Vendor and purchaser — Option to purchase — Whether option validly exercised — Whether words ‘subject to contract’ in heading of a letter purporting to exercise the option deprived it of effectiveness — Whether option, which required written notice to the vendor, was effectively exercised by notice to the vendor’s solicitors — Whether a notice purporting to exercise the option not immediately but at a future date was invalid — Appeal from judge who held that option had been validly exercised dismissed
agreement which gave rise to the present dispute provided for the purchaser to
give notice in writing to the vendor of the exercise of the option on or before
a date which was originally July 20 1987 but was later extended to February 19
1988 — The consideration for the grant of the option was £5,000 and the
consideration for the purchase was £175,000 — The difficulties arose from two
letters sent by the purchasers’ solicitors to the vendor’s solicitors
purporting to exercise the option — The letters, sent at an interval of three
days, were broadly the same in material content, except that the first
mentioned a future date for the exercise of the option, namely the last
available date, February 19 1988 — Both letters had in the heading ‘subject to
contract’ and both were addressed to the vendor’s solicitors, not to the vendor
in person — It was the purchasers’ case that the option had been validly
exercised by either of the documents — The trial judge held that the option was
validly exercised by the first letter and he did not go into detail in regard
to the effect of the second letter — The vendor appealed
of Appeal the vendor claimed that the earlier letter was not a valid exercise
of the option because: (a) it was marked ‘subject to contract’; (b) it was sent
to the vendor’s solicitors and not, as the option agreement required, ‘to the
vendor’; (c) it did not purport to exercise the option immediately but at a
future date — The objections to the second letter were the same as regards (a)
and (b), but (c) did not apply to it — The Court of Appeal concentrated on the
second letter — As Dillon LJ said, it did not really matter which of the
notices was the valid exercise of the option
‘subject to contract’ in the heading of the later letter were, in the court’s
opinion, meaningless and could be treated as mere surplusage with no
significance — The cases of Shirlcar Properties Ltd v Heinitz and The Trado were
distinguishable — The other objection, that the notice had been sent to the
vendor’s solicitors and not to the vendor himself, required more consideration
— The answer depended on what authority the solicitors had in the circumstances
of the case — Walton J in Re Munro had pointed out that it was a fallacy to
think that solicitors had a general implied authority on behalf of their
clients to receive notices — They had not — In the present case, however, it
was clear from an examination of the relevant correspondence that the vendor’s
solicitors were actively engaged in dealing with all matters affecting the
vendor’s title to the land, including his ability to give the purchaser a good
title if and when the option was exercised — There was no doubt that the
solicitors had implied authority in these circumstances to accept the notice
contained in the letter exercising the option — Appeal accordingly dismissed
The following cases are referred to in
this report.
Holwell Securities Ltd v Hughes [1973] 1 WLR 757;
[1973] 2 All ER 476; (1973) 26 P&CR 28
Marseille Fret SA v Oltmann (D) Schiffahrts
GmbH & Co KG [1982] 1 Lloyd’s Rep 157
Munro, In re, ex parte Singer v Trustee in Bankruptcy [1981]
1 WLR 1358; [1981] 3 All ER 215
Saffron Walden Second Benefit Building
Society v Rayner
(1880) 14 Ch D 406
Shirlcar Properties Ltd v Heinitz (1983) 268 EG
362, [1983] 2 EGLR 120, CA
This was an appeal by the defendant
vendor, Lewis Herbert Moores (by Melvyn Douglas Moores, his guardian ad
litem), from the decision of Mr Andrew Blackett-Ord, sitting as a deputy
High Court judge, in favour of the validity of an option to purchase exercised
by the plaintiff purchasers, Westway Homes Ltd. The option related to certain
land owned by the appellant at Lowford, Bursledon, consisting of a bungalow
called ‘Sunnyfield’ and some adjoining land.
Michael Mark (instructed by Lamport
Bassitt, of Southampton) appeared on behalf of the appellant; Owen Rhys
(instructed by Paris Smith & Randall, of Southampton) represented the first
respondents, the purchasers, Westway Homes Ltd; Frank Hinks (instructed by Blake
Lapthorn) represented the second respondents, McCarrahers (a firm), in an
appeal on a separate matter which is not the subject of this report.
Giving judgment, DILLON LJ said: I am
concerned at this stage of the hearing with the appeal by the first defendant
in these proceedings, Mr Moores, against a decision of Mr Andrew Blackett-Ord,
sitting as a deputy High Court judge in the Chancery Division on January 18
1990. There is an appeal also concerned with the costs of the second defendants
and a contingent appeal by the plaintiffs, Westway Homes, involving the second
defendants, but with those I am not concerned at the moment.
The appeal by Mr Moores concerns the
ruling of the judge after the trial of the action that a certain option to
purchase land under an option agreement of October 20 1986 had been validly
exercised by the plaintiffs, Westway Homes Ltd. The very broad background is
that the plaintiffs were a property company concerned to acquire land for
development. Mr Moores was the owner of certain land at Lowford, Bursledon,
Hampshire. That consisted of a bungalow called ‘Sunnyfield’ and some adjoining
land. Mr Moores had an absolute registered title to the bungalow and part of
the land, but in relation to some two-thirds of the land he had a possessory
title only, which was derived from having entered into occupation of the land
many years before and used it, it would seem, for farming purposes.
Having only a possessory title, there was
difficulty in selling that
question about access, because the planning authority had taken the view that
any access to the land when developed should be from, I think, the north, a
side whereby Mr Moores did not at that time have any access. It was, therefore,
necessary, if there was to be development, for someone to see if access could
be negotiated, which involved in the result the buying of a ransom strip from,
I think, Wimpeys.
The terms of the option agreement were
originally negotiated between a director of Westway and Mr Moores himself, and
they went to solicitors to put the arrangement into proper form. The result was
the option agreement of October 20 1986. It was there provided by clause 1 that
the vendor, Mr Moores, should grant the purchaser, Westway, a sole option to
purchase the land described in the first schedule, that is the land with
absolute and with possessory title, for a consideration, particulars of which
are contained in the second schedule and subject to the special conditions
contained in the third schedule. In consideration of the grant of the option to
the purchaser the purchaser was to pay the vendor the sum of £5,000. It was
then provided by clause 3 that the purchaser might exercise the option by
giving notice to the vendor of the purchaser’s intention so to do, provided
that the notice was given in writing on or before July 20 1987, after which
date the option should expire and the agreement would have no further effect.
The price referred to in the second
schedule was to be £175,000. The special conditions in the third schedule,
apart from bringing in the Law Society’s general conditions of sale, provided
by para that upon the exercise of the option the purchasers should pay to the
vendor’s solicitors by way of deposit the sum of £17,500.
That was prepared between solicitors, Mr
Moores’ solicitors being McCarrahers of Southampton, whose senior partner, Mr
Kitcatt, dealt with the matter and in fact witnessed Mr Moores’ signature of
the document. Westway’s solicitor at that time was a Mr Skitch of Eastleigh.
The time originally granted was extended
to January 20 1988 by agreement between the parties themselves in April 1987.
It was in fact further extended somewhat later to expire on February 19 1988.
That was done through solicitors. I shall have to refer later to the extent of
the involvement of the solicitors.
It was the plaintiffs’ case that the
option had been validly exercised by either of two documents. The first was a letter
from the plaintiffs’ solicitors to the defendant’s solicitors of February 15
1988 coupled, if necessary, with a letter of the same date from the defendant’s
solicitors, McCarrahers, who are in fact the second defendants in the
proceedings but not concerned with this issue, to Mr Moores himself.
Alternatively, it was said that the option had been exercised by a letter of
February 18 1988 by the plaintiffs’ solicitors to the defendant’s solicitors on
the basis that the defendant’s solicitors (Mr Moores’ solicitors) had implied
authority, or authority inferred from the facts, to accept service of the
notice.
The judge held that the option had been
validly exercised by the letters of February 15, and he did not, therefore,
have to go in detail into the effect of the letter of February 18. But that is
raised in a respondents’ notice on behalf of Westway, and Mr Michael Mark, for
Mr Moores, has realistically accepted that if his appeal is to be successful he
has to show that the option was not validly exercised by either or any
combination of the letters relied on.
The letter of February 15 is from Gore
Wood & Co, who by then were acting for Westway, and is in these terms in
the relevant passage:
Will you please accept this letter as
formal notice to the effect that our client proposes to exercise its option to
purchase in respect of the above property on February 19 1988.
The heading to the letter was ‘Moores to
Westway Homes Limited, Land at Lowford, Bursledon, Subject To Contract’. That
is the first time the words ‘subject to contract’ are used.
It is said by Mr Mark with respect to
that letter that it was not a valid exercise of the option, (a) because it was
marked ‘subject to contract’; (b) because it was sent to McCarrahers (Mr
Moores’ solicitors) and not to Mr Moores himself, and (c) because it did not
purport to exercise the option or give notice of intention to exercise the
option immediately, but gave notice of Westway’s proposal to exercise the
option at a future date, namely on February 19.
The letter of February 15 from
McCarrahers to Mr Moores himself says:
We are writing to inform you that we have
today heard from the Solicitors acting for Westway Homes Limited that they do
intend to exercise the option to purchase your property on 19th February and
this means that they will be entitled to purchase it at the price of £175,000
written into the Option Agreement unless you are able to come to any
arrangement with them whereby they will pay a higher price.
The letter urged Mr Moores to contact
Westway on that aspect if he wished immediately.
Mr Mark says that that does not really
cure any defects in the letter of February 15, because it remains a letter
subject to contract; it remains a letter referring to exercising the option on
the later date, February 19, and, as to the point that the letter of February
15 from Gore Wood & Co had been sent to the solicitors rather than to Mr
Moores himself, the letter to Mr Moores from McCarrahers does not enclose a
copy, or the original, of the letter they had received from Gore Wood, and it
does not even tell Mr Moores that they had heard in writing from Gore Wood as
opposed to by telephone. Anyhow, that is the effect of the correspondence of
February 15.
The letter of February 18 bears the same
heading, ‘Moores to Westway Homes Ltd — Land at Lowford, Bursledon — Subject to
Contract’. It goes on as follows:
We hereby give you formal Notice,
pursuant to clause 3 of the Agreement dated 20th October, 1986 entered into by
our respective Clients, as amended by the terms of our Client’s letter to your
Client dated 19th April 1987 and your letter to us of 14th January, 1988
— those were the two extensions of time —
of our Client’s exercise of the Option
contained in the Agreement.
We, therefore, enclose cheque for
£19,500, representing:–
1. The 10% deposit . . .
2. The sum of £2,000 payable in pursuance
[of one of the terms for the original extension of the option].
The letter goes on to deal with certain
conveyancing matters in relation to obtaining vacant possession of the property.
As to that letter, Mr Mark submits that
the words ‘subject to contract’ in the heading still have the effect of
depriving the letter of all effect as an exercise of the option and, second,
that it was addressed to McCarrahers, the solicitors, and not to Mr Moores
himself, and so was not a proper exercise of the option, which requires, as I
have indicated, written notice to the vendor. But he accepts that, those points
apart, the wording would have been effective to exercise the option, that is to
say the point about purported exercise at a future date does not arise under
the letter of February 18.
So far as the facts are concerned, Mr
Moores was not on the telephone and was some distance from McCarrahers’ office.
Therefore, there was no possibility of his receiving a copy of this letter to
McCarrahers before the end of February 19, and he did not in fact receive
notification of it until after the weekend on February 22.
No particular point seems to have been
taken at the time on the words ‘subject to contract’ in the title, but the
point was fairly soon taken by McCarrahers on behalf of Mr Moores that the
notice had been given to the wrong people, that is to say to McCarrahers rather
than to Mr Moores himself. Mr Moores was, as he was told in the course of
correspondence that the difficulties were being solved and Westway were getting
nearer and nearer to having the title in proper order, becoming more and more
unhappy at the price that he had agreed. It would seem that at that stage in
1988, though it may seem rather far away at the moment, there was a booming
property market and he hoped, no doubt, that he might be able to achieve a
better price if the option had not been properly exercised and had therefore
lapsed.
I find it convenient, since it does not
really matter to the outcome which of the notices was the valid exercise of the
option, to concentrate on the notice of February 18 1988. I have no doubt that
the words ‘subject to contract’ in the heading in that letter were meaningless
and can have had no effect at all. This was virtually the last date for the
exercise of the option. The conditions of the contract which would result from
exercise of the option had been prescribed by the option agreement itself, and
there was no reason whatsoever why the words ‘subject to contract’ should have
been put in that letter. In the earlier letter of February 15, which referred
to exercise of the option on February 19, it might be possible to think that
‘subject to contract’ was put in to preserve the position that the option had
not been exercised up to February 19 when it was proposed to exercise it. But
that cannot apply to the wording of the letter of February 18, because that
does not talk about exercising the option on February 19.
We were referred in connection with this
point to the decision of
362, [1983] 2 EGLR 120. That was concerned with whether a letter written by
landlords’ agents had constituted an effective trigger notice for the purpose
of a rent review clause. Lawton LJ, in the final paragraph of his judgment,
said:
Since there is an argument both ways
about this matter and as . . . it is an argument which is reasonable on both
sides, it seems to me that it cannot be said that the tenants, on receiving
this letter, would necessarily and reasonably have inferred that it was an
effective trigger notice for the purpose of the lease. There is doubt about its
meaning and as there is doubt it seems to me that the letter was ineffective for
the purposes of the rent review clause in the lease.
It seems to me that any solicitor reading
the letter of February 18 would necessarily and reasonably have inferred that
the words ‘subject to contract’ in the heading were in the context meaningless.
We were equally referred to a decision of
Parker J in The Trado [1982] 1 Lloyd’s Rep 157, which was concerned with a
charterer’s option to extend the charter. Parker J there, at p 159 in the
right-hand column, said that those who have options in their favour must, if
they wish to exercise them, exercise them in words which are not really capable
of doubt. I do not regard the words of the letter of February 18 as really
capable of doubt. They are plain. It is, therefore, a question of whether the
notice was properly given to the solicitors rather than to Mr Moores himself.
In this context, we have to see what the solicitors were doing on behalf of
their client. We have been referred in the skeleton arguments to the decision
of this court in Saffron Walden Second Benefit Building Society v Rayner
(1880) 14 Ch D 406, where James LJ pointed out that there is no such thing
as ‘the office of solicitor’ for a person and said at p 409: ‘The solicitor is
his solicitor when he chooses to employ him and in the matter in which he is so
employed.’ Nobody doubts the correctness
of that.
We have also been referred by Mr Mark to
the decision of Templeman J in Holwell Securities Ltd v Hughes [1973]
1 WLR 757 and to the affirmation of that decision by this court reported at [1974]
1 WLR 155. The issue actually decided by both courts was that where the
plaintiffs had been granted by the defendant an option to purchase property and
the option was to be exercised by notice in writing to the defendant, it was
not a sufficient exercise of the option that a notice had been posted which was
never received by the defendant and, so far as the evidence went and the judge
found, never delivered to the defendant’s address to which it was sent. On the
facts of that case, a letter had been sent to the defendant’s solicitor
exercising the option, and it was a copy of that letter with a covering letter
which was sent to the defendant himself but never arrived. With the letter sent
to the solicitor there had been the plaintiff solicitor’s cheque for the amount
of the option.
In the circumstances of that case there
was no suggestion by anyone that the solicitors had authority to accept a
notice exercising the option. The underlying facts do not appear clearly from
the report, but it does not appear that there had been contact between the
solicitors, since the option agreement had been entered into quite a few months
before.
We were referred also to a decision of
Walton J in Re Munro [1981] WLR 1358. That was a case which arose in the
bankruptcy of two solicitors who had been practising in partnership, and the
trustee in bankruptcy, having achieved such realisation as he had any hope of
achieving, was intending to apply for his release. Before he applied for his
release he was required to send notices of his intention to make the
application, together with a summary of his accounts, to the debtor and also to
such of the creditors as had proved their debts according to the addresses in
their respective proofs. That was the requirement of the bankruptcy rules.
One debtor who had proved was a Mr Singer
who was actually resident at the time in the south of France, and that was the
address given in his proof of debt. But the trustee sent the notice intended
for Mr Singer not to that address but to the address of Mr Singer’s solicitors
in London. That was not in accordance with the rules and it did not appear that
the notice so sent to the solicitors had been forwarded to Mr Singer. It
followed that Walton J set aside the release which had been granted. That does
not, so far as the facts are concerned, assist in the present case, but the
case is cited for a general comment of Walton J at p 1361 D-E:
It is, of course, a common fallacy to
think that solicitors have an implied authority on behalf of their clients to
receive notices. They may have express authority so to receive them, but in
general a solicitor does not have any authority to accept a notice on behalf of
his client.
One has to look from the general to the
particular and, as was urged by James LJ in the Saffron Walden Building
Society case, to consider what McCarrahers were employed for and what
matter it was in which they were employed. That is covered by a fairly
considerable amount of correspondence with notes of telephone attendances in
the agreed bundle. The position was that at the time the option was granted the
reason for having an option rather than an immediate sale was, as I have
indicated, the fact that Mr Moores’ title was possessory. To get to a position
in which the option could be exercised, matters had to be carried through to
improve Mr Moores’ title and also to solve the access problem in relation to
the ransom strip owned by Wimpeys. The handling of the access strip was dealt
with entirely by Westway’s solicitors, but to improve Mr Moores’ title was the
common objective of Mr Moores and Westway, and McCarrahers were instructed by
Mr Moores to assist with that on the basis indeed that Westway would pay for
the work they did, but they were co-operating in their capacity as solicitors for
Mr Moores.
We find, after the option agreement had
been entered into and after the first extension had been arranged between the
parties in April 1987, on June 11 1987 there is a letter from Mr Skitch for
Westway to McCarrahers headed:
Dear Mr Kitcatt
Re: Your Client — Mr L Moores
My Clients — Westway Homes Limited
Land at Lowford, Bursledon
and the writer says that he is writing as
promised ‘to follow up our telephone [conversation] of 4th June which leads
back to my earlier discussion with one of your Partners on Wednesday the 22nd
April’. He then goes on to refer to having explained that Westway were looking
further into the possibility of Mr Moores’ possessory title being upgraded to
absolute, and were investigating the history of the adjacent track, and that
Westway had wanted Mr Skitch to meet with them and with Mr Moores, and having
regard to etiquette he cleared the meeting with the partner in McCarrahers ‘on
the strict understanding that anything which passed at it would be wholly on
the ‘Without Prejudice’ basis’, and that the outcome would be reported in due
course. The meeting had apparently taken place on April 23 and there is a full
report of matters discussed to keep McCarrahers fully in the picture. The
letter at the end of the penultimate page says:
It is . . . anticipated that subject to a
successful outcome to the Planning Application and to other negotiations . . .
the Option will be exercised probably during the extended period rather than
the original one, but I shall keep you closely posted about this.
Then the letter ends:
You kindly confirmed on the telephone
that the period of our Authority to Inspect the Register is deemed still to be
running, but I would welcome an up to date signed Authority for my file in due
course.
On June 15 McCarrahers sent a duly signed
authority and they referred to the matters having been briefly discussed ‘a
week or so ago’, and they make comments on various matters appearing in Mr
Moores’ deeds and as to what they did or did not know.
In July there is a further report from Mr
Skitch to McCarrahers, and he talks about wanting to peruse Mr Moores’ deeds at
McCarrahers’ office, and so forth, and says that subject to satisfactory and
speedy resolution of certain matters and synchronisation of other related arrangements
‘[Westway] will be in a position to commit itself irrevocably to the intended
development and in particular to the exercise of the Option granted by Mr
Moores’. He asks whether McCarrahers have any particular instructions on
time-scale from Mr Moores.
There is a reply of July 10 thanking Mr
Skitch for the letter of July 9 and expressing happiness to co-operate in any
way with regard to matters referred to in point 2 in Mr Skitch’s letter. There
is a discussion of how the deeds could be inspected at McCarrahers’ offices.
There is a comment that as Mr Skitch has it in mind to ask Mr Moores to make a
further statutory declaration, McCarrahers (that is Mr Kitcatt) would like to
see the draft first and obtain instructions from Mr Moores before it is prepard
for swearing. As to time-scale, Mr Kitcatt says he has no particular
instructions from Mr Moores, but naturally he would like matters to proceed as
quickly as possible.
Then there is considerable correspondence
about a proposed statutory declaration to support the title, and it appears
that Mr Kitcatt saw Mr Moores to go through that with him, and steps were
generally taken with a view to getting the statutory declaration prepared.
In September of 1987 Gore Wood & Co
took over from Mr Skitch as the solicitors for Westway, and they continued the
correspondence about the statutory declaration. They referred to understanding
that the option had been extended to January 20 1988. About the same time the
question was arising whether the matter might not be dealt with by getting a
title insurance, so that there would be the backing of an insurance company if
any problem were raised about the title at some later date. But regular
correspondence between McCarrahers and Gore Wood & Co continues throughout
the autumn of 1987.
It is a normal solicitors’ correspondence
between two solicitors who are co-operating with a view to achieving the end,
in the interests of both their clients, that the title would be one on which
development of the property in accordance with planning permission could take
place, and the option could be exercised as the preliminary to development by
Westway. Steps are taken with a view to improvement of the title in the Land
Registry and McCarrahers write to various insurance companies. The correspondence
continues without any interruption, and matters take a bit longer than had been
anticipated. There is, furthermore, inquiry by Mr Moores about the possibility
of his participating in the development, and there is some correspondence about
that. The extension of the option to February 19 is confirmed between the
solicitors on January 14. That is explained direct to Mr Moores by Mr Johnson,
a director of Westway. We then have the letter of February 15 which is relied
on as the alternative for the exercise of the option, and on that McCarrahers
on the same day write to their client and there are various telephone
conversations between Mr Kitcatt at McCarrahers and Mr Reece of Gore Wood in
relation to the various matters which had been discussed. I do not need to go
into them in detail.
My conclusion from the course of that
correspondence is that by February 18 1988 McCarrahers were firmly in the
saddle, instructed by Mr Moores to deal with all matters relating to the
improvement of his title, or the protection of the title by insurance, or
anything else which would enable the property to be developed and for the
development to be marketable and to enable the option to be exercised, which
was of course the way in which Westway would be developing the property and the
only reason, so far as Westway were concerned, as must have been apparent to Mr
Moores, why Westway were concerned with the improvement of Mr Moores’ title.
In those circumstances, and on the facts
of this case, I have no doubt that McCarrahers had authority from Mr Moores to
accept the notice in the letter of February 18 exercising the option. Had
objection not been taken which led to these proceedings, the correspondence
would have gone on in the normal way to the conveyancing completion under the
option agreement.
For these reasons, I do not find it
necessary to consider further the letter of February 15 and I would dismiss Mr
Moores’ appeal.
Agreeing, NOURSE LJ said: I agree.
I do not say that it is impossible to uphold the learned judge’s decision on
the ground on which he decided it. However, like Dillon LJ, I see no point in
going into that question, because I, too, am of a clear opinion that the
service of Gore Wood & Co’s letter of February 18 1988 on Mr Moores’
solicitors, McCarrahers, at about 4.30 in the afternoon of that same day, was a
sufficient giving of notice to Mr Moores of Westway’s intention to exercise the
option within clause 3 of the agreement of October 20 1986.
Mr Mark has taken two points on the
letter of February 18. First, he says that the introduction of the words
‘subject to contract’ into the heading of the letter had the effect of making
the exercise of the option provisional only at that stage. He has referred us
to cases where in other contexts those words have been construed as evincing an
intention that a transaction shall remain provisional. One of them is the case
about a notice given under a rent review provision to which Dillon LJ has
already referred, Shirlcar Properties Ltd v Heinitz (1983) 268 EG
362, [1983] 2 EGLR 120. I would like to read a passage from Dillon LJ’s own
judgment in that case at p 364:
The question is, then, as to the effect
of the words ‘subject to contract’. They are wholly in apposite to a trigger
notice given by landlords under this particular rent review clause. My initial
inclination, therefore, was that they should be disregarded and that a
reasonable tenant would take the view that they were merely meaningless. On
consideration, however, I think that these time-hallowed words ‘subject to
contract’ would leave the tenant in doubt as to whether the figure of £6,000 a
year was being put forward as a firm figure specified by the landlords under
the rent review clause or was merely being put forward as a provisional figure
which, if not agreed by a binding contract such as is envisaged by the words
‘subject to contract’, the landlord might reserve the right to revise. If it is
merely a provisional figure, then it is not enough to trigger the rent review
clause.
On the whole I feel that a reasonable
tenant might regard this as merely a provisional figure.
Applying that test to the letter of
February 18, I regard it as wholly impossible that a reasonable vendor or his
solicitor would have regarded the exercise of the option as being intended to
be provisional only. I think that if the recipient had directed his mind to it,
he might well have thought that the typist had simply carried forward the
heading of the three previous letters, starting with that of February 15 and
that the author of the letter of February 18 had had no part in it at all.
However that may be, even if he had paid some attention to those words, he
could not possibly have thought that they were intended to have some detractive
effect on the substantive part of the letter, which is the clearest exercise of
an option that it is possible to imagine. There used to be a process of
construction — I trust that there still is — called common law rectification. I
think that that process should be applied here by striking out the words
‘subject to contract’ as being entirely meaningless.
Mr Mark’s second point is that
McCarrahers had no authority, express or implied, to accept the letter on
behalf of Mr Moores. That is a question to be decided on the facts of the
individual case. It appears clear that there was no express authority. In
regard to implied authority, Mr Mark has referred us to Bowstead on Agency 15th
ed, p 111, where we find article 30 headed ‘Professional Agents: Implied
Authority Where Employed In The Course of Business As Agent (Usual Authority)’.
The text of that article is as follows:
Every agent who is authorised to do any
act in the course of his trade, profession or business as an agent has implied
authority to do whatever is normally incidental, in the ordinary course of such
trade, profession or business, to the execution of his express authority, but
not to do anything which is unusual in such trade, profession or business, or
which is neither necessary for nor incidental to the execution of his express
authority.
Mr Mark submits that McCarrahers’ express
authority to act on behalf of Mr Moores for certain specified purposes did not
extend to the acceptance of a notice exercising the option and that to do so
was neither necessary for nor incidental to the execution of their express
authority. We have not called on Mr Rhys to answer the appeal on behalf of
Westway, but he might have referred us to article 32 in Bowstead, at p
118, which is in these terms:
Authority Implied From Course of Dealing
And Circumstances Of Case. Every agent has, in addition to the forms of
authority indicated in Articles 27 to 31, such authority as is to be inferred
from the conduct of the parties and the circumstances of the case.
From the commentary on p 119 I extract
this:
The question as to implication does not
stop at the matters previously mentioned, but goes on to involve consideration
of the whole circumstances of the agent’s position. This may lead to the
agent’s having a wider authority initially, or to his authority being enlarged
by his principal’s acquiescence in his assuming further powers.
Mr Mark submits that McCarrahers’ express
authority was to act on behalf of Mr Moores in relation to questions of title
and insurance. What was their duty in regard to questions of title? It was to ensure, so far as practicable, that
Mr Moores was able to give Westway a good title to the land if and when the
option to purchase was exercised. It hardly seems to be an improbable
proposition to say that it was no more than incidental to the discharge of that
duty for McCarrahers to accept a notice exercising the option.
However that may be, the matter does not
stop there. As Dillon LJ has demonstrated, there was a very long correspondence
between the solicitors. At this stage I can start with a letter of January 11
1988 from Mr Kitcatt of McCarrahers to Mr Moores, asking if he was prepared to
agree to a further extension of the period for the exercise of the option until
February 19 1988. On January 14 there was a telephone conversation between Mr
Moores and Mr Kitcatt, of which the latter made a note as follows:
Mr Moores telephoned and we discussed my
letter of 11th January. He agreed to grant the extension of time for exercising
the option until 19th February.
On the same day McCarrahers wrote to Gore
Wood & Co saying:
We refer to our telephone conversation
this morning and write to confirm that the date for the exercise of the option
by your clients under the terms of clause 3 of the Agreement dated 20th October
1986 is to be deemed to be extended until 19th February 1988.
It could not
be suggested that McCarrahers did not have express authority from Mr Moores to
write that letter. All other
that authority for them to accept a notice exercising the option. Having been
made the authorised channel of communication for the one purpose, they must
surely have been made the channel for the other. It is true that on January 18
Mr Johnson of Westway wrote to Mr Moores personally, saying: ‘I am pleased to
confirm therefore that we will be exercising the option agreement by the 19th
February 1988 in accordance with the terms set out.’ Mr Mark made much of the fact that on this
and other occasions Mr Moores and Mr Johnson communicated directly with each
other. But the question is: what authority did McCarrahers have from Mr Moores
on February 18 when the notice was served on them? Looking at the events and correspondence as a
whole, in particular at those of January 14, I think it clear that they had an
implied authority to accept, on Mr Moores’ behalf, a notice exercising the
option.
For these reasons, as well as for those
given by Dillon LJ, I, too, would dismiss the appeal.
Also agreeing, RUSSELL LJ said: I,
too, would wish to concentrate upon the letter dated February 18 1988, whatever
may have been the true legal position created by the earlier correspondence, in
relation to which I would prefer to make no definitive finding.
As to the letter February 18 1988, in my
judgment it was a clear and unambiguous document written in formal terms, and
the words ‘subject to contract’ at the head of the letter simply cannot
sensibly exist so as to give those three words any meaning. I recognise that
the approach must be an objective one in respect of the intent of the writer,
but, that said, I agree that the words are mere surplusage in the context of
this case and have no legal significance.
Was the notice validly served upon the
solicitors as opposed to the vendor personally?
My answer to that question is in the affirmative for the reasons given
by Dillon and Nourse LJJ in their respective judgments. I gratefully adopt those
reasons.
There is nothing further that I can
usefully add, save to indicate that I, too, would dismiss this appeal.
The appeal of plaintiffs against
dismissal of their claim against second defendants was dismissed with costs;
appeal of first defendant dismissed with costs not to be enforced without
leave, his present liability assessed at nil; legal aid taxation of first
defendant’s costs; plaintiffs’ application for costs against Legal Aid Board
adjourned to the Registrar of Civil Appeals; application of plaintiffs to vary
judge’s order for costs dismissed; plaintiffs to pay second defendant’s costs
of application.
