R & D Construction Group Limited V. Hallam Land Management Limited
| Jurisdiction | Scotland |
| Judge | Lord Reed,Lord President,Lord Drummond Young |
| Judgment Date | 10 December 2010 |
| Neutral Citation | [2010] CSIH 96 |
| Docket Number | CA63/08 |
| Published date | 10 December 2010 |
| Court | Court of Session |
| Date | 10 December 2010 |
| FIRST DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord President Lord Reed Lord Drummond Young | [2010] CSIH 96 CA63/08 OPINION OF THE LORD PRESIDENT in Reclaiming Motion by R & D CONSTRUCTION GROUP LIMITED Pursuer and Reclaimer; against HALLAM LAND MANAGEMENT LTD Defender and Respondent: _______ |
Alt: Borland; Harper MacLeod LLP
10 December 2010
Introduction
[1] In November 1999 the respondent entered into an option agreement to purchase up to 21.1 acres of land from Barbara Kerr ("Mrs Kerr"). In October 2003 the reclaimer concluded missives with the respondent to purchase from it 4.685 acres of that land at a price of £571,314. Clause 4.1.10, introduced in the respondent's qualified acceptance of 24 September 2003, contained a suspensive condition in the following terms:
"The Missives shall be essentially conditional upon:-
...
4.1.10 the Seller [the respondent] agreeing a purchase price for the Subjects with the current proprietor in terms wholly acceptable to the Seller (the Seller being required to use all reasonable endeavours in this regard)"
[2] On 26 May 2004, having failed to agree a price with Mrs Kerr, the respondent purported to resile from the purchase contract. The reclaimer brought an action for breach of contract, founding on the parenthetical requirement in clause 4.1.10. The respondent argued that the requirement was unenforceable, being no more than an agreement to agree, or, alternatively, being concerned with an object which was too vague and uncertain to have contractual force. On 16 September 2009, following proof, the Lord Ordinary decided that the requirement was enforceable, but that, on the acceptable evidence, the respondent was not in breach of contract ([2009] CSOH 128). Against that decision this reclaiming motion has been brought. The respondent has lodged grounds of cross-appeal, challenging the Lord Ordinary's decision as regards the enforceability of the requirement.
Background
[3] The Opinion of the Lord Ordinary sets out in detail the contractual context and the chronology of events (at paras [4] - [31]). A summary of the main matters relevant to the submissions made in this reclaiming motion, which focussed on events in March 2004, is set out below.
Contractual context
[4] Under the option agreement the "purchase price" for any land was to be the higher of: (i) seventy five percent of the Open Market Value; or (ii) £75,000 (schedule 2). Clause 6 set out the procedure for exercising the option. Before doing so, the respondent had to obtain planning permission with which it was satisfied. It could then serve a provisional notice, which fixed the valuation date and obliged Mrs Kerr to negotiate the amount of the purchase price. Both parties were required to use all reasonable endeavours in that regard. If no agreement was reached within twenty working days, either party could refer the matter to a decision of an expert. The respondent was entitled, but not bound, to exercise the option within one calendar month of the amount of the purchase price being agreed or determined. Clause 12 provided for the agreement of parties, acting reasonably, concerning the routes over which any "rights, servitudes and wayleaves" were to be granted, and for the provision of such rights and servitudes of vehicular and pedestrian access to, and egress from, any retained land as were required by Mrs Kerr acting reasonably.
[5] As well as clause 4.1.10, the purchase agreement between the reclaimer and respondent contained a number of other suspensive conditions. In particular, clause 4.1.5 of the initial offer provided that missives were conditional upon the reclaimer obtaining a site survey, ground conditions report and environmental assessment in terms wholly acceptable to it. Clause 10 of the respondent's qualified acceptance introduced a long-stop date: it had seven months from the receipt of written notice that the reclaimer had purified or waived condition 4.1.5 to complete the purchase, failing which it was entitled to resile from the agreement without penalty.
Chronology of events
[6] The reclaimer's offer of £571,314 was based on a residential development of thirty five units. On 6 October 2003 the reclaimer's solicitors, Burness LLP, notified the respondent's solicitors, MacRoberts, of the purification of clause 4.1.5, from which date the seven month long-stop period began. Following a meeting with her in early November 2003, a representative of the respondent reported that Mrs Kerr appeared happy with an Open Market Value of £571,314, subject to two matters: (i) vouching of sufficient marketing of the land; and (ii) her being allowed to reserve a strip of ground to permit vehicular access to the remaining land for the purposes of future residential development. The respondent sent Mrs Kerr a provisional notice in terms of the option agreement on 12 December 2003, thereby fixing that date as the date at which the Open Market Value was to be determined.
[7] In January 2004 it became clear that the respondent was minded to provide only agricultural access to land retained by Mrs Kerr, thus controlling its development. In the same month, correspondence from Mr Dale, Mrs Kerr's solicitor, made clear that Mrs Kerr's valuation of the purchase subjects was £630,000. On 15 January 2004 he wrote to Mrs Kerr asking her to solicit a written offer for that amount from another interested company, Aftondale Ltd. It made such an offer, subject to planning permission and satisfaction as to ground conditions, on 20 January 2004. At a meeting with Mr Hopkins, an employee of the respondent, on 16 January 2004 the reclaimer was made aware of Mrs Kerr's position. On around 19 January 2004 John Hume, the reclaimer's chairman and chief-executive, instructed its sales and marketing director, Derick Reid, to write to Mr Hopkins offering to increase the price it would pay to £610,000 and suggesting that the respondent "take the hit" for the £20,000 shortfall between that figure and £630,000. Mr Reid gave evidence that he telephoned Mr Hopkins that day, but that the proposal was refused. Mr Hopkins could not recall that conversation, but gave evidence that the respondent would not have accepted an offer which resulted in their receiving as profit less than 25% of the difference between the Open Market Value and the option price.
[8] On 2 March 2004 Mr Hume spoke with Mr Hopkins on the telephone. Mr Hume could not recall the conversation in detail. However, he was referred to a file note, dated 3 March 2004, of a meeting between representatives of the respondent, its in-house solicitor, Chris King, and Anne Fergusson of Burness, who drafted the note. He inferred from that note that during the conversation on 2 March he had offered to increase the price which the reclaimer would pay to £630,000. Mr Hopkins did not recall that offer, but gave evidence that he would not have acted on it without a formal written amendment of the price in the missives. Also on 2 March 2004 Mr Dale wrote to Mr Hopkins seeking agreement of a "purchase price", by which, parties agreed, he actually meant an Open Market Value, of £606,000. Again on 2 March, following their telephone conversation, Mr Hume wrote to Mr Hopkins. The letter, drafted by Mr Reid, referred to Mrs Kerr's request for access. While making clear that the preferred choice was a more restricted right of access, the letter stated:
"We would be willing to keep our purchase price for the land at the same value, i.e. £565,000 even with the loss of two units, reducing the overall development from 35 units to 33."
The "rogue" figure of £565,000 was described by Mr Hume and Mr Reid as a typographical error.
[9] Only Mr Hopkins gave evidence about the meeting to which the file note of 3 March 2004 related and his recollection was unclear. The note itself recorded that Mr Dale had accepted an Open Market Value of £606,000, with his client receiving 75% of that sum; that the reclaimer was willing to pay up to £630,000 but that the respondent "would just turn the deal at £606k"; that Mr Hopkins had informed the meeting that the reclaimer would accept the access rights demanded by Mrs Kerr; and that he would fax Ms Fergusson the correspondence and plans to allow her to write to Burness to confirm how the deal was to be structured. In the event, there was no evidence that such action was taken. The Lord Ordinary accepted that the file note reflected the respondent's position on that date. However, he noted that there was no evidence that confirmed the "structure of the deal" to be agreed with Burness or that Mr Hume's letter of 2 March 2004 had reached the respondent in time to be considered - he inferred from the terms of the file note that it had not.
[10] Nor was there evidence that, at the beginning of March, the reclaimer was aware of the respondent's proposal to take £630,000 from it, while paying only 75% of £606,000 to Mrs Kerr. Mr Hume's position was that he had not agreed to such a deal at that time. However, the Lord Ordinary found that, in principle, a deal on those terms was agreed at a meeting on 24 March 2004 between Mr Hume, Mr Reid and Mr Hopkins. The reclaimer agreed to pay the respondent £606,000 by 30 April 2004, with a further £25,000 being paid in May 2004 as a "finder's fee". That allowed the missives to be amended to show a price of £606,000, preventing disclosure to Mrs Kerr of the further payment were she to seek sight of them. Mr Hume and Mr Reid's evidence, accepted by the Lord Ordinary, was that they understood the respondent to have already agreed the price of £606,000 with Mrs Kerr and that a deal had been struck which could then be formalised. Mr Hopkins accepted that such a proposal may have been made, but stated that he was not authorised to accept it and would have to place it before the respondent's board of directors. This assertion of lack of authority was not accepted...
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