Purchaser of part of vendor’s business claiming contractual right to buy remainder on being notified of vendor’s intention to resign – Vendor announcing such intention – Purchaser purporting to exercise option – Vendor claiming that purchaser had no more than a right of first refusal – County court making order for specific performance – Vendor’s appeal dismissed
Until 1980 the defendant had for many years operated a scrap metal and vehicle recovery business from Green Lane and Pelham Road, Ilford, Essex. By a deed dated 11 July 1980, the defendant and his wife (together described as the “assignor”) sold and transferred to the claimant (the “assignee”) all the business conducted from Green Lane, while reserving the right to continue to operate from Pelham Road under South Park Auto Recoveries (SPAR).
By clause 3 of the deed, the assignor purported to grant to the assignee “an option to purchase [their leasehold interest in Pelham Road] at the price of one pound such option to be exercisable upon such dates and terms as relate to the option referred to in Clause 6 below”.
Clause 6 declared: “the Assignor will on cessation of the towing and recovery service known as [SPAR] first offer to the Assignee the said business exclusive of plant used therein, for purchase by the Assignee at the price of one thousand pounds… such option expiring twenty eight days after the date upon which the Assignor shall have notified the Assignee that he wishes to dispose of the said business and the Assignor… Covenants… that they will give notice of their intention to retire and dispose of the said business at least twenty eight days before they shall actually retire or cease business”.
In May 1995 the claimant received word from an employee of the defendant that the defendant, having just recovered from a serious illness, had decided to let the SPAR business go. On 26 May the claimant wrote to the defendant purporting to exercise the options contained in clauses 3 and 6. The defendant, who had changed his mind about retirement, claimed that he had made no proposal capable of constituting a binding offer. In county court proceedings brought by the claimant, it was held that a valid offer had been made and accepted, and that the claimant was entitled to a decree of specific performance. The defendant appealed, contending that the claimant, on being notified, had no more than an opportunity to make an offer, which the defendant was free to accept or reject.
Held: The appeal was dismissed
1. Reading the relevant clauses as a whole, it was clear as a matter of common sense that the claimant was to have the opportunity to buy the SPAR business on being informed of the defendant’s intention to retire. For that reason, it could not be contended that the judge had given insufficient weight to the opening words of clause 6. Moreover, the judge had rightly sought to ascertain the true intention of the parties before concluding that the claimant had acquired an option as distinct from the right of first refusal contended for by the defendant, there being nothing in Pritchard v Briggs [1977] 2 EGLR 124 (concerning land registration) to suggest that the question of classification was paramount.
2. While the deed could be criticised for failing to specify a time-limit for responding to the defendant’s notification, the judge had correctly implied a term that the response should be given within a reasonable time, since without such a term the notification procedure could serve no useful purpose.
The claimant respondent appeared in person; Hilton Harrop Griffiths (instructed by BS O’Connor & Co, of Romford) appeared for the defendant appellant.
Alan Cooklin, barrister
