Parramatta Commercial Holdings Pty Ltd v Vision Medical and Health Pty Ltd [2018] NSWSC 272

Supreme Court New South Wales

Medium Neutral Citation: Parramatta Commercial Holdings Pty Ltd v Vision Medical and Health Pty Ltd [2018] NSWSC 272 Hearing dates: 28 February 2018 Date of orders: 01 March 2018 Decision date: 01 March 2018 Jurisdiction: Equity Before: Kunc J Decision: Summons dismissed with costs Catchwords: CONTRACTS — Construction — Interpretation — No issue of principle — Whether offer of call option engages right of first refusal to purchase land Cases Cited: Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; [1974] HCA 49 Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7 Category: Principal judgment Parties: Parramatta Commercial Holdings Pty Ltd ACN 105 992 658 (Plaintiff)

Vision Medical and Health Pty Ltd ACN 614 250 289 (First Defendant) Michael Lee (Second Defendant) Max Distribution Pty Ltd ACN 168 061 201 (Third Defendant) Representation: Counsel: H Altan; P Tiliakos (Plaintiff) D K L Raphael (First Defendant)

Solicitors: Duffy Law Group (Plaintiff) Penhall & Co (First Defendant) File Number(s): 2017/386790 Publication restriction: No

EX TEMPORE Judgment (REVISED)

Summary 1. These proceedings concern whether a tenant's right of first refusal to purchase the demised premises has not been exercised with the result that the landlord is at liberty to sell the premises to a third party. 2. The plaintiff, Parramatta Commercial Holdings Pty Ltd ("PCH"), owns a building in Victoria Road, Parramatta (the "Premises"). The first defendant, Vision Medical and Health Pty Ltd ("Vision"), leased the ground floor of that building from PCH pursuant to a lease which commenced on 30 August 2016 for a five-year term, with an option for a further five years (the "Lease"). If PCH wishes to sell the Premises, the Lease gives Vision a right of first refusal on certain terms, including that PCH has a right to sell the Premises within 120 days if Vision does not exercise Vision's right of the first refusal to purchase the Premises. 3. On 26 or 27 October 2017, PCH granted the third defendant, Max Distribution Pty Ltd ("Max Distribution"), a twelve-month call option to purchase the premises ("the Call Option"). Max Distribution has paid an option fee which is currently being held by the second defendant, Michael Lee ("Mr Lee") as stakeholder. Mr Lee is Max Distribution's solicitor. 4. The Call Option is expressed to be "subject to and conditional upon the exercise of" the right of first refusal by Vision. The option fee is to be released to PCH "in the event that the Right of First Refusal is not exercised". 5. PCH says it has complied with the terms of the right of first refusal and that Vision did not exercise it. PCH therefore seeks an order that Mr Lee release the option fee to PCH. Vision submits that an offer in terms of the Call Option (to which, for the sake of simplicity, I will also refer as the Call Option) did not engage its right of first refusal, so that no question of Vision not having exercised the right can arise. 6. By its summons filed on 21 December 2017, PCH seeks orders which include: "2. An Order against the First Respondent (VMH) that the Right of First Refusal contained in Clause 31 of the Lease between the parties which commenced 30 August 2016 in respect of Premises known as Ground Floor 1 Victoria Road Parramatta, being Folio Identifier 2/577865 (Property), has lapsed. 3. A Declaration (against the Third Respondent Max Distribution) that the Condition contained in Clause 2.2 of the Call Option Deed between the Applicant and the Third respondent dated 20 October 2017 has been satisfied and the call Option Deed is unconditional. 4. An Order that the Second Respondent (Michael Lee) pay to the Applicant, the Call Option Fee under the Call Option Deed dated 27 October 2017 forthwith by payment to the Trust Account of Duffy Law Group by Bank Cheque being Trust Account BSB: 032 710 Account Number: 174 458 held at Westpac Narellan." 1. The relief sought in paragraph 3 of the summons was ultimately not pressed. 2. Although the dispute ultimately turns on the proper construction of the Call Option (being an agreement between PCH and Max Distribution), the protagonists before the Court were PCH and Vision. Mr Lee and Max Distribution in effect interpleaded. 3. PCH submitted that it had afforded Vision the opportunity to purchase the Premises in accordance with the right of first refusal by offering Vision an option on precisely the same terms as the Call Option, and that Vision did not exercise the right of first refusal within the specified thirty days. Vision submitted that, on the proper construction of the right of first refusal, an offer in the terms of the Call Option was not the offer of terms and conditions of the kind referred to in the right of first refusal. 4. The Court accepts Vision's argument because the Call Option was not limited so as to require the completion of any sale pursuant to the exercise of the Call Option within the 120 days referred to in the right of first refusal. 5. It follows that on the proper construction of the Call Option, the occasion for the exercise or non-exercise of the right of first refusal has not arisen so that the obligation on Mr Lee to release the option fee to PCH has not arisen. 6. The summons will be dismissed with costs. It is important to note that the Court's conclusion is confined to the sole issue that was presented for argument. I express no view as to any other issue concerning any other rights of Vision and Max Distribution under the Call Option as a consequence of this judgment or otherwise. 7. Mr H Altan of Counsel appeared with Mr P Tiliakos of Counsel for PCH. Mr D K L Raphael of Counsel appeared for Vision. Mr Lee and Max Distribution entered submitting appearances.