The recent case of Al Maha Pty Limited v Coplin [2018] NSWSC 1623 highlights the need to strictly comply with contractual terms relating to the exercise of options.
On 16 October 2014, Mr Coplin and Al Maha Pty Ltd (Al Maha) entered into a Put and Call Option agreement granting Al Maha an option to purchase Mr Coplin’s home for $2.2million (Agreement). A contract for the sale of land was attached to the Agreement which would become binding upon the exercise of the Option (Contract).
Ms Tait was Mr Coplin’s conveyancer for the purposes of the Agreement. Under the Contract, Ms Tait was defined as Mr Coplin’s ‘solicitor/ conveyancer’ and the ‘depositholder.’ On or about 23 October 2014, Ms Tait ceased to act for Mr Coplin.
On or about 23 October 2014, Ms Tait ceased to act for Mr Coplin.
On 14 May 2015, Mr Coplin commenced proceedings against Al Maha to set aside the Agreement on the grounds that Mr Coplin was denied the opportunity to review the agreement with the advice of his solicitor. In order to ensure that the option period did not expire while the proceedings were being determined, the parties entered into a Deed of Variation of Put and Call Option Agreement (Deed). The Deed extended the option exercise period to mean:
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.
Ultimately, it was found by the Court of Appeal that the original Agreement was binding and the subsequent Deed was valid.
The delivery of the Court of Appeal’s decision started the time running for the exercise of the Option. Al Maha had until 4:00pm on 10 January 2018 to exercise the Option.1
In accordance with the Agreement, to exercise the Option Al Maha was required:
The notice could be delivered to the party’s solicitor/ conveyancer and would then be taken to be delivered and received.2
Al Maha took steps to exercise the Option on 18 December 2017. Al Maha separately served notices on both Ms Tait, and Mr Coplin’s new solicitor (Mr Berman) to serve the exercise of option documents in accordance with the Option.
A day later, Mr Berman emailed Al Maha, advising that he did not have instructions to accept service.
Similarly, Ms Tait advised that she no longer acted for Mr Coplin.
On 21 December 2017, Al Maha exercised the Option by serving notice to Ms Tait at her office. Importantly, in the exercise of option, Al Maha complied with each requirement under the Agreement for the exercise of the Option.
A few hours later, Ms Tait emailed Al Maha once again advising that she was no longer acting and did not have instruction to accept service of any documents. The Option documents were returned to Al Maha’s solicitor.
Al Maha’s proposition was that:
Mr Coplin’s counsel argued that ‘solicitor/ conveyancer’ must be construed as the party’s solicitor or conveyancer for the time being. In advancing this argument, Ms Oliak stated that the intention of the ‘solicitor/ conveyancer’ clause was to ensure that the Option documents were received and passed onto the client.4
Ultimately, the court held that the Option was validly exercised.
In reaching his decision, Kunc J reiterated the well established principles for the construction of contracts:
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.5
In reaching his decision, Kunc J explained that the Agreement should be construed in conjunction with the Contract, particularly seeing as several terms were expressly defined. By reference to the text, context and commercial purpose of the Agreement, a reasonable business person would have understood ‘solicitor/ conveyancer’ to be the solicitor listed in the absence of receiving a change of representation notice.
The notice to exercise the Option, the execution of the Contract and the payment of the deposit had to occur simultaneously. These requirements were all met by Al Maha. The Court did not doubt that the intention of Al Maha was to ensure that the option exercise documents and deposit came into Mr Coplin’s possession simultaneously.
Ultimately, Ms Tait remained the solicitor and the depositholder until Mr Coplin notified Al Maha otherwise. Mr Coplin had not so notified Al Maha before the option was exercised. The Court ordered that the Contract be specifically performed and made cost in favour of Al Maha’s.
For there to be a valid exercise of an option, the terms governing the exercise must be strictly complied with. It was irrelevant that Ms Tait no longer acted for Mr Coplin. Ms Tait answered the description within the definitions of the Agreement and the Contract.6 The courts will strive to give a commercial effect to a contract. The decision in this case is evidence of this approach.
[1] Al Maha Pty Limited v Coplin [2018] NSWC 1623 [19]
[2] Al Maha Pty Limited v Coplin [2018] NSWC 1623 [28]
[3] Al Maha Pty Limited v Coplin [2018] NSWC 1623 [32]
[4] Al Maha Pty Limited v Coplin [2018] NSWC 1623 [33]; Pratt & Anor v Hawkins (No 2) (1991) NSW Conv55-592
[5] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd & Anor (2015) 256 CLR 104, per French CJ paragraphs 16 – 51
[6] Fussell v Deigan [2018] NSWSC 1419
