Carmarthen Developments Limited V. Samuel James Pennington
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2008] CSOH 139 |
| Court | Court of Session |
| Date | 24 September 2008 |
| Published date | 24 September 2008 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 139 | |
| OPINION OF LORD HODGE in the cause CARMARTHEN DEVELOPMENTS LIMITED Pursuer; against SAMUEL JAMES PENNINGTON Defender: ________________ |
Pursuers: Sandison, Advocate; Brodies LLP
Defenders: Cowie, Advocate; Lindsays WS
24 September 2008
[1] This case concerns two contracts for the sale of land. Each of the contracts contained suspensive conditions. The issue in this case is whether the pursuers exercised their right to intimate that the conditions were satisfied and so made the contracts unconditional before the defender effectually resiled from the contracts. That issue in turn raises a question as to the scope of the postal acceptance rule in the law of contract and a question as to what amounts to effective service of a notice under the contracts.
The contracts
[2] In October 2005 the pursuers entered into missives with the defender for the purchase of two plots of land amounting respectively to 0.355 hectares and 0.896 hectares. The plots of land formed part of the defender's land at West Reston Mains, Reston, Berwickshire. The missives in each contract comprised an offer document on behalf of the pursuers dated 18 October 2005 which contained all of the operative terms of the contract and an unqualified acceptance on behalf of the defender dated 19 October 2005. The contracts (clause 12 in each contract) contained a suspensive condition in the following terms:
"12.1 It is an essential condition of this Offer and the Missives which the Purchaser may at its sole option waive in whole or in part, that the Purchaser:
12.1.1 obtains a satisfactory report following a geotechnical survey of the Subjects;
12.1.2 obtains outline planning permission for residential development ... and
12.1.3 being satisfied with the servicing detail of the Subjects ... .
12.2 It shall be at the complete discretion of the Purchaser as to whether the matters specified in Condition 12.1 above are satisfactory."
[3] The pursuers had the unilateral right to waive the suspensive conditions or to declare them to be purified as clause 12.6 was in the following terms:
"Condition 12.1 above shall be purified or waived only by our expressly intimating the same in writing to the Seller or to the Seller's solicitors. Failing such intimations:-
....
12.6.2 as regards Condition 12.1.2 within the two years following the date of conclusion of the Missives ...; or
12.6.3 as regards Condition 12.1.3 within two years following the date of conclusion of the Missives ...;
then each of the Purchaser and the Seller shall be entitled at any time thereafter, but prior to such relevant purification or waiver, as the case may be, to resile from the Missives."
If the pursuers had wished to waive any of those conditions they required to give the defender three months' prior notice under clause 12.7 of the missives.
[4] It can be seen from those clauses that the pursuers required timeously to intimate the purification or waiver of the conditions if they were to exclude the defender's right to resile from the contracts.
[5] The contracts also contained notice provisions (clauses 26 and 24 respectively) in the following terms:
"1 Any notice to be served under the Missives must be in writing and served on the Seller or the Purchaser, as the case may be, at their address as specified in the Missives or on their respective solicitors.
2 Any such notice shall be sufficiently served if sent by recorded delivery post or delivered by hand or sent by facsimile.
3 Any notice sent by recorded delivery post shall be deemed to have been duly served upon the expiry of two working days after the date of posting and in proving service it shall be sufficient to prove that the envelope containing the notice was duly addressed to the Seller or the Purchaser or their respective solicitors as the case may be and was posted to the place to which it was so addressed. Any such notice sent by facsimile shall be deemed to be served on the day of transmission, if transmitted fully between the hours of 9am and 5pm on a working day and which failing on the next working day, and in proving service it shall be sufficient to exhibit the transmission slip and the date and time of transmission on it."
The notice provisions applied to several clauses in the contracts which required or allowed parties to communicate with each other as well as the intimation provisions in clause 12.
[6] At the end of the offer document in each of the contracts the pursuers excluded the postal acceptance rule in relation to the creation of the contract by providing:
"This Offer, unless sooner withdrawn, is open for acceptance by formal letter
to reach us not later than 5pm on 21 October 2005 failing which it will be deemed to be withdrawn."
The events giving rise to the dispute
[7] After concluding the contracts the pursuers applied for and obtained planning permission for residential development on the plots of land. The defender was annoyed that the pursuers did not then make the contracts unconditional and pay him the sums due under the contracts but instead waited until the two-year long-stop date at which he would obtain a right to resile. He had understood from pre-contractual discussions with the pursuers that the deal, into which he had entered, gave him a right to payment shortly after a suitable permission was obtained and the other suspensive conditions were purified and that the pursuers would wait until the long-stop date only if those conditions had not been purified. He therefore decided that he would resile from the contracts as soon as the long-stop date arrived. He obtained legal advice from his solicitor, Mr David Soeder of Messrs Turnbull, Simson & Sturrock, Jedburgh. Mr Soeder advised him that he should wait until Saturday 20 October 2007 before intimating withdrawal and warned him that he expected that the pursuers would purify the suspensive conditions before he obtained the right to resile. The defender and Mr Soeder agreed that Mr Soeder should go into his office on the Saturday morning and fax letters resiling from the contracts. Mr Soeder drafted the letters on Friday 19 October and, as instructed, returned to his office on the morning of 20 October to send the fax message including the two letters of withdrawal from the contracts. Before doing so, Mr Soeder, in accordance with the normal practice of his firm, collected mail addressed to the firm from the sorting office of the Post Office in Jedburgh. He brought a bag containing the mail to his firm's office and deposited it there. I discuss the events of the Saturday morning in more detail in paragraphs 23 - 28 below as they were the main issue of factual dispute. For now it suffices to say that he sent the fax which he had prepared on the previous day. Because the fax was sent on a day which was not a working day, intimation of withdrawal could not take effect under the contracts (see clauses 26.3 and 24.3 respectively) until 9am on Monday 22 October 2007.
[8] While the defender was preparing to withdraw from the contracts, Dickson Minto, the pursuers' solicitors, took steps to purify the conditions and thereby prevent the defender from resiling. Mr Robert Forman, an assistant in Dickson Minto, had been instructed by the pursuers to send letters on 19 October 2007 purifying the conditions. He prepared the letters on Thursday 18 October and on the morning of 19 October arranged for a partner to sign them before giving them and a fax cover sheet to his secretary to fax and then post. As a result of an oversight the letters were not sent by fax. The envelope was franked for first class delivery and was picked up from Dickson Minto by the Royal Mail at 5.55pm. Intimation of purification therefore depended on the first class post.
[9] On the morning of Monday, 22 October 2007, Mr Soeder, as was his normal practice, travelled by car with his two daughters from his home to the centre of Jedburgh, where he picked up the firm's mail bag from the sorting office of the Post Office at about 8.50am. Normally he deposited the mail bag in the firm's office nearby before driving for about five minutes to deliver his daughters to their school on the outskirts of Jedburgh just before 9am. On this occasion, however, his eldest daughter was anxious to arrive at school slightly earlier than normal. So Mr Soeder placed the firm's mail bag in his car and drove to the school before returning to the centre of Jedburgh, parking his car and entering his firm's office at about 9.03am. After depositing the mail bag and going to his office to take off his coat, he re-sent the fax resiling from the contracts at 9.08am.
Parties' submissions
[10] Mr Sandison for the pursuers submitted that they had purified the suspensive conditions in clause 12 of the two contracts before the defender's notices of withdrawal took effect at 9am on Monday 22 October 2007. He advanced three separate reasons for that contention. First, he submitted that the well- known postal acceptance rule had the effect that the pursuers' notices of purification took effect on Friday 19 October 2007 when they were posted by first class mail. Secondly, he invited the court to hold that, on balance of probabilities, the notices of purification reached Jedburgh on the Saturday morning and were within the mail bag which Mr Soeder picked up that morning. Thirdly, he submitted that, in any event, the notices were served on the defender's solicitors at the latest at 8.50am on the Monday morning when Mr Soeder picked up the Monday mail bag at the Post Office before he took his daughters to school. I consider each submission in turn.
The postal acceptance rule
[11] In an elegant submission Mr Sandison argued that because the notification of purification of the suspensive conditions, by converting a contract containing unilateral obligations on the part of the seller into a bilateral or synallagmatic contract in which the purchaser...
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