APPLICANT SEEKS COURT’S DECISION ON THE VALIDITY OF THE CALL OPTION AGREEMENT
Hilas & Anor v GGPG Developments (No 133) Pty Ltd & Anor [2020] QSC 313 (7 October 2020)
This case involves an applicant seeking the validity of the call option entered into by the parties where the deed was varied to extend the time for exercising the option under the deed and the variation the deed did not address.
Facts:
The applicants are the registered owners of a property situated at Park Ridge Road, Park Ridge, Queensland. The applicants and GGPG Developments (“the Company”) entered into a call option deed for the acquisition by the Company (or its nominee) of the property (“the Deed”). The second respondent, Mr. Clancy, is the sole director of the Company.
The applicants submit that the only question before the Court is whether the Deed (as varied) was uncertain as to the purchase price of the call option. According to the applicants, this is a question of law which may be determined summarily by originating application as no disputed facts arise. The respondents do not accept that the option was validly exercised primarily because, upon the proper construction of the Deed as varied by the Fifth Variation Deed, the parties had failed to agree upon the purchase price to be paid by the Company or its nominee if the call option was exercised. The respondents submit: “Without any agreement about the Purchase Price, GGPG Developments was not, in truth, granted a call option which it could exercise validly."
The respondents submit that no purchase price was agreed if the Company exercised the call option in circumstances where the Sale Contract would settle after 5 July 2020. As the Fifth Variation Deed extended the call option expiry date to 4 September 2020, “the put and call option periods under the Deed were not validly extended and the Purported Notice given pursuant to the Variation Deed is ineffective. The put and call options under the Deed have thereby lapsed completely, with the consequence that the Applicants have not validly exercised their put option”.
Issue: Is the exercise of the call option valid and effectual?
Held:
The court does not accept the respondents’ submission that the Deed as varied was incomplete, in that it was uncertain as to price. As originally defined, the term “call option expiry date” contemplated that the Company could exercise the call option within 23 months from 5 July 2018 (that is, by 5 June 2020). If the call option was exercised any time after 5 June 2020, settlement (which was within 30 days) would occur more than 24 months from the date of the Deed. In accordance with cl 3.4(c) (ii)B of the Deed, if settlement occurred more than 24 months from the date of the Deed, the maximum price of $22,500,000 would apply. The Fifth Variation Deed, in extending the call option expiry date to 4 September 2020, did not need to deal with the question of purchase price. This was because, when the Fifth Variation Deed was entered into on 9 June 2020, the Company had not exercised the call option within the call option period which expired on 5 June 2020, and by operation of cl 3.4(c) (ii) B the maximum purchase price of $22,500,000 had been reached. The Company, after 5 June 2020, could not exercise the call option to obtain any reduction from the maximum purchase price of $22,500,000.
To give commercial sense to the Deed and the Fifth Variation Deed, the purchase price under the call option could only have been understood by the parties to be the maximum of $22,500,000. There was, in the court’s view, no uncertainty as to price that rendered the Company incapable of exercising the call option at that purchase price prior to 4 September 2020.
Conclusion: The Court declares that the applicants’ exercise of call option was valid and effectual.
