Park Lane Ventures Ltd v Locke & Anor [2006] EWHC 1578 (Ch)

Case No 5BM30105

[2006] EWHC 1578 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue BIRMINGHAM DISTRICT REGISTRY, Royal Courts of Justice, Strand, London, WC2A 2LL

Date Thursday 29 th June 2006

Before

Mr JOHN RANDALL QC

Between

PARK LANE VENTURES LIMITEDClaimant

(In Administrative Receivership)Claimant

B E T W E E N :

- and –

Between

IAN KELVIN LOCKE (2) DAWN SMALLMANDefendant

Mr Robert Sterling of Counsel, instructed by Turner Parkinson, Solicitors of Manchester M3, appeared for Claimants

The Defendants appeared in person for in person

Hearing Hearing dates : 15 th- 17 th and 31 st May 2006 (in Birmingham)

JUDGMENT

The Deputy Judge :

[1]These proceedings are brought by Park Lane Ventures Limited, a company which entered Administrative Receivership on 10 December 2001 (“the Company”) to enforce the second of two parts of an alleged option agreement dated 10January 2000 and made between the Company and the Defendants. The Company is unable to produce the original of such agreement, and therefore relies on a copy thereof together with witness evidence in support thereof. On its application a caution was registered at HM Land Registry (“HMLR”) to protect the same on 21 June 2002. This has survived an application by the Defendants to HMLR for its cancellation or ‘warning off’, and subsists. The Company seeks primarily an order for Specific Performance, but also other relief including in particular damages.

[2]The Defendants by their hand-written Defence (on a pro-forma headed ‘Defence and Counterclaim’) deny that the agreement alleged by the Company was ever signed (averring that only a very different agreement was ever signed), and alternatively contend that, even if it was, the Company in any case broke various obligations it undertook, such as (one way or another) to preclude it from enforcing the second part.

[3]Although no counterclaim was put forward as such in the Defendants’ hand-written pleading, the Company (recognising the Defendants’ difficulties acting in person, and notwithstanding that they have clearly obtained legal assistance in connection with their defence of these proceedings from time to time) has very fairly not taken any pleading point in that regard. I therefore treat there as being before me a counterclaim by the Defendants for damages in respect of the said alleged breaches (given that the Company is in Administrative Receivership, a mandatory order to carry out the outstanding work, as sought in their written closing submission, is unrealistic in any event) and for an order vacating the caution.

The issues in more detail

[4]The alleged option agreement comprised 17 pages of text, a copy of which forms exhibit RJ2 to the witness statement of Mr Jenking [A/50-66] (to which 17 pages I shall refer as simply “RJ2”) plus 2 plans (together “the Copy Option”), and relates to 2 parcels of land, designated Parcels A and B. Parcel A comprised all of a plot of open land at 18-20 Avon Street, Sparkhill, Birmingham (registered title number WK84356 [B/87-89]; “18-20”), of which the First Defendant (“Mr Locke”) was the registered freehold proprietor, free of mortgage, together with a triangle of land from the northern corner of the back garden of the neighbouring property, 16 Avon Street (“number 16”). Number 16 (registered title number WK193164 [B/429-435]) essentially comprises a house and back garden, and is the home of Mr Locke, his wife the Second Defendant, who chooses to use her maiden name (“Miss Smallman”), and their 3 children. Miss Smallman is the registered freehold proprietor, subject to a Building Society mortgage, of number 16. Parcel B comprised all of number 16, less (by obvious and necessary implication) such part thereof as has already been transferred pursuant to the first part of the option, within Parcel A. The Options in respect of these parcels were respectively designated Option A and Option B.

[5]The Company’s case is that, in accordance with its express terms, Option A was exercisable up to and including 4 November 2000, and Option B up to and including 4 November 2004 (the significance of those dates being anniversaries of the date in 1999 when agreement for the grant of such options is said to have been first reached, orally). The Claimant is thus able to contend that the service of notice in the contractually prescribed form, signed by one of its then directors Mr Robert Stevenson, on 23rd August 2000 [B/92] was a due exercise of its option in respect of Parcel A, and that the Transfer eventually entered into on 11 June 2001 was (subject to an intervening re-negotiation of the exact boundaries of the land thereby transferred) by way of completion of the contract thereby formed. Of most immediate relevance to the present proceedings, the Company also contends that service of notice in the contractually prescribed form, signed by its Administrative Receiver Mr Robert Cooksey, by solicitor’s letter dated 26 October 2004 [B/507.1-507.2] was a due exercise of its option in respect of Parcel B.

[6]The parties agree that an Option agreement was signed on 10 January 2000. However, whereas the Company (on whom the burden of proof lies) contends that its terms were as I have just outlined, the Defendants’ case (from a combination of their hand-written Defence and their witness statements) is that what was signed was limited to a 6 month option in respect of Parcela. A. It would follow that the Defendants were free of any such option from either 10 July 2000 or (if the 6 months were calculated from 4 November 1999) 4 May 2000, that they were thus under no obligation to enter into the said Transfer on 11 June 2001 (the first exercise notice not having been served until August 2000), and that they are not and never have been under any obligation to the Company in respect of Parcel

b. B. However the Defendants have not been able to produce a copy of any such Option agreement (or anything at all like it).

[7]Given that the present proceedings relate to Parcel B, it may be noted that although both Defendants entered into one Option agreement, so far as Parcel B is concerned the subject land is vested solely in Miss Smallman.

[8]Thus the first and most fundamental issue for me (issue (i)) is whether the Company has discharged the burden of proving that the Copy Option (which most importantly includes Option B) was ever entered into.

[9]Should the Company succeed on that issue, the Defence raises three other points which I must consider:9.1 (issue (ii)) has the Copy Option been terminated on the basis of the Company’s repudiatory conduct?

9.2 (issue (iii)) was it a condition precedent to the exercise of Option B that all the Company’s obligations in relation to Parcel A, and in particular the carrying out of the ‘Accommodation Works’ set out in the Second Schedule, should first have been discharged? and

9.3 (issue (iv)) does the Company’s (admitted) failure to perform a collateral contractual obligation to make good/renew the external rendering to the flank gable wall of number 16 (i.e. that facing the access formed over Parcel A), or otherwise satisfactorily to weather proof that wall to the reasonable satisfaction of Mr Locke, operate as any form of defence?

[10]I think it appropriate, given that the Defendants are unrepresented, also to consider whether, in the light of various points which were raised or emerged during the hearing, the remedy of Specific Performance should be refused as a matter of judicial discretion (issue (v)).

[11]As for the deemed counterclaim, resolution of the above questions will resolve the question of whether the caution over number 16 should be vacated. However it also raises a sixth issue of what, if any, damages I should award for the late performance of the Accommodation Works and the non-performance of the collateral obligation in respect of the flank gable wall (issue (vi)).

The witnesses

[12]The oral examination of the 6 witnesses who gave testimony before me was in substantial part a difficult and at times highly charged process. The fact that the Defendants were representing themselves (generally through Mr Locke, although I confirmed directly with Miss Smallman at appropriate points that she was content with what had been said and done) did not help, as judicial intervention was required to avoid the quite frequent risk of the process becoming unduly heated, and to ensure that the Defendants not only put their case as appropriate to the Company’s witnesses (in particular, Mr Jenking), but also did themselves justice in answering Mr Sterling’s questions. Those questions, despite consistently being posed in a moderate and non-confrontational manner, nevertheless often provoked emotional responses which did more to illustrate how deeply the Defendants felt about the possible outcome of the case than to express the answer which they would really have wished to give upon calm reflection. What would normally be an undesirably high level of judicial intervention during the oral evidence resulted. If anyone was disadvantaged as a result it was the ever patient Mr Sterling. However for the reasons indicated I am confident that the process of cross-examination would have been less constructive or revealing than it was had I allowed it to proceed with significantly less intervention.

[13]I will give my findings in respect of the witnesses in the order in which they were called.

[14]Mr Richard Jenking was formerly employed by the Company as its Construction Director, though he was not in fact a formally appointed director. The moderate and thoughtful manner in which he gave his evidence, and the way in which it fitted in with the available contemporary documents, impressed me. He did not demonstrate any undue loyalty to the interests of the Company, nor any inappropriate hostility towards the Defendants. I find him to have been a reliable witness.

[15]Mr Kevin Looby is a Solicitor and a partner in the Blackpool firm now known as Warings. He gave his oral evidence with appropriate care, and again it fitted in with the available contemporary documents. I find him too to have been a reliable witness.

[16]Mr Rodney Ashford FRICS is a sole practitioner working as a Quantity Surveyor and Construction Cost Manager in the West Midlands. He evinced signs of having become deeply irritated with the Company, no doubt as a result of his dealings with them while he was acting on behalf of Friendship Housing and Care (a Housing Association subsequently renamed fch Housing and Care, and to which I will refer as simply “the Association”) and the Company was facing impending insolvency. His witness statement included a number of serious allegations against the “Directors and Shadow Directors” of the Company which were not directly relevant to the matters in issue before me. I think it right to approach any controversial parts of his evidence with some caution, although in the event the principal importance of his evidence was limited to providing some of the background to the Company’s breaches of its obligations in respect of the Accommodation Works and the flank gable wall, and some actual or estimated costs in respect of the same, in respect of which it was not materially challenged.

[17]Mr Robert Stevenson FRICS, a former director of the Company, was made the subject of a witness summons on behalf of the Defendants. His unexpected non-attendance on the first day of the trial, when the evidence of both Mr Jenking and Mr Looby (with both of whom he dealt at the material time) was taken and completed, caused them some concern. Athough at the commencement of the proceedings on day 2 they told me he was 10-15 minutes away, in the event he attended much later that morning. In the event he attended late that morning. When he gave evidence he explained this by reference to suffering ill-health, an explanation to which he also resorted on a number of other occasions during his evidence. He demonstrated a high level of animosity towards the Company. The inclusion of the first sentence of paragraph 5.0 in his first witness statement as to the motives for the inclusion of the benefit of the Parcel B option in the Company’s Statement of Affairs, when it later turned out (on his own answers in cross-examination) that he had no knowledge of or involvement in its preparation whatever, having resigned his directorship several months earlier, affords but one illustration of this.

[18]Mr Stevenson gave evidence principally as to issue (i), including the assertion (contrary to Mr Jenking’s recollection, but supported by that of both Defendants) that he was present when an option agreement was signed on 10 January 2000. On the first morning of the trial I allowed the Defendants’ application for permission to adduce a late, second witness statement of Mr Stevenson to the extent of admitting paragraphs 1, 7 (first sentence) and 8-12, being those going to the issues before me. Having considered his position overnight, Mr Locke did not pursue his application for permission to adduce the remainder. Mr Stevenson told me that he prepared his own first witness statement, which was initially provided to the Company’s present solicitors, though at the time he had access to few documents (he confirmed in cross-examination that one he did have was RJ2). Nevertheless, his use of the phrase “the Defendants might well be correct in what they say” (in paragraph 3.0) as to their denial that they ever entered into an option to sell number 16 sits very uneasily with the evidence he gave in his second witness statement (paragraph 12) and orally, none of which later versions were materially supported by the available documents. In his second witness statement (paragraph 12) he stated that the signed agreement “was limited [to] an option in respect of Parcel A because Mr Locke had become concerned as to the implications of such a long term commitment and that he did not fully understand it’s [sic] legal implications … any reference to Option B was deleted.” In his oral evidence on Day 2 he volunteered an extended and graphic description of large parts of what had been a lengthy typed agreement, prepared by him, being manually deleted at the meeting which ended in its signature. However when confronted with his own letter to Mr Looby of 13 October 2000 [B/86], Mr Looby’s evidence (supported by his production of his original file, the presence of the original copy document a photocopy of which forms RJ2, and the absence of any copy agreement with extensive - or indeed any – manuscript amendments to the text other than the date above the signatures), and then his own letter to Mr Looby of 25 October 2000 (see esp. para. iii) [B/100] he was lost for sensible answers (though he continued to answer at length), and at one point even resorted to asserting (an answer confirmed in repetition to me) that he thought it would be of no concern to a careful conveyancing solicitor to know that large parts of the contract he was sent had been deleted before signature! During the next morning (day 3), having arrived slightly late, his evidence dramatically changed. He claimed that, having thought about it again, there had been no such exercise of whole-scale deletion, and that what had happened was that an additional sentence or two to the effect that Parcel B did not form part of the agreement had been added in manuscript to one of the typed pages,. He asserted (quite unfairly and inaccurately) that the previous day he had been “pressed” to answer questions and had not had time to give properly considered answers. He accepted that there was nothing of this latest version in either of his witness statements. I would observe that it still failed to explain either the form of the enclosure with his letter to Mr Looby of 13 October 2000 or the terms of para iii of his letter of 25 October 2000.

[19]I was very troubled by the performance of Mr Stevenson, the holder of a respected professional qualification, in the witness box, and particularly by the evidence he gave as to the form and signature of the agreement of 10 January 2000. In his closing submissions Mr Locke for the Defendants realistically acknowledged that Mr Stevenson had been a difficult witness. I find Mr Stevenson to have been a loquacious, and at times self-absorbed and self-indulgent, witness, who had so allied himself with the cause of the Defendants (his strong hostility towards the Company being his only motivation for so doing known to me) that his answers were driven by a far greater concern to support that cause than any concern accurately to recall events as they in fact occurred, or properly to consider the obvious purport of documents placed before him. It would be wrong to attach any weight to the controversial parts of his evidence, and as will be clear from my findings of fact below there is much of it that I reject.

[20]I should add that, where my findings in some limited respects accept evidence of Mr Stevenson (e.g. as to his colouring plans with watercolours), I have borne in mind the thrust of Mr Locke’s submission that the Company should not be permitted to be selective in its criticisms of Mr Stevenson’s credibility. I approach all Mr Stevenson’s evidence on the basis of my foregoing findings about it. However it does not follow that every single thing he said, whether or not controversial, was inaccurate or should be rejected merely because it came from him.

[21]Miss Smallman was a pleasant but somewhat highly strung witness, who on at least one occasion emphasised her answer by banging the witness box with her hand, and it took little to cause her to react to Mr Sterling’s moderately framed questions. Mr Locke was so concerned for his wife’s welfare that on several such occasions he rose to his feet. I can well understand his concern, given that his wife suffered a heart attack in mid November 1999, aged only 38 at the time. Thereafter, she largely left dealings with land matters to her husband, and the reality is that she had little first hand involvement thereafter on which to found any reliable recollection of events themselves or of the sequence in which they occurred. I am sure that the knowledge that a case was pending in which the future ownership of her family home was at stake must have been very stressful for her, and the immediacy of the trial process all the more so. Miss Smallman has become convinced that after her heart attack she would never have contemplated agreeing to the sale of her house, and gave evidence accordingly. In her favour, I should note that she has been consistent in her essential account of matters (that the triangle was the only part of number 16 ever included in an option) since at least July 2002 when she spoke to Mr Palmizi of HMLR [B/459]. However when it came to testing that account, including passages in her witness statement, by reference to details she struggled, and she had no recollection of the figures initially discussed (which were uncontroversial in themselves), as evidenced by the letter from Mr Jenking to Mr Locke of 13 October 1999. I find Miss Smallman’s recollections of the relevant events between October 1999 and the Transfer of June 2001 to be unreliable (notwithstanding her somewhat blunt observation that she had suffered “a heart attack, not brain damage”), and the result of wishful thinking over subsequent years.

[22]Mr Locke was a forceful witness, who had a tendency immediately to disagree with suggestions put to him by Mr Sterling. My clear impression was that such disagreement was often more a reflection of the fact that the suggestion came from his opponents in the litigation than of his considered response to the question on its merits. I intervened a number of times to encourage him to try to give more considered responses.

[23]As to the central issue, Mr Locke has given a number of different versions of events, and did not give any satisfactory explanation of those differences in his answers to cross-examination. It is noteworthy that :23.1 The letter dated 19 July 2002, handwritten by Mr Locke on behalf of his wife (who may well have been the signatory – the foot of the copy letter is cut off) [B/455 & 460] in response to HMLR’s letter of the previous day enclosing a copy of RJ2 [B/453-4] (which had been lodged in support of the caution), contains no direct denial that a document such as that enclosed by HMLR had been signed;

23.2 When Mr Locke visited HMLR on 28 August 2002 (as evidenced by the letter to Mr Looby from Mr Palmizi at HMLR written the following day [B/475-6]), his response to being confronted with RJ2 was not to dispute the authenticity of what he was shown, but rather to assert that “there was a further page where specific reference was made to the exclusion of the options as to parcel ‘B’ ”. When this passage from Mr Palmizi’s letter was put to Mr Locke in cross-examination he did not directly dispute the accuracy of its contents, but sought to explain it by suggesting (I summarise) that he may not have put his points over to Mr Palmizi as clearly as he would have wished. I would also observe that Mr Palmizi’s letter was concurrently copied to Miss Smallman [B/474], but neither Defendant refuted it at the time as an inaccurate summary of what they were saying;

23.3 When Mr Locke telephoned the Company’s present solicitors on 1 November 2004 in response to the exercise notice in respect of Option B, he asserted first that Option B had lapsed as a result of the Company’s non-compliance with its obligations upon the exercise of Option A, and second that he had only agreed to finalize the sale in respect of Parcel A on the understanding that no right of action would then exist in relation to Parcel B (Attendance Note at B/508, accepted by Mr Locke in cross-examination as accurate);

23.4 Mr Locke’s witness statement at para. 15 [A/108] asserted that the Option agreement which was signed was “a several page A4 size document”, which he orally confirmed meant a document a few pages long, far shorter and less detailed than the 17 page RJ2 (with or without plans). It said nothing of an extra page excluding Parcel B nor of any manuscript amendments other than that to the date on the signature page.

[24]Mr Locke’s recollection of documents and events has been unduly influenced by his re-reading of various documents (he has plainly spent some time poring over them) and picking up on particular features or passages which have appeared to be (in themselves) helpful to the Defendants’ cause. An example is the reference in the letter of 13 October 1999 [B/1] to a 6 month option period. He has convinced himself that the document he and Miss Smallman ultimately signed was for only 6 months, despite the fact that two surviving (and undoubtedly later) versions of the option refer to longer option periods (12 months and 5 years from 4 November 1999), and that even Mr Stevenson’s second witness statement (which the Defendants were so keen to have admitted in evidence) differed from his recollection and asserted that the option period in respect of Parcel A had been 12 months, not six [para. 10, A/140].

[25]I do not find that when Mr Locke signed his witness statement or gave his oral evidence he was consciously trying to mislead the Court. However notwithstanding the force and conviction with which it was delivered, I have to treat Mr Locke’s evidence of recollection at best with considerable caution. In a number of places I have to reject it as unreliable. As with Miss Smallman’s, it has been influenced by wishful thinking over subsequent years.

The law – secondary evidence of a private document

[26]As is well known, the law is that for such an agreement to be valid it must be “made in writing” (s.2, Law of Property (Miscellaneous Provisions) Act 1989, “the 1989 Act”). However, notwithstanding that the document here relied on was drafted with the intention that it be executed as a Deed (see clause 11 and the form of the signature page), the law does not require that it be made by Deed (as to which see the provisions of s.1 of the 1989 Act) in order to be valid.

[27]Thus the Company has to prove that the Copy Option was entered into, even though it is unable to produce the original or, to put it another way, unable to adduce the ‘best evidence’ that this occurred.

[28]I take the modern law on proving private documents by ‘secondary evidence’ from Halsbury’s Laws of England, 4th ed., vol. 17(1) (2002 reissue), under the title ‘Evidence’ at paras. 412-414, 815 and 817, to which I refer for their full text without lengthening this judgment by setting it out in full. In essence, to act on secondary evidence I must be satisfied that the document existed, that it has been lost or destroyed (i.e. the original document or ‘primary evidence’ is not available), and that a reasonable explanation for this has been given. For this purpose I must judge whether a sufficient search has been made, and do so according to the particular circumstances of the case.

The Facts

[29]Mr Locke and Miss Smallman have been married for 12 years or so.

[30]In April 1987 Mr Locke was registered at HMLR as the proprietor with title absolute of number 16 [B/321].

[31]Miss Smallman seems to have acquired number 16 from Mr Locke on or about 30 October 1989, with the assistance of a mortgage from the Halifax Building Society (“the Halifax”), and became the registered proprietor thereof with title absolute on 22 November of that year [see B/320-324, B/430-433]. I do not know what she paid for it.

[32]Mr Locke acquired 18-20 by Transfer from Birmingham City Council dated 13 March 1996, subject to restrictive covenants which limited its use to garden land and parking. He became the registered proprietor thereof with title absolute on 10 September of that year [see B/87-89]. I do not know what he paid for it, but one would expect that the price duly reflected the said restrictions on its use. As well as being in effect an extensive side garden for number 16, Mr Locke used 18-20 as a location on which to keep two particularly valued poseessions, namely a (still mobile) military Scout Car and a substantial steel container (dimensions approximately 6m x 2.5m) which he used for a workshop and store.

[33]In or about 1999 the Company, through Mr Jenking, became interested in obtaining the design and build work for a proposed development by the Association at the corner of Baker Street and Warwick Road in Sparkhill, which was close to the Defendants’ said properties, to their east (“the Baker Street development”). The site had access difficulties, and its development potential could be improved if access could be obtained to its rear, from Avon Street. Mr Jenking had a look at the land involved, and probably first met one of the Defendants when peering over the back fence of number 16. The vacant plot 18-20 was the obvious basis for an access route (at least to those unaware of the restrictive covenant), but the layout was such that any such access would require at least a corner from the garden of number 16 to complete its required route. The plans (both dated ‘Oct 99’) at B/2 and B/3 afford a convenient indication of the sort of development, so accessed, which was then contemplated, although the exact detail of the proposal varied over time (see also the Architects’ plan of March or April 2000 at B/434).

[34]On (Friday) 8 October 1999 Mr Jenking met the Defendants at their home, and wrote a follow-up letter to Mr Locke on Wednesday 13 October [B/1]. It evidences that the meeting was cordial, that the option period then being suggested by the Company was 6 months, that a non-returnable option fee of £500 was offered, and that 2 possible options were discussed ‘subject to contract’, either for the purchase of all number 16 and 18-20 at £56,000, or for the purchase of all of 18-20 and a ‘splay’ from the rear garden of number 16 at £18,500. Mr Locke made it clear from this early stage that it was most a crucial requirement for him that sufficient curtilage be left in number 16 to accommodate his scout car and steel container, both of which were then located on 18-20. I have no direct evidence of market values at the time, and it would seem inherently likely that the Company would have allowed itself some room for manoeuvre in its negotiations (at least as to the aggregate figure) when making what appears to have been its initial offer; indeed, it did in the event contract at a total of £60,000 for the whole. However given that (as the Defendants stressed a number of times) the Company was clearly keen (they put it more strongly) to secure the access from Avon Street if at all possible, it is inherently unlikely that it would have made offers significantly below market value. This view is supported by the evidence of Mr Stevenson, in his first witness statement, that the cost of the requisite works to the flank gable wall (which I consider further, below) at the date of transfer of the access land (which was June 2001) “would have represented a sum in the order of 25%-30% of the market value of the property” [i.e. number 16]. Applying Mr Ashford’s figure for those works in 2002 of £7,500 (the figure nearest in time available to me), this would suggest a market value for number 16 in the region of £25,000 to £30,000 (albeit, this being by its nature a very ‘rough and ready’ exercise).

[35]The letter also evidences that the Company offered to meet the Defendants’ legal fees, up to a maximum of £350. With hindsight, the Defendants may regret not taking legal advice (which, at least if an agreement had resulted, could have been at the Company’s expense) at this stage. However the offer was undoubtedly made. From Mr Jenking’s oral evidence during cross-examination, which was not challenged by Mr Locke, this was not the first property transaction Mr Locke had undertaken independently of his own home.

[36]Shortly afterwards, the Company obtained from HMLR the plan (dated 22 October 1999) of the title to number 16, which was to a scale of 1/1250 on an Ordnance Survey base, and showed the surrounding area including Warwick Road (and properties to its south), Baker Street (and properties to its west) and Avon Street (and properties on both sides; those with which I am concerned are to its north) [B/484] (“the 1/1250 plan”). Mr Stevenson confirmed that the Company had an account with HMLR, and was experienced in obtaining such plans for itself. There is nothing to indicate that the Company obtained anything more than plans at that stage, and therefore did not learn of the restrictive covenant affecting 18-20

[37]Mr Jenking’s evidence is that he had a further meeting with the Defendants on (Thursday) 4th November 1999, and that an oral agreement (reflected in the terms of the Copy Option with its 2 plans) was reached on that day. As to the date of this meeting (which is not in itself actively disputed by the Defendants), I accept Mr Jenking’s evidence, supported as it is by the use of 4th November 1999 as the date from which the periods of 12 months and 5 years in RJ2 are calculated. No other explanation for such use of that date has been suggested.

[38]As to whether an oral agreement was then reached, I again accept Mr Jenking’s evidence. How far the drafting up of such an agreement had been progressed prior to 4th November 1999 is unclear. However the essence of the agreement was quite straightforward. There were to be 2 options, designated A and B. In accordance with the Defendants’ wishes, the amount of money to be paid ‘up front’ for the access land only (the subject of Option A) was markedly increased, from the initially offered £18,500 to £30,000. The option period in respect of the access land was to be 12 months from that date. The aggregate to be paid if the Company chose to acquire the house and remainder of number 16 as well (the subject of Option B) was more modestly increased, from the initially offered £56,000 to £60,000. The period for Option B (which could only be exercised after Option A) was to be 5 years from that date. It was further agreed that if the Company exercised Option B before the end of that period, the Defendants should have the right to postpone its operation, up to the end of that period, i.e. 4November 2004. This further term was plainly intended to benefit the Defendants (after all, the Company could choose when – if at all - within the 5 year period it exercised Option B) and, for example, could be used to give them and their family time to plan for their move. Unfortunately for the Defendants, they do not appear to have thought of the desirability of seeking some form of indexation of the amount payable upon an exercise of Option B, given that 5 years is a lengthy period in the property market. Had they taken legal advice, a competent and careful solicitor would have raised this point.

[39]As Mr Jenking recognised, a written agreement was required, and such preparatory work for it as had not already been done was then carried out. This was dealt with by Mr Stevenson, who put his own name on the frontsheet. He used as his starting point or ‘precedent’ an option agreement which Mr Looby had previously drafted for the Company in relation to a different site. Although one earlier version survives [B/43-57] (which is unlikely to have been the first draft), the final version of the text he prepared was that comprised in RJ2. It may be noted that the typed provision for dating of the document on the signature page [A/60] included (in words) 1999 as the year. All that really indicates is that work on the typed text started in 1999 – the text is likely to have been finalised in early 2000, a few days before the Copy Option was signed on 10 January (the Company was keen to progress matters to the signature stage, and I consider it unlikely that the final draft had been produced before New Year, yet ‘sat around’ for 10 days plus). On 10 January 2000 Mr Locke noticed that the year was (now) wrong, and made the appropriate correction in manuscript, when or just before signing the Copy Option.

[40]Mr Stevenson had also prepared plans to be incorporated therein, in each case colouring the same by use of watercolours. For one (required “for identification purposes only” in the parcels clauses in the First Schedule) he used the 1:1250 plan as his base, colouring number 16 green and 18-20 red [B/484] (“Option Plan 1”). The other plan required by the text of RJ2 (see both the parcels clause as to Parcel A, and the provision for Accommodation Works in relation thereto in paras 2(i)(ii)(iii) of the Second Schedule) was a “1:500 site plan”, required to be coloured (in part) blue and yellow, and to be marked with points A and B and the location of a pathway crossover. Somewhat confusingly, there are two candidates for this plan (“Option Plan 2”) within the four copy plans later provided to Mr Looby by the Company under cover of its letter dated 30 August 2002 [B/480-484]. One [B/483] is to the scale 1:500 (as Mr Stevenson has endorsed on it in manuscript), has a triangle of land coloured blue (Mr Stevenson thought in watercolour, which he used), and points A and B endorsed. However it includes no yellow colouring, nor any reference to the location of a pathway crossover. The other [B/482] is marked as to the scale 1:200 (which does not correspond with the references in the text of RJ2 to “1:500”), but does include all the colouring required i.e. both blue and yellow (again Mr Stevenson thought both were in watercolour) and all the indorsements required (albeit, as to the pathway crossover, that it not only shows a location aligning with gates into number 16, but also bears the caption “Final position of gates & crossover to be agreed on site”). Although at one point Mr Sterling suggested to Mr Stevenson that plans B/483 and B/484 went with the Option agreement and obtained the answer “could well be”, I have concluded and find that (by 10 January 2000) it was plan B/482 (not B/483) which formed Option Plan 2. Just before the answer I have quoted, Mr Stevenson had said that he could not recall which of B/482 and B/483 had preceded which. Both these plans (unlike B/481) were coloured up in his way, using watercolours. The draft text of RJ2 developed over a period of weeks. When it was first produced, reference to the scale 1:500 was included. At that stage it is logical to think that plan B/483 was the one intended to be used, and I know of no other reason why Mr Stevenson would himself have used blue watercolour and indorsed points A and B on that plan. Equally, had yellow colouring and the position of a pathway crossover been required when he produced B/483, they would have been included. However as the text developed (and by the time document 9 mentioned below had been produced) the additional requirements of yellow colouring and a position for the pathway crossover were added, and these markings related to matters included (added) for the benefit of the Defendants. I am confident that they (Mr Locke in particular) would have required a plan which depicted those additional features (the Defendants took an interest in plans), and it is significant that it was a copy of plan B/482 (not B/483) which was provided to Michael Lee & Co when the Defendants first instructed them (see further below), and which that firm included in draft contracts sent out on 24 October 2000 (dealt with further, below). Plan B/483 was unsuited (not least being to too small a scale) to have those additional features (particularly the yellow colouring) added to it, and I infer that a new, larger scale plan (extracted, as Mr Stevenson said, from an architect’s drawing) was therefore adopted and all the necessary colouring and markings indorsed on it. That became B/482. There would be no reason for Mr Stevenson to have used his blue and yellow watercolours on any such extracted plan earlier than when the text of the draft option agreement came to require it, and he said nothing in his evidence to suggest that this work was done later (i.e. after 10 January 2000), whether retrospectively to remedy an omission, or as part of the re-negotiation of exact boundaries which preceded the Transfer of Parcel A in 2001. The one relevant slip that was made (and I am satisfied that is all it was) was that when the new, larger scale and more detailed plan was adopted in order to meet all the requirements of the developed draft, the existing references in earlier drafts to a 1:500 plan were not updated so as to refer to a 1:200 plan (just as the typed date on the signature page had not been updated after the turn of the year). The parties all understood that the plans referred to were B/484 and B/482, those are the plans which formed part of the Copy Option when signed on 10 January 2000, and given the need for yellow as well as blue colouring, and a location for the pathway crossover, the mistaken (in the sense of outdated or superceded) reference to a scale of 1:500 was and is readily capable of “correction” as a matter of construction of the document, without the need for any rectification.

[41]Within a few days, an application was lodged by the Association for planning permission for the Baker Street development, based on access from Avon Street [B/5-6]. Hence the Company clearly had a strong commercial incentive promptly to secure a written, binding option over the access land.

[42]On or about 16 November Miss Smallman suffered her heart attack as I have already mentioned, and thereafter Mr Locke in accordance with her wishes very much took responsibility for dealings with the Company.

[43]There were continuing dealings, at a number of meetings (whether casual or pre-arranged), between the parties over the period after 8 October 1999 and before 10 January 2000, in addition to the meeting of 4 November. However these meetings are not formally or otherwise recorded. During the course of them the split in prices between Parcels A and B was discussed. As Mr Jenking said, Mr Locke expressed concern that if Parcel A was taken, there would be resultant devaluation of the house/Parcel B, and wanted a greater proportion of the total price than the originally offered £18,500 “up front”. He/the Company would not agree to that unless they were sure that the Company had the right to buy the house/Parcel B as well at a later date. I accept Mr Jenking’s evidence (contrary to that of both Defendants) that at no stage between Miss Smallman’s heart attack and 10 January 2000 did she say to him that there was no way she was moving anywhere. Had that been said, the parties would have pursued the first alternative canvassed in the letter of 13 October 1999, namely an option in respect of Parcel A only (as the Defendants say happened). I reject the account of the sequence of the negotiations set out in paragraphs 9, 10 and 14 of Mr Locke’s witness statement and paragraph 3 of Miss Smallman’s witness statement as inaccurate recollections.

[44]Mr Jenking took the original of the Copy Option to the Defendants’ home on 10 January 2000. They both signed a single copy of it, and he ‘witnessed’ their signatures by writing his name under their signatures. The only change made in manuscript to the typed text was Mr Locke’s correction of the year on the signature page (to 2000). The document comprised the 17 pages (including a front sheet) of RJ2 together with the 2 Option Plans, stapled together (see further below). Mr Jenking paid the £500 (or £501, if anyone remembered to follow the revised wording of clause 2 in that regard, which seems unlikely), possibly in cash. Those are my findings, whether or not Mr Stevenson was also present. As follows from those findings, I reject each of the various alternative accounts which, if accurate, would have meant that whatever was signed extended only to Parcel A, including that there were wholescale manuscript deletions made before signature, that a couple of extra sentences to that effect were added either on an additional page or in some available space on one of the typed pages, and that only an entirely different and much shorter document giving only a 6 month option in respect of Parcel A (of which no copy or draft survives) was signed.

[45]However, in case it should matter, I will address the disputed question of whether Mr Stevenson was also present on 10 January. Mr Jenking had no recollection of his presence, and thought that the document he took may already have been signed by Mr Stevenson [A/44]. He could not recall one way or the other whether he had written his name below Mr Stevenson’s signature when that signature was first applied or (which assumed it to be different) at the same time as writing it below the Defendants’ signatures (for the reasons given above, it does not matter whether the Copy Option was executed as a Deed, and hence whether the formal requirements as to attestation prescribed by s.1(3)(a)(i) and (b) of the 1989 Act were complied with). Mr Stevenson and both Defendants gave evidence that Mr Stevenson was present. However Mr Stevenson’s first witness statement makes no mention of his having been present on the one occasion when a document was signed by the Defendants, and his use of the phrase “might well be correct” in para. 3.0 thereof tends to suggest that he had no definite first hand knowledge of what they signed. Though his second statement unambiguously asserts his presence, this is directly linked to his assertion that “any reference to Option B was deleted”, which I am quite sure is not what happened. For the reasons I have indicated above, I attach no weight to Mr Stevenson’s evidence that he was present. The Defendants both said that Mr Stevenson was first introduced to them by Mr Jenking on 10 January 2000. I do not think they were deliberately seeking to mislead me, or inventing a meeting with Mr Stevenson at their home. The question, therefore, is whether they were right, or whether they were confusing 10 January 2000 (when the document was signed) with another, earlier meeting at their home about the transaction. I take the latter view. Not only does this accord with my general preference for the evidence of Mr Jenking (whose recollection was that Mr Stevenson had previously been to see the Defendants for discussions about the proposed agreement, and who was “fairly sure” that the Defendants had seen the “whole document” prior to 10 January 2000, albeit not in his presence) but this also makes it easier to explain the fact of the Defendants’ physical possession of the document which they designated (for disclosure purposes) document 9 [B/43-57] (“document 9”), bearing what all agree is an original signature of Mr Stevenson (in blue ink), but no other manuscript entry on the signature page [see B/53, marked 9-10 by the Defendants]. It is likely that the meeting with Mr Stevenson present at their home which the Defendants can both recall was the meeting at which document 9 was discussed, which from the contents of the latter is likely to have been after 4 November 1999.

[46]Before the commencement of proceedings the Defendants already had document 9 (the pages of which, as I pointed out during the hearing, show no sign of ever having been stapled together) in their possession. Neither party has adduced any positive evidence of how this comes about, though the matter was explored in cross-examination of the Defendants. Again in case it should matter, I shall address the question. As I have mentioned, document 9 bears an original signature of Mr Stevenson (in blue ink), but no other manuscript entry, on the signature page [B/53]. For the avoidance of doubt, and as is apparent on non-expert inspection, that signature is not the same as that of which a copy appears on the signature page of RJ2 [A/60] (which is a copy of another, slightly different but also genuine, signature of Mr Stevenson’s). Although the pages of this document are generally similar to those of RJ2, a careful comparison shows document 9 to be a slightly different, and I am satisfied (contrary to Mr Locke’s belief) earlier, draft of the Option agreement. Not only are there page breaks in different places, but also the text in RJ2 has been revised in a number of places, including:46.1 near the commencement of the second (unnumbered) paragraph within clause 2, providing for additional, albeit in itself nominal (£1), consideration for Option B;

46.2 the word “prior” has been added to clause 3.2, making it clear that Option B may not be exercised before a purchase of Parcel A has been completed;

46.3 in clause 3.3, where greater particularity has been added as to the timing and form of any Counter Notice from the Defendants postponing implementation of any exercise of Option B (which ties in with the addition of an Annex E [A/65-66] - document 9 had ended at Annex D);

46.4 the expansion of clause 4 to create a new clause 4.2 dealing separately with (and refining) provision for the completion date in respect of Option B;

46.5 the expansion of clause 5, mainly by the creation of new sub-clauses in respect of the payment of a deposit in respect of (to put it simply) the exercise of Option B;

46.6 the expansion of paragraph 3(iv) in the Second Schedule entitling the Company to require the Defendants, to enter into a Deed of Easement in respect of the development to be carried out to the rear of number 16 (i.e. the Baker Street development), at any time up to completion thereof;

46.7 an Annex E was added, being a form of notice to be used by the Defendants should they wish to exercise their right to postpone implementation of an exercise of Option B;

46.8 a slip in the paragraph numbering of Option Notice A was corrected;

46.9 the heading of Annex D was changed from all upper case to only the letters A and D being in upper case, bringing it into line with the form of heading of Annex C (as well as the new Annex E). I note that the latter two changes (minor in themselves) would have been wholly illogical if document 8 had preceded document 9.

[47]I can see no logical reason why a copy agreement in the form of document 9 and bearing the signature of Mr Stevenson, or anything like it, should have been put to the Defendants after they signed an option agreement on 10 January 2000. I do not accept the suggestion in both Defendants’ witness statements that document 8 and document 9 (whether in that order or otherwise) were put to them by the Company in the summer of 2000 (see also further below, as to allowing a 6 month option period to expire). As I have mentioned, document 9 differs slightly but materially from that signed on 10 January 2000 (and nobody suggests that a new typed text was prepared during the course of negotiations on that day). I conclude that document 9 was a proposed text handed or sent to the Defendants some time after 4 November 1999 but prior to 10 January 2000. I would infer that it was signed by Mr Stevenson either before or possibly at the meeting with the Defendants at which it was discussed, in the hope (in the event unfulfilled) that the Defendants would agree it as drawn and sign it too.

[48]As Mr Stevenson signed document 9, and the Company was keen to conclude a signed agreement, it is likely that at least some of the changes were prompted by points raised by Mr Locke. One obvious possibility, given the changes that were then made, is that Mr Locke raised queries about the practical implications should the Defendants wish to exercise their right to postpone in respect of Parcel B. Whether or not that possible explanation for a number of the changes then made is correct, my conclusion as to the circumstances in which it came into existence and to be signed by Mr Stevenson are as I have stated. I would also observe that the fact of these relatively detailed refinements being made to the terms of the Option agreement after it had been drawn up so as already to include the 2 options designated A and B, exercise periods expiring on 4th November (in 2000 and 2004 respectively) and the £30,000 for Option A and £30,000 for Option B price structure (all of which is included in document 9), but prior to an Option agreement actually being signed by the Defendants, in itself militates against the Defendants’ version of events surrounding the signature of a document on 10 January 2000.

[49]It is noteworthy that the Defendants’ document 8 [B/27-42] (“document 8”) appears to be an effectively identical copy of RJ2 [A/50-66] save only for the absence of any signature page, and that the Defendants’ document 6 [B/7] (“document 6”) is a photocopy of the signature page effectively identical to that which appears in RJ2 [A/60]. When pressed as to how he came to have document 6 in his possession prior to disclosure taking place, Mr Locke first asserted that the Defendants had received document 6 from HMLR in 2002, and then that they had received it from the Company’s present solicitors (who, I was told by counsel on instructions, dispute this suggestion). I do not accept either of Mr Locke’s explanations, and find that these documents were in the Defendants’ possession prior to the commencement of these proceedings. As to the latter explanation, RJ2 (with or without a signature page) was not annexed to or otherwise physically incorporated into the Particulars of Claim, and no letter from the solicitors written prior to disclosure was produced to me either expressly or even impliedly suggesting that such a document was enclosed. As to the dealings with HMLR in 2002, Mr Locke identified the enclosures with their letter to Miss Smallman dated 29 August 2002 [B/474-477] as the source of document 6. However that copy of the signature page [B/477, and see also B/479] features a prominent black triangle to the top left (characteristic of photocopying of a document clipped to others) which runs very close to the start of the text, and continues below and to the left of it. That triangle cannot have been present on the original underlying document 6. With or without the physical evidence of the originals to which I will turn in a moment, I would infer that the most likely explanation of the Defendants’ physical possession of documents 6 and 8 (or else document 115, as to which see further below) prior to the commencement of these proceedings is that they together represented a copy of the Option agreement which they had signed on 10 January 2000, which was supplied to them by the Company shortly afterwards, as would have been proper, as Mr Locke stated in para. 15 of his witness statement that he could “clearly remember asking to be sent” (though he could “not recall ever receiving”) [A/108] and as Mr Stevenson at one point said that he thought he had done.

[50]Further, upon my non-expert physical examination of the originals of documents 6 and 8, there are clear indications that they started life stapled together, with document 6 (the signature page) located behind the Third Schedule and before Option Notice A (as in RJ2). The pages of document 8 down to the Third Schedule are punctured by a pair of staple holes which align. So is document 6. The remaining pages of document 8 are again punctuated by such a pair of staple holes, but in some cases also 1 or 2 inner holes (largest at the back page) consistent with the use of a heavy duty or longer staple the ends of which have been turned inwards. As one works back through the document from the final page [B/42] the inner holes become progressively smaller until 4 pages in (Annex C [B/39]) only one inner hole punctures the page with a discernible indentation aligning with the second inner hole in the pages below. Option Notice A [B/37] is the last (working from the back) page with a third, inner puncture – and that puncture hole is only small compared to those below it. The next 2 pages in (in the natural order) are the signature page (document 6 [B/7]) and then the Third Schedule [B/36]. In addition to the pair of aligning staple holes, there is in document 6 a discernible indentation aligning with the one small inner hole in the page below (Option Notice A [B/37]). Whilst I remind myself that I am not an expert document examiner, and that no such expert evidence has been called or tested by cross-examination in this case, I am satisfied that the physical features of the pages comprising documents 6 and 8 which I have endeavoured to describe are sufficiently clear on non-expert inspection to entitle me properly to conclude that document 6 started life stapled amongst the pages of document 8, positioned as I have indicated. Near the end of his oral evidence, in answer to questions from me about certain of the documents, Mr Locke himself stated that he definitely did separate out document 6 from another document. Although I cannot accept his evidence that the likely source of that other document was the Company’s present solicitors, I accept and find that he did separate document 6 out from another document. Contrary to Mr Locke’s further answer that he was sure that such other document was not document 8, I find that it was. It does not ultimately matter when and why Mr Locke detached document 6 from document 8, and started treating document 6 as a separate document.

[51]Also near the end of his oral evidence, Mr Locke produced from among the various documents the Defendants had with them a further effectively identical copy of RJ2, this time stapled together and complete. The cover sheet has been endorsed by Mr Locke with the hand printed caption “Copy of another agreement supposedly signed by I. Locke and D. Smallman, with Option Notice’s A & B and Annex’s C, D, E,”. Upon checking it was confirmed that this document had not previously been disclosed, and I therefore designated it “document 115” (the Defendants’ “additional disclosure list” [B/530] finishing at 114). Upon inspection, document 115 turned out to be (save for the said hand printed caption) an effectively identical copy of RJ2 [A/50-66], this time stapled together and complete, as well as (unlike documents 6 & 8) hole punched as for insertion in a ring or lever arch file. This may well be the copy of the option agreement lodged with HMLR in support of the caution which HMLR sent to Miss Smallman under cover of their letter dated 18 July 2002 [B/453-454]. The caption hand printed on the same suggests to me that it is more likely to have been so than documents 6 and 8 (though it ultimately matters not which was the copy first supplied by the Company, and which was the copy supplied by HMLR).

[52]Turning to the question of plans, Mr Jenking in his oral evidence, clarifying exactly what he had meant in paragraph 6 of his witness statement concerning the form of the agreement which was signed, said that there were plans attached, as there had been when he had seen it earlier, once prepared by Mr Stevenson. I accept that evidence. It would be strange if Mr Stevenson, having taken the trouble to mark up with watercolours plans for the purpose of incorporation into the option agreement, had not then attached them to the original he prepared for signature. It would be much less strange for him not to have taken the trouble to attach the duplicates he must also have similarly coloured up to either of the photocopies and/or duplicate prints subsequently taken of the signed document (i.e. those which became RJ2, and those which became documents 8 and 6). That, I find, is the explanation with regard to the plans. I would also observe that provided there were in existence, at the time of the document’s signature, plans which the parties understood and intended to be those referred to in the document itself (specifically coloured up for that purpose), as I find that there were, they would have been effectively incorporated into the signed document by express reference in any event (see s.2(2) of the 1989 Act). The Defendants took an interest in plans, and I am sure would not have signed the document they did without at least looking at and approving the coloured up plans, whether or not (as I find they were) they were physically attached to the document they signed. The availability to Michael Lee & Co on 24 October 2000 of a coloured copy of Option Plan 2 shows that the Defendants had a copy of at least that plan in their possession by that time. It must have come from the Company (the colouring having been carried out in watercolour by Mr Stevenson), and either was left with them on or before 10 January 2000 or accompanied the copy of RJ2 which I have found that the Company gave them shortly after that date.

[53]It is clear that Company entered into the Option agreement of 10 January 2000 unaware that 18-20 was subject to a restrictive covenant precluding its intended use as an access route, which strongly suggests that Mr Locke had either forgotten that fact or chosen not to mention it during the negotiations. Mr Locke’s witness statement (at para. 24) says that he was “completely unaware” that the covenant had been imposed. I take that as intended to mean that he had completely forgotten about it by 2000; if it was intended to mean that he had not known of it at the time of purchase in 1996, I would have found that to be most unlikely. In respect of the unknown existence of the restrictive covenant, it was the Company which suffered the consequences of not using solicitors in negotiating or entering into the Option agreement.

[54]A letter from Mr Jenking to Mr Locke dated 14 February 2000 records that planning permission was approved on 11 February 2000 [B/26].

[55]On 23 August 2000 Option A was duly exercised by the Company, by hand delivery to the Defendants of notice in the contractually prescribed form, signed by Mr Stevenson [B/92]. This is a convenient point at which to record that I do not accept (as is a necessary consequence of the Defendants’ account of matters) that the Company would have allowed a 6 month option obtained on 10 January 2000 over Parcel A (which was sufficient to obtain access from Avon Street to the Baker Street development) to have lapsed on 10 July 2000 (or 4 May 2000) unless a replacement option was already in place (which no-one has suggested). The reason for the (undisputed in itself) service of Option Notice A on 23 August 2000 was, as all parties recognised at that time, that Option A was then still in force. Were it otherwise, I am quite sure that the Defendants would have pointed out the position to Michael Lee & Co when first instructing them, and that (whether or nor the Defendants were still willing to contemplate selling Parcel A to the Company, despite no longer being under any obligation to do so) something would have been said about this in Michael Lee & Co’s first letter to Warings.

[56]On 12September 2000 the Company by Mr Stevenson executed a standard form of Building Agreement with the Association in respect of the Baker Street development [B/62-80] (“the Building Contract”). It seems that the Association allowed the Company into possession the following day, but did not in fact sign the agreement (probably following discovery of the restrictive covenant) until some time later.

[57]On 21 September 2000 the Defendants, as Mr Locke states in paragraph 21 of his witness statement “duly instructed Messrs Michael Lee & Co to act on our behalf in the proposed sale of land at Avon Street”. Michael Lee & Co’s initial letter of confirmation of instructions was sent to the Defendants the same day [B/81].

[58]On 13 October 2000 Mr Stevenson for the Company wrote to Mr Looby at Vincent Waring to instruct him in relation to the exercised Option A and the related “back to back” sale of the same land to the Association [B/86]. When the letter was drafted or dictated the text included the sentence “Attached herewith is a copy of the Option Agreement together with relevant plans.” However Mr Stevenson endorsed in manuscript alongside his signature “P.S. plans to follow.” His enclosure was the 17 pages of text comprising RJ2, which Mr Looby retained, which the Company in due course disclosed within these proceedings, and which was brought to court for the trial with the other documents on Mr Looby’s file. He identified exhibit RJ2 as a true copy of the enclosure which came with the letter of 13 October 2000, making a page by page comparison of the same during his evidence.

[59]It was Mr Looby’s subsequent letter of 23 October 2000 [B/96] seeking instructions on 7 points which led to Mr Stevenson’s faxed response of 25 October 2000 including the passage “at this stage, we are only proceeding in respect of the property referred to in the First Schedule (not the land and premises described as Option Parcel B)” [B/100, B/101] to which I have already referred (emphasis added).

[60]Mr Looby wrote to Michael Lee & Co (Mr Padhiar) in respect of the exercise of Option A, having been given their name by the Company as the firm acting for the Defendants [B/91], initially requesting a draft contract (though he later recognised that this was unnecessary - see B/94, B/102). Their initial response was dated 24 October 2000 [B/99], having first taken some basic instructions from the Defendants, or Mr Locke on their behalf, as evidenced by the attendance note added to the bundle at B/531-2. It enclosed draft contracts for the two parts of Parcel A [B/99A-M], one of which included (and the other of which incorporated by express reference) a coloured plan corresponding to Option Plan 2 [B/482]. I infer that Michael Lee & Co got this plan from their own clients. Although the Company had apparently been instrumental in introducing the Defendants to that firm, we know from the correspondence exchanged between Mr Stevenson and the Company’s established solicitor Mr Looby [B/86, B90] that he had not at this time provided Mr Looby with either of the option plans, and it would be very surprising if (and there is no evidence whatever that) the Company had provided Michael Lee & Co with those plans or either of them without also sending them to Mr Looby.

[61]Mr Looby also wrote to Dawkins & Grey (Judith Bonegal) on behalf of the Association, in respect of the back to back sale to them of Parcel A at £32,000.

[62]Much of the subsequent correspondence with each of these firms is not of immediate relevance to the issues I have to determine, and I will not lengthen this judgment by rehearsing it.

[63]The problem for the two transactions in respect of Parcel A posed by the (duly registered) restrictive covenant over 18-20 emerged in or about November 2000 (see e.g. the letter from Dawkins & Grey dated 14 November 2000, B/122). It seems that the City Council initially intimated a figure of £40,000 for a release, though by early December they had lowered their sights and were inviting an offer of £15,000. Instructions to Counsel were prepared by Mr Looby (B/59-61 appears to be at least part of these), based on drafts prepared by Mr Jenking and faxed to Mr Looby on 5 and 12 December 2000 [B/134-7, B/141-144]. In the event a conference was held on 19 December 2000 with counsel and the clients present, and Mr Looby available by telephone.

[64]Mr Looby wrote to the City Council on 18 January 2001 [B/162], in terms apparently based on a draft settled by Counsel. On 23 January 2001 the City Council replied in terms which indicated the makings of a dispute [B/170], but on the same day Dawkins & Grey for the Association indicated, at that stage ‘without prejudice’, a willingness to consider buying subject to the restrictive covenant, themselves taking over the negotiations for a release [B/168]. This proved to be the means by which the two ‘back to back’ transactions were able to proceed.

[65]By late February/mid March terms had been reached between the Company and the Association with regard both to finalising the Building Contract (the total sum payable being increased by £25,000) and to the Transfer proceeding subject to the restrictive covenant of Parcel A, as was confirmed in an exchange of solicitors’ letters [B/196-7, B/206].

[66]On 18 April 2001 the Halifax confirmed its willingness to release its charge over the blue triangle out of number 16 which formed part of Parcel A provided the (modest) outstanding arrears on Miss Smallman’s account were all discharged [B/230]. The Company funded this [B/232-3].

[67]The same day Michael Lee & Co approved the draft Transfer which Mr Looby had submitted some 6 months earlier [B/229, B/102]. However that approval appears to have been premature, insofar as by 9 May 2001 [B/247] they wrote indicating that their clients did not agree with the plan (which appears to have been prepared from a base similar to that of Option Plan 2 [see B/248]). They also raised on the Defendants’ behalf an apparent agreement for the flank gable wall of number 16 to be re-rendered, and the need for an express agreement as to the future location of the steel container. The letter ended with a threat of “withdrawal from this transaction” unless it was completed by the end of May.

[68]The matter of the flank gable wall was uncontroversial in that Mr Stevenson had similarly instructed Mr Looby the previous day [B/244], and on the latter’s suggestion it was proposed to be recorded in correspondence rather than changing the Transfer so as to include something which did not appear in the Option agreement [B/245-6]. The open letter in which the promise was recorded (Mr Looby’s of 8 May 2001) appears to have crossed with Michael Lee & Co’s letter of the following day. Near the end of the month Mr Looby sought Mr Stevenson’s confirmation that this approach was acceptable (para. 1 of letter dated 29 May 2001, B/261), and it was given it by fax on 1 June 2001 (confusingly, sent on a fax sheet which had the date 26/03/2001 pre-typed on it [B/213]).

[69]However the matter of the plan was clearly more sensitive, and the subject of further negotiation with the Defendants conducted, it seems, by Mr Stevenson. A further possible base plan was provided by the architects [B/250-1], and depicted a layout which included purported provision for the future location of Mr Locke’s steel container (thereon shown as being 6.020m x 2.050m) (“the new plan”). On 18 May 2001, apparently while seeing Mr Padhiar of Michael Lee & Co, the Defendants signed two slightly different plans to indicate their consent to either being used in the Transfer. One (that in the event used) was the new plan [B/257]. The other, endorsed to indicate that it was the Defendants’ “preferred option”, showed the route of the access road in a slightly different position, but one which required a small triangle of land from the south corner of the garden of 103 Warwick Road [B/258]. Mr Padhiar wrote to Mr Looby enclosing both on 21May 2001 [B/256-8]. Unsurprisingly, the Company wanted to proceed with the new plan. However the new plan (now signed by the Defendants), though it showed a road layout in relation to the boundary between 18-20 and number 16 and in relation to certain physical features of number 16 (including its north-western walls), did not depict the boundary lines of the plot to be transferred.

[70]In early June either the Company or Mr Looby endorsed on the new plan the ‘missing’ plot boundaries. The Defendants reacted strongly, feeling that the boundaries so indorsed were not where they should have been (in particular, in running along the outside edge of the north western wall of number 16 at the Avon Street end, rather than parallel to it, 1 metre away, leaving the pedestrian pathway to be constructed inside the close-boarded fence in accordance with the Second Schedule of RJ2, in the ownership of one of the Defendants). Initially they instructed their solicitors to withdraw from the transaction, saying they would defend any proceedings on behalf of the Company [B/271, B/274-5]. However they were in due course placated, and the parties completed the contract formed by the exercise of Option A by the execution of a form TR1 on or about 11 June 2001 [B/283-286] (and its subsequent registration at HMLR). Although the process of placating the Defendants included the making of profuse apologies, curiously it appears from the copy of the executed Transfer in the Court bundle [B/286] that the plan it incorporated still included within the land transferred all of the land to the northwest of number 16, including in particular the 1 metre strip at the Avon Street end.

[71]However the ‘back to back’ Transfer to the Association did exclude that strip of 18-20 which lay to the south east of the intended edge of the estate road, leaving that land (including the said 1 metre strip) vested in the Company (subject to the right of way in favour of the Defendants created by clause 12(a) of the first Transfer [B/284]). Hence the ‘back to back’ Transfer did not include the entirety of either of the 2 registered titles, and form TP1 was therefore used together with a revised plan [B/293-296].

[72]I should note here that the Transfer to the Association (as did the contract – see B/289-290) contained obligations on the Association matching those owed by the Company to carry out ‘the Accommodation Works’ provided for by paragraph 2 of the Second Schedule to RJ2 within 28 days from completion. These included relocating Mr Locke’s steel container within the curtilage of number 16 as directed by the vendor/transferor (in each case). Thus (given that the Association was an established and reputable body, and no ‘man of straw’) the Company had taken realistic and responsible steps to ensure that the work was duly carried out. This was true whether or not the Company (as it hoped and expected) was engaged by the Association as its contractor to carry out such works.

[73]On 14 August 2001 the Association reported to its solicitors that Mr Locke had (allegedly) prevented a workman accessing the Baker Street development via Parcel A. They wrote to Mr Looby about it the same day [B/330], as did he to Michael Lee & Co [B/331]. However it appears that Michael Lee & Co were no longer acting for Mr Locke, and therefore simply passed on a copy to him [B/336]. Mr Locke, who tells me he is an officer in a gun club, was upset by the suggestion in these letters that he had been “brandishing a shotgun”. The only direct evidence I have received on the point is his, and I find no reason to reject his denial of that suggestion.

[74]At about the same time (and no later than when the Association’s solicitors wrote to Mr Looby on 17 September 2001 B/338-342) difficulties with the re-siting of Mr Locke’s steel container on number 16 emerged. There appear to have been 2 elements to this: first, that the dimensions of the steel container shown on earlier plans had been understated, and were in fact 6.100m x 2.410m, and second that in order to be able to obtain access to/egress from the container, a greater gap needed to be left between the end of the container and the adjacent rear (north-eastern) wall of number 16. The effect was, in practical terms, to reduce the available width for the access road at the northern corner of the container, and, in legal terms, to raise the prospect of an encroachment of the container onto what appears strictly to have remained the Company’s land (having been included in the Transfer to the Company, but excluded from the ‘back to back’ Transfer to the Association).

[75]A dispute as to Company’s access to the (whole) site, and consequent entitlement to be allowed extra time (and I think a concomitant financial allowance), under the Building Contract ensued. It went to Adjudication. The Adjudicator refused the extension sought by the Contractor, while indicating the view that a lesser extension ought to have been granted. I need say no more about this.

[76]On Monday 15 October 2001 a site meeting in relation to the Building Contract was held. It was attended by 2 officers of the Association, Mr Ashford and Mr Jenking. The minutes [B/358-9, 369-378] record within item 1.1 that a position for the steel container had finally (and reluctantly in the Association’s case) been agreed, and that a ‘without prejudice’ meeting was to take place with Mr Locke 2 days later to finalise the details of the work in connection with his boundary. It is noteworthy that at item 1.1 (4) they record Mr Jenking stating (not in the presence of the Defendants, but at a time when the existence of Option B was not known to be in issue) that the Company had agreed (at its own cost) to provide a brick boundary wall at the Avon Street end of the boundary, and to re-render the flank gable wall, “since they had an option to purchase the house”. The minutes went on to record that if such purchase was completed “the future of the container .. could be considered at that stage and, maybe, the land could be reclaimed by [the Association]”. The Company tabled a draft tripartite agreement [B/360-2], but the Association were advised not to enter into the same pending determination of the Adjudication.

[77]On Wednesday 17 October Messrs Locke, Jenking and Ashford met. As Mr Ashford puts it, “various matters were resolved”. Mr Locke was given assurances by Mr Jenking that commencement of the work was imminent (his account of exactly what date he was given has slightly varied, but immaterially for present purposes). He was also given a copy of the draft tripartite agreement.

[78]On 8 November 2001 Mr Ashford wrote to the Company on the Association’s behalf complaining of the extremely slow progress of the works, very little work having been carried out since a meeting on 10 August, and giving notice under the Building Contract of intended determination unless various matters were attended to within 14 days.

[79]On 11 November 2001 the Company moved offices (Mr Jenking recalled that date). Mr Stevenson, who held half a dozen files concerning different aspects of the Baker Street development, and to whom Mr Jenking passed the signed option agreement (he remembered that it was placed in one of Mr Stevenson’s wallet files), told me that the Company moved offices twice during 2001, and that the first of them was from Tipton to Cannock. Its offices suffered a number of break-ins during the summer of 2001, were “smashed to pieces”, and there were “papers everywhere”. They also suffered a fire at about the time of a move. He said that the Company had the original document in the earlier part of 2000, but that he could not say after that. I find no reason to reject that uncontroverted evidence.

[80]On 15 November 2001 Mr Locke wrote to Mr Jenking at the Company’s by then former address in Tipton [B/403]. He complained that the works to number 16 (which encompassed the Accommodation Works and the re-rendering of the flank gable wall) had still not been started. His complaint was justified, since at least the Accommodation Works had been due to be carried out within 28 days of completion (which had occurred on or about 11 June) under the terms of the Copy Option and the Transfer, and Mr Jenking had apparently promised at the meeting on Wednesday 17 October that the works would start at 8.00am the following day (per Mr Locke’s letter) or on the following Monday, 22 October (per Mr Locke’s witness statement, para. 52). The letter went on to give notice that unless work started within 7 days, Mr Locke would terminate their relationship and engage a different Contractor to complete the outstanding works. Mr Jenking never received the letter.

[81]On 23 November 2001 Mr Ashford on behalf of the Association terminated the Building Contract, pursuant to the notice of intention of 8 November [B/405]. In the event, the Royal Mail were unable to deliver the termination letter at the Company’s Cannock address, and Mr Ashford ended up personally hand delivering the same to Mr Jenking on 27th November [B/409].

[82]The Association first wrote to Mr Locke about the consequences of the termination the same day [B/406-7]. Mr Locke took steps to move his Scout Car from 18-20 onto number 16 as they requested. Through Mr Ashford’s good offices, arrangements were made with Mr Locke for the Association’s new contractors, Mantons, to carry out the Accommodation Works (broadly in accordance with the Associations obligations under the terms of the Transfer to it from the Company, but including, presumably as a gesture of goodwill, the variation previously agreed by the Company whereby the Avon Street end of the new boundary would be a brick wall rather than a fence) [see B/414-6]. However the re-rendering of the flank gable wall had not been provided for by either of the Transfers, but only by a side-letter from the Company’s solicitors to the Defendants’ solicitors, and therefore the Association was not willing to undertake those.

[83]In the end Mantons carried out the Accommodation Works (at a cost to the Association of about £4,500) satisfactorily, staring in about December 2001 and finishing them in February or March 2002. I do not have exact dates, and will (if anything erring a little in favour of the contractually wronged party, the Defendants) take that as being 8 months after the work should have been done. The re-rendering of the flank gable wall has never been done, and (taking this as impliedly due either at the same time as the Accommodation Works or within a reasonable time of completion, which would be say 6 weeks) is now in round terms 5 years overdue.

[84]On 11 December 2001 the Company entered Administrative Receivership upon Mr Cooksey’s acceptance of such an appointment by Deed executed by a debenture holder (who was also a director and the main shareholder) Mr Wayne Rushton, the previous day [B/416.1-416.3]. The practical reality was that the Company had been under considerable financial pressure for at least a number of months, and, as Mr Jenking candidly acknowledged, it had been prioritising that work most likely to produce income quickly. Unfortunately for both the Defendants and the Association, the Baker Street development, the Accommodation Works and the re-rendering of the flank gable wall were judged not to come into that category.

[85]On 21 June 2002 (on the Company’s application sent the previous day by its then solicitors) a caution was registered against the title to number 16 to protect the Company’s interest under Option B. I do not find any particular assistance for the Defendants in the fact that no application was made earlier, and further note that there is no evidence that the option over Parcel A (which all agree existed in one form or another, and was itself important to the Company) was ever registered at all [see the Office Copy Entries at B/87-89 and B/429-433]. I refer elsewhere in this judgment to some of the Defendants’ dealings with HMLR, and in particular to the unsuccessful application [B/446] to ‘warn off’ the Company’s cautions, including the fact that HMLR sent a copy of RJ2 to Miss Smallman under cover of its letter dated 18 July 2002, the terms of the initial reply thereto dated 19 July 2002 written out for Miss Smallman by Mr Locke, and what Mr Locke said on his visit to HMR on 28 August 2002, evidenced by Mr Palmizi’s letter of the following day. Otherwise, suffice it to say that the related documents in the bundle are largely self-explanatory.

[86]Notice to exercise Option B was served in the contractually prescribed form, signed by Mr Cooksey, under cover of the Company’s present solicitor’s letter dated 26 October 2004 [B/507.1-507.2], together with that firm’s cheque for the £3,000 deposit. The Defendants do not dispute receiving this (though they chose to return rather than bank the deposit cheque), and there is no issue taken that (if the Copy Option was the signed agreement) this was a due exercise of the Company’s option in respect of Parcel B. I have already mentioned what Mr Locke said when he telephoned the Company’s present solicitors in response [B/508 refers].

[87]The present proceedings were issued in mid December 2004. The Particulars of Claim made it quite clear that the claim was all about Option/Parcel B (see e.g. paras. 6-9 and 13, A/5-6), which will have come as no surprise to the Defendants given the matters I have mentioned in the previous paragraph. Their first step in the proceedings was to issue an application for a stay pursuant to section 9 of the Arbitration Act 1996, dated 17 January 2005. The form and content of one page of the documentation [A/16] is such that they clearly had some legal assistance in preparing their application, which expressly acknowledged and necessarily relied on the existence of a contract dated 10 January 2000 including (at clause 12) an arbitration agreement. The document they exhibited equates to all the pages of RJ2 preceding the signature page. The availability to the Defendants of those pages to copy could be explained by their possession of documents 8 or 115. Perhaps more significantly, I note that those pages include clear references to Option/Parcel B (e.g. in clause 3.2 and the First and Third Schedules: A/20, 23, 26). This application was subsequently withdrawn, and the course of the proceedings thereafter is a matter of record.

Findings and decision re the alleged agreement (issue (i))

(i) )

[88]Applying the law mentioned above, I am satisfied that it is proper to accept and act on the secondary evidence of the Copy Option in this case. All parties agree that a document was signed on 10 January 2000 (the signature page being that at A/60), and therefore the Court’s enquiry is as to its terms or other pages, rather than whether anything was signed at all. I have heard evidence from all 4 signatories (including Mr Jenking within that term for convenience), who include the 2 senior executives of the Company most directly involved with the transaction and the document itself at the time (Messrs Stevenson and Jenking), as well as from the Company’s solicitor who received RJ2 from it. The last person known to have had custody of the original was Mr Stevenson, who was of course called by the Defendants.

[89]Mr Stevenson stated in evidence that the pages of the original document, prepared by him and signed in January 2000, were (as one would naturally have expected) stapled together. RJ2 as sent to Mr Looby by Mr Stevenson in October of the same year (which included a copy of the signed signature page towards the middle of it, between the schedules and the 5 annexes) was also stapled together. Whether the latter originated as a copy taken directly from the signed original (before it was lost) or as a copy of a copy, it came from the Company. If (whether in its typing or by manuscript alteration) the true signed document had extended only to Parcel/Option A, the only reasonable explanation for the form of RJ2 would be the deliberate substitution of one or more pages from a different document from that truly signed, occurring at some stage between 10 January and 13 October 2000. It was not suggested by or to either Mr Stevenson (who sent RJ2 to Mr Looby on the latter date), or Mr Jenking (the other senior executive involved, who had access to all or some of the Company’s files), that any such thing had occurred, and I find no reason whatever to believe that any such thing happened.

[90]As I have indicated, the original signed document was initially kept at the Company’s offices, in one of Mr Stevenson’s envelope or wallet files, and not in Mr Jenking’s “builder’s file”, which was broken down into sections. Mr Jenking was almost certain that he had seen the original again, after the day on which it was signed. He also observed that the Company had not planned to lose a document like this, and that it was clearly unfortunate that it was neither kept under lock and key nor straightaway sent to the Company’s solicitors.

[91]Has a reasonable explanation been given for its subsequent loss? In my judgment it has. The Company moved offices twice in 2001. It suffered a number of break-ins, during which its papers were substantially interfered with, and on one occasion a fire. The Company ultimately entered Administrative Receivership at the end of that year. The loss of the original document is unsurprising.

[92]The document had been lost by the time Mr Looby wrote to HMLR on 12 September 2002 [B/487]. HMLR had sought the original of the copy document they already had, and Mr Looby informed them on instructions that “unfortunately … during [the Company’s] removal of offices the original of the Option Agreement appears to have been mislaid”. It would clearly have been in the Company’s interest to produce any such original which it had, and although I did not hear any direct evidence of the process of searching, I am willing to infer, in the circumstances, that a reasonable and sufficient search would have been made at that stage before Mr Looby was so instructed. It is clear beyond doubt that the Company’s papers (or such of them as survived) would by 2002 have been in a very different form than they were when Mr Stevenson put the signed original of the Copy Option into one of his wallet files on shortly after 10 January 2000.

[93]There is powerful evidence from the words of both Mr Stevenson and Mr Locke in 2000-2001 to suggest that each of them then thought that an option had been signed in respect of Parcel B : see the terms of Mr Stevenson’s letter to Mr Looby dated 25 October 2000 at para (iii), quoted above, and Mr Jenking’s observations at the site meeting of 15 October 2001, recorded in item 1.1(4) of the minutes. Both these statements, though not made in the presence of the Defendants, were made at a time when no issue had arisen as to whether or not there was an Option B.

[94]It is also noteworthy that the Defendants had in their possession two copies of RJ2, which equates to the entire text of the Copy Option contended for by the Company. One probably came from HMLR under cover of its letter dated 18 July 2002. However I have found that the other came from the Company shortly after the original agreement was signed. Furthermore, Michael Lee & Co must have had such a document available to them, and a copy of Option Plan 2, in order to have been able to produce the draft contracts they did on 24 October 2000 [B/99-99M], incorporating the words of the Second Schedule as it appears in RJ2 (which include at least two specific references to “Parcel B”) and that plan [B/99G, B/482]. They did not get these from Mr Looby (his letter of 18 October 2001 did not purport to enclose one, and nor did his letter of 23 October, which in any event appears to have crossed with Michael Lee’s of 24 October). Mr Looby had not been provided with either of the plans by his own client at this stage. The probability is that they got them from their own clients, the Defendants. It is right to note that there is some evidence of direct contact between Mr Stevenson and Michael Lee & Co, insofar as the former introduced the latter to the Defendants. However even if (of which there is no direct evidence) Mr Stevenson provided Michael Lee & Co not only with another copy of RJ2 but also with a copy of Option Plan 2 (at a time when he had not even provided the Company’s own solicitor with the latter), a possibility which I consider remote, it would remain the case that their consultation with their clients produced no query whatever about that document or the references to Parcel B.

[95]I find that the Company has succeeded in proving that the Copy Option, in the form of RJ2 together with two plans in the form of Option Plans 1 and 2, was entered into by the parties, being signed by both Defendants in the presence of Mr Jenking on 10 January 2000 (who wrote his name beneath them both at the time), and by Mr Stevenson on behalf of the Company, probably shortly before that meeting (Mr Jenking writing his name below either at the time Mr Stevenson signed it or in the presence of the Defendants). Findings and decision re the Claimants alleged breaches (issues (ii)-(iv)) 96. Issue (ii)

Findings and decision re the Claimants alleged breaches (issues (ii)-(iv))

[96]As to issue (ii), the Defendants’ case is very weak. First, the Company obtained a ‘back to back’ contractual commitment from the Association to carry out the Accommodation Works. This was in the circumstances a perfectly reasonable way of ensuring that its obligation to the Defendants was discharged. I do not construe paragraph 2 of Schedule 2 as having required the Company itself (whatever exactly that might mean, given the prevalence of self-employed sub-contractors in the construction industry) to do the works, but rather as having made the Company contractually responsible for ensuring that the works were done. Assuming in the Defendants’ favour that the Company was contractually bound to the Association between 11 June and 23 November 2001 to carry out the Accommodation Works under the terms of, or as an ‘extra’ to, the Building Contract (which is not clear on the evidence before me), it is impossible to spell out of the Company’s dilatoriness as a contractor to the Association an intention not to be bound by its contractual obligations to the Defendants under the Copy Option. Nor did the late performance of those works amount to a sufficiently serious breach of the Copy Option as a whole to ‘go to the root of the contract’ (whichever formulation of that basic test is applied).

[97]Second, the flank gable wall re-rendering only ever was the subject of a collateral contract, or a collateral obligation. In this respect the Company’s position as to both evinced intention and seriousness of breach is if anything stronger, notwithstanding that the period of default was of course much longer.

[98]Third, as Mr Locke frankly accepted in his closing submissions, notwithstanding the terms of his letter of 15 November 2001 (which did not reach Mr Jenking), in the event he continued to press for, and in due course obtained at no cost to himself, performance of the Accommodation Works from the Association, whose only contractual obligation to do them was that owed to/obtained by the Company.

[99]To put it shortly, there was neither a repudiation of the Copy Option by the Company, nor an acceptance of any such repudiation by the Defendants.

[100]In these circumstances it is not necessary to go into the further and rather more technical point raised by Mr Sterling, namely that the obligation in the Copy Option to carry out the Accommodation Works related to the exercise of Option A, and had merged into the Transfer of 11 June 2001 (where it was repeated). Issue (iii)

[101]As to issue (iii), was it a condition precedent to the exercise of Option B that all the Company’s obligations in relation to Parcel A, and in particular the carrying out of the ‘Accommodation Works’ set out in the Second Schedule, should first have been discharged? This is essentially a question of construction of the Copy Option, and there I find little support for it. Before summarising the effect of what is stated in some of the key clauses, I would first point out that nowhere is such a condition precedent expressly imposed on the exercise or completion of Option B.

[102]Clause 2 provides that upon the exercise of Option A the Defendants shall sell and the Company shall purchase the same “…subject to and with the benefits of those matters mentioned in the Second Schedule …” (and see also clause 9). The Accommodation Works are provided for in paragraph 2 thereof, under the side heading “PARCEL A - Accommodation Works”, which commences: “Matters affecting the Property. Upon the Purchasers exercising its Option in respect of Parcel A it shall within 28 days of the completion date …”.

[103]Apart from service of the prescribed form of option notice, clause 2 imposes no conditionality upon an exercise of Option B. It repeats the words “…subject to and with the benefits of those matters mentioned in the Second Schedule …” in respect of a sale and purchase pursuant to Option B (and again, see also clause 9). Clause 3.2, under the main heading Exercise of Options and the side heading Parcel B, opens with the words “Subject to the prior completion of the sale and purchase of Parcel A the Purchaser may exercise its option to purchase Parcel B by service of notice in writing … at anytime after the sale and purchase of Parcel A before and including 4th November 2004 …” As to the meaning of “completion”, not only do the immediately following words “of the sale and purchase” support the natural meaning of completion in the normal conveyancing sense of (to oversimplify) exchange of a duly executed Transfer for the unpaid balance of the purchase price, but this meaning is further reinforced by the (albeit rather oddly drafted) words of clause 4.1 which provide that “The date for completion of the land comprised in Parcel A should be 28 days from the date of service of the Option Notice ….” Had any condition precedent such as the Defendants contend for been intended, I would have expected it to be expressly provided for in at least one of clauses 2 (second paragraph), 3.2 and 4.2.

[104]The intended operation and effect both of clause 3.4 and of clause 3.5 is somewhat obscure. Notwithstanding the physical layout of clause 3, with its side headings and the absence of any blank line between clauses 3.3 and 3.4, it would appear that clauses 3.4 and 3.5 are both intended to apply to Option Notices/agreements in respect of either Parcel A or Parcel B. Clause 3.5 reads:

“In the event that the agreement is not completed in accordance with the terms of this agreement then this agreement shall be deemed to be terminated and all of the rights and liabilities of the parties hereto shall cease.”

In my judgment the phrase “this agreement” used twice in clause 3.5 must refer to the Copy Option (in its entirety), but the phrase “the agreement” near the beginning of the clause must refer to an agreement for sale and purchase brought into existence by the combination of the Copy Option and the subsequent valid service of Option Notice A or Option Notice B (as the case may be). One area of obscurity is how this prima facie self-executing or automatic deeming clause is intended to apply in the event of non-completion due to the fault of a party whose breach has brought about the non-completion (the normal principle being that a party cannot rely on his own breach to relieve himself of his contractual obligations), and in the event of non-completion without causative fault on either side (or without causative fault of the party subsequently seeking to enforce it). However I am confident that the words “the agreement is not completed in accordance with the terms of this agreement” relate to the non-completion of the relevant sale and purchase (as to which see clauses 3.1-3.3), and as with the use of “prior completion” in clause 3.2 the reference to non-completion is therefore to a failure to ‘complete’ in the normal conveyancing sense mentioned above.

[105]I conclude that upon the true construction of the Copy Option there is nothing to make the Defendants’ promise to sell Parcel B to the Company in the circumstances and on the terms provided for dependent on the Company’s prior performance of its obligations to carry out the Accommodation Works post-completion of a sale and purchase of Parcel A.

[106]Further, the Accommodation Works had in any event been satisfactorily carried out (by Mantons as contractors for the Association) in February/March 2002, long before Option Notice B was served in October 2004. The condition precedent alleged in the Defence was thus fulfilled long before the service of Option Notice B in any event. For a condition precedent to assist the Defendants in these circumstances, it would have to be one which required the Accommodation Works first to have been carried out :106.1 by the Company itself (a construction which I reject, as explained under issue (ii) above), and/or

106.2 strictly within the time prescribed by the Copy Option (28 days from completion of the sale and purchase of Parcel A). This would run contrary to the normal contractual principle that time is not of the essence of contractual obligations (in the absence of express provision making it so) unless they are of a special category and/or arise in circumstances which make such essentiality implicit, and I find no basis for any such construction.

[107]Mr Sterling cited 2 nineteenth century cases to support the proposition that the Court will treat an option as a free-standing contract, separate from other obligations even if they are to be found in the same contract, and hence will grant specific performance of such option whatever the position be with regard to performance or non-performance of such other obligations. Those cases are Green v Low (1856) 22 Beav 625, Romilly MR, and Raffety v Schofield

[1897] 1 Ch 937

, Romer J. In my judgment these cases, in both of which a decree of specific performance of an option to purchase a freehold was obtained on the facts, do not support quite as wide a proposition. Indeed the decision in the latter is expressly put on the basis that “it clearly was not a condition precedent to the exercise of the option that the defendant should not have made default under the building agreement” [which also contained the option]: per Romer J at 942 (thereby implicitly recognising that the parties could have made it such). However what these cases do, in my judgment, illustrate is that the Court, in construing agreements which contain both options and other contractual obligations, will not readily construe the right to exercise the options (in the absence of express words to this effect) as being subject to an implied condition precedent that the option holder have first strictly performed all his other obligations created in the same instrument, even where in the natural course of events one would expect the other obligations to have been performed first. Had I otherwise been in doubt as to the true construction of the Copy Option, this approach would have assisted me in coming to the decision which I in any event have on issue (iii). Issue (iv)

[108]As to issue (iv), the existence of a binding obligation on the Company to “make good/renew the external rendering to the flank gable wall at number 16 Avon Street, or otherwise satisfactorily weather proof the same to the reasonable satisfaction of .. Mr Ian Locke” (see B/246) was not ultimately disputed by Mr Sterling. Rather, he limited his submissions to asserting that the same came into existence in or about May 2001, related to the agreement for completion of the Transfer in respect of Parcel A (which was then the focus of discussions between the parties), and was in any event collateral to the express terms of the Copy Option.

[109]Mr Locke’s evidence was that the agreement to carry out these works predated signature of an Option agreement on 10 January 2000, although in fairness to him he did recognise the difficulty of recollecting exactly when in the whole history of the parties’ dealings this agreement had been reached.

[110]I accept Mr Sterling’s submissions on this matter, and find that this obligation was either created or first evidenced by the Company’s solicitors’ letter dated 8 May 2001 [B/246], and (if the latter) did not materially precede it. There is no documentary evidence which indicates that it was agreed at an earlier stage. Further, on the Defendants’ own case, the Company was very anxious to curry favour with them prior to a binding option agreement in respect of (at least) the access land being signed. On that basis, which appears to be broadly correct, I can see no reason why, had there been agreement on this topic during the negotiations between October 1999 and 10 January 2000, the works in question should not have been incorporated into the Second Schedule of the draft agreement prepared by the Company. On the contrary, had it been agreed at that stage Mr Locke would have insisted on its inclusion in the document before it was signed. I reject the suggestion in Mr Stevenson’s first witness statement (paragraph 3.0) that the omission was due to “an oversight in drafting”. Once the Option agreement was signed on 10 January 2000, there was no further need for the Company to agree to undertake this additional obligation until the difficult negotiations leading to the execution of the Transfers in June 2001, and neither party puts forward any relevant occasion when it might have been agreed between those two times. The fact that Mr Looby’s letter of 8 May 2001 was written just as the latter negotiations were nearing fruition is no coincidence. That is when and why the Company undertook this further obligation.

[111]Unlike the ‘Accommodation Works’ set out in the Second Schedule to the Option agreement, these works were not incorporated into the Transfer Deed. The parties’ solicitors were content to leave them as what is sometimes colloquially referred to as a “side agreement”, agreed/evidenced in the exchange of letters of 8 and 9 May 2001. In lawyers’ terms this was a collateral agreement. I have already dealt with this in the context of alleged repudiation.

[112]In these circumstances it is again not necessary to go into a further and rather more technical point raised by Mr Sterling, namely that this obligation was collateral to the agreement for the Transfer of Parcel A rather than collateral to the 10 January 2000 Option agreement, so that it was unrelated to the parties’ rights and obligations with regard to Parcel B.

The law – Specific Performance

[113]Apart from the 2 cases cited by Mr Sterling, I take the law from the relevant passages in chapters 2 and 3 of Specific Performance, Jones & Goodhart, 2nd ed (1996) and from Price v Strange

[1978] Ch 337

, to which I referred the parties during the trial.

[114]At the risk of over-simplifying the principles there explained, I will endeavour very shortly to summarise those which appear to be of the most potential significance in this case.

[115]Specific Performance will be denied if damages are an adequate remedy. I note Jones & Goodhart’s discussion of the familiar principle that land is taken as being unique and of a ‘peculiar and special value’, and the resultant assumption in relation to contracts for its purchase that damages would be an inadequate remedy (op cit at pp 32-34).

[116]Specific Performance will be denied if there is ‘want of mutuality’. Prior to the decision of the Court of Appeal in Price v Strange, this principle (taken from Fry’s seminal treatise on Specific Performance) was thought to require that, for Specific Performance to be awarded, the obligations of both parties to the contract must have been capable of being specifically enforced at the time the contract was made. It is noteworthy that while the rule on want of mutuality was still so understood, it was said that “an option is one of the exceptions to [that rule]” (per Foster J in McCarthy & Stone v Hodge

[1971] 1 WLR 1547

at 1554F-G). However the question of that possible exception is rendered far less important by the decision in Price v Strange. Fry’s absolute principle has been rejected, and the decision whether or not to grant specific performance is now one of judicial discretion, to be exercised in the light of everything which has occurred up to the date of the hearing (see per Goff LJ at 354E-F). As to the general principle which informs the Court’s exercise of such discretion, Buckley LJ stated it thus: “the court will not compel a defendant to perform his obligations specifically if it cannot at the same time ensure that any unperformed obligations of the plaintiff will be specifically performed unless, perhaps, damages would be an adequate remedy to the defendant for any default on the plaintiff’s part” (at 367H-368A). Scarman LJ agreed with both Goff and Buckley LJJ (at 371A).

[117]As to the significance of breaches of contract by the claimant, notwithstanding dicta in older cases as to collateral obligations, Jones & Goodhart opine that it must be doubtful whether the court would now concern itself with the question whether it is possible formally to split up the elements of what in substance is a single transaction into two separate contracts, and suggest that the true principle is now that Specific Performance will be denied if the claimant has failed to perform an obligation which is sufficiently important (having regard to its connection with the obligation which the claimant is seeking to enforce) to make it inequitable to grant specific performance (op cit at p85). I agree with and adopt that approach.

[118]There are also general principles that Specific Performance will be refused in circumstances where the claimant has been guilty of some unfairness or sharp practice in procuring the defendant to enter into the transaction, even though it falls short of fraud (of which Pateman v Pay (1974) 232 EG 457, Templeman J, affords a relatively modern example) and in circumstances which would result in personal hardship (of which Patel v Ali

[1984] Ch 283

affords such an example).

Should Specific Performance be refused, as a matter of judicial discretion? (issue (v))

(v) )

[119]In the course of the Defendants’ closing submissions, Mr Locke frankly stated that the Defendants would have no realistic prospect of both remaining in number 16 and being able to pay damages to compensate the Company for loss of the benefit of Option B. Thus the practical reality is that (even if their substitution for Specific Performance was otherwise justifiable) damages would not afford the Company an adequate remedy. I have in mind that the principle that a defendant’s inability to pay damages does not make a contract specifically enforceable if it would not otherwise be so (see Amec Properties v Planning Research & Systems

[1992] 1 EGLR 70

at 71K per Balcombe LJ, approving an observation of Millett J at first instance), but (as in that case) it is not applicable here : the Copy Option is specifically enforceable.

[120]That being the case, it is unnecessary for me to consider further whether there is anything in the circumstances of the case (in particular, that the practical purpose of this claim is, I infer in the absence of any contrary indication, to enable the insolvent Company immediately to sell number 16, presumably together with the immediately adjacent strip out of 18-20 which it excluded from the back to back sale, and use the considerable prospective profit towards paying its creditors) which might justify departure from “the well-established principle … that a contract for the grant of an interest in land will normally be specifically enforced” (see per Mann LJ in Amec Properties v Planning Research & Systems at 72L-M). I would simply observe that here is little to encourage such a departure in the passage in Jones & Goodhart cited in paragraph 115 above.

[121]As for want of mutuality, the only unperformed obligation of the plaintiff (since Mantons finished the Accommodation Works in February or March 2002) has been the collateral obligation to re-render the flank gable wall of number 16. Given that the Company has been entitled to a Transfer of number 16 since it served the valid Option Notice B in 2004 (or 28 days thereafter), I am satisfied that damages would be an adequate remedy to compensate the Defendants in respect of that failure (see further under issue (vi) below), leaving aside any question of the collateral nature of that obligation. As to that question, I would apply the approach mentioned in paragraph 117 above, and ask whether the importance of that obligation/its non-performance (having regard to its connection with the obligation which the Company is seeking to enforce) is sufficient to render inequitable that specific performance be granted. I am quite satisfied that its importance is not that great.

[122]This is not a case where I have any sense that the Company has taken such unfair advantage of the Defendants in entering into the Copy Option with them as to render it inequitable that the Company be granted Specific Performance. First, the Defendants have not raised any such defence. Further, the clear offer of meeting their legal fees up to the sum of £350 mentioned in the very first letter (13 October 1999) and in Mr Jenking’s evidence would have made such a defence very hard to get off the ground. The Defendants chose to enter into the Copy Option without first consulting solicitors, nor was the Company using solicitors at that stage, and each suffered some disadvantage as a result (which I have already identified). I accept Mr Jenking’s evidence that neither Defendant said anything to him to indicate that they did not understand the document they were signing. Such apparent understanding was the more credible to him because he knew or believed that this was not the first time Mr Locke had entered into a property transaction other than one in relation to his own house. I also accept his evidence that neither Defendant expressed any concern over the 5 year period for the exercise of Option B, and that had any such concern been raised the Company would have gone along with either a shorter or a longer period.

[123]Nor is this a case where there are exceptional circumstances giving rise to such personal hardship on the Defendants as might render it inappropriate to grant specific performance. First, as before, the Defendants have not raised any such defence. Further, a contract which later turns out to have been a bad bargain (here, by reason of dramatic movement in the residential property market) does not cease to be specifically enforceable for that reason. It is also noteworthy that the Copy Option entitled the Defendants to call for Option B to be exercised within 28 days (or released within 14 days) at any time during the option period (see clause 2, second paragraph, and Annex C). Thus the Defendants were not ‘locked in’ to a sale at a price ever lower than the open market price without any remedy whatever being available to them. Leaving aside the sensitive question of their awareness/recollection of the true terms of the Copy Option in relation to Parcel B prior to the dealings with HMLR in 2002, once it became clear that their application to ‘warn off’ faced serious opposition (i.e. by the summer of 2002) they must have been aware of the risks of letting more and more time go by (or have shut their eyes to the same). The course they then took of ‘keeping their heads down’ and waiting to see whether any attempt to exercise the option would be made (as Mr Locke stated, they did not have to pursue the matter unless and until a claim was brought against them, so they did not), and of trying to resist the same if and when it became necessary so to do, had inherent risk, especially during a period of rising residential property values.

[124]There is no indication that in late 1999/early 2000 the consideration agreed for Option A or Option B was below open market value. Given the undisclosed existence of the restrictive covenant over 18-20, that for Option A may even have been above it. However following the considerable rise in the residential property market between January 2000 and October 2004, the end result is sad indeed for the Defendants, as their house would have to be sold whether by the Company following completion of an order for Specific Performance or (were this to be an otherwise appropriate course) to enable them to pay the Company damages in lieu thereof. In either case their entitlement under Option B (£30,000) is now (as is common ground) well below its open market value. However that results from the absence of an indexation clause, as to which I have commented earlier in this judgment. Although the Defendants did not expressly advance any defence to a decree of Specific Performance based on adverse market movement or the limited buying power of either £30,000 or £60,000 in the present residential property market, had they done so the following observation of Russell LJ in Mountford v Scott

[1975] Ch 258

at 264E-F:

“If the owner of a house contracts with his eyes open .. it cannot in my view be right to deny specific performance to the purchaser because the vendor then finds it difficult to find a house that suits him and his family on the basis of the amount of money in the proceeds of sale”

. The resultant position is related to the potential effect of rises in the market in Barnsley’s Land Options, 4th ed (2004) at p346 thus: “.. the fact that .. the market has devalued the price originally agreed to be paid for the property, so that the vendor will be unable to afford suitable alternative accommodation is no reason for refusing an order for specific performance because the parties should be held to their bargain (provided they both entered the contract ‘with their eyes open’)”.

[125]I conclude that, applying the well-established legal principles I have identified, the Court’s discretion ought (subject to the question of conditions) to be exercised in favour of granting the Company the order for Specific Performance of Option B which it seeks. However I am entitled to impose conditions on any such order for Specific Performance, and in this case I am quite satisfied that it would be inequitable to award the Company such a decree without making it conditional upon payment in full of such award as the Defendants obtain on their deemed counterclaim. I am conscious that the Company is insolvent, and that in one sense the effect of such a condition is to give the Defendants the benefit of payment of their damages at 100p in the pound. However this is only the same as an insolvency set-off, full payment of such damages etc may properly be regarded as an incidental cost (and a modest one at that) of a ‘realisation’ by the Administrative Receiver which will almost certainly prove highly advantageous to the creditors, and the Company’s insolvency does not exempt it, coming to the Court as it does to seek an equitable order, from the general requirements of equity.

The deemed Counterclaim for damages (issue (vi))

[126]The delay in performance of the Accommodation Works beyond about 9 July 2001 (28 days after completion) was a breach of the Company’s contractual obligations to the Defendants, in respect of which they are entitled to damages. They do not allege that any specific financial losses resulted, so this is a case for an award of so-called general damages. These are to compensate them for the inconvenience and loss of amenity occasioned to them and their family through not having a duly fenced back garden with the access provision it should have had. As indicated above, the relevant period is in round terms 8 months. For that period, as Mr Locke briefly elaborated in response to my invitation (see also para 44 of his witness statement), use of the back garden by his family (and in particular by their 5½ year old daughter and their dog) was severely curtailed, in that there was no effective boundary onto what became a building site (albeit a rather inactive one for the period prior to the replacement of the Company with Mantons as the Association’s contractor). A temporary fence formed of wire mesh mounted on substantial blocks was erected in about September (the steel container having been moved to its eventually agreed position on number 16 in August), which remained in position until when Mantons started work, which Mr Locke put at about December. This was still apparently ineffective always to contain the dog. The exercise of quantifying compensatory general damages is inevitably a rough and ready one, and in this country such awards are consistently assessed on a relatively conservative basis, but doing the best I can I would assess a proper award as £750.

[127]The flank gable wall of number 16 has had no work done to it for (in round terms) the past 5 years, in breach of the Company’s collateral contractual obligation to the Defendants. However it is now over 18 months since Option Notice B was served, and I have held validly served, so the Defendants’ discomfort from living in a house with a damp upstairs room since then has been as a result of their unsuccessful attempts to resist implementation of Option B, including their defence of this action.

[128]Mr Ashford gave me his rough estimates for the cost of the requisite work of £7,500 at 2002 prices, and £9,000 at current prices. I see no reason not to accept those uncontradicted figures as reasonable estimates, and would do so. However given that the Company has throughout had an option to purchase number 16, and exercised it in 2004, the appropriate measure of the Defendants’ loss is not the lump sum which represents the cost of doing the works, which has yet to be incurred by anyone. Again, the Defendants have not alleged that any specific financial losses have been occasioned to them, so this too is a case for an award of general damages. These are to compensate them for the discomfort and loss of amenity occasioned to them and their family through having to live in a house which was damper than it should have been for want of adequate weather protection to the outside of its flank gable wall. I take the relevant period for which they are entitled to compensation as 3½ years, again rounding up a little in the Defendants’ favour. As Mr Locke briefly explained, again in response to my invitation, although there is some pre-existing rendering on this wall, its condition has been progressively deteriorating, and it has been decreasingly effective as weather-proofing. The rooms behind it have been damp as a result, and the wallpaper has started peeling off. There is however no suggestion that the affected rooms were at any stage unusable or a serious hazard to the health of those using them. Again the exercise of quantifying compensatory general damages is inevitably a rough and ready one. Most such awards are made in the County Courts, which seldom result in fully reported decisions, but I have been assisted by reviewing for general comparison the table of County Court damages decisions in disrepair cases set out in the Encyclopedia of Housing Law & Practice at para 1-2327.3, and the summary of damages awards in various courts for inconvenience and discomfort in Repairs – Tenants’ Rights, Luba & Knafler, 3rd ed (1999) at paras. 9.1-9.34 (albeit now a little dated). Doing the best I can I would assess a proper award as £3,500.

[129]Thus I arrive at a total award of £4,250 upon the deemed counterclaim in respect of general damages. Given that the Defendants have remained in the house to date, unsuccessfully resisting implementation of Option B, including by their unsuccessful defence of this action, I would not think it right to award interest in respect of the past 18 months in any event. However the relevant periods of loss of amenity etc. suffered by the Defendants did occur some time ago now, and some award of interest would in my judgment be appropriate. Interest on such general damages is often awarded at the rate of 2%. The figures and periods involved in this case do not justify a sophisticated calculation. I will simply award interest on the total award assessed in the modest lump sum of £250. For the reasons indicated under issue (v) above, I shall make it a condition of any order for Specific Performance that the Company pay the aggregate sum of £4,500 in respect of general damages and interest in addition to the full purchase consideration of £30,000 (its deposit cheque having been returned to it unpresented) upon completion.

Conclusion and proposed Order

[130]The Company’s claim for Specific Performance of Option B succeeds (on the condition mentioned), though there ought in the circumstances to be an appropriate declaration as to the existence and terms of the missing original agreement. The deemed counterclaim for an order vacating the caution fails accordingly.

[131]The deemed counterclaim for damages and interest thereon succeeds to the extent of an aggregate award including interest of £4,500, and payment thereof on (or before) completion of the Transfer of number 16 will be a condition of the order for Specific Performance.

[132]Given the above, so far as the Court is presently aware the Company is unlikely to wish to press for any award of damages (the quantification of which would have gone off for assessment in any event) or other consequential relief, but any such application may be raised immediately following the handing down of this judgment when the terms of the Order are to be finalised. [END]

Cited in 1 later judgment

Arowolo v Department for Work and Pensions 2013