Scottish Court of Session Decisions

Pursuer: Duthie; T C Young LLP

Defender: Davies; Drummond Miller LLP

19 October 2011

[1] I heard a motion for summary decree in this action in which Port of Leith Housing Association ("PLHA") seeks to enforce missives with Mr and Mrs Akram by which it has contracted to purchase heritable property at 78-82 Great Junction Street, Leith. As I discuss below, the contract contained suspensive conditions and a provision which allowed PLHA by written notice to hold the conditions to be purified.

[2] Counsel debated three issues in the motion for summary decree. They were:

(i) the construction of the missives,

(ii) the construction of the purification letter and

(iii) whether Mr and Mrs Akram's solicitors had actual or ostensible authority to receive the purification letter on their behalf.

[3] Having heard counsel at some length on the motion, I decided that I could not determine the third matter without hearing evidence. Counsel nevertheless agreed that the other two matters which had been debated could be determined without hearing evidence and that a decision on those issues would shorten the submissions after proof. I therefore set out my views on those issues.

The missives

[4] The contract of sale comprised a letter of offer dated 17 September 2010 by T C Young on behalf of PLHA, qualified acceptances dated 30 September, 4 and 12 October 2010 and 4 March 2011 and a letter dated 4 March 2011 by Somerville & Russell on behalf of Mr and Mrs Akram concluding the bargain.

[5] Condition 3.1 of the letter of offer as amended set out three suspensive conditions relating to ground and site examination tests and environmental audits, the completion of contracts to acquire other parts of the proposed development site and the approval by the Board of PLHA of the development of the whole site. Condition 3.2 was in the following terms:

"This Condition 3 shall be construed solely for the benefit of the Purchasers and it shall be in the sole option of the Purchasers at any time to intimate to the Sellers in writing that any or all of the suspensive conditions contained in Condition 3.1 is/are waived, in which case the Missives shall be deemed purified to that extent. This condition shall however only be purified or deemed to be purified by the Purchasers giving written notice to the Sellers to that effect."

Condition 3.3 as amended stated:

"In the event that any/all of the suspensive conditions contained in Condition 3.1 have not been purified or waived by the Purchasers by 30 July 2011 ("the Long-Stop Date") (or by such later date as the parties may agree in writing) the Purchasers and the Sellers shall be entitled (but not bound) at any time thereafter, provided this Condition 3 remains unpurified, to resile from the Missives by written notice to that effect served on the other party, and that without penalty save in respect of any antecedent breach."

[6] In the definitions at the beginning of the letter of offer "the Purchasers" were defined as PLHA and "the Sellers" as Mr and Mrs Akram. Each definition stated the address of the party. The definitions also defined "the Date of Entry" in these terms:

"a date being 14 days after purification (or waiver by the Purchasers) of all of the suspensive conditions contained in clause 3 of this offer or such other date as is mutually agreed by the Purchasers and the Sellers."

[7] The Condition 13 of the letter of offer contained an entire agreement clause in the following terms:

"The Missives shall constitute the entire agreement between the Purchasers and the Sellers with respect to all matters to which they refer and supersede and invalidate all other undertakings, representations and warranties relating to the subject matter thereof which may have been made by the parties either orally or in writing prior to the date of conclusion of the Missives. Each party warrants to the other that it has not relied on any such undertaking, representation or warranty in entering into the Missives."

The submissions of the parties

[8] Mr Davies' submission for Mr and Mrs Akram was simple. The parties had provided in Condition 3.2 that written notice of purification had to be given to Mr and Mrs Akram. The condition was an important one as it converted a conditional contract into a unconditional one which the purchasers could then enforce against the sellers. In the interests of certainty the parties had provided that notice be given to the sellers themselves rather than their solicitors. Thus while the parties' solicitors would deal with each other to organise the conveyance of the property, this critically important notice would have to be served on the sellers themselves.

[9] The position adopted by Mr Duthie for PLHA was equally simple. He submitted that the missives did not disclose any intention by the parties to impose precise formalities in relation to the service of this notice. Clause 3.2 simply required the purchasers to give written notification of purification or waiver to the sellers and, if the notice was served on their solicitor who was actually or apparently authorised to receive such notices, the notification was effective.

Discussion

[10] The issue is whether clause 3.2 of the missives required PLHA to serve the purification letter on Mr and Mrs Akram so that service on an agent authorised to receive such notifications was invalid.

[11] I have come to the view that the missives did not require PLHA to send the written notice to Mr and Mrs Akram rather than to their solicitors. I acknowledge the general principle that, if the parties contract for strict compliance with formal steps in the giving of notices, the court will enforce such compliance: Scrabster Harbour Trust v Mowlem Plc 2006 SC 469, Sir David Edward at paragraph [47]. He made this statement when discussing clauses which give one party a unilateral right to bring a contract to an end or to alter it in some other way. The approach clearly applies to such clauses. But it is, of course, important to construe the particular contract and to apply general statements with due regard to the words which the parties have chosen to use in their contract.

[12] The authorities on which Mr Davies relied involved considerably more precise provisions than those in these missives. In Muir Construction Ltd v Hambly Ltd 1990 SLT 830 Lord Prosser was dealing with clause 28 of the J.C.T. Standard Form of Building Contract (1980 edition) which empowers the contractor to determine the contract on giving notice by registered post or recorded delivery. He held (at p.833) that a hand-delivered notice was invalid because the parties had used "precise words in a carefully structured provision" which they intended to "have a precise effect in a carefully structured procedure." In Capital Land Holdings Ltd v Secretary of State for the Environment 1997 SC 109 an Extra Division was dealing with a break clause in a twenty-year lease which empowered the tenant to terminate the lease by twelve months' written notice after ten or fifteen years. It held that service of the notice on the landlord's agents was not a valid service. Importantly for the decision of the court, clause 7 of the lease provided that any notice to the landlord was to be sent to its registered office, if an incorporated body, or to his last known address, if a person. In delivering the opinion of the court, Lord Sutherland observed (at p.114) that if clause 2, which required notice in writing to be given to the landlord, had stood alone, there might have been arguments as to what constituted proper service on the landlord. But as the parties had made specific provision in clause 7, service of written notice on agents was invalid.

[13] In Ben Cleuch Estates Ltd v Scottish Enterprise 2008 SC 252 an Extra Division applied those authorities in holding that the tenants, who sought to bring a lease to a premature end, had, absent personal bar, to comply with the notice provisions for the exercise of that option. But that case concerned the service of a notice on a company other than the landlords and shed no light on the issue which arises in this case.

[14] Mr Duthie referred me to my decision in Batt Cables Plc v Spencer Business Parks Ltd 2010 SLT 860 in which I held that a break notice was validly served when it was served on an agent whom the landlord had authorised to receive it. I opined in paragraph [37] that where a principal authorises an agent to receive and process all correspondence addressed to the principal, that agent has authority to receive a break notice from a tenant. Mr Davies did not question that decision but sought to distinguish it on the basis that there was clear evidence of such authorisation in that case.

[15] It is, as I have said, necessary in each case for the court to have regard to the terms of the particular contract. Thus, in the Scrabster case, an Extra Division concluded (at paragraph [61]) that it was not dealing with "precise words in a carefully structured provision". Nor are we dealing with such precision in this case. The contract is a straightforward one in which the suspensive conditions had to be purified within less than five months of the conclusion of the missives. There are no precise requirements relating to the service of notices and no indication that the parties intended that service of the purification letter on the sellers' solicitors, who were authorised to receive correspondence from the purchasers' solicitors and to progress the conveyancing of the subjects, would not be valid. The purification letter was a stage in the implementation of the relatively simple transaction for which the parties contracted. The contract does not have detailed and precise provisions as to the method of service. The other provisions of the contract do not suggest that the parties intended to draw a clear distinction between themselves and their agents so that where the contract provided that one party is to perform a juristic act in relation to the other, one party's agent could not perform that act in relation to the other party's agent. On the contrary, I have formed the view that the very simplicity of the contractual provisions firmly points against a construction which would allow such a distinction to be drawn. Further, I do not see the practical advantage or business rationale of serving the notice on the sellers rather than on their solicitors; I would have expected the sellers immediately to take the notice to their solicitors to ascertain its validity.

[16] I therefore conclude that the contract of sale allowed PLHA to serve a purification notice on Mr and Mrs Akram's solicitors, if the solicitors had actual or apparent authority to receive such a notice.

The purification letter

[17] On 22 July 2011 Ms Christine Stuart of T C Young sent Messrs Somerville & Russell a formal letter in these terms:

"On behalf of and as instructed by our clients Port of Leith Housing Association Limited, being a registered Scottish Charity (Charity Number SC27945), registered under the Industrial and Provident Societies Act and having their Registered Office at 108 Constitution Street, Leith, Edinburgh, EH6 6AZ we refer to the bargain concluded with your clients Mr Mohammed Akram and Khurshidan Akram, both residing at 16 Eildon Terrace, Edinburgh, EH3 5LU, relating to the acquisition of the subjects formerly known as 78-82 Great Junction Street, Leith, Edinburgh, as constituted by our Offer of 17 September 2010, your formal letter of 30 September 2010 as amended by your formal letters of 4 and 12 October 2010, our formal letter of 4 March 2011 and your concluding letter of 4 March 2011, and we hereby confirm that conditions 3.1.1, 3.1.2, 3.1.3 and 3.1.4 of our said Offer may be regarded as purified in terms of condition 3.2 of that said Offer and that Date of Entry will be 29 July 2011."

Counsels' submissions

[18] Mr Davies submitted that the purification letter was invalid because the purpose of the notice was to fix the date of entry and it had incorrectly stated that date. The contract of sale provided that the date of entry was to be fourteen days after the purification or waiver of all of the suspensive conditions. PLHA's solicitors had intended to serve the notice on 15 July and thus give fourteen days' notice, but delays had caused them not to do so and had thus invalidated the notice.

[19] Mr Duthie disputed that analysis. All that the purification letter did was to give notice of the purification of the suspensive conditions. There was no need for it to state the date of entry. If the correspondence between solicitors had not amounted to an agreement to change the date of entry, any misdescription of the date of entry in the purification letter had no legal effect and did not invalidate the notice.

Discussion
[20] I do not accept the suggestion that the purification letter had to specify the date of entry in order to fix that date. In my view, the function of the purification letter was simply to intimate that the purchasers had waived the suspensive conditions in clause 3.1. That had the effect of deeming the conditions to be purified, as clause 3.2 provides. The contract fixed the date of entry in the definition section of the missives; see paragraph [6] above. Accordingly, there was no need to specify the date of entry in the purification letter. Either the missives ruled or the parties had agreed to alter the date of entry. There is a disagreement between the parties whether the parties' solicitors had in fact agreed the date of entry as 29 July 2011. I cannot determine that matter at this stage. But, assuming that the specified date of entry was erroneous, that mistaken statement did not invalidate the purification letter.

Conclusion
[21] As the parties disagree on whether Somerville & Russell had actual or apparent authority to receive the purification letter, that matter will need to be determined by proof. I indicated my views on the issues which I have addressed in this opinion to parties at a continued hearing of the summary decree motion. On their joint motion I reserve the expenses of the summary decree motion.