England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
CIVIL DIVISION
On appeal from Order of Mr Justice Brightman.

		Royal Courts of Justice,
		17th October 1974.

LORD JUSTICE RUSSELL: This case below is reported at 1974 1 All England Reports, at page 248, and 1973 3 Weekly Law Reports, 884, and reference may be made to those reports for the details of the case.

Mr Narayan, who has argued the case for the appellant with courtesy and candour allied to pertinacity, has taken a number of points, some attacking the validity of the option agreement itself, and a final point, in the alternative, if the option agreement be valid, asserting that specific performance should not be ordered of the contract, constituted by the exercise of the option, for sale and purchase of the property at the price of £10,000.

His first contention is that the option agreement was vitiated by a representation made on behalf of the plaintiffs by Mr Sambruck on the occasion when the agreement was signed by Mr Scott, the representation being to the effect that what he (Mr Scott) was being asked to sign was a document which he would be able to get out of at any time within six weeks of its signature. The Judge's finding that there was no such representation was, it was contended, against the weight of the evidence. This was indeed, with respect, a hopeless point, particularly in the absence of any transcript of evidence. The learned Judge heard the evidence of Mr Sambruck and of Mr Scott; he preferred the evidence of Mr Sambruck where the evidence of the two diverged, and he came not only to the clear conclusion that no such representation had been made in any shape or form, but further that Mr Scott was never under any misapprehension on this point. That attack on the validity of the option agreement, in those circumstances, cannot possibly succeed.

The next attack on the validity of the option agreement was that it was an unconscionable bargain and consequently one that a Court of Equity would not support. I may say at once that there was no evidence or even any suggestion that the price of £10,000 was inadequate. Indeed, Mr Scott had successfully stuck out for £1,000 more than his neighbours. Nor, under this head, was any reliance placed on the £1 option money being inadequate consideration for the option. The suggestion mainly made really amounted I think to this, that Mr Sambruck ought to have told this house-painter with a wife and six children that he ought, before signing, to have considered whether if he sold the house he would have enough money to buy himself a suitable house elsewhere. Several cases — and of this I make no complaint — on unconscionable bargains were cited to us. But, in my view, none of them assist. It is perfectly true that Mr Scott cannot read; but there is nothing before us to suggest that he was not intelligent, let alone that he has any weakness of mind. He speaks (according to the learned Judge) and understands English perfectly well. The option agreement was explained to him by his friend and lodger Mr Reld, and I have little doubt that the whole matter of the options on this row of four houses was the subject of much discussion between Mr Scott and his neighbours well before he signed the final document at the price which he thought right. I can find nothing in this case remotely approaching the circumstances in which equity has been prepared to intervene under the general heading of unconscionable bargain.

The third ground of attack on the validity of the option agreement was that the consideration for the grant of the option, stated and paid, namely £1, was a sum which the law would not regard as valuable consideration: therefore there was no consideration in the eye of the law to support the obligation on Mr Scott not to withdraw his offer for six months. This I found a startling proposition. The industry of Mr Narayan has not been able to find any support for it in English authority; and his reliance on a Canadian case of Gilchrist v. Sedley, which is reported in (1967) 66 Dominion Law Reports, Second Series, page 24, was based on a misreading, in my view, of the decision in that case, which appears to me to suggest only that possible future obligations which could be avoided by payment of £1 were illusory as consideration.

The situation in this case, therefore, is that the option agreement was valid and effective, it constituted an irrevocable offer to sell (so that Mr Scott's purported rejection of any obligation in his letter in January 1972 was inoperative as a withdrawal of the offer) and, on the exercise of the option, the offer to sell was accepted and the contract for sale and purchase was constituted.

The final contention for the appellant was that that contract should not be specifically enforced, but that the purchaser should have only been awarded damages. I see no justification for that contention. If the owner of a house contracts with his eyes open, as the Judge held that Mr Scott did, it cannot in my view be right to deny specific performance to the purchaser because the vendor then finds it difficult to find a house to buy that suits him and his family on the basis of the amount of money in the proceeds of sale. It is to be observed, as to this particular case, that to the knowledge of the vendor Mr Scott, the purchasers were and are planning development on one site embracing his house together with the three other houses. It is right to say that, after this final point had been the subject-matter of a certain amount of debate in this Court, Mr Narayan found himself unable to pursue the point - unable, let me say, not because he was unable to get a word in edgeways, but because he thought in the end, after debate, that the point was not a good one. Accordingly, I reject the contention that the Judge could not or should not have ordered specific performance.

But I wish to add a comment on the learned Judge's approach to that last point. As I have said, a valid option to purchase constitutes an offer to sell irrevocable during the period stated, and a purported withdrawal of the offer is ineffective. When therefore the offer is accepted by the exercise of the option, a contract for sale and purchase is thereupon constituted, just as if there were then constituted a perfectly ordinary contract for sale and purchase without a prior option agreement. The Court is asked to order specific performance of that contract of sale and purchase, not to order specific performance of a contract not to withdraw the offer: provided that the option be valid and for valuable consideration and duly exercised, it appears to me to be irrelevant to the question of remedy under the contract for sale and purchase that the valuable consideration can be described as a token payment: and so also if the option agreement be under seal with no payment, which is what I take the learned Judge to be referring to when he refers to a gratuitous option in his Judgment. While I therefore agree that a valid option to purchase constitutes an interest in the land, I do not consider, as the learned Judge appears to have thought, that that fact is necessary to his conclusion and my conclusion on what is the appropriate remedy.

I would, for those reasons, dismiss the appeal.

LORD JUSTICE CAIRNS: Mr Narayan, who appeared in this Court for the defendant appellant, summarised his argument under three headings: first, that the learned Judge's finding that the defendant was not induced to enter into the transaction by misrepresentation by Mr Sambruck on behalf of the plaintiffs was against the weight of evidence; secondly, that the whole transaction was an unconscionable bargain which the Court will not enforce; thirdly, that the option agreement was not valid, or alternatively, if it was valid, then the only remedy to which the plaintiffs were entitled was damages and not specific performance.

As to the first of these points, the only representation relied on in this Court was a representation that the effect of the option agreement was to give either party the right to withdraw from it within six weeks. So far as appears from the Judgment, which is the only guide we have to the evidence which was given, it is not even clear that the defendant stated that Mr Sambruck said anything of the kind. The defendant may have been resting his case wholly on his allegation, not now persisted in, that pages of the document had been changed after he signed it. But if he did say that such a representation had been made orally, the Judge disbelieved him; and it is impossible for this Court to say that the Judge was not entitled to do so. Mr Narayan invited us to infer that Mr Reid, a friend of the defendant who was present when the agreement was signed, in explaining the matter to the defendant, misinterpreted Clause 4 of the agreement and that Mr Sambruck failed to correct it. This is pure speculation, and it is quite impossible to say that it is supported by evidence of weight or by any evidence at all. As to the second point, there is in my opinion no good ground for describing this as an unconscionable bargain. All the 19th Century cases to which Mr Narayan referred had features which distinguished them from this one. They were cases where a person at some disadvantage was induced to enter into a very bad bargain, usually with no time for thought and no opportunity of getting legal advice. Here, there was no reason to suppose that £10,000 was less than the market value of the house. The defendant had had many weeks to consider a transaction on the lines of what was ultimately agreed, and more than a week to consider a price of £10,000. It had been suggested in a letter from Mr Sambruck that he might get the advice of a lawyer, and at the time of the signing of the agreement he had two friends with him, one of whom explained it to him, and the whole transaction lasted over a period of about half an hour. Stress is laid by Mr Narayan on the fact that between the 12th December 1971 and the 3rd January 1972 the defendant was unable to find suitable accommodation for himself and his family at a price which, with the £10,000 he was to receive, he would be able to pay. There was no duty on the part of the plaintiffs or their agent to discover what the defendant's requirements were in the way of a new home, or what the cost of it was likely to be. Even assuming a degree of ignorance and lack of intelligence on the part of the defendant, which by no means follows from the fact of his illiteracy, it cannot possibly be said that the bargain was unconscionable because the defendant was not advised as to the difficulties that he might be faced with if he could not quickly find a new home within his means. It is contended that the option agreement was unconscionable, in that the defendant was paid only £1 and might have to wait six months before knowing whether the plaintiffs were going to buy his house or not. But it is very difficult to put a value on an option, and I believe it to be a common practice for options to be granted for a merely nominal consideration. There was nothing unreasonable in the plaintiffs wishing to have a reasonable time to ensure that they could buy all four houses and getting planning permission. No doubt the price that the defendant could have got for the house without planning permission would have been much lower. At the risk of some uncertainty, there was the chance of his receiving a substantial price for the house; and I cannot regard the option agreement as being in any way unconscionable.

Then, thirdly, there was a separate contention, based on the Canadian decision to which my Lord has referred, that the £1 consideration was no consideration in law. That was not the actual decision in the Canadian case and, if it had been, it would have been contrary to a mass of English authority to the effect that anything of value, however small the value, is sufficient consideration to support a contract at law. When it comes to the equitable remedy of specific performance, it is to be remembered that this only arises if the option agreement is valid. If it was valid, then it was conceded that it was irrevocable. Therefore, on the 29th March 1972, when the plaintiffs exercised the option, a valid contract for sale was made. For that contract there is no basis for saying that the consideration was inadequate or for any other reason specific performance should not be ordered.

In so far as there is a difference in approach to this matter between that of the learned trial Judge and that of my Lord Lord Justice Russell, I agree with Lord Justice Russell.

For the reasons that I have given, I too would dismiss this appeal.

SIR JOHN PENNYCUICK: I agree with the Judgments which have been delivered, and do not wish to add anything.

LORD JUSTICE RUSSELL: Then, Mr Maxwell, the appeal will be dismissed.

MR MAXWELL: My Lord, I must ask for the costs of this appeal, as well as the costs below, which, of course, were awarded to me by the learned Judge.

LORD JUSTICE RUSSELL: Mr Narayan, can you resist an Order for costs?

MR NARAYAN: No, I cannot.

LORD JUSTICE RUSSELL: Appeal dismissed with costs.

MR MAXWELL: I am obliged, my Lord.