Escrow — Undated lease delivered as an escrow — Dispute as to date from which rent became payable under lease — Lease delivered as an escrow on November 1 1976 but conditions subject to which it was delivered not fulfilled until November 18 1977 — Which was ‘the date hereof’ (from which the payment of rent became due) to be inserted in the lease? — Discussion of much old learning on the doctrine of escrow and some difference of judicial opinion — Deputy High Court judge considered that the date should be November 18 1977 — One lord justice (Ackner LJ) agreed with him, but the Master of the Rolls and the other lord justice considered that it should be November 1 1976 — Judgments constitute a valuable text on the law concerning the effect of delivery of a deed as an escrow — Although ‘a relic of medieval times’, the law is by no means of academic interest only — ‘Deeds are not uncommonly delivered in escrow today’ — A case to be noted by conveyancers and students — Appeal from Deputy Judge Rubin allowed — Leave not given to appeal to House of Lords
This was an
appeal by Alan Estates Ltd, the landlords, from a decision of Judge Rubin,
sitting as a deputy judge of the High Court, on an originating summons taken out
by the landlords to determine the date from which rent became payable in
respect of a lock-up shop at 32 Goldhawk Road, London W12, which was the
subject of a lease to W G Stores Ltd, the defendants before Judge Rubin and the
respondents to the present appeal.
Gordon Nurse
(instructed by Martin Boston & Co) appeared on behalf of the appellants;
Lawrence Cohen (instructed by Woolf, Seddon) represented the respondents.
Giving
judgment, LORD DENNING MR said: In this case we have to consider the medieval
law about an ‘escrow’ and to put it into its modern setting.
The Facts
There is a
lock-up shop at 32 Goldhawk Road, London W12. In September 1976 it was empty. W
G Stores Ltd were keen to take a lease of it from the landlords, Alan Estates
Ltd. They wanted to occupy it as soon as possible. In anticipation of the
lease, the landlords allowed the tenants to have the key — so as to measure up
for shop fittings. The tenants paid a quarter’s rent to the landlords’
solicitors, asking them to hold it as stakeholders pending completion of the
lease. Inquiries were made as to title and so forth. But no preliminary
contract was entered into. The solicitors got on straight away with preparing
the lease, and getting it engrossed and executed. Then on Monday November 1 1976
the solicitors exchanged the lease and counterpart duly executed. But this is
to be noted: both lease and counterpart were undated. Each started off:
THIS LEASE is
made the day of One thousand nine hundred and seventy-six BETWEEN ALAN ESTATES
LIMITED . . . and W G STORES LIMITED . . .
The tenants’
solicitors wrote this letter to the landlords’ solicitors:
We now
enclose the Lease duly executed by our client . . .
As agreed on
the telephone you will hold this document to our order pending receipt by us of
satisfactory final searches (and various other conditions) . . .
Pending
clarification of all the above points by way of confirmation you will hold the
executed Lease to our order and also continue to hold the sum of £937.50 (the
first quarter’s rent).
Yours
faithfully,
PAUL WOOLF
& CO
(Tenants’
solicitors).
PS Our
Company Agents advise us that there is an undischarged charge in favour of
Northern Commercial Trust Ltd and we shall also require your undertaking in
respect of this.
The landlords’
solicitors replied on the same day:
We thank you
for your letter of today’s date enclosing the Lease, duly executed . . .
We presume it
is acceptable that we date the Lease today?
We enclose
herewith our Clients’ part of the Lease duly executed by way of exchange . . .
Yours
faithfully,
MARTIN BOSTON
& CO
(Landlords’
solicitors).
Those letters
were written on Monday November 1 1976.
On the
following Monday, November 8 1976, the tenants’ solicitors wrote to the
landlords’ solicitors. They took no objection to the date being inserted,
November 1 1976. They simply said:
Thank you for
your letter of the 1st November with enclosures as therein stated.
Unfortunately
there still appears to be a problem regarding the mortgage to Northern
Commercial Trust Ltd . . .
Our Client is
anxious to complete this matter and indeed we did try to telephone your Mr
Boston on Friday without success.
That was
Monday November 8. On the next day, Tuesday November 9, the tenants decided to
call off the whole thing. Their solicitors telephoned to the landlords’
solicitors. They replied that they regarded the transaction as binding. The
tenants’ solicitors wrote this letter on Tuesday November 9 1976:
As explained
on the telephone today our Client has decided to withdraw from the transaction
and we should be obliged if you would return our Client’s cheque in the sum of
£937.50 which, under the terms of our letter dated November 1, you are still
holding to this firm’s order.
As explained
on the telephone we very much regret the lateness of our Client’s decision and
we must confess we were surprised to hear from you that you considered the
transaction to have been completed . . .
So there it
was. The landlords’ solicitors considered that the transaction was binding. The
tenants’ solicitors said it was not binding.
Two days
later, on Thursday November 11 1976, the landlords’ solicitors issued a writ
claiming a declaration that the lease and counterpart were binding:
alternatively, that it was an escrow. The defendants denied it.
Decision
of Whitford J
The action
took a year to come on. Then on November 14 and 15 1977 it was tried by
Whitford J. At the end of the day it was accepted by both sides that the lease
was delivered as an escrow on the terms set out in the tenants’ solicitors’
letter of November 1 1976. The only question was whether the various conditions
had been fulfilled. It was accepted that all had been fulfilled save for the
postscript requiring an undertaking about the ‘undischarged charge in favour of
Northern Commercial Trust Ltd’. It would have been quite easy to fulfil this
but the landlords’ solicitors had not done it. The tenants’ solicitors
submitted that it was too late for them to do it. But Whitford J held
otherwise. He said:
I reject the
conclusion that is urged upon me by counsel on behalf of the defendants
(tenants) that it is now too late for the plaintiffs (landlords) to satisfy the
outstanding condition. They ought to have had a reasonable time after November
8 1976 to meet this last condition contained in that letter then outstanding,
and I am prepared to give them a reasonable time to satisfy that condition and
accordingly to make the transaction binding to date.
The landlords
did satisfy the condition on November 18 1977, so the lease became binding.
At the end of
the hearing before Whitford J counsel then raised the question of rent. From
what date was it payable? Whitford J
said: ‘There is nothing about this in the pleadings in this connection at all.
I am not prepared to deal with it’.
These
proceedings
So these
proceedings were commenced to ascertain the date from which rent was payable.
Was it from November 1 1976 (when the lease and counterpart were
exchanged)? Or from November 18 1977
(when the last condition was fulfilled)?
The landlords took out an originating summons to determine it.
Judge Rubin
held that the rent is payable only from November 18 1977. The landlords appeal.
The blank
in the lease
The difficulty
has arisen because of the blank in the lease. No date was inserted. But the
rent was to run ‘from the date hereof’. So we have the problem. From what date
is the rent to run? Something may turn
on the wording of the document. So I will set it out. The lease was in this
form:
THIS LEASE is
made the day of One thousand nine hundred and seventy-six BETWEEN ALAN ESTATES
LIMITED (etc) and W G STORES LIMITED (etc)
The Landlord
HEREBY DEMISES unto the Tenant ALL THAT property (etc)
TO HOLD the
demised premises unto the Tenant for a term of TWENTY FOUR YEARS from the
Twenty-ninth day of September One thousand nine hundred and seventy-six
(determinable as hereinafter provided) PAYING THEREFOR unto the Landlord from
the date hereof and throughout the said term hereby granted yearly and
proportionately for any fraction of a year the several rents hereinafter
referred to:
A. Until the
Twenty-ninth day of September One Thousand nine hundred and eighty the yearly
rent of THREE-THOUSAND TWO HUNDRED AND FIFTY POUNDS (£3,250)
IN WITNESS
whereof the parties hereto have hereunto set their respective common seals and
hands and seals as appropriate the day and year first before written
|
THE COMMON SEAL OF |
|||
|
W G STORES LIMITED |
Seal |
||
|
was hereunto affixed in the |
|||
|
B SOLOMONS |
Director. |
||
|
B SOLOMONS |
Secretary |
||
If there had been no repudiation
In order to
solve the problem, I would ask this question: Suppose the tenants had not
repudiated their obligations. What date would have been inserted in the
lease? I feel sure that the solicitors
would have inserted November 1 1976. I say this because of the letter of the
landlords’ solicitors of November 1 1976 in which they said: ‘We presume it is
acceptable that we date the lease today?’
To which the tenants’ solicitors took no objection. In addition, both
lease and counterpart were exchanged on November 1 1976: and, by analogy with
contract and conveyances of land, the effective date when the parties are bound
is the date of exchange, see Eccles v Bryant [1948] Ch 93 and Harrison
v Battye [1975] 1 WLR 58.
However, no
date was inserted. It remained blank. The reason was because the tenants
repudiated the transaction altogether. They denied that the tenants were bound.
I cannot think that they can take advantage of their own repudiation — so as to
postpone the date of the deed — or the term from which rent should run. No one
can take advantage of his own wrong. We should insert the date which would have
been inserted had they not repudiated. That is November 1 1976. The rent should
run from that date.
In case this
simple solution be erroneous, I must go on to deal with the law about escrow.
When does
an escrow take effect?
Another way of
approaching the problem is to ask: At what date does an escrow take
effect? On the date when the deed is
delivered? Or on the date when the
conditions are fulfilled?
Judge Rubin
held that:
. . . a deed,
delivered as an escrow, takes effect from the satisfaction of the condition and
not from the date of its delivery as an escrow. Applied to the present case, in
my judgment both lease and counterpart took effect together on the satisfaction
of the condition on November 18 1977 and, accordingly, such date is ‘the date
hereof’, and the rent ought to be calculated from and become payable from that
date.
In coming to
this conclusion Judge Rubin felt that he had the clearest possible authority in
the judgment of Walton J in Terrapin International Ltd v Inland
Revenue Commissioners [1976] 1 WLR 665 who said of an escrow (p 669):
. . .
although of course it contains within itself the possibility of becoming an
effective deed, a deed rising phoenix-like from the ashes of the escrow, at the
stage before the condition is fulfilled it is of no effect whatsoever.
To the
contrary, however, is the dictum of Vaisey J in Re Duke of Devonshire’s
Settlement (1952) ATC 405:
As a rule the
date properly to be inserted in a deed delivered as an escrow is the date at
which it was so delivered and not the date when the condition of the delivery
has been fulfilled.
The
doctrine of escrow
The doctrine
of ‘escrow’ is a relic of medieval times. It dates from the time when
conveyances were made by feoffment and livery of seisin. It has survived to the
present day and often operates in regard to conveyances of land or the creation
or disposition of estates and interests in land such as a term of years. It has
changed its features much since the days of Sheppard’s Touchstone and Preston’s
Abstracts. We no longer speak of a first delivery or a second delivery. But
it does predicate a document which is executed and delivered. The accustomed
formula is ‘signed, sealed and delivered’. When that formula is used in the
document and it is signed by the party (or in the case of a company its seal is
affixed) and attested by a witness with intent by the maker that it should be
binding on him, it is conclusively presumed to be ‘signed, sealed and
delivered’. If it is handed over to another unconditionally, it is delivered as
a deed. If it is handed over to another conditionally, it is delivered as an
escrow. It only becomes a deed when the conditions are fulfilled.
Thus far there
can be no dispute. The question in this case is: What is the effect of an
escrow before the conditions are fulfilled?
One thing is clear. While the conditions are in suspense, the maker of
the escrow cannot recall it. He cannot dispose of the land or mortgage it in
derogation of the grant which he has made. He is bound to adhere to the grant
for a reasonable time so as to see whether the conditions are to be fulfilled
or not. If the conditions are not fulfilled at all, or not fulfilled within a
reasonable time, he can renounce it. On his doing so, the transaction fails
altogether. It has no effect at all. But if the conditions are fulfilled within
a reasonable time, then the conveyance or other disposition is binding on him
absolutely. It becomes effective to pass the title to the land or other
interest in the land from the grantor to the grantee. The title is then said to
‘relate back’ to the time when the document was executed and delivered as an
escrow. But this only means that no further deed or act is necessary in order
to perfect the title of the grantee. As between grantor and grantee, it must be
regarded as a valid transaction which was effective to pass the title to the
grantee as at the date of the escrow, see Perryman’s case (1594) 5 CoRep
846. But this doctrine of ‘relation back’ does not operate so as to affect
dealings with third parties, see Butler v Baker’s case (1591) 3
CoRep 25a. So far as the grantee is concerned, while the conditions are in
suspense, he gets no title such as to validate his dealings with third persons.
He cannot collect rents from the tenants. Nor can he give the tenants notice to
quit. He cannot validly mortgage the land, though, if he purports to do so, the
mortgage might be ‘fed’ later when he acquires the title.
Such are the
principles which I deduce from the very learned work of Williams on Real
Property, 1901 ed at p 151 note (k) and the authorities cited therein: and
from the judgment of Farwell LJ in Foundling Hospital Governors v Crane
[1911] 2 KB 367 at p 377 and of Lord Cross of Chelsea in Security Trust Co
v Royal Bank of Canada [1976] AC 503 at p 517. I said likewise in Cory
(Wm) & Son Ltd v Inland Revenue Commissioners [1964] 1 WLR 1332
at p 1341. I realise that both Diplock LJ and Lord Reid said otherwise, see
[1964] 1 WLR at p 1346 and [1965] AC at pp 1107-8. But they had not the benefit
of having cited to them the earlier authorities and their observations are said
in the latest textbook to be erroneous, see Emmet on Title (1978) p 650.
What date
is to be inserted?
The question
in this case is as between grantor and grantee. The counterpart lease was
executed (a day or two beforehand) and delivered in escrow on November 1 1976.
In exchange the lease was executed (a day or two beforehand) and delivered in
escrow on November 1 1976. The date of delivery in escrow was therefore
November 1 1976. The conditions were fulfilled on November 18 1977. Thereupon
the title related back to the delivery on November 1 1976. That is the date to
be inserted in the lease as ‘the date hereof’. For this purpose we go back to Coke
upon Littleton 46b:
If the habendum
be for the terme of twenty-one years, without mentioning when it shall begin,
it shall begin from the deliverie, for there the words take effect, as is
aforesaid. If an indenture of lease beare date which is void or impossible, as
the thirtieth day of Februarie, or the fortieth of March, if in this case the
terme be limited to begin from the date, it shall begin from the deliverie, as
if there had been no date at all
Conclusion
This case has
taken us back to the language and thought of the medieval lawyers. The result
is that the lessees must pay the rent of the lock-up shop from November 1 1976
and not from November 18 1977. This seems to me the just result. It would not
be right that the lessees — by repudiating their obligations on November 9 1976
— should thereby get out of paying any rent for a whole year — while the issue
was being litigated — in which they were found to be wrong.
I would
therefore allow the appeal.
Dissenting,
ACKNER LJ said: The habendum in the lease, the subject-matter of this dispute,
provides for ‘A term of 24 years from September 29 1976 (determinable as
hereinafter provided) paying therefor unto the landlord from the day hereof . .
. the several rents hereinafter referred to’. ‘The date hereof’ is a reference
back to the date of the execution of the lease. But the lease is not dated. The
question which we have to decide is from what date did the obligation to pay
rent begin. Was it November 1 1976, the date when the lease was executed by the
appellant landlord in escrow, the condition being the unconditional delivery by
the tenant of the counterpart, or November 18 1977 when for the first time the
only outstanding term (the production of a certified copy of the transfer of
the mortgage) under which the counterpart had been delivered was first
satisfied?
This appeal
thus raises the short but by no means simple question — from what date does an
escrow become operative — from the date it was delivered as an escrow or from
the date when the conditions subject to which it was delivered have all been
satisfied? At first instance the learned
deputy judge found in favour of the second alternative. He held that the
execution of a lease occurred only when it was signed, sealed and
unconditionally delivered.
The nature
of an escrow
If an
instrument be delivered to take effect on the happening of a specified event,
or upon condition that it is not to be operative until some condition is
performed, then pending the happening of the event or the performance of the
condition the instrument is called an escrow (see Norton on Deeds, 2nd
ed p 18):
The maker (of
a deed) may so deliver it as to suspend or qualify its binding effect. He may
declare that it shall have no effect until a certain time has arrived or until
some condition has been performed, but when the time has arrived, or the
condition has been performed, the delivery becomes absolute, and the maker of
the deed is absolutely bound by it, whether he has parted with possession or
not. Until the specified time has arrived, or the condition has been performed,
the instrument is not a deed; it is a mere escrow.
Per Lord
Cranworth in Xenos v Wickham (1866) LR 2 HL 296 at p 323.
This view of
the nature of an escrow was accepted by Diplock LJ, as he then was, in Cory
(Wm) & Son Ltd v Inland Revenue Commissioners [1964] 1 WLR 1332
at p 1346. He said:
So long as it
remains an escrow it is not yet executed as a deed; for delivery again as a
deed is required before it becomes one. While an escrow it conveys nothing, it
transfers nothing.
However, a
party who executes a deed of transfer as an escrow has no locus poenitentiae.
It is well established that during the intervening time between the execution
of the escrow and the satisfaction of the condition subject to which it was so
delivered, the maker of the escrow cannot withdraw. He cannot recall it or
repudiate it. He must await the event to see whether or not the condition is
fulfilled (see Beesly v Hallwood Estates Ltd [1961] Ch
105, Vincent v Premo Enterprises (Voucher Sales Ltd) [1969] 2 QB
609 and Kingston v Ambrian Investment Co Ltd [1975] 1 WLR 161 at
p 166 B-D). The dicta to the contrary by Lord Reid in Cory’s case [1964]
AC 1088 at p 1108 is generally accepted as being per incuriam
(see Emmet on Title, 17th ed, 650 referring to the decision of Walton J
in Terrapin International Ltd v IRC [1976] 1 WLR 665 at pp
669-670 — a case to which I shall make a more detailed reference hereafter.
While this is clearly an important characteristic of an escrow, it does not
seem to me to relate to the problem we have to solve. It is, of course, common
ground that all the conditions subject to which the escrow was delivered have
now been satisfied. This escrow had therefore ceased, so to speak, to be in
suspended animation and we are not therefore concerned with what might have
been the position during the interregnum between the execution of the escrow
and the satisfaction of the conditions.
The
doctrine of relation back
In Preston’s
Abstracts, 2nd ed, vol 3 (1824) p 65, the law is stated as follows:
The rules
respecting escrows are, 1st, The writing will not operate as a deed till the
second delivery. 2ndly, The party deputed to make the second delivery, cannot
give effect to the writing by delivering the same before the conditions are
performed. 3rdly, On the second delivery of the writing, it will have relation,
for the purposes of title, and not for the purpose of giving a right to the
immediate rent, etc from the delivery. 4thly, So as the conditions be
performed, and the deed delivered a second time, the deed will be good, not
withstanding the death of either or both of the parties before the second
delivery.
These
observations have frequently been cited with approval — see in particular Foundling
Hospital Governors v Crane [1911] 2 KB 367 per Farwell LJ at p 377.
The reference to a second delivery was because under the old law an escrow had
to be delivered to a third party — not to the person intended to take
thereunder, since otherwise there would have been a technical delivery. The
limited nature of this doctrine is apparent from the following observations of
Lord Cross giving the opinion of the Board in Security Trust Co v The
Royal Bank of Canada [1976] AC 503 at p 517:
On fulfilment
of the condition subject to which it was delivered as an escrow, a deed is not
taken to relate back to the date of its delivery for all purposes, but only for
such purposes as are necessary to give efficacy to the transaction — ut res
magis valeat quam pereat (see Butler and Baker’s case (1591) 3 CoRep
25a). Thus, the fact that the grantor has died before the condition of an
escrow is fulfilled does not entail the consequence that the disposition fails.
If and when the condition is fulfilled the doctrine of relation back will save
it, but notwithstanding the relation back for that limited purpose the grantee
is not entitled to the rents of the property during the period of suspense or
to lease it or to serve notices to quit (see Sheppard’s Touchstone 7th
ed (1820) 60, Thompson v McCullough [1947] KB 447)
This doctrine
does not seem to me to advance the appellant’s case.
I return now
to Terrapin’s case (cit supra), which raised for decision the
correct rate of stamp duty payable upon a document originally delivered as an
escrow. Walton J, to decide this question, considered that he had to go back to
first principles as to the nature of escrows. Having cited from Preston’s
Abstracts, in the terms referred to above, he went on to say this (p 669
G):
A document
which is intended to take effect as a deed when conditions have been fulfilled
may be executed as an escrow: that is to say, with all the formalities of a
deed save that the vital unconditional delivery, which is essential for the
proper execution of a true deed, is missing; it is replaced by a conditional
delivery, usually express, but capable of being assumed. At this stage, the
document is not a deed; and although of course it contains within itself the
possibility of becoming an effective deed, a deed rising phoenix-like from the
ashes of the escrow, at the stage before the condition is fulfilled it is of no
effect whatsoever.
Having quoted
that part of the judgment of Diplock J in Cory’s case, to which I have
made reference above, he continued:
If I may
repeat the crucial passage; — ‘So long as it remains an escrow it is not
executed as a deed; for delivery again as a deed is required before it becomes
one’. It follows in my judgment that . . . the first date on which the deed of
exchange which is the subject matter of the present appeal was executed was on
the day on which the conditions were fulfilled and it was in the eye of the law
for the first time delivered unconditionally and thus for the first time
delivered as a deed.
After anxious
hesitation, having had the advantage of reading in draft the judgments of my
Lord, the Master of the Rolls, and Sir Denys Buckley, I agree with Walton J, as
did the learned deputy High Court judge. A deed delivered as an escrow takes
effect from the satisfaction of the conditions and not from the date of its
delivery as an escrow.
I am conscious
that in reaching this decision I am not following the dicta of Vaisey J in Re
Duke of Devonshire’s Settlement (1952) ATC 405. The learned judge was not,
however, dealing with an escrow, nor was this point apparently the subject
matter of argument, and it certainly did not arise for his decision. Moreover,
it is clear from the observations made by counsel at the conclusion of the
judgment that for the special reasons referred to the case had been taken out
of its turn and dealt with with special expedition.
Thus, with all
proper diffidence, I also would decide that both lease and counterpart took
effect together on the satisfaction of the condition on November 18 1977 and
accordingly such date is ‘the date hereof’.
Agreeing in
the result with Lord Denning MR, SIR DENYS BUCKLEY said: It was common ground
between the parties in the 1976 action that the counterpart lease was executed
in escrow by the tenants. Whitford J’s judgment proceeded explicitly on that
basis and that judgment is undisturbed. It is common ground before us that the
conditions of that escrow were fully satisfied on November 18 1977. The
question for decision in the present proceedings is how in the circumstances
set out in the judgment of my Lord, the Master of the Rolls, the expression
‘from the date hereof’ should be interpreted. The plaintiff says that it
signifies November 1 1976: the defendants say it signifies November 18 1977.
The plaintiff as landlord naturally contends that the former is correct: the
defendants as tenants equally naturally contend that the latter is correct. The
determination of the question depends in my view upon the true effect of the
delivery of a deed in escrow. The law in this respect is ancient but has not
become anachronistic. Deeds are not uncommonly delivered in escrow today.
The tenant’s
argument is to the effect that a document delivered as an escrow does not
acquire any of the characteristics of a deed until the conditions of the escrow
have been fulfilled. Thereupon unconditional delivery of the document as the
deed of the maker takes place, and the document is then for the first time
effective as a deed. Since the essential characteristics of a deed are that it
is a written instrument which has been signed, sealed and delivered, an escrow
cannot rank as a deed until there has been unconditional delivery.
The landlord’s
argument on the other hand is to the effect that as soon as the instrument is
delivered in escrow it has all the characteristics of a deed save in one
respect which is that, although the instrument is binding on the maker from the
moment when it has been signed, sealed and delivered in escrow, so that he
cannot resile from it, it has otherwise no operative power or effect until the
condition of the escrow has been fulfilled. It is consequently a deed ab
initio, but subject to a temporary restriction on its operative effect. It
is a deed the operative effect of which, but not its binding quality, has been
suspended by the maker until a certain event or time by the manner in which he
has delivered it.
Over the ages
the books contain many authoritative statements of what constitutes an escrow.
It is not easy to reconcile all of them. They can be found collected in Norton
on Deeds, itself a work of great authority (Norton on Deeds, 2nd ed
p 18 et seq). The difficulty in reconciling some of these statements derives, I
think, from a difficulty in being sure in precisely what sense the various
writers use the word ‘deed’. Norton starts his work with a discussion of how
difficult it is to give a satisfactory definition of a deed. His own definition
is at p 3 of the second edition. Three of its essential requirements are (1)
writing, (2) sealing and (3) delivery. Since January 1 1926 an individual
executing a deed must sign it or put his
that to constitute a deed a written instrument must have been ‘delivered’ by
the maker of it.
‘Delivery’ for
this purpose is not to be confused with any form of exchange of documents or of
physical delivery of the instrument to someone other than the maker. ‘No
particular form of words or acts is necessary to render an instrument the deed
of the party sealing it. The mere affixing of the seal does not render it a
deed: but as soon as there are acts or words sufficient to show that it is
intended by the party to be executed as his deed presently binding on him it is
sufficient’: Xenos v Wickham (1866) LR 2 HL 296 per Blackburn J
at p 312. ‘It is a question of intention and fact to be tried by the jurors’: ibid
per Pigott J at p 309. The maker of the deed may retain it physically in his
own possession and yet ‘deliver’ it so long as he makes clear that he intends
it as his deed presently binding on him. Anything which shows that he treats
the instrument as his deed will suffice (Tupper v Foulkes (1861)
9 CB (NS) 797 per Williams J at p 809). If, however, an instrument intended to
take effect as a deed be delivered with the intention that it shall operate
only at some future time or on the happening of a specified event, or upon
condition that it shall not be operative until some condition is performed, it
is said to be delivered as an escrow.
The maker may
so deliver (the instrument) as to suspend or qualify its binding effect. He may
declare that it shall have no effect until a certain time has arrived, or till
some condition has been performed, but when the time has arrived or the
condition has been performed the delivery becomes absolute and the maker of the
deed is absolutely bound by it, whether he has parted with the possession or
not. Until the specified time has arrived, or the condition has been performed,
the instrument is not a deed. It is a mere escrow.
(Xeros
v Wickham, supra, per Lord Cranworth at p 323). Again no special form of
words is necessary to constitute delivery of an instrument delivery as an
escrow: it is a question of intention, however, that intention may be
displayed.
After the
happening of the event or the performance of the condition upon which delivery
of an escrow was made, the instrument operates as a deed without any further
delivery.
It has been
accepted as common ground by the parties in this case that, once the maker of
an instrument has delivered it as an escrow, he cannot by any means withdraw
from it or alter it: see Beesly v Hallwood Estates Ltd [1961] Ch
105 and Kingston v Ambrian Investment Co Ltd [1975] 1 WLR 161,
166. It may perchance never take effect because the condition or event upon
which the instrument is intended to become operative never occurs, but
otherwise it will certainly take effect upon the satisfaction of that condition
or the occurrence of that event. The maker, having delivered the instrument,
has lost all control and dominion over it. It is as binding upon him as if he
had delivered it unconditionally.
I am much
disposed to think that the effect of delivery upon a deed is the same as the
effect of delivery upon an escrow. Each renders the delivered instrument
inescapably binding upon the deliverer. The difference between a deed and an
escrow lies not in the binding quality of the instrument but in the time and
circumstances at and in which the obligation can be enforced. For my part I
should be prepared to hold that an instrument delivered in escrow is as much a
deed as is a precisely similar instrument delivered unconditionally in the
first instance save that the operative effects of the instrument are suspended
while it remains in escrow. In Xenos v Wickham in the passage I
have already cited Lord Cranworth used language suggesting that, until the time
specified for the maturity of the escrow has arrived or the condition of the
escrow has been satisfied, the instrument is not a deed: it is a mere escrow.
And in Foundling Hospital Governors v Crane [1911] 2 KB 367
Farwell LJ at p 377 said: ‘Now an escrow or script is not a deed at all; it is
a document delivered upon a condition on the performance of which it will
become a deed and will take effect as from the delivery, but until such
performance it conveys no estate at all.’
Lord Cranworth, it seems to me, was clearly using the term ‘deed’ to
describe an instrument binding on the grantor and immediately enforceable
against him. Farwell LJ was considering whether the instrument in question in
his case was capable of having conveyed a legal estate, ie was a deed in the
full sense. In the event, however, the document was held not to have been
delivered at all. Norton does not deal with the point, but more modern writers
seem to favour the view that an escrow, while it remains in escrow, is not a
deed. See eg Halsbury’s Laws of England, 4th ed, vol 12, para 1334. It
is perhaps merely a matter of semantics whether an instrument which is
delivered as an escrow should properly be described as a deed, the operative effect
and so the enforceability of which are temporarily suspended, or as a document
delivered upon a condition on the performance of which (and not before) it will
become a deed. The substantial point, I think, for the purposes of this
question of construction, is that the maker cannot resile from the terms and
effect of the document which he has ‘delivered’, notwithstanding that he may
have delivered it in circumstances which for the time being deprive it of
operative effect and enforceability.
I have laboured
this point perhaps at undue length because it seems to me to have an important
bearing upon the meaning to be attributed to the words ‘the date hereof’ in the
present case. The date was left blank in both the lease and the counterpart:
the dates which are now to be found there were inserted later and not by
agreement. So we are left to discover the date of the lease from extrinsic
evidence. We must surely look for the date when the lease first had some legal
effect. That was when the lease and counterpart were delivered in escrow, ie
November 1 1976. True it cannot then have vested a legal term in the tenants
but it created a state of affairs in which the landlord could do nothing with
the property inconsistent with his ability to implement his grant upon the
instant of the fulfilment of the conditions attached to the escrow. On the
facts the lease and counterpart were both in my opinion delivered in escrow on
November 1 1976.
I agree with
the Master of the Rolls that if the tenants had not repudiated the bargain, it
is likely that the solicitors would have inserted the date November 1 1976 in
both the lease and the counterpart; but for my part I prefer to base my
decision on the reasons contained in the last preceding paragraph of this
judgment rather than upon the first ground adopted by my lord.
When the
conditions of an escrow are fully satisfied, so that it becomes an immediately
operative deed, that effect relates back to the date of its delivery in escrow,
but not for all purposes; only for such purposes as are necessary to give
effect to the transaction (Security Trust Co v Royal Bank of Canada [1976]
AC 503 per Lord Cross at p 517 at F), which I take to mean all the terms and
provisions of the instrument which remain capable of being given effect to
implement the bargain between the parties. A grant in escrow of a lease, or an
assignment in escrow of the reversion to a lease, falling within the Law of
Property Act 1925, section 52(1), cannot while it remains in escrow convey or
create any legal estate which did not previously exist. It cannot, accordingly,
while the instrument remains in escrow create the legal relationship of
reversioner and tenant. So during the subsistence of the escrow the intended
reversioner is not at law the reversioner upon a term vested at law in the
tenant. Accordingly the grant or assignment, while it remains in escrow, will
not entitle the intended reversioner to demand the rents nor to serve notices
to quit (Security Trust Co v Royal Bank of Canada, supra, at p
517G). But if the intention of the parties was that, upon the escrow ceasing to
be such the rights and liabilities of the parties shall be treated as being
those which would have arisen if the instrument had been delivered absolutely,
and not as an escrow, in the first place, the lease, when it ceases to be an
escrow and becomes an effective deed, is, it seems, to be given effect as
between the parties so far as practicable as though the term had vested in the
tenant and the reversion in the reversioner when that would have occurred if
the instrument had been originally delivered unconditionally. Certainly for the
purpose of ascertaining the date when the term will expire it must be
calculated from the date, if any, specified in the lease. (Where no such date
is specified, see Coke on Littleton, folio 46b.) In this case that period is specified as ’24
years from September 29 1976′. The term will expire on September 29 2000.
Similarly the periods by reference to which instalments of rent are to be
calculated must, I think, be ascertained as though the lease had not been
delivered in escrow but unconditionally. In this case that period runs ‘from
the date hereof and
that a lease should reserve a rent to be calculated as from a date anterior to
the date on which the lease takes effect. There is nothing here to make
November 1 1976 an inappropriate date to treat as ‘the date hereof’ when
construing the redendum of the lease.
As a matter of
construction there can, in my opinion, be only one ‘date hereof’. If the lease
dates back for any purpose to the original delivery, that date must in my
judgment be the ‘date hereof’ within the meaning of the lease.
For these
reasons I am of opinion that, according to the true construction of the lease
in the events which have happened ‘the date hereof’ means November 1 1976. I
would accordingly allow this appeal.
The appeal was allowed with costs in the Court of
Appeal and below, the appellants being granted a declaration that the
obligation to pay rent commenced on November 1 1976. The date from which
interest should be calculated on the amount due was to be agreed by the
parties, with liberty to apply. Leave to appeal to the House of Lords was
refused.