New South Wales Supreme Court CITATION : Carter v Schmitt & Ors [2003] NSWSC 1166 HEARING DATE(S) : 30 October 2003, 10 November 2003 JUDGMENT DATE : 10 December 2003 JUDGMENT OF : Smart AJ at 1 DECISION : See para 71 CATCHWORDS : Option to renew - Agricultural Tenancy - whether correctly exercised LEGISLATION CITED : Agricultural Tenancies Act 1990 Agricultural Tenancies Regulation 2001 Ballas v Theophilos (No 2) (1957) 98 CLR 193 Bava Holdings Pty Ltd v Pando Holdings Pty Ltd (1998) NSW Conv R 55-862 Carter v Hyde (1923) 33 CLR 115 CASES CITED : Mannai Investments Co Ltd v Eagle Star Insurance Co Ltd 1997 AC 749 Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 Riltang Pty Ltd v L Pty Ltd [2002] NSWSC 625 Tonitto & Anor v Bassal & Ors (1992) 28 NSWLR 564 PARTIES : Keith Carter v Schmitt & Ors FILE NUMBER(S) : SC 4878/03 COUNSEL : (P) Mr Bradford (D) Ms Bartush-Peek SOLICITORS : (P) Booth, Brown, Samuels & Olney (D) Long, Howland IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST SMART AJ Wednesday, 10 December 2003 4878/03: Keith Carter v Schmitt & Ors JUDGMENT 1. The plaintiff, Keith Carter, and his wife have owned a rural property known as "Maybrook", River Road, Geurie for a number of years. By an agreement of 4 November 1998 Mr Carter entered into a sharefarming agreement with John Francis Schmitt, his wife Margaret Rose Schmitt and their sons Andrew John and Mark Frederick. That agreement confers on the Schmitts an option to renew the agreement for a further three years subject to following a particular procedure and to certain conditions. The Schmitts, by their solicitors purported to exercise the option to renew but the plaintiff asserts that it was not validly exercised in that: (a) the Schmitts did not follow the procedure specified in the agreement for exercising the option, and (b) the Schmitts did not comply with all the conditions and agreements contained in the sharefarming agreement; substantial breaches were alleged 2. There have been many disputes between the parties. Investigating this latter aspect of alleged breaches is likely to involve a lengthy hearing on the facts. The parties agreed that certain preliminary issues should be resolved first, namely: (1) Whether as a matter of construction the notice in the letter of 27 June 2003 (from the defendants solicitors to the plaintiff's solicitors) is capable of constituting a valid exercise of the option to renew the sharefarming agreement. (2) Whether it was a permissible method of exercising the option to renew the sharefarming agreement between the plaintiff and the defendants for Long Howland (the defendants' solicitors) as agents for the defendants to give the written notice of exercise of the option to renew to Booth Brown Samuels & Olney (the plaintiff's solicitors). (3) If the answer to question 2 is in the negative whether the plaintiff has waived or is estopped from asserting that the letter of 27 June 2003 could not be given by the solicitors for the defendants to the solicitors for the plaintiff. 3. Th3 sharefarming agreement provided for a 5 year term from 4 November 1998 to 4 November 2003. The agreement recited that the parties "have agreed to sharefarm the property, Maybrook and grow onions and potatoes and other crops depending on contract availability, market forces and seasonal conditions." 4. The agreement set out the obligations of the owner (the plaintiff). One of his important obligations was to provide the amount of irrigation water required by the farmer per potato/onion growing period. Another was to provide and maintain the pumping machinery, piping and infrastructure sufficient to pump the required quantity of water. 5. The "contribution" of the farmer (the defendants) included: "(1) Seed, chemicals, machinery and labour as shall be required to plant, husband and harvest a crop each growing period." 6. Provision was made for the remuneration of the owner and the farmer from the proceeds of all potato sales. There were a separate remuneration provisions as to the sale of the onions and cereal/oil/seed/pulse crops. 7. The agreement provided that nothing in it shall be construed as giving the farmer legal possession of the property or any right of possession or occupation other than expressly granted for the purposes of the agreement. 8. The clause dealing with the option to renew was un-numbered but treated as clause 5. It reads: "OPTION TO RENEW TERM Should the Farmer wish to renew this Agreement for a further term of three (3) years from the date in Item 7 of the Schedule then the Farmer shall give to the Owner not more than Six (6) months and not less than three (3) months prior to the date in item 7 notice in writing if he wishes to take a renewal of the Agreement for a further term of three (3) years. Provided he has duly performed and observed on his part all the conditions and agreements contained in this Agreement up to the end of the term herein then the Owner will at the cost of the Farmer grant him the further term of three (3) years." 9. About late November 2002 the defendants changed from their then solicitors to Long Howland, who were instructed to act as their solicitors on all aspects of their sharefarming disputes and arrangements with the plaintiff. Correspondence ensued between Long Howland and the plaintiff's solicitors on an appreciable number of disputes relating to the sharefarming arrangements, with various claims and counter claims being made. These are summarised in para 9 of the affidavit of P J Long of 4 November 2003. Mr Long visited the Schmitts on many occasions between 16 January 2003 and 2 June 2003. He was often accompanied by Megan Dries, then his personal assistant (secretary). In May 2003 Ms Dries became a law clerk with Long Howland. One of the matters on which she worked under Mr Long's supervision was that of the Schmitts. Mr Long told the Schmitts to contact her generally and in his absence. 10. Mr Long deposed to saying on both 13 May 2003 and 2 June 2003 to each of the Schmitts, that if they wished to farm at Maybrook for another three years they had to give notice at least 3 months before their current agreement ended and that they needed to let Long Howland know if they intended to renew the agreement, so Long Howland could give the notice. 11. About 23 June 2003 Mr Andrew Schmitt, who had authority from his parents and his brother, telephoned Long Howland and spoke to Megan Dries, Mr Long being absent. On behalf of the firm she received instructions to renew the sharefarming agreement. Mr Andrew Schmitt gave this version of the conversation which is probably correct, namely: "We've had a talk about the option at Carters and we've decided to go ahead with. We have to give notice before 4 August. Could you send them a letter and let them know that we want to renew. Make sure you send the letter registered post." She told Mr Andrew Schmitt that she would let Mr Long know and that the firm would attend to that matter. 12. On 23 June 2003 Ms Dries sent this e-mail to Mr Long concerning the Schmitts: "Andrew just called to let us know that 4 August is the deadline for them to exercise their option for 3 more years." Mr Long, in reply, sent this e-mail: "Then let's get a letter off to Carter's exercising the renewal. Has to go by security post. Can you check the Agreement re the earliest date notice can be given? Ta." 13. An attempt was made in cross-examination to attach importance to the use of "Carter's" rather than "Carters" or "Carters'". I took the view that this was not important. 14. About 26 June 2003 Mr Long spoke with Ms Dries and she told him: "We could have given notice any time within six months of the end of the agreement but we must give it no later than three months before then." 15. Mr Long instructed Ms Dries to make sure the letter went and to send the clients a copy 16. On 27 June 2003 Mr Long left his office in Gunnedah for Miriam Vale, in Queensland, some 1000 kms away, to see a client. On 27 June 2003 Ms Dries prepared a letter purporting to exercise the option. It was signed, or more correctly initialled, by a senior law clerk in the office on behalf of Long Howland Lawyers. It was on their letterhead and addressed to Booth Brown Samuels & Olney, Solicitors, DX 4000 Dubbo and read: "Dear Colleagues Security Post J F and M R Schmitt & Sons v K G Carter We write to advise that our clients will be exercising their option to renew the Share Farming Agreement as set out in paragraph 5 of the Agreement." 17. The letter which was not sent by security post but by the document exchange was received by Booth Brown Samuels & Olney on 30 June 2003. It was not suggested that the plaintiff was not made aware of this letter shortly after it was received. Mr Long did not see a draft of the letter before it was sent. Ms Dries believed she had authority to send it on behalf of the firm without referring a draft to Mr Long. He had intended the letter to be sent to Mr Carter rather than his solicitors. Mr Long, a litigation solicitor did not appear to be aware of the body of law dealing with the necessity for the option to be exercised strictly in accordance with the instrument granting the option. If he had been so aware he would not have left the drafting and despatch of the letter to a junior law clerk. 18. After receiving the letter of 27 June 2003 the solicitors for the plaintiff did not respond until 8 August 2003, when they wrote to Long Howland: " … We note that the time period for exercise of the option to renew under the Share Farming Agreement expired on 4 August 2003 and that there was no valid exercise of the option by your clients prior to that time. Accordingly, the Share Farming Agreement will terminate upon the expiry of the Head Term on 4 November 2003. Our clients will not agree to any extension of the Head Term, and require vacant possession of the property on 4 November 2003." 19. By letter of 13 August 2003 the plaintiff's solicitors wrote that the bases upon which there had been no valid exercise of the option were: "1. Your letter dated 27 June 2003 is expressed in the future tense and in our view that letter does not constitute an unequivocal election to exercise the option. 2. In the absence of any enabling provision in the Share Farming Agreement, it is not open to your clients to appoint an Agent, such as their Solicitor, to exercise the option on their behalf. A notice of this kind, absent such a provision, or conduct which amounts to a waiver, should be signed by the person who is purporting to give it, ie, in this case, each of John Francis Schmitt, Margaret Rose Schmitt, Andrew John Schmitt and Mark Frederick Schmitt, they being the persons who are identified in the Schedule to the Share Farming Agreement as being "the Farmer". 3. In addition, again in the absence of any enabling provision in the share Farming Agreement, it is necessary for your clients to give such notice to Keith Carter personally. Service of a letter on us as Mr Carter's Solicitor is not, in our view, authorised by Clause 5 of the Share Farming Agreement." 20. At the hearing of the preliminary issues the plaintiff advanced the following arguments: 21. Construction of Letter 27 June 2003 The plaintiff submitted that the letter of 27 June 2003 is not, on its face, a notice that the Schmitts objectively intended, "there and then", to exercise the option; it is a mere statement of future intention. The letter is expressed in the future tense, "will be". At best the notice was equivocal or ambiguous. 22. The plaintiff further submitted that there was nothing in the circumstances in which the letter was given to explain or amplify the meaning of the words used. Indeed, such circumstances as existed pointed to the plaintiff's contentions being correct, 23. The defendants contended that the letter purporting to exercise the option indicated an immediate intention to exercise the option. The words "will be" were explicit and expressed an unambiguous intention on the part of the defendants to exercise the option. Reliance was also placed on the words in the letter, "as set out in paragraph 5 of the agreement." It was submitted that the letter was not equivocal, it was not subject to negotiations and there was no reservation or qualification. 24. Generally, an option must be exercised within the time and in the form stipulated with the party exercising the option having met any conditions precedent imposed. On occasions a method of service of the notice exercising the option is prescribed. 25. In Prudential Assurance Co Ltd v Health Minders Pty Limited (1987) 9 NSWLR 673 the Court of Appeal (Kirby P, Samuels and McHugh JJA) in determining whether the option was validly exercised applied the tests as formulated by Dixon CJ in Ballas v Theophilos (No 2) (1957) 98 CLR 193 and Isaacs J in Carter v Hyde (1923) 33 CLR 115. Applied to this case the formulation of Dixon CJ raises this question, was the letter of 27 June 2003 a clear and unequivocal election to renew the sharefarming agreement for a further three years? The answer is to be given by reference to what Isaacs J said, "…what would anybody when he received that letter fairly understand to be the meaning of it, in the circumstances of its receipt." See per Samuels JA in Prudential at 681 and McHugh JA at 683. 26. In Tonitto & Anor v Bassal & Ors (1992) 28 NSWLR 564 at 576 Sheller JA stated that great care must be taken in the exercise of an option. He continued "It is common enough for grantees to seek to avoid a purported exercise and an obvious way is to claim that the exercise was not in accordance with the terms of the option." There is obvious truth in these remarks. At times during the submissions counsel for the plaintiff seemed to be advocating that because of poor quality legal work which did not attempt to take the necessary professional care, the purported exercise of the option should be held to be invalid. It is not the task of this Court to punish a party because the legal work done by his solicitors was below standard. The question to be asked and answered are those posed in Prudential and previously mentioned. 27. In Bava Holdings Pty Limited v Pando Holdings Pty Ltd (1998) NSW Conv R 55-862, Santow J reviewed a number of decisions as to the exercise of options and said at 16304 that more recently "there have been some signs of relaxation of the strict approach, though by reference primarily to ordinary principles of construction … But significantly, in construing notices with some inaccuracy, obvious error or looseness of formal expression the courts have simply asked how would the recipient, as a reasonable commercial person be taken to have understood the intent of the notice. Mannai Investments Co Ltd v Eagle Star Insurance Co Ltd 1997 AC 749." 28. I was also referred to a number of other authorities but there is no need to go through them all. 29. The circumstances surrounding the despatch and receipt of the letter of 27 June 2003 include that the letter was given on 27 June 2003, within the period specified, that is between 4 May to 4 August 2003 in the latter half of that period. 30. By letter of 24 April 2003 the plaintiff's solicitors had tried to discourage the defendants from exercising the option. They had written: "… the term of the Share Farming Agreement expires on 4 November 2003. There is no reasonable prospect that the harvest of any crop sown this winter would be concluded prior to that time. Your clients will have no entitlement to rely upon the option to renew, as such entitlement is expressly subject to the proviso that your client 'has duly performed and observed on his part all the conditions and agreements contained in this agreement up to the end of the term herein.' Your clients have failed to satisfy that proviso. …" The letter went on to specify the alleged principal breaches on which the plaintiff relied. 31. By letter of 8 May 2003 from Long Howland, the plaintiff's solicitors were advised that the defendants did not accept that they were in breach of the agreement and asserted that the plaintiff owed moneys to them. Particulars were sought of the defendant's breaches. 32. In the light of the correspondence when the letter of 27 June 2003 was received it would have been fairly understood by the plaintiff and a hypothetical person as a reasonable farmer and commercial person, that the defendants were exercising their option to renew the sharefarming agreement. That would have been understood as the intent of the letter. 33. Lack of Authority The plaintiff submitted that Long Howland had no authority to forward the letter of 27 June 2003 to the solicitors for the defendant and no authority to send the letter by the Document Exchange. 34. The plaintiff pointed out that Andrew Schmitt had instructed Long Howland to send a letter exercising the option to the Carters and by registered post. Mr Long had instructed his clerk to send the letter by security post. He had anticipated that the letter would be sent to the Carters. The plaintiff submitted that Ms Dries had acted on her own initiative and sent a letter which was unauthorised. 35. The essence of the instructions of Andrew Schmitt on behalf of the defendants to Long Howland was that the option was to be exercised before 4 August 2003. The defendants wanted the option correctly exercised. Mr Andrew Schmitt was told in substance that Long Howland would attend to that and he was content to leave that to them, that is, how the option was exercised. It was not of the essence of Mr Schmitt's instructions that the notice be sent to the Carters direct rather than to the Carters' solicitors, or that the notice be sent by registered post. Mr Andrew Schmitt does not complain of the notice being sent to the Carters' solicitors via the Document Exchange. He and his family are concerned whether the option was validly exercised. 36. The letter was sent by the Document Exchange by mistake. Ms Dries made a mistake when she put the Document Exchange number on the letter of 27 June 2003 instead of the ordinary address of the plaintiff's solicitors and Long Howland's office staff made a mistake in not querying the letter when it contained the words "Security Post". Ms Dries misunderstood Mr Long's requirements that the letter be sent to the Carters or Mr Carter. 37. These are the kind of mistake inexperienced staff make when a principal is away and unable to supervise closely. I do not think that any of these mistakes is necessarily fatal. A timely letter was sent to and received by the solicitors for the Carters exhibiting an intention by the defendants to exercise the option. That was the crux of the situation. 38. Ms Dries was at all times acting as a member of the staff of Long Howland under supervision. She endeavoured to carry out the instructions which she had received. Her mistakes related only to the manner of her carrying out those instructions. 39. Could Long Howland Give the Notice The plaintiff submitted that on the true construction of the sharefarming agreement it was not competent for Long Howland as solicitors for the defendants to give the notice exercising the option. The plaintiff did not dispute that Long Howland had been authorised by the defendants to give the notice exercising the option to the Carters (or Mr Carter). 40. Clause 5 of the sharefarming agreement provides that 'the farmer' shall give to the owner notice in writing. The clause does not refer to agents or solicitors giving notice on behalf of the farmer but it does not preclude them from doing so. I see no difficulty with duly authorised solicitors giving a notice exercising the option to the owner. In the absence of an express or implied prohibition there is no impediment to authorised agents giving notice of the exercise of the option on behalf of the defendants. This is what Long Howland did. The letter states "Our clients will be exercising their option to renew". The letter correctly implies that Long Howland have been authorised to write in those terms. 41. It was open to Long Howland to write as agents for the defendants and exercise the option to renew on their behalf. 42. Was It Permissible to send the Notice to the Plaintiff's Solicitor The plaintiff emphasised that cl 5 provided that notice in writing be given to the owner. The plaintiff submitted first that the agreement precluded a notice exercising the option being given to his agent and secondly that even if the agreement did not preclude a notice being given to his agent there was no evidence that his solicitors had authority (whether express or implied) to receive the notice. 43. The plaintiff further submitted that the mere fact that his solicitors had been retained to act for him in connection with the arbitration proceedings arising out of the sharefarming and/or ongoing disputation as to the sharefarming does not in itself, confer on them actual authority to accept service of or be served with the notice exercising the option. The plaintiff's solicitors did not have a general retainer to act in connection with the administration of the sharefarming agreement or the renewal of its term. 44. The sharefarming agreement, and cl 5 in particular, does not by its terms prohibit the appointment or authorisation of an agent to receive the defendants' notice exercising the option. Clause 5 is cast in general terms and does not contain detailed procedures which have to be followed. 45. In Riltang Pty Ltd v L Pty Ltd [2002] NSWSC 625 a dispute arose whether the lessee effectively exercised an option available to it to renew its lease for a further seven years. Under the lease "lessor" included the lessor, its successors and assignees and, where not repugnant to the context, its servants and agents. The option for renewal clause required the lessee to give the lessor notice in writing that it desired to have a lease granted to it for the further term of seven years. The first issue was whether service of the notice of renewal upon Metro, the managing agent, was service upon the lessors. The judgment of Davies AJ contains this review of the authorities and that judge's conclusion: "[12] In Kratzmann (Toowong) Pty Limited v Marjorie's Investments Pty Limited (1986) 67 Aust & NZ Conveyancing Reports 803, Moynihan J held that service on a managing agent was not valid service on the lessor. However, in Setena Pty Limited v Permanent Trustee Nominees (Canberra) Limited (1987) NSW Con VR par 55-322, McLelland J found to the contrary. His Honour said: 'The management of property leased to tenants would ordinarily embrace the receiving of a notice from a tenant exercising an option of renewal of his lease, and in my view a managing agent of such property would, in the absence of proof of some relevant limitation to his authority, be presumed to have authority to receive such a notice (cf. Peers v Sneyd 17 Beav. 151, 51 E.R. 990, R v Chief Immigration Officer (1973) 1 W.L.R. 141)' [13] A like view was taken in Young v Lamb [2001] NSWCA 225. At par 36, Stein JA, with whom the President and Hodgson JA agreed, said: ' What is plain about the definition of 'lessor' is that it does not preclude acceptance by the appellant's agent. It is silent on the matter. Given that the lease contains no address for the lessor, how is the lessee to effect service 'on the lessor'? It seems to me to make perfect sense to serve the letter on the lessor's duly appointed agent, Dedricks. The respondents had been notified that Dedricks had been appointed as managing agent. Dedricks wrote to the respondents on 21 April 1998 reminding them of the option. There was no evidence to suggest that the agent's authority was in any way limited. Indeed, that Dedricks had authority to accept any letter exercising the option is reflected by the course of dealings between the parties.' [14] It follows that the agent's authority to accept service of a notice of renewal must be determined having regard to the circumstances of the case, including the terms of the lease and the part which the agent performs in the relationship between the lessor and the lessee. " 46. In determining whether the plaintiff's solicitors had authority to accept service of a notice exercising the option regard must be had to the circumstances of the case including the sharefarming agreement and the part which those solicitors played in the relationship between the owner and the farmer. The position of the plaintiff's solicitors is somewhat different from that of a managing agent. Normally, the fact that a solicitor is acting for a party in one set of proceedings does not enable the service of a document by the same opposing party in another set of proceedings upon the solicitor for the party in the earlier proceedings. This case does not involve two sets of proceedings but the Court should not be too ready to hold that the plaintiff's solicitors had authority to receive the notice exercising the option. It is necessary to examine the correspondence passing between the solicitors for the plaintiff and for the defendant and the course of dealing between them. 47. The plaintiff's solicitors, Booth Brown Samuels & Olney, have been acting for the plaintiff since at least 1999. In 1999 the Schmitts instituted proceedings in the Equity Division of the Court against Mr Carter. Those proceedings were settled, without admissions, and involved the Schmitts giving a series of undertakings as to the disposition of the onion crops and portion of the proceeds of sale. The Court noted the agreement of the parties which provided that the Schmitts "are at liberty to harvest, remove and sell the onions presently being grown and harvested at Maybrook", the mutual release of all claims arising from the agreements of 11 September 1997 and 4 November 1998 and any ancillary or connected matter and that both parties would observe the provisions of the sharefarming agreement. 48. Any truce in hostilities was short lived. In their letter of 11 January 2000 to the Schmitts' solicitors Booth Brown Samuels & Olney (BBSO) queried whether the Schmitts were complying with their undertaking to the Court. By February 2000 the solicitors for the parties were exchanging letters accusing the other of breaches of the sharefarming agreements. In their letter of 23 February 2000 BBSO accused the Schmitts of having "apparently abandoned the job." 49. By letter of 18 September 2000 addressed to the Schmitts, BBSO asserted that the last crop sharefarmed was a crop of onions sown about 18 months previously, that most of that crop was never harvested by them, that such parts as were harvested yielded an unsatisfactory financial return, that at the conclusion of harvesting activities the Schmitts had removed all their farming plant and equipment and that they had undertaken no farming activities on the property since. BBSO on behalf of the Carters asked the Schmitts to plant "this summer's potato crop." The letter continued that if they did not receive written advice within 10 days confirming the Schmitt's intentions as to a potato crop Mr Carter "will consider that you have abandoned your obligations pursuant to the Sharefarming Agreement, and he will make alternate use of the land." 50. By letter of 27 September 2000 the solicitors for the Schmitts denied any wrongdoing on their part and stated that they had no intention of abandoning their obligations. The restoration of a nominated pivot irrigator and compliance by Mr Carter with his obligations under the sharefarming agreement were requested. Thereafter correspondence ensued between the solicitors alleging defaults and containing some explanations. It revealed poor relations between the parties. Matters such as the Schmitts requesting the plaintiff to remove the locks from the power supply and irrigation equipment were dealt with by way of a solicitor's letter. 51. By letter of 3 May 2001 the solicitors for the Schmitts complained to BBSO that in breach of the sharefarming agreement Mr Carter had permitted 150 to 200 head of cattle to occupy the sharefarming area and demanded their immediate removal. 52. By letter of 7 June 2001 BBSO made many complaints about what the Schmitts had and had not done. In summary they asserted that the Schmitts had not conducted any genuine farming activity on Maybrook since a crop of onions were sown in the first half of 1999 and made no further attempt to conduct any farming activities on the property until about late November 2000. They complained that when they first knew of a wheat crop being sown in mid January 2001 was when a sub-contractor was seen doing so. In early February 2001, and without prior notice, a different contractor arrived at the property and ploughed the "wheat crop" in. By then that "crop" was a hopeless failure. The plaintiff's solicitor claimed that the Schmitts had not done any further farming work on the property "since pretending to grow that wheat crop last summer" and they had not told Mr Carter about their future farming intentions, if any. BBSO asserted that the cattle had been in sharefarming areas since mid May 2001 and were keeping the weeds down to a more reasonable level. BBSO stated that the cattle would be moved to another area of Maybrook upon request if the Schmitts intended to farm a winter crop. 53. By letter of 22 June 2001 the Schmitts' solicitors advised that the Schmitts wished to commence preparation of the soil to prepare a crop and requested that Mr Carter immediately remove the cattle from the sharefarming area. 54. By letter of 22 March 2002 the Schmitts' solicitors advised of the amount received for the wheat crop. That letter contained a series of offsets or counter claims including for damage done by the cattle to the soil and agistment charges. It also contained complaints about the watering system and sought repairs and improvements. By letter of 2 May 2002 Mr Carter's solicitors replied in detail. Broadly, they rejected the counter claims and offsets and the allegations of faulty irrigation equipment. 55. There was further correspondence between the solicitors in May 2002 in which both parties made complaints with the Schmitts pressing their complaint that the irrigation equipment was not in proper working order. About 15 May 2002 the Schmitts sought arbitration under the Agricultural Tenancies Act 1990 in respect of "a series of disputes arising from 17 December 1999 to date in respect of a sharefarming agreement …" 56. By letter of 28 November 2002 BBSO advised the Schmitts' solicitors that the severe and prolonged drought in the Wellington district was beginning to significantly impact upon Mr Carter's ability to provide adequate irrigation water and that professional advice (contained in an enclosed copy report) was to the effect that any irrigated crop sown on Maybrook in the prevailing conditions would probably not be able to be provided with a quantity of irrigation water sufficient to sustain the crop, thus involving an extremely high level of risk. There was also the potential for significant damage to Mr Carter's pumping equipment if there was a requirement to continue pumping from a depleted or failing bore. 57. BBSO advised that Mr Carter did not consent to any further irrigated crop being sown on Maybrook for the time being until the consultants advised that the drought had broken sufficiently to replenish the level of the aquifiers from which Mr Carter's bore water was drawn. Further, the Schmitts would not be permitted access to Maybrook for purposes of or related to the growing of any proposed future irrigated crops until the time mentioned. 58. There was correspondence between the solicitors as to the availability of water and other matters. 59. In their letter of 24 April 2003 (parts of which – asserting non-entitlement to exercise the option - have earlier been summarised) BBSO in reply to a letter of 23 April 2003 of Schmitts' solicitors that the Schmitts were proposing to shortly commence ground operations work at Maybrook "for the winter season", wrote: "Our clients do not give their consent to the farming of any winter crops by your clients and your clients will not be permitted access to our client's property for the purposes of or related to the growing of any proposed winter crop." 60. The correspondence to which I have briefly referred reveals that there were many disputes between the parties arising out of the sharefarming agreement and its implementation. The position was reached where any matter of importance and an appreciable number of lesser importance were dealt with by and between the solicitors. That was the manner in which the parties communicated. The letters written, while never objectionable were forthright. In the administration and application of this sharefarming agreement exchanges between solicitors on behalf of the parties were the norm. 61. Having regard to the lack of any specification of the manner in which the notice exercising the option might be served and the course of dealing between the parties I am of the opinion that it was permissible for the notice exercising the option to be delivered to BBSO as agents for Mr Carter. In his affidavit Mr Carter did not suggest that BBSO was not authorised to receive the letter of 27 June 2003. 62. The defendants advanced an argument based upon the Agricultural Tenancies Act 1990. By virtue of s.4(1) "tenancy means a lease or licence, an agreement for a lease or licence, a tenancy at will or a sharefarming arrangement or any other arrangement by which a person who is not the owner of the farm has a right to occupy or use it" and "tenant includes a sharefarmer …". 63. The Act deals with improvements carried out by the tenant and by the owner with the consent of the other and those carried out by the tenant and the owner without the consent of the other and the payment of compensation. The Act provides that various provisions shall be a term of the tenancy, for example, the duty each has to keep proper accounts in connection with the tenancy (s.13). Part 4 of the Act contains provisions for the arbitration and mediation of disputes. Section 27 provides that any agreement purporting to waive or abrogate any right, power or duty created by the Act or otherwise to defeat the purposes of the Act, is to that extent, void. 64. Counsel for the Schmitts placed particular reliance upon s.28 which provides: "(1) Any document required or permitted to be served on a person for the purposes of this Act or the regulations may be served: (a) by delivering the document to that person, or (b) by leaving the document at the last known place of residence or business of that person, or (c) by sending the document by post, with the postage prepaid, in an envelope addressed to that person at the usual or last known place of residence or business of that person. (2) Service on a solicitor or agent currently acting for a person is also sufficient. (3) Nothing in this section precludes the use of any other means of service provided by law or by agreement between the parties." 65. That section applies to any document required or permitted to be served on a person "for the purposes of this Act or the regulations". A notice exercising an option is not a document required or permitted to be served on a person for the purposes of the Act or regulations. Counsel for the Schmitts purported to overcome this hurdle by referring to s.3(b) which is one of the objects of the Act namely: "to encourage the use of written agreements for agricultural tenancies and to set out terms that are taken to apply to all agricultural tenancies, including terms setting out the rights of the parties." 66. I do not think that this provision is of assistance. 67. Section 28(2) is not able to be read as a "stand alone" provision generally applying to all notices which have to be given in connection with a sharefarming agreement. Section 28(2) has to be read with s.28(1) and applies to documents required or permitted to be served for the purposes of the Act or the regulations. 68. I add that the Agricultural Tenancies Regulation 2001 contains nothing of relevance. I was informed that there was no other regulation. 69. When the letter of 27 June 2003 was sent by Document Exchange to BBSO Ms Dries proceeded upon the basis that when a party was represented by a solicitor documents should be sent to the solicitor for that party. Because of her inexperience she did not turn her mind to the issues debated in this Court. I have taken the view that if, as I have held, BBSO had authority to receive the notice exercising the option, that is sufficient. 70. Waiver/Estoppel The Schmitts relied on the following: (i) Since early 2000 the plaintiff has accepted service of notices pursuant to the agreement from the defendants' solicitors on their behalf forwarded to the plaintiff's solicitors. He has also served notices upon the defendants by his solicitors forwarding such notices to the defendants' solicitors. (ii) The course of dealing between the parties revealed in the correspondence, that is, most important matters arising under or out of the sharefarming agreement were dealt with in correspondence between the solicitors. That correspondence was extensive. 71. In view of the conclusions to which I have earlier come it is unnecessary for me to deal with these points. If the defendants have duly performed and observed on their part all the conditions and agreements contained in the Agreement of 4 November 1998 between them and the plaintiff, the defendants have validly exercised their option for a further term of three years. The parties asked me to reserve the question of costs for future argument. It will now be necessary to determine whether the defendants did duly perform and observe all the conditions and agreements which they had to perform and observe. Counsel should arrange a further date with my Associate to settle the short minutes and hear argument as to costs. ********** Last Modified: 12/16/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.