Rennie v Westbury Homes (Holdings) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Dyson,Lord Justice Jacob,Lord Justice Latham |
| Judgment Date | 13 November 2007 |
| Neutral Citation | [2007] EWCA Civ 1401 |
| Docket Number | Case No: A3/2007/0448 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 November 2007 |
[2007] EWCA Civ 1401
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION
(MR JUSTICE HENDERSON)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Dyson
Lord Justice Jacob and
Lord Justice Latham
Case No: A3/2007/0448
Mr K Reynolds QC (instructed by Messrs Everett Tomlin Lloyd & Pratt) appeared on behalf of the Appellant.
Mr J Male QC (instructed by Messrs Wragge & Co) appeared on behalf of the Respondent.
The issue that arises on this appeal is whether the defendant validly required the period for exercising an option to purchase land to be extended in accordance with the terms of an Option Agreement, (“the Agreement”) made on 17 September 2002 between the claimant and his late wife as intending vendors and the defendant as intending purchaser. The judge held that it did so by a letter dated 12 September 2002 from the defendant's solicitors to the claimant's solicitors. The land in question is Angel Farm, Coleford, Gloucestershire (“the Property”). The claimant appeals with the permission of Thomas LJ.
The Agreement. The “Option Period” was defined in clause 1.1.9 of the agreement as meaning (without prejudice to certain immaterial provisions permitting the later exercise of the option in specified circumstances):
“… the period expiring on the date 10 years from and including today's date or (if the intending Purchaser shall have exercised its right contained in clause 9.1) the period expiring on the date 15 years from and including today's date.”
It is common ground that the Option Period expired at midnight on 16 September 2002. By clause 2 of the Option Agreement Mr and Mrs Rennie, in consideration of payment of £50,000 by the defendant, granted the defendant the option to purchase the Property upon the terms and conditions therein set out, provided that the option should first have been validly exercised. By clause 8.1 the option was exercisable on up to three occasions over the whole or specified parts of the Property. The price payable on the exercise of the option was 50 % of the open market value of the Property—if the exercise related to the whole of the Property—or a corresponding proportion of that sum if the exercise related to only part of the Property. By clause 7 the defendant agreed to undertake various planning obligations at its own expense, including obligations to apply as soon as practicable for planning consent in relation to the Property and to use every reasonable endeavour to maximise the development value of the Property. Clause 9.1 provided for extension of the Option Period in the following terms:
“At any time during the last year of the Option Period (meaning the period of 10 years referred to in clause 1.1.9) the intending Purchaser may by notice in writing served upon the intending Vendor require such period to be extended by 5 years and upon service of such notice and payment to the intending Vendor of the additional sum of TWENTY THOUSAND POUNDS (£20,000) this Agreement shall be construed as if the Option Period was 15 years.”
Clause 19.2 provided that any notice or document should be sufficiently served by or on a party if it was served by or on their respective solicitors. The purported exercise of the option.
On 12 September 2002 the defendant's solicitors wrote to the claimant's solicitors in these terms:
“Dear Sirs,
Rennie to Westbury Homes (Holdings) Limited
Angel Farm, Coleford
We shall very shortly be placed in funds for the extension of the option for a further 5 years upon payment of £20,000 by Westbury (clause 9.1 of the option agreement refers).
We presume that payment should be made to your good selves. Please could you let us [have] your bank account details so that we can organise a chaps transfer.
The payment arrangements will be handled by our Mr Herbert at our Birmingham office—please note the details of this letterhead. It will be appreciated if you could please fax your bank account details through to our Birmingham office. Thank you.”
The claimant's solicitors did not fax the bank account details or respond in any way. The next thing that happened was that, on 17 September the defendant's solicitors telephoned the claimant's solicitors and asked for details of their client account, which they were given by a secretary. The £20,000 was then transferred into the claimant's solicitor's client account at 15.07 hours that day. The claimant's solicitors acknowledged receipt of the money later the same day.
On 19 September they wrote to the defendant's solicitors, alleging that the option had not been validly renewed. They sought to return the £20,000 by enclosing a cheque for that amount.
On 12 June 2006, the claimant issued a claim form under CPR part 8, seeking a declaration that the Option Agreement had ceased and determined, and consequential orders vacating class C (iv) land charges, which had been registered by the defendant in respect of the Option Agreement, and a subsequent entry against the registered title to Angel Farm which had been entered on its first registration on 16 September 2002.
The Judgment.
In a careful judgment, Henderson J rejected the submissions made on behalf of the claimant. He rejected the submission that clause 9.1 of the agreement prescribed an “indispensable condition” for the exercise of the power to extend the Option Period, namely, that the defendant should by notice in writing require the period to be extended. The use of the phrase “indispensable condition” owes its origin to a passage in the speech of Lord Steyn in
Mannai Investment Co. Ltd v Eagle Star Life Assurance Co Ltd [1997 AC 747 767 D. Henderson J said this at paragraph 21:
“I can deal briefly with Mr Trace's first contention. I am unable to accept it, because clause 9.1 does not, in my judgment, lay down any condition that the notice must contain specific information in the sense in which Lord Steyn must be understood to have used that expression. There are, no doubt, two indispensable conditions which the notice did have to satisfy. First, it had to be in writing; and secondly, it had to be served upon Mr Rennie or his solicitors during the last year of the Option Period. Failure to comply with either of those conditions would have been fatal, because the notice would not have been a notice of the type stipulated by clause 9.1. But the provision that Westbury should by the notice ‘require [the option] period to be extended by 5 years’ is a stipulation of a different nature. It simply describes what it is that the notice must convey to the recipient, without prescribing any particular form of words or any particular details that must be included. There is nothing in the nature of a condition precedent to valid exercise of the right, but rather a statement of the meaning which the notice must communicate to the intending Vendor. Such statements fall squarely within the ambit of the Mannai test, and the question is simply how they would have been understood by a reasonable recipient.”
He then dealt with the second submission made on behalf of the claimant. This was based on an application of the test of how a reasonable recipient would have understood the notice in its context. The judge concluded that, looked at objectively, the letter would have been understood by a reasonable recipient as requiring the Option Period to be extended by five years. He gave a number of reasons for this:
“31. I move on now to the third requirement: did the letter, looking at the matter objectively, require the Option Period to be extended by 5 years? I begin by making the following observations. First, the letter refers in terms in the first paragraph to ‘the extension of the option for a further 5 years upon payment of £20,000 by Westbury’, and it also refers in terms to clause 9.1 of the Option Agreement. So the reasonable recipient could have been in no possible doubt that the letter was...
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...with a requirement of the option clause will invalidate its exercise. 49 The third case was the decision of this court in Rennie v Westbury Homes (Holdings) Ltd [2007] EWCA Civ 1401. That case concerned an option to buy land under which the option period was capable of extension. The clause......
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...in the notice itself. (4) Authorities such as Mannai Investment Co Ltd v Eagle Star Life Assurance Ltd [1997] AC 749 and Rennie v Westbury Homes (Holdings) Ltd [2007] 2 P. & C.R. 12 establish that (i) contractual notices must be construed against the relevant factual background, with the f......
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...762 per Lord Jauncey (dissenting on other points). 44 A further, and recent, illustration of this approach is to be found in Rennie v Westbury Homes [2007] EWHC 164 (Ch). This involved a clause in an option agreement to the following effect: “At any time during the last year of the Option P......