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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Miller Homes Ltd v Frame & Ors [2000] ScotCS 58 (7 March 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/58.html Cite as: [2000] ScotCS 58

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[1] In 1994 the first defenders, who are husband and wife, were heritable proprietors of an area of ground extending to approximately 90 acres at Torheads Farm, Hamilton ("the subjects"). The pursuers carry on business as housebuilders. In furtherance of that business they became interested in acquiring an option to purchase the subjects. By missive dated 31 March 1994 and adopted as holograph they addressed to an estate agent for the first defenders an offer to acquire on certain terms and conditions such an option. That offer contained inter alia the following terms and conditions:-

[2] That offer was responded to by solicitors acting on behalf of the first defenders by a missive dated 25 April 1994 and adopted as holograph which accepted the offer of 31 March subject to certain qualifications. These included:-

[3] By missive dated 18 May 1994 and adopted as holograph, the pursuers unqualifiedly accepted that qualified acceptance and stated that they "accordingly hold the bargain as concluded".

[4] By formal missives dated 1 and 3 November 1995 passing between solicitors acting for the pursuers and the first defenders respectively, condition 6.4 of the missive of 25 April 1994 was deleted and the following substitution therefor made:-

[5] The pursuers aver and the defenders admit that the titles to the subjects were passed to the pursuers. The pursuers aver that they did not resile on the basis of anything the titles revealed and that condition 4 of the missive of 31 March was purified on or about 7 June 1994. They produce a letter of that date which bears to return the title deeds and to "confirm in terms of the missives that we are satisfied as regards the various matters disclosed in the title deeds". That letter also bears to enclose cheques in favour of the first defenders' professional agents as envisaged in condition 3 of the missive of 25 April 1994. The pursuers aver that at various times in 1996 and in 1997 there were communings between them and the first defenders concerning proposed further amendments to the missives, though these did not in the event result in any further amendment.

[6] In November 1997 the first defenders granted in favour of the second defenders, who are related family trustees, a gratuitous disposition of a one half pro indiviso share of the subjects, which disposition was recorded in the General Register of Sasines in December 1997. The pursuers aver that they did not learn of this transaction until April 1999. This discovery and other events led the pursuers to believe, they aver, that the first defenders did not regard themselves as bound by any option in favour of the pursuers. An issue in this case is whether they are so bound.

[7] The pursuers maintain that the missives in their terms create a valid option to purchase the subjects. Their pleadings also contain, in response to a defence pled by the defenders of breach of contract by the pursuers, a case of personal bar based largely on events related to time spent and expense incurred by them in promoting the planning potential of the subjects, resulting ultimately in a favourable outcome. The issues of alleged breach of contract and of personal bar, which turn to some extent on disputed issues of fact, were not the subject of discussion before me. However, as the planning history bears on one aspect of the argument which I heard, it is appropriate to summarise here the pursuers' averments in that regard. They say that since 1994 they have continuously promoted the planning potential of the subjects; that included objecting to certain adverse planning proposals both in a regional structure plan review and in a draft local plan, representation at a public inquiry into the latter plan, the submission of an outline planning application for residential development of the subjects, representation at a further public inquiry, the conclusion of an option for the purchase of neighbouring property to provide access for a housing development on the subjects and the instruction of various professional persons, all with considerable financial implications; the outcome, they say, is that outline planning consent has been obtained for some 650 houses on the subjects. All this, it is maintained, was done by the pursuers on the basis that a binding contract existed in terms of the missives.

[8] The parties also have pleadings about the identification by the first defenders, in late 1994 and again in early 1995, of properties in Hamilton for possible satisfaction of the option consideration referred to in condition 2 of the missive of 31 March 1994. In the event and for reasons which it is unnecessary at this time to discuss, neither of these properties was acquired by the pursuers for provision to the first defenders in satisfaction of that condition. No other property has been so provided. The defenders' case of breach of contract rests on the non-provision of such property.

[9] The case came before me at debate for discussion of a contention by the defenders that the pursuers' action was fundamentally irrelevant. Mr Jones on their behalf submitted that, in respect of a transaction of the kind with which the missives were concerned, the fixing of the price or of a mechanism for determining the price was essential to the conclusion of a contract, that the missives neither fixed the price nor put in place an effectual mechanism for fixing it and that no concluded agreement had accordingly been reached. The relevant terms were condition 2 of the missive of 31 March (which envisaged the provision by the pursuers for the use of the first defenders of a house meeting defined criteria but which would remain the pursuers' property) and condition 2 of the missive of 25 April (which among other things required that the property be acceptable to the first defenders). These did not expressly provide any mechanism for identifying a particular property to satisfy the criteria referred to. The pursuers had sought in their pleadings to read into the missives such a mechanism. The pursuers averred -

This Mr Jones described as "the pursuers' scheme". An implication in terms of the pursuers' scheme was, for reasons to be expended on, not warranted. The acid test for determining whether parties had reached a concluded (and thus enforceable) agreement was whether or not it could be enforced by specific implement in accordance with its terms, express or implied (McArthur v Lawson (1877) 4 R 1134, especially per Lord President Inglis at p.1136). Agreement on price or on a method of calculating it was an essential of a contract of sale (May & Butcher Ltd v The King [1934] KB 17, especially per Viscount Dunedin at p. 21; Courtney & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297, especially per Lord Denning MR at p.300). Here the price envisaged for the option was consideration in the form of the use of property. It was essential to a concluded agreement that it identified the specific property or provided a mechanism for its identification which did not require further consent by one or other or both parties. Reference was made to Grant v Peter G. Gauld & Co 1985 SC 251, especially per Lord Justice Clerk Wheatley at p. 258. The missives provided no effectual agreement on price which could be enforced by specific implement. R & J Dempster Ltd v Motherwell Bridge & Engineering Co Ltd 1964 SC 308 was readily distinguishable. It was not the function of the court to make for parties an enforceable bargain when they had failed to make one for themselves. Reference was made to East Anglian Electronics Ltd v OIS plc 1996 SLT 808 at p.811. In the present case it was not to be assumed that, at the moment when missives were concluded, parties intended to be bound on the matter of price. The first defenders were an elderly couple for whom a house for their retirement was to be provided. It was quite intelligible that they should not intend to be bound unless and until an acceptable house had been identified and provided. Likewise the pursuers, who were to own the house to be provided for the first defenders' use, had an interest in not becoming bound unless and until they were satisfied that any particular property identified was acceptable to them - for example, in respect of title conditions or of fitness as a long term investment. It was essential to have certainty and that without innovating on the terms of the bargain as made (Retail Parks Investments Ltd v The Royal Bank of Scotland plc (No 2) 1996 SC 227, per Lord McCluskey at p.240 and per Lord Kirkwood at p.249). The present provision was to be contrasted with that discussed in McCall's Entertainments (Ayr) Ltd v South Ayrshire Council (No 1) 1998 SLT 1403. The factual matrix might provide a tool for ascertaining the meaning of language actually used; it was not a tool for supplementing it by the addition of expressions which were not present (Bank of Scotland v Junior 1999 SCLR 284, per Lord Penrose at p.291). There were at least three sources from which a particular bungalow might come to be provided by the pursuers for the first defenders' use, namely, from the former's existing stock of completed houses, from their stock of houses being built or to be built and by acquisition of a house from a third party. The pursuers' scheme envisaged only the last. Moreover, the effect of the qualification inserted by condition 2 of the missive of 25 April (that the property was to be acceptable to the first defenders) involved a meeting of minds beyond that expressed in the missives, namely, an offer by the pursuers to provide a particular property and an acceptance by the first defenders of that offer. The pursuers' scheme innovated on the missives by postulating identification by the first defenders of a property meeting the criteria and an obliga

[10] Lord Mackay of Drumadoon for the pursuers submitted that the defenders' motion for dismissal should be refused. It was plain, he argued, from the missives read as a whole that they were on each hand intended to create immediately prestable rights and obligations. Particular reference was made to condition 3 of the missive of 31 March and to condition 4 of the missive of 25 April. It was clear that the missives were concerned with a commercial transaction, namely, an option for the purchase and sale of some 90 acres of agricultural land with a prospect of planning consent for housing development and that the price on exercise of the option was potentially very substantial. Reference was made to condition 6.4 of the missive of 25 April in its original and in its subsequently amended form. The first defenders had entered into this transaction with the benefit of legal advice. The appropriate approach to construction was (1) so far as reasonably possible to prefer a construction which gave the missives binding effect and (2) to seek, having regard to the substance of the matter, to give effect to ascertainable contractual intention. It was plain that the parties intended from the time of their conclusion that the missives be binding. The option period was, by condition 1 of the missive of 31 March, to endure for a minimum of ten years from a date defined by reference to condition 4. The option period, as the pursuers averred, had in fact begun to run from 7 June 1994. It was also clear on averment that the parties had acted on the basis that the missives were binding. The court should prefer a construction which avoided the law incurring the reproach of being the destroyer of bargains (Hillas & Co Ltd v Arcos Ltd [1932] 43 Ll.L.R. 359, per Lord Tomlin at pp.363-4, quoted with approval by Lord President Clyde in R & J Dempster Ltd v Motherwell Bridge & Engineering Co Ltd at pp.327-8). In a commercial agreement the further parties had gone on with their contract, the more ready were the courts to imply any reasonable term so as to give effect to their intentions (F & J Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Ll. L.R. 53, per Lord Denning MR at pp.57-8 and per Dankwerts L.J. at p.59). Here the pursuers had met the first defenders' legal and other fees and outlays as per condition 3 of the missive of 25 April; they had also, as they averred, incurred major expense in progressing matters to a favourable planning situation. In addition they had entered into correspondence in 1994 and again in 1995 in relation to properties identified by the first defenders as possible candidates for satisfaction of the option consideration. In May & Butcher Ltd v The King, Viscount Dunedin at p. 21 had envisaged as a perfectly good contract one which provided that the price be settled by one of the parties. The case there referred to appeared to be Steven v Robertson (1760) Fac. Coll. 450 (also reported at (1760) M. 3158). In the present case it was a perfectly good and binding provision that the particular property was one, meeting the defined criteria, which was identified by the first defenders as acceptable to them. No question arose of consent or agreement further than that contained in the missives. What fell to be construed was the missives, not any "pursuers' scheme". The effect of condition 2 of the missive of 25 April was that, although a property might meet the defined criteria, the first defenders could, subject to good faith, effectively veto it as the consideration for the option if it was not acceptable to them. There was sufficient in the terms of the missives to allow of a particular property being identified and provided without the need for further agreement. It was unnecessary to set out an elaborate scheme for that purpose. In practice the initiative in identifying a pro

[11] In response Mr Jones referred to the speech of Lord Wright in Hillas & Co Ltd v Arcos Ltd at p.367. The pursuers were in effect asking the court to make and enforce a bargain which was not contained in the missives. In relation to implied terms the pursuers had no pleadings other than their "scheme".

[12] In my view it is plain from the missives that the pursuers and the first defenders intended by them there and then to enter upon a concluded and enforceable bargain. The form of their communings (by missives, in every case adopted as holograph), points, in the case of a transaction which, as here, required formal communings for the creation of an enforceable bargain, to an intention to create such a bargain. The final missive concludes with an expression conventional in such arrangements. The content of the missives also points, in my view, unequivocally to an intention there and then to enter upon a binding legal relationship. Words of obligation appear in virtually every condition. Condition 4 of the missive of 31 March refers to an entitlement in the pursuers in certain circumstances to "resile from the bargain" - an expression apt only for a bargain intended to be concluded. Moreover, some at least of the obligations bore to be immediately or virtually immediately prestable. I refer in particular to conditions 3, 4 and 10 of the missive of 31 March and to conditions 3 and 4 of the missive of 25 April. If confirmation of that intention were needed (as, in my view, it is not), it is to be found in the circumstance that, when parties came as they did to vary their initial arrangement, they did so again by formal missives. It would, in my view, be remarkable if either party had, in an arrangement such as this, had any different intention. The ultimate interest on each side was to achieve a sharing of the enhanced value of the subjects in the event of a favourable planning situation coming to pass. The pursuers were to use their experience and resources in seeking to bring that about. The prize in terms of enhanced value was no doubt potentially considerable. It would be very surprising in these circumstances if the first defenders did not insist on a binding commitment on the pursuers to advance the planning situation and the pursuers did not insist on a binding commitment by the first defenders to sell the subjects to them on a predetermined basis.

[13] It is, of course possible that for legal reasons that plain intention might be frustrated; but the courts will be reluctant to hold that it has been. As Lord Tomlin observed in Hillas & Co Ltd v Arcos Ltd at p.364

These words were quoted with approval by Lord President Clyde in R & J Dempster Ltd v Motherwell Bridge & Engineering Co Ltd at p.328. That principle is not, in my view, confined to commercial arrangements. In any event, the present arrangements were in my view of a commercial nature. It may be added that they were also, at least on the pursuers' averments, acted on as obligatory, a circumstance which has been held relevant to the court preferring a construction which gives the arrangements binding effect (R & J Dempster Ltd v Motherwell Bridge & Engineering Co Ltd, per Lord Clyde at pp.327-8, with whom Lord Carmont agreed). There may, however, be a difficulty about that particular proposition (see the reservation by Lord Guthrie at p.332) and in the circumstances of this case I do not require to rely on it.

[14] At the core of Mr Jones' submissions was the proposition that the fixing of a price or of a mechanism for determining the price was an essential for the conclusion of a contract of the present kind and that that essential was absent. It is, of course, true that agreement on the price (or on a mechanism for fixing it) is a requirement for the constitution of any contract of sale. It is not, however, so evident that it is a requirement for the constitution of every option contract. Under Scots law a valid option to purchase, whether constituted as a promise or as a bilateral contract, might, I should have thought, be created without any consideration at all. If that be so, it is difficult to see why fixing of a price should always be an essential. On the other hand, it is apparent that under the present arrangements valuable consideration in the form of use of a dwellinghouse (referred to in the missive of 31 March as "the price of the said option" and as "Option Consideration") was to be given by the pursuers for the grant of the option to purchase. If the particular dwellinghouse is not identified in the missives or if no mechanism or an inoperable mechanism is there provided for its identification, then no doubt there is no completed bargain. In this case it is contended that from the outset there was no effectual mechanism. To make out that contention at this stage the defenders must, in my view, satisfy the court that, on a fair construction of the missives against the whole relevant circumstances, identification of a particular dwellinghouse could not be achieved without further agreement between the parties to them.

[15] I am not so satisfied. The missives do not in terms envisage further agreement between the parties in relation to the price (cf the arrangement discussed in May & Butcher Ltd v The King). Condition 2 of the missive of 31 March identified, by reference to three criteria ("a two-bedroomed bungalow", a maximum value and a specified locality), the class of property to constitute the consideration. It also identified the nature of the provision of it, namely, for occupation rent-free by the first defenders and the survivor of them, the pursuers meeting various outlays in respect of the property which was to remain in their ownership. Mr Jones accepted in the course of argument that, if that condition had been accepted without qualification, a valid term as to the option price would have been created. That condition was, however, he observed, qualified by condition 2 of the missive of 25 April which, in addition to conferring on the first defenders an option to enter into a formal lease (which was not suggested to be material for present purposes), provided that the bungalow was to be "a property acceptable to[the first defenders]". That qualification, which was in turn accepted, does not, however, in my view render the option consideration uncertain. All it does it to narrow the class by adjecting a further criterion, namely, acceptability to the first defenders. That term thus conferred on the first defenders the right, exercisable in good faith, to exclude from the class of otherwise qualifying property a property which was not acceptable to them. The exercise of that right required no agreement by the pursuers.

[17] The manner in which a particular property came to be identified was not, in my view, important and did not require to be prescribed. It would seem sensible that, as in fact happened, the first defenders took the initiative in the matter. But a candidate might equally have been found by the pursuers. Once either party had found a candidate, the communications thereafter between them would not, in my view, have required further agreement - in the sense of an agreement necessary to render the provision in the missives certain; such communication would have involved implementation of an already certain agreement. If a property satisfying all the criteria were identified but the pursuers refused to provide it, the first defenders would, at least in ordinary circumstances, have a remedy in specific implement. The form of the remedy available would, however, depend on the particular circumstances in which the refusal to provide arose. In some circumstances (for example, where the property identified was owned by a third party who refused to sell it to the pursuers) the court might decline to grant specific implement - either because it held that there was an implied term that the first defenders would not insist on having such a property provided or because it held that in such circumstances the appropriate remedy of the first defenders lay in damages. In other circumstances (such as where the pursuers merely protested that the provision of the particular property would be inconvenient or financially disadvantageous to them), it is likely that the court would grant decree of specific implement. It is, in my view, unnecessary to speculate about all the possible situations which might occur. That some of these might hypothetically give rise to some practical difficulties does not, in my view, deprive the missives of the required certainty in relation to price. The court, while being astute not to make a contract for the parties or otherwise to go outside the words used, is entitled in circumstances such as the present to draw appropriate implications of law "as, for instance, the implication of what is just and reasonable to be ascertained by the Court as a matter of machinery where the contractual intention is clear but the contract is silent on some detail" (Hillas & Co Ltd v Arcos Ltd, per Lord Wright at pp. 367). It may also be that the courts are readier to do so where the agreement has been partially implemented (F & G Sykes (Wessex) Ltd v Fine Fare Ltd, per Lord Denning, MR at p.57-8). Where machinery for ascertainment of the price is provided, albeit not in elaborate detail, the court should not, in my view, hold the provision ineffectual unless it appears that under it the price could not, even with the adjection, if necessary, of appropriate implications of law, be made certain.

[17] The essential issue turns, as Lord Mackay submitted, on the construction of the missives. The fact that the pursuers have set out on averment how the machinery might operate does not mean that that is the only possible mode of its operation. Nor do the pursuers have, in my view, an obligation to set out on averment all other possible modes.

[18] I should add that the pursuers also have an averment to the effect that, if the provisions as to identification of the option price were ambiguous, that ambiguity was cured by the subsequent actings of the parties. This was not the subject of argument before me and I say nothing about it.

[19] I shall for those reasons refuse the defenders' motion for dismissal of the action and allow to parties a proof before answer of their respective averments. The case will be put out By Order to discuss preparations for that proof.