Rennie v Westbury Homes (Holdings) Ltd

JurisdictionEngland & Wales
JudgeMr Justice Henderson
Judgment Date07 February 2007
Neutral Citation[2007] EWHC 164 (Ch)
CourtChancery Division
Date07 February 2007
Docket NumberCase No: HC06C0234

[2007] EWHC 164 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

The Honourable Mr Justice Henderson

Case No: HC06C0234

Between
Peter Anthony Rennie
Claimant
and
Westbury Homes (Holdings) Limited
Defendant

Mr Anthony Trace QC and Ms Louise Hutton (instructed by Everett Tomlin Lloyd & Pratt) for the Claimant

Mr John Male QC (instructed by Wragge & Co.) for the Defendant

Hearing date: 18 th January 2007

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 HON. MR JUSTICE HENDERSON

Mr Justice Henderson

Mr Justice Henderson

Introduction: The Option Agreement

1

The basic question that I have to decide in this case is whether an option agreement was validly extended by the service of a notice in accordance with the terms of the agreement. If the answer to that question is affirmative, further questions arise whether the sum of £20,000 payable on the extension of the option period was paid in time, and (if not) what are the consequences of the failure to make the payment in good time.

2

The option was granted in 1992 by the claimant, Peter Anthony Rennie, and his late wife, Rita Marjorie Rennie, who were the joint owners of Angel Farm, Coleford, Gloucestershire. Angel Farm extends to some 21.53 acres and consisted then, as it does now, of agricultural land on the outskirts of Coleford. It was thought that the land had development potential, and the Rennies entered into negotiations with the defendant, Westbury Homes (Holdings) Limited (“Westbury”), a company whose business included the identification and acquisition of land suitable for house building and the development of such land. The negotiations culminated in the grant of the option by an option agreement (“the Option Agreement”) dated 17 th September 1992 and made between Mr and Mrs Rennie (1) and Westbury (2).

3

The Option Agreement defined the Rennies as “the intending Vendor” and Westbury as “the intending Purchaser”. Angel Farm was defined as “the Land”, and the “Property” as the Land or (if less at any relevant time) so much of the Land as should (in short) have the benefit of planning permission for residential development on terms reasonably acceptable to Westbury.

4

“The Option Period” was defined in clause 1.1.9 as meaning (without prejudice to certain immaterial provisions permitting 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 now common ground that the Option Period expired at midnight on 16 th September 2002, although in the run up to the end of the Option Period it is clear that Westbury, and probably Mr Rennie and his solicitors too, were under the misapprehension that it expired a day later at midnight on 17 th September.

5

By clause 2 of the Option Agreement the Rennies, in consideration of payment of £50,000 by Westbury, granted Westbury 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 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 Westbury 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 Land, and to use every reasonable endeavour to optimise the development value of the Land.

6

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.”

7

Clause 8.7 provided that:

“If the intending Purchaser shall not exercise the Option within the period or periods for exercise prescribed by this Agreement (including any extensions thereof as herein provided) this Agreement shall cease and determine and the intending Purchaser shall cancel any C(iv) Land Charge which it may have registered in respect of this Agreement.”

8

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

9

There was no exercise of the option by Westbury over any part of the Property before September 2002.

10

On 26 th October 1998 Mrs Rennie died, and her interest in Angel Farm passed to Mr Rennie by survivorship. He was also her executor and the sole residuary beneficiary under her Will.

11

On 12 th September 2002, a few days before the expiry of the Option Period, Westbury's solicitors, Messrs. Davies and Partners, wrote to Mr Rennie's solicitors, Messrs. Everett & Tomlin, in the following 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 would be appreciated if you could please fax your bank account details through to our Birmingham office. Thank you.”

12

This is the letter that is now relied on by Westbury as having constituted a valid notice pursuant to clause 9.1 of the Option Agreement. It was received by Everett & Tomlin on the following day, 13 th September, which was a Friday. However, they did not respond to it either before or after the weekend, nor did they fax their bank account details as requested.

13

Nothing then happened until the following Tuesday, 17 th September, when Davies and Partners telephoned Everett & Tomlin and asked for details of their client account, which they were then given by a secretary. The £20,000 was then transferred into Everett & Tomlin's client account at 3.07 p.m.. On the same day, Davies and Partners sent a fax to Everett & Tomlin saying:

“We refer to our letter dated 12 th September.

We write to confirm that we have today arranged for a telegraphic transfer in the sum of £20,000 to be sent to your client account for the extension of the option for a further 5 years in accordance with clause 9.1 of the option agreement.

We should be obliged if you would kindly acknowledge receipt of the sum of £20,000.

We look forward to hearing from you.”

14

Everett & Tomlin replied later on 17 th September, saying simply:

“Thank you for your fax dated 17 th September 2002. We acknowledge receipt of the sum of £20,000 relating to the extension of the option relating to the above.”

15

Two days later, Everett & Tomlin wrote again and now for the first time took the point that the Option Period ran until (and included) 16 th September, but did not extend to the following day. They alleged that the option had not been validly renewed, and sought to return the £20,000 by enclosing a cheque for that amount.

16

It is unnecessary to carry the narrative of events any further. The question of when the Option Period expired was debated in correspondence, and as early as 23 rd September 2002 Davies and Partners were putting forward the essential contentions on which Westbury now rely, to the effect that the letter of 12 th September gave notice that Westbury required the option to be extended, and that there was no requirement for the £20,000 to be paid within the original 10-year Option Period.

17

Eventually, letters before action were exchanged in April 2006 (with Wragge & Co now acting as litigation solicitors for Westbury), and on 12 th June 2006 Mr Rennie issued a claim form under CPR Part 8 seeking a declaration that the Option Agreement had ceased and determined, and consequential orders vacating the Class C(iv) Land Charges which had been registered by Westbury 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 th September 2002.

The first issue: Was the letter of 12 th September 2002 a valid notice pursuant to clause 9.1 of the Option Agreement?

18

On behalf of the claimant, Mr Anthony Trace QC submits that the letter of 12 th September 2002 was not a valid notice pursuant to clause 9.1 of the Option Agreement. He puts this part of his case in two alternative ways.

19

His first contention is that clause 9.1, on its true construction, prescribes an indispensable condition for exercise of the power to extend the Option Period, namely that Westbury should, by notice in writing, require the period to be extended by 5 years. He submits that the letter of 12 th September 2002 clearly does no such thing. It is simply a statement of what Westbury's solicitors understood the current position to be, together with an indication of their future...

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