Supreme Court New South Wales Medium Neutral Citation: Al Maha Pty Limited v Coplin [2018] NSWSC 1623 Hearing dates: 22 October 2018 Date of orders: 24 October 2018 Decision date: 24 October 2018 Jurisdiction: Equity - Real Property List Before: Kunc J Decision: Option validly exercised; specific performance ordered; cross summons dismissed; defendant to pay plaintiffs' costs Catchwords: LAND LAW — Conveyancing — Options — Call options — Construction — Notice of exercise of option able to be given to grantor's conveyancer — Whether option validly exercised by notice given to conveyancer no longer retained by grantor at time of purported exercise EQUITY — Equitable remedies — Specific performance — Set off — Court's power to order legal costs owing by vendor to be set off against purchase price Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Al Maha Pty Ltd v Coplin [2017] NSWCA 318 Cherry v Steele-Park [2017] NSWCA 295 Coplin v Al Maha Pty Ltd [2016] NSWSC 1745 Fussell v Deigan [2018] NSWSC 1419 Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674 Lahoud v Lahoud [2012] NSWSC 284 Miller v DPP [2004] NSWCA 249 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd & Anor (2015) 256 CLR 104; [2015] HCA 37 Pratt & Anor v Hawkins (No 2) (1991) NSW Conv55-592 Thomas Developments Pty Ltd v Setlee Pty Ltd [2002] NSWSC 816; 11 BPR 20,495 Category: Principal judgment Parties: Al Maha Pty Ltd ABN 71118230087 (First Plaintiff) Sophia Norma Bechara (Second Plaintiff) Iraklis Gary Coplin (Defendant) Representation: Counsel: T M Faulkner SC and A F Garsia (Plaintiffs) B Oliak (Defendant) Solicitors: HWL Ebsworth (Plaintiffs) De Pasquale Lawyers (Defendant) File Number(s): 2018/39242 Publication restriction: No Judgment Summary 1. This dispute is about whether an option to buy land was validly exercised. 2. By a Put and Call Option Agreement dated 16 October 2014 (the "Agreement"), the defendant ("Mr Coplin") granted the first plaintiff, Al Maha Pty Ltd ("Al Maha") an option to purchase Mr Coplin's home for $2,200,000 (the "Option"). The Agreement attached the contract for sale of land which would become binding upon exercise of the Option (the "Contract"). 3. The Agreement provided that one way the Option could be exercised was by Al Maha giving the requisite notice to Mr Coplin's "solicitor/conveyancer". The Contract identified Mr Coplin's "solicitor/conveyancer" as V J Tait & Associates, a conveyancing firm ("Ms Tait"). 4. On 21 December 2017, Al Maha purported to exercise the Option by serving the necessary paperwork on Ms Tait's office. However, by that time Ms Tait was no longer retained by Mr Coplin. 5. Al Maha argued that, on the proper construction of the Agreement, it had validly exercised the Option because Ms Tait remained Mr Coplin's "solicitor/conveyancer" by reason of her being so described in the Contract. Mr Coplin, relying on a decision of Young J (as his Honour then was), submitted that those words in the Agreement referred to Mr Coplin's "solicitor/conveyancer" retained as such at the time when the Option was purportedly exercised. He therefore submitted that service on Ms Tait was not a valid exercise of the Option. 6. There is much to be said for both arguments. However, the Court prefers Al Maha's construction because: 1. Under the Contract Ms Tait, as Mr Coplin's conveyancer, was the "Depositholder" (with specific duties as such) and remained the "Depositholder" under the Contract until Mr Coplin notified Al Maha otherwise; 2. Exercise of the Option involved three steps which were intended to be able to be simultaneous, of which one was payment of the "Deposit" to the "Depositholder" (Ms Tait); and, 3. It avoids the uncommercial result that by an uncommunicated and unilateral act (withdrawing his conveyancer's instructions), Mr Coplin could vitiate one of the means of exercising the Option for which Al Maha had bargained. 1. This result gives rise to a secondary issue, being Al Maha's application that costs owing to it by Mr Coplin under previous costs orders should be set off against the purchase price payable by Al Maha's nominee (the second plaintiff, Ms Bechara) under the Contract. The Court is satisfied that it is in the interests of the just, quick and cheap resolution of the costs issues between the parties for such a set off to be ordered. 2. The Court will order that the Contract be specifically performed and that $235,000 be set off against the purchase price payable to Mr Coplin under the Contract. 3. Mr T M Faulkner of Senior Counsel appeared for Al Maha and Ms Bechara with Ms A F Garsia of Counsel. Ms B Oliak of Counsel appeared for Mr Coplin. The facts 1. Because these proceedings were really in the nature of a construction summons, the facts were uncontroversial and were relied upon by the parties by way of background rather than as being of any legal significance for the purpose of construing the Agreement. 2. The Agreement was entered into between Mr Coplin and Al Maha on 16 October 2014. The Option was exercisable for 18 months from the 43rd day after the date of the Agreement. If it was not exercised in that period, Mr Coplin had a put option exercisable for seven business days after the expiry of the Option. 3. Ms Tait was Mr Coplin's conveyancer for the purposes of the preparation and execution of the Agreement and was named as such in the Contract. Ms Tait witnessed Ms Coplin's execution of the Agreement. 4. Ms Tait's uncontradicted evidence was that, by reason of events which it is not necessary to record, she formed the view on or about 23 October 2014 that she was no longer retained by Mr Coplin. Nevertheless, it was common ground that both the first and second tranches of the "Security Amount" (see clause 8 of the Agreement reproduced in paragraph [28] below) were paid to Ms Tait as the "Depositholder", the second payment occurring 12 months after the date of the Agreement. 5. Not long after entering into the Agreement, Mr Coplin sought to withdraw from it. It is not necessary to record his reasons for doing so. 6. On 14 May 2015, Mr Coplin commenced proceedings against Al Maha (and its buying agent) in this Court seeking to set aside the Agreement. Mr E Berman of E Berman & Co was Mr Coplin's solicitor in those proceedings. Seventy five thousand dollars of the "Security Amount" was paid into Court pending resolution of the proceedings. That amount remains in Court and it was accepted by the parties that, whatever the outcome of these proceedings, there was no reason for those funds not to be released to Mr Coplin. 7. Because the Option would have expired in accordance with its terms while Mr Coplin's proceedings were yet to be determined, on 12 April 2016 the parties entered into a Deed of Variation of Put and Call Option Agreement (the "Variation Deed") which included: "2. Variation of Option Agreement 2.1 With effect from the date of this deed, the Grantor and the Grantee agree to vary the Option Agreement in the manner as set out in Schedule 1. 2.2 Other than as specified in this deed, the Option Agreement will continue to be binding on the Grantor and the Grantee. 2.3 The Grantor and the Grantee each affirm the Option Agreement as varied by this deed. … Schedule 1 Variation of Option Agreement The Option Agreement is varied as follows:- (a) delete the definition of Call Option Exercise Period from clause 1.1 and replaced it with the following definition: "Call Option Exercise Period means the period beginning at 9:00am on the 43rd day after the date of this deed and ending at 4:00pm on the date that is 30 calendar days after judgment being handed down in the Proceeding." … (c) insert new definition in clause 1.1 as follows: "Proceeding means the proceeding commenced by Iraklis Gary Coplin in the Supreme Court of New South Wales (Proceeding Number 2015/143602), including any appeal of that proceeding." 1. Lindsay J heard Mr Coplin's proceedings in May and June 2016. His Honour delivered judgment on 16 December 2016 and declared the Agreement to be void ab initio: Coplin v Al Maha Pty Ltd [2016] NSWSC 1745. 2. An appeal from Lindsay J's decision was heard by the Court of Appeal on 28 July 2017. By judgment delivered on 11 December 2017, the appeal was allowed and Mr Coplin's proceedings at first instance were dismissed with costs: Al Maha Pty Ltd v Coplin [2017] NSWCA 318. Mr Coplin was also ordered to pay Al Maha's costs of the appeal. 3. The delivery of the Court of Appeal's decision on 11 December 2017 started time running for the exercise of the Option in accordance with the Variation Agreement (see paragraph [16] above). It was able to be exercised until 4.00pm on 10 January 2018. 4. On 18 December 2017 at 10.57am, Al Maha's solicitor emailed Mr Berman: "I am acting for the purchaser with respect to the exercise of option and the conveyance of the property named above. The option and contract name V J Tait and Associates as the conveyancers on record for the vendor Mr Coplin. I understand that you acted for Mr Coplin solely in relation to the litigation. We have not received any notification from V J Tait and Associates that they cease to Act for Mr Coplin and in our view they continue to act on that basis. Accordingly, unless we receive from you prior to 12.00pm on Tuesday 19 December 2017, written confirmation that: 1. you act for Mr Coplin in relation to the sale of the property (in addition to the litigation); and 2. you will accept service on that basis, we will serve the exercise of option documents (including the contract) to, and draw the cheque for the deposit in favour of, V J Tait and Associates, in accordance with the option." 1. On 18 December 2017 at 1.43pm, Al Maha's solicitor emailed Ms Tait: "We act for the purchaser with respect to the exercise of option and the conveyance of the property named above. Clause 28(a)(i) of the option requires that all notices or documents required or permitted to be given by one party to another under the option must be in writing, addressed to the other party or their solicitor/conveyancer and delivered to that party's address or the address of their solicitor/conveyancer. Furthermore, the contract for sale of land annexed to the option names V J Tait and Associates as Mr Coplin's (the vendor) conveyancer and depositholder. Based on such provisions, our client intends exercising the call option and serving you with the exercise of option documents (including the contract) on Wednesday, 21 December 2017 in the absence of receiving a response from you by close of business tomorrow telling us this would not be a valid exercise of our client's call option." 1. Mr Berman replied on 19 December 2017 at 11.51am: "We refer to your email of yesterday. We do not have instructions to accept service. We deny your client has any right to serve Notice of option documents. A further letter will follow later today." 1. Ms Tait replied on 19 December 2017 at 11.59am: "Further to your email yesterday, we advise that we are no longer acting and have no instructions to accept service of any documents in this matter." 1. At 9.14am on 21 December 2017, this letter from Al Maha's solicitor with its enclosures was delivered by hand to Ms Tait's office and accepted by her receptionist: "Dear Ms Tait AJ Maha Pty Ltd (Grantee) option to purchase from Irklis Gary Coplin (Grantor) Property: XXX, St Leonards NSW We refer to the above matter and to the Put and Call Option Agreement dated 16 October 2014 in respect of the Property (Option). We note that the contract attached to the Option permits delivery of the call option exercise documents to V.J. Tait & Associates and requires that the balance of the deposit payable under the contract be held by V.J. Tait & Associates as stakeholder. We enclose by way of service the following documents to effect the Grantee's exercise of the call option, pursuant to the terms of the Option: 1. Notice of exercise of the call option; 2. Notice nominating Sophia Norma Bechara (Nominee) as purchaser; 3. Contract, signed by the Nominee, and dated 21 December 2017; and 4. Cheque payable to V.J. Tait and Associates Trust Account, in the amount of $110,000, being payment of the balance of the deposit. We confirm that settlement is due in 42 days' time, being on 1 February 2018." 1. Barely an hour later, Ms Tait emailed Al Maha's solicitor: "Further to my email below, advising you on Tuesday 19th December, 2017, we advised that we are no longer acting and have no instructions to accept service of any documents. I note that you had delivered to my office this morning correspondence dated 21st December, 2017 which has attached to it Notice of Exercise, Notice, Contract and cheque. We do not accept service of same. We will be returning to you via express post tonight. The Vendor has withdrawn instructions from us some time ago." 1. By letter dated 21 December 2017, Ms Tait returned the documents referred to in paragraph [24] above to Al Maha's solicitors. 2. Between 21 December 2017 and 10 January 2018, Al Maha took no other steps to exercise the Option. The Agreement and Contract 1. The relevant terms of the Agreement are (emphasis added): "1. Definitions and interpretation clauses … Call Option means the option granted by the Grantor to the Grantee pursuant to clause 2. … Call Option means the period beginning at 9.00am on the 43rd day Exercise Period after the date of this deed and ending at 4.00 pm on the date that is 18 calendar months after. … Contract means the contract for sale of the Property attached to this deed at Annexure E. … Deposit means the deposit payable by the Grantee (as purchaser) under the Contract. Depositholder means the Depositholder under the Contract. … Notice of Exercise means a notice in the form of or substantially to the Of Call Option effect of Annexure A. … Property has the same meaning as in the Contract. … Sale Price means the purchase price shown on the front page of the Contract, namely $2,200,000.00. … Security Amount means the amount paid in accordance with clause 8, to secure performance of the Grantee's obligations under this deed and to an extent the Contract. 1.2 Interpretation (a) In this deed unless a contrary intention is expressed: … (vii) a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, this deed and a reference to this deed includes any clause, annexure, exhibit and schedule; … 3. Exercise of Call Option 3.1 Call Option Exercise Period The Grantee may exercise the Call Option at any time during the Call Option Exercise Period. The Grantee is not entitled to exercise the Call Option after the Call Option Exercise Period. 3.2 Conditions of exercise of Call Option If the Grantee wishes to exercise the Call Option it must during the Call Option Exercise Period: (a) give to the Grantor the Notice of Exercise of Call Option signed by the Grantee and dated the same date that the Call Option is exercised; (b) give to the Grantor one copy of the Contract signed by the Grantee and dated the same date as the Notice of Exercise of Call Option; and (c) pay the Deposit in accordance with the Contract. … 6. Exchange of Contracts (a) At the time of exercise of either Option the Grantor and the Grantee are deemed to have entered into a contract for sale of land for the sale of the Property on the same terms and conditions as those set out in the Contract and will immediately exchange copies of the Contract properly signed by each party. (b) Failure to exchange the Contracts will not affect the validity of this deed [it was common ground "this deed" should be read as "the Contract"] created by the exercise of either Option and the Contract is deemed to have been exchanged at the time and on the date that either Option is exercised. (c) For the avoidance of doubt, the parties agree that unless and until either Option is exercised, there is no agreement between the Grantor and Grantee for the sale of the Property or any interest in it. … 8. Security Amount 8.1 Security Amount The Grantee must pay the Security Amount as set out in this clause 8 to secure performance of its obligations in this deed and to an extent the contract. 8.2 First tranche (a) The Grantee must pay to the Depositholder the First Tranche on the date of this deed. (b) The First Tranche is released to the Grantor on the date of this deed and is not refundable by the Grantor to the Grantee. 8.3 Second tranche (a) The Grantee must pay to the Depositholder the Second Tranche on or before the date which is 12 calendar months from the date of this deed. (b) The Second Tranche is released to the Grantor on the date of this deed [it was common ground "this deed" should be read as "payment"] and is not refundable by the Grantor to the Grantee. 8.4 Acknowledgement re composition of Security Amount For the avoidance of any doubt, the parties agree the Security Amount comprises the aggregate of the First Tranche and the Second Tranche. 8.5 Application of Security Amount If the Grantor and Grantee enter into a Contract as contemplated by this deed, the Security Amount will become part of the Deposit payable under the Contract. … 11. Nomination (a) The Grantee may, by notice in writing to the Grantor given at the same time as the exercise of the Call Option, nominate the Nominee who will replace the Grantee as the purchaser under the Contract. … 25. Amendment This deed may only be amended or supplemented in writing executed by the parties. … 28. Notices (a) All notices or documents required or permitted to be given by one party to another under this deed must be in writing, addressed to the other party or their solicitor/conveyancer; and: (i) delivered to that party's address or their solicitor's/conveyancer's; or (ii) delivered to a party's solicitor's/conveyancer's DX; or (iii) transmitted by facsimile transmission to that party's address or their solicitor's/conveyancer. (b) A notice given to a party under clause (a) above is treated as having been given and received: (i) if delivered to a party's address or their solicitor's/conveyancer on the day of delivery if a Business Day, otherwise on the next Business Day; and (ii) if delivered to a party's solicitor's/conveyancer by DX, on the second Business Day after the delivery to the document exchange servicing that solicitors/conveyancers DX, if a Business Day, otherwise on second Business Day after the next Business Day; and (iii) if transmitted by facsimile to a party's facsimile number or their solicitor's/conveyancer's and a correct and complete transmission report is received, on the day of transmission if a Business Day, otherwise on the next Business Day." 1. The relevant provisions of the Contract are: "Vendor's Agent Without the intervention of an agent Co-agent: Not applicable Vendor IRAKLIS GARY COPLIN XXXX, St Leonards NSW 2065 Vendor's V.J. Tait & Associates Phone (02) XXXX XXXX Solicitor/Conveyancer Licenced Conveyancers Fax (02) XXXX XXXX XXXXXXXXX, Ref Vanessa XXXX, XXXX, West Pennant Hills NSW 2125 … 1. Definitions (a term in italics is a defined term) … depositholder vendor's agent (or if no vendor's agent is named in this contract, the vendor's solicitor); … solicitor in relation to a party, the party's solicitor or licensed conveyancer named in this contract or in a notice served by the party; ... 2. Deposit and other payments before completion 2.1 The purchaser must pay the deposit to the depositholder as stakeholder. 2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential. 2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential. 2.4 The purchaser can pay any of the deposit only by unconditionally giving cash (up to $2,000) or a cheque to the depositholder or to the vendor, vendor's agent or vendor's solicitor for sending to the depositholder. 2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full. 2.6 If the vendor accepts a bond or guarantee for the deposit, clauses 2.1 to 2.5 and 3 do not apply. 2.7 If the vendor accepts a bond or guarantee for part of the deposit, clauses 2.1 to 2.5 and 3 apply only to the balance. 2.8 If any of the deposit or of the balance of the price is paid before completion to the vendor or as the vendor directs, it is a charge on the land in favour of the purchaser until termination by the vendor or completion, subject to any existing right. … 20. Miscellaneous … 20.5 A party's solicitor can receive any amount payable to the party under this contract or direct in writing that it is to be paid to another person. 20.6 A document under or relating to this contract is – 20.6.1 signed by a party if it is signed by the party or the party's solicitor (apart from a direction under clause 4.3); 20.6.2 served if it is served by the party or the party's solicitor; 20.6.3 served if it is served on the party's solicitor; even if the party has died or any of them has died; 20.6.4 served if it is served in any manner provided in s 170 of the Conveyancing Act 1919; 20.6.5 served if it is sent by fax to the party's solicitor, unless it is not received; 20.6.6 served on a person if it (or a copy of it) comes into the possession of the person; and 20.6.7 served at the earliest time it is served, if it is served more than once." The applicable legal principles 1. There was no controversy between the parties about the applicable legal principles. These are conveniently summarised in the judgment of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd & Anor (2015) 256 CLR 104; [2015] HCA 37: "46. The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 47. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. 48. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. 49. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. 50. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 51. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience"." 1. Although not relevant to the disposition of these proceedings, I record for completeness that the question of when recourse can be had to what is sometimes referred to as the surrounding circumstances has been resolved in New South Wales by the decision of the Court of Appeal in Cherry v Steele-Park [2017] NSWCA 295 to the effect that there is no necessity for the Court to find ambiguity before regard may be had to surrounding circumstances. In this case, neither party took up the Court's invitation to identify any such surrounding circumstances which should be taken into account in construing the Agreement. The parties confined their arguments to what was apparent from the face of the Contract. Consideration — overview 1. Al Maha's fundamental proposition was that, on its proper construction, the reference to a party's "solicitor/conveyancer" in clause 28(a) of the Agreement meant that party's solicitor or conveyancer as stated in the Contract. In advancing that construction, Mr Faulkner SC accepted that it was open to either party to give notice to the other of some other solicitor or conveyancer being authorised to receive notices on their behalf for the purposes of the Contract. Al Maha's argument that, as at 21 December 2017, Ms Tait was Mr Coplin's "solicitor/conveyancer" for the purposes of clause 28(a) of the Agreement was based on reading the provisions of the Contract in relation to the "Depositholder" together with the requirements of clause 3.2 of the Agreement for the exercise of the Option. 2. On behalf of Mr Coplin, Ms Oliak submitted that "solicitor/conveyancer" in clause 28(a) must be construed as the party's solicitor or conveyancer for the time being or, putting it another way, the solicitor or conveyancer retained as such at the time of the purported exercise of the Option. She submitted that the intention of clause 28(a) was to ensure that the documents exercising the Option were received by the party for whom they were intended (in this case, Mr Coplin). A solicitor or conveyancer who is acting for a party is an agent for the party and owes duties to the party in relation to any documents received by them on the party's behalf, including to pass on those documents to their client, or at least notify the client of their existence. The same could not be said once the solicitor or conveyancer's retainer had been terminated. In support of her argument, Ms Oliak relied on the judgment of Young J (as his Honour then was) in Pratt & Anor v Hawkins (No 2) (1991) NSW ConvR 55-592 ("Pratt"). 3. Essentially for the reasons given by Mr Faulkner SC, the Court concludes that by reference to the text, context and commercial purpose of the Agreement, a reasonable business person would have understood "solicitor/conveyancer" in clause 28(a) of the Agreement to mean that party's solicitor or conveyancer listed as such in the Contract in the absence of having received a notice under the Contract otherwise. I shall first set out the reasons for that conclusion before explaining why I do not accept the arguments put on behalf of Mr Coplin. Consideration — Al Maha's construction accepted 1. The Court's reasons for accepting Al Maha's construction Contract are: 1. Quite apart from the general law obligation to construe the Agreement by reference to any documents referred to in the text of the Agreement (see paragraph [30] above), it was clear from the Agreement that the parties intended that the Agreement should be construed by reference to, and consistently with, the Contract. So much is apparent from the fact that a number of important terms used in the Agreement were expressly defined by reference to the Contract, e.g. "Property", "Price", "Deposit" and "Depositholder". 2. The "Security Amount" referred to in clause 8 of the Agreement was required to be paid to the "Depositholder" and formed part of the "Deposit". 3. The "Depositholder" is defined in clause 1.1 of the Agreement to mean the "Depositholder under the Contract". The standard terms of the Contract defined "Depositholder" to mean the "Vendor's agent (or if no vendor's agent is named in this Contract, the vendor's solicitor)". 4. As was apparent from the face of the Contract, the sale was being effected without the intervention of an agent. 5. The term "solicitor" was defined in clause 1 of the Contract as: "In relation to a party, the party's solicitor or licenced conveyancer named in this contract or in a notice served by the party". 1. On page 1 of the Contract the "vendor's solicitor/conveyancer" was named as Ms Tait. 2. Pausing there, there can be no doubt that under the terms of the Agreement, Ms Tait was the "Depositholder". Al Maha had to pay the two tranches of the "Security Amount" to her. This was commercially sensible given that the "Security Amount" formed part of the "Deposit". 3. Turning to the exercise of the Option itself, it is apparent that the Depositholder's role under the Agreement was not confined to receiving the "Security Amount". Upon exercise of the Option, the "Deposit" had to be paid to the "Depositholder". 4. It is convenient at this point to set out again clauses 3.2 and 6 of the Agreement (emphasis added): "3.2 Conditions of exercise of Call Option If the Grantee wishes to exercise the Call Option it must during the Call Option Exercise Period: (a) give to the Grantor the Notice of Exercise of Call Option signed by the Grantee and dated the same date that the Call Option is exercised; (b) give to the Grantor one copy of the Contract signed by the Grantee and dated the same date as the Notice of Exercise of Call Option; and (c) pay the Deposit in accordance with the Contract. … 6. Exchange of Contracts (a) At the time of exercise of either Option the Grantor and the Grantee are deemed to have entered into a contract for sale of land for the sale of the Property on the same terms and conditions as those set out in the Contract and will immediately exchange copies of the Contract properly signed by each party. (b) Failure to exchange the Contracts will not affect the validity of this deed [it was common ground "this deed" should be read as "the Contract"] created by the exercise of either Option and the Contract is deemed to have been exchanged at the time and on the date that either Option is exercised. (c) For the avoidance of doubt, the parties agree that unless and until either Option is exercised, there is no agreement between the Grantor and Grantee for the sale of the Property or any interest in it." 1. It is apparent from the terms of clause 3.2 that to exercise the Option, Al Maha had to do three things: give two documents to Mr Coplin and pay the "Deposit". 2. When clauses 3 and 6 of the Agreement are read together, it is clear that the parties intended those steps to occur simultaneously. Under clause 3.2(a) the "Notice of Exercise of Call Option" must be dated the same date that the Option is exercised (i.e. the day on which all three steps are taken). The copy of the Contract required to be given under clause 3.2(b) must be "dated the same date as the Notice of Exercise of Call Option" (i.e. the same day that the Option is exercised). Finally, the "Deposit" must be paid "In accordance with the Contract". Clause 2.2 of the Contract requires the deposit to be paid "on the making of this Contract, and this time is essential". Clauses 6(a) and (b) require the Contract to be "immediately" exchanged "at the time of exercise of" the Option, failing which "the Contract is deemed to have been exchanged "at the time and on the date" (emphasis added) that the Option is exercised. When it is understood that certainty as to the time of the exercise of the Option was important because the parties were deemed to have entered into the Contract "at the time and on the date" the Option is exercised, the reference to "at the time" makes the conclusion irresistible that the parties intended that all three steps were to occur simultaneously. 3. Under clause 3.2(c) of the Agreement, the "Deposit" had to be paid "in accordance with the Contract". Clause 2.1 of the Contract provides that the "Deposit" must be paid to the "Depositholder as stakeholder". This is not to overlook that clause 2.4 provided that the purchaser could pay any part of the "Deposit" not only to the "Depositholder" but also to "the vendor, vendor's agent or vendor's solicitor for sending to the Depositholder". On any view, the "Deposit" had to end up with the "Depositholder". 4. Given that the "Deposit" prima facie had to be paid to the "Depositholder" and that the payment had to be simultaneous with the other two steps in Clause 3.2 of giving documents to Mr Coplin, it is clear that a reasonable business person would have concluded by reference to the text of the Agreement (including the Contract) alone that the parties intended that the documents required to exercise the Option could be given to Mr Coplin's conveyancer pursuant to clause 28(a) who was also the "Depositholder" as defined in the Agreement and the Contract. In this case, that was at all material times (including as at 21 December 2017) Ms Tait. 5. Turning from the text and the context, this conclusion is also consistent with the purpose of the Agreement. While certainty is important in all commercial agreements, it is particularly important in relation to option agreements. This oft recalled observation of Windeyer J in Thomas Developments Pty Ltd v Setlee Pty Ltd [2002] NSWSC 816; 11 BPR 20,495 is particularly apt for this case: "21 In contract terms the world of options is a cold hard world. Experience is that grantors are often the defendants in the matters where a grantee of an option is seeking to enforce it. Experience is that grantors are often sorry that they have entered into options and will do whatever is in their power to prevent the option being exercised. That experience is born out in this case." 1. The construction intended for by Al Maha is to be preferred as encouraging commercial certainty. It means that there can be no doubt to whom the various documents referred to in clause 3.2 of the Agreement can be simultaneously given and the "Deposit" paid, so as to exercise the Option validly. For reasons which I will develop below, the argument made on behalf of Mr Coplin leads to a commercially uncertain result, which is one of the reasons why the Court does not accept that argument. 1. It is convenient at this point to deal with two submissions put by Ms Oliak against Al Maha's construction. 2. The first was to the effect that, if the Agreement was construed in the way in which I have construed it, it was contrary to public policy because it required Mr Coplin to retain a solicitor or conveyancer at all times. I do not accept that argument because that is not what the Agreement requires. Rather, the Agreement was entered into on the basis that each party had retained a solicitor or conveyancer who was identified as such in the Contract. 3. Second, Ms Oliak submitted that if Al Maha's construction was correct, then at the time of the purported exercise of the Option, Al Maha was on constructive notice that Mr Berman was now Mr Coplin's solicitor. This submission could be made because, on Al Maha's interpretation, the fact that Al Maha had been put on actual notice that Mr Berman did not have instructions to accept service was irrelevant. 4. Nevertheless, Ms Oliak's submission must be wrong. The definition of "solicitor" in clause 1 of the Contract provides that it is the person named as such in the Contract "or in a notice served by the party". "Serve" is defined in the same clause to mean "serve in writing on the other party". It is clear beyond doubt that, for the purposes of the definition of "solicitor" (and therefore in this case for the purposes of the definition of "Depositholder"), constructive notice of a change of solicitor was irrelevant. Consideration — Mr Coplin's submissions 1. Ms Oliak submitted that the intention of clause 28(a) was to ensure that the documents exercising the Option were received by Mr Coplin. A conveyancer acting for a party is an agent of the party and owes duties to the party in relation to any documents received by them on the party's behalf. That could not be said where the conveyancer received documents on a former client's behalf. In this case, clause 28(a) was intended to ensure that the documents came into Mr Coplin's possession. That did not occur on 21 December 2017 because Ms Tait no longer acted for Mr Coplin. 2. It was further submitted that a construction requiring the conveyancer to be actually retained for the client at the relevant time was supported by the terms of clause 28(a), being the present possessive form of a "party's solicitor/conveyancer", referring to the person currently acting for the party at the time of service. It did not include a "former" solicitor or conveyancer. 3. In support of Mr Coplin's argument, Ms Oliak relied heavily on the judgment of Young J (as his Honour then was) in Pratt. His Honour said: "Clause 9 of the standard form of contract provides that the vendor may forfeit the deposit "by notice in writing served on the purchaser". Clause 21(a)(ii) provides that service shall be sufficient if "effected on the solicitor for the party". It is undoubted that a facsimile notice of forfeiture was sent on 16 July, and a confirmatory copy was received by the current solicitors for the purchaser on 17 July. The first question is what the word "solicitor" means in cl 21. Mr Jenkins for the purchaser has submitted that the word means the solicitor described in Item E of the Particulars. Mr Pritchard for the plaintiffs has submitted that it means the solicitor acting in the conveyancing matter for the time being. The evidence shows that the purchaser, who was a solicitor, acted for himself in the conveyance up to somewhere before 20 December 1990. Certainly by that date the purchaser's present solicitors were acting for him in the conveyancing transaction. Accordingly, the purchaser's present solicitors were the solicitors acting for him in the conveyance as at 16 and 17 July 1991. In my view, the word "solicitor" in cl 21 refers to the solicitor for the time being in the conveyancing transactions and not to the solicitor named in the particulars, if there has been a change. It would seem to me, with respect to the argument to the contrary, that it would be absurd for parties to be taken to have intended that if they had changed solicitor during the currency of a conveyancing transaction any notice had to be given to the original solicitors, rather than the current solicitor." 1. At an abstract level, Ms Oliak's argument is immediately attractive for its straightforwardness, especially when fortified by Young J's judgment. It could be reinforced by at least two additional propositions. First, it might be argued that commercial parties should always be taken to have known that people can change their solicitors or conveyancers during the course of a transaction. Second, why didn't the parties say so in terms if they wanted the solicitor or conveyancer referred to in clause 28(a) to be subject to the same kind of arrangements as the "Depositholder"? 2. Nevertheless, for the following four reasons, the Court does not accept the construction advanced on behalf of Mr Coplin. 3. First, it interprets the words "party's solicitor/conveyancer" in isolation from the rest of the Agreement. In other words, it pays insufficient attention to the context, in particular the context provided by the terms of the Agreement relating to the "Depositholder", the "Security Amount" and the requirements of the exercise of the Option as set out in clause 3. 4. Second, and closely related to the first reason, Young J's decision in Pratt is clearly distinguishable. It is not necessary for me to agree or disagree with his Honour's decision. It is clear from the passage which I have quoted (see paragraph [42] above) that his Honour was considering the then standard form of contract. That was the 1988 form of contract. A copy of that standard form was tendered before me and the clauses to which Young J refers in his reasons appear in that 1988 form of contract. The only conclusion open from his Honour's judgment is that his construction was based on the clauses to which his Honour makes express reference. 5. The important point for present purposes is that the 1988 form of contract contained no provisions similar to the defined terms "Depositholder" and "Solicitor" in the Contract (which is in the form of the 2005 edition of the standard contract for the sale of land in New South Wales). So much may be demonstrated by reference to the provisions in relation to the deposit in the 1988 form of contract: "(Cl 2) H. THE DEPOSIT is payable to: [vendor's agent first named] … 2. Deposit and price (a) Upon or before the making of this agreement the sum stipulated as deposit in G of the particulars shall be paid by the purchaser in accordance with H of the particulars and shall be held as stakeholder until completion when, and by virtue of which, the deposit shall vest in the vendor and shall be accounted for to the vendor upon receipt of an order form the purchaser or the purchaser's solicitor authorising such payment, which order shall be given on completion. (b) The deposit or any part thereof may be paid by cheque. (c) If the deposit is not paid as provided in this agreement or if any cheque for the deposit is not honoured on presentation, the purchaser shall immediately and without notice be in breach of an essential obligation under this agreement. (d) For the purpose only of determining whether the deposit has been paid within the time required under Cl 2(a), delivery to the vendor, or to the vendor's solicitor, or to the vendor's agent, of the whole or any part of the deposit for transmission to the receipt designated in H of the particulars, shall be deemed payment thereof to the recipient so designated. (e) The balance of the price as stated in G of the particulars shall be paid as stipulated in the First Schedule. Any other amount payable by virtue of this agreement shall be paid (unless otherwise stipulated) by cash or unendorsed bank cheque on completion. (f) Any moneys payable under this agreement to the vendor, by the purchaser or by the vendor's agent, or by any other person, shall be paid to the vendor's solicitor, or as that solicitor may direct in writing." 1. Third, Ms Oliak's argument gives insufficient attention to the legal reality that the giving of the notice as referred to in clauses 3.2(a) and (b) of the Agreement is not just for the purpose of putting the other party on notice of something. Many notices in contractual arrangements are given only for that purpose, e.g. to notify the other party of a change in address for service. On the other hand, the notices referred to in clause 3.2 are given primarily to bring about a legal effect, namely the exercise of the Option. They go to the very purpose of the Agreement. 2. So understood, it becomes of considerably less importance whether by some process of agency or otherwise a notice referred to in clause 3.2 constructively or actually puts the addressee of the notice (in this case Mr Coplin) on notice of the matters set out therein. The law is clear that for there to be a valid exercise of an option, the terms governing the exercise of that option must be strictly complied with. Those terms generally set out a series of objectively verifiable actions solely within the control of the grantee of the option to perform in a particular way and within a particular period of time. 3. In the present case, that means the relevant inquiry is not whether Ms Tait in fact held instructions to act as Mr Coplin's conveyancer on 21 December 2017, but whether she answered the description as such within the definition contained in the Agreement and Contract. For this reason, it does not matter that Ms Tait was not actually retained by Mr Coplin at the relevant time. The Agreement could just as easily have provided for the notices to be affixed to the statue of Queen Victoria in Square (assuming for the sake of argument that such an action was otherwise lawful). 4. The observation in the preceding paragraph is on all fours with comments made by Justice Parker in Fussell v Deigan [2018] NSWSC 1419 ("Fussell"). This decision was drawn to my attention by Mr Faulkner SC for its brief reference to Pratt. I respectfully adopt what Parker J said (emphasis added): "283. In the case of service on the party who had died or become mentally ill, the contract in fact did make express provision. It provided for service on that party's "solicitor". In my view this means, in accordance with the definition of "solicitor" in cl 1 of the standard form, the person named as the vendor's solicitor in the contract (it is not necessary to consider whether it would also include a solicitor who subsequently assumed carriage of the matter without notice having formally been given pursuant to the cl 1 definition: cf Pratt v Hawkins No 2 (1991) NSW Conv R 55-592). In my view this did not depend upon whether the solicitor had any authority on the deceased's behalf outside the contract, and it would be immaterial whether the party's death had resulted in the termination of the solicitor's retainer. Had the contract provided that notice could be given by publication in a newspaper or on a bulletin board, I have no doubt that would have been treated as effective irrespective of whether such a notice came to the attention of those responsible for the affairs of the deceased or mentally ill party." 1. Fourth, accepting Mr Coplin's construction of the Agreement would lead to a very uncommercial result. In the course of argument, I put to Ms Oliak that the consequence of this construction was that Mr Coplin could foil Al Maha's attempt to exercise the option by removing himself from the jurisdiction (thereby preventing personal service) and terminating the retainer of his conveyancer. 2. Ms Oliak (correctly) responded that it would still have been open to Al Maha to deliver the relevant documents to Mr Coplin's address and thereby satisfy the first part of clause 28(a)(i). While that is correct, it is not the point for at least two reasons. 3. First, Ms Oliak also submitted (as was necessary for her argument to be consistent) that the termination of Ms Tait's retainer meant that she was no longer the "Depositholder". If that were right (which as a matter of construction I have found it is not), in the scenario which I postulated Al Maha would not be able to exercise the Option. This would be because the "Deposit" could not be paid in accordance with clause 2.4 by being given to the "Depositholder" (on this construction there being none), the vendor (in my example out of the jurisdiction), the vendor's agent (none in this case) or the vendor's solicitor (none in my example). 4. Second, and of more general application, as Mr Faulkner SC submitted, the example which I had given drew attention to the fact that Al Maha had bargained to be able to exercise the Option by any of the several means set out in clause 28(a) of the Agreement, of which one was to be able to give all the requisite documents (including the cheque for the "Deposit") simultaneously to the "Depositholder" who was also Mr Coplin's conveyancer named in the Contract. 5. On the construction advanced for Mr Coplin, it would be open to him unilaterally and secretly to deprive Al Maha of one of its contracted means of exercising the Option by terminating the retainer of his conveyancer specified in the Contract. That would be a completely uncommercial result. I accept Mr Faulkner SC's submission that it was not to the point, and no less uncommercial, because in this case Al Maha had been told that Ms Tait was no longer acting. A party had to be entitled to rely on the terms of its contract without further inquiry. In other words, a party was entitled to serve documents in the belief that it was good service under the relevant contract. The Agreement was not to be interpreted on the basis that a party might make inquiries to ascertain whether or not the conveyancer who had been recorded in the Contract as such was still acting in that capacity. 6. Because the Court has accepted Al Maha's construction of the Agreement, it follows that it is entitled to a declaration that the Option was validly exercised and that a contract in terms of the Contract is in effect between Ms Bechara (as Al Maha's nominee — see clause 11 of the Agreement) and Mr Coplin. As I discuss further below, the Court is also satisfied that the contract to which I have just referred should be the subject of an order for specific performance. This means that, in due course, the balance of the purchase price will be payable by Ms Bechara to Mr Coplin. Set off 1. By reason of the judgment of the Court of Appeal (see paragraph [18] above), Al Maha is the beneficiary of costs orders against Mr Coplin. An affidavit from Al Maha's current solicitor, attaching all the relevant invoices, demonstrated that (on a solicitor/client basis) Al Maha had incurred $200,880.00 (GST inc) in solicitor's fees in respect of the proceedings before Lindsay J and in the Court of Appeal. The same affidavit proved disbursements of $151,983.12 (GST inc). For the purposes of the present exercise, I reviewed the invoices attached to the affidavit to ascertain that of the disbursements recorded, $6,569.00 were Court of Appeal filing fees and $72,970.78 (GST inc) were for counsel's fees. I draw attention to those figures because it is the Court's experience that disbursements of that kind are generally allowed on assessment in full. 2. Al Maha sought an order modelled on that made by the High Court in similar circumstances to the present (a specific performance case) in Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674 at 701 that "costs of trial and of the appeal to be set off against the purchase money". 3. There was no dispute between the parties that, as a matter of principle and in the exercise of the Court's discretion, the Court could make such a set off order. The relevant principles are to found in the judgment of Ward J (as her Honour then was) in Lahoud v Lahoud [2012] NSWSC 284 at [70]–[93] and Miller v DPP [2004] NSWCA 249 at [24] (per Young CJ in Equity) to this effect: 1. The inherent jurisdiction of the Court gives it power to order a set off between costs and other sums which is neither a common law set off nor an equitable set off; 2. The power is not limited to set off between costs orders, but extends to set off between costs orders and other orders for the payment of money; 3. By analogy the Court may order a set off between a costs order and a sum payable pursuant to a contractual obligation short of a judgment debt; 4. The power is in the discretion of the Court; 5. Exercise of the discretion is informed by similar factors to those taken into account in respect of costs orders generally, such as the public interest, the efficient administration of justice, the conduct of the parties, the solvency of the parties and fairness; 6. A set off may be ordered even when one of the sums is not quantified; and 7. A set off may be made between a costs order in one case and a judgment in another case, and may even be made despite the fact that the parties are not the same. 1. The argument on this point proceeded pragmatically. Ms Oliak submitted that, as a matter of discretion, the Court should not make such an order in circumstances where Al Maha had already had many months in which it could have got its costs assessed. She submitted that if the Court was minded to order a set off, it should be conservative in its approach so as to ensure that if the costs are ultimately assessed, the set off has not been allowed for a greater sum than is ultimately determined as payable on assessment. 2. On the other hand, Mr Faulkner SC submitted that the public interest would be served by making a set off order because it might bring the question of costs between the parties to an end. In a commendably realistic submission, he argued that the smaller the gap between what was allowed to be set off and what might ultimately be the result on assessment, the more likely the parties would not bother to go to assessment and engage in no further dispute on the question of costs. Mr Faulkner SC fairly submitted that he was unable to make any submission based on concerns about Mr Coplin's solvency. Beyond the fact that the subject of the Agreement was his home, the Court has no evidence about Mr Coplin's financial circumstances. 3. Taking up the pragmatic tone of the parties, and applying the overriding purpose set out in s 56 of the Civil Procedure Act 2005 (NSW) that the Court should exercise its jurisdiction to achieve the just, quick and cheap resolution of the real issues in dispute, there is much to be said for the proposition that the Court should order a set off. Nevertheless, in circumstances where Al Maha has not had its costs assessed, I accept Ms Oliak's submission that some caution should be demonstrated. 4. In the course of argument I indicated to the parties that I would be prepared to act upon the Court's experience that, on assessment, party/party costs tend to be reduced to anywhere between two thirds and 80% of the solicitor/client costs. On that basis, and consistently with their respective positions, Ms Oliak submitted that a "safe" figure would be 50% of the solicitor/client costs, whereas Mr Faulkner SC urged 65% as the bottom of the range that I had indicated. 5. I accept Mr Faulkner SC's submission that there is a real public interest in the Court doing what it can to reduce the possibility of satellite arguments in relation to costs. As I noted above, of the disbursements identified in the solicitor's affidavit, $6,569.00 was the Court of Appeal filing fee and $72,970.78 (GST inc) was counsels' fees. In the Court's experience, these are items which would be allowed in full and I propose to do so, giving a total of $79,539.78 (GST inc). 6. This leaves the solicitor/client costs of $200,880.00 (GST inc) and the balance of the disbursements of $72,443.34 (GST inc), totalling $273,323.34 (GST inc). On the evidence before the Court, nothing more can be said about the likely amount of those additional disbursements that would be allowed on assessment. Accordingly, I propose to treat the balance of the disbursements and the solicitor/client costs together. Balancing the parties' submissions for reduction to between 50% and 65% of the solicitor/client figure, I propose in the exercise of the Court's discretion to allow an amount of 57.5%, being $157,160.92 (GST inc). When this is added to the figure for counsel's fees and Court of Appeal filing fees, this becomes $236,700.70 (GST inc), which for the purposes of the order I will make I will round down to $235,000.00 (GST inc). 7. Accordingly, the Court will order a set off between the purchase price and the costs which the defendant owes to Al Maha in the sum of $235,000. Miscellaneous matters 1. Ms Oliak submitted that the Option had not been exercised, because at no time had Al Maha paid the "Deposit" in accordance with the Contract. I do not agree. It follows from the construction of the Agreement which the Court has adopted that the Option was validly exercised on 21 December 2017 by delivery of the documents as described in paragraph [24] above to Ms Tait's office. The fact that Ms Tait rejected the tender of the notices and the cheque, and returned the documents, does not have any legal effect on the validity of the exercise of the Option. 2. Ms Oliak also submitted that the evidence did not demonstrate that, on the assumption that the Option had been validly exercised, Ms Bechara was ready, willing and able to perform her contractual obligations. It was common ground that the first time this objection had been raised was in the course of Ms Oliak's oral submissions, the point not having been taken in her written submissions. I accept Mr Faulkner SC's submission that I should approach this aspect of the matter in a practical way (see Fussell at [16]) on the basis that it seems highly unlikely that the plaintiffs would have gone to the trouble of running these proceedings only to fall at the hurdle of completion of the Contract. I propose to deal with this aspect of the matter by making the Court's order for specific performance conditional upon Al Maha or Ms Bechara paying the outstanding amount of the "Deposit" ($110,000.00) to Mr Coplin's current solicitor within seven days for her to hold that amount as "Depositholder" and "stakeholder" under the terms of the Contract. 3. Third, as I noted in paragraph [15] above, the parties were agreed that the $75,000.00 paid into Court by Mr Coplin in accordance with orders made by Lindsay J can now be paid out to Mr Coplin forthwith. I will make an order to that effect. 4. Finally, Mr Coplin filed a cross summons in these proceedings seeking declarations to the effect that the Agreement had been terminated and for consequential relief. That cross summons would only have succeeded if Mr Coplin had persuaded the Court to accept his construction of the Agreement. Because Mr Coplin has failed in that endeavour, the cross summons will be dismissed. Conclusion 1. The Option was validly exercised. Subject to payment of the "Deposit", Ms Bechara is entitled to an order for specific performance. Mr Coplin is entitled to the funds held in Court. 2. I will hear the parties as to the precise form of orders to give effect to these reasons, and as to costs. ********** 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. Decision last updated: 25 October 2018