England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CHANF 97/1227/3

COURT OF APPEAL (CIVIL DIVISION )

(Deputy Master Weir) Royal Courts of Justice

Strand

London WC2

Monday, 19th October 1998

B e f o r e :

LORD JUSTICE PETER GIBSON

LORD JUSTICE THORPE

LORD JUSTICE WALLER

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(1) WILLIAM ROGERS

(2) INGRID ROGERS

Appellants

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(1) ROGER FREEGUARD

(2) MARGO FREEGUARD

Respondents

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(Computer Aided Transcript of the Stenograph Notes of Smith Bernal Reporting Limited

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MR. C. HOLBECH (instructed by Messrs Hackenbroch & Co., Stanmore, Middlesex) appeared on behalf of the Appellants/Defendants.

MR. J. HOLMES-MILNER (instructed by Messrs Blairs, Portsmouth) appeared on behalf of the Respondents/Plaintiffs.

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J U D G M E N T

( As approved by the Court )

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Crown Copyright

LORD JUSTICE PETER GIBSON: This case provides another vivid illustration of the pitfalls which can surprise those who, without legal training and advice, enter into agreements drawn up by themselves for the conveyance of real property. The defendants, William and Ingrid Rogers, appeal with the leave of Deputy Master Weir from his order dated 26th June 1997. By that order he granted the plaintiffs, Roger and Margo Freeguard, an order for specific performance of an option agreement which the plaintiffs and the defendants signed on 10th October 1995 and an inquiry as to damages.

The defendants, who are an elderly couple, are the owners of a freehold house and garden, 9, Graffham Close, Chichester, registered at the Land Registry under title number WSX 92019. They are also the owners of the adjoining garage held under a long lease. That is registered with title No. WSX 92020, the freehold owner being a company which I would imagine was associated with the developers of the estate. That company holds the freehold, subject to a 99-year lease from 1st January 1984 at a peppercorn and insurance rent. At the Land Registry the garage is described as Garage 10, Graffham Close, and it excludes the floor above the garage which is, or is part of, a flat separate from both the garage and the house at 9 Graffham Close.

In July 1995 the defendants had instructed estate agents, GA Property Services ("GA"), to market their house and garage. Particulars of sale had been prepared by GA. The property to be sold was described as freehold and expressly included the garage. The price which was asked for was £119,500. The defendants were due to leave this country to go abroad on 21st October 1995. In the absence of a sale they were prepared to consider letting the property furnished. The plaintiffs were introduced to the defendants by a mutual acquaintance early in October 1995. The plaintiffs were in need of accommodation and the defendants offered them the property for sale but also said that they were prepared to let it on a 6-month tenancy. The plaintiffs did not really want a furnished house and also they wanted a longer letting, but they said that they would accept a 6-month tenancy provided that they could have an option to purchase running currently with the tenancy, the purchase price on the exercise of the option to be £110,000. The defendants arranged for an assured shorthold tenancy agreement to be prepared professionally.

Mr. Freeguard produced the option agreement which he drew up himself using a precedent which he had. That document was in this form. It was headed "Agreement conferring option to purchase Freehold". It read: "AN AGREEMENT made the 21st day of October 1995

BETWEEN William Rogers and Ingrid Rogers the Vendors of the one part

AND Roger Freeguard and Margo Freeguard the purchasers of the other part

WHEREBY in consideration of the sum of £1 paid by the purchasers to the vendors (the receipt of which the vendors hereby acknowledge)

It is agreed as follows:

1. The Vendors hereby grant to the Purchasers the Option for the period of 6 months from the date hereof to purchase at the price of £110,000 the property known as No.9 Graffam [sic] Close, Chichester in the County of Sussex the same as is registered at H.M. Land Registry with Title Absolute under the number WSX 68508 for an estate in fee simple in possession free from all encumbrances.

2. If the Purchasers during the said period of 6 months gives [sic] notice in writing to the Vendor [sic] exercising the said Option and pays [sic] to the Vendors a deposit of 10% of the said purchase price then this agreement and the said notice shall constitute a contract for the sale and purchase of the said property."

Then there was a space for the signatures of the vendors and a further space for the signatures of the purchasers. The plaintiffs signed as purchasers and the defendants signed as vendors.

The title number was supplied to Mr. Freeguard by Mr. Rogers. Unfortunately, for that purpose, Mr. Rogers looked at a document which he had available and which might have been the builders' plan of the whole estate before the house at 9, Graffham Close was built. The title number which he gave corresponds to that on that plan. That title number in October 1995 was not appropriate for 9, Graffham Close. The Deputy Master found that the option agreement was signed on 10th October even though post-dated to 21st October, the date on which it was to take effect, and from which the 6- month period was to run. The consideration for the option agreement, £1, was paid by Mr. Freeguard to Mr. Rogers.

On 6th April 1996 the defendants served a notice to quit on the plaintiffs and required possession of 9, Graffham Close on 21st June. On 20th April 1996, as the Deputy Master found, a notice was served by the plaintiffs on the defendants. That notice exercised the option to purchase "the freehold property known as 9, Graffham Close, Chichester, West Sussex, registered under title number WSX 68508" and a cheque of £11,000 for the deposit was sent. There was then a dispute between the parties as to whether or not a contract had come into existence, the defendants denying that they had ever signed an option agreement, and, if they had, they denied that it included the garage and chattels in the house such as the carpets, the plaintiffs, on the other hand, insisting that the contract extended not only to the house but also to the garage and the chattels. On 20th August 1996 the plaintiffs applied to register a caution. On 22nd August the defendants obtained an order for possession of 9, Graffham Close, and on 9th September the plaintiffs were evicted.

By this time each side had solicitors acting for them. On 18th September the defendants' solicitors wrote to the plaintiffs' solicitors saying that, without prejudice to the defendants' rights and contentions, they were serving a notice to complete. By this the defendants gave the plaintiffs notice that they were willing and ready to execute a conveyance/transfer of the fee simple of the property situate at and known as 9, Graffham Close, and warned that if the plaintiffs failed to comply with the notice within 10 working days from that date, the deposit would be forfeited to the defendants. At that stage none of the usual pre-contract or post-contract inquiries had been made. On 26th September the defendants' solicitors wrote to the plaintiffs' solicitors, including office copy entries for 9, Graffham Close. On 1st October the plaintiffs' solicitors replied, denying the validity of the defendants' notice to complete and stating that the plaintiffs would be willing to complete within 28 days, provided that full information was given as to the freeholders' rights and liabilities. On 23rd November the plaintiffs served the defendants with a notice to complete within 28 days. The property was described as "the property known as 9, Graffham Close, Chichester, West Sussex, contracted to be sold by the vendors to the purchasers by agreement dated 21st October 1995 between the vendors and the purchasers in accordance with the terms of the said agreement and including all the items referred to in the particulars issued by General Accident Property Services annexed thereto." The evidence does not support the suggestion that the GA particulars were ever annexed to the option agreement, nor were they even referred to in the option agreement.

On 8th January 1997 these proceedings were commenced by originating summons, the plaintiffs seeking an order for specific performance of the option agreement, an order that the defendants include in the sale certain chattels, and, further or alternatively, that the defendants pay general and aggravated and exemplary damages. Despite the hostile nature of the claim no pleadings were ordered.

At the trial, which the parties agreed should take place before a Master, the plaintiffs appeared in person and the defendants by their solicitor. At the trial on the second day, that is to say, the date of the judgment, the plaintiffs abandoned the claim that chattels were included in the agreement. The Deputy Master heard oral evidence from each of the plaintiffs but only from Mrs Rogers on the defendants' side, Mr. Rogers not being well enough to give evidence. The Deputy Master considered first what the option agreement comprised. He concluded that there was no contract for the chattels. On the question whether the garage was included, he posed the question, "What was meant by the property known as 9, Graffham Close?" He held that nothing turned on the mistaken title number. He had earlier referred to the parol evidence rule by reference to Chitty on Contracts, 26th Edition (1994), paragraph 12-081, to the effect that, if there be a contract which has been reduced to writing, verbal evidence is not allowed to be given so as to add to, or subtract from, or vary or qualify the written contract. The Deputy Master said that an exception to that rule is that extrinsic evidence might be admitted to identify the subject matter when there is doubt as to what the subject matter in fact was.

He then referred to the evidence which he had heard as to the appearance of the property as it would appear to someone inspecting it. He said this:

"The house stands in a garden. There is a road in front of the house and at the side and the garage stands at or near the back end of the garden and opens on to the road at the side on the left of the garage as you view it from the house. The garage, as appears also from the filed plans, adjoins the site of the house and garden the whole way along its length and as well as the main doors opening on to the road there is a side door opening straight into the garden. The garage clearly was designed to, and does, go with the house. It would not be obvious to a prospective purchaser inspecting it that it was in some way under a separate title even though there is a flat above the garage that does not belong. A person inspecting it would regard the garage as belonging to the house."

The Deputy Master found that some assistance might be obtained from the GA particulars which show that 9, Graffham Close was described as including a garage. The Deputy Master wrongly said that the particulars had never been issued publicly. Mrs Rogers' evidence was that they had been issued by GA. The Deputy Master therefore held that the garage was included in the description in the option agreement of the property comprehended by that agreement.

The Deputy Master went on to hold that the option agreement was authentic and valid as a contractual document. The contract arising from the exercise of the option was an open contract with various terms to be implied. He held that the option was validly exercised and that that gave rise to an enforceable contract with which the defendants had not yet complied. He considered whether damages would be an adequate remedy but held that they would not, and he found no other factors which would disentitle the plaintiffs to the remedy of specific performance. He held, in addition, that the plaintiffs were entitled to damages for breach of contract but did not say when the breach occurred. He rejected the claim for aggravated damages but ordered an inquiry as to damages.

It is unfortunate that neither side was represented by counsel, as the Deputy Master did not receive as much assistance as the case in my view warranted. Far too much attention was paid, for example, in the oral evidence to matters which were irrelevant. However, we have had the advantage on this appeal of having counsel appearing for both sides.

Mr. Holbech appears for the defendants and Mr. Holmes-Milner for the respondents. Mr. Holbech contends that the Deputy Master was wrong in law to admit extrinsic evidence as to the meaning of "the property known as 9, Graffham Close". He says that the Deputy Master should have treated the reference to the title number as a falsa demonstratio or false description, and applied the maxim falsa demonstratio non nocet cum de corpore constat, a false description does not vitiate when there is no doubt what subject matter is meant. He says that the essence of the maxim is that when the words of description apply in part correctly and in part incorrectly to some subject matter, the incorrect part will be rejected and the correct part read as if it stood alone. He referred us to the remarks of Alderson B in Morrell v Fisher (1849) Exch 591 at p. 604, concerning the maxim:

"that if there be an adequate and sufficient description, with convenient certainty of what was meant to pass, a subsequent erroneous addition will not vitiate it. The characteristic of cases within the rule is that the description, so far as it is false, applies to no subject at all; and so far as it is true, applies to one only."

That was a case where a devise of "all my leasehold farm-house, homestead, lands, and tenements at Headington, containing about 170 acres, held under Magdalen College, Oxford, and now in the occupation of Thomas Burrows" was construed as excluding two parcels of land not occupied by Thomas Burrows at Headington, the words relating to the acreage being rejected as a false description. Mr. Holbech referred us also to a number of other authorities, including Re Bright-Smith (1886) 31 Ch D 314, where Chitty J felt able to construe the devise of "my freehold farm and land situate at Edgware and now in the occupation of James Bray" as including copy holds which were part of his farm and land situate at Edgware and in the occupation of James Bray, even though there were also freeholds which undoubtedly were included in the description given.

What the court does in each case, when there are words which are or may be inapposite, is to decide which is the governing description and to reject other words as inessential or a false description. I will not go through all the cases cited to us as I do not find any of them to be on all fours with the present case.

Mr. Holbech points to those parts of the option agreement which, he says, limit the subject matter of the agreement to the house and do not apply to the garage, that is to say, that the property was expressed to be freehold, to be conveyed for an estate in fee simple and was known as No. 9, Graffham Close. He says that the incorrect title number falls to be ignored. That is not in doubt. He argues that if the term of the option agreement clearly defines the land or interest conveyed, excluding the incorrect title number, evidence of physical factors is not admissible, nor is evidence of the sales particulars in the absence of any finding that those particulars were ever advertised or handed to the plaintiffs.

Mr. Holmes-Milner accepts, as he must, that extrinsic evidence is not admissible to vary or contradict a description which is clear or unambiguous, or to make a description where there is none. But he argues that extrinsic evidence is admissible as an aid to the construction of an unclear description, and he prays in aid what is said in Lewinson, The Interpretation of Contracts, 2nd Edition (1997), where it is said that as a general rule extrinsic evidence is admissible to identify the subject matter of the conveyance (see paragraph 10.03). The court seeks to arrive at the true meaning of the parties upon a fair consideration of the language used. He points out that the common intention of the parties is construed objectively. He relies on what was said in this court in Targett and Targett v Ferguson and Diver (1996) 72 P & CR 114 (per Sir John Balcombe), to the effect that the objective test to be satisfied is, what would the reasonable layman think he was buying? He said that the court can have regard to the facts of which both parties were aware. He submitted that, on the facts of this case, the Deputy Master was right to conclude that the subject matter of the agreement included the garage.

The dispute between counsel is not as to the principles which are applicable, but as to the application of those principles to the facts. To my mind, the primary description of the subject matter of the option agreement is clear. It is "the property known as 9 Graffham Close". It is common ground that the false title number given by Mr. Rogers falls to be ignored. It is true that the agreement shows that both parties thought that what was to be conveyed was a freehold property, and so that it would be purchased as an estate in fee simple. But I do not read the references to the freehold and to an estate in fee simple as part of the primary description. In my judgment, when a property, the subject matter of a conveyancing document, is described as "the property known as....", it is permissible, indeed inevitable, that recourse will be had to extrinsic evidence to identify the property so known. In Spall v Owen (1981) 44 P & CR 36 at p. 43, in which there was a description of a property as "the property known as plot number 1", I said that such a description cried aloud for evidence of the surrounding circumstances. That dictum was quoted by this court in the Targett case with approval.

In my judgment, it was permissible for the Deputy Master to have regard to the appearance of the property in determining what property was known as 9, Graffham Close. I have already quoted what the Deputy Master said about that appearance. Mr. Holbech submitted that the appearance of the property on the ground did not support the Deputy Master's view that the garage was plainly designed to and did go with the house. He pointed to the fact that the garage had an electricity supply separate from that for the house, and he said that the garage could have been sold separately from the house. No doubt it could, but even Mrs Rogers accepted that the door from the garage to the garden would have to be taken out and bricked up before such sale. In other words, the garage at the relevant time was not so separate from the house and garden that it did not satisfy the description given to it by the Deputy Master. Mrs Rogers also accepted that all the houses on the estate had garages, though in some cases (though not this case) there was no immediate access from the garage to the garden or the house with which it went. Mrs Freeguard's evidence was that Mrs Rogers showed her round the garage and that although it contained possessions of the defendants, the defendants knew that the plaintiffs would also be using the garage to put boxes in. This, they explained, was because the defendants asked for a locked room inside the house in which to keep personal possessions of their own. It was common ground that this room was included in the tenancy agreement, even though there was no express term relating to the user of that room in the tenancy agreement. Mrs Freeguard's evidence on the garage was not challenged by the defendants' solicitor in cross-examination. Further, Mrs Rogers' own evidence was that the plaintiffs were given the key to the garage, although it is right to add that Mrs Rogers said that this was simply to enable the plaintiffs to start the defendants' car for them, the defendants' car being left either in the garage or, more likely, outside the garage. There is nothing to indicate that the garage was excluded from, and I take it to have been included in, the tenancy agreement, although the Deputy Master did not make any finding about that.

In my judgment, the Deputy Master was able to look at the GA particulars when considering what property was known as 9, Graffham Close. Mr. Freeguard in his affidavit said that the defendants supplied to the plaintiffs a copy of the GA particulars, and Mrs Freeguard agreed. Mr. Freeguard was not cross-examined on this. Mrs Freeguard was cross-examined about this matter. She said in her evidence that the defendants had shown the particulars to the plaintiffs. The significance of the particulars is that they indicate that the defendants themselves, through their agent to whom they had given instructions and who issued these particulars publicly, treated the garage as part of the property which they were selling as freehold property under the description 9, Graffham Close. There is no doubt that the plaintiffs did have those particulars, and there is no evidence to contradict their statement that they had the particulars at the relevant time. The Deputy Master did not make a finding that the defendants had handed over the particulars to the plaintiffs, but he was wrong, as I have already indicated, to suggest that the particulars were only a draft and had not been issued. It is plain that these particulars were available to any purchaser in the months between July and October 1995 when the option agreement came into being. Those particulars are evidence of how the defendants themselves then viewed the garage in relation to the house, and it is apparent that the plaintiffs had precisely the same view. There is no evidence whatever that the defendants, at the time of the option agreement, had in mind that the garage was held only under a leasehold title, still less that they had drawn that fact to the attention of the plaintiffs.

In these circumstances, in my judgment, it was open to the Deputy Master, on the material available before him, to reach the conclusion that the property known as 9, Graffham Close did include the garage as well as the house itself. I therefore conclude, despite Mr. Holbech's valiant attempts to sustain the appeal on this point, that the Deputy Master's decision cannot be impugned.

Mr. Holbech then challenged that part of the order made by the Deputy Master which directed an inquiry as to damages for breach of contract. Mr. Holbech pointed out that the Deputy Master had said nothing about when the defendants became in breach of contract. The Deputy Master simply assumed that they were in breach. Further, Mr. Holbech has drawn attention to the fact that the plaintiffs themselves were not willing to complete except on the basis that chattels, such as carpets, were included in the contract for sale. They only abandoned that claim on the afternoon of the day on which the Deputy Master gave judgment. In those circumstances, he submitted, no inquiry as to damages should have been ordered. Mr. Holmes-Milner submitted that the inquiry should be allowed to go ahead and the Master left to determine what loss resulted. That presupposes that there was a breach of contract giving rise to damages which founded the order for an inquiry.

In my judgment, the Deputy Master should not have made the order unless he had reached the conclusion both that there was such a breach and that damages had resulted from the breach. In this case, there being no date fixed for completion and the contract created by the exercise of the option being an open contract, completion should have occurred within a reasonable time of the contract being concluded. No doubt a reasonable time did elapse before 26th June 1997, but it is clear that the reason why completion never took place was because each side was insisting, incorrectly, on rights which did not belong to them. The plaintiffs were saying that there could be no completion without the chattels being included. The defendants were denying any contract at all, and, if there was such a contract, they were insisting that it should exclude the garage. Normally where there is an open contract a notice to complete will be served, and on the failure to comply with that notice, an allegation will be made of repudiation and usually a claim will be made for damages which have resulted. In this case the notice to complete served by each side was invalid. I do not say that unless there is a notice to complete there can be no damages, but in the unusual circumstances of the present case it has not been shown to my satisfaction that the plaintiffs have suffered any damage as a result of the defendants' breach of contract through failing to complete. The plaintiffs, it is clear, would not have completed without the chattels and they maintained their position up until the day of judgment. Indeed, it is apparent from the correspondence that when the parties were close to completion the plaintiffs produced another stipulation, holding out for the retention of part of the purchase money because of the counterclaim brought in the county court proceedings against the defendants. In these circumstances it would seem to me impossible to say that the defendants have, through not completing within a reasonable time, caused any damage to the plaintiffs, because before the day of judgment the plaintiffs themselves would not have been prepared to complete on the basis which is now established to be the correct basis in law.

I therefore conclude that no inquiry as to damages should have been ordered. I would therefore allow the appeal to the limited extent of discharging that part of the Deputy Master's order which ordered the inquiry as to damages.

LORD JUSTICE THORPE: I agree.

LORD JUSTICE WALLER: I also agree.

Order: Appeal allowed to limited extent of discharging that part of Deputy Master's order which ordered the inquiry as to damages; order for costs below to stand; respondents to have three-quarters of the costs of the appeal, not to be enforced without leave of the court; legal aid taxation.

(Order not part of the judgment of the court)