England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
(His Honour Judge Boggis QC)

		Royal Courts of Justice Strand London WC2
		6th October 1997

LORD JUSTICE NOURSE: The question here is whether time is of the essence in relation to the date by which an option to purchase land is expressed to be exercisable. It comes as something of a surprise to find that such a question should not be regarded as having been settled well before the middle of the last century.

By two agreements under seal dated 17th November 1989 options were granted to the plaintiff, Benito Di Luca, in the first case by the first defendant, Juraise (Springs) Limited, and in the second by the second and third defendants, Adrian Clifford Walter Amess and Kathleen Frances Amess, his wife. The first defendant is a company controlled by the second and third defendants. The options were to purchase half shares in separate pieces of freehold land at the rear of Sugarbrook Mill, Buntsford Hill, Stoke Pound, Bromsgrove in Hereford and Worcester.

The relevant provisions of the two agreements being identical, it is only necessary to read from the second. So far as material, clause (1) provides:

"ADRIAN CLIFFORD WALTER AMESS and KATHLEEN FRANCES AMESS (his wife) ... (`the Grantors') HEREBY GRANT to BENITO DI LUCA ... (`the Grantee') the option for a period of SIX YEARS from the 17th day of November 1989 to purchase at the price of FIVE THOUSAND POUNDS (£5,000) plus 6% to be added to the consideration at each anniversary of this agreement one-half share in the premises described in a Transfer of even date ... (`the Property') for an estate in fee simple in possession ..."

Clause (2) provides:

"The Option is exercisable on one of the following events occurring:-

i) one or both of the Grantors dying; or

ii) the Grantors wishing to dispose of the Grantors' interest in the Property by way of lease, transfer or assignment; or

iii) the Property being granted the benefit of a satisfactory planning permission for the erection of industrial units

If none of the events listed above have occurred within the period of six years then this Option shall be null and void."

Clauses (3) to (6) contain provisions relating to planning permission. So far as material, clause (7) provides:

"In the event of one of the matters listed in Paragraph 2 above taking place then the Grantee shall within two months of such event give notice (`the Option Notice') in writing to the Grantors exercising the option hereby granted and then the Option Notice shall constitute herewith a contract for the sale and purchase of the Property ..."

So far as material, Clause (10) provides:

"The option shall only be valid and enforceable if the Grantee registers within a period of two (2) months from the date hereof notice thereof against the title of the Property at H.M. Land Registry ..."

No other provision of the agreement has been treated as being material.

The purchase price payable if the option granted by the first agreement is exercised is £15,000. For today's purposes it is agreed that both properties were granted the benefit of a satisfactory planning permission within clause 2(iii) of each agreement on 19th December 1994, that is to say within the period of six years from 17th November 1989. That meant that the two-month period prescribed by clause (7) expired on 18th February 1995. We are told that the planning permission did not come to the plaintiff's notice until 11th January. On 17th February, a Friday, the plaintiff's solicitors despatched notices exercising both options through the Midlands document exchange, but they were not received by the defendants' solicitors until Monday, 20th February, outside the two-month period. It is agreed that if time was of the essence of the two-month period the notices were given too late.

The question came for decision on a trial of preliminary issues before His Honour Judge Boggis QC, sitting as a judge of the Chancery Division in Birmingham, on 18th June 1996. The other questions he decided are no longer in dispute and need not be referred to. The judge held that time was of the essence and he dismissed the plaintiff's action for specific performance. The plaintiff now appeals to this court.

Mr Stockill, for the plaintiff, while accepting that time is of the essence in regard to the six-year period in clause (1), submits that that is not so in regard to the two-month period in clause (7). He relies on the express provision at the end of clause (2) for the option to become null and void if none of the three events listed in that clause shall have occurred within the six-year period. He also relies on clause (10), which expressly provides for the option to be invalid and unenforceable if it is not registered within a period of two months from the date of the agreement. Mr Stockill submits that the absence of any comparable provision in clause (7) shows that time was not intended to be of the essence in relation to the two-month period.

I think it clear that the advantage to the plaintiff, if any, in that submission is neutralised by the consideration that if, for example, a satisfactory planning permission had not been granted until, say, 1st November 1995, the combined effect of clauses (1), (2) and (7) would have been that the options could have been exercised up to 31st December 1995, even though that date would have fallen outside the six-year period. So in reality there is only one period, being a period expiring two months after the occurrence of the specified event, provided that it occurs during the six-year period. The question is whether time is of the essence of that period or not.

The question is a short one. A useful introduction to it will be found in the judgment of Danckwerts LJ in Hare v Nicoll [1966] 2 QB 130. At p.145F, he said that the law was correctly stated in Halsbury's Laws of England, Vol. 8 (1954) 3rd Ed. at p.165:

"An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse."

I entirely agree that that is a correct statement of the law. Danckwerts LJ continued:

"The authority cited for that proposition is a very striking case, Dibbins v. Dibbins, a decision of Chitty J. In that case an option for a surviving partner to purchase a deceased partner's share had to be exercised within three months of his death. A notice within the three months was given by solicitors on behalf of the surviving partner, but he was of unsound mind, and therefore the notice was not effective. Under an order in lunacy, a fresh notice was given, but it was too late in time, and equally ineffective. The rule really is long established, as Ranelagh (Lord) v. Melton (a decision of Kindersley V-C) and other cases show."

The question must be approached by acknowledging that in regard to contractual stipulations time was always of the essence at law. Moreover, equity relieved against them only in certain cases, in particular where there was a contract for the sale and purchase of land with a specified date for completion. A contract granting an option to purchase land is not such a contract. The distinction and its consequences were clearly stated by Sir Richard Kindersley V-C in Lord Ranelagh v. Melton (1864) 2 Drew. & Sm. 278, where there was an option for lessees to purchase the freehold. He said, at p.281:

"I apprehend the rule of law applicable to cases like the present is perfectly clear. No doubt, if an owner of land and an intending purchaser enter into a contract constituting between them the relation of vendor and purchaser, and there is a stipulation in the contract that the purchase-money shall be paid and the contract completed on a certain day, this Court in ordinary cases has established the principle that time is not of the essence of the contract, and that the circumstance of the day fixed for the payment of the money and completion of the purchase being past does not entitle either party to refuse to complete. On the other hand it is well settled that where there is a contract between the owner of land and another person, that if such person shall do a specified act, then he (the owner) will convey the land to him in fee; the relation of vendor and purchaser does not exist between the parties unless and until the act has been done as specified. The Court regards it as the case of a condition on the performance of which the party performing it is entitled to a certain benefit; but in order to obtain such benefit he must perform the condition strictly. Therefore, if there be a day fixed for its performance, the lapse of that day without its being performed prevents him from claiming the benefit."

Similarly, in Dibbins v Dibbins, which was more a decision on ratification than on time being of the essence, Chitty J said [1896] 2 Ch 348 at p.350:

"The doctrine of equity, that time is not of the essence of the contract, is not one of universal application, and it is settled with reference to options of this kind that there is no difference as to time between the rule of equity and the rule of common law; in other words, in exercising an option of this nature where time is limited the option must be exercised (if at all) within the time for which it is expressed to be given, both at law and in equity."

A like rule has since been affirmed in relation to options to acquire other kinds of property, for example shares in a private company (Hare v. Nicoll) and aircraft (United Dominions Trust (Commercial) Ltd. v. Eagle Aircraft Services Ltd. [1968] 1 WLR 74. The difficulty, if indeed there is one, has been caused by some observations of Lord Diplock in United Scientific Holdings Ltd. v. Burnley Borough Council [1978] AC 904, in which it was held by the House of Lords that time was not usually of the essence in relation to timetables specified in rent review provisions in leases.

At p.929C, Lord Diplock said:

"Again I will refrain from repeating the more elaborate juristic analysis of the distinction between the two types of contract that I attempted in the United Dominions Trust case [1968] 1 WLR 74, 83-84. A more practical business explanation why a stipulation as to the time by which an option to acquire an interest in property should be exercised by the grantee must be punctually observed, is that the grantor, so long as the option remains open, thereby submits to being disabled from disposing of his proprietary interest to anyone other than the grantee, and this without any guarantee that it will be disposed of to the grantee. In accepting such a fetter upon his powers of disposition of his property, the grantor needs to know with certainty the moment when it has come to an end."

Those observations clearly affirm a settled and invariable rule in relation to options to purchase. However, Mr Stockill has relied on them as a basis for submitting that the rule does not apply where it can be shown that the grantor does not reasonably need to know with certainty the date when the option period has come to an end. He has also relied on observations of Winn LJ in Hare v. Nicoll at p.148C-D, although it must be very doubtful whether they were intended to be anything more than a comment on the circumstances of that case as opposed to a considered explanation of the rule.

I have no hesitation in rejecting Mr Stockill's submission. The rule is a universal one and, except where the language of the option demonstrates the contrary, it applies irrespective of what may or may not be reasonably thought to have been the needs of the grantor. A tentative explanation of the rule which Lord Diplock thought was helpful in deciding an entirely different case cannot erode its application. Indeed, at any rate in regard to options to purchase land, the rule is so well established that it needs no explanation and I apprehend that no experienced conveyancer would pause to give it one.

Mr Stockill has made further submissions in relation to the particular provisions of the agreements in this case. He maintains, first, that under the terms of clause (2) the option could have become exercisable on more than one occasion. For example, if the second or third defendant had died early in the six-year period, the plaintiff could either have exercised the option then or he could have waited until a satisfactory planning permission had been granted. Although it is not perhaps clear that that is a correct construction of clause (2), I will assume that it is. Mr Stockill then says that the choice available to the plaintiff shows that time was not intended to be of the essence of the two-month period.

I am unable to see why that should be so. Supposing that the option was exercisable as Mr Stockill would have it, the two-month period would still have run from the event in respect of which it was exercised and time would still have been of the essence of that period.

Secondly, Mr Stockill says, correctly, that the plaintiff might have been unaware of the death of one of the grantors or that a satisfactory planning permission had been granted until a very late stage in the two-month period or perhaps not at all. He says that since there is no provision for notice of the event to be given to the grantee the parties must have intended that time should not be of the essence of that period.

Again I must reject that submission. I agree with Mr Stockill that it is impossible to imply a provision for notice of the event to be given to the grantee. But that does not mean that some laxity which it would not otherwise enjoy can attach to the two-month period. One answer to the submission may well be that a period of two months was more generous than it might otherwise have been for the very purpose of giving the grantee a fuller opportunity to get to know of the occurrence of the event.

Those have been Mr Stockill's principal submissions on this appeal. For the reasons I have given I would reject them. I think that Judge Boggis's decision of this question was correct. I would therefore affirm it and dismiss the appeal.

LORD JUSTICE HUTCHISON: I agree.

LORD JUSTICE THORPE: I agree.

Order: appeal dismissed with costs.