Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192 (21 June 1976)

HIGH COURT OF AUSTRALIA

QUADLING v. ROBINSON [1976] HCA 31; (1976) 137 CLR 192

Contract

High Court of Australia
Barwick C.J.(1), Gibbs(2), Stephen(3), Jacobs(4) and Murphy(5) JJ.

CATCHWORDS

Contract - Lease - Option for lessee to purchase - Notice of acceptance - Whether counter-offer or exercise of option with statement of intention - Exercise of option to be conditional upon consent of Sugar Cane Prices Board - Whether condition precedent or subsequent - Repudiation - Specific performance - Regulation of Sugar Cane Prices Acts, 1962 (Q.), s. 37.

HEARING

Brisbane, 1976, June 1.
Sydney, 1976, June 21. 21:6:1976
APPEAL from the Supreme Court of Queensland.

DECISION

June 21.
The following written judgments were delivered: -
BARWICK C.J. The appellant, by instrument in writing, leased certain in the instrument. To those of the terms on which the appellant relies we have been referred. They are cll. 12, 14, 15 and 16. The principal of these are cll. 14 and 15: indeed, in the long run, nothing was said relevantly to turn on the other clauses. I set out cll. 14 and 15 in full:

"14. It is hereby agreed that for the duration of this lease
and for ONE (1) MONTH thereafter the lessees shall have the
first firm and exclusive right to purchase free from
encumbrances whatsoever the premises hereby demised at or for
the price or sum of FIFTY THOUSAND DOLLARS ($50,000.00)
which said sum shall be paid in the following manner,
that is to say: -
(a) By a deposit of TWENTY-FIVE THOUSAND DOLLARS
($25,000.00) to be paid within ONE (1) MONTH of the
exercise of the said Option;
(b) By payment of the lessees to the lessor after the option
has been exercised during a period of THREE (3) years
from the exercise of the said option a sum equal to ONE
THOUSAND EIGHT HUNDRED DOLLARS ($1,800.00) in each
year by way of interest at the rate of 7.2% per annum
on the balance then outstanding;
(c) By payment of the balance or sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000.00) within THREE (3)
YEARS of the exercise of the said Option.
15. It is further agreed between the parties hereto that this
said Option shall be subject to the consent of the Central
Sugar Cane Prices Board hereto and any exercise of the said
Option shall be subject to the consent of the Central Sugar
Cane Prices Board thereto and should such consent not be
forthcoming then in such case it shall be subject to such
variation as shall from time to time be mutually agreed upon
between the parties, and failing mutual agreement shall be
deemed to have lapsed." (at p194)

2. On 17th October 1973, during the currency of the term of the lease, the respondents signed and delivered to the appellant a document in the following terms:

"We, ROBERT JOHN ROBINSON of Walkerston near Mackay
and NORMA CLARE ROBINSON his wife of Walkerston near
Mackay refer to a lease between you and us dated the
fifteenth day of July One thousand nine hundred and
seventy. We refer to the option which you have given to us
which is contained more especially in clause 14 of this lease
with reference also to clauses 12 and 16. WE HEREBY
EXERCISE THIS OPTION and require you to sign documents at
our solicitors office Messrs. Macrossan & Amiet, of 12
Gregory Street, Mackay. Upon receipt of the consent of the
Cane Prices Board you will be paid the sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000.00) and we will execute a first
mortgage in your favour over the said land in respect of the
balance of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) and
the interest terms as outlined in clause 14 of the said
document." (at p194)

3. The Central Sugar Cane Prices Board ("the Board") consented to the grant of the lease but it may be doubtful whether they approved the whole of the terms of the option. However, no issue arises out of this circumstance on the pleadings in the case. (at p194)

4. The respondents in fact offered to give the appellant a cheque for the sum of $25,000 on 18th October 1973, which offer was refused. As well, other steps were taken in connexion with the performance of the contract, but I do not pause to speak of them as nothing turns on them. The only agreement of which specific performance was sought in the action between the parties was an agreement said to be formed by the exercise on 17th October 1973 of the option contained in the lease. (at p195)

5. Apparently the approval by the Board of the exercise of the option was not sought. But, as conceded by the counsel for the appellant, that circumstance would not prevent the making of an order for specific performance if that course were otherwise warranted. Consequently, par. 9 of the statement of defence, which set up the failure to obtain the approval of the Board, does not constitute a defence of the action. The case made on the pleadings and the case dealt with by the primary judge and the Full Court of the Supreme Court of Queensland was whether or not the document of 17th October 1973 constituted an exercise of the option and brought into existence a contract subject, of course, to the approval by the Board of the contract so formed. (at p195)

6. In the respondents' action for specific performance, the learned primary judge (Kneipp J.) held that the document of 17th October 1973 was not an exercise of the option but merely a counter offer. He thus concluded because the respondents in the writing of that date said: "Upon receipt of the consent of the Cane Prices Board you will be paid the sum of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) and we will execute a first mortgage in your favour over the said land in respect of the balance of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) and the interest terms as outlined in clause 14 of the said document." Being of that opinion, his Honour found against the respondents and dismissed the suit. They successfully appealed to the Full Court of the Supreme Court of Queensland. The Full Court allowed the appeal, holding that by the document of 17th October 1973, read with the terms of the option, the respondents had "unequivocally ... bound themselves to the performance of the terms of the option"; and that the "stipulation about payment on receipt of the consent of the Central Sugar Cane Prices Board is not inconsistent with the performance of the obligation to pay within a month". The Full Court did not find the case of Carello v. Jordan (1935) St R Qd 294 , to which they had been referred, to stand in the way of that conclusion. (at p195)

7. The appellant submits in this Court that the reference to payment of the sum of $25,000 after receipt of the consent of the Board denied that the option in cl. 14 was exercised because it introduced a term inconsistent with the provisions of that clause: or, put another way, that the respondents had indicated that they were not intending to be bound by the terms of the option and that, rather, they wanted a different and inconsistent agreement. Citation was made by the appellant's counsel of Carter v. Hyde [1923] HCA 36; (1923) 33 CLR 115 ; Carello v. Jordan (1935) St R Qd 294 ; and Cavallari v. Premier Refrigeration Co. Pty. Ltd. [1952] HCA 26; (1952) 85 CLR 20 . (at p196)

8. The decision turns in each case upon its particular facts: the principle which they applied is not in doubt. However, having regard to one aspect of counsel's argument, I shall later say something of the joint reasons for judgment in the last-mentioned of these cases. (at p196)

9. The agreement to come into existence by the exercise of the option was by the terms of the lease to be subject to the approval of the Board. Clearly, the obtaining of the consent of the Board is an event to take place after the option has been exercised. It is the exercise of the option which is to be approved: that is to say, the agreement resulting from the exercise of the option is subject to a condition subsequent and in no sense is its formation subject to a condition precedent. It would be proper to say, in my opinion, that an unqualified obligation to pay the stipulated price does not arise from the exercise of the option until the approval of the Board to that exercise has been given. But the option must have been drawn up on the assumption that consent would be forthcoming within one month of the exercise of the option. Paragraph (a) of cl. 14, although subject to approval of the Board, does provide for the payment of $25,000 within one month of the exercise of the option. In fact, when approval of the lease itself was sought, it was obtained in eight days. One would naturally expect that an authority with the responsibilities and, doubtless, the expertise of the Board would be well able within much less than a month of being asked to approve or disapprove of the exercise of the option. But, of course, it must be pointed out that the relevant time begins with the exercise of the option and not with the approval of the Board. Further, it must be considered possible, though I would not think probable, that the approval of the Board may take longer than could be expected: or that an application for the approval may not be made at all within the month. It is beyond doubt, in my opinion, that it rested with the appellant as vendor to seek the Board's approval: and to do so with all due expedition. But he may fail of his obligation in this respect. (at p196)

10. In my opinion, the respondents, in the relevant statement in the document of 17th October 1973, might well have thought they were expressing what the parties contemplated, though there may be difficulty in accommodating that contemplation to the terms of the option. The substitution of the Board's approval for the date of the exercise of the option as determining the occasion for the payment was a departure from the language of the option. However, to offer to pay the $25,000 within one month of the date of the exercise of the option may be thought not to assert that, if the approval of the Board were not forthcoming within one month of the date of the exercise of the option, the amount would not be paid until after the approval was forthcoming. The positive statement that it would be paid did not necessarily contain a pregnant negative that the contract would not be performed. Thus, I agree with the Full Court of the Supreme Court that the respondents' statement was not inconsistent with the terms of the option. (at p197)

11. However that may be, the statement made in connexion with the performance of the contract did not, in my opinion, render nugatory the express exercise of the option nor evidence an intention to make a counter offer. (at p197)

12. If the respondents' phrasing should be construed as a statement as to what the respondents consider to be their obligation under the contract emanating from their exercise of the option, the result is not that that exercise is displaced, or precluded from being effective. Nothing in their language would support the view that they intended the exercise of the option to be contingent on the acceptance of their view of the obligations. The relevant language of the document of 17th October 1973, constitutes, on that view, no more than a statement of what the respondents intend in the performance of the contract. If their interpretation were in error and the contract, properly construed, required the payment of the $25,000 within a month of the exercise of the option, though by that time the Board had not signified its approval, the non-payment of that sum within that time would be a breach of the contract but would not afford ground for the rescission of the contract. Time in respect of that payment was not of the essence: though, if payment were not made, it might be made so by notice after the expiry of the month, though the failure of the appellant to endeavour to secure the approval of the Board would be a material consideration in that connexion. Non-payment within the time would have given the appellant a right to sue for the amount. A statement by the respondents as to their intention not to pay could rise no higher than their actual failure to pay. At best, it could possibly amount to an anticipatory breach but even so not, in my opinion, to a repudiation giving ground for rescission. (at p198)

13. In this connexion, I should make some observations upon the possible interpretation of the facts in Cavallari v. Premier Refrigeration Co. Pty. Ltd. [1952] HCA 26; (1952) 85 CLR 20 with which the joint judgment in that case dealt and upon which the appellant's counsel has placed some emphasis. On this interpretation, the option stipulated that the optionor should not be called upon to give possession until he had had such time (not being less than six months) as would enable him "to make arrangements re (his) business, plant etc." A statement in the purported acceptance of that offer, "vacant possession to be given after the expiration of six months" was said to render the purported exercise of the option so interpreted, ineffective: this, for the reason that, by omitting any reference to "enabling", the optionee made the arrangements to which he referred the basis of his purported exercise. This conclusion evidently treated the statement "vacant possession to be given after the expiration of six months" as indicating the relevant basis on which the purported exercise was made. Thus, the supposed case became one in which the optionee made acceptance of his view a condition of his purported exercise of the option. If that was the right analysis, the conclusion was, with due respect, acceptable. But I can find no analogy in that supposed case to this. Of course, it goes without saying that if an optionee purports only to exercise the option upon the footing that an erroneous construction of the option is accepted, there is no due exercise. But, as I have pointed out I am unable to read the document of 17th October 1973, read in the way it could be read most favourable to the appellant, as doing more than indicate how the optionees intend to perform the agreement which their exercise of the option, for whatever it provides, had brought into existence. (at p198)

14. For these reasons, I would dismiss the appeal. (at p198)

GIBBS J. By an agreement in writing dated 5th July 1970 the appellant leased to the respondents lands at Walkerston near Mackay for a term of three years commencing from 1st January 1971. Clauses 14 and 15 of the agreement provided as follows:

"14. It is hereby agreed that for the duration of this Lease
and for ONE (1) MONTH thereafter the lessees shall have the
first firm and exclusive right to purchase free from
encumbrances whatsoever the premises hereby demised AT OR FOR
the price or sum of FIFTY THOUSAND DOLLARS ($50,000.00)
which said sum shall be paid in the following manner,
that is to say: -
(a) By a deposit of TWENTY-FIVE THOUSAND DOLLARS
($25,000.00) to be paid within ONE (1) MONTH of the
exercise of the said Option;
(b) By payment of the lessees to the lessor after the option
has been exercised during a period of THREE (3) YEARS
from the exercise of the said option a sum equal to ONE
THOUSAND EIGHT HUNDRED DOLLARS ($1,800.00) in each
year by way of interest at the rate of 7.2% per annum
on the balance then outstanding;
(c) By payment of the balance or sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000.00) within THREE (3)
YEARS of the exercise of the said Option.
15. It is further agreed between the parties hereto that this
said Option shall be subject to the consent of the Central
Sugar Cane Prices Board hereto and any exercise of the said
Option shall be subject to the consent of the Central Sugar
Cane Prices Board thereto and should such consent not be
forthcoming then in such case it shall be subject to such
variation as shall from time to time be mutually agreed upon
between the parties, and failing mutual agreement shall be
deemed to have lapsed."

Clause 12 excluded from the lease a building allotment on the lands described and cl. 16 excluded from the option portion of the lands demised but the details of these clauses are not material. The lands were used as a cane farm and were assigned to the Pleystowe Mill and it was accordingly necessary to seek the approval of the Central Sugar Cane Prices Board ("the Board") constituted under the Regulation of Sugar Cane Prices Acts, 1962 (Q.), as amended, to the lease: see s. 37 of that Act. On 24th July 1970 the Board intimated its approval in the following terms:

"(i) Approved Lease.
(ii) Parties are informed that approval of the lease is not
necessarily approval of the purchase price contained in
the option Clause 14. If the option is exercised the
transaction must be submitted under Section 37."

On 17th October 1973, which was of course before the expiration of the lease, the respondents delivered to the appellant a letter purporting to exercise the option under the lease. The letter was in the following terms (omitting formal parts):

"We, ROBERT JOHN ROBINSON of Walkerston near Mackay
and NORMA CLARE ROBINSON his wife of Walkerston near
Mackay refer to a lease between you and us dated the
fifteenth day of July One thousand nine hundred and
seventy. We refer to the option which you have given to us
which is contained more especially in clause 14 of this lease
with reference also to clauses 12 and 16. WE HEREBY
EXERCISE THIS OPTION and require you to sign documents at
our solicitors office Messrs. Macrossan & Amiet, of 12
Gregory Street, Mackay. Upon receipt of the consent of the
Cane Prices Board you will be paid the sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000.00) and we will execute a first
mortgage in your favour over the said land in respect of the
balance of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) and
the interest terms as outlined in clause 14 of the said
document."

However, the appellant has refused to join with the respondents in seeking the approval of the Board to the sale, or to receive the deposit of $25,000 which the respondents offered notwithstanding that the Board's approval had not been obtained, or otherwise to complete the transaction. The respondents commenced proceedings for specific performance in the Supreme Court of Queensland and the Full Court of the Supreme Court, reversing the learned trial judge, have held that the respondents are entitled to a declaratory order for specific performance of the agreement constituted by the exercise of the option. From this judgment the appellant now appeals. (at p200)

2. The sole submission relied upon by the appellant before us was that the option was not validly exercised, because the letter of 17th October 1973 was not an unqualified acceptance of the rights and liabilities specified in the option agreement. Under cl. 14 (a) the deposit of $25,000 is to be paid "within ONE (1) MONTH of the exercise of the said Option". By the letter of 17th October 1973 the respondents state that "Upon receipt of the consent of the Cane Prices Board you will be paid the sum of TWENTY-FIVE thousand dollars ($25,000.00)". According to the submission of the appellant this meant that payment would not be made until receipt of the consent of the Board notwithstanding that such consent was not obtained within one month, and that accordingly the letter did not bind the respondents to perform the terms set out in cl. 14 (a) of the lease. It was conceded that payment of the deposit did not form a necessary part of the exercise of the option. (at p200)

3. In Laybutt v. Amoco Australia Pty. Ltd. [1974] HCA 49; (1974) 132 CLR 57, at pp 71-76 I discussed the nature of an option, but whether (as I think) the option in the present case was a conditional contract of sale, or whether it was merely an irrevocable offer to sell, it is clear that the exercise of the option, to be valid, must have been absolute and unqualified and must have bound the respondents to perform the very terms set out in the option. Authority is hardly necessary to support this statement, but some of the cases are collected in the judgment of Smith J. in Ballas v. Theophilos (1958) VR 576, at p 581 (which was affirmed on somewhat different grounds [1957] HCA 90; (1957) 98 CLR 193 ). However, it is not always easy to determine whether the purported exercise of an option should be understood as attempting to vary the terms of the option or as intending to accept its terms without modification, notwithstanding that they may have been misdescribed, or notwithstanding that the grantee of the option may have indicated that he intends to perform the contract in a manner for which the terms of the option do not provide. Thus although a notice misstates the terms of the option which it purports to exercise, it may nevertheless amount to an unqualified and unconditional exercise of the option: see Carter v. Hyde [1923] HCA 36; (1923) 33 CLR 115, at pp 121-122, 126, 133 . On the other hand, if the grantee of an option sets out his own erroneous understanding of the option, and then purports to exercise the option as so understood, there will (speaking generally) be no effective exercise of the option: see Cavallari v. Premier Refrigeration Co. Pty. Ltd. [1952] HCA 26; (1952) 85 CLR 20, at pp 26-27 . It must of course depend upon the proper construction of the document by which the grantee purports to exercise an option whether it amounts to an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option. (at p201)

4. Before dealing with this question in the present case it is convenient to consider the effect of cl. 15 of the lease which makes both the option and its exercise subject to the consent of the Board. The necessity for obtaining the approval of the Board to the lease or sale of the lands arose because of the provisions of s. 37 of the Act which, so far as material, provide as follows:

"... an assignment shall lapse if the cane-grower holding
that assignment sells, leases, sub-leases, lets or otherwise
transfers or disposes of the lands contained in that
assignment or any part therof unless such cane-grower has
obtained the prior approval in writing of the Central Board to
such sale, lease, sub-lease, letting, transfer or disposition, as
the case may be, in which case the assignment of such lands
or such part thereof shall be deemed to be transferred to the
person to whom such sale, lease, sub-lease, letting, transfer or
disposition, as the case may be, has been made."

If an assignment under the Act were to lapse the cane-grower would no longer be able to require the mill to which the lands were assigned to accept and pay for his cane (see s. 50 and see also ss. 41 (2) and 55, and definition of "farm peak" in s. 5) and the lands would be valueless, at least as a cane farm. As was rightly said in Goodwin v. Temple (1957) St R Qd 376, at p 380 of an earlier section corresponding to s. 37, "this provision dominates any proposed dealing in lands having a mill assignment". (at p202)

5. In my opinion it is clear that the provisions of cl. 15 do not require that the Board should consent to the option itself. What cl. 15 provides is that the option "shall be subject to the consent of the ... Board hereto" and these words must refer to the consent of the Board to the lease. The word "hereto" appears in cl. 15, and not in cl. 14 by which the option is given, and for that reason would not naturally refer to the option. Further, s. 37 does not render necessary the Board's approval to the giving of an option and if cl. 15 were ambiguous this circumstance would support the view that the introductory words of that clause speak of the consent to the lease and not of the consent to the option. The Board did of course give its approval to the lease. However, the exercise of the option would result in a sale or disposition of the lands and would require the prior approval of the Board under s. 37. The second part of cl. 15 accordingly makes the exercise of the option subject to the consent of the Board. (at p202)

6. The argument on behalf of the appellant was based on the assumption that the option under cl. 14 would be effectively exercised once a sufficient notice were given of an intention to exercise it and that the provisions of cl. 15 that the exercise "shall be subject to the consent" of the Board impose a condition subsequent rather than a condition precedent. On this assumption cl. 14 (a) would require payment of the deposit within one month of the date of the giving of such notice notwithstanding that the consent of the Board was not obtained within that period. In my opinion, however, the second part of cl. 15 makes the consent of the Board a condition precedent to an effective exercise of the option. That seems to me the natural meaning of the words of cl. 15, but if they are ambiguous they should be construed in the light of the fact that it was essential to the continued operation of the cane farm that an assignment should continue in force, and it should not be concluded that the parties intended to enter into a contract that might render the assignment liable to lapse. It appears from a number of provisions of the lease (particularly the reddendum and cll. 9, 10 and 13 as well as cl. 15) that the purpose of the lease was that the lands should continue to be used as a cane farm, although that was in any case obvious. Any ambiguity in the words of cl. 15 should be resolved by giving them an effect which avoids any collision with the requirements of s. 37. For these reasons it appears to me that the effect of cll. 14 and 15, upon their proper construction, is that anything done in an attempt to exercise the option would be conditional upon the approval of the Board being obtained. Although the respondents might, without first obtaining the Board's approval, give a notice declaring their intention to exercise the option, the notice would not take effect until the Board had given its approval. Of course it would have been open to the parties to agree that the deposit should be paid within one month of the giving of the notice, but in fact they agreed that it should be paid within one month of the exercise of the option, and since the option could not be exercised until the Board had given its approval, this meant within one month after both necessary events (the giving of the notice and the approval of the Board) had occurred. The statement in the letter of 17th October 1973 therefore amounted to an intimation, not that the respondents might delay payment beyond the time stipulated, but that they would make payment earlier than the contract obliged them to do. An acceptance of the terms of an option is not rendered ineffective because it is coupled with a statement of intention to pay more quickly than those terms require. (at p203)

7. If I am wrong in my opinion as to the construction of cll. 14 (a) and 15, I would nevertheless consider (although not without some hesitation) that the letter of 17th October 1973 did not depart from the terms of cl. 14 (a) of the lease, and was a valid exercise of the option. The letter commenced by identifying the option and then stating "We hereby exercise this option". That was of course an unequivocal and unqualified acceptance of the option. The letter then went on to state that payment of the deposit would be made upon receipt of the consent of the Board; if the contract required payment within one month of the giving of the notice exercising the option it is obvious that if the Board's consent were not obtained within one month a payment made as indicated in the letter would not be in conformity with the requirements of cl. 14 (a). However, I cannot accept that the letter should be read as a statement by the respondents that although they exercised the option they did not intend to carry out its terms. The letter does not state that the respondents understood that their obligation was not to pay within one month of the exercise of the option, nor did they say that they declined to make payment before the Board gave its consent if the contract required such payment. It would have been natural to think that if the Board approved it would give its approval within one month. The letter would, I think, be understood by an ordinary reasonable recipient as an outright exercise of the option, coupled with a statement of the respondents' intention as to the time when payment would be made, but not as a declaration that the respondents would not pay at an earlier date if the option required it. (at p204)

8. The case of Carello v. Jordan (1935) St R Qd 294 , upon which the appellant relied, is in my opinion distinguishable, although the line between that case and the present is a fine one. There the option provided that the purchase price should be payable as to two hundred pounds "on the exercising of this option". The notice purporting to exercise the option commenced by stating "I do hereby exercise the option ..." but went on: "Take further notice that I tender you herewith a deed of assignment together with a transfer of the selection to give effect to the purchase, and take further notice that my solicitor ... holds the sum of two hundred and fifty pounds and will pay the same over to you on completion of the above documents tendered you for execution herewith". It was the insistence that these documents be completed that was regarded by the Court as a qualification of the provisions of the option and as rendering the purported exercise ineffective - see particularly per Henchman J. (1935) St R Qd, at p 322 . (at p204)

9. The appellant cannot rely upon the fact that the approval of the Board has not yet been obtained, because his conduct has prevented the necessary application from being made to the Board for its approval. If it proves necessary, he may be ordered to join in an application for the Board's approval: Butts v. O'Dwyer [1952] HCA 74; (1952) 87 CLR 267 . (at p204)

10. In my opinion the Full Court was right in decreeing specific performance and the appeal should be dismissed. (at p204)

STEPHEN J. I have had the advantage of reading the reasons for judgment of the Chief Justice and of Gibbs J. I agree with their disposition of this appeal. (at p204)

2. Whether the consent of the Central Sugar Cane Prices Board, to which any exercise of the option to purchase was made subject by cl. 15 of the lease, be regarded as a condition precedent, as my brother Gibbs would have it, or a condition subsequent, the view taken by the Chief Justice, the respondents' exercise of the option must in any event be valid and effective. Their exercise of the option involved an unqualified acceptance of the previously agreed terms upon which they were entitled to purchase the demised land and did not constitute any counter-offer. Their reference to payment of the deposit "upon receipt of the consent of the Cane Prices Board" should not be understood as seeking to alter the terms upon which they might purchase the property but rather as an intimation of the time when, as they then appreciated the position, payment would be made. It appears probable that, but for the appellant's subsequent conduct, that appreciation would have perfectly coincided with the terms of the contract; the Board would have given its consent a few days after application was made to it and payment "upon receipt of the consent" would then have resulted in payment "within one month of the exercise of the said option". (at p205)

3. I would dismiss this appeal. (at p205)

JACOBS J. I agree with Barwick C.J. that the option was validly exercised and that the words "Upon receipt of the consent of the Cane Prices Board you will be paid the sum of TWENTY-FIVE THOUSAND DOLLARS" did not make the acceptance of the offer constituted by the option a conditional acceptance which added to or varied the terms of the offer which had been made. They were no more than an indication of a way in which the contract could be carried to completion consistently with the need or supposed need to obtain the consent of the Cane Prices Board. I would dismiss the appeal. (at p205)

MURPHY J. The question is whether there was a valid exercise of the option contained in cl. 14 of the instrument of lease between the parties. Clause 14 states:

"14. It is hereby agreed that for the duration of this lease
and for ONE (1) MONTH thereafter the lessees shall have the
first firm and exclusive right to purchase free from
encumbrances whatsoever the premises hereby demised AT OR FOR
the price or sum of FIFTY THOUSAND DOLLARS ($50,000.00)
which said sum shall be paid in the following manner, that is
to say: -
(a) By a deposit of TWENTY-FIVE THOUSAND DOLLARS
($25,000.00) to be paid within ONE (1) MONTH of the
exercise of the said Option;
(b) By payment of the lessees to the lessor after the option
has been exercised during a period of THREE (3) YEARS
from the exercise of the said option a sum equal to ONE
THOUSAND EIGHT HUNDRED DOLLARS ($1,800.00) in each
year by way of interest at the rate of 7.2% per annum
on the balance then outstanding;
(c) By payment of the balance or sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000.00) within THREE (3)
YEARS of the exercise of the said Option.

The purported exercise in writing was:

"We ... refer to a lease between you and us dated ... We
refer to the option which you have given to us which is
contained more especially in Clause 14 of this lease with
reference also to clauses 12 and 16. WE HEREBY EXERCISE
THIS OPTION and require you to sign documents at our
solicitors office.... Upon receipt of the consent of the Cane
Prices Board you will be paid the sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000.00) and we will execute a first
mortgage in your favour over the said land in respect of the
balance of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) and
the interest terms as outlined in Clause 14 of the said
document."

Clauses 12 and 16 of the instrument are not relevant to this appeal. (at p206)

2. The words "WE HEREBY EXERCISE THIS OPTION" are themselves an unconditional exercise of the option. The appellant contended that the added words vitiate the exercise of the option because they constitute either a counter-offer or a simultaneous repudiation of the contract. The added words are not a counter-offer, either express or implied. (See Carter v. Hyde [1923] HCA 36; (1923) 33 CLR 115 .) They state what the respondent intended to do "upon receipt of the consent of the Cane Prices Board" (the exercise of the option being by cl. 15, subject to the consent of the Board). It was conceded that the provision for consent of the Board did not preclude the remedy of specific performance. (at p206)

3. There are several answers to the contention that the additional words amounted to a repudiation. One is that the stated intention was not necessarily inconsistent with due performance of the contract (depending upon subsequent circumstances). Another is that even if it were inconsistent, there was no intimation amounting to repudiation. (at p206)

4. The suggested repudiation (anticipatory breach) does not meet the test proposed by Lord Coleridge C.J. in Freeth v. Burr (1874) LR 9 CP 208, at p 213 :

"...where the question is whether the one party is set free by
the action of the other, the real matter for consideration is
whether the acts or conduct ... do or do not amount to an
intimation of an intention to abandon and altogether to
refuse performance of the contract."

A mere misconstruction of the obligations does not amount to repudiation (James Shaffer Ltd. v. Findlay Durham & Brodie (1953) 1 WLR 106 .) The construction put on the contract by the respondent, even if erroneous, was not "impossible or a stupid point of view to suggest" (to use the words of Morris L.J. in James Shaffer Ltd. v. Findlay Durham & Brodie (1953) 1 WLR, at p 123 ). (at p207)

5. In my opinion, the respondents did not intimate an intention not to be bound by the contract into which they were entering. The option was (subject to the consent of the Board) validly exercised. The appeal should be dismissed. (at p207)

ORDER

Appeal dismissed with costs.