Michael Coaten v PBS Corporation
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PETER SMITH |
| Judgment Date | 18 July 2006 |
| Neutral Citation | [2006] EWHC 1781 (Ch) |
| Court | Chancery Division |
| Date | 18 July 2006 |
| Docket Number | Case No: HC05C03623 |
[2006] EWHC 1781 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Peter Smith
Case No: HC05C03623
Mr M Dencer (instructed by Oliver Fisher) for the Claimant
Mr T Fancourt QC (instructed by Bircham, Dyson Bell) for the Defendant
Hearing dates: Monday 10th July 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE MR JUSTICE PETER SMITH
Peter Smith J:
INTRODUCTION
This claim is a dispute in respect of a very valuable flat (worth around £1,500,000) at the ground and first floor of 90 Eaton Place London SW1 ("the Property").
The point raised is a short one involving the construction of an agreement in writing ("The Agreement") dated 28th August 1984 between the Defendant (1) and the Claimant (2). Following the construction of the Agreement the next question to be decided is the legal effect of the Agreement as so construed.
At the start of the hearing Mr Dencer who appears for the Claimant clarified the nature of the Claimant's case. His case was that the true construction of the Agreement was that it created an immediate option in the Claimant's favour which was exercisable upon the death of Luis Bacardi and that following his death and the exchange of correspondence between the Claimant's solicitors and the Defendant's solicitors constituted an exercise of that option.
He accepted that if the Agreement as construed did not constitute an option and was a right of pre-emption which merely obliged the Defendant to offer the property for sale to the Claimant for first refusal on the death of Mr Bacardi the correspondence that passed between the parties on that basis fails to establish a binding contract. The reason he conceded was that if the contract was attempted to be constituted by that correspondence it did not comply with the provisions of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 ("The Act").
In that context he did not assert that a contract complying with the Act by those letters could be achieved by construing the typing of the Defendant's name as a signature and by the attaching of his clients signature to the offer letter.
For his part Mr Fancourt QC who appeared for the Defendant acknowledged that if the Agreement as construed conferred on the Claimant an option that complied with the provisions of both section 40 of the Law of Property Act 1925 and section 2 of the Act. If that was the correct construction he conceded that the letters which passed between the parties respective solicitors constituted an effective exercise of the option despite their language.
Accordingly the one issue for determination is whether or not the Agreement conferred on the Claimant an option.
BACKGROUND TO THE AGREEMENT
The Agreement arose in the circumstances set out in the Claimant's unchallenged witness statement. I should say that that background material does not provide any facts as to aid the construction. The question of construction is derived solely from the consideration of the Agreement. Apparently the Claimant had a short lease of the Property. He held a nine year lease of the Property from 1973. He was a long standing friend of Mr Bacardi. They were all apparently well off. When the lease was coming to an end he negotiated to buy a new long lease. After some delay he negotiated by August 1984 a new lease of 57 3/4 years in exchange for a premium of £105,000. That was a discount from the normal price of £150,000 because he was regarded as a protected sitting tenant. Mr Bacardi asked if he could buy the flat. The Claimant agreed. At the time the flat was not his only home and in addition Mr Bacardi would only be in the UK for a maximum 90 days a year. It was therefore agreed that the flat would be acquired in the name of the Defendant an off-shore company incorporated in Panama. Thus Mr Bacardi through his company paid the £105,000 and the Claimant enabled that purchase to take place at a discounted price. The Claimant paid all the outgoings on the flat but was reimbursed them by the Defendant.
Mr Bacardi died on 21st January 2005.
TERMS OF THE AGREEMENT
The relevant terms are as follows:-
"1. In consideration of Mr Coaten guaranteeing the covenants of PBS in a Lease ("the Lease") now or intended shortly hereafter to be entered into by PBS between the Trustees of the Grosvenor Estate and itself of the Ground and First Floor Maisonette at 90 Eaton Place London SW1 ("the Premises") PBS hereby agrees with Mr Coaten as follows:-
(a) (i) PBS will not at any time during the period of twenty one years from the date hereof either:-
(a) enter into any agreement or option to sell or assign the Lease or
(b) sell or assign the Lease
Without first offering the same to Mr Coaten for purchase in manner hereinafter appearing
(ii) in the event of the death of Mr Luis del Campo Bacardi of Principoute deMonaco Bld de Belgique25 Monaco within the said period of twenty one years PBS will offer to sell the Lease to Mr Coaten in manner hereinafter appearing
(b) The price at which PBS will offter the Lease for sale to Mr Coaten shall be the aggregate of:-
(i) the sum of £105,000 and
(ii) legal costs and disbursements (including VAT Stamp Duty and Land Registry fees) incurred by PBS on purchase of the Lease
(iii) the actual cost incurred by PBS in connecting with the installation of central heating in the Premises (as required by the terms of the Lease) and of other improvements (excluding tenant's fixtures and fitting curtains and carpets) as evidenced by duly receipted invoices
(c) An offer to sell to Mr Coaten ("the sale offer") shall be made in writing and shall specify the sale price calculated in accordance with Clause 1(b) hereof and Mr Coaten shall within four weeks of service of the sale offer give written counter-notice to PBS stating whether or not he wishes to accept such offer
(d) If Mr Coaten states by counter-notice that he does not wish to purchase the Lease or if he fails to serve within the said period a written counter-notice in response to the sale offer then PBS shall be at liberty to sell or assign the Lease to such other purchaser and on such terms as it may think fit and Mr Coaten shall cause to be cancelled or withdrawn any notice or registration made by him at H.M. Land Registry or H.M. Land Charges Registry to protect the rights hereby granted
(e) The service by Mr Coaten of a counter-notice accepting th sale offer shall constitute a contract for sale and purchase made between the parties. The terms of the National Conditions of Sale then current shall apply to such sale and purchaser. Subject to any agreement to the contrary between the parties the sale and purchase shall be completed and the purchase price shall be paid and vacant possession of the property shall be given upon the date which is four weeks after service of the said counter-notice".
There is no dispute over the effect of Clause 1 (a) (i). It creates a right of pre-emption. Thus the Claimant has no rights unless PBS decided to sell the Property in which case it must first offer it to him. It is acknowledged that no contractual rights therefore arise until there is an offer made by PBS "in manner hereinafter appearing". The terms hereinafter appearing are that the price will be £105,000 together with costs of a legal nature and installing central heating. Sub clause (c) obligates the Defendant to make an offer to sell in writing specifying the price calculated in accordance with the provisions set out above and giving the Claimant four weeks after service of the offer to give a written counter-notice stating whether or not he wishes to accept it. If he does not serve a counter-notice within that period or states that he does not wish to take up the offer the Defendant can then sell or assign the Lease to such other purchaser that it thinks fit (Sub paragraph (d)). If however he wished to accept the offer he has to serve a counter-notice in accordance with sub clause (e).
The only difference between clause 1 (a) (i) and the right contended to be an option in sub clause (ii) is that the latter arises automatically on the death of Mr Barcardi provided always of course that he dies within 21 years.
Thus under that sub clause the Defendant (i.e. the grantor) is obliged to make an offer but the manner is still the same. The price mechanism and the other procedures are those set out in sub clause (b) – (e).
The Claimant contends that under this provision however the right is in the nature of an option rather than a right of pre-emption. It is said that it is a conditional option which only arises on the death of Mr Bacardi. The difference the Claimant contends is that significantly under this clause the Defendant is obligedto make the offer whereas under clause 1 (a) (i) it only has to make an offer if it wishes so to do. That says the Claimant transforms the nature of the obligation so as to confer on the Claimant an option rather than a right of pre-emption. It is said that the purpose...
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