England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th October 2003

The Vice-Chancellor :

1. The Coventry Football Club (Rugby Union) ("the Club") was an unincorporated association. In 1920 it had acquired through trustees a plot of land comprising some 4.1 acres at Barker Butts Lane, Coventry ("the Ground") on which was its rugby football ground and a club house. In 1996 the Club sought to increase its income through corporate sponsorship of its matches. This was not enough and by 1998 it actively sought to sell the Ground. Between August 1996 and April 2002 a number of transactions concerning the Ground were carried out by the Club and others. The issue before me is which of the parties to these proceedings now has the better right to the Ground.

2. The Claimant, Butts Park Ventures (Coventry) Ltd ("Butts Park"), claims to be entitled to the freehold of the Ground by virtue of (i) the exercise of a right of pre-emption granted by the Club by an agreement dated 1st August 1996, (ii) an order of the High Court made on 7th September 1998 for the winding up of the Club and the appointment of liquidators with power to sell the property of the Club, (iii) the assignment in favour of Butts Park of the benefit of the right of pre-emption and (iv) a transfer dated 18th April 2002 made by the Club through such liquidators in its favour. It seeks registration of its title to the Ground free from any interest of the defendant, Bryant Homes Central Ltd ("Bryant"). Bryant claims to have a better right to the freehold of the Ground by virtue of a contract dated 15th April 1998 and made between the trustees of the Club and Bryant whereby subject to the conditions contained therein the trustees agreed to sell the Ground to Bryant for £1.2m or the open market value of the Ground with the benefit of detailed planning permission. Each attacks the title of the other. Bryant claims that the transfer of the Ground to Butts Park was both ineffective and otherwise than in the exercise of the right of pre-emption. Butts Park contends that the Bryant Agreement is moribund and devoid of any further legal effect. To explain these and other points on which the parties rely it is necessary to go into the conveyancing history in some detail.

3. The Ground was acquired by trustees for the Club in 1920. There is no dispute as to this root of title. Nor is it disputed that by 1996 such title had been transmitted to the trustees assuming to act in 1996, namely Messrs G.S.Sugrue, M.A.Price and P.B.Jackson.

4. The evidence before me includes a letter dated 1st August 1996 whereby Mr Sugrue, claiming to be duly authorised for and on behalf of the Club, wrote to Leander Bromley Ltd ("Leander") to record the terms of an agreement reached between the Club and Leander relating to corporate sponsorship and pre-emptive rights over the property of the Club. Leander agreed to use its reasonable endeavours to generate new corporate sponsorship for the Club on the terms set out in Paragraph 1. In paragraph 2 the Club purported to grant to Leander a right of pre-emption in respect of the Ground. It provided that [letter references inserted by me]

[a] "In consideration of what you are agreeing to do for us the Club hereby grants you the right to purchase the unencumbered freehold of the Property [defined as the Ground] if the Club shall decide to sell or otherwise dispose of the Property during the Pre-Emption Period [defined as five years from the date of the letter or the later expiry of a notice served under paragraph 4]. This pre-emption right shall take effect immediately."

[b] "The Club shall give written notice ("the Notice of Proposed Disposal") to you of its decision to sell or otherwise dispose of the Property which shall specify the price at which the Club intends to sell or otherwise dispose of the Property and whether it wishes to sell or otherwise dispose of the whole of the Property or a specific part ("the Specified Part")."

[c] "The right of pre-emption shall be exercisable by notice in writing to the Club signed by you served within two months of receipt by you of the Notice of Proposed Disposal and completion of the sale shall be three months after the exercise of the right of pre-emption."

[d] The Club shall sell the property or the specified part (as the case may be) with full title guarantee with vacant possession on completion and title shall be deduced commencing with a good root of title not less than 15 years old at the relevant time...."

[e] "If you do not exercise the right of pre-emption the Club may at any time during the six months from the date of the Notice of Proposed Disposal sell the Property or the Specified Part (as the case may be) at a price which is not less than the price specified in the Notice of Proposed Disposal......The Club will give you a further Notice of Proposed Disposal in relation to any proposed disposal during the said six month period at a price less than the price specified in the earlier Notice of Proposed Disposal or after the six month period at any price."

Paragraph 4 provided for the continuation of the agreement for five years and thereafter until terminated by either party giving six months notice. Paragraph 5 permitted Leander to assign the benefit of the agreement to any holding company or subsidiary of such holding company.

5. The letter concluded with a request to Leander "Please sign and return the enclosed copy of this letter to us to confirm your agreement to its terms." The original letter and the original copy have not been found. Two versions have been put before me. Both are photocopies. One produced by Leander bears only the signature of its director. The other produced by the Club bears both the signature of the director of Leander and also the signature of Mr Sugrue "duly authorised for and on behalf of the Club".

6. It is common ground that, contrary to what its contents would lead one to expect, the letter was prepared by Leander on the Club's headed paper and signed by a director of Leander. Both the original and the copy enclosed with it were then sent by Leander to the Club for signature. It is clear that Mr Sugrue signed at least one of the documents so sent but it is not clear which, nor is it clear that the document he did sign bore an original, as opposed to a photocopy, signature of the director of Leander. Bryant, with a view to the provisions of s.2 Law of Property (Miscellaneous Provisions) Act 1989, invites me to infer that neither the original letter nor the original copy contained two original signatures. In this event, Bryant contends, the terms of s.2(3) would not be satisfied and the agreement would be ineffective as a contract for the sale or other disposition of an interest in land.

7. It is also relevant to the Leander Pre-Emption Right as I shall call it that on 7th August 1996 all three trustees signed a further letter on the Club's headed paper addressed to Leander, but not signed by anyone on its behalf. They referred to the Sponsorship Agreement dated 1st August 1996 and continued

"The signatories to this letter are the trustees in whom all the land belonging to Coventry Football Club is now vested.

In consideration of what [Leander] has agreed to do for the Club in the Sponsorship Agreement, we hereby agree to the rights of pre-emption set out in the Sponsorship Agreement being granted to [Leander]."

What appear to be the signatures of each of the three trustees is witnessed by another.

8. Thus the first issue for determination is what inference I should draw as to the signatures to the Leander Pre-emption Agreement. Did Mr Sugrue add his signature to a piece of paper containing only a photocopy signature of the director of Leander or to one containing the original signature of that director? If he signed a piece of paper containing a photocopy signature only would the provisions of s.2(3) be satisfied anyway?

9. I have no hesitation in inferring that the paper signed by Mr Sugrue already bore the original signature of the director of Leander. I draw this inference for essentially two reasons. First, it is common ground that the letter was prepared by Leander, signed by its director and then, with a copy thereof, sent to the Club. I cannot see the purpose of Leander sending to the Club an original but wholly unsigned letter and a copy for the purpose of counter-signature bearing only a photocopy of the signature of the Leander's director. Common sense and ordinary business usage indicate the probability that both documents contained an original signature of the director even if Leander only retained a photocopy for its own records. Second, the probability must be that Mr Sugrue signed both documents and the copy which was returned to Leander has been lost. But if he only signed and retained one of them, the overwhelming probability must be that he signed and retained that which bore the signature of the director as opposed to that which bore only a photocopy of his signature. This would be consistent with the fact that the only version with both signatures was in the possession of the Club. In other words it would be most unlikely that either Leander would only send photocopies or that Mr Sugrue would chose to sign the version with a photocopy signature in preference to that with an original signature. Were it otherwise it would be necessary to explain why the point now relied on was not spotted before.

10. It follows that the provisions of s.2 Law of Property (Miscellaneous Provisions) Act 1989 were satisfied even if, as was disputed, the Leander Pre-emption Agreement came within subsection (1) and a photocopy signature would not comply with the requirements of subsection (3). Counsel for Bryant also contended that the Leander Pre-emption Agreement was not binding on the Club because Mr Sugrue did not purport to sign it as trustee or on behalf of his co-trustees and did not have their authority. This point is unmaintainable in the light of the confirmatory letter dated 7th August 1996. For all these reasons I conclude that the Leander Pre-emption Agreement was valid when signed and binding on the Club and its trustees.

11. On 7th April 1998 the Club by Mr Sugrue its chairman and trustee gave notice to Leander pursuant to the Leander Pre-emption Agreement that it intended to sell the whole of the Ground. The notice continued:

"2. The Club intends to sell the land at a price which is the greater of:-

2.1 One million two hundred thousand pounds (£1,200,000) or

2.2 the open market value of the land with the benefit of planning permission for residential or commercial development,

in either case exclusive of VAT.

3. The minimum price at which the Club is prepared to sell the land to you is one million two hundred thousand pounds (£1,200,000) exclusive of VAT."

Mr Sugrue no doubt had in mind the agreement made eight days later with Bryant. Leander did not respond to that notice within the two months permitted by clause [c] of the Leander Agreement or at all.

12. By an agreement dated 15th April 1998 and made between Messrs Jackson, Sugrue and Price as the trustees of the Club (1) and Bryant (2) ("the Bryant Agreement") the Club agreed to sell the Ground to Bryant on the terms and conditions therein contained. They are long and detailed but may be adequately summarised as follows. Clause 1 contained a number of definitions including that of "the Price". This was the open market value of the Ground to be calculated at the valuation date assuming a satisfactory planning permission, defined in clause 1 as a planning permission and any attendant planning obligation which is satisfactory to Bryant in its absolute discretion, or £1.2m whichever was the greater. Clause 2, headed "Conditions Precedent" provided that

"The sale and purchase of [the Ground] is conditional upon the grant of Satisfactory Planning Permission occurring prior to the Termination Date and upon the non-exercise of the pre-emption rights contained in the Leander Agreement."

Clause 3 dealt with obtaining a satisfactory planning permission, clause 4 with the determination of the price by an expert if not agreed with completion 105 days after notification by Bryant to the Club of the grant of satisfactory planning permission. Assignment of the benefit of the agreement was permissible with the consent of the other party or in the case of Bryant to another group company without consent. On the same day Bryant lodged a caution against first registration of title to the Ground on the basis that it was "interested in the land" as a purchaser pursuant to the Bryant Agreement.

 

13. The second issue which arises for my determination is whether, Leander not having responded to the notice dated 7th April 1998, the Bryant Agreement constituted a disposal of the Ground by the Club for the purpose of the Leander Pre-emption Agreement. If it did then the Leander Pre-emption Agreement was spent because the Club could not thereafter reach the decision required by clause [a] so as again to trigger the obligation to give notice of proposed disposal. If it did not then the Leander Pre-emption Agreement remained in force.

14. Counsel for Bryant contended that any binding contract for the sale of the Ground to a third party discharged the Leander Pre-emption Agreement. This was disputed by counsel for Butts Park. In addition he contended that the notice dated 7th April 1998 did not comply with the terms of the Leander Pre-emption Agreement with the consequence that it did not trigger the right of pre-emption anyway.

15. I can deal with the latter point quite shortly. If the notice did not comply with the Leander Pre-emption Agreement then the Club would have been in breach of contract and liable for any consequential loss. But that is quite separate from the question whether the Bryant Agreement was a disposal of the Ground to a third party so as to preclude any future obligation on the Club to give another notice of proposed disposal.

16. In relation to that point I am satisfied that the Bryant Agreement did not constitute such a disposal. The right of pre-emption arose in accordance with paragraph [a] in the event that "the Club shall decide to sell or otherwise dispose of the" Ground. It is clear from paragraph [e] that the obligation to serve a notice of proposed disposal could arise again if the original price was reduced or the disposal contemplated by the first notice was not completed. Thus the obligation undertaken by the Club in the Leander Pre-emption Agreement would not come to an end at the time of the contract for sale of the Ground to a third party, even if unconditional, but only when that sale was completed so that any further sale or other disposition by the Club was impossible. It follows that the Bryant Agreement could not discharge the obligations of the Club under the Leander Pre-emption Agreement unless and until all the conditions precedent were satisfied and it had been duly completed by a transfer. Accordingly in my view the Leander Pre-emption Agreement remained in force notwithstanding the conclusion of the Bryant Agreement.

17. On 7th September 1998 His Honour Judge Boggis QC, sitting as a deputy High Court judge of the Chancery Division, made an order that the Club "be wound up under the Court's general equitable jurisdiction". He appointed two partners or employees of Buchler Phillips "as joint liquidators" and conferred on them "the powers set out in Schedule 1 to this order for the purpose of acting as joint liquidators". Such powers closely follow those set out in Schedule 4 to the Insolvency Act 1986 and include in paragraphs 5 and 6 the power to sell any of the Club's property and to do all acts and execute in the name of the Club all deeds and other documents.

18. This order gives rise to the third issue for my determination. Counsel for Bryant contends that the judge had no jurisdiction to appoint joint liquidators nor to confer on them such powers as would authorise the subsequent transfer in favour of Butts Park executed by them on 18th April 2002. He contends that the order was ineffective for those purposes notwithstanding that it was an order of the High Court and has not been set aside. I do not agree. The judge did not purport to wind-up the Club under the Insolvency Act 1986. The jurisdiction he exercised is well recognised by and described in the many cases referred to in Halsbury's Laws of England 4th Ed Vol 6 (reprint) para.256. It is true that none of them refer in terms to the appointment of a liquidator but counsel for Bryant did not dispute that the Court can in the exercise of that jurisdiction appoint persons to carry out the functions of a liquidator in collecting in the assets of the unincorporated body and distributing them amongst the members in accordance with their rights. In that event the court can attach to those persons such name, description or label as it thinks fit. It follows that in my view the order made by Judge Boggis was within his jurisdiction and was valid and effective to confer on the named individuals the powers set out in the schedule to the order whether or not they were correctly described as liquidators.

19. On 26th October 2001 the Club acting by those individuals contracted to sell the Ground to Gallan Properties Ltd, seemingly an associate of Bryant, but subject to (i) Leander exercising its right of pre-emption and completing the consequential purchase (clause 3.8.4), (ii) completion of the Bryant Agreement, described as an option, (clause 3.9) and (iii) Gallan obtaining within five working days the consent of Bryant to the assignment to Gallan of the benefit of the Bryant Agreement. The Ground was to be sold subject to all outstanding charges for £150,000.

20. The Club recognised that, notwithstanding the existence of the Bryant Agreement, the Leander Pre-emption Agreement obliged it to give notice of that proposed disposal to Leander. Accordingly, on 8th November 2001 the Club by its liquidators gave notice to Leander of the proposed sale of the Ground for £150,000 subject to three legal charges, various licences and the Bryant Agreement. On 28th December 2001 Leander by its duly authorised director indorsed thereon:

"To: Coventry Football Club acting by its liquidators.

Leander Hotels Limited hereby exercises the right to purchase the [Ground] in accordance with clause 2 of [the Leander Pre-emption Agreement]."

It is common ground that that document complies with s.2 Law of Property (Miscellaneous Provisions) Act 1989.

21. By an assignment made on 28th December 2001, for the consideration therein mentioned, Leander Bromley Ltd assigned to Leander Hotels Ltd the benefit of the Leander Pre-emption Agreement, the notice of intended disposal dated 8th November 2001 and the benefit of the contract arising out of the same. As Leander Hotels Ltd was a company in the same group as Leander Bromley the assignment was permitted by clause 5 of the Leander Pre-emption Agreement. On the same day written notice of the assignment was given by both Leander Bromley Ltd and Leander Hotels Ltd to the Club. The sale of the Ground was completed by a transfer dated 15th April 2002 made by the Club acting by its liquidators to Leander Hotels Ltd. On 8th May 2002 Leander Hotels Ltd changed its name to Butts Park Ventures (Coventry) Ltd.

22. It follows from the transactions described in paragraphs 20 and 21 above, which are not challenged by Bryant, that the Leander Pre-emption Agreement was properly implemented by the sale to Butts Park and the latter obtained priority over the contract for sale to Gallan. The only remaining issue is whether it has priority over the Bryant Agreement also.

23. Had the Bryant Agreement been or become unconditional then it would have enjoyed priority over the later exercise of the Leander Pre-emption Agreement on the sale to Butts Park. But it was not and did not become unconditional. Whatever the position about planning permission, one of the conditions precedent set out in clause 2 of the Bryant Agreement is the "non-exercise of the pre-emption rights contained in the Leander Agreement". As they have now been fully and effectively exercised it follows that the condition precedent can never be performed, the Bryant Agreement can never become unconditional so that the rights of Bryant under that agreement can never obtain priority over those of Butts Park.

24. It may be that the Bryant Agreement has not been terminated but it is quite plain that it can never become unconditional either. Accordingly neither Bryant nor anyone claiming under Bryant can ever claim to be entitled to a present interest in the Ground by virtue of the Bryant Agreement. It follows that I should (i) order the caution against first registration lodged by Bryant on 15th April 1998 to be vacated, (ii) declare that Bryant has no subsisting interest in the Ground and (iii) entertain further argument in relation to the Legal Charge referred to the paragraph 4 of the Claim Form.