Contract of sale refers to ‘the general conditions printed within’ but in fact includes none–Purchaser’s notice to complete upheld though expressed to be given under condition 19 of Law Society’s conditions–Effect of option to purchase six acres of adjacent grazing land when contract rescinded–Restitutio in integrum held possible despite expiry of option in the meantime–Contract held effectively rescinded, purchaser entitled to return of deposit
This was a
claim by Mr P B McKay against Mr G H Turner and Mr J R Haines for a declaration
that a contract made by him with them in their capacity of executors of Miss de
Winter deceased for the purchase of ‘Tally-Ho,’ Guiting Power, Gloucestershire,
for £46,000 had been effectively rescinded or had been terminated by agreement.
The defendants counterclaimed damages for breach of contract.
Mr C I Howells
(instructed by Kennedy, Ponsonby & Prideaux) appeared for the plaintiff,
and Mr J Munby (instructed by Haines & Sumner), of Gloucester, represented
the defendants.
Giving
judgment, Fox J said: In this action the plaintiff seeks a declaration that he
has effectively rescinded a contract made with the defendants on May 22 1974
for the purchase of a property known as ‘Tally-Ho,’ Guiting Power,
Gloucestershire; or alternatively, that the contract was terminated by
agreement between the parties. In addition the plaintiff claims repayment of
the deposit. The defendants counterclaim damages for breach of contract. The
facts I find are as follows. The property ‘Tally-Ho’ consisted of a house with
about three acres of land and had been owned by a Miss de Winter. The
defendants were Miss de Winter’s personal representatives, and they are
solicitors practising under the name of Haines & Sumner in Gloucester. In
their capacity as personal representatives of Miss de Winter they offered the
property for sale by auction on May 22 1974, and at the auction it was
purchased by the plaintiff for £46,000. The plaintiff paid a deposit of £4,600.
The special conditions of sale contained a condition, no 7, that there should
be assigned to the purchaser the benefit of an option
the price of £6,000. This option, which expired on July 31 1974, was of
importance to the plaintiff. The house is in hunting country, a fact which is
emphasised in the auction particulars, and one of its attractions to the
plaintiff was that it stood in his own hunt, the Cotswold. The plaintiff keeps
his own horses. He intended to keep them at ‘Tally-Ho,’ and wanted the additional
four acres for that purpose. He could not graze them satisfactorily without the
additional land. ‘Tally-Ho’ itself has a small paddock, but this is only about
0.66 of an acre, and because of various obstructions, in particular some walls
and a steep bank, it is not possible to get horses into it except from the
option land. Although, I mention later, the conveyance was not in fact to be
taken in the plaintiff’s name, there is no question but that the property was
intended for his beneficial occupation.
The house was
at the time of the sale in a very bad condition, and a considerable amount of
work needed to be done to it. The plaintiff’s intention was to do the repairs
during the summer and autumn of 1974. His company had men available to do the
work at that time; they would become available about June 30, and would only be
available until the autumn. Because of the derelict state of the property it
was necessary to do the work in good weather. By condition 2 of the special
conditions of sale, the completion of the sale was fixed for July 16 1974.
About the beginning of June the defendants informed the plaintiffs that a Mr
Lough-Scott, who had been allowed to graze his ponies in the ‘Tally-Ho’ paddock
by Miss de Winter, was refusing to move his ponies, and claimed that he was
entitled to use the paddock for this purpose. The plaintiff, I am satisfied,
was wholly unaware of any such claim at the time of the auction. By a letter of
June 4 1974 to the plaintiff’s solicitors, the defendants stated: ‘We are
taking tougher action on this now; this should be resolved before
completion.’ The conveyancing
formalities of the sale proceeded without difficulty. On June 20 the
plaintiff’s solicitors sent to the defendants a draft of the conveyance and of
the assignment of the option for approval. In a covering letter the plaintiff’s
solicitors stated that the name of the purchaser was left blank as it was
possible that the purchase would be in the name of a nominee. As to the
assignment of the option, the draft showed the plaintiff as the transferee. In
the covering letter the plaintiff’s solicitors also suggested that the
consideration for the assignment should be the sum of £1. By a letter of June
24 the defendants approved the draft conveyance and the draft assignment. The
letter contained the following paragraph: ‘With regard to the ponies in the
paddock, we have a summons for an injunction due to be heard next week
following which we hope the matter will be virtually resolved. I have tried
some physical tactics (ie boarding up entrances) but these have been broken
down.’ On June 27 the plaintiff’s
solicitors wrote again. They stated that they could not engross the conveyance
until a final decision had been come to about the name of the person to whom
the conveyance was to be made, but that it was hoped that that would be settled
in the next few days. After dealing with a further matter, the letter continued
as follows:
We note with
some concern that it appears to be necessary to obtain an injunction in respect
of the use of the paddock, and we trust that this matter will be satisfactorily
resolved and vacant possession given by the date fixed for completion. We do
not think we could advise our client to complete until you are in a position to
give vacant possession. Having regard to [this point], and also to the fact
that the completion date is in any case fairly close to the date for the
exercise of the option, we are wondering whether your clients would be prepared
to complete the assignment of the option before completion of the purchase of
the said property so as to enable our client to serve notice and negotiate
generally with Mr Hicks. We do not see that your clients lose by doing this, as
the monthly value of the option agreement must be more or less nominal, since
the price we paid for the land edged blue seems quite high. We therefore
enclose an engrossment of the assignment and await hearing from you as to
whether you are prepared to deal with the matter in this way.
The next
letter is dated July 1 and is from the defendants to the plaintiff’s
solicitors. It stated (inter alia) that the defendants had instituted
proceedings in the county court for an injunction against Mr Lough-Scott to
restrain him from using the paddock, but the county court judge had refused to
make an interlocutory order and had intimated that there should be a speedy
trial. The letter stated that it was hoped that this would be in the next four
weeks. The assignment of the benefit of the option, executed by the defendants,
was enclosed. On July 3 the plaintiff’s solicitors were saying that the
identity of the person to whom the conveyance was to be made was still
undecided and might not be known until after July 16. The letter stated (as was
the fact) that the plaintiff was away in France until July 12. The letter
continued: ‘In the circumstances we had better leave the whole matter in
abeyance until shortly before the completion date, when we will get in touch
with you to report and enquire as to progress.’
The defendants replied to that letter on July 4 in the following terms:
‘Thank you for your letter of the 3rd, and although we must be careful not to
prejudice our contractual rights we are reasonably content to let matters take
their natural course and for things to fall into place as they will. We will
keep you informed, of course, of developments at our end and about which Mr
McKay was aware.’ There was no further
correspondence until July 31. It would be convenient if I mentioned here the
course of the county court proceedings, which was as follows: The proceedings
were commenced on June 17. On June 28 the defendants issued a notice of
application for an interim injunction. On July 1 the latter application came
before the judge. As I have already mentioned, the judge refused to grant an
interim injunction. On July 19, the pretrial review was heard. The trial was on
September 16.
I now return
to the correspondence. On July 31 the defendants wrote to the plaintiff’s
solicitors as follows: ‘Further to our letter of the 4th instant, would you
like to be a little more definite about the completion arrangements pending
settlement of the dispute of Mr Lough-Scott (probably in September now). While
we appreciate that the money cannot be released to us as yet, would you let us
know what facilities your client requires at the house and in the light of this
whether he is prepared to allow us interest under the contract until actual
completion.’ The plaintiff’s solicitors
replied to that letter on August 2. Their letter stated (inter alia) as
follows: ‘Our client does not have any immediate need for possession and
therefore the question of interest does not yet arise. We note that the hearing
of the action against Mr Lough-Scott will not now take place until September.
The rumour locally is that apparently he intends to appeal if unsuccessful, but
we understand that this will depend on whether he can get legal aid. We do not
think there is anything to be done at present except await events.’ After a reference to a question concerning
the gardener’s wages, the letter concluded as follows: ‘We should add for the
record that all these arrangements and deferments are without prejudice to our
client’s rights under the contract.’
Prior to the
end of July, the plaintiff’s solicitors had been in touch with Mr Hicks, the
owner of the option land, about extending the option which, under its terms,
expired on July 31. There was never, I think, any doubt that some substantial
extension would be granted. Mr Hicks was friendly and easy-going. On August 2
the plaintiff’s solicitors wrote to Bevir & Son, the solicitors to Mr
Hicks, confirming that it was agreed that the time-limit for the exercise of
the option should be extended beyond July 31, but that they were awaiting Mr
Hicks’s confirmation as to the exact length of the extension, though they
understood that six weeks would be
to the option being exercisable at any time within seven days after completion
of the sale of ‘Tally-Ho,’ with some overall limit. In a letter of August 2 Mr
Hicks’s solicitors wrote saying that although they were without formal
instructions, they thought it safe to write and state that the option would be
continued for six weeks commencing on August 1. On August 5, the defendants
wrote stating that Mr Lough-Scott had obtained legal aid limited to taking
counsel’s opinion, and that that was the reason why the proceedings were being
delayed until September. The plaintiff was not informed of the precise hearing
date; September 16 was ultimately fixed, but the plaintiff was not informed of
that until September. On August 7 Mr Hicks’s solicitors wrote to the
plaintiff’s solicitors stating that the option would expire on September 12.
The letter continued:
We are
confident that if your client is not in a position to exercise the option
before it expires, our client will treat with him as soon as the purchase from
Miss de Winter’s trustees is completed. We cannot guarantee that the price of
£6,000 will still obtain, but it does seem from previous correspondence that it
was your client’s wish to alter the area of land over which the option existed,
and whether there was an option or not the terms would have to be renegotiated.
It is uncertain
whether this letter reached the plaintiff’s solicitors on August 8 or 9. On
August 8 the plaintiff’s solicitors wrote to the defendants acknowledging
receipt of the letter of August 5. The plaintiff’s solicitors stated that they
noted what was said about the proceedings against Mr Lough-Scott, and they
said, ‘We will await further information from you on this subject.’ The plaintiff, having been informed by Mr
Hicks’s solicitors that the option would only be renewed for six weeks and that
there could be no guarantee that the price of £6,000 would obtain thereafter,
and being also concerned as to whether there would be enough time for his
workmen to do the necessary works on the house, decided to give a notice to
complete the contract. On August 12 his solicitors wrote to the defendants enclosing
a notice to complete the contract. The letter also stated that the conveyance
would be taken in the name of a company called Mentor Investment Corporation
SW, the address of which they were awaiting. The notice to complete, which was
expressed to be given under condition 19 of the Law Society’s General
Conditions of Sale (1973 revision), required completion of the transaction in
accordance with that condition; that is to say within 28 days excluding the day
of service.
On August 13
(the day of service of the notice) the defendants wrote acknowledging the
letter of the 12th and returning a copy of the notice duly receipted. The 28
days expired on September 10. On August 20 the plaintiff’s solicitors wrote to
the defendants enclosing the completed engrossment of the conveyance. On
September 6 (a Friday) the defendants wrote to the plaintiff’s solicitors
informing them that counsel instructed on behalf of Mr Lough-Scott had advised
that the legal aid certificate should not be extended. This letter was not
received by the plaintiff’s solicitors until September 10. The plaintiff and
his solicitors heard nothing more until September 12. On that day the plaintiff
had arranged to meet Mr Carey, his solicitor, in London, primarily to discuss
another matter. The plaintiff and Mr Carey had lunch together. During lunch the
plaintiff decided that as nothing further had been heard from the defendants,
and the time limited by the notice to complete had expired, the contract should
be rescinded. The plaintiff and Mr Carey returned to the latter’s office at
about 2 o’clock. Mr Carey telephoned to the first defendant, who was out. Mr
Carey left a message to the effect that as completion had not taken place in
accordance with the notice, the plaintiff rescinded the contract. The first
defendant telephoned Mr Carey between about 3 o’clock and 3.45, but owing to a
misunderstanding in Mr Carey’s office (it was thought he was engaged) did not
speak to Mr Carey direct. The first defendant left a message of which Mr
Carey’s secretary, Mrs Kilburn, took a note. That note is set out on page 27 of
the bundle of agreed correspondence, and it is as follows: ‘12.9.74. Haines
& Summer rang. If you wish to rescind the contract in accordance with
notice to complete, it is OK with them, but please confirm. Full vacant
possession has been available since Monday. He thought our client knew.’ I find that this is not a verbatim account of
what the first defendant said, but Mrs Kilburn’s understanding of it. The first
defendant told me, and I accept it, that he does not use the expression ‘OK by
me,’ or ‘us.’ I think, therefore, that
‘OK by them’ was Mrs Kilburn’s rendering of her understanding of what was said.
The first defendant himself made an attendance note immediately after the
conversation with Mrs Kilburn. This is on page 28 of the bundle of agreed
correspondence, and follows after a note of Mr Carey’s message stating that the
plaintiff was rescinding. It reads ‘12.9.74. I replied, if he wishes to, please
confirm, as we were not too concerned. Full vacant possession had been
available since Monday, as I thought his client knew.’ I accept this attendance note as accurate.
At about 4.15
pm on September 12, Mr Carey telephoned to the first defendant. Mr Carey
repeated that as completion had not taken place, the plaintiff was treating the
contract as at an end. The first defendant said he was not very worried about
this but asked for confirmation that it was what Mr McKay really wanted. Mr
Carey replied that he had seen the plaintiff that afternoon and had his
instructions, but would write to the defendants and confirm the position. By a
letter of September 12, written after the first defendant’s conversation with
Mrs Kilburn and before his conversation with Mr Carey, the defendants confirmed
that full possession had been available since September 9. This letter
continued: ‘We understood by your cryptic phone message that you wish to
enforce your notice to complete; if so, we are in the fortunate position of not
being too concerned, but in order to be quite fair to your client, please
confirm.’ The plaintiff’s solicitors on
September 13 wrote to the defendants confirming the rescission. On September 18
the defendants wrote to the plaintiff’s solicitors stating that they had now
taken instructions and that these were to hold the plaintiff to the contract on
the ground that the defendants were in a position to complete on September 9.
The letter enclosed a notice to complete, and added (a) that at the court
hearing on September 16 an injunction had been obtained against Mr Lough-Scott,
and (b) that Mr Hicks had granted a further extension of the option. I am quite
satisfied that the plaintiff and his solicitors were unaware, until the first
telephone message from the defendants on the afternoon of September 12, that
the defendants had obtained vacant possession of the land from Mr Lough-Scott
on September 9, or at all. The first time the defendants told the plaintiff, or
his solicitors, anything to that effect was in the first telephone conversation
by the first defendant on the afternoon of the 12th. It will be seen that the
letter dated September 18 represented a change of front by the defendants. The
first defendant’s account (which I accept) was that in saying, in the telephone
conversation on September 12, that he was not too worried, he was bluffing.
Subsequently, after discussing the matter with the principal beneficiary of the
estate, it was decided to insist at once on performance of the contract. Mr
Carey, in the conversation on September 12 with Mr Turner (the first defendant)
took at face value the first defendant’s statement that the defendants were not
too worried whether the contract went off.
As I have
said, the defendants sent with their letter of September 18 a notice to the
plaintiff to complete the contract. This notice, like the plaintiff’s, was
expressed to be given under condition 19 of the Law Society’s Conditions of
Sale
conditions of sale contained in the auction particulars. Special condition 1 is
in the following terms: ‘The property is sold subject to the general conditions
printed within so far as they are not varied by or inconsistent with these
conditions but the rate of interest under condition 16 shall be 15 per
cent.’ In fact, there were no ‘general
conditions printed within.’ The special
conditions of sale were drafted by the first defendant on behalf of the defendants.
There is no doubt that he intended to incorporate the Law Society’s Conditions
of Sale (1973 revision). The first defendant, when he drafted the ‘Tally-Ho’
contract, used for the special conditions the fourth page of the standard form
of the Law Society’s Conditions of Sale. He sent the draft to the auctioneer’s
printers, but did not tell them to print the Law Society’s conditions. The
omission passed quite unnoticed by the defendants. The plaintiff and his
solicitors did not notice the error in special condition 1 before the contract
was entered into, but had not at that time directed their minds to the question
of what conditions were incorporated. The position did not become apparent to
the plaintiff’s solicitors until they were drafting the notice to complete in
August. Mr Carey then formed the view that having regard to the reference to
condition 16, the Law Society’s conditions were intended to be incorporated.
The defendants did not become aware of the error in special condition 1 until
shortly before September 24, when they wrote to the plaintiff’s solicitors
taking the point. I should add that it is common ground that the option price
of £6,000 was high. The defendants paid £1 for the option, and only obtained it
because they thought that, as accommodation land, it might make ‘Tally-Ho’ more
attractive to prospective purchasers. The property was resold by the defendants
in April 1974. According to the pleadings the price was £35,000, but there was
no evidence before me about that.
I turn now to
the contentions of the parties. The plaintiff contends that the conversation on
September 12 constituted an agreement to rescind the contract. It is said that
Mr Carey, on behalf of the plaintiff, stated that the contract was rescinded,
and that the first defendant, on behalf of himself and the second defendant,
(a) agreed to rescission of the contract, or alternatively, (b) agreed to such
rescission conditionally upon receipt of written confirmation from the
plaintiff’s solicitors, or in the further alternative, (c) offered to accept an
offer on the part of the plaintiff and contained in the telephone calls by the
plaintiff’s solicitors to rescind the contract upon receipt of written
confirmation from the plaintiff’s solicitors. I do not accept these
contentions. It is clear that parties can agree to rescind a contract and that
the consideration will be the mutual release of their obligations under the
contract. But I do not think that either party to the conversations on
September 12 was intending to enter into any contract at all. So far as the
plaintiff was concerned, Mr Carey was under the impression that the plaintiff
had a right to rescind and that he was merely communicating an intention to
rescind; he was not contemplating contract at all. As regards the defendants,
it seems to me impossible to infer from the language used by Mr Turner any
intention to enter into any agreement or to accept any offer. It seems to me
that such phrases as ‘we are not too concerned’ are simply not the language of
contract. All that happened was that Mr Carey communicated to the first
defendants the asserted unilateral rescission by the plaintiff. In my view the
defendants committed themselves to nothing on September 12. If anything
happened on that day, it was simply rescission. That brings me to the
plaintiff’s alternative submissions. The plaintiff says that the notice to
complete given on August 12 1974 was a valid notice, and that as it was not
complied with, the plaintiff was entitled to rescind and did rescind. Under
this head the plaintiff contends (i) that the Law Society’s General Conditions
of Sale (1973 revision) applied to the contract, and that the notice was in
accordance with condition 19 of these conditions and was valid, and (ii) that
if the Law Society’s conditions did not apply to the sale, the notice was in
any event a good notice under the general law. The defendants admit that on the
authorities as they stand, if the Law Society’s conditions did not apply, the
notice was valid, and that subject to a question as to restitutio in
integrum which I will mention later, the contract was effectively rescinded
by the plaintiff.
The first
question which I have to determine under this head, therefore, is whether the
Law Society’s conditions applied to the contract. That depends upon the
construction of special condition 1 of the contract which I have set out above.
That condition I can only construe on the basis of the actual wording of the
condition interpreted in the light of any admissible surrounding circumstances.
The latter cannot I think include the fact that Mr Turner intended that the Law
Society’s conditions should apply. Reading the language of condition 1, I do
not think that I can infer that ‘the general conditions printed within’ must
refer to the Law Society’s General Conditions of Sale (1973 revision). It is
true that condition 16 of these conditions contains a reference to a rate of
interest which would be consistent with the fact that special condition 1 says
that the rate of interest under condition 16 shall be 15 per cent. It is also
true that the conditions in most general use are the Law Society’s conditions,
the national conditions and the statutory conditions, and that neither of the
latter two has a condition 16 which refers to a rate of interest. The first
defendant, in evidence, agreed that the reference to condition 16 suggested to
him that the Law Society’s conditions were intended. But it would be perfectly
possible for solicitors or auctioneers to use a set of conditions which
contained condition 16 in the Law Society’s conditions but were different in
other respects. What is being incorporated by special condition 1 is a complete
set of conditions, and it is necessary that one should be certain as to the
identity of all the conditions intended to be incorporated. Disregarding, as I
must, the first defendant’s evidence of what he intended, I can only guess at
what ‘the general conditions printed within’ were to be. With regret, I feel
that I cannot infer that the Law Society’s conditions of 1973 are incorporated
in the contract. I should add that it was not suggested before me that any
question of rectification arises.
That brings me
to the plaintiff’s alternative contention under this head, namely that the
notice was a good notice under the general law. As to that, the defendants
accept that the notice is, in point of form, a good notice save in one respect.
The defendants say that since the notice purports to be given under condition
19 of the Law Society’s conditions, which I have found to be inapplicable, the
notice is a ‘tricky’ notice and invalid. I was referred to Rightside
Properties Ltd v Gray [1975] Ch 72. In that case the date for
completion of sale of land was June 19. The plaintiffs failed to complete on
that date. On Friday June 23, the defendant’s solicitors wrote to the
plaintiffs’ solicitors and enclosed a notice, purportedly in accordance with
condition 9 of the statutory conditions of sale, requiring completion ‘within
21 days’ from June 23. The letter was received by the plaintiffs’ solicitors
not earlier than June 24, but it was uncertain whether the letter was delivered
on the Saturday or Monday. It was held that even if the defendant had proved
that the notice had been received by the plaintiffs’ solicitors on June 24, the
notice was invalid, because the defendant had only given the plaintiffs 20
days’ notice within which to complete, while under condition 9 they had to give
21 days’ notice, which had to be 21 days excluding the date of service. The
defendant had applied to amend his pleadings so as to plead in the alternative
that the notice was given under the general law and not under condition 9. This
application was in the end withdrawn, but Walton J, at p 81, intimated that he
did not think it would assist the defendant,
statutory conditions and the defendant must be bound by that; if not, the
notice was a ‘tricky’ notice and bad. But in that case what the defendant
purported to serve was a notice under a condition requiring completion within
21 days from the date of service, and he could not be permitted to claim that
it was a notice to complete within a period less than 21 days from the date of
service. The present case, it seems to me, is quite different. The notice here
was simply a notice to complete the transaction in accordance with condition
19. That left no room for any misunderstanding as to the period within which
the sale was to be completed, nor is the plaintiff now seeking to set up any
different period than that specified in condition 19. The document gave exactly
the notice which it was intended by the plaintiff and understood by the
defendants to give.
In the
circumstances I do not think the notice was bad in form, or was bad as a
‘tricky’ notice. The next matter is this. The notice, assuming it to be otherwise
good, can only be an effective notice if two conditions are satisfied, namely
(1) at the time when the notice was given the defendant must have been guilty
of such delay as would entitle the plaintiff to rescind, subject to this being
done by reasonable notice, and (2) once the right to serve the notice has
arisen, the time allowed by the notice must be a reasonable time (see for
example Re Barr’s Contract [1956] Ch 551 and Smith v Hamilton
[1951] Ch 174). This is all common ground. I turn, then, to the first of these
questions. Had there been such delay as entitled the plaintiff to serve a
notice to complete at all? In
determining that question the court must take into account all the
circumstances of the case and the conduct of both parties (see for example Stickney
v Keeble [1915] AC 386 at p 418 per Lord Parker). In this connection it
is said on behalf of the defendants that up to the time the notice was served,
there had been no pressure by the plaintiff for completion. The plaintiff, it
is said, really lulled the defendants into a state of uncertainty. For example,
in their letter of July 3 the plaintiff’s solicitors say, ‘Clearly there is
nothing more to be done until you can obtain a trial date.’ Between July 3 and August 2 there was no letter
from the plaintiff’s solicitors, and in the letter of August 2 they said, ‘We
do not think there is anything to be done at present except to wait events,’
though that letter concluded with the warning that ‘these arrangements and
deferments are without prejudice to our client’s rights under the
contract.’ Looking at the matter as a
whole, however, I think that the ‘lulling’ complaint is over-critical of an
innocent party who adopted a helpful attitude to the defendants’ problems as
long as he reasonably could. The plaintiff knew nothing of any claim by Mr
Lough-Scott when he purchased the property. He was unaware of the matter until
about the beginning of June. There was nothing he could do about the claim
anyway; he had no status.
In their
letter of June 4 the defendants refer merely to ‘a little trouble with a
villager who had been allowed to graze his pony in the paddock and has not
complied with our request to remove it.’
The defendants did not institute proceedings until June 17, and on July
1, when the application for interlocutory relief failed, they informed the
plaintiff’s solicitors that it was hoped to arrange ‘an early trial date,
possibly within the next four weeks.’
The crucial matter, it seems to me, was the option. It was plainly of
importance to the plaintiff that, if the sale was to be completed, the option
should be available to him; and he could not reasonably be expected to exercise
the option until the sale had been completed with vacant possession. Prior to
the end of July, the plaintiff was in touch with Mr Hicks about the extension
of the option, and it was clear that some extension would be granted. On August
2 Bevir & Son, Mr Hicks’s solicitors, wrote to say that although they were
without instructions they thought it safe to say that the option would be
extended for six weeks. It was not until August 7 that Bevir & Son wrote
saying that the option would expire on September 12. It is not certain whether
that letter was received on August 8 or 9. The notice to complete was dispatched
on August 12. In view of Bevir & Son’s letter, the plaintiff, it seems to
me, had no choice but to serve a notice to complete unless he was (i) to risk
losing the option, or (ii) to exercise the option before completion, neither of
which he could reasonably be expected to do. The option was to the plaintiff an
important part of the property sold, and in my judgment the date of expiry of
the option must be taken into account in determining whether there had been
such delay in completion as to justify service of a notice to complete. When
the notice was served, 26 days had elapsed since the contractual completion
date and a final date for expiry of the option had been indicated. In the
circumstances, the plaintiff was in my view entitled to serve a notice to
complete.
The next
question is whether the time allowed by the notice was reasonable. The time was
28 days. Here again the court will take into account all the circumstances of
the case (see Stickney v Keeble, supra, and Ajit v Sammy
[1967] 1 AC 255). The fact that it is important to the purchaser to obtain
early completion is a relevant circumstance (see Stickney v Keeble,
supra, per Lord Parker at p 419). In the present case there were no
conveyancing difficulties. A draft conveyance had been agreed in June, and
although the question of the name of the transferee had been left open, the
name was notified to the defendants in the letter of August 12 which
accompanied the notice to complete, and in the same letter it was stated that
the address was expected in the next day or two. The engrossed conveyance was
in fact sent to the defendants on August 20. The plaintiff was not aware until
August 8 at the earliest (possibly the 9th) that the final limit time on the
option was September 12. I do not, therefore, think that there was unreasonable
delay before giving the notice. The 28 days’ notice which was given expired on
September 10. Since the option was to expire on the 12th, any substantially
longer notice than 28 days would not have been practicable if the notice was to
be of any use at all in relation to the problem which gave rise to the notice,
namely the final expiry date of the option. In fact the defendants did obtain
possession of the paddock by September 9, though the plaintiff was not aware of
that until September 12. The defendants contend that as the plaintiff had
allowed July 31 to pass by and the option to expire, he was not entitled
thereafter to rely upon the option as a relevant factor as to the time for
completion. I do not accept that. Both parties were contemplating that as July
31 approached the plaintiff would negotiate with Mr Hicks to extend the option
period. This is what happened, and the option period was in fact extended. It
seems to me that for practical purposes the option remained, after July 31, a
major factor in the case.
In my view,
therefore, the plaintiff’s notice to complete was a valid notice, and subject
to the point which I am about to mention, he effectively rescinded in pursuance
of it. The defendants, however, contend that this case was not one where
rescission was possible because, say the defendants, restitutio in integrum
is impossible, since the option expired on July 31 and the plaintiff cannot,
therefore, reassign it. That in general restitutio is a prerequisite to
rescission is clear. Thus in Erlanger v New Sombrero Phosphate
Company (1878) 3 App Cas 1218, Lord Blackburn at p 1278 said: ‘It is, I
think, clear on principles of general justice that as a condition to a
rescission there must be restitutio in integrum. The parties must be put
in statu quo . . . It is a doctrine which has often been acted upon both
in law and in equity.’ Thorpe v Fasey
[1949] Ch 649 is a modern example. The rule derives, as Lord Blackburn says in
the passage I have quoted, from principles of general justice. Thus if a
plaintiff has obtained a benefit from the property which cannot be
restored, or he has destroyed the property or altered its nature, or it has
deteriorated in his hands with consequent loss to the defendant if the latter
had to take the property back, the plaintiff cannot in general rescind (at any
rate without compensation in suitable cases). Lord Blackburn in the Erlanger
case at p 1278 said: ‘It would be obviously unjust that a person who had been
in possession of property under the contract which he seeks to repudiate should
be allowed to throw that back on the other party’s hands without accounting for
any benefit he may have derived from the use of the property, or if the
property, though not destroyed, has been in the interval deteriorated, without
making compensation for that deterioration.’
In the present case the plaintiff did not alter the nature of the
option, or destroy it or allow it to deteriorate. The option came to an end by
effluxion of time. Nor, it seems to me, did he get any benefit from it. True,
it enabled him to deal with Mr Hicks, but nothing that he did with Mr Hicks
conferred any legal rights upon him. As pointed out by McCardie J in Armstrong
v Jackson [1917] 2 KB 822 at p 829, the phrase restitutio in integrum
is somewhat vague, and it must be applied with care. It cannot I think be
applied mechanically. It does not seem to me that it can be said in any real
sense here that the defendants will not be put in statu quo. If the
defendants had never assigned the option to the plaintiff at all, then the
position today would not be different from what it is. The option would have
gone. It would have expired on July 31 and while there was still on foot a
contract under which it was to be assigned to the plaintiff, so that the
defendants would not prior to expiry have been able to deal with it as they
chose. Equally, if the plaintiff had reassigned it to the defendants at any
time before August 1 1974, the defendants’ position would be just what it is
now. The option would have expired.
In the
circumstances there do not appear to me to be any grounds of general justice
which would require me to hold that rescission is now impossible by reason of
the expiry of the option. Accordingly, in my judgment the defendants’ objection
on this point fails, and the plaintiff is entitled to the declaration which he
seeks.
The plaintiff
was granted a declaration that he had effectively rescinded the contract of May
22 1974, with an order for repayment of his deposit. The defendants were
ordered to pay the costs of the claim and counter-claim.
