Bircham & Company Nominees (No 2) Ltd and another v Worrell Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CHADWICK,SIR CHRISTOPHER STAUGHTON,LORD JUSTICE SCHIEMANN |
| Judgment Date | 22 May 2001 |
| Neutral Citation | [2001] EWCA Civ 775 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2000/0136 |
| Date | 22 May 2001 |
[2001] EWCA Civ 775
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE VICE-CHANCELLOR
(SIR RICHARD SCOTT)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lord Justice Schiemann
Lord Justice Chadwick and
Sir Christopher Staughton
Case No: A3/2000/0136
Mr Simon Berry QC & Mr A Hill-Smith (instructed by Messrs Bircham Dyson Bell for the Appellant)
Mr Kirk Reynolds QC (instructed by Adler & Co for the Respondent)
This is an appeal against an order made on 3 November 1999 by Sir Richard Scott, Vice-Chancellor, in proceedings brought by the appellants, Bircham & Co Nominees (No 2) Limited and Sarah Stowell, against Worrell Holdings Limited in relation to property known as 13 Alexander Square, London SW3. The property is held by Worrell Holdings from the appellants under a lease granted in 1984. The issue on the appeal is whether an agreement for the sale by Worrell Holdings to the appellants of the remainder of the term of the lease, following the exercise or purported exercise by the appellants of rights of pre-emption granted by the lease, is enforceable notwithstanding that the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 are not satisfied. Permission to appeal was granted by this Court (Lord Justice Aldous) on 24 January 2000.
The underlying facts
The property, 13 Alexander Square, is held on a long lease granted on 15 May 1984. The reversion expectant on the determination of the term is vested in the appellants as nominees for the trustees of the Alexander Trust. The leasehold interest was acquired by Worrell Holdings under an assignment dated 25 February 1991. Clause 5 of the lease is in these terms (so far as material):
"If at any time during the term hereby created the Lessee shall wish to dispose of the term hereby created in the demised premises it shall first offer the same in writing to the Lessors stating the price at which it is prepared to sell the same and the encumbrances (if any) subject to which the said term shall be assigned. If the Lessors shall not within twenty-one days of the receipt of such notice accept the offer therein contained the Lessee may within six months thereafter (subject to getting the Lessors' consent thereto as hereinbefore provided) assign the said term to an approved assignee at a price equivalent to or greater than that at which it was offered to the Lessors, but shall not assign the same for any lesser sum than that at which it was last offered to the Lessors without again offering the same in writing to the Lessors at such lower figure."
On 30 September 1997 Messrs W A Ellis, as agents of Worrell Holdings, wrote to Cluttons, the agents for the landlords, enclosing a sales brochure in respect of the property. That letter was followed, a month later, by a facsimile message dated 28 October 1997:
"Re: 13 Alexander Square – Worrell Holdings Ltd
You will be aware that we have been marketing this property for some time now and I am now writing to inform you that we have had an acceptable offer of £1.7 million for the remaining leasehold interest from an offshore company.
I note that under the terms of the lease that the Alexander Trust has a right of pre-emption and I will be grateful if you could let either Karen Carpmael or myself know if the trust wishes to exercise it. It is my understanding that the Estate has to let my clients know within three weeks if they wish to proceed, however, if you are aware that this is something that the Estate certainly would not wish to do we would be grateful if you could let us know as soon as possible so that we can arrange for a contract to be sent out.
I look forward to hearing from you at your earliest convenience."
The period of twenty-one days from 28 October 1997 expired on 18 November 1997. On that day Messrs Bircham & Co, solicitors, replied to W A Ellis, also by facsimile:
"We confirm that we act for the Trustees of the Alexander Trust and that the Trustees wish to exercise the right of pre-emption set out in clause 5 of the Lease dated 2nd May 1984. We confirm that our clients accept the offer contained in your letter of £1.7m for the remaining unencumbered leasehold interest on the basis that vacant possession will be given on Completion and that the curtains, carpets and kitchen fittings are included in the sum of £1.7m."
That letter was acknowledged on the same day by Messrs Portrait, the solicitors then instructed by Worrell Holdings. They wrote, on 18 November 1997:
"In view of the fact that your clients are the freeholders of this property we would propose that the matter proceeds straight to completion by way of surrender to take place within ten working days of the 18th November 1997. Please confirm that that is agreed."
Despite chasing letters of 2 and 8 December 1997 Bircham & Co heard nothing further from Portrait until 11 December 1997. By a letter of that date Portrait sent a draft deed of surrender, copies of their client's title and an inventory listing the items which would remain at the property at completion. That letter crossed with a letter of the same date from Bircham & Co, purporting to make time of the essence of the contract and requiring completion within 28 days. On 18 December 1997 Bircham & Co returned the draft deed of surrender, with amendment, and indicated that they were taking instructions regarding the inventory. They asked for a date for completion.
Before Portrait could respond to that letter, and for reasons which I shall explain, Worrell Holdings had instructed new solicitors, Messrs Adler & Co. The new solicitors wrote to Bircham & Co on 7 January 1998. They asserted that there was no binding contract for the sale of the leasehold interest. They took three points: (i) they denied that the letter from W A Ellis of 28 October 1997 (wrongly described as a letter dated 18 November) constituted an offer to sell; (ii) in the alternative, they denied that Bircham & Co's letter of 18 November 1997 (wrongly described as a letter dated 28 November) amounted to an acceptance of any offer that was contained in the letter of 28 October 1997; and (iii) in any event, they pointed out that, even if the two letters of 28 October and 18 November 1997 were to be treated as an offer and an acceptance, those letters could not satisfy the requirements of section 2 of the 1989 Act. The letter concluded:
"We therefore take this opportunity of informing you that our clients no longer wish to sell the Property at this stage. Accordingly, we would ask you for your formal confirmation that your client accepts that no contract exists between your client and our client company …"
That confirmation was not forthcoming. Bircham & Co wrote on 9 January 1998, rejecting each of the three contentions advanced in Adler & Co's letter of 7 January; and asserting "that the lessors have every intention of enforcing this contract and will not allow the matter to rest until this position is achieved." These proceedings, seeking specific performance of the alleged obligation to surrender the lease, were commenced in or about July 1998.
The reason for the apparent change of mind on the part of Worrell Holdings, between the letter dated 11 December 1997 from Portrait and the letter dated 7 January 1998 from its new solicitors, Adler & Co, is, I think, irrelevant to the issues which fall for decision on this appeal. But this judgment would be incomplete without a short explanation. The prospective purchasers from whom W A Ellis had received what they described in their facsimile letter of 28 October 1997 as "an acceptable offer of £1.7 million … from an offshore company" were Mr and Mrs B A Fellowes. Between 28 October and 18 November 1997 matters proceeded, as between Worrell Holdings, W A Ellis and Mr and Mrs Fellowes, on the basis that the leasehold interest would be sold by Worrell Holdings to Mr and Mrs Fellowes at a price of £1.7 million. It is clear that the lessors' decision, on 18 November 1997, to exercise pre-emption rights under clause 5 of the lease came as unwelcome news to the prospective purchasers. On 20 November 1998 Mr Fellowes wrote to Cluttons, the lessors' agents, offering to buy 13 Alexander Square on whatever leasehold or freehold basis their clients might have in mind. But that suggestion was not acceptable. So Mr and Mrs Fellowes decided to make an offer for the shares in Worrell Holdings. Worrell Holdings is, it seems, a single asset company incorporated in the British Virgin Islands and having Jersey-based directors. That offer was accepted and control of the company passed to Mr and Mr and Mrs Fellowes. That enabled them to occupy the property without the need for an assignment of the lease.
It is, perhaps, pertinent to note that (i) that the original lessee under the 1984 lease was a company registered in Panama and (ii) that the lease contains an express covenant requiring the property to be used as a private dwelling house in single occupation and for no other purpose whatsoever. It was plainly contemplated – no doubt with the enfranchisement provisions of the 1967 Act in mind – that the property would be occupied by an individual or family under arrangements which left the lease held by an offshore company which he or they controlled. It has not been suggested, so far as I am aware, either that the occupation by Mr and Mrs Fellowes is in breach of any covenant in the lease, or that their purchase of the shares in Worrell Holdings triggered any right of pre-emption in the lease. Sir Richard...
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