Vendor and purchaser — Conveyance — Pre-emption clause — Purchasers’ obligation not to sell within 21 years without first offering land to vendors — Vendors to have two months for acceptance — Whether purchasers could change their minds about selling and withdraw offer within the two months — Appeal from decision of Judge Paul Baker QC, sitting as a High Court judge, who dismissed vendors’ claim for specific performance, holding that purchasers were entitled to withdraw their offer
appeal raised a short point on the construction of a conveyance dated May 10
1984 which contained a covenant by the purchasers not to resell the land in
question within 21 years of the conveyance without first offering it to the
vendors, who would have two months within which to accept the offer — On July
29 1987 the purchasers notified the vendors in accordance with the 1984
conveyance that the purchasers proposed to sell most of the land — The vendors
replied saying that they were taking advice before coming to a decision —
However, within the two-month period, the purchasers notified the vendors that
a problem had arisen in regard to their proposed disposal and that the offer of
the land to the vendors was withdrawn — The vendors challenged the purchasers’
right to do so, but in proceedings by the vendors for specific performance
Judge Paul Baker QC upheld the purchasers’ right — The vendors appealed
clear — Was the position that once the purchasers had notified their intention
to sell to a third party, giving the vendors the opportunity to exercise their
right of pre-emption, they were obliged to hold the offer open for acceptance
during the whole period of two months, even though they no longer wished to
sell to anybody? From a common-sense
point of view the purchasers had been guilty of no breach — They had fulfilled
their promise not to sell the land to a third party without first giving the
vendors the chance to buy it — The question was, however, whether the
provisions in the conveyance contained any express or implied obligation on the
purchasers to hold the offer open for the full two months — There was no such
express obligation — It was, however, suggested by the vendors that there was
an implied obligation in these words: ‘and the buyer shall have two months from
receipt of such offer within which to accept it’ — If the offer was not kept
open for two months the vendors could not have two months within which to
accept it — The Court of Appeal refused to accept this implication — In their
view the words merely drew attention to the machinery which enabled the
purchasers to know when the right of pre-emption had lapsed, leaving them free
to go ahead with alternative arrangements — No implication of the kind
suggested could be spelt out of the existing provisions and there was no
justification for deliberately inserting an implied term
below had come to the same conclusion in favour of the purchasers by the
different, and perhaps slightly questionable, approach of applying the law of
offer and acceptance in contract — Appeal accordingly dismissed
The following
case is referred to in this report.
Pritchard v Briggs [1980] Ch 338; [1979] 3 WLR 868; [1980] 1 All ER
294; (1979) 40 P&CR 1, CA
This was an
appeal by the vendors, Margaret Mary Tuck and Michael Charles Hewitt, from the
decision of Judge Paul Baker QC, sitting as a judge of the High Court, in
favour of the purchasers, Victor James Julian Baker, Brian John Baker and
Sylvia Jane Reid, in a dispute arising out of the construction of a conveyance
of land at Church Farm, Bosham, Sussex.
Robert Reid QC
and Vivian Chapman (instructed by Swepstone Walsh) appeared on behalf of the
appellants; Charles Sparrow QC and James Behrens (instructed by Blake Lapthorn,
of Portsmouth) represented the respondents.
Giving
judgment, MUSTILL LJ said: This appeal, from a decision of His Honour
Judge Paul Baker QC, raises a very short point on the construction of a
conveyance dated May 10 1984 made between Mrs Margaret Tuck and Mr Michael
Hewitt of the one part as vendors of land at Church Farm, Bosham, Sussex, and
the personal representatives of Mr Albert Baker of the other part as
purchasers. By this conveyance the vendors transferred to the purchasers the
plot of land therein described.
The dispute
now before us stems from one clause in the conveyance and one paragraph in the
Fifth Schedule thereto, which I will straightaway set out:
4. THE
PURCHASERS jointly and severally covenant that no sale or other disposition
whatsoever directly or indirectly for value shall be made by the Purchasers or
their successors in title of the land hereby conveyed or any part thereof
within twenty-one years from the date hereof unless: —
(a) the freehold has been first offered for sale
to the Vendors and
(b) the Vendors have refused the offer or failed
to accept it within two months of receiving it
and the
provisions of the Fifth Schedule hereto shall govern this right of pre-emption
. . .
Para 2 of the
Fifth Schedule is as follows:
The offer by
the seller to the buyer shall be in writing and if it does not relate to the
whole of the land hereby conveyed shall identify the part thereof the subject
of the offer (‘the relevant part’) and the buyer shall have two months from
receipt of such offer within which to accept it. Acceptance must be signified
to the seller in writing.
Para 3:
Any notices
to be given hereunder shall, if not given personally, be deemed sufficiently
served if sent by registered or recorded delivery post to the last known
address of the party to be served.
Para 4:
If the offer
is accepted the letter of offer and acceptance thereof shall constitute a
binding Contract for Sale and Purchase of the land hereby conveyed or the
relevant part as the case may be on the following terms
and then the
terms are set out.
As I have
said, the conveyance was made in 1984. Three years later, on July 29 1987, the
purchasers’ solicitors wrote to the vendors’
Under the
provisions of that Conveyance your clients enjoy the benefit of a right of
pre-emption. Our clients are proposing to dispose of all of the remaining land
comprised in the Conveyance (excepting only that part the subject of
correspondence last year). In accordance with clause 4(a) of the Conveyance the
land in question is now offered for sale to your clients on the terms of the
Conveyance.
On August 3
the vendors’ solicitors acknowledged the letter. On August 12 the purchasers’
solicitors wrote directly to Mr Hewitt enclosing ‘a copy of the plan which our
clients propose selling’. On August 20 1987 the vendors’ solicitors wrote to
the following effect:
We thank you
for sending a copy of your letter to our client dated the 12th instant. Our
Client is taking appropriate valuation advice before coming to a decision in
this matter. We will be in touch with you further in due course.
Nothing then
passed until September 3, when the purchasers’ solicitors sent the following
letter:
We are afraid
that a problem has arisen in the discussions for the disposal of the land at
Church Farm, Bosham.
Accordingly,
the offer contained in our letter of July 29 is withdrawn.
Immediately
the vendors’ solicitors responded to this effect:
By virtue of
your letter of July 29 1987 our Clients have an option to purchase and it is
not within your Clients’ power to extinguish it.
The
purchasers’ solicitors responded:
Your clients
do not have an option to purchase. Our clients made an offer to sell. The offer
has been withdrawn before acceptance. There is, therefore, no offer in
accordance with the Conveyance of the 10th May 1984.
The issue thus
raised is simple to state. Did the conveyance produce the result that once the
purchasers had intimated to the vendors that they proposed to sell to a third
party and had given the vendors the opportunity to exercise their right of
pre-emption, they were obliged to hold the offer open for acceptance for the
whole period of two months referred to in the conveyance, even though they no
longer wished to sell to anybody? Or
were the purchasers entitled freely to change their minds on whether to sell,
in which event the opportunity given to the vendors would fall away, unless
already acted upon?
I ventured to
say at the outset that this is a very short point. As such, it is not susceptible
of extended argument. We have had submissions from Mr Reid QC, on behalf of the
vendors, which were, if I may say so, as clear as they were economical.
Nevertheless, notwithstanding the matters which have been urged upon us, I feel
no doubt that the judgment under appeal was right.
We may start
by considering the nature of the promise contained in para 4 of the conveyance.
It seems to me simply this: that the purchasers would not sell the land to a
third party without first giving the vendors the chance to buy it themselves.
So if one asks whether the purchasers are in breach of this promise, the answer
is undeniably ‘no, they have not sold to a third party’.
Accordingly,
if the appeal is to succeed the court must be persuaded that there is something
express in the conveyance, as in Pritchard v Briggs [1980] Ch
338, or anything to be implied into the conveyance which created a superimposed
undertaking on the part of the purchasers that once the mechanism of
pre-emption had been set in motion they would do nothing to prevent it from
yielding a completed repurchase by the vendors.
Is there
anything in clause 4 which expressly produces this result? I can see nothing. The purpose of the clause
is to delineate the inhibition created by the right of pre-emption on what
would otherwise have been the unfettered right of the purchasers to alienate
their own property. It does so by stipulating the period during which, if the
vendors desire to re-acquire the land ahead of any sale to the third party,
they must make their intention known. Some such provision was necessary,
because otherwise the purchasers could not know, if the vendors did not
immediately exercise their rights, how long they would be required to wait
until they could safely sell elsewhere. Beyond this clause 4 does not, in my
opinion, go.
One is then
referred to the Fifth Schedule which clause 4 stipulates is to govern the right
of pre-emption. The vendors rely on the opening words of para 2, which I will
quote again:
The offer by
the seller to the buyer shall be in writing and if it does not relate to the
whole of the land hereby conveyed shall identify the part thereof the subject
of the offer (‘the relevant part’) and the buyer shall have two months from
receipt of such offer within which to accept it.
For the
vendors it is maintained that the words ‘the buyer shall have two months from
receipt of such offer within which to accept it’ mean that if the offer is not
kept open for two months, the vendors cannot have two months within which to
accept it. Well, I can see that the words might be capable of having this
meaning taken in isolation, but read in the context of the structure
established by clause 4 it seems to me quite plain that they merely restate the
necessary part of the mechanism, already introduced by clause 4, which enabled
the purchasers to know when the right of pre-emption had lapsed, leaving them
free to go ahead with an alternative transaction.
If there is
nothing in the conveyance which expressly renders the mechanism of pre-emption
unstoppable, even if the circumstances are such that it is no longer a
‘pre-emption’ at all, absent any intention on the part of the purchasers to
sell to a third party, should a term to this effect be implied? I can see that the vendors might have wished
to insert such a term to prevent the inconvenience and (it may be) waste of
money which would ensue if the purchasers continually changed their minds. If
so, they could have pressed for the use of a formula such as we find in Pritchard
v Briggs. Whether the purchasers would have agreed to fetter themselves
in this way I very much doubt. But the test for an implied term is not whether
it might have been sensible to include such a provision in the contract but
whether the contract will work properly without it. To my mind, the contract
will work perfectly well without any provision that the mechanism once started
can never be stopped without the vendors’ consent. I would not imply any such
term.
I have
expressed this opinion in terminology which differs slightly from that of the
learned judge, who was disposed to approach the matter in terms of the law
relating to offer and acceptance. For my part, I am not sure that the offer
referred to in the Fifth Schedule really is an offer in the ordinary sense,
which to my mind connotes a voluntary invitation by the offerer to the offeree
to enter into a contractual relationship. Here, the offer is not voluntary in
the true sense, for the existing contractual arrangements already required the
purchasers to make what is called ‘the offer’, if they were to have the
opportunity to exercise their right to sell the land to a third party. I see
the ‘offer’ as simply being part of the contractual procedure which must be
gone through if the purchasers are to carry out a sale. As such, it is a signal
to the vendors that their right of pre-emption has become available, and for
the reasons already stated there is nothing in the conveyance to prevent the
purchasers from recalling this signal and from stopping the procedure in its tracks
if the vendors have not already availed themselves of it.
But this
distinction in terminology makes no difference. If one reads the word ‘offer’
in the ordinary sense as a first step towards a contract, it is of course quite
clear law that the offerer can take a step back again, unless there is
something special about the relationship between the parties which binds him
not to do so. I can find nothing in the conveyance here, either express or
implied, which has any such effect.
Accordingly, I
would dismiss the appeal.
BELDAM and LEGGATT LJJ agreed and did not add anything.
The appeal
was dismissed with costs.
