Scottish Court of Session Decisions

LORD ROSS'S OPINION.—In this action the pursuers seek declarator that they have validly exercised an option to purchase three acres of ground at Kirksheaf Farm, Tain, declarator that the first-named defender is bound to give effect to the exercise of the option and in particular is bound to make, execute and deliver to the pursuers a valid disposition of the said three acres, and a decree ordaining the first-named defender to make, execute and deliver to the pursuers such a disposition in exchange for the agreed price. There are further conclusions dealing with alternative remedies and expenses.

It appears from the averments that the first-named defender is the executrix-nominate of the late Mrs Agnes Ballantyne Hunter or Denoon, who was the owner of Kirksheaf Farm, Tain. It is admitted that Kirksheaf Farm includes a field marked No. 1240 on the Ordnance Survey sheet. In or about 1964 following on missives this field was disponed by the first-named pursuer to the said Mrs Agnes Ballantyne Hunter or Denoon. In terms of the missives an option was conferred on the first-named pursuer and his successors in the ownership of the fields Nos. 1242 and 1219 to purchase an area of 3 acres forming part of field No. 1240. The option was for ten years and one year's notice was required.

Prior to the hearing on procedure roll, the parties lodged a joint minute admitting inter alia the three letters constituting the missives and dispensing with probation of these three documents. It is admitted in the pleadings, however, that the condition in the missives conferring the option was subsequently incorporated in a Minute of Agreement between the parties dated 12th and 22nd January 1965. A copy of the Minute of Agreement was lodged in process during the hearing, and parties appeared willing that I should look at it. The Minute of Agreement was not, however, included in the Joint Minute and probation thereof was not renounced. The relevant portion of the Minute of Agreement is, however, set out in the pleadings, and it was ultimately agreed at the hearing that when considering the Minute of Agreement I should confine my attention to these averments. As I understand it, it was also agreed that the Minute of Agreement superseded the missives so far as the option was concerned, and that the option which the pursuers claim to have validly exercised is the option created and contained in the Minute of Agreement. In the pleadings it is averred that in the Minute of Agreement the said Mrs Agnes Ballantyne Hunter or Denoon was referred to as "the First Party" and the pursuer was referred to as "the Second Party," but in the heading of the Minute of Agreement it is made plain that it is the first-named pursuer and his successors in the ownership of the remainder of the lands of Mayfield, Tain who are referred to as "the Second Party." The party entitled to the option is thus the same under both the missives and the Minute of Agreement. The portion of the Minute of Agreement set out in the pleadings is as follows:

"Firstthe First Party (the said Mrs Agnes Ballantyne Hunter or Denoon) agrees to grant and hereby grants to the Second Party (the first-named pursuer) and the Second Party agrees to accept and hereby accepts from the First Party an option to purchase from the First Party a piece of ground extending to 3 acres or thereby Imperial Measure forming the north-west corner of field or enclosure No. 1240 of the Ordnance Survey Sheet XL1 4 for the County of Ross and Cromarty and bounded on the north-west and south-west by the fields of enclosures Nos. 1244 and 1243 of the said Ordnance Survey Sheet and situated in the Parish of Tain and County of Ross and Cromarty; Second the said option shall exist for a period of 10 years from the first day of December 1964 being the date of entry under the said missives, and shall be exercisable by the First Party (sic) giving to the Second Party (sic) 1 year's notice in writing of his intention to exercise the same; Third—in the event of the Second Party exercising the said option he shall pay to the First Party a price at the rate of One hundred and twenty pounds sterling per acre, and in addition he shall pay to the First Party the value of the crop, grass and unexhausted manures on the ground affected …; Fourth—on payment of the price and valuations the First Party shall grant to the Second Party a disposition of the ground so acquired."

(It was agreed that in Clause Second "First Party" should read "Second Party" and vice versa.)'

In their pleadings the pursuers proceed to aver that they have exercised the option. In article III of the Condescendence they aver "By letter dated 6th August 1973, the pursuers' agents gave notice of exercise of the said option to the agents for the said Mrs Agnes Ballantyne Hunter or Denoon. By letter dated 7th August 1973, the agents for the said Mrs Agnes Ballantyne Hunter or Denoon acknowledged receipt of the said letter. Copies of the said letters are produced and held as repeated herein brevitatis causa. The said exercise was timeous in terms of the said option." In the Answers the two letters are merely referred to for their terms, but in the Joint Minute referred to above, the letters are admitted, and probation of the documents is dispensed with. It is also agreed in the Joint Minute that the letter of 6th August 1973 (No. 12 of Process) is not probative.

In No. 12 of Process, the pursuers' agent after explaining the position regarding the ownership of fields Nos. 1219 and 1242, stated—"As Agents for Mr E. B. Stone and for Highland Fine Houses Limited, we therefore hereby give notice that our clients wish to exercise the option contained in clause 7 of the letter to you dated 14th November 1964 from Messrs McKenzie & Cormack to purchase about three acres forming the north-west corner of field No. 1240, together with certain rights of access and servitude rights, at a price of £120 an acre. We shall be in touch with you again about the date of entry and about the necessary conveyancing documents. Meantime would you please acknowledge receipt of this letter, and confirm that you regard it as a valid notice."

In their reply of 7th August 1973 (No. 13 of Process) the agents for the said Mrs Agnes Ballantyne Hunter or Denoon merely acknowledged receipt of No. 12 of Process, and I observe quantum valeat that they did not expressly confirm that they regarded No. 12 as a valid notice. It will also be observed that No. 12 of Process did not provide for a date of entry to the subjects in question.

It is a matter of admission between the parties that no further action was taken by the pursuers in furtherance of the exercise of the option until 9th August 1977. It is averred by the pursuers, however, by way of explanation that the said Mrs Agnes Ballantyne Hunter or Denoon died on 14th November 1974 and that the first-named defender was not confirmed as her executrix until 17th May 1977.

Both parties have pleas to the relevancy and both parties agree that the issues between them fell to be determined now as matters of law, and that there was no need for any enquiry into the facts. The defenders contended that the action was irrelevant and should be dismissed whereas the pursuers submitted that the defences were irrelevant and should be repelled and that decree should be pronounced in terms of the first three conclusions of the Summons as amended. (I allowed the first conclusion to be amended since it contained a reference to the missives instead of the Minute of Agreement which parties were agreed had superseded the missives so far as the option was concerned.)

In support of his motion for dismissal, Mr Black for the defenders advanced two principal submissions. In the first place, he contended that on a proper interpretation of the provisions of the option, the letter No. 12 of Process was not an exercise of the option, i.e. that No. 12 did not comply with the conditions set out for the exercise of the option. In the second place, he contended that even if No. 12 could be a valid exercise of the option, the result would not give rise to an enforceable obligation for the sale of the three acres, i.e. that one did not have all the essentials for an enforceable obligation for the sale of heritable property.

In support of his first submission Mr Black examined the relevant provisions of the Minute of Agreement, and contended that the Minute of Agreement envisaged exercise of the option as being a two-state process; there would firstly be the giving of one year's notice of an intention to exercise the option, and secondly there would be the actual exercise of the option. He maintained that the giving of one year's notice was a condition precedent for the exercise of the option, and that the second stage or step was clearly implied.

As Mr Black conceded, the point which he raises in his first argument is one of interpretation. Having considered his submission, I feel that the interpretation which he seeks to place upon the Minute of Agreement is a highly artificial one which fails to give proper effect to the words used. There is no express provision for two stages in the exercise of the option and I see no justification for implying that there should be two stages. One is here seeking to ascertain the intention of the parties, and if two stages had been intended, I would have expected that to have been clearly expressed in the Minute of Agreement. The language of Clause Second is not the language which I would have expected to have been used if the giving of notice was to have been a condition precedent for the subsequent exercise of the option, and indeed the language used, in my opinion, is inconsistent with such an interpretation. The Clause provides inter alia "The said option … shall be exercisable by the First Party (sic) giving to the Second Party (sic) one year's notice in writing of his intention to exercise the same." I read these words as spelling out comprehensively what the Second Party requires to do in order to exercise the option, and it is not merely providing for a condition precedent. The clause is providing that the option shall be capable of being exercised by the First Party giving due notice and no more and no less. There is no indication that any act of the Second Party other than giving notice of intention is required for the exercise of the option.

I accept that the notice in writing is to be "of his intention to exercise the same," but when such notice is given, I am satisfied that that constitutes exercise of the option in terms of the contract. In terms of the agreement between the parties timeous intimation of an intention to exercise the option was not merely a sine qua nonfor the exercise of the option but was the prescribed method for the exercise of the option. I find some support for this conclusion in the judgment of Lord Keith in Sichi v. Biagi 1946 S.N. 66 and in the judgment of Lord Stott in the unreported case of Scott v. Morrison (17th November 1978) In these circumstances, I reject Mr Black's first submission.

In support of his second submission, Mr Black admitted that the crucial question was to determine the status of an option. He contended that there were two possible classifications here—(1) the option might be regarded as a unilateral obligation to convey property subject to the pursuers fulfilling the conditions set out in the option or (2) the option might be regarded as an offer to sell which was open to acceptance within ten years and which required acceptance.

The importance of determining which classification is correct lies in the fact that if the option is a unilateral obligation subject to conditions, then the intimation of the intention to exercise the option need not be probative. On the other hand, if the option is an offer which requires acceptance, then Mr Black contended that the acceptance would require to be in a probative writing since it would fall within the category of obligationes litteris. In support of his contention that the option was an offer requiring a formal acceptance, Mr Black founded strongly on the case of Hamilton v. Lochrane (1899) 1 F. 478, and in particular on the opinion of Lord Trayner. It is true that in that case Lord Trayner expressed the view that the agreement between the parties purporting to confer an option on one party to purchase a house amounted "… in effect, to nothing more than this—an offer on the part of the pursuer to sell the house to the defender, binding on the pursuer for a certain time, within which the defender had the option to accept or decline the offer." The case can readily be distinguished from the present case. In Hamilton v. Lochrane, the memorandum of agreement was essentially a contract for the building of a house by the First Party with the added stipulation that when a stage of completion had been reached the First Party should intimate this to the Second Party who was then to have the option of purchasing down to a certain date. In that situation one can understand how the agreement came to be regarded as an offer on the part of the pursuer to sell, which offer required to be accepted. The intimation by the builder that the house was complete together with the conferring of an option can readily be understood as an offer by the builder to sell which required to be accepted or declined, but I do not understand Lord Trayner to be saying that in all cases an option fell to be regarded as an offer to sell.

In my opinion, the better view is expressed by Lord Keith in Sichi v. Biagi, supra. "This in my opinion, is a case where on a sound construction of the document there arises a promise, as distinct from an offer, a distinction discussed in Gloag on Contract at pages 24 and 25." Lord Keith goes on to express the view that the exercise of the option does not require any probative acceptance or writing. I would also observe that although Lord Trayner in Hamilton v. Lochrane refers to the need for a writing, he does not stipulate a probative writing. Again I would refer to Lord Stott's opinion in Scott v. Morrison, supra.

No doubt an option to purchase heritage is an obligation relating to heritage and as such must be created by a writing that is probative. But when it comes to exercising an option which has been validly created by a probative writing, I do not see why a further probative writing should be required. It is contracts relating to heritage which require a probative writ, and a document exercising an option is not such a contract. I agree with Mr Drummond Young, who appeared for the pursuers, that No. 12 of Process merely gives rise to or brings into operation rights which have already been constituted in the probative Minute of Agreement. I respectfully agree with the opinion of Lord Keith in Sichi v. Biagi, supra, where he stated "It is said, however, for the defender, that the exercise of the option calls for a probative writ and none, it is said, is averred … I am of opinion, however, that no probative acceptance is necessary. If the defender is under a binding obligation to sell the subjects to the pursuer at the latter's option all that is necessary, in my opinion, is that the defender should be called on to carry out his obligation and that the pursuer should tender the price in return for a conveyance containing the usual and necessary clauses … This action is in itself sufficient indication of an intention to exercise the option apart from any prior communings of the parties." I observe in Scott v. Morrison, supra that Lord Stott also agreed with this dictum of Lord Keith.

In his Principles of Scottish Private Law (2nd ed.) vol. II, p. 1472, Professor Walker, having observed that a contract for the sale of heritage must be constituted in a probative writing, states "The creation, and the exercise, of an option to purchase heritage must be similarly created and exercised." Although I agree that the creation of an option to purchase heritage requires a probative writing, I do not agree that the exercise of such an option (i.e. a validly created option) also requires a probative writing. I therefore reject this branch of Mr Black's argument.

In support of his second submission, Mr Black also contended that No. 12 of Process did not contain the essentials of an obligation for the sale of heritage since it contained no date of entry. This argument, of course, proceeded upon the basis that No. 12 of Process should be regarded as an acceptance of an offer contained in the Minute of Agreement. I have already rejected this argument.

In any event, however, I do not accept Mr Black's proposition, that a date of entry is an essential feature of a valid contract for the sale of heritage. Mr Black very properly pointed out that a contrary view had been expressed by Lord Stott in Sloans Dairies Ltd. v. Glasgow Corporation 1977 SC 223, but I agree that that case can readily be distinguished in that there was a provision in the missives providing that the date of entry was to be a date agreed between the parties.

In support of his submission, Mr Black founded on Freeman v. Maxwell 1928 S.C. 682, Stobo Ltd. v. Morrisons (Gowns) Ltd . 1949 SC 184 and Law v. Thomson 1978 S.C. 343.

In Freeman v. Maxwell, Lord Justice-Clerk Alness stated at page 685 "All material matters relating to the sale—e.g. the subjects, the parties, the price and the date of entry—were settled," and on page 686, Lord Anderson said "the missives are duly stamped and are probative, being ‘adopted as holograph.’ They embody all the essentials of a contract to sell heritage. The purchaser and seller are named, the subjects are described, the price is fixed, and the date of entry is specified. The essentials of a contract of sale are thus exhaustively set forth." In Stobo v. Morrisons (Gowns) Ltd .Lord Keith stated at page 194 "The offer contains all the essentials necessary, if accepted, to instruct a sale of heritable property. The subjects are identified. The price and term are stated …" I accept that these dicta afford some support for the defender, although it must be observed that in these cases the date of entry having been stated, the Court did not require to consider what the position would have been if the relevant missives had been silent as to entry. The dicta relied upon are clearly obiter.

In Law v. Thomson, Lord Maxwell stated "In my opinion, normally at least, there must be an agreed date of entry before there can be a binding contract. An agreement for a sale ‘sometime’ is not, in my opinion, an agreement which the law would normally recognise." Lord Maxwell did state that there might be exceptions to the rule as stated by him, and he expressly stated that he was not deciding a broad question of principle. With all respect to Lord Maxwell, I do not agree that normally there must be an agreed date of entry before there can be a binding contract. It appears from the report in Law v. Thomson that all the relevant authorities were not cited to Lord Maxwell. I refer particularly to Secretary of State v. Ravenstone Securities Ltd . 1976 S.C. 171. In that case the Lord President observed "In spite of the obiter dicta in the case of Freeman and a statement to the same effect by Lord Keith obiter, in Stobo v. Morrisons (Gowns) Ltd . 1949 SC 184 at 194 there is a considerable body of authority for the view that a date of entry is not one of the essentials of a contract for the sale of land [vide Bell's Lectures on Conveyancing (3rd ed.), vol. 2, p. 696; the article by Burns in vol. 13 of the Encyclopaedia of the Law of Scotland para. 376; Smith v. Marshall 22 D. 1158]. I do not, however, require to resolve any doubt there may be upon the matter …" (p. 189). At pp. 196–7, Lord Cameron states inter alia "It is not essential, however, in my opinion that a precise date of entry should be matter of specific stipulation and agreement before it can be held that a contract for the sale of heritage has been completed. It may well be possible to infer from the correspondence produced agreement of parties on a date of entry. Clearly when the stage of settlement of the transaction is reached, at that point entry can be demanded by the purchaser and while as matter of practice this is a matter which ought to be dealt with specifically in the contract (cf. Burns: Conveyancing Practice, p. 162) it is not of such imperative necessity that absence of specific reference to a stipulated date of entry has the inevitable legal consequence that no completed contract of sale can be inferred from missives which are sufficient in other respects."

I respectfully agree with Lord Cameron and I therefore reject Mr Black's argument to the effect that the date of entry is one of the essentials of a contract for the sale of heritage.

Mr Black did recognise that in some cases the date of entry falls to be implied, and pointed out that in the present case the pursuers aver that it was an implied term of No. 12 of Process that entry would be taken within a reasonable time after the expiry of the one year's notice. He then referred to the delay which is averred in Answer 3 and maintained that this element of delay should be taken into account when construing the documents. I confess to finding it difficult to understand this submission. In my opinion, it must be taken to be implied that entry would fall to be taken within a reasonable time of the exercise of the option, and there are no relevant averments that that implied obligation was not performed.

Although the defenders have made averments about delay, there is no suggestion of mora, taciturnity and acquiescence and no plea-in-law to that effect. In these circumstances, I am of opinion that the defenders' averments on this matter are irrelevant. The present case concerns an option and in this connection I respectfully agree with Lord Keith in Sichi v. Biagi, supra, where he stated "The late Professor Gloag suggests that an option might have to be exercised within a reasonable time. I doubt whether mere delay would be enough without some circumstances from which abandonment or personal bar might be inferred." On the averments here there is no room for drawing any such inference.

In these circumstances, I am satisfied that the defenders' attack upon the relevancy of the action fails, and that no relevant defence has been put forward to the pursuers' action so far as the first three conclusions of the Summons are concerned. I shall accordingly sustain the seventh plea-in-law for the pursuers and shall repel the first, second and fourth pleas-in-law for the defenders; I shall further sustain the first and second pleas-in-law for the pursuers and shall grant decree in terms of the first conclusion (as amended), the second conclusion and the third conclusion of the Summons. Quoad ultraI shall continue the cause.