Vendor and purchaser — Right of pre-emption — Whether offer to sell valid in accordance with the relevant agreement — Whether there was a valid acceptance of offer — Right of pre-emption incorrectly referred to in the agreement and in correspondence as an option — Right of pre-emption implies that the vendor has decided to dispose of the land in question
leading to the present motion by the plaintiffs arose from an agreement in 1963
relating to certain land retained by the vendor — The material parts of clause
8 of the agreement provided that:
time hereafter during the lifetime of the Vendor she should desire to sell [the
retained land] the Purchasers . . . shall have the option of purchasing the
said land . . . on the following terms: (a) The Vendor will make an offer to
sell in writing to the Purchasers and such offer will remain open to acceptance
for a period of one month . . . (b) if the Purchasers shall before the
expiration of the period of one month in writing accept such an offer the
Vendor will sell the said property to the Purchasers on the terms hereinafter
mentioned . . . (g) The sale [price] under the said option shall in default of
agreement be fixed by the valuation of a valuer appointed by the parties hereto
or in default of agreement to be appointed by the Vendor’s solicitors
defendants to the present motion were the purchasers in 1963 of land, other
than the retained land, from the vendors — It was accepted that the sale price
for pre-emption would be based on open market value
which purported to make the offer to sell in accordance with the pre-emption
clause gave notice of the vendor’s intention to sell the retained land and then
went on to say: ‘We shall be grateful if you will please let us know within one
month of today’s date whether or not you wish to exercise your option to
purchase this piece of land’ — This letter was headed ‘Re: Option Agreement
dated 13th May 1963’ — It was suggested on behalf of the defendants that the
letter was not expressed in sufficiently precise terms to be a valid offer
under the pre-emption clause — Harman J, however, held that the reference in
the heading incorporated the terms of clause 8 and that the letter was entirely
adequate as a trigger notice under the clause
question was whether a letter from the male defendant was a clear and
unequivocal acceptance of the offer — The letter said: ‘I confirm my
conversation . . . when I said I retained the interest in the land, first
expressed in 1963, as a logical squaring off of my site . . . subject to
agreement on price’ — The letter containing the offer and the reply were both
in May 1988 — Harman J held that the reply was not a clear and unequivocal
acceptance; it was an expression of interest only, and, incidentally, by the
male defendant only, although the offer was made to him and his wife, the
female defendant
was that an adequate offer had been made in accordance with the pre-emption
clause, but it had not been accepted and the rights under the clause had lapsed
— Plaintiffs were entitled to the declarations to that effect which they sought
The following
case is referred to in this report.
Banstead
Urban District Council v Wilkinson [1962]
EGD 377; (1962) 182 EG 155
This motion,
which was treated by agreement as the trial of the action, was by the
plaintiffs Stephen Churchman and John Churchman, executors of the late Mrs Ivy
Churchman, the vendor in 1963 of land at Peartree Cottage, Albany Road, West
Bergholt, Suffolk, referred to in the motion. The defendants, Mr and Mrs Lampon,
were the purchasers of the land, other than the retained land, and were the
potential beneficiaries of the right of pre-emption over the latter. The
plaintiffs sought declarations that, in effect, the offer under the pre-emption
clause had been validly made but that there had been no valid acceptance, with
the result that the right of pre-emption had lapsed.
Malcolm
Davis-White (instructed by Ellison & Co, of Colchester) appeared on behalf
of the plaintiff executors; Michael Richard King (instructed by Budd Martin
Burrett, of Colchester) represented the defendants.
Giving
judgment, HARMAN J said: This is a motion which both parties have agreed
to treat as the trial of an action and counterclaim. By a writ issued on May 10
1989, endorsed with a statement of claim, the plaintiff alleges that by an
agreement in writing, made as long ago as May 1963, rights were granted over
certain lands by the late Mrs Churchman to the defendants, Mr and Mrs Lampon.
The agreement contained in clause 8 an obligation in relation to land not at
that time agreed to be sold by the late Mrs Churchman to the Lampons. It was a
clause which plainly gives rise to a right of pre-emption, although it was
referred to in the document as an option and it has been referred to in
correspondence as an option. It is not an option, it is a right of pre-emption.
As Mr King,
for the defendants, rightly says, options and rights of pre-emption have to be
strictly construed, and I must therefore read clause 8 with a careful eye so as
to be clear that the obligations in it are properly set out. The obligations in
the clause are slightly unusual because clause 8, as pleaded, begins with: ‘If
at any time during the lifetime of the late Mrs Churchman, she shall desire to
sell the land . . .’. It does not say ‘She shall give notice of such desire or
intention to the other parties’.
The pleading
alleges that there was a notice given by letter of May 4 1988 under the terms
of clause 8 of the agreement; that one of the defendants, the first defendant,
Mr Lampon, wrote a letter on May 26; that that letter was not an unequivocal
acceptance of the offer made by the letter of May 4 and accordingly that,
pursuant to its terms, the right of pre-emption has lapsed.
The defence
and counterclaim effectively admits the documents, asserts that the letter of
May 4 did not constitute an offer within the terms of clause 8, and accordingly
says that the obligation which
on this view, did, her personal representatives are bound to honour within six
months and have not done so. On that basis, they say that the option, so
called, is still capable of taking effect.
The documents
are in the shortest terms: they consist of a copy of the contract of May 13 1963,
which is plainly carefully drawn by solicitors, and four letters passing
between the parties, that of May 4 1988, an unimportant one of May 13, saying
that they will be further getting in touch, a surprising letter of May 17 from
the late Mrs Churchman’s solicitors and an answer of May 26 said to be an
acceptance.
The option
agreement, so called, having, as I have already said, started out with a
proposition that if Mrs Churchman during her life should wish to sell, then
provides that the purchasers should have an option on the following terms: (a)
The vendor will make an offer to sell in writing to the purchasers. (b) If the
purchasers shall, before the expiration of one month, accept such offer, the vendor
will sell on the terms mentioned, and (after provisions about what was to
happen during the month and the method of delivery of the offer making time of
the essence) there is then clause (g), which reads: ‘The sale under the said
option’ — and that must by common consent have been meant to read ‘the sale price
under the said option’ — ‘shall in default of agreement be fixed by the
valuation of a valuer’ followed by machinery for the appointment of a valuer.
That provision has no definition whatever of the basis upon which the sale
price is to be fixed, but it is accepted between counsel that the only basis
can be at the open market value, as between a willing vendor and a willing
purchaser of the land in its then state, with such permissions as exist at the
date of the offer.
The terms are,
I am told, more or less taken from a precedent in the Encyclopaedia of Forms
and Precedents. There has been some litigation in the past on similar but
not the same terms, especially the decision of Wilberforce J (as he then was)
in Banstead Urban District Council v Wilkinson (1962) 182 EG 155.
That was a sale to a council tenant under the Housing Act 1957 requiring a
resale to the council if there was a desire to sell or lease the property in
the first five years after the acquisition. Wilberforce J had before him a
claim that there had been an offer to sell within the terms of that provision.
He held that the offer which was required by the contract had not been made
because the offer required by the obligation from the council was to sell to
the council at £2,100, and the actual offer made was to sell at £2,100 plus the
conveyancing costs. Thus, said Wilberforce J, no offer in accordance with the
terms had ever been made. But he went on to hold that the conditions requiring
an offer had been satisfied and he obliged the defendant to make an offer in
accordance with the obligation which existed.
That decision,
in my view, does not particularly enlighten one as to this case. The question
in this case is really a short question of construction upon the letter of May
4. Does that letter comply with the obligation under clause 8(a) of the
document, which can be summarised as: ‘The Vendor will make an offer to sell in
writing to the Purchasers’.
The letter
itself refers expressly to the option agreement, gives express notice, which
was not required, of Mrs Churchman’s intention to sell the land defined as
coloured brown and yellow on the plan, and then goes on: ‘We shall be grateful
if you will please let us know within one month of today’s date whether or not
you wish to exercise your option to purchase this piece of land’.
Surprisingly,
it appears that the draftsman of that letter did not have before him any copy
of the option agreement. How, without any copy, he managed to be so precise
about the option date and the land defined, I find it difficult to understand,
but he was. He then did not follow the words absolutely precisely by making an
offer under clause 8(a). That is not perhaps surprising if he did not have
clause 8(a) in his hand at the time.
In my
judgment, the reference to the option agreement as precisely as that
incorporates by reference the terms of clause 8 in this letter. Anyone reading
this letter must read it upon the terms that it is specifically including the
obligations in clause 8.
In my view,
the neat argument put up by Mr King that this is not an adequate offer is one
which is altogether too precise for the requirements of daily life. The letter
does not say ‘Mrs Churchman hereby offers to sell’, but there is ample
authority in the books that an offer does not have to contain any such word as
‘offer’ to be understood in that sense. In my view, the phrase —
Following the
Notice of Intent to sell, we should be grateful if you would let us know within
one month whether or not you wish to exercise your option
— plainly
implies that this is the trigger notice within one month of which the offer
must be accepted. In my view, although I quite see that there could have been
better drafting of the letter of May 4, it is entirely adequate to give proper
notice.
Upon that
basis, the question arises, is there any acceptance? The only document relied on as an acceptance
is a letter from Mr Lampon alone, signed on May 26. It is notable that the
offer was, as was required, made to Mr and Mrs Lampon. The letter makes no
reference whatever to Mrs Lampon. It is in the singular, it refers to ‘I’, and
it is signed by Mr Lampon alone and does not refer to his wife at all. The
letter says:
I confirm my
conversation with Mr Churchman
— that is, I
believe, a son of Mrs Churchman —
when I said I
retained the interest in the land, first expressed in 1963, as a logical
squaring off of my site . . . subject to agreement on price.
Anxious as I
would be to let Mr and Mrs Lampon have the benefit of the land in which they
have plainly been interested for many years, I cannot read that letter as a
clear acceptance of the offer which I hold was inevitably made by the letter of
May 4. It seems to me that this letter is entirely equivocal if it were to be
sued upon as an acceptance of the offer pursuant to clause 8(b) of the option
agreement, so called, of May 13 1963. I do not consider that any court would
hold that that was a sufficient acceptance to compel the signer of it to go
forward with an obligation to purchase the land at the price to be fixed in
default of an agreement by a valuer. It is an expression of interest but it is
not an acceptance of the offer.
Thus, in my
view, there was an offer properly made within the terms of clause 8(a), but,
conclusively against the defendants, there is no acceptance of that offer
within the one-month period. In the result it seems to me plain beyond a
peradventure that the option, so called, the right of pre-emption, was properly
complied with. The offer was adequately made, it was not accepted and the
rights under the pre-emption have lapsed. It may be hard and sad for the
Lampons, but in my view there is really no other way one can construe these
documents, and I therefore hold that the plaintiffs are right and are entitled
to their relief.
Declarations
were made in favour of the plaintiffs with costs to be taxed on the standard
basis.
