variation.
On 14 March 1979 the Secretary replied to the appellant's solicitor, Mr
Savage, stating that a sub-lease as proposed in terms of
the draft agreement
submitted would be allowed, if in order, and lodged promptly in triplicate
provided some nine conditions were
fulfilled. These included the endorsement
of the mortgagee's consent on the sub-lease and the filling in of certain
parts left blank
e,g. the commencement date of the term. Conditions 1, 6 and 7
are particularly relevant and were as follows:-
"(1) the sublessees furnish the usual declaration they have each attained
the age of 18 years and are qualified to hold;
. . . . . . . . .
(6) Clauses 2 and 3(d) of the Sublease Agreement are duly completed in all
particulars;
(7) amended Clause 3(b) of the Sublease Agreement as inserted by Clause 1
of the Deed of Variation is amended by deletion
of the words "Crown rents"
where appearing therein;"
On 29 March 1979 the Bank of New South Wales, as mortgagee, wrote to Mr Smith indicating that it would, on certain terms, consent to the sub-lease.
The Bank's letter enclosed the sub-lease and deed of variation in triplicate. Whilst in his possession, alterations were made by Mr Smith to the documents to indicate the Huttleys were taking as joint tenants and to insert the power of attorney requested by the Bank. The Huttleys further initialled the document and added signatures at the foot of the fourth schedule.
On 2 April 1979 Mr Savage wrote to Mr Smith forwarding a copy of the Land
Administration Commission's letter. He wrote:-
"We refer to our recent telephone conversastion with Mr Smith and enclose
copy of letter received from the Land Administration
Commission. We will
attend to the necessary amendments on return of the Lease documents from the
Bank of New South Wales. Although
the Bank of New South Wales has not
returned the documents, we have been advised that the Lease is satisfactory
to them and that
their consent is to be endorsed.
We note that we have still not received any money from your client. Please
let us have same forthwith."
On 6 April 1979 Mr Smith wrote to the appellant's solicitor in the following
terms:-
"Re: Huttley lease from Di Feliceinserted in the Lease Agreement the power of attorney clause required by the Bank of New South Wales. This has been initialled by our clients and we confirm the undertaking given to us by 'phone on the 2nd April that you will have your client initial this additional clause prior to registration. The Lease in triplicate, Deed of Variation in triplicate and Consent Forms have been returned to the Bank of New South Wales, Mareeba, after signing where required by our clients together with our clients cheque for $13,500 for the credit of your client's account.
We refer to your letter of the 2nd April and advise that we have had
The payments of $13,500 and $11,500 referred to in that letter were accepted by the Bank and the appellant respectively and together comprised the first year's rent of $25,000. With his letter to the Bank of 6 April 1979, Mr Smith forwarded the documents as altered and requested the Bank to note its consent thereon.
Apparently the documents remained in the possession of the Bank at least until 28 May 1979. On that date they were returned to the appellant's solicitor because the appellant had not put his initials against the insertion of the power of attorney clause requested by the Bank. On 21 June, after the documents had been endorsed as requested they were returned to the Bank by the appellant's solicitor requesting the Bank's consent to be endorsed and for the documents to be returned. In fact it turned out that the Bank's consent became unnecessary because by 10 July 1979 the debt had been paid and the Bank's security was released.
On 15 May 1979, the appellant executed a deed of assignment under Part X of the Bankruptcy Act appointing the first respondent as trustee. Mr Smith was informed of this by Mr Savage around 26 July 1979. On 21 November 1979 the Huttleys were advised by letter by the trustee of the appointment. He wrote:-
"RE: PHILIP DI FELICEDeed of Assignment with his creditors under the provisions of Part X of the Bankruptcy Act. If not, this letter is to advise that he has assigned his assets to me as Trustee and by law his property now vests in me. I have in my possession copies of the agreements entered into by you with him in respect of the property at Mareeba and I note that the agreements provide for a payment of $25,000 per annum by way of a rental and that you also have an option to purchase.
You may already be aware that the abovenamed debtor has entered into a
Mr Smith wrote back on 10 December 1979 returning as suggested the duplicate copy of the trustee's letter thereby acknowledging notice of appointment. In the same letter a cheque was enclosed for $17,294.88 which represented the second year's rental of $25,000 less adjustments. An explanation was given and correspondence forwarded with regard to that adjustment. The cheque for the balance of the rental was accepted by the trustee.
Meanwhile, there was correspondence between Mr Savage and Mr Smith regarding the documents. Further alterations were made to the documents by the appellant's solicitor to comply with the conditions imposed by the Land Administration Commission and they were lodged for stamping. On 28 February 1980 they were submitted for registration with the Commission. It appears from the correspondence in evidence that Mr Savage had kept his client, the appellant, informed of all matters.
On 15 April 1980 the Commission wrote to the appellant's solicitor requesting a declaration by the Huttleys that they had attained aged 18 and were qualified to hold the selections. This however, as was then pointed out to the Commission by Mr Savage, overlooked the fact that there had already been inserted in the document a declaration in those terms.
The sub-lease was registered on 16 July 1980 and the duplicate and triplicate copies were returned to the appellant's solicitor on 23 July 1980.
Mr Smith apparently did not receive a copy of the registered document until late 1980 or early 1981 when he noticed that certain additional changes had been made since he last saw them.
On 23 October 1980 the trustee wrote to Mr Smith requesting payment of the
third year's rental. The letter also asked to be informed
as to the likelihood
of the Huttleys exercising their option to purchase under the sub-lease. On 15
December 1980 their solicitor
replied enclosing a cheque for $22,857.17 for
the third year's rental less adjustments. The letter went on:-
"Our clients are intending to exercise the option but are unable to say at
this stage whether they will do so."
The cheque was accepted. This meant that the rental for each of the three years had either been paid as requested or in discharge of outgoings relevant to the property which were the liability of the appellant as sub-lessor.
On 15 April 1981 Mr Smith wrote to the trustee as follows:-but the copy we do have was not altered, to our knowledge, after the date of signing. This sub-lease was varied by a Deed of Variation and both documents were completed sometime in 1978.
"We do not have our client's stamped copy of the sub-lease at the moment
The letter also contained an offer to purchase the selections for cash at a reduced figure.
The appellant was not interested in the cash offer and the trustee wrote
back on 28 April 1981 informing the solicitor of this.
In that letter the
trustee also wrote:-
"However, I do note the notice given by your clients that they wished to
exercise the option as set out in the agreement."
About this time the appellant began to question alterations to the sub-lease document and in the letter of 28 April the trustee mentioned that the appellant had expressed discontent about alterations which had not been initialled by him. This was the first time that the appellant or his solicitor had communicated to Mr and Mrs Huttley or their solicitor any query as to the documentation. At this time the sub-lease documents had been registered by the Commission, the term of the sub-lease had almost expired and notice had been given exercising the option.
On 1 June 1981 Mr Smith wrote to the trustee indicating that his clients
were desirous of entering into a formal agreement as provided
for in the
fourth schedule to the sub-lease with necessary modifications contained in the
deed of variation. With regard to the balance
of purchase money the letter
contained the following:-
". . . . . The agreement between the parties, as is evidenced by
correspondence between their respective solicitors at the time,
was that
this balance would be payable over ten years with interest at the rate of 8%
p.a. The reference in the clause to instalments
of $30,000 was meant to be a
rough estimate of the annual payments of principal and interest and should
never really have been inserted
anywhere in the Agreements."
The letter also requested completion by 1 July 1981.
On 16 June the trustee indicated he was taking the necessary steps to have a
formal agreement for sale prepared. He added in a letter:-
I note your comments concerning the balance of the previous money referred
to in clause 2(c) of the Deed of Variation. It appears
that we may have to
disregard the amount of $30,000 and simply take the basis of the payment of
the balance as being ten annual payments
of principle with interest at the
rate of 8%."
On 28 July 1981 Mr Smith wrote submitting a formal agreement already signed by Mr and Mrs Huttley. This had followed upon a telephone conversation he had with the trustee.
Towards the end of July 1981, a Miss Gallo, who conducted a real estate
agency, indicated to the trustee that she had a buyer who
had offered $400,000
subject to inspection. The trustee, on 5 August 1981, wrote to the appellant
referring to Miss Gallo's letter
and stated:-
"I have been requested by the solicitors for Hutley (sic) to execute this
as Trustee of your property under Deed of Assignment.
The legal advice
obtained by me is to the effect that I must execute the document. You are
requested to read the formal Agreement
and let me know within 14 days
whether there are any cogent reasons why I should not go ahead and execute
the document."
Following this letter, on 14 August 1981, the appellant commenced the present proceedings.
Originally the appellant sought to avoid the agreement on a number of grounds which, broadly speaking, were that the agreement had been altered without his knowledge, that it had not been consented to and was unenforceable under the Land Act that, in any event, the option, which it purported to grant, was in terms too uncertain to be enforceable. On any one of these bases, he claimed, the trustee should be restrained from proceeding to sell the perpetual selections to Mr and Mrs Huttley.
The learned trial Judge rejected each of his claims and dismissed the application.
It is important to bear in mind, in considering the issues in this appeal, that his Honour, in coming to a decision, generally rejected the evidence of the appellant and Miss Gallo. He also regarded it as significant that Mr Savage, his solicitor, was not called. He was generally disposed to accept the evidence given by Mr Smith. These findings make it difficult for the appellant to attack the judgment on many matters. At the hearing of the appeal many submissions pressed below were not put and a number of the grounds of appeal were abandoned. However, in considering matters still pressed, the effect of his Honour's findings on credit need to be borne in mind.
At the hearing of the appeal it was contended by the appellant that the
learned trial Judge erred because, on several essential
matters, there had
been no agreement between the parties and that, therefore, either their
agreement had not been approved or the
agreement as approved did not
constitute their full agreement and because of the need for Ministerial
approval was unenforceable.
It was also contended that the option,
particularly as to payment of the balance of purchase money was in terms too
uncertain to
be enforceable.
Was there a concluded agreement on essential matters?
The first matter upon which this attack was based was an argument that there was no agreement that the appellant should pay the crown rents. Clause 1 of the Deed of Variation, in the form it was submitted to the Land Administration Commission in March 1979, varied clause 3 of the sub-lease to provide that the lessee would pay all Crown rents and all local authority general rates charges and assessments made, levied or imposed upon or against the land during the term but that the lessee should be entitled to deduct these except certain increases in respect thereof from the rental payable. As stated earlier, the Commission made approval of the proposed sub-lease conditional on the provision providing that the lessee should pay crown rents being deleted and a clause being inserted making payment of crown rents solely the responsibility of the sub-lessor.
Before being submitted for registration, the documents were altered first,
by deleting the reference to crown rents and secondly,
by inserting a new
clause 8 in the deed of sub-lease as follows:-
"8. The lessor shall duly and punctually pay the crown rental due and
payable upon the said land without recourse or contribution
being sought by
the lessor from the lessees."
These alterations which, on the face of the documents, appear to have been adopted by the parties thereto clearly met the condition contained in the Land Commission's letter.
The appellant however, relied on two letters written by Mr Smith on behalf of the Huttleys to support a submission that in fact no agreement had been reached.
On 6 April 1979, Mr Smith replied to a letter of 2 April from Mr Savage in
which the latter had stated in relation to the Commission's
requirements - "We
will attend to the necessary amendments on return of the lease documents from
the Bank of New South Wales." Mr
Smith said:-
"As indicated by you the remainder of the items could be attended to after
the Bank has returned the documents to you. However,
with regard to item 7,
we do not agree that the words 'crown rents' should be deleted from the Deed
of Variation but rather it should
be included in a separate agreement (or
incorporated in the lease itself) that the sub-lessor remains solely
responsible to the crown
for land rents. Our client still requires to be
able to pay the rents."
In a letter of 10 December 1979, Mr Smith wrote to the trustee, inter alia:-
"It was a condition of the sub-lease (as contained in the Deed of Variation thereto) that our client would pay all crown rents and all local authority general rates etc."
In considering this submission, it should be borne in mind that, under the documents in the form they bore in March 1979, although the lessees were to pay the crown rents, they were entitled to deduct amounts paid from the rental.
The evidence in the case shows that there had been a failure on the part of the lessor to pay the rents and at one stage during the term fixed by the sub-lease, the question of forfeiture arose. This would explain, of course, a desire on the part of the lessees to have a right to pay. On the other hand the lessees could have no objection to a clause which ensured that the lessor was liable to pay the crown rents and was to have no right of recourse against the lessees. Mr Smith's insistence that the lessees still required to be able to pay the rents was obviously intended to protect the sub-lease from forfeiture for non payment. The appellant clearly did not object to this nor did the Lands Commission because, in fact, in relation to the second and third payments of rent under the sub-lease, the lessees paid them and deducted from the sub-lease rental the amounts which they had paid.
There is no specific evidence that Mr Smith saw the deed of variation with the reference to crown rents deleted after 6 April 1949 and prior to registration. The opportunity for this to have occurred was, on the evidence, quite possible. As his Honour held, the solicitors involved seem to have forwarded documents without always sending a covering letter and the full extent of conversations were not proved before him. It is also significant that agreement had been reached by 6 April 1979 that Mr Savage, the appellant's solicitor, would make the amendments necessary to conform with the Land Administration Commission's provisos. This was, of course, subject to Mr Smith's reference to the deletion of the reference to crown rents but the possibility exists of there being discussion and agreement on this matter between December 1979 and the time when the documents were lodged for registration.
So far as the appellant's involvement was concerned, there was evidence that
his solicitor, Mr Savage, had kept him informed. By
letter to the trustee
dated 14 February 1980 he wrote:-
"We have kept Mr Di Felice advised of all matters and have asked him to
convey to you the situation from time to time."
According to his Honour, only one term of the agreement for sale was made the subject of attack by the appellant before him, namely, that relating to the payment of the balance of purchase money.
So far as concerns the making of alterations prior to the appointment of the trustee, his Honour held that the inference to his mind was inescapable that when the first payment of rental was made and accepted it was believed that everything had finally been agreed and this belief was founded on the appellant's solicitor's letter of 2 April undertaking to make the necessary alterations and that the alterations were made with the appellant's knowledge. The changes to the document made in April 1979 and the obligation to make further changes were accepted by the appellant along with the first payment of rental and thereafter it was not open to him to complain of those alterations.
His Honour accordingly held that the registered document recorded the totality of the final agreement between the parties and he regarded that finding as disposing of any argument that there was no concluded agreement.
His Honour concluded that all the changes made by Mr Savage were authorised by Mr Smith and instanced the deletion of the reference to crown rental as one of them.
On this basis, his Honour went on to find, however, that the making of any unauthorised changes by Mr Savage who was continuing to act with the consent of the trustee could not operate against the Huttleys so as to vitiate the contract or entitle the appellant to avoid it in the form in which agreement was reached in April 1979. He was not prepared to hold that part performance was a defence which would protect the Huttleys from the operation of ss. 11 and 59 of the Property Law Act (Statute of Frauds). On the other hand he felt that because of the trustee's conduct, the appellant was estopped from relying on those sections because he had assented to the sub-lease in its final form.
As we indicated earlier, this ground does not appear to have been raised at the hearing. On the evidence there was an opportunity for the solicitors to have agreed to the deletion before submission for registration. However, even if there was no actual agreement on the matter, it does not follow that the appellant is entitled to rely on the fact.
When the provisions are analysed, it will be seen that the clause as to
payment of crown rental etc. was not inconsistent with what
the Huttleys
wanted. In their solicitor's letter he said:-
"Our client still requires to be able to pay the rents."
The deletion of the words did not prevent them from actually paying the rents and clearly the new clause they agreed to which confirmed the liability for the sub-lessor did not prevent it. On this basis it seems to us difficult to conclude that the documents as registered did not represent the agreement between the parties. As the solicitor said, the appellant still wanted to be able to pay the rents. Nothing in the documents as registered impeded this. The fact that they paid them and deducted the crown rents from the rental due under the sub-lease was accepted by the appellant and his trustee.
Furthermore, this analysis shows that the term in question was not an essential term. It is hardly a basis upon which to defeat an agreement which appears to have been accepted as concluded by all parties.
The claim that the Minister's consent had not been given to it is equally tenuous. The Minister's concern was to ensure that the liability to pay crown rents rested on the shoulders of the sub-lessor without recourse. This was accepted by all parties and a clause inserted in the lease.
Apart from all this, we think his Honour was correct in holding that, in view of what happened, it is not now open to the appellant or to his trustee, if he so wished, to assert that the documents registered do not, in this respect, represent the agreement between the parties.
The second ground upon which counsel for the appellant relied was that there was failure to agree on the essential term of price. The argument was founded on two matters.
First, it was argued that the parties had not finally agreed as to the price to be paid for the property in the event of the option being exercised. There is in fact a discrepancy between clause 9 of the deed of sub-lease and the Memorandum of Agreement contained in the Fourth Schedule thereto as varied by the deed of variation. Clause 9 grants the sub-lessees the option to purchase the land and the equipment in the third schedule for $289,000. Clauses 1 and 2 of the Memorandum of Agreement as varied provide for a price of $299,000.
When clauses 1 and 2 of the Memorandum of Agreement as varied are read together, there is, in our view, no uncertainty as to the total price. It is $299,000. The deed of variation obviously represents the final agreement between the parties and to the extent to which there is a discrepancy, the provisions of clause 9 of the deed of sub-lease should, in our view, be regarded as overtaken.
The parties clearly intended $299,000 to be the purchase price because they go on to provide for the payment of the amount in certain smaller amounts which total $299,000. It is a clear case of oversight and it would be doing an injustice to the contracting parties to treat clause 9 as creating uncertainty or pointing to a failure to agree on an essential term.
On the evidence before the learned trial Judge, the explanation for the discrepancy is clear enough. The deed of sub-lease, as originally conceived, contained clause 8 which provided for the lessees to buy from the sub-lessor, equipment described in the second schedule for $10,000. The Memorandum of Agreement in the fourth schedule, in its original form, wrongly included within the option provided for in clause 9 the very same equipment. However, when clause 8 was struck out of the original draft and the deed of variation was executed, the Memorandum of Agreement made sense in so far as it referred to the equipment in the second schedule. It was then appropriate that the total purchase price be not $289,000 but $299,000, the second schedule of equipment being included. The solicitors clearly overlooked changing the figure in clause 9 of the deed of sub-lease from $289,000 to $299,000 when clause 8 was deleted.
The learned trial Judge explained it in this way:-overlooked a need for a consequential deletion of the Second Schedule. As one more boost to the rampat confusion, Mr Savage's Fourth Schedule to the sub-lease, an agreement for sale to be executed consequent upon an exercise of the option misdescribed the subject matter of the sale, mentioning the Second Schedule equipment instead of referring to the Third Schedule equipment. Mr Smith missed that error also. However, by his deed of variation, Mr Smith provided for the price payable on a sale pursuant to the option to be increased to $299,000 and for the sale to include, as well as the selections, 'all improvements erected thereon and fixtures fittings plant and machinery, thereby including the Second Schedule of equipment in the subject matter of the option.'"
"Clause 8 was struck out of that document by Mr Smith who, however,
Another matter which the appellant claimed showed lack of agreement as to price was the provision for payment of the balance of purchase money under the option. It provided for payment of the balance of $196,000 "within a period of ten (10) years from the date of completion of the sale by instalments of approximately thirty thousand dollars ($30,000) together with interest thereon at the rate of 8% per annum on the balance of purchase moneys from time to time owing." It also provided for the execution of a mortgage "to be prepared and registered by the Vendor's solicitors at the expense of the Purchaser and to contain the usual terms and conditions appropriate to such Mortgages."
The appellant submitted that the parties had not agreed upon the amount and times for payment of instalments and that this is illustrated by the correspondence between Mr Smith and the trustee after the Huttleys purported to exercise the option. In it Mr Smith indicated that the agreement between the parties was to pay the balance of purchase money over ten years by annual instalments with interest at 8%. He prepared and tendered an agreement on this basis. The trustee, in reply to this suggestion, was minded to adopt it. On 28 July 1981 Mr Smith submitted a formal agreement providing for the payment of annual instalments of not less than $19,600 over a period of ten years with interest at 8%. It was also submitted that even if the deed of variation represented the final agreement between the parties it was too uncertain in this respect to be enforceable.
Senior counsel for the second and third respondents argued that the documents, as registered, represented the final agreement between the parties, that the clause as varied by the deed of variation was not too uncertain to be enforceable and that it was a question of construing it. The construction preferred was that it required regular instalments of $30,000 each over a period of ten years. He argued, however, that if it should be construed as bearing some other meaning this did not mean it was uncertain.
In our opinion, the submissions put on behalf of the respondents should be accepted.
His Honour held that he could not, on the evidence, hold that the parties intended to contract in different terms to those set out in clause 3 of the deed of variation. He regarded those terms as the final agreement between the parties.
In our opinion, his Honour's findings in these respects should be accepted. Indeed, on the evidence before him, we do not think his Honour could properly have reached any other conclusion. Whatever difficulties of interpretation it may give rise to, clause 2(c) of the memorandum of agreement in the fourth schedule as varied by the deed of variation, was clearly adopted by them as part of their agreement when they signed it. The only question which arises therefore is whether what they accepted as their agreement was too uncertain to be enforceable.
The learned trial Judge found that the agreement was not void for uncertainty. Before him, as before us, the argument centred round the provisions for payment of instalments of $30,000. His Honour held that it was sufficiently certain to be given a meaning. He thought that the provision would be satisfied by seven instalments of "approximately" $30,000 over 10 years, for instance, it could be satisfied by seven instalments of $28,000 at approximately regular intervals over that period.
We agree with the conclusion which his Honour reached. Whatever difficulties may be involved in the interpretation of the provision they do not render it void for uncertainty.
The Courts, particularly in relation to commercial contracts, have been ready to overcome difficulties of interpretation and if practicable give meaning and effect to an agreement. Indeed, the circumstance that a provision may bear two or more possible meanings does not mean it is uncertain.
This approach is illustrated in the following passage from the judgment of
Barwick C.J. in Upper Hunter County District Council
v. Australian Chilling
and Freezing Co. Ltd. [1968] HCA 8; (1968) 118 C.L.R. 429 at pp. 436/7:-
"But a contract of which there can be more than one possible meaning or
which when construed can produce in its application more
than one result is
not therefore void for uncertainty. As long as it is capable of a meaning,
it will ultimately bear that meaning
which the courts, or in an appropriate
case, an arbitrator, decides is its proper construction: and the court or
arbitrator will
decide its application. The question becomes one of
construction, of ascertaining the intention of the parties, and of applying
it.
Lord Tomlin's words in this connexion in Hillas & Co. Ltd. v. Arcos Ltd.
[1932] UKHL 2; (1932) 147 L.T. 503, at p. 512 ought to be kept in mind. So long as the
language employed by the parties, to use Lord Wright's words in Scammell
(G.)
& Nephew Ltd. v. Ouston (1941) A.C. 251 is not 'so obscure and so
incapable of any definite or precise meaning that the Court is unable to
attribute to the parties any particular
contractual intention', the contract
cannot be held to be void or uncertain or meaningless. In the search for
that intention, no
narrow or pedantic approach is warranted, particularly in
the case of commercial arrangements. Thus will uncertainty of meaning,
as
distinct from absence of meaning or of intention, be resolved."
Mason J. at p.475 in a recent decision of the High Court (Meehan v. Jones [1982] HCA 52; (1982) 42 A.L.R. 463) spoke of ". . . . the traditional doctrine that courts should be astute to adopt a construction which will preserve the validity of the contract".
Of course, if the contract is what has been termed "illusory", that is to say, if notwithstanding that the parties thought they had agreed, it is on any view only an agreement to agree there is no contract. The courts still insist on the parties agreeing on the essential terms of the contract but nevertheless will find agreement if the words used will properly bear it. Meehan v. Jones (supra) Booker Industries Pty. Limited v. Wilson Parking (Qld) Pty. Limited [1982] HCA 53; (1982) 56 A.L.J.R. 825 and Sudbrook Trading Estate Limited v. Eggleton & Others (1982) 3 W.L.R. 315, are recent illustrations of this.
In this case it was submitted for the appellant that there were at least four meanings which could be given to the terms of the deed of variation providing for payment of the balance of $196,000 and reliance was, as we have indicated, placed on the fact that when the Huttleys came to exercise the option, their solicitor requested that the provision for payment of the balance be different to that contained in the contract so as to provide for ten equal annual instalments of $19,600 each. It was also submitted that it was capable of meaning that it was for the purchaser to determine when the instalments of approximately $30,000 would be paid and that these could be made on each day of the last week of the period of ten years. In the face of these possibilities, it was asked, how could the agreement be certain.
As stated earlier, a very significant circumstance is that the parties clearly adopted the deed of variation and the clause in question as expressing their agreement and it is for the court, in our view, if practicable, to give that provision meaning. The fact that several interpretations are possible, does not necessarily point to uncertainty. In our view in this case it raises only a question of construction.
The clause is the parties' provision for payment of the balance of purchase moneys. Normally, such provisions require the payment of the balance by equal instalments at regular intervals over a period, together with interest on the balance outstanding. Here, whether by oversight or otherwise, the clause lacked the usual precision that such clauses contain. However, we think it is capable of a meaning that is certain. Against the background of what is usual in such clauses we think the parties, by the words they used, intended that the balance would be paid by instalments of approximately $30,000 payable at regular intervals over the ten year period. The payment of seven instalments of $28,000 each at regular intervals over a period of ten years could, we think, fairly be described as "payment of the balance within a period of ten years by instalments of approximately $30,000." This was the view to which his Honour was attracted and we agree with it.
"Instalment" is defined by the Shorter Oxford Dictionary as meaning (inter alia) "the arrangement of the payment of a sum of money by fixed portions at fixed times". This is consistent with the view we have adopted.
It was submitted for the appellant that such a construction was not supported by commercial considerations when one had regard to the rate of interest of 8% made payable on the outstanding balance. However, in this respect it is important to bear in mind first that interest rates were lower than they are now at the time the deed of variation was executed and secondly, that 8% was the rate clearly adopted by the parties and presumably was what they considered would justly compensate the vendor for being out of his money pending payment of the balance. There is therefore no substance in this submission.
Another aspect of the payment of the balance of purchase money which was adverted to in argument was the provision requiring the execution of a mortgage to be prepared by the vendor's solicitors containing "the usual terms and conditions appropriate to such mortgages." No reliance was placed on this before the learned trial Judge as indicating uncertainty or a failure to reach agreement. He indicated that, in his view, having regard to cases such as Axelson v. O'Brien [1949] HCA 18; (1949) 80 C.L.R. 219, the provision was not uncertain. In our opinion, his Honour's view was correct. It is consistent not only with the decision of the High Court in the case mentioned but also with the more recent cases to which we have referred. If disagreement arose, it would not point to lack of agreement, for it would be competent for a Court, in an action for specific performance, to enquire into and determine what were the usual terms and conditions appropriate to a mortgage of the type in question.
The appellant further contended that there was no agreement as to the subject matter of the option. In support of this, counsel for the appellant relied on a paragraph in the letter from Mr Smith to Mr Savage of 6 April 1979, to which we have referred earlier and to certain conversations which Mr Huttley admitted in evidence he had had relating to this matter.
The document, as registered, constituted, as the learned primary Judge found, the agreement between the parties and, in our view, the agreement is clear as to what should constitute the subject matter of the option, namely, the property referred to in clause 1 of the fourth schedule to the sub-lease as amended by clause 2 of the deed of variation. This property is the land and all improvements erected thereon and fixtures, fittings, plant and machinery and all the equipment referred to in the second schedule. There is a variance between this and clause 9 of the sub-lease to which we have already referred but there is no uncertainty about it when the deed of variation is treated, as it should be, as the final agreement between the parties. So far as the sub-lease is concerned, it is, in terms, an agreement to sub-lease the land. The fact that the plant and equipment is not referred to except in the option does not mean that there is any failure to agree as to what was the subject matter of the sub-lease for, on its face, what was sub-let was the land.
The learned primary Judge found that, whatever discussions may have taken place in relation to the purchase and sale of the equipment in the second schedule, there was in fact no evidence of a concluded agreement in relation to it, except what is contained in the documents. We agree with this conclusion. What is contained in the documents is, in our view, capable of a clear construction.
Even if there had been an oral agreement to sub-let plant and equipment, we
do not think the failure to reduce that to writing or
put it in the sub-lease
would, as was submitted on behalf of the appellant, avoid the sub-lease for
want of Ministerial approval.
Such an agreement would be collateral in
character and might well be dependent on the sub-lease being entered into and
approved.
However, there is nothing in s.274 of the Land Act 1962 which
requires such an agreement itself to be approved.
Did the Minister approve of the agreement of sub-lease?
It was submitted that it was essential to the validity of the sub-lease and therefore of the option, that it be approved by the Minister under the Land Act and that this approval had not been given. It was also argued that as some of the terms which were inserted in the lease as registered and which we have referred to earlier in this judgment had not, in fact, been agreed upon, the actual agreement of sub-lease had not been approved and was therefore void.
Section 274(1) of the Land Act 1962-1978 provides that it shall not be
lawful for a lessee of certain holdings and selections to
sub-let them. They
do not include the selections in question here. Section 274(2)(3)(4) and (5),
s.296(1) (2) and (2A) and s.91 of
the Act provide:-
"274. . . . . . . . .a holding may, subject to paragraphs (b) and (c) of this subsection, with the prior approval in writing of the Minister, sublet the whole or any part of his holding.
(2) (a) Save as prescribed by subsection (1) of this section, a lessee of
(a) any preferential pastoral holding or selection; orcountry lease,
(b) any perpetual town lease, perpetual suburban lease, or perpetual
(a) comprised ofwho rank pari passu to share in the profits of the partnership or corporation in the same proportions as they hold the holding in question, and no other. 91. (1) Subject to this Act -
(i) himself; and
(ii) his spouse, children,
grandchildren and like descendants of his or any of them,
and no other; or
(b) comprised of persons who are lessees of the holding in question and
(b) any -thereof or interest therein, is a trustee, agent or servant of or for any other person,
(i) corporation whatsoever, or
(ii) person who in respect of the land applied for or held, or any part
shall not be competent to apply for or hold any selection.ordinarily depastured on a selection shall be prima facie evidence that the lessee is a trustee of the selection for the owner of the stock."
(2) Proof that the stock of any person other than the lessee are
His Honour found that the sub-lease had been approved by the Minister in writing pursuant to s.274(2) by the Land Administration Commissioner's letter of 14 March 1979, the Commission being the delegate of the Minister for the purposes of the Act (s.23(4)).
By virtue of s.274(2) (c) application is to be made for approval to the sub-lease not later than three months after the date of the agreement to enter into a sub-lease and it is to be accompanied by a draft of the proposed sub-lease. Here the agreement to enter into a sub-lease was constituted by the document of sub-lease when it was signed by the appellant. As his Honour found, this happened between the forwarding of the documents by Mr Smith on 8 December 1978 and 2 March 1979 when the application for Ministerial approval was made. That application was accompanied by a copy of the sub-lease as then executed by the parties.
The sub-section speaks of a "proposed" sub-lease. The fact that the sub-lease had by then been executed did not of course constitute non-compliance with the Act. It was not an effective sub-lease but its execution did entitle the parties to treat it, as between themselves, as an agreement for a sub-lease. (See Butts v. O'Dwyer [1952] HCA 74; (1952) 87 C.L.R. 267).
The Act contemplates the actual sub-lease coming into existence, as such, after Ministerial approval being given. It also contemplates that that approval may be given subject to conditions and modifications. Section 274(2) (e) assumes that as soon as practicable after approval is given the sub-lease will be executed in a form in which it complies with any conditions or modifications so imposed and lodged for registration.
In this case, the sub-lease and deed of variation, when first executed by the parties, were therefore not effective as a sub-lease because Ministerial approval had not then been given but were effective as an agreement for sub-lease. The Minister, through the Land Administration Commission, approved of the sub-lease being executed in accordance with those documents, subject to certain modifications. Those modifications were duly made. When made, as his Honour found, the documents represented the agreement between the parties. They were then submitted for registration and were duly registered.
This procedure, in our view, clearly complies with s.274 and constituted approval of the sub-lease. There was some argument as to whether actual registration constituted approval. In our view this question does not arise because the process that was followed satisfied the requirements of s.274.
We have already indicated that, in our opinion, the documents as registered
represented the agreement between the parties, that
in the material respects
alleged they were not uncertain, and, that there were no outside terms which
were not approved. There is
therefore no substance in the argument that the
actual agreement for sub-lease was not approved. Even if, contrary to our
view, there
was an agreement as to the leasing of certain machinery and plant
it was oral and did not need approval. What required approval was
the
agreement to sub-lease the selections and this was obtained in the manner we
have indicated.
Were the Huttleys in executing the sub-lease trustees for a company, V.M.
Huttley Pty. Limited and if so did this invalidate the sub-lease?
According to the evidence, the first draft of the sub-lease named a company of which Mr and Mrs Huttley were the shareholders and directors as the proposed sub-lessee. Its name is V.M. Huttley Pty. Limited. It is claimed that although the Huttleys were subsequently named as the sub-lessees in the document, in truth they were merely trustees for or nominees of their family company.
A number of circumstances were relied upon to establish this. For instance, in correspondence with the local council, Mr Smith referred to the company as the sub-lessee and as responsible for the payment of all rates. On occasions, in correspondence between him and the trustee, Mr Smith treated the company as if it were the sub-lessee. His Honour found that there was little doubt that the Huttleys would have preferred that the company had been the sub-lessee and that they did not allow their understanding that the company could not hold the sub-lease to disrupt their plans to use it in their operation of the property. Mr Huttley claimed that he and his wife did carry out farming on the selections and earned income in respect of which they submitted returns. However, the major farming operations were performed by the company. It paid the rent under the sub-lease including payments of crown rental and rates to the authorities. It purchased machinery and carried out improvements to the house and contouring of the land. It claimed taxation benefits by reference to these payments. They were made not at the direction of the Huttleys but on its own behalf. The Huttleys gave evidence that there was no trust in favour of the company but as his Honour pointed out this did not prevent the existence of an implied trust, nor did it mean that the Huttleys did not hold on behalf of the company or as nominee or agent for the company.
This evidence is not conclusive, but it does tend to support the view that they held such interest under the sub-lease for their family company and we prefer to determine the appeal on this basis. Even so, we think there are several answers to the appellant's submissions on this aspect.
Section 274(2)(b) applies to a sub-lease the same qualification tests as apply to a lessee by virtue of s.91. Thus, subject to the Act, a corporation is not competent to hold a sub-lease. Section 296 is concerned with the right or title of a person to a selection or an interest in a selection so that it also applies to a sub-lessee. The effect of s.296(2), however, is that the acquisition of an interest as trustee or agent for another is not to render the acquisition void but to make the right or title of the person to that interest liable to forfeiture. No forfeiture of the sub-lease has been effected and, in our opinion, both the sub-lease and the option granted under it still subsist. Likewise s.274 does not, in our opinion, render void a sub-lease to a corporation or to a person who holds as trustee or agent. By virtue of s.274(4), this would constitute a breach of the sub-lease and render it liable to forfeiture. The sub-lease itself, however, would remain valid and would subsist until forfeiture. If it were otherwise, there would be little point in s.274(4). Further, if it had been intended that the sub-lease should, in such circumstances, be unlawful, one would have expected the legislature to have so provided, particularly in the light of s.274(1).
It follows from this analysis that notwithstanding that the consent of the Minister was given on the basis that the Huttleys were to hold on their own behalf, the breach of that condition did not avoid the consent but left the sub-lease liable to forfeiture.
Reliance was placed, on behalf of the appellant, on the provisions of
s.296(2A) of the Land Act to exempt the sub-lease from any
effect s.294(2)
might have. However, this provision only applies to a holding not to an
interest in a holding and therefore can have
no application to this case.
Justice and Equity
At the hearing before the learned trial Judge, submissions were put by the
respondents based on s.212A of the Bankruptcy Act to the effect that it would
not be just and equitable for the appellant to be allowed to prevent the
exercise of the option. Because
we agree with the respondent's argument on all
other matters, there is no need for us to consider this issue.
Conclusions.
For all these reasons the appeal should, in our opinion, be dismissed. The appellant should pay the respondents' costs.
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