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OUTER HOUSE, COURT OF SESSION

[2009] CSOH 26

A800/06

OPINION OF LORD BRACADALE

in the cause

GEORGE AND ELIZABETH MITCHELL

Pursuers;

against

CAVERSHAM MANAGEMENT LIMITED

Defender:

________________

Act: Walker; McGrigors

Alt: Upton; Paull & Williamsons

26 February 2009

Introduction

[1] In this action the pursuers seek declarator that the contract for the purchase by the defender from the pursuers of certain subjects in Aberdeen has come to an end and the parties are accordingly both free from the obligations imposed by the contract. The pursuers are husband and wife. Mrs Mitchell did not give evidence and, indeed, she scarcely featured in the proof. There was, however, no suggestion that her position was in any way different from that of her husband. For convenience, when I refer to them individually, I shall do so by name, and otherwise refer to them as "the pursuers". I heard the proof over a number of days and was favoured with extensive and detailed written submissions for which I am grateful to counsel.

The contract

[2] The pursuers owned the Metro Hotel and other property in Market Street, Aberdeen. In 2005 they decided to sell part of the buildings comprising the properties above ground floor level at 15-19 and 21/23 Market Street ("the premises"). Mr Mitchell was told that a solicitor, Daniel Cohen, of Cohen & Co, Aberdeen, was someone who "could make things happen" and contacted him. Mr Cohen introduced Mr Mitchell to Mr Keane of the defender. The defender is a property development company. As it happened, Mr Keane owned the Douglas Hotel which was also in Market Street. Mr Keane was interested in converting the premises into a number of flats to sell on. He concluded that a significant profit could be made from the development. Mr Keane and Mr Mitchell met and in due course a price was agreed. Mr Cohen agreed to act for both parties. While this was within the rules of the Law Society of Scotland at the time, it was not, in retrospect, the wisest approach to carrying out this commercial transaction. On any view, as the months went by and difficulties emerged, it seems likely that both parties would have been better served by dealing at arms length through separate solicitors.

[3] By letter dated 27 February 2006 (production 6/1) the defender offered to purchase the premises for £360,000 and by letter of the same date (production 6/2) the pursuers accepted the offer. In terms of that offer and acceptance the purchaser undertook by 14 March 2006 to submit a planning application for conversion of the premises into flats. By a further exchange of letters (productions 6/3 and 7/16) it was agreed to extend the date for submission of the planning application to 14 April 2006. This much is common ground.

[4] The offer dated 27 February 2006 contained the following suspensive condition in clause 4 (a):

"The purchaser obtains planning permission/building warrants to convert the subjects into a minimum of eighteen residential units on reasonable terms of which he shall be the sole judge. He undertakes to submit the planning application by no later than 14 March 2006. In the event of his not obtaining planning permission by 30 June 2006, either party will be entitled to resile without penalty. In the event that the Local Authority have the application under consideration but have not made a decision, the purchaser will be permitted to extend this period by such time as it takes until the council have made their decision. The seller undertakes to cooperate with the application and not to object to the local authority."

In his evidence Mr Mitchell said that he agreed to the change from 14 March to 14 April. Mr Cohen had told him that things were taking a bit longer than was expected and that he told Mr Cohen just to speed it up as much as he could.

[5] Clause 2 was in the following terms:

"Entry and vacant possession shall be given within 45 days after the purification of the suspensive condition clause 4, or on such other date as the parties may mutually agree, when the price shall become payable and at least one key for all external locks will be delivered."

Thus, on the basis that planning permission would be obtained by 30 June 2006 completion could be expected in mid-August at the latest.

[6] In the event, the application for planning permission was not made until about 24 May 2006. The reason for this is not entirely clear. Mr Mitchell said that Mr Fitzgerald, the defender's architect, had told him that he was waiting for money from Mr Keane before he could complete the drawings. Mr Keane said that the architect's son had died. These different explanations are perhaps an earnest of the much more significant discrepancies in evidence which emerged in the course of the proof and which I endeavour to address. The matter was not canvassed with Mr Fitzgerald, who gave evidence. Mr Mitchell spoke to Mr Cohen and Mr Keane on a number of occasions about delay. He raised his concerns with them and asked if things could be speeded up.

The pursuers' primary case and the 21 June letter

[7] In their primary case the pursuers aver that the contract was varied so as to introduce a longstop date of 30 September 2006, after which either party could resile. This leads to a consideration of what came to be known as "the 21 June letter" (production 6/4). The evidence in relation to this letter was controversial. The document bears to be a letter dated 21 June 2006 sent from Cohen & Co to the pursuers on behalf of the defender offering to reopen the missives on a certain basis. According to Mr Mitchell the circumstances leading to Mr Cohen preparing this letter were that he had been talking to Mr Cohen and told him that he wanted the whole thing settled. Mr Mitchell said that he did receive the 21 June letter from Mr Cohen. The letter contained amendments to the missives in the following terms:

"1. With regard to clause 2 this will be amended that payment will be no later than 14 days after the purification of the amended suspensive clause and in any event the date of entry will be no later than 30 September 2006.

2. With regard to clause 4 the second sentence is deleted. The time for obtaining consent should be extended to 14 September 2006."

Mr Mitchell's evidence was that he understood from that letter that 30 September would be the last date for everything to be settled. Mr Cohen told him that he had spoken to Mr Keane. Mr Mitchell himself did not discuss the date of 30 September as a final date with Mr Keane. According to Mr Mitchell, Mr Cohen reckoned that timescale was what was required in order to get the planning permission and for everything to be dealt with. It was Mr Cohen who suggested the date 30 September. Mr Mitchell had said to Mr Cohen that he was getting "pissed off" and understood that he could walk away at the end of September. He himself had had a discussion with Mr Cohen a couple of days before the letter dated 21 June was issued. He said that he himself was content on the basis that the deal would definitely be settled by 30 September. He explained that 30 September was important because he had a VAT bill of over £100,000 to pay.

[8] In any event, it is clear that the pursuers did not sign an acceptance of that letter although Mr Mitchell thought that they had done so. There is a file note in Mr Cohen's file dated 18 July 2006 (Production 7/47) noting a reminder sent to Mr Mitchell that the pursuers had not signed the acceptance for the 21 June letter. Mr Mitchell did not recall receiving a reminder.

[9] Mr Keane denied knowing that the 21 June 2006 letter was sent or that he had given instructions to that effect. He said that he had never seen the letter dated 21 June 2006 before the court case. He had no discussions with Mr Cohen about sending a letter in these terms. His position was that he, Mr Mitchell and Mr Cohen all had a similar state of knowledge as to the progress of the planning application. In June it looked as if it would be a close run thing to get planning permission in August and the possibility would be that it would be September. If planning permission were granted around 14 September he would have been able to conclude at the end of September. It was a hope. He denied having any discussion with Mr Mitchell about 30 September being the latest date. In cross-examination Mr Keane said that in June and July he was looking at a September date. They did discuss the date 30 September. Mr Keane's position was that 30 September was a target date and not the longstop date. In June 2006 he still had the hope that he would conclude by 30 September.

[10] In relation to the 21 June letter Mr Cohen said that 30 September was intended to be the last date for payment and in Mr Cohen's view either party could have resiled thereafter. He sent the letter out on behalf of the defender. There had been discussions with both parties before it was sent out; he thought that these discussions were on the telephone. Mr Mitchell had agreed to the new 30 September deadline which was gone over with him. No acceptance was sent back but by Mr Mitchell's conduct Mr Cohen believed that that was an oversight.

[11] Mr Cohen said that the letter of 21 June was issued with the full knowledge of Mr Keane. He referred to production 6/12 which was an e-mail dated 22/06/06 to Mr Keane attaching a copy of the letter dated 21 June. The e-mail was in the following terms:

"Dear Robert

In connection with the contract for the sale/purchase of the units at Hotel Metro I attach herewith a further amendment to the missives to keep everybody right in accordance with my discussions.

Regards

Danny Cohen"

The e-mail bears to have an attachment. In his evidence Mr Keane denied receiving this e-mail or a copy of the letter.

[12] Mr Cohen reacted very strongly to the suggestion by Mr Keane that he did not know about the 21 June letter and that he had not given the instructions for it. He described that suggestion as "untrue" and "very disappointing". He said that Mr Keane never challenged his authority to send the letter dated 21 June. If he had done so Mr Cohen would have seen a conflict which would have disallowed him from acting for both sides. It was a nonsense to suggest that the missive did not have Mr Keane's authority. In cross-examination Mr Cohen was insistent that Mr Keane was fully aware of the significance of 30 September as the deadline. He accepted that there was no note in his file of any telephone conversation with Mr Keane prior to the letter being sent out but rejected the proposition that that was because it had not taken place. He accepted that he should have made a file note of the telephone conversation. He very strongly rejected the suggestion that he had taken it UPON himself to write the letter dated 21 June without reference to Mr Keane. He rejected the suggestion that he had acted because he knew that if the 30 June deadline passed there was a risk that the contract would fall apart and he might not be paid.

[13] In relation to the file note of the issue of a letter reminding Mr Mitchell to sign the 21 June letter acceptance it was put to him that there was no copy of that letter in the file. Mr Cohen said that the letter may not have been filed. They were operating a mixture of paper and electronic storage at the time.

[14] It is clear from this chapter of evidence that by mid June the 30 June 2006 deadline in the original missives could not be achieved. That deadline allowed either party to resile without penalty. Good sense in this commercial transaction would indicate that by mid June parties would require to address that issue. On any view it is clear that by mid June Mr Mitchell, who was under financial pressure, was exercised about the delays. All three of the witnesses made it clear that there was some discussion. The difference between the position of Mr Mitchell and Mr Cohen, on the one hand, and that of Mr Keane on the other, is that while the former, according to their evidence, were looking to a longstop date of 30 September, Mr Keane, according to his evidence, was treating 30 September as a target date. Mr Cohen's evidence that he sent the 21 June letter acting on the instructions of Mr Keane is supported by Mr Mitchell's account of what was happening around this time. It is also supported by the existence of the e-mail, production 6/12. I accept that that e-mail had as an attachment a copy of the 21 June letter. While the extent to which reliance on demeanour of witnesses in a case of this kind is limited, I considered Mr Cohen's reaction of outrage to the suggestion that he had sent the letter without the instructions of Mr Keane was genuine. I am satisfied that on the matter of the circumstances in which the 21 June letter was sent the evidence of Mr Cohen is to be preferred. Accordingly, I find that the 21 June letter was sent by Mr Cohen on the instructions of Mr Keane.

[15] I am driven by that analysis of the evidence to conclude that Mr Keane was not truthful on this aspect of his evidence. That, in turn leads me to treat his evidence on other aspects of the case with care, though I recognise that a witness may be untruthful or unreliable in certain parts of the evidence but may be truthful and reliable on other aspects. I conclude that Mr Keane must have known that he was offering to commit himself to a longstop date of 30 September. My impression was that Mr Keane was prepared to do that confident that Mr Mitchell would in any event agree to a further extension should that be necessary.

[16] I find, therefore, on the evidence before me that the parties did intend to agree to the variation of the contract contained in the 21 June letter. I also find that the pursuers never signed the acceptance of the letter. The contract related to the transfer of land and was accordingly subject to Sections 1 and 2 of the Requirements of Writing (Scotland) Act 1995 ("the 1995 Act"). So far as material section 1 provides-

"(1) Subject to subsection (2) below and any other enactment, writing shall not be required for the constitution of a contract...

(2) Subject to subsection (3) below, a written document complying with section 2 of this Act shall be required for -

(a) the constitution of -

(i) a contract... for the creation, transfer, variation or

extinction of an interest in land...

(3) Where a contract... mentioned in subsection (2)(a) above is not constituted in a written document complying with section 2 of this Act, but one of the parties to the contract... ('the first person') has acted or refrained from acting in reliance on the contract... with the knowledge and acquiescence of the other party to the contract... ('the second person') -

(a) the second person shall not be entitled to withdraw from the contract...; and

(b) the contract... shall not be regarded as invalid,

on the ground that it is not so constituted, if the condition set out in sub-section (4) below is satisfied.

(4) The condition referred to in subsection (3) above is that the position of the first person -

(a) as a result of acting or refraining from acting as mentioned in that subsection has been affected to a material extent; and

(b) as a result of such a withdrawal as is mentioned in that sub-section would be adversely affected to a material extent.

...

(6) This section shall apply to the variation of a contract... as it applies to the constitution thereof but as if in subsections (3) and (4) for the references to acting or refraining from acting in reliance on the contract... and withdrawing therefrom there were substituted respectively references to acting or refraining from acting in reliance on the variation of the contract... and withdrawing from the variation".

[17] Mr Walker, on behalf of the pursuers, accepted that in the absence of a written acceptance by the pursuers the provisions of section 1(3) and (4) of the 1995 Act required to be met. He submitted that subsequent events did satisfy these requirements and that, accordingly, the contract had been varied to create the longstop date of 30 September. He recognised that he had to demonstrate that the pursuers had acted, or refrained from acting, in reliance on the variation of the contract; that they had done so with the knowledge and acquiescence of the defender; that as a result of so acting, or refraining from acting the position of the pursuers had been affected to a material extent; and that in the event of the defender withdrawing from the variation, the pursuers would be adversely affected to a material extent. Both Mr Walker and Mr Upton, who appeared on behalf of the defender, recognized that the acting, or failure to act, relied on must post-date the agreement to vary and be referable to the contract as varied. (Tom Super Printing Supplies Limited & Another v South Lanarkshire Council (unreported) Lord Hamilton, 28 September 1999). Mr Walker contended that in relation to the question of acquiescence by the defender a wide reading should be given. The 1995 Act did not require that the defender should know each and every aspect of the pursuers' acting or failure to act. The defender might not know the precise way or ways in which the pursuers were acting. It would, said Mr Walker, be sufficient that it knew generally that they were arranging their affairs in reliance on the fact that the contract had been varied. Mr Upton submitted that that approach was unsound. There was no warrant in the 1995 Act for that approach What the first party has or has not done must be known to or acquiesced in by the other party, or it was irrelevant to the application of the statutory test. The relevance of conduct arose from the fact that the other party had notice of it, which rendered it just to proceed to the conclusion that such conduct should be a factor binding him to the informal agreement.

[18] Mr Walker submitted that the acting or refraining from acting on the part of the pursuers could be summarised as follows: (i) the pursuers had agreed to a further extension; (ii) the pursuers had refrained from seeking another purchaser; (iii) the pursuers had refrained from resiling sooner; (iv) the pursuers attending meetings with Mr Cohen and Mr Keane; (v) the pursuers instructing Mr Cohen to attend meetings with Mr Keane; and (vi) the pursuers generally had arranged their affairs on the basis that the transaction would settle by 30 September 2006.

[19] While it is true that the evidence indicated that the pursuers agreed to the extension to 30 September, that in itself would not post-date the agreement to vary. Accordingly, it could not constitute relevant actings for the purpose of section 1 (3) and (4).

[20] In relation to the proposition that the pursuers had refrained from seeking another purchaser Mr Walker relied on a piece of evidence from Mr Mitchell to the effect that if it had been suggested that 30 September was not a deadline he would have tried to sell elsewhere. Mr Upton submitted that this was no more than a single, throw-away remark which Mr Mitchell did not explain or expand. He did not explain what he would done in terms of any specific, practical steps. Furthermore, Mr Mitchell had said in evidence that over the whole of the summer until the end of September, he hoped and thought that the deal with Mr. Keane would happen. His evidence looked at as a whole did not bear the interpretation that the pursuers had in mind selling elsewhere but were constrained only by a requirement to wait until the longstop date had past. It seems to me that this contention is well founded on the evidence. Looking at the evidence as a whole I conclude that selling elsewhere was not in the pursuers' minds between 21 June and the end of September.

[21] Mr Walker contended that the pursuers had refrained from resiling sooner because of the variation in the contract. I am unable to find an evidential basis for this contention. Again, looking at the evidence as a whole, it seems to me that as the summer developed and the transaction stumbled along, Mr Mitchell was not seriously considering resiling. He became increasingly concerned and irritated at the delays but he was still looking to completing the transaction with the defender.

[22] Then Mr Walker relied on evidence that the pursuers attended meetings with Mr Cohen and Mr Keane, instructed Mr Cohen to attend meetings with Mr Keane and paid fees to Mr Cohen. It is difficult to see how these activities, in the context of an ongoing transaction, could be regarded as acting or refraining from acting in a manner which was referable to the variation to the contract.

[23] In my opinion Mr Upton is well founded in his submission that in order to satisfy the test in the 1995 Act it would not be sufficient that the defender knew generally that the pursuers were arranging their affairs in reliance on the fact that the contract had been varied. It seems to me that what is required is for the pursuers to be able to point to specific actings or examples of refraining from acting and that these must be known to and acquiesced in by the other party. These provisions provide relief from a failure to meet the general requirements as to written agreement. That would require a clear identification of the actings or refraing from acting. Further, the actings or refraining from acting require to known about and acquiesced in by the other party. Accordingly, they should be capable of clear identification in order that the relevant knowledge and acquiescence of the other party may be ascertained.

[24] In these circumstances I conclude that the pursuers have failed to meet the test set out in sub-sections (3) and (4) of section 1 of the 1995 Act. I therefore hold that the contract was not varied in terms of the 21 June letter and the pursuers' primary case must fail.

The pursuers' esto case

[25] The first issue to be addressed in relation to the pursuers' esto case is whether they have pled one. In his principal written submissions Mr Walker had presented his arguments in two chapters: first, what he described as the pursuers' primary case, namely, that the contract had been varied so as to make 30 September 2006 a longstop date; and, second, what he described as the pursuers' esto case, namely, that esto the contract had not been varied to make 30 September 2006 a longstop date, in terms of the unvaried original contract the pursuers were free to resile at any time after 30 June 2006, which they did.

[26] Mr Upton contended that the pursuers had failed to plead an esto case in the pleadings as amended. He submitted that in their written submissions the pursuers had, for the first time, introduced an alternative argument that, esto the contract was not varied, then the pursuers were entitled to resile, and after 30 September gave due intimation that they were doing so. There was, said Mr Upton, no record for that case. It failed on that basis. Accordingly, he submitted, unless the pursuers succeeded on their primary case, the defender was entitled to absolvitor.

[27] In his submissions in reply Mr Walker contended that throughout the action the pursuers had always maintained two alternative arguments, namely, (i) that they had resiled from the contract as unvaried; and (ii) that, in the alternative, the contract was varied to introduce the longstop date leading to automatic termination of the contract. That was clear from a reading of the record as it stood up until the morning of the proof. On the morning of the proof the record was opened up and amended in terms of the defender's minute of amendment and the pursuers' answers. The effect of the answers was to swap the two cases over so that the argument based on the contract having been varied, which had hitherto been the alternative case, became the primary argument. The case based on resiling from the unvaried contract, which had hitherto been the primary case, became the alternative case. He explained that that was done in order to make the pleadings more logical in terms of timing. The change was not designed to limit the pursuers' case to one basis, namely, that the contract had been varied. The case had always been, and continued to be, presented on the basis of an alternative that the pursuers resiled from the unvaried contract.

[28] Having read articles 4 and 5 of condescendence in their forms before and after the amendment of the record which I allowed on the morning of the proof, I can see what happened. Of course, it is the record in its final form as amended which must govern what happens at the proof and represents the case or cases pled by a party. While I consider that the answers lodged by the pursuers on the morning of the proof left something to be desired in the clarity of averring alternative cases, I am not persuaded that they indicated that the pursuers were abandoning their approach of pleading alternative cases. It seems to me that when read as a whole the pursuers' pleadings in their amended form do give notice of the pursuers' intention to plead an alternative case based on the pursuers having resiled from an unvaried contract. In addition, this was against the background that they had pled alternative cases throughout the action. It cannot be said that the defender did not have fair notice that the pursuers intended to rely on alternative cases. Accordingly, I reject Mr Upton's contention that the pursuers have failed to plead an esto case in the pleadings as amended and his submission that unless the pursuers succeed on their primary case, the defender is entitled to absolvitor.

[29] In order to form a view on the merits of the pursuers' esto case it is necessary to examine certain events in August, September and October 2006.

The 17 August telephone calls

[30] In Mr Cohen's file there is a note dated 17 August 2006 which he said was made at the time. It is in the following terms:

"Attendance at telephone with George Mitchell when he said that he had heard that the permission was not going to be through by the end of September and that the plans had been lodged late. He thought that it was appropriate that George Mitchell [recte Robert Keane] should show his good faith by allowing some of the deposit to be paid. I was asked to speak to Robert Keane to get his view on this.

Telephoning Robert Keane and obtaining his permission to release £8,000."

The £8,000 was paid to Mr Mitchell on 18 August (production 7/24).

[31] Mr Mitchell's position was that by the middle of August he had his doubts but was still being told by Mr Cohen and Mr Keane that it was hoped to get planning permission by the end of September. He denied that Mr Keane told him that the application would be coming before the October meeting of the planning committee.

[32] Mr Mitchell agreed that he had telephoned Mr Cohen and asked if he could get the deposit and that Mr Keane agreed to pay £8,000. However, Mr Mitchell's position was that at that stage Mr Keane was still adamant that the deal would conclude by the end of September. He said that he had asked for the deposit on the understanding that it was all going through in September. Mr Mitchell said that the statement in the file note of 17 August to the effect that he had said to Mr Cohen that he had heard that the permission was not going to be through by the end of September was not true.

[33] According to Mr Keane the position was that round about 12 or 14 August 2006 he had a telephone conversation with a planning officer in the Planning Department of the Local Authority who told him that because of a backlog the planning application would not be heard in September and would be heard in October instead. He said that he discussed this with Mr Mitchell and Mr Cohen. He met Mr Mitchell and told him that the planning application would not be considered until October. Mr Mitchell said that the delays were causing him problems but that it was good that they were getting planning permission. This conversation was around about the 15 August. Mr Mitchell had personal and financial problems. He had anticipated that the deal would have been done sooner. He was more upset than angry.

[34] A day or so later Mr Keane spoke to Mr Cohen and told him the position. Mr Cohen said that he would discuss it with Mr Mitchell. He called back and said that the Mitchells were unhappy because of the financial problems and it would help greatly if Mr Keane released some of the deposit. He agreed to release £8,000.

[35] Mr Cohen's account of the 17 August telephone call was that Mr Mitchell had said that he was worried that planning permission would not be through by the end of September. However, the main purpose of the call was to get the money. The planning permission issue was not that significant. There was some reference to delays and things were not going wonderfully well but he could not recall any detail on that. The discussion did not indicate that the payment of money was conditional on the pursuers agreeing not to resile by October. As far as Mr Cohen was concerned the 30 September longstop date still applied. Had the question of an extension beyond the end of September been discussed that would have been put into the file note. Had it been a condition of the payment of £8,000 that Mr Mitchell would not resile after the end of September that would have been reflected in the file note. In cross-examination Mr Cohen said that the main purpose of the call was to get the money. He said that the payment of the money was not specifically related to the failure to get the planning permission. It was a recognition that Mr Keane already had an extension to the end of September.

[36] It seems to me that there are difficulties in the accounts of both Mr Mitchell and Mr Keane. I consider that Mr Mitchell's assertion that what Mr Cohen had written in his file note was untrue is untenable. While I accept that Mr Keane himself knew, as a result of his telephone conversation with an official in the Planning Department of the Local Authority, that the application would not be heard until the October meeting, I do not accept that he communicated that information in a straightforward way to either Mr Mitchell or Mr Cohen. It would not be consistent with the terms of Mr Cohen's file note. If both Mr Mitchell and Mr Cohen had been told directly by Mr Keane that the application would not be considered until the October meeting, the entry in the file note would make no sense. I would expect the entry in the file note to reflect that position. In addition, it would not be consistent with the general impression which I have formed of the way in which, as the transaction developed and delays were encountered, Mr Keane tended to keep Mr Mitchell going with encouraging noises as to progress. In this regard I also note a piece of evidence given by Mr Fitzgerald, the architect for the project, who stated that he might have tried to be optimistic and mentioned September as a possibility at a time when he thought it likely that the application would come before the October meeting.

[37] I do not consider either Mr Mitchell or Mr Keane to be reliable in their accounts of the events on and surrounding 17 August 2006. Of the accounts given of the August 17 telephone conversation and the surrounding events, I prefer that given by Mr Cohen.

[38] I accept the evidence of Mr Cohen as to the nature and effect of the telephone conversation on 17 August. Had the question of an extension beyond the end of September been discussed I would have expected Mr Cohen to include that in the file note.

[39] Further support for Mr Cohen's position that the payment of the deposit was a gesture of goodwill and not in consideration of an agreement to an extension until the meeting of the Planning Committee in October is to be found in the evidence of what happened towards the end of September. As far as Mr Cohen was concerned as the end of September was approaching it was necessary to take some action. He did so. He met Mr Mitchell and thereafter Mr Keane and drafted the letter of 29 September specifying a new agreement. He was proceeding on the basis that the longstop date was 30 September. Had it been the case that in August there had been the kind of agreement for which the defender contends, it would have been unnecessary for these steps to be taken. Furthermore, had there been such an agreement in August I would have expected Mr Cohen to have reflected that in missives, as he did in the 21 June and 29 September letters.

[40] The question arises as to the effect of the events of 17 August. Mr Upton submitted that the evidence demonstrated that the payment of the deposit was in consideration of the pursuers' agreement not to object to determination of the application taking until the October meeting of the Planning Committee. Mr Upton submitted that the telephone conversation should be interpreted as an operation of the clause 4(a) "permission" or, alternatively, a basis for holding that the pursuers were personally barred from resiling or had waived their objection to an extension. Mr Walker submitted that the deposit was paid to the pursuers as a gesture of goodwill and without any condition.

[41] Mr Upton submitted that clause 4(a) of the missives did not require the purchaser's option to extend time to be exercised in writing. The exercise of the option was not a variation of the contract but the implementation of that agreement. Accordingly, writing was not required by the Requirements of Writing Act 1995. The defender therefore did not need to prove that what was said on 17 August was succeeded by facts which met the criteria in sub-sections 1(3) & (4) of the 1995 Act. All that was necessary was a unilateral exercise of the option by the purchaser. He accepted that exercise of the option had to be made known to the sellers. Mr Upton went on to submit that a bilateral agreement to extend time constituted an exercise of the option. The option could be validly implemented unilaterally by the purchaser intimating as much to the seller; or by both agreeing to implement it; or by the seller representing that he so agreed so as to waive his right to object to the buyer taking the time, or so as personally to bar himself from objecting.

[42] I accept Mr Upton's contention that the exercise of the option in clause 4(a) would not constitute a variation of the contract but would be an implementation of the agreement. It would not therefore be necessary to meet the criteria in sub-sections 1(3) & (4) of the 1995 Act. However, I find it very difficult, on any view of the effect of the 17 August telephone call, to interpret it as an exercise of the option in clause 4(a) to extend the deadline for obtaining planning permission. It seems to me to be a valiant, but strained and ultimately untenable effort to deal with the issue of why, once the application for planning permission was made, the defender did not simply exercise the option in clause 4(a) and give notice to the pursuers that it was doing so.

[43] In the light of the view that I have formed of the basis of the discussion about the deposit in the telephone call it does not seem to me that the discussion could on any view be interpreted as an exercise of the option under clause 4(a). Accordingly, whatever may have been in the mind of Mr Keane, I am satisfied that there was no agreement in August as suggested by Mr Upton.

[44] Mr Upton further submitted that if it was not agreed on 17 August that time would be extended, Mr. Mitchell and, on his behalf, Mr. Cohen, had represented that the pursuers had no objection to further time being needed to obtain planning permission, that the time for that purpose would be extended to include October, and the pursuers thus represented that they would not object to the defender not settling sooner. This, he submitted, provided a foundation for personal bar or waiver. Mr Upton referred to the following passage in the speech of Lord Chancellor Birkenhead in Gatty v Maclaine 1921 S.C. (H.L.) 1 at p.7:

"The rule of estoppel or bar, as I have always understood it, is capable of extremely simply statement. Where A has by his words or conduct justified B in believing that a certain state of facts exists, and B has acted upon such belief to his prejudice, A is not permitted to affirm against B that a different state of facts existed at the same time."

He also referred to the opinion of Lord Nimmo Smith in Wm. Grant & Sons Ltd. v. Glen Catrine Bonded Warehouse Ltd. 2001 SC 901 at p. 938 paragraphs [3] & [4] where in the context of acquiescence it was pointed out that B's reliance must be reasonable.

[45] In the light of my conclusions as to the content and circumstances of the 17 August telephone call outlined above, I do not accept that Mr. Mitchell and Mr. Cohen represented that the pursuers had no objection to further time being needed to obtain planning permission, that the time for that purpose would be extended to include October, and that the pursuers thus represented that they would not object to the defender not settling sooner. In any event, on the view that I have reached on the evidence, I do not accept that the evidence supports Mr Upton's contention that in reasonable reliance on the representations of the pursuers, the defender acted to its prejudice in three specific ways. Firstly, he contended that it released the deposit irrevocably to the pursuers. The evidence from Mr Keane on this issue seemed to me to indicate that he had not really addressed the question at all. He said that he would not have expected return of the deposit because he expected the deal to go through anyway. Secondly, Mr Upton submitted, Mr Keane did not instruct Mr. Cohen to invoke the option in clause 4(a). I did not find the evidence on which Mr Upton relied in support of this proposition to be reliable. It emerged in response to leading questions and was not consistent with Mr Keane's evidence at another point that he simply assumed that Mr Cohen would deal with those kinds of issues. Thirdly, Mr Upton submitted, the defender did not do what it would otherwise have done had the pursuers expressed objection to further time being needed, namely to have offered to settle the transaction forthwith, waiving the need for planning permission. Again, I am not persuaded that Mr Keane had addressed this issue. It was only with hindsight that he said that he would have completed the deal regardless of whether planning permission had been granted. The inference which I draw from the evidence as a whole is that Mr Keane assumed that the pursuers would put up with anything because of their financial difficulties and that they would simply go along with whatever delays developed. Accordingly, I reject the contention that the pursuers were personally barred from resiling from the contract. For similar reasons I reject the contention that the pursuers had represented themselves as having waived the right to object to the defender not settling earlier.

Events in September and October 2006

[46] As before in the history of this contract, in relation to events towards the end of September there are significant differences of recollection between Mr Mitchell, Mr Keane and Mr Cohen. Mr Mitchell's position was that as the end of September approached he realised that the contract was not going to be completed. There was now talk of October for planning permission and money being paid at the end of December. By this stage Mr Mitchell had lost confidence in both Mr Cohen and Mr Keane. He described his reaction to the suggestion of October for planning permission as being "shattered". He was in financial trouble; he had domestic problems at the time and felt let down by Mr Keane and Mr Cohen.

[47] Mr Mitchell did meet Mr Cohen on 28 September but said that he left being upset with Mr Cohen. He said to Mr Cohen that he could walk away and Mr Cohen agreed but said that he would try to get some extra money. Mr Mitchell had said to him that he could do what he liked. He said that he told Mr Cohen that 30 September was the final date and he was not going to sign any extension. In relation to Mr Cohen's file note dated 28 September 2006 (production 7/25) to the effect that when Mr Mitchell came in and saw Mr Cohen before the scheduled meeting with Robert Keane he had stated that it was his intention to grant the extension beyond 30 September 2006, Mr Mitchell's position was that that was not true.

[48] Mr Keane claimed that in August Mr Cohen had suggested to him that it might be better to say to the Mitchells that they would have their money in November or December. Mr Keane had said there was no point in that because the money would be paid in October. Between 17 August and 30 September Mr Keane met Mr Mitchell as usual. There was discussion about selling additional premises on the ground floor. At this stage this was more the issue of conversation than the planning permission question.

[49] Under reference to the meeting with Mr Cohen on 28 September Mr Keane said that he agreed to increase the price by £5,000 on this occasion. He regarded it as paying a token amount. Mr Keane had said that he would settle on 31 October whether planning permission was granted or not. Mr Cohen had said that they had better say to Mr Mitchell that it could be December. Mr Keane had said "No" to that suggestion because he was prepared to pay whether planning permission was through or not. The 30 September deadline was not discussed. Mr Keane had assumed since 17 August that an extension would be agreed. Mr Cohen said that he did not see it as being a problem with Mr Mitchell to grant an extension. Mr Keane left Mr Cohen's office thinking that everything was in order. He understood that Mr Cohen had extended the contract and had had a discussion with Mr Mitchell who had been in his office that morning.

[50] Mr Keane denied that the meeting on 28 September was because the longstop date of 30 September was looming. By mid-August it had been clear that the planning application would be considered at the October meeting and everyone knew that the target date of 30 September was not going to be achieved. If the longstop date had been in place as 30 September then a meeting would have been held earlier in September. He denied the evidence of Mr Cohen that when Mr Cohen had been trying to contact him he had not been responding. Production 6/6 is the letter dated 29 September 2006 from Mr Cohen to the pursuers. There were elements of that which did not reflect Mr Keane's instructions to Mr Cohen. As far as Mr Keane was concerned 31 October was now the real date because the planning committee were meeting around 20 October. They would conclude by the 31 October. Mr Cohen said that Mr Mitchell had been inconvenienced and asked whether Mr Keane would offer more money. Mr Keane said that if it eased the thing £5,000 was not a big payment to make in good faith.

[51] The file notes prepared by Mr Cohen on 26 and 28 September are of significance. The first is dated 26 September 2006 and is in the following terms:

"I was being pressed by George Mitchell to arrange a meeting with Robert Keane so that a proper formal extension could be given before the time limit specified in the missives of 30 September 2006 ran out. On the strength of this I telephoned Robert Keane with a view to making this meeting. This meeting was scheduled for 28^th September 2006."

There are two file notes dated 28 September. The first is as follows:

"George Mitchell came in before the scheduled meeting with Robert Keane and asked me to deal with it on his behalf. He stated at this time that it was his intention to grant the extension beyond 30 September 2006. He said that as long as it was properly "tied up". I discussed with him whether he wanted anymore [sic] money for the extension. He said that he left that with me. I told him that I thought that we should ask for more money. I was asked to speak to Robert Keane as I was better at expressing things than him."

The second file note dated 28 September 2006 is in the following terms:

"Meeting with Robert Keane around 2pm when Robert Keane went through the state of the planning application with me. He said that it had been in for a long time and there were a few issues that had to be sorted out. The architect's son had died during the course of the summer and this had held things up and everyone should be sympathetic about this.

I asked for more money on George Mitchell's behalf if the entry was going to be beyond 31 October 2006. I agreed with Robert Keane that there would be £5000 extra to pay. I knew that George Mitchell had given me authority for this.

He stated that it was his firm intention to pay before the end of October but asked in connection with a new longstop date to keep it before Christmas. On the strength of the meeting I had had with George Mitchell in the morning I said that I thought all this would be in order.

I then sent out on the same day a letter strictly advising George Mitchell that in my opinion he did not have to extend the period for obtaining planning permission."

In evidence Mr Cohen explained that as 30 September approached he thought that date very important. Parties needed to speak to each other through him and something formal would be required. If Mr Keane needed a further extension that should be done before 30 September. A meeting was scheduled for 28 September in the afternoon. Mr Mitchell did not attend that meeting but came in and spoke to Mr Cohen in the morning. He did not wish to attend the meeting. Mr Cohen understood his instructions to be that as long as something was certain he did not mind giving an extension. Mr Cohen put it thus: "The strong probability, and even greater, was that he was ready to give even more time for completion of the contract." Accordingly, Mr Cohen took the view that a further change to the missives would be required. Mr Cohen asked Mr Mitchell if he would like more money and Mr Mitchell said that it was not about money. He said that he was not a happy man because of difficulties in his personal life. At that stage he preferred not to meet Mr Keane. He did not give the impression that he was ready to walk away from the contract. Mr Cohen felt that Mr Mitchell was in a strong negotiating position and could ask for more money to extend the missives again as he would be doing a favour to Mr Keane. Mr Cohen's impression was that Mr Mitchell wanted to get the matter resolved and have a definite date on which he could rely.

[52] Mr Cohen had the meeting with Mr Keane who put forward his final extension arrangement. He would pay as soon as possible. He expected to pay before the end of October but the very last date would be 20 December.

[53] Mr Cohen then wrote a letter dated 29 September because he wanted something in place before the 30^th. The letter, so far as material, is in the following terms:

"As discussed with you the purchasers are due to fulfil their contract and pay for the flats by 30^th September 2006.

However, you are aware that there have been delays in obtaining planning permission.

After discussion with Mr Keane of Caversham Management Limited, this letter confirms that his proposal is that he will make payment by 31^st October if at all possible and is willing to pay an extra £5000 (that is raise the price to £365,000) if payment goes beyond that date. He wishes to have in the contract a final payment date of no later than 20^th December 2006. In the event of him not paying by that time you are free to keep the benefit of the £12,000 deposit and to walk away from the contract.

In order to recognise the terms of this arrangement I have prepared a letter re-opening the contract for you and Betty to sign if you are happy. Please return this to me at your earliest..."

In evidence Mr Cohen explained that it was not the position that at the meeting with Mr Keane on 28 September he had already bound the pursuers to the proposal. The terms of the letter were not consistent with that suggestion. The letter was framed on the basis that Mr Keane was making a new "proposal".

[54] I am unable to accept Mr Mitchell's account of his meeting with Mr Cohen on 28 September. It is flatly contradicted by Mr Cohen's file note. I find that at that meeting Mr Mitchell was still contemplating the possibility of some further extension, though he was doing so against a background of increasing frustration and dissatisfaction with both Mr Keane and Mr Cohen. Nor am I able to accept Mr Keane's evidence, particularly in relation to the proposed longstop date of 20 December. His position on that issue is not borne out by the entry in Mr Cohen's file note or the terms of the letter sent by Mr Cohen to the pursuers. According to Mr Cohen, the new longstop date had its provenance in Mr Keane. In addition, the extra £5000 would only become payable if there was no settlement by 31 October. I also reject Mr Keane's evidence that when he left the office the extension was in place. In his file note Mr Cohen had include the paragraph quoted above, "I then sent out on the same day a letter strictly advising George Mitchell that in my opinion he did not have to extend the period for obtaining planning permission." In his letter to the pursuers dated 29 September 2006 Mr Cohen referred to the defender's "proposal" and invited the pursuers to sign the acceptance if they were happy. In the event, of course, the pursuers did not accept the proposal.

Events in October

[55] Mr Mitchell explained that his brother John had helped him out in the past. In early October Mr Mitchell spoke to his brother John about John Mitchell buying the hotel. John said that he was going to come in and he started taking people into look at it in early October. Mr Mitchell said that he felt bitter about the defender and that Mr Keane had led him up the garden path. He described the letter dated 29 September as "the final straw". He did not sign or return the acceptance letter. Instead, in early October he telephoned Mr Cohen and told him that he was walking away from the deal.

[56] Mr Mitchell said that he spoke to Mr Keane early in October and told him that he had done a deal with his brother John Mitchell. They had a meeting and at this stage Mr Keane offered to buy the whole place for £1.3 million. Mr Mitchell agreed that by the time Mr John Mitchell was involved any decision would be between Mr Keane and John Mitchell.

[57] In cross-examination Mr Mitchell stated that he had not put his decision to walk away from the contract in writing he agreed that that was so but added "I let the parties know", by which I understood him to refer to Mr Keane and Mr Cohen.

[58] John Mitchell said that he wanted an asset for bailing out his brother and the premises were the asset. He said that he said to George that if "this guy" pulled out or let him down, he, John, would step in. Production 7/42 was a document dated 12 October 2006 which they had drawn up confirming the agreement. The reference to "purchase" in production 7/42 reflected that they had shaken hands on it and that he, John, had paid all the bills. He had a phone call followed by a meeting with Mr Keane who asked if he could buy the hotel from him. Mr John Mitchell told him in no uncertain fashion that it was not for sale. He told Mr Keane that he was a harder person to deal with than George. He said that he did not want to sell it to Mr Keane. I considered Mr John Mitchell to be a credible and reliable witness.

[59] Mr Keane's account of events in early October was that in the first week in October he received a telephone call from Mr Cohen to say that there was a problem. He said that Mr Mitchell had been on the phone and he had been ranting and raving about the delays. He was talking about his brother and his financial situation and his personal life. He suggested that Mr Keane should speak to Mr Mitchell. Mr Keane contacted Mr Mitchell at the beginning of the following week. Mr Mitchell said that his brother did not want him to go through with the deal and told Mr Keane that his brother had lent him money. Mr Keane told him that he was legally bound to conclude the contract. They arranged to meet and when they did Mr Mitchell told Mr Keane that he owed his brother money. He told him that things were now out of his hands. He was being pushed by his brother into making a decision that he did not want to make. This was the message which he got across to Mr Keane. Mr Keane's impression was that he was being bullied by his brother. He said that he would speak to his brother and hopefully get it resolved. He would go back and try to persuade his brother to allow him to move forward as they had agreed. Ten days later Mr Mitchell phoned and suggested that Mr Keane should talk to his brother John. Mr Keane contacted John Mitchell and they had a meeting. John Mitchell was clear that he was not prepared to deal and there was nothing to discuss. Mr Mitchell was out of the picture by this stage.

[60] Mr Keane denied that when he had the meeting with Mr Mitchell, Mr Mitchell had told him that his brother John was interested in buying the property. When he met John Mitchell he, John Mitchell, did not tell him that he was buying the property. John Mitchell was concerned as to whether the amount of money that Mr Keane was paying was enough for the debt owed by Mr George Mitchell to Mr John Mitchell.

[61] Mr Cohen said that in October things went awry. Mr Keane told him that Mr Mitchell had told him that he was not going ahead. Mr Keane was the first person who told him that Mr Mitchell did not agree to the extension. Mr Cohen spoke to Mr Mitchell. This would be no later than the second week in October. Mr Cohen said that he was astonished at Mr Mitchell's decision. He advised Mr Mitchell that he ought either to go ahead or renegotiate. Mr Mitchell told Mr Cohen that it was too late to go on with the transaction because he had done a deal with someone else who turned out to be his brother.

[62] Mr Cohen described Mr Keane's reaction to Mr Mitchell's decision to resile as disappointment and desperation. Mr Cohen's impression was that Mr Keane knew that 30 September was the longstop date and he knew that he had not complied with that. Mr Keane spoke to Mr Mitchell direct and tried to persuade Mr Mitchell to keep to the deal by offering more. Mr Keane panicked and then went to other lawyers.

[63] I am unable to accept Mr Keane's evidence that Mr Mitchell did not communicate to him that he, Mr Mitchell, was resiling from the contract. That evidence is not consistent with the evidence of Mr Mitchell himself. It is not consistent with the evidence of surrounding circumstances spoken to by John Mitchell. Nor is it consistent with Mr Cohen's evidence that Mr Keane himself told him that Mr Mitchell was not going ahead or Mr Cohen's evidence as to Mr Keane's reaction to that news. I reject the evidence of Mr Keane on this matter. I accept the evidence of Mr Mitchell which fits in with the rest of the evidence in this chapter. I am satisfied that Mr Mitchell did communicate to Mr Keane directly that he was resiling and also communicated that to Mr Cohen who was still acting as solicitor for Mr Keane at that stage. I am satisfied that he did so early in October and, in any event, before 24 October when the defenders' new agents sent the letter (production 7/29) to the pursuers' agents, Cohen & Co., withdrawing the unaccepted letter of 21 June, and intimating the exercise the option to extend time in clause 4(a) until the planning authority had made their decision.

[64] In the light of the view of the evidence at which I have arrived on the basis of the analysis set out in this opinion, I conclude that in terms of the unvaried contract the pursuers were entitled to resile and did give adequate notice that they were doing so. Accordingly, in my opinion the pursuers have succeeded in proving their esto case. In these circumstances I shall sustain the pursuers' fourth plea-in-law, repel the defender's pleas-in-law and grant decree of declarator as concluded for. I shall reserve meantime the question of expenses.