Lamont v Heron [1970] HCA 47; (1970) 126 CLR 239 (20 November 1970)

HIGH COURT OF AUSTRALIA

LAMONT v. HERON [1970] HCA 47; (1970) 126 CLR 239

Vendor and Purchaser

High Court of Australia
Barwick C.J.(1), McTiernan(2), Owen(3), Walsh(4) and Gibbs(5) JJ.

CATCHWORDS

Vendor and Purchaser - Sale of land - Contract - Option to purchase - Time for exercise - Meaning of "30 days option" - Method of exercise - Telegram referring to "letter following".

HEARING

Sydney, 1970, November 19, 20. 20:11:1970
APPEAL from the Supreme Court of New South Wales.

DECISION

BARWICK C.J. In this matter the appellants on 21st January 1969 gave to the respondent in writing an option to purchase a parcel of land owned by them at Wyoming in the Shire of Gosford comprising about eleven acres for a cash price of $22,000. The QB 161; Young v. Higgon [1840] EngR 297; (1840) 8 Dowl. PC 212; 6 M & W 49 (151 ER
"In consideration for the sum of one dollar ($1.00) we hereby
grant to Mr. B. S. Heron, 30 days option to purchase Lot 13
in Deposited Plan 22207 Parish of Gosford Shire of Gosford
County of Northumberland having a frontage to Day Street,
Wyoming and an area of about 11 acres for the sum of $22,000
cash." (at p241)

2. On 19th February 1969, the respondent sent to the appellants QB 161; Young v. Higgon [1840] EngR 297; (1840) 8 Dowl. PC 212; 6 M & W 49 (151 ER

"Advise taking up our option Wyoming Street land as per
option given by you stop Letter following." (at p242)

3. On the same day, 19th February 1969, the respondent wrote to the appellants a letter which contained the following relevant paragraphs :

"I wish to advise that I am taking up the option granted to
me by you and your wife as per your letter of 21st January
1969, for approximately 11 Acres of Residential Land being
Lot 13 in D.P. 22207, Day Street, Wyoming for a figure of
$22,000.
Please forward a contract for approval to my Solicitors,
Burridge & Legg, 14 The Centre, Forestville." (at p242)

4. The appellants received that letter on 20th February 1969. (at p242)

5. At the suit of the respondent the Supreme Court in Equity ordered the specific performance of the contract to sell and to purchase the land which the learned judge constituting the Court held to be formed by the grant of the option and its exercise which his Honour held to be effected by the respondent's letter of 19th February. (at p242)

6. The appellants on appeal to this Court submitted first that the option to purchase granted to the respondent expired at the end of the day of 19th February, that the telegram of 19th February was ineffective to exercise the option because it was not unconditional. It was said that the statement "Letter following" necessarily prevented the exercise of the option being unconditional. (at p242)

7. Secondly, that if the option to purchase did not expire until the end of the day of 20th February 1969 the respondent's letter of 19th February was not an unconditional exercise of the option because of the request to forward a contract for approval by the respondent's solicitors. (at p242)

8. The appellant's counsel sought to fortify what he claims is the necessarily conditional nature of the taking up of the option by reference to answers obtained from the respondent under cross-examination in which the nature of the contents of the draft contract which the respondent expected to receive were discussed. (at p242)

9. The Supreme Court acceded to the submission that the telegram was not an exercise of the option because of the statement that a letter would follow. His Honour, whilst not founding himself upon it, found some support for that view in a decision in the Supreme Court of New Zealand in Armstrong v. Wellingt on Manawatu Railway Co. Ltd. (1885) 3 NZLR 441 . There Richardson J. said of a telegram which had said that a tender was accepted but added the words "Letter by post" (1885) 3 NZLR, at pp 444-445 :

"The next point is that there was by telegram an unqualified
acceptance. That position is, I think, not tenable, because
the telegram itself refers to a letter posted. It would be a
most injurious decision if I were to hold that the telegram was
an unconditional acceptance. It is impossible in these brief
messages to give complete information, and it is a well-known
mercantile custom to refer in a telegram to a letter posted,
which means that the conditions are fully explained in writing
in a letter which has been forwarded." (at p243)

10. In fact, in that case, the following letter confirmed the acceptance of the tender and dealt with a matter of sureties for the performance of the contract, a matter touched upon by the tenderer in his tender but not being part of the tender nor part of the acceptance. (at p243)

11. If the decision of the New Zealand case depended upon some local commercial practice which, because of its notoriety, could properly be held to give local significance to a statement that a letter had been posted, I might be able to agree with the relevant conclusion expressed by the Supreme Court. But, in that event, the decision has no relevance to the present circumstances. However, if the decision is not to be explained in this manner, I find myself quite unable to agree with it. (at p243)

12. I cannot read the telegram in the instant case as no more than a preliminary announcement of an intention on the part of the respondent subsequently to exercise the option. The use of the word "advice" does not, in my opinion, import into the expression "taking up" any element of futurity. It is no more, in my opinion, than a statement, such as "for your information" or "I inform you that I am". The circumstance that it was a telegram sent on 19th February points against the conclusion that the telegram was merely tentative, as did, in my opinion, the actual words employed. (at p243)

13. In my opinion, the language of the telegram is clear enough. It purports to exercise the option, and its terms are apt to do so. The reference to a letter to follow does not, in my opinion, indicate that its exercise of the option is, in any sense, qualified or deferred. That that exercise should be confirmed by some more formal writing than a telegram does not detract from the effectiveness of the exercise of the option by the telegram. The final words of the telegram do not indicate that the letter to follow will be anything but such a confirmation. (at p243)

14. In my opinion, the option to purchase was effectively exercised by the respondent by the telegram sent and received on 19th February 1969. This is enough to dispose of this appeal. (at p243)

15. However, I should say something briefly as to the other submissions of the appellants. It was said that the equitable interest deriving from the grant of the option was created by that grant and vested in the optionee on the day the option was granted. Further, it was said that the option was capable of exercise on the day it was granted. (at p244)

16. Some authorities in this connexion were cited, but I need not refer to them because it seems to me quite clear that both these propositions are correct ; but granted that the equitable interest came into existence immediately upon the grant of the option and that the option was capable of exercise on the day of its grant, these conclusions do not seem to me to require that it should be held that the day of the grant of the option should be counted as one of the thirty days for which the option was granted. The question is not when the equitable interest in the land began or how soon the option could be exercised. The question is when the equitable interest would cease and what time the option would expire, both events being contemporaneous. (at p244)

17. Counsel submitted that there was some rule of law which required the Court to hold that the day of the grant of the option was included in the thirty days for which it was granted ; but in my opinion there is no such rule of law. In Associated Beauty Aids Pty. Ltd. v. Federal Commissioner of Taxation [1965] HCA 20; (1965) 113 CLR 662, at p 668 , I dealt briefly with the consequences of the use of the preposition "from" in an expression delineating a period of time. In this case there is no such preposition. The relevant time is said to be thirty days ; but what I said in that case as to the context in which an expression is found, including the purpose which the document in which it is found is evidently designed to effect, is quite applicable in deciding what the words of the document in this case mean. They are found in an option to purchase. The words are "thirty days" for which the option is granted. Bearing in mind the purpose of fixing a duration for the option, I am of opinion that in such a document the words mean that the optionee will have the succeeding thirty days in which to exercise the option. Whilst it is true that, theorectically, the option could be exercised immediately on the day it is granted, the real purpose of taking an option is to obtain a period of time during which the question of its exercise can be considered. There is no reason why an optionee should or should not desire to exercise the option on the day it is granted. (at p244)

18. I am clearly of opinion that the true meaning of the writing of 21st January is that the option to purchase should remain open until the end of 20th February 1969. (at p245)

19. Lastly, it was said that the request for a draft contract for a solicitor's approval should be regarded as an indication that the respondent was not accepting the terms of purchase set out in the grant of the option, but that he required a statement of the appellant's terms in the form of a draft contract so that his solitor might consider them in order to decide whether or not the respondent would agree to purchase upon them. I am unable to accept this submission. The taking up of the option is not said to be subject to a contract approved by the solicitor, nor, in my opinion, can the last paragraph of the letter be read as making that taking up subject to such a contract. Rather, in my opinion, that paragraph of the letter ought to be read as no more than an indication that the respondent desired the agreement to purchase to be reduced into a formal document, in which event he desired his solicitor to ensure that that document did express the agreement which had been made. The reduction of an informally made agreement into a formal document is not infrequently done as a prudent matter of business. Even if it had been thought by the respondent that some additional terms of a conveyancing nature might be agreed upon and expressed in the formal contract, that circumstance, in my opinion, would not make the exercise of the option ineffective, and nothing is to be derived from the oral evidence which, in my opinion, was irrelevant to the meaning or operation of the documents in this case. (at p245)

20. In my opinion the letter of 19th February received on 20th February, if the telegram of the 19th had not done so, would have effectively exercised the option to purchase granted on 21st January. (at p245)

21. In my opinion the order of the Supreme Court was right and this appeal should be dismissed. (at p245)

MCTIERNAN J. I agree with the judgment of the Chief Justice in so far as it deals with the interpretation of the telegram of 19th February 1969. (at p245)

2. I would dismiss the appeal on that ground. (at p245)

OWEN J. I agree that the appeal should be dismissed, since I am of the opinion that the plaintiff exercised the option given to him by the defendants by the telegram to which the Chief Justice has referred. (at p245)

2. In these circumstances I do not express any opinion on the other points which were argued before us. (at p246)

WALSH J. I am of the opinion that the option was exercised effectively when on 19th February 1969 the telegram sent by the respondent on that day was received by the appellants. (at p246)

2. I agree with the reasons which the Chief Justice has given for reaching that conclusion. It is therefore unnecessary for me to decide whether or not the letter of 19th February received by the appellants on 20th February constituted an unqualified acceptance of the offer contained in the option document or to decide whether or not that acceptance was within time. (at p246)

3. In the circumstances I prefer to refrain from expressing any opinion on those matters. I agree that the appeal should be dismissed. (at p246)

GIBBS J. I agree that the appeal should be dismissed for the reasons given by the Chief Justice. (at p246)

ORDER

Appeal dismissed with costs.