Offer
Cases
Byrne & Co v Leon Van Tien Hoven & Co
[1880] 5 CPD 344
Lindley J
“There is no doubt an offer can be withdrawn before it is accepted, and it is immaterial whether the offer is expressed to be open for acceptance for a given time or not. The offer was posted on the 1st of October, the withdrawal was posted on the 8th, and did not reach the plaintiff until after he had posted his letter of the 11th accepting the offer. It may be taken as now settled that where an offer is made and accepted by letters sent through the post, the contract is completed the moment the letter accepting the offer is posted: Harris’s Case; Dunlop v Higgins, even although it never reaches its destination. When, however, those authorities are looked at, it will be seen that they are based upon the principle that the writer of the offer has expressly or impliedly assented to treat an answer to him by a letter duly posted as a sufficient acceptance and notification to himself, or, in other words, he has made the post office his agent to receive the acceptance and notification of it. But this principle appears to me to be inapplicable to the case of the withdrawal of an offer. In this particular case I find no authority in fact given by the plaintiffs to the defendants to notify a withdrawal of their offer by merely posting a letter, and there is no legal principle or decision which compels me to hold, contrary to the fact, that the letter of the 8th of October is to be treated as communicated to the plaintiff on that day or on any day before the 20th, when the letter reached him…
…Before leaving this part of the case it may be as well to point out the extreme injustice and inconvenience which any other conclusion would produce. If the defendants’ contention were to prevail no person who had received an offer by post and had accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it.”
Carlill v Carbolic Smoke Ball Company
[1892] EWCA Civ 1 i
“£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball.
£1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.
During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.
One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s. post free. The ball can be refilled at a cost of 5s. Address: “Carbolic Smoke Ball Company”, 27, Princes Street, Hanover Square, London.”
Lindley LJ
“I will begin by referring to two points which were raised in the Court below. I refer to them simply for the purpose of dismissing them. First, it is said no action will lie upon this contract because it is a policy. You have only to look at the advertisement to dismiss that suggestion. Then it was said that it is a bet. Hawkins, J., came to the conclusion that nobody ever dreamt of a bet, and that the transaction had nothing whatever in common with a bet. I so entirely agree with him that I pass over this contention also as not worth serious attention.
Then, what is left? The first observation I will make is that we are not dealing with any inference of fact. We are dealing with an express promise to pay £100. in certain events. Read the advertisement how you will, and twist it about as you will, here is a distinct promise expressed in language which is perfectly unmistakable —
“£100. reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball.”
….
“We must first consider whether this was intended to be a promise at all, or whether it was a mere puff which meant nothing. Was it a mere puff? My answer to that question is No, and I base my answer upon this passage: “£1000. is deposited with the Alliance Bank, shewing our sincerity in the matter.” Now, for what was that money deposited or that statement made except to negative the suggestion that this was a mere puff and meant nothing at all? The deposit is called in aid by the advertiser as proof of his sincerity in the matter — that is, the sincerity of his promise to pay this £100. in the event which he has specified. I say this for the purpose of giving point to the observation that we are not inferring a promise; there is the promise, as plain as words can make it.
Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody in particular. Now that point is common to the words of this advertisement and to the words of all other advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer. In point of law this advertisement is an offer to pay £100. to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. That rests upon a string of authorities, the earliest of which is Williams v Carwardine,[4] which has been followed by many other decisions upon advertisements offering rewards.
But then it is said, “Supposing that the performance of the conditions is an acceptance of the offer, that acceptance ought to have been notified.” Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified. But is that so in cases of this kind? I apprehend that they are an exception to that rule, or, if not an exception, they are open to the observation that the notification of the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked, and if notice of acceptance is required — which I doubt very much, for I rather think the true view is that which was expressed and explained by Lord Blackburn in the case of Brogden v Metropolitan Ry Co[5] – if notice of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shews by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance.
We, therefore, find here all the elements which are necessary to form a binding contract enforceable in point of law, subject to two observations. First of all it is said that this advertisement is so vague that you cannot really construe it as a promise — that the vagueness of the language shews that a legal promise was never intended or contemplated. The language is vague and uncertain in some respects, and particularly in this, that the £100. is to be paid to any person who contracts the increasing epidemic after having used the balls three times daily for two weeks. It is said, When are they to be used? According to the language of the advertisement no time is fixed, and, construing the offer most strongly against the person who has made it, one might infer that any time was meant. I do not think that was meant, and to hold the contrary would be pushing too far the doctrine of taking language most strongly against the person using it. I do not think that business people or reasonable people would understand the words as meaning that if you took a smoke ball and used it three times daily for two weeks you were to be guaranteed against influenza for the rest of your life, and I think it would be pushing the language of the advertisement too far to construe it as meaning that. But if it does not mean that, what does it mean? It is for the defendants to shew what it does mean; and it strikes me that there are two, and possibly three, reasonable constructions to be put on this advertisement, any one of which will answer the purpose of the plaintiff. Possibly it may be limited to persons catching the “increasing epidemic” (that is, the then prevailing epidemic), or any colds or diseases caused by taking cold, during the prevalence of the increasing epidemic. That is one suggestion; but it does not commend itself to me. Another suggested meaning is that you are warranted free from catching this epidemic, or colds or other diseases caused by taking cold, whilst you are using this remedy after using it for two weeks. If that is the meaning, the plaintiff is right, for she used the remedy for two weeks and went on using it till she got the epidemic. Another meaning, and the one which I rather prefer, is that the reward is offered to any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball. Then it is asked, What is a reasonable time? It has been suggested that there is no standard of reasonableness; that it depends upon the reasonable time for a germ to develop! I do not feel pressed by that. It strikes me that a reasonable time may be ascertained in a business sense and in a sense satisfactory to a lawyer, in this way; find out from a chemist what the ingredients are; find out from a skilled physician how long the effect of such ingredients on the system could be reasonably expected to endure so as to protect a person from an epidemic or cold, and in that way you will get a standard to be laid before a jury, or a judge without a jury, by which they might exercise their judgment as to what a reasonable time would be. It strikes me, I confess, that the true construction of this advertisement is that £100. will be paid to anybody who uses this smoke ball three times daily for two weeks according to the printed directions, and who gets the influenza or cold or other diseases caused by taking cold within a reasonable time after so using it; and if that is the true construction, it is enough for the plaintiff.
I come now to the last point which I think requires attention — that is, the consideration. It has been argued that this is nudum pactum – that there is no consideration. We must apply to that argument the usual legal tests. Let us see whether there is no advantage to the defendants. It is said that the use of the ball is no advantage to them, and that what benefits them is the sale; and the case is put that a lot of these balls might be stolen, and that it would be no advantage to the defendants if the thief or other people used them. The answer to that, I think, is as follows. It is quite obvious that in the view of the advertisers a use by the public of their remedy, if they can only get the public to have confidence enough to use it, will react and produce a sale which is directly beneficial to them. Therefore, the advertisers get out of the use an advantage which is enough to constitute a consideration.
But there is another view. Does not the person who acts upon this advertisement and accepts the offer put himself to some inconvenience at the request of the defendants? Is it nothing to use this ball three times daily for two weeks according to the directions at the request of the advertiser? Is that to go for nothing? It appears to me that there is a distinct inconvenience, not to say a detriment, to any person who so uses the smoke ball. I am of opinion, therefore, that there is ample consideration for the promise.
We were pressed upon this point with the case of Gerhard v Bates,[6] which was the case of a promoter of companies who had promised the bearers of share warrants that they should have dividends for so many years, and the promise as alleged was held not to shew any consideration. Lord Campbell’s judgment when you come to examine it is open to the explanation, that the real point in that case was that the promise, if any, was to the original bearer and not to the plaintiff, and that as the plaintiff was not suing in the name of the original bearer there was no contract with him. Then Lord Campbell goes on to enforce that view by shewing that there was no consideration shewn for the promise to him. I cannot help thinking that Lord Campbell’s observations would have been very different if the plaintiff in that action had been an original bearer, or if the declaration had gone on to shew what a société anonyme was, and had alleged the promise to have been, not only to the first bearer, but to anybody who should become the bearer. There was no such allegation, and the Court said, in the absence of such allegation, they did not know (judicially, of course) what a société anonyme was, and, therefore, there was no consideration. But in the present case, for the reasons I have given, I cannot see the slightest difficulty in coming to the conclusion that there is consideration.
It appears to me, therefore, that the defendants must perform their promise, and, if they have been so unwary as to expose themselves to a great many actions, so much the worse for them.”
Bowen LJ
“I am of the same opinion. We were asked by the council for the defendants to say that this document was a contract too vague to be enforced.
The first observation which arises is that the document itself is not a contract at all, it is only an offer made to the public. The defendants contend next, that it is an offer the terms of which are too vague to be treated as a definite offer, inasmuch as there is no limit of time fixed for the catching of the influenza, and it cannot be supposed that the advertisers seriously meant to promise to pay money to every person who catches the influenza at any time after the inhaling of the smoke ball. It was urged also, that if you look at this document you will find much vagueness as to the persons with whom the contract was intended to be made — that, in the first place, its terms are wide enough to include persons who may have used the smoke ball before the advertisement was issued; at all events, that it is an offer to the world in general, and, also, that it is unreasonable to suppose it to be a definite offer, because nobody in their senses would contract themselves out of the opportunity of checking the experiment which was going to be made at their own expense. It is also contended that the advertisement is rather in the nature of a puff or a proclamation than a promise or offer intended to mature into a contract when accepted. But the main point seems to be that the vagueness of the document shews that no contract whatever was intended. It seems to me that in order to arrive at a right conclusion we must read this advertisement in its plain meaning, as the public would understand it. It was intended to be issued to the public and to be read by the public. How would an ordinary person reading this document construe it? It was intended unquestionably to have some effect, and I think the effect which it was intended to have, was to make people use the smoke ball, because the suggestions and allegations which it contains are directed immediately to the use of the smoke ball as distinct from the purchase of it. It did not follow that the smoke ball was to be purchased from the defendants directly, or even from agents of theirs directly. The intention was that the circulation of the smoke ball should be promoted, and that the use of it should be increased. The advertisement begins by saying that a reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic after using the ball. It has been said that the words do not apply only to persons who contract the epidemic after the publication of the advertisement, but include persons who had previously contracted the influenza. I cannot so read the advertisement. It is written in colloquial and popular language, and I think that it is equivalent to this:
“100l. will be paid to any person who shall contract the increasing epidemic after having used the carbolic smoke ball three times daily for two weeks.”
And it seems to me that the way in which the public would read it would be this, that if anybody, after the advertisement was published, used three times daily for two weeks the carbolic smoke ball, and then caught cold, he would be entitled to the reward. Then again it was said: “How long is this protection to endure? Is it to go on for ever, or for what limit of time?” I think that there are two constructions of this document, each of which is good sense, and each of which seems to me to satisfy the exigencies of the present action. It may mean that the protection is warranted to last during the epidemic, and it was during the epidemic that the plaintiff contracted the disease. I think, more probably, it means that the smoke ball will be a protection while it is in use. That seems to me the way in which an ordinary person would understand an advertisement about medicine, and about a specific against influenza. It could not be supposed that after you have left off using it you are still to be protected for ever, as if there was to be a stamp set upon your forehead that you were never to catch influenza because you had once used the carbolic smoke ball. I think the immunity is to last during the use of the ball. That is the way in which I should naturally read it, and it seems to me that the subsequent language of the advertisement supports that construction. It says: “During the last epidemic of influenza many thousand carbolic smoke balls were sold, and in no ascertained case was the disease contracted by those using” (not “who had used”) “the carbolic smoke ball,” and it concludes with saying that one smoke ball will last a family several months (which imports that it is to be efficacious while it is being used), and that the ball can be refilled at a cost of 5s. I, therefore, have myself no hesitation in saying that I think, on the construction of this advertisement, the protection was to enure during the time that the carbolic smoke ball was being used. My brother, the Lord Justice who preceded me, thinks that the contract would be sufficiently definite if you were to read it in the sense that the protection was to be warranted during a reasonable period after use. I have some difficulty myself on that point; but it is not necessary for me to consider it further, because the disease here was contracted during the use of the carbolic smoke ball.
Was it intended that the 100l. should, if the conditions were fulfilled, be paid? The advertisement says that 1000l. is lodged at the bank for the purpose. Therefore, it cannot be said that the statement that 100l. would be paid was intended to be a mere puff. I think it was intended to be understood by the public as an offer which was to be acted upon.
But it was said there was no check on the part of the persons who issued the advertisement, and that it would be an insensate thing to promise 100l. to a person who used the smoke ball unless you could check or superintend his manner of using it. The answer to that argument seems to me to be that if a person chooses to make extravagant promises of this kind he probably does so because it pays him to make them, and, if he has made them, the extravagance of the promises is no reason in law why he should not be bound by them.
It was also said that the contract is made with all the world — that is, with everybody; and that you cannot contract with everybody. It is not a contract made with all the world. There is the fallacy of the argument. It is an offer made to all the world; and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition? It is an offer to become liable to any one who, before it is retracted, performs the condition, and, although the offer is made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of the advertisement. It is not like cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate — offers to receive offers — offers to chaffer, as, I think, some learned judge in one of the cases has said. If this is an offer to be bound, then it is a contract the moment the person fulfils the condition. That seems to me to be sense, and it is also the ground on which all these advertisement cases have been decided during the century; and it cannot be put better than in Willes, J.’s, judgment in Spencer v Harding. “In the advertisement cases,” he says,
“there never was any doubt that the advertisement amounted to a promise to pay the money to the person who first gave information. The difficulty suggested was that it was a contract with all the world. But that, of course, was soon overruled. It was an offer to become liable to any person who before the offer should be retracted should happen to be the person to fulfil the contract, of which the advertisement was an offer or tender. That is not the sort of difficulty which presents itself here. If the circular had gone on, ‘and we undertake to sell to the highest bidder,’ the reward cases would have applied, and there would have been a good contract in respect of the persons.”
As soon as the highest bidder presented himself, says Willes, J., the person who was to hold the vinculum juris on the other side of the contract was ascertained, and it became settled.
Then it was said that there was no notification of the acceptance of the contract. One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. Unless this is done the two minds may be apart, and there is not that consensus which is necessary according to the English law — I say nothing about the laws of other countries — to make a contract. But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose there can be no doubt that where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance; and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.
That seems to me to be the principle which lies at the bottom of the acceptance cases, of which two instances are the well-known judgment of Mellish, LJ, in Harris’s Case,[7] and the very instructive judgment of Lord Blackburn in Brogden v Metropolitan Ry Co,[5] in which he appears to me to take exactly the line I have indicated.
Now, if that is the law, how are we to find out whether the person who makes the offer does intimate that notification of acceptance will not be necessary in order to constitute a binding bargain? In many cases you look to the offer itself. In many cases you extract from the character of the transaction that notification is not required, and in the advertisement cases it seems to me to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but that if he performs the condition notification is dispensed with. It seems to me that from the point of view of common sense no other idea could be entertained. If I advertise to the world that my dog is lost, and that anybody who brings the dog to a particular place will be paid some money, are all the police or other persons whose business it is to find lost dogs to be expected to sit down and write me a note saying that they have accepted my proposal? Why, of course, they at once look after the dog, and as soon as they find the dog they have performed the condition. The essence of the transaction is that the dog should be found, and it is not necessary under such circumstances, as it seems to me, that in order to make the contract binding there should be any notification of acceptance. It follows from the nature of the thing that the performance of the condition is sufficient acceptance without the notification of it, and a person who makes an offer in an advertisement of that kind makes an offer which must be read by the light of that common sense reflection. He does, therefore, in his offer impliedly indicate that he does not require notification of the acceptance of the offer.
A further argument for the defendants was that this was a nudum pactum – that there was no consideration for the promise — that taking the influenza was only a condition, and that the using the smoke ball was only a condition, and that there was no consideration at all; in fact, that there was no request, express or implied, to use the smoke ball. Now, I will not enter into an elaborate discussion upon the law as to requests in this kind of contracts. I will simply refer to Victors v Davies[8] and Serjeant Manning’s note to Fisher v Pyne,[9] which everybody ought to read who wishes to embark in this controversy. The short answer, to abstain from academical discussion, is, it seems to me, that there is here a request to use involved in the offer. Then as to the alleged want of consideration. The definition of “consideration” given in Selwyn’s Nisi Prius, 8th ed. p. 47, which is cited and adopted by Tindal CJ, in the case of Laythoarp v Bryant,[10] is this:
“Any act of the plaintiff from which the defendant derives a benefit or advantage, or any labour, detriment, or inconvenience sustained by the plaintiff, provided such act is performed or such inconvenience suffered by the plaintiff, with the consent, either express or implied, of the defendant.”
Can it be said here that if the person who reads this advertisement applies thrice daily, for such time as may seem to him tolerable, the carbolic smoke ball to his nostrils for a whole fortnight, he is doing nothing at all — that it is a mere act which is not to count towards consideration to support a promise (for the law does not require us to measure the adequacy of the consideration). Inconvenience sustained by one party at the request of the other is enough to create a consideration. I think, therefore, that it is consideration enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants received a benefit from this user, for the use of the smoke ball was contemplated by the defendants as being indirectly a benefit to them, because the use of the smoke balls would promote their sale.
Then we were pressed with Gerhard v Bates.[6] In Gerhard v Bates, which arose upon demurrer, the point upon which the action failed was that the plaintiff did not allege that the promise was made to the class of which alone the plaintiff was a member, and that therefore there was no privity between the plaintiffs and the defendant. Then Lord Campbell went on to give a second reason. If his first reason was not enough, and the plaintiff and the defendant there had come together as contracting parties and the only question was consideration, it seems to me Lord Campbell’s reasoning would not have been sound. It is only to be supported by reading it as an additional reason for thinking that they had not come into the relation of contracting parties; but, if so, the language was superfluous. The truth is, that if in that case you had found a contract between the parties there would have been no difficulty about consideration; but you could not find such a contract. Here, in the same way, if you once make up your mind that there was a promise made to this lady who is the plaintiff, as one of the public — a promise made to her that if she used the smoke ball three times daily for a fortnight and got the influenza, she should have 100l., it seems to me that her using the smoke ball was sufficient consideration. I cannot picture to myself the view of the law on which the contrary could be held when you have once found who are the contracting parties. If I say to a person, “If you use such and such a medicine for a week I will give you 5l.,” and he uses it, there is ample consideration for the promise.
Smith LJ
The first point in this case is, whether the defendants’ advertisement which appeared in the Pall Mall Gazette was an offer which, when accepted and its conditions performed, constituted a promise to pay, assuming there was good consideration to uphold that promise, or whether it was only a puff from which no promise could be implied, or, as put by Mr. Finlay, a mere statement by the defendants of the confidence they entertained in the efficacy of their remedy. Or as I might put it in the words of Lord Campbell in Denton v Great Northern Ry. Co.,[11] whether this advertisement was mere waste paper. That is the first matter to be determined. It seems to me that this advertisement reads as follows:
“100l. reward will be paid by the Carbolic Smoke Ball Company to any person who after having used the ball three times daily for two weeks according to the printed directions supplied with such ball contracts the increasing epidemic influenza, colds, or any diseases caused by taking cold. The ball will last a family several months, and can be refilled at a cost of 5s.”
If I may paraphrase it, it means this: “If you” – that is one of the public as yet not ascertained, but who, as Lindley and Bowen, L.JJ., have pointed out, will be ascertained by the performing the condition — “will hereafter use my smoke ball three times daily for two weeks according to my printed directions, I will pay you 100l. if you contract the influenza within the period mentioned in the advertisement.” Now, is there not a request there? It comes to this: “In consideration of your buying my smoke ball, and then using it as I prescribe, I promise that if you catch the influenza within a certain time I will pay you 100l.” It must not be forgotten that this advertisement states that as security for what is being offered, and as proof of the sincerity of the offer, 1000l. is actually lodged at the bank where with to satisfy any possible demands which might be made in the event of the conditions contained therein being fulfilled and a person catching the epidemic so as to entitle him to the 100l. How can it be said that such a statement as that embodied only a mere expression of confidence in the wares which the defendants had to sell? I cannot read the advertisement in any such way. In my judgment, the advertisement was an offer intended to be acted upon, and when accepted and the conditions performed constituted a binding promise on which an action would lie, assuming there was consideration for that promise. The defendants have contended that it was a promise in honour or an agreement or a contract in honour — whatever that may mean. I understand that if there is no consideration for a promise, it may be a promise in honour, or, as we should call it, a promise without consideration and nudum pactum; but if anything else is meant, I do not understand it. I do not understand what a bargain or a promise or an agreement in honour is unless it is one on which an action cannot be brought because it is nudum pactum, and about nudum pactum I will say a word in a moment.
In my judgment, therefore, this first point fails, and this was an offer intended to be acted upon, and, when acted upon and the conditions performed, constituted a promise to pay.
In the next place, it was said that the promise was too wide, because there is no limit of time within which the person has to catch the epidemic. There are three possible limits of time to this contract. The first is, catching the epidemic during its continuance; the second is, catching the influenza during the time you are using the ball; the third is, catching the influenza within a reasonable time after the expiration of the two weeks during which you have used the ball three times daily. It is not necessary to say which is the correct construction of this contract, for no question arises thereon. Whichever is the true construction, there is sufficient limit of time so as not to make the contract too vague on that account.
Then it was argued, that if the advertisement constituted an offer which might culminate in a contract if it was accepted, and its conditions performed, yet it was not accepted by the plaintiff in the manner contemplated, and that the offer contemplated was such that notice of the acceptance had to be given by the party using the carbolic ball to the defendants before user, so that the defendants might be at liberty to superintend the experiment. All I can say is, that there is no such clause in the advertisement, and that, in my judgment, no such clause can be read into it; and I entirely agree with what has fallen from my Brothers, that this is one of those cases in which a performance of the condition by using these smoke balls for two weeks three times a day is an acceptance of the offer.
It was then said there was no person named in the advertisement with whom any contract was made. That, I suppose, has taken place in every case in which actions on advertisements have been maintained, from the time of Williams v Carwardine,[4] and before that, down to the present day. I have nothing to add to what has been said on that subject, except that a person becomes a persona designata and able to sue, when he performs the conditions mentioned in the advertisement.
Lastly, it was said that there was no consideration, and that it was nudum pactum. There are two considerations here. One is the consideration of the inconvenience of having to use this carbolic smoke ball for two weeks three times a day; and the other more important consideration is the money gain likely to accrue to the defendants by the enhanced sale of the smoke balls, by reason of the plaintiff’s user of them. There is ample consideration to support this promise. I have only to add that as regards the policy and the wagering points, in my judgment, there is nothing in either of them.”
Daulia Ltd v Four Millbank Nominees Ltd
[1977] EWCA Civ 5
Goff LJ.
“I therefore turn to the first question. Was there a concluded unilateral contract by the first defendants to enter into a contract for sale on the agreed terms? The concept of a unilateral or “if contract” is somewhat anomalous, because it is clear that, at all events until the offeree starts to perform the condition, there is no contract at all, but merely an offer which the offeror is free to revoke.
Doubts have been expressed whether the offeror becomes bound so soon as the offeree starts to perform or satisfy the condition, or only when he has fully done so.
In my judgment, however, we are not concerned in this case with any such problem, because in my view the plaintiffs had fully performed or satisfied the condition when they presented themselves at the time and place appointed with a banker’s draft for the deposit, and their part of the written contract for sale duly engrossed and signed and there tendered the same, which I understand to mean proffered it for exchange. Actual exchange, which never took place, would not in my view have been part of the satisfaction of the condition but something additional which was inherently necessary to be done by the plaintiffs to enable, not to bind the first defendants to perform the unilateral contract.
Accordingly in my judgment, the answer to the first question must be in the affirmative.
Even if my reasoning so far be wrong the conclusion in my view is still the same for the following reasons. Whilst I think the true view of a unilateral contract must in general be that the offeror is entitled to require full performance of the condition which he has imposed and short of that he is not bound, that must be subject to one important qualification, which stems from the fact that there must be an implied obligation on the part of the offeror not to prevent the condition becoming satisfied, which obligation it seems to me must arise as soon as the offeree starts to perform. Until then the offeror can revoke the whole thing, but once the offeree has embarked on performance it is too late for the offeror to revoke his offer.
This brings me to the second question. There are certain English cases touching this matter, but none precisely in point.
The plaintiffs rely strongly on Warlow v. Harrison (1858) 1 E1. & E1. 295 and Johnston v. Boyes [1899] 2 Ch. 73 . In the former an auctioneer knocked down as sold for 61 guineas, which was bid by the owner, a pony which according to the particulars was to be sold without reserve, and the auctioneer, not the vendor, was sued for damages by the plaintiff who was the highest independent bidder at 60 guineas. In the Court of Queen’s Bench, see p. 308, Lord Campbell held that there was no contract because the vendor had revoked the auctioneer’s authority to accept the plaintiff’s bid, and therefore no question of the impact of section 17 of the Statute of Frauds arose.
The Exchequer Chamber agreed with this conclusion on the pleadings as they stood, but allowed an amendment, and held the defendant liable; per Martin B. as upon a contract that the sale should be without reserve, and per Willes J. and Bramwell B. upon a breach of warranty of authority to sell without reserve, and Martin B. said at pp. 316-317:
“Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue the auctioneer as upon a contract that the sale shall be without reserve. We think the auctioneer who puts the property up for sale upon such a condition pledges himself that the sale shall be without reserve, or, in other words, contracts that it shall be so; and that this contract is made with the highest bona fide bidder; and, in case of breach of it, that he has a right of action against the auctioneer. The case is not at all affected by section 17 of the Statute of Frauds, which relates only to direct sales, and not to contracts relating to or connected with them.”
This case affords support for the plaintiffs’ contention as far as it goes, but it is distinguishable, since there the action was against the auctioneer, not the vendor, and it was not upon a contract by the auctioneer that he himself would sell to the highest bidder but that his principal would do so.
Warlow v. Harrison, 1 E1. & E1. 295 was approved by Cozens-Hardy J. in Johnston v. Boyes [1899] 2 Ch. 73 , 77, where he related it to the vendor himself, saying:
“A vendor who offers property for sale by auction on the terms of printed conditions can be made liable to a member of the public who accepts the offer if those conditions be violated: see Warlow v. Harrison, 1 E1. & E1. 295 and the recent case of Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256. Nor do I think that the Statute of Frauds would afford any defence to such an action. The plaintiff is not suing on a contract to purchase land: she is suing simply because her agent, in breach of the first and second conditions of sale, was not allowed to sign a contract which would have resulted in her becoming the purchaser of the land. I think this conclusion results from the decision of the Exchequer Chamber in Warlow v. Harrison.”
This, however, was merely obiter because not only was the action once again not against the vendor but against the auctioneer, but also the court held that there could be no liability anyway, quite apart from the effect of the statute, because the plaintiff’s agent had not tendered cash, but only a cheque, which the auctioneer was not bound to accept. The case is in any event unsatisfactory because the complaint made was that the auctioneer had refused to allow the plaintiff’s agent to sign a memorandum on her behalf, but that would not have been of any use to her. What was required was a note or memorandum signed by or on behalf of the vendor.
On the other hand Rainbow v. Howkins [1904] 2 K.B. 322 , so far as it goes tells against the plaintiffs but again it is distinguishable, because the action was brought on the ground that the auctioneer was personally liable as if he were vendor under a contract of sale not upon a collateral contract, and alternatively for breach of warranty of authority, but it was held that he could not be sued on the first ground because of the statute, and could not be sued for breach of warranty of authority, because there was none since, apart from the statute, he had effectively bound the vendor.
Mr. Hoffmann also relied on Wood v. Midgley (1854) 2 Sm. & G. 115 , and on appeal, 5 De G.M. & G. 41. That, however, was not a case of an agreement to enter into a written agreement but of a concluded oral agreement for sale with a concurrent or collateral agreement to reduce it to writing, so that again is distinguishable.
In these circumstances in my judgment it is necessary to consider how the matter stands in principle. As I see it the question is whether the unilateral contract is – and I quote these words from section 40 – a “contract for the sale or other disposition of land or any interest in land.”
It is clear to me that ex hypothesi it is not a contract for the sale of land or any interest in land because it is a separate and independent contract to enter into such a contract.
In my judgment, however, it is equally clearly a contract for some other disposition of an interest in land.
It is not necessary in my view that the interest in land to be disposed of should actually exist at the time of the contract. I cannot doubt that a contract for valuable consideration to grant an easement over Blackacre would be a contract for the disposition of an interest in land within the meaning of the section.
Now, in the present case we have a contract to enter into a proper written contract for the sale of land. Such a contract if entered into would be specifically enforceable and would therefore give the plaintiffs a right to the land in equity and so would create and give them an equitable interest in the land. It follows in my judgment that the unilateral contract was a contract to dispose of an interest in land, because it was a contract to do something which would have that effect in law.
The plaintiffs say: “But we are not claiming specific performance; only damages.” That, however, in my view is an irrelevant consideration for two reasons. The first, which is I think conclusive, is that we are not concerned with whether the “unilateral contract” could be specifically enforced so as actually to create an interest in land, but whether it is a contract to do that which, if done, would create such an interest. The words of the section look only to the contract.
The second is that the plaintiffs cannot escape the impact of the section by limiting the nature of the relief they seek and, moreover, the damages for breach of the unilateral contract must, as I see it, be exactly the same as damages for breach of the contract of sale would have been if contracts had been exchanged and then broken by the plaintiffs.
If, however, contrary to my view it be necessary that the unilateral contract should be one capable of specific performance, in my judgment it is so notwithstanding the decision of Stirling J. on motion in Johnston v. Boyes, 42 S.J. 610 , which with all respect to that judge is in my view incorrect.
For this purpose one must regard the matter apart from section 40, for if one postulates that the section applies, one begs the whole question. So regarded, I cannot see how a vendor can escape an order for specific performance by agreeing (with sufficient particularity to be effective in law) to agree to sell rather than by a direct agreement to sell.
The dictum of Lord Wright in Hillas and Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503 , 515 “a contract de praesenti to enter into what, in law, is an enforceable contract is simply that enforceable contract, and no more and no less,” with which I respectfully agree, does not directly apply, because prior to exchange of contracts which never took place the plaintiffs were not themselves bound to purchase or to enter into a contract to purchase. They could have resiled at the very last moment, even after tender, so that this was not a contract between A and B to make a contract between A and B, but a unilateral contract by A to enter into a particular contract with B, but in my view the principle must be the same.
I am fortified in this conclusion by the American case of Union Car Advertising Co. Inc. v. Boston Elevated Railway Co. (1928) 26 Fed.Rep. (2d) 755 , a decision of the Circuit Court of Appeals, First Circuit. Mr. Godfrey pointed out that the court said, at p. 759:
“… it was virtually conceded by the plaintiff at the argument that under the law of Massachusetts an oral contract to execute a written contract for the sale or transfer of an interest in land is within the statute of frauds and invalid.”
But the case before the court was not such a case but one of a contract not to be performed within the year. Therefore, he said, this American decision did not help because the position with regard to a contract for the sale or other disposition of an interest in land was not before the court, and anyway the court was dealing only with the law of Massachusetts.
So far as the second point is concerned the case is none the less persuasive authority, and as to the first, the citations in the judgment from other cases show that the concession was in truth in accordance with the law of that state, and show that law to be founded upon reasoning which commends itself to me and entirely accords with my own.
Thus in Sarkisian v. Teele (1909) 88 N.E. 333 , where the subject matter was an oral contract to execute an unsigned written contract to sell stock in trade and to let the business premises, the court said, at p. 334:
“… if the bill is considered as seeking to enforce an oral promise by the defendant to enter into the formal writing, as containing all the essential elements of the contract, it cannot be maintained,” and again “By the statute of frauds such an agreement was required to be in writing, and an oral promise to execute a contract embodying these terms also comes within the statute.”
Further in McLachlin v. Village of Whitehall (1906) 99 N.Y.S. 721 , as cited in 26 Fed.Rep. (2nd series) p. 758:
“… the trustees of the defendant village entered into an oral contract wherein it was agreed that if the plaintiff would increase his plant, so that he could furnish incandescent lights for private houses in the village, the trustees would renew…”
the written contract he then had for lighting its street, which would otherwise expire in 1897. In that case the court said, at pp. 722-723:
“The question is therefore presented whether damages can be recovered for the breach of an oral agreement to enter into a contract, which, under the statute of frauds, is required to be in writing. It is true that the oral agreement to enter into the written contract might be fully performed within a year or within a day. The action is not in form one to recover damages for a breach of contract for lighting the streets and public places for a term of five years, but for damages consequent upon a breach of the verbal agreement to award such a contract to the plaintiff. The damages, however, claimed as consequent upon such breach, are none other than the same damages as would have been recoverable for breach of the contract for lighting if it had been awarded to the plaintiff…. It is conceded that a contract for lighting for a term of five years would be void if not in writing, but if an oral agreement to enter into such a written contract is not also void, where the damages claimed for the breach of the oral agreement are not independent of it, but necessarily are the same as those which would arise from the breach of the written contract, the door would be open for the practical nullification of the statute of frauds in a large class of cases.”
The law is similarly stated in 72 American Jurist (2nd Series), Statute of Frauds, para. 4:
“The general rule is that an oral agreement to reduce to writing a contract which is within the scope of the operation of the statute of frauds, or to sign an agreement which the statute of frauds requires to be in writing, is invalid and unenforceable.”
In my judgment, therefore, the unilateral contract in this case is prima facie unenforceable, and I turn to the third question.
The plaintiffs rely on all and every of the acts done by them to satisfy the conditions of the “unilateral contract,” as being also sufficient acts of part performance.
The first defendants say that that cannot be so because nothing can be part performance if done before there is any binding contract. Mr. Hoffmann puts his case as high as saying that by definition there can never be part performance of a unilateral contract.
I doubt whether that is right as a general principle, since in most cases the performance of the condition by the offeree is also the discharge of all his obligations and is certainly done pursuant to the inchoate contract. I think in many cases the offeree’s acts may amount to part performance, though I doubt whether in this case they caused sufficient prejudice to the plaintiffs to raise an equity on which the first defendants could be charged.
In my view, however, it is unnecessary to decide these questions since in my judgment the ease fails because none of the alleged acts of part performance of themselves suggests that there was any contract between the parties. Indeed they point to the exact opposite and suggest that the parties were about to make or contemplated making a contract. It is only if one first looks to see what the oral contract is, and finds that it is a unilateral contract, such as pleaded in this ease, that the acts can begin to be regarded as part performance, but that is an inquiry which one is not permitted to make: see per Lord Reid in Steadman v. Steadman [1976] A.C. 536 , 541-542, where he said:
“I think that there has been some confusion between this supposed rule and another perfectly good rule. You must not first look at the oral contract and then see whether the alleged acts of part performance are consistent with it. You must first look at the alleged acts of part performance to see whether they prove that there must have been a contract and it is only if they do so prove that you can bring in the oral contract…. In my view, unless the law is to be divorced from reason and principle, the rule must be that you take the whole circumstances, leaving aside evidence about the oral contract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not.”
Lord Salmon appears to have taken a contrary view: he said, at p. 571:
“In the present case, the payment of £100 by the husband to his wife who had divorced him – looked at without regard to its surrounding circumstances – would not be any evidence of any contract, let alone of a contract concerning land.”
The other members of the court did not state the position so specifically one way or the other, but both Viscount Dilhorne at p. 553 and Lord Simon at p. 561 accepted the statement in Fry, Specific Performance of Contract, 6th ed. (1921), p. 278, section 582:
“The true principle, however, of the operation of acts of part performance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged,”
approved by Upjohn L.J. in Kingswood Estate Co. Ltd. v. Anderson [1963] 2 Q.B. 169 , 189. Here, of course, the acts do not prove any contract.
The plaintiffs argue that whilst one may not look to see what oral contract is alleged, one may look at the promise made as part of the surrounding circumstances and then the alleged acts of part performance are explained and shown to be referable to the existence of a contract; but that, with all respect, I reject as too subtle, and in reality looking to and examining the alleged acts of part performance in the light of the alleged contract.
For these reasons in my judgment the plaintiffs fail on the third question also, and I would dismiss this appeal. I intended to say that I would do so with considerable regret as the first defendants’ conduct unexplained appeared to me to be unmeritorious. However, this case having been heard simply on an application to strike out the statement of claim as disclosing no cause of action, the motives or reasons which influenced the defendants have not been investigated, and we were informed by counsel that at the very last moment the mortgagors found a purchaser at a higher price and so they felt themselves bound to reject the plaintiffs despite the assurances they had given them. It seems, therefore, that in this particular case there may be a good explanation and I leave it there.”
Entores Ltd v Miles Far East Corporation
[1955] EWCA Civ 3
Denning LJ
“there was a completed contract by which the defendants agreed to supply 100 tons of cathodes at a price of £239 10s. a ton. The offer was sent by Telex from England offering to pay £239 10s. a ton for 100 tons, and accepted by Telex from Holland. The question for our determination is where was the contract made?
When a contract is made by post it is clear law throughout the common law countries that the acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made. But there is no clear rule about contracts made by telephone or by Telex. Communications by these means are virtually instantaneous and stand on a different footing.
The problem can only be solved by going in stages. Let me first consider a case where two people make a contract by word of mouth in the presence of one another. Suppose, for instance, that I shout an offer to a man across a river or a courtyard but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make a contract, he must wait till the aircraft is gone and then shout back his acceptance so that I can hear what he says. Not until I have his answer am I bound. I do not agree with the observations of Hill J in Newcomb v De Roos.[1]
Now take a case where two people make a contract by telephone. Suppose, for instance, that I make an offer to a man by telephone and, in the middle of his reply, the line goes “dead” so that I do not hear his words of acceptance. There is no contract at that moment. The other man may not know the precise moment when the line failed. But he will know that the telephone conversation was abruptly broken off: because people usually say something to signify the end of the conversation. If he wishes to make a contract, he must therefore get through again so as to make sure that I heard. Suppose next, that the line does not go dead, but it is nevertheless so indistinct that I do not catch what he says and I ask him to repeat it. He then repeats it and I hear his acceptance. The contract is made, not on the first time when I do not hear, but only the second time when I do hear. If he does not repeat it, there is no contract. The contract is only complete when I have his answer accepting the offer.
Lastly, take the Telex. Suppose a clerk in a London office taps out on the teleprinter an offer which is immediately recorded on a teleprinter in a Manchester office, and a clerk at that end taps out an acceptance. If the line goes dead in the middle of the sentence of acceptance, the teleprinter motor will stop. There is then obviously no contract. The clerk at Manchester must get through again and send his complete sentence. But it may happen that the line does not go dead, yet the message does not get through to London. Thus the clerk at Manchester may tap out his message of acceptance and it will not be recorded in London because the ink at the London end fails, or something of that kind. In that case, the Manchester clerk will not know of the failure but the London clerk will know of it and will immediately send back a message “not receiving.” Then, when the fault is rectified, the Manchester clerk will repeat his message. Only then is there a contract. If he does not repeat it, there is no contract. It is not until his message is received that the contract is complete.
In all the instances I have taken so far, the man who sends the message of acceptance knows that it has not been received or he has reason to know it. So he must repeat it. But, suppose that he does not know that his message did not get home. He thinks it has. This may happen if the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated: or the ink on the teleprinter fails at the receiving end, but the clerk does not ask for the message to be repeated: so that the man who sends an acceptance reasonably believes that his message has been received. The offeror in such circumstances is clearly bound, because he will be estopped from saying that he did not receive the message of acceptance. It is his own fault that he did not get it. But if there should be a case where the offeror without any fault on his part does not receive the message of acceptance – yet the sender of it reasonably believes it has got home when it has not – then I think there is no contract.
My conclusion is, that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received.
In a matter of this kind, however, it is very important that the countries of the world should have the same rule. I find that most of the European countries have substantially the same rule as that I have stated. Indeed, they apply it to contracts by post as well as instantaneous communications. But in the United States of America it appears as if instantaneous communications are treated in the same way as postal communications. In view of this divergence, I think that we must consider the matter on principle: and so considered, I have come to the view I have stated, and I am glad to see that Professor Winfield in this country (55 Law Quarterly Review 514), and Professor Williston in the United States of America (Contracts, § 82, p. 239), take the same view.
Applying the principles which I have stated, I think that the contract in this case was made in London where the acceptance was received. It was, therefore, a proper case for service out of the jurisdiction.
Apart from the contract by Telex, the plaintiffs put the case in another way. They say that the contract by Telex was varied by letter posted in Holland and accepted by conduct in England: and that this amounted to a new contract made in England. The Dutch company on September 11, 1954, wrote a letter to the English company saying: “We confirm having sold to you for account of our associates in Tokyo: 100 metric tons electrolitic copper in cathodes: £239 10s. for longton c.i.f. U.K./ Continental main ports: prompt shipment from a Japanese port after receipt of export licence: payment by irrevocable and transferable letter of credit to be opened in favour of Miles Far East Corporation with a first class Tokyo Bank. The respective import licences to be sent directly without delay to Miles Far East Corporation.” The variations consisted in the ports of delivery, the provisions of import licence and so forth. The English company say that they accepted the variations by dispatching from London the import licence, and giving instructions in London for the opening of the letter of credit, and that this was an acceptance by conduct which was complete as soon as the acts were done in London.
I am not sure that this argument about variations is correct. It may well be that the contract is made at the place where first completed; not at the place where the variations are agreed. But whether this be so or not, I think the variations were accepted by conduct in London and were therefore made in England. Both the original contract and ensuing variations were made in England and leave can properly be given for service out of the jurisdiction.
I am inclined to think also that the contract is by implication to be governed by English law, because England is the place with which it has the closest connection.
I think that the decisions of the master and the judge were right, and I would dismiss the appeal.”
Gibson v Manchester City Council
[1979] UKHL 6
Lord Diplock
“Lord Justice Geoffrey Lane in a dissenting judgment, which for my part I find convincing, adopted the conventional approach. He found that upon the true construction of the documents relied upon as constituting the contract, there never was an offer by the corporation acceptance of which by Mr. Gibson was capable in law of constituting a legally enforceable contract. It was but a step in the negotiations for a contract which, owing to the change in the political complexion of the council, never reached fruition.
My Lords, there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance; but a contract alleged to have been made by an exchange of correspondence between the parties in which the successive communications other than the first are in reply to one another, is not one of these. I can see no reason in the instant case for departing from the conventional approach of looking at the handful of documents relied upon as constituting the contract sued upon and seeing whether upon their true construction there is to be found in them a contractual offer by the corporation to sell the house to Mr. Gibson and an acceptance of that offer by Mr. Gibson. I venture to think that it was by departing from this conventional approach that the majority of the Court of Appeal was led into error.
My Lords, the words I have italicised seem to me, as they seemed to Geoffrey Lane LJ, to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by Mr. Gibson’s written acceptance of it. The words “may be prepared to sell” are fatal to this; so is the invitation, not, be it noted, to accept the offer, but “to make formal application to buy” upon the enclosed application form. It is, to quote Geoffrey Lane LJ, a letter setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course.
I therefore feel compelled to allow the appeal. One can sympathise with Mr Gibson’s disappointment on finding that his expectations that he would be able to buy his council house at 20 per cent below its market value in the autumn of 1970 cannot be realised. Whether one thinks this makes it a hard case perhaps depends upon the political views that one holds about council housing policy. But hard cases offer a strong temptation to let them have their proverbial consequences. It is a temptation that the judicial mind must be vigilant to resist.”
Lord Russell of Killowen
“My Lords, I cannot bring myself to accept that a letter which says that the possible vendor ” May be prepared to sell the house to you” can be regarded as an offer to sell capable of acceptance so as to constitute a contract. The language simply does not permit such a construction. Nor can the statement that the letter should not be regarded as a firm offer of a mortgage operate to turn into a firm offer to sell that which quite plainly it was not. ”
Harvela Investments Ltd. v Royal Trust of Canada (CI) Ltd.
[1986] 1 AC 207
Lord Templeman
“In the South Hetton case there was no fixed bid but only a referential bid by one bidder of £200 more than the amount offered by the other bidder who offered £31,000. The referential bid was held to be invalid. The South Hetton case was decided by a powerful court, has stood unchallenged for over 80 years and was binding on the Court of Appeal in the present case. It was argued that Sir Leonard’s unsuccessful valid bid of $2,100,000 in some unexplained fashion transformed his invalid referential bid into a valid bid, but the argument owes everything to wishful thinking and nothing to logic. It was also argued that the South Hetton case was distinguishable because the vendors in that case undertook to accept “the highest net money tender,” whereas in the present case the vendors undertook to accept “the highest offer.” The argument seeks to elevate a trivial difference into a legal distinction. The decision in the South Hetton case was followed by a majority of the members of the New York Court of Appeals in S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1982) 449 N.Y.S. 2d 173. The majority judgment, at pp. 174-175, succinctly and cogently summarised the reasons for rejecting referential bids as follows:
“The very essence of sealed competitive bidding is the submission of independent, self-contained bids, to the fair compliance with which not only the owner but the other bidders are entitled… to give effect to this or any similar bidding practice in which the dollar amount of one bid was tied to the bid or bids of another or others in the same bidding would be to recognise means whereby effective sealed competitive bidding could be wholly frustrated. In the context of such bidding, therefore, a submission by one bidder of a bid dependent for its definition on the bids of others is invalid and unacceptable as inconsistent with and potentially destructive of the very bidding in which it is submitted.”
Lord Diplock
“The answer to the construction question itself, however, appears to me to present no difficulties in so far as it leads to the conclusion that the condition subsequent to which the vendors’ obligations under the unilateral contracts were subject was incapable of being fulfilled by either promisee except by a self-contained offer of a purchase price for the shares expressed as a fixed sum of money which did not necessitate, for its quantification, reference to offers made by any other bidders. I appreciate that this cannot be quite so obvious as I myself have thought throughout, seeing that the Court of Appeal felt compelled to come to a different conclusion.”
Holwell Securities v Hughes
[1973] EWCA Civ 5 [1974] 1 WLR 155, [1973] EWCA Civ 5, [1974] WLR 155, [1974] 1 All ER 161
LORD JUSTICE RUSSELL:
It is not disputed that the plaintiffs’ solicitors’ letter dated 14th April addressed to the defendant at his residence and place of work, the house which was the subject of the option to purchase, was posted by ordinary post in a proper way, enclosing a copy of the letter of the same date delivered by hand to the defendant’s solicitors. It is not disputed that the letter and enclosure somehow went astray and never reached the house nor the defendant. It is not disputed that the language of the letter and enclosure would have constituted notice of exercise of the option had they reached the defendant. It is not contended that the handing of the letter to the solicitor constituted an exercise of the option.
The plaintiffs’ main contention below and before this Court has been that the option was exercised and the contract for sale and purchase was constituted at the moment that the letter addressed to the defendant with its enclosure was committed by the plaintiffs’ solicitors to the proper representative of the postal service, so that its failure to reach its destination is irrelevant.
It is the law in the first place that prima facie acceptance of an offer must be communicated to the offeror. Upon this principle the law has engrafted a doctrine that, if in any given case the true view is that the parties contemplated that the postal service might be used for the purpose of forwarding an acceptance of the offer, committal of the acceptance in a regular manner to the postal service will be acceptance of the offer so as to constitute a contract, even if the letter goes astray and is lost. Nor, as was once suggested, are such cases limited to cases in which the offer has been made by post. It suffices I think at this stage to refer to Henthorn v. Fraser (1892 2 Chancery, 27). In the present case, as I read a passage in the judgment below at page 764 “D”, Mr Justice Templeman concluded that the parties here contemplated that the postal service might be used to communicate acceptance of the offer (by exercise of the option); and I agree with that.
But that is not and cannot be the end of the matter. In any case, before one can find that the basic principle of the need for communication of acceptance to the offeror is displaced by this artificial concept of communication by the act of posting, it is necessary that the offer is in its terms consistent with such displacement and not one which by its terms points rather in the direction of actual communication. We were referred to Henthorn v. Fraser and to the obiter dicta of Mr Justice Farwell in Bruner v. Moore (1904 1 Chancery, 305), which latter was a case of an option to purchase patent rights. But in neither of those cases was there apparently any language in the offer directed to the manner of acceptance of the offer or exercise of the option.
The relevant language here is, “The said option shall be exercised by notice in writing to the Intending Vendor …”. a very common phrase in an option agreement. There is, of course, nothing in that phrase to suggest that the notification to the defendant could not be made by post. But the requirement of “notice … to”, in my judgment, is language which should be taken expressly to assert the ordinary situation in law that acceptance requires to be communicated or notified to the offeror, and is inconsistent with the theory that acceptance can be constituted by the act of posting, referred to by Anson as “acceptance without notification”.
It is of course true that the instrument could have been differently worded. An option to purchase within a period given for value has the characteristic of an offer that cannot be withdrawn. The instrument might have said “The offer constituted by this option may be accepted in writing within six months”: in which case no doubt the posting would have sufficed to form the contract. But that language was not used, and, as indicated, in my judgment the language used prevents that legal outcome. Under this head of the case hypothetical problems were canvassed to suggest difficulties in the way of that conclusion. What if the letter had been delivered through the letter-box of the house in due time, but the defendant had either deliberately or fortuitously not been there to receive it before the option period expired? This does not persuade me that the artificial posting rule is here applicable. The answer might well be that in the circumstances the defendant had impliedly invited communication by use of an orifice in his front door designed to receive communications. There is, I consider, a further or perhaps parallel ground for exclusion of acceptance by act of posting in this case, which arises under section 196 of the Law of Property Act, 1925, and in particular subsection (5) which was new in property legislation. It extends the other provisions of the section to “notices required to be served by any instrument affecting property”. It was accepted for the plaintiffs that the option instrument was an instrument affecting property. The view of Mr Justice Plowman in Re 88 Berkeley Road, N.W.9 (1971 Chancery, 648) that “served” meant “given” was not disputed. Subsection (4) of the section provides that such a notice shall be sufficiently served if it is sent by post in a registered letter addressed to the person to be served by name at his abode or place of business, and that, if it is not returned through the post office undelivered, service shall be deemed to be made “at the time at which the registered letter would in the ordinary course be delivered”. Later provisions include in this the Recorded Delivery service. These provisions, if applicable to the present case, are of course to be regarded as part and parcel of the option instrument. Being such, they are, it seems to me, inconsistent with the application of the theory of acceptance at the time of posting. For suppose an exercise of the option by a registered letter which went astray, and suppose it to have been posted on the last option day: this section would deem the notice to have been given too late. This conflicts with and therefore negatives the application of a system of acceptance by the act of posting the registered letter, just as would be the case if the option instrument had expressly provided “The said notice in writing if sent by registered post duly etc., etc., shall be deemed to have been given to the Intending Vendor at the time at which etc., etc.”. Counsel for the plaintiffs frankly accepted the validity of that argument, but contended that this was not the type of notice to which the section was directed. I do not see why it is not. Perhaps in the end his contention was based upon much the same grounds as those upon which he sought to deny the significance of the words “notice in writing to” upon which I have founded the first part of this judgment.
This leaves an alternative contention for the plaintiffs which Mr Justice Templeman dismissed with brevity at page 765 “F”. When the defendant’s solicitors received the plaintiffs’ solicitors’ letter dated 14th April, set out at page 758 of the report below, they communicated by telephone with the defendant. They did not read the letter to the defendant. The defendant’s evidence was as follows: “(Q) Did you then, as a result of that, ring Messrs Bulcraig & Davis? (A) As a result of that, I did, yes. (Q) And to whom did you speak there? (A) I spoke to Mr Wade. (Q) Do you remember what he told you? (A) Yes. (Q) Not the exact words? (A) No. He asked me if I had heard from Messrs Brecher, the other people’s solicitors, and I said ‘No’. He said ‘Well, I have had a letter from them delivered to me today and I understand that you will be getting a letter as well, or a copy of this’. My recollection is that he said ‘a letter’ but later I understood that what was meant was a copy. And he said: ‘I don’t think this option is exercised properly until notice is served on you’, or ‘until you receive a letter’, and I said ‘Oh, dear, I had intended to go to Ireland this evening. Will it be all right if I do?’ and he said yes it would. My recollection is that he said ‘Your presence does not have to be there’ or ‘You don’t have to be there yourself, if this letter is delivered, or posted to you’.” Counsel for the plaintiffs argued that since the defendant knew that the plaintiffs were anxious to exercise the option, and there was in existence a written notice exercising it, therefore there was a “notice in writing to the defendant”. I consider this argument to be fallacious. A person does not give notice in writing to another person by sitting down and writing it out and then telephoning to that other saying “Listen to what I have just written”. Moreover, the defendant did not have knowledge of the existence of the combination of two letters which alone could be said to be an exercise of the option. The case of Dickinson v. Dodds (1876 2 Chancery Division, 463) referred to does not assist on this point: all it does is to show that an offeree cannot accept a withdrawable offer after he has learnt, by whatever means, that it has been withdrawn.
Accordingly, I would dismiss the appeal; and Lord Justice Buckley authorises me to say that he agrees with the judgment that I have delivered.
LORD JUSTICE LAWTON: The issue in this appeal was clear. Did the plaintiffs exercise an option to purchase the premises known as 571, High Road, Wembley, by posting a letter to the defendant which he never received? The answer to this problem can be reached by two paths: the short one and the roundabout one. Both, in my judgment, are satisfactory but the roundabout one has some paths leading off it which can lead the traveller after legal truth astray. The plaintiffs, I think, took one of these paths.
I propose in this judgment to start by taking the short path and then to survey the other.
It is a truism of the law relating to options that the grantee must comply strictly with the conditions stipulated for exercise: see Hare v. Nicholl, 1966 2 Queen’s Bench, 130. It follows that the first task of the Court is to find out what was stipulated: the instrument of grant has to be construed. It is a formal document which must have been drafted by someone familiar with conveyancing practice. From its lay-out and content it is likely to have been based on a precedent in the Encyclopaedia of Forms and Precedents. It follows, so it seems to me, that the words and phrases in it should be given precise meanings whenever possible and that words which are in common use amongst conveyancers should be construed in the way they use such words.
The material parts of the option clause are as follows: “The said option shall be exercisable by notice in writing to the Intending Vendor at any time within six months from the date hereof …”. In my judgment, the phrase “notice in writing” is of importance in this context. Conveyancers are familiar with it and frequently use it. It occurs in many sections of the Law of Property Act, 1925; for examples, see sections 36(2), 136, 146 and 196. In the option clauses under consideration the draftsman used the phrase in connection with the exercise of the option but in other parts of the agreement he was content to use such phrases as “agreed in writing” (see clause 4) and “if required in writing” (see clause 8(a)). Should any inference be drawn from the use of the word “notice”? In my judgment, yes. Its derivation is from the Latin word for knowing. A notice is a means of making something known. The Short Oxford English Dictionary gives as the primary meanings of the word: “Intimation, information, intelligence, warning,… formal intimation or warning of something”. If a notice is to be of any value it must be an intimation to someone. A notice which cannot impinge on anyone’s mind is not functioning as such.
Now in this case, the “notice in writing” was to be one “to the Intending Vendor”. It was to be an intimation to him that the grantee had exercised the option: he was the one who was to be fixed with the information contained in the writing. He never was, because the letter carrying the information went astray. The plaintiffs were unable to do what the agreement said they were to do, namely, fix the defendant with knowledge that they had decided to buy his property. If this construction of the option clause is correct, there is no room for the application of any rule of law relating to the acceptance of offers by posting letters since the option agreement stipulated what had to be done to exercise the option. On this ground alone I would dismiss the appeal.
I turn now to what I have called the roundabout path to the same result. Mr Macpherson on behalf of the plaintiffs submitted that the option was exercised when the letter was posted, as the rule relating to the acceptance of offers by post did apply. The foundation of his argument was that the parties to this agreement must have contemplated that the option might be, and probably would be, exercised by means of a letter sent through the post. I agree. This, submitted Mr Macpherson, was enough to bring the rule into operation. I do not agree. In Henthorn v. Fraser (1892 2 Chancery, 27) Lord Herschell stated the rule as follows (at page 33):
“Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted”.
It was applied by Mr Justice Farwell in Bruner v. Moore (1904 1 Chancery, 305) to an option to purchase patent rights. The option agreement, which was in writing, was silent as to the manner in which it was to be exercised. The grantee purported to do so by a letter and a telegram.
Does the rule apply in all cases where one party makes an offer which both he and the person with whom he was dealing must have expected the post to be used as a means of accepting it? In my judgment, it does not. First, it does not apply when the express terms of the offer specify that the acceptance must reach the offeror. The public nowadays are familiar with this exception to the general rule through their handling of football pool coupons. Secondly, it probably does not operate if its application would produce manifest inconvenience and absurdity. This is the opinion set out in Cheshire and Fifoot’s Law of Contract, 3rd Edition, at page 43. It was the opinion of Lord Bramwell as is seen by his judgment in British American Telegraph C. v. Colson, (1871) Law Reports, 6 Exchequer, 108, and his opinion is worthy of consideration even though the decision in that case was overruled by this Court in Household Fire Insurance Co. v. Grant, (1879) 4 Exchequer Division, 216. The illustrations of inconvenience and absurdity which Lord Bramwell gave are as apt today as they were then. Is a stockbroker who is holding shares to the orders of his client liable in damages because he did not sell in a falling market in accordance with the instructions in a letter which was posted but never received? Before the passing of the Law Reform (Miscellaneous Provisions) Act, 1970 (which abolished actions for breach of promise of marriage), would a young soldier ordered overseas have been bound in contract to marry a girl to whom he had proposed by letter, asking her to let him have an answer before he left and she had replied affirmatively in good time but the letter had never reached him? In my judgment, the factors of inconvenience and absurdity are but illustrations of a wider principle, namely, that the rule does not apply if, having regard to all the circumstances, including the nature of the subject-matter under consideration, the negotiating parties cannot have intended that there should be a binding agreement until the party accepting an offer or exercising an option had in fact communicated the acceptance or exercise to the other. In my judgment, when this principle is applied to the facts of this case it becomes clear that the parties cannot have intended that the posting of a letter should constitute the exercise of the option.
The option agreement was one to which section 196 of the Law of Property Act, 1925, applied: see subsection (5); which is in these terms:
“The provisions of this section shall extend to notices required to be served by any instrument affecting property executed or coming into operation after the commencement of this Act unless a contrary intention appears”.
The option agreement was an instrument affecting property. A notice in writing had to be given to exercise the option. Giving a notice means the same as serving a notice: see In re 88 Berkeley Road (1971 1 Chancery, 648). The object of this subsection was to enable conveyancers to omit from instruments affecting property stipulations as to the giving of notices if they were prepared to accept the statutory ones. As there was nothing in the option agreement to a contrary effect, the statutory stipulations applied in this case. Subsection (4) is in these terms:
“Any notice required or authorised by this Act to be served shall also be sufficiently served if it is sent by post in a registered letter addressed to the lessee, lessor, mortgagee, mortgagor, or other person to be served, by name, at the aforesaid place of abode or business, office, or counting-house, and if that letter is not returned through the post office undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered”.
The object of this subsection, as also of subsection (3), is to specify circumstances in which proof of actual knowledge may be dispensed with. This follows from the use of the phrase “any notice … shall also be sufficiently served …”. If Mr Macpherson’s submissions are well-founded, a letter sent by ordinary post the evening before the option expired would have amounted to an exercise of it; but a registered letter posted at the same time and arriving in the ordinary course of post, which would be after the expiration of the option, would not have been an exercise.
The parties to the option agreement cannot have intended any such absurd result to follow. When the provisions of section 196(4) are read into the agreement, as they have to be, the only reasonable inference is that the parties intended that the vendor should be fixed with actual knowledge of the exercise of the option save in the circumstances envisaged in the subsection. This, in my judgment, was enough to exclude the rule.”
I would dismiss the appeal.
Partridge v Crittenden
[1968] 1 WLR 1204i
Ashworth J
“This is an appeal by way of case stated from a decision of Chester justices. On July 19, 1967, they heard an information preferred by the prosecutor on behalf of the RSPCA alleging against the appellant that he did unlawfully offer for sale a certain live wild bird, to wit a brambling, being a bird included in schedule 4 to the Protection of Birds Act 1954, of a species which is resident in or visits the British Isles in a wild state, other than a close-ringed specimen bred in captivity, contrary to section 6, subsection (1) of the Act.
The case arose because in a periodical known as “Cage and Aviary Birds,” the issue for April 13, 1967, there appeared an advertisement inserted by the appellant containing, inter alia, the words “Quality British A.B.C.R. … bramblefinch cocks, bramblefinch hens, 25s each.” In the case stated the full advertisement is not set out, but by the agreement of counsel this court has seen a copy of the issue in question, and what is perhaps to be noted in passing is that on the page there is a whole list of different birds under the general heading of “Classified Advertisements.” In no place, so far as I can see, is there any direct use of the words “Offers for sale.” I ought to say I am not for my part deciding that that would have the result of making this judgment any different, but at least it strengthens the case for the appellant that there is no such expression on the page. Having seen that advertisement, Mr. Thompson wrote to the appellant and asked for a hen and enclosed a cheque for 30s A hen, according to the case, was sent to him on May 1, 1967, which was wearing a closed-ring, and he received it on May 2. The box was opened by Mr. Thompson in the presence of the prosecutor, and the case finds that Mr. Thompson was able to remove the ring without injury to the bird, and even taking into account that the bird had travelled from Leicester in a box on the railway, its condition was rough, it was extremely nervous, it had no perching sense at all and its plumage was rough.
Stopping there, the inference from that finding is that the justices were taking the view, or could take the view, that from its appearance, at any rate, this was not such a bird as a person can legitimately sell within the Act of 1954. The case goes on to find:
“The expression ‘close-ringed’ is nowhere defined nor is there any universally recommended size ring for a bramble finch… (g) The ring is placed on the bird’s leg at the age of three to 10 days at which time it is not possible to determine what the eventual girth of the bird’s leg will be.”
Having been referred to the decision of this court in Fisher v. Bell the justices nonetheless took the view that the advertisement did constitute an offer for sale; they went on further to find that the bird was not a close-ringed specimen bred in captivity, because it was possible to remove the ring. Before this court Mr. Pitchers for the appellant, has taken two points, first, this was not an offer for sale and, secondly, that the justices’ reason for finding that it was not a close-ringed bird was plainly wrong because the fact that one could remove the ring did not render it a non-close-ringed bird.
It is convenient, perhaps, to deal with the question of the ring first. For my part I confess I was in ignorance, and in some state of confusion, as to the real meaning and effect of this particular phrase in the section, and I express my indebtedness to Mr. Havers, for the prosecutor, for having made the matter, as far as I am concerned, perfectly clear. I would say if one was looking for a definition of the phrase “close-ringed” it means ringed by a complete ring, which is not capable of being forced apart or broken except, of course, with the intention of damaging it. I contrast a closed-ring of that sort — it might take the form, I suppose, of an elastic band or of a metal circle ring — with the type of ring which sometimes exists which is made into a ring when a tongue is placed through a slot and then drawn back; that is a ring which can be undone and is not close-ringed. In this case what is contemplated, according to Mr. Havers, and I accept it, is that with a young bird of this sort between three and ten days after hatching a closed-ring of the type described is forced over its claws, which are obviously brought together so as to admit the passage of the ring, and it is then permanently on or around the bird’s leg, and as it grows, it would be impossible to take that ring off because the claws and the like would have rendered a repetition of the earlier manoeuvre impossible.
Therefore, approaching the matter this way, I can well understand how the justices came to the conclusion that this was not a close-ringed specimen, because they could take the ring off. If that were the only issue, I should not find any difficulty in upholding their decision. But the real point of substance in this case arose from the words “offer for sale,” and it is to be noted in section 6 of the Act of 1954 that the operative words are “any person sells, offers for sale or has in his possession for sale.” For some reason which Mr. Havers for the prosecutor has not been able to explain, those responsible for the prosecution in this case chose, out of the trio of possible offences, the one which could not succeed. There was a sale here, in my view, because Mr. Thompson sent his cheque and the bird was sent in reply; and a completed sale. On the evidence there was also a plain case of the appellant having in possession for sale this particular bird. But they chose to prosecute him for offering for sale, and they relied on the advertisement.
A similar point arose before this court in 1960 dealing, it is true, with a different statute but with the same words, in Fisher v. Bell. The relevant words of section 1 (1) of the Restriction of Offensive Weapons Act 1959, in that case were: “Any person who … offers for sale. … (a) any knife. …” Lord Parker C.J., in giving judgment said:
“The sole question is whether the exhibition of that knife in the window with the ticket constituted an offer for sale within the statute. I confess that I think that most lay people and, indeed, I myself when I first read the papers, would be inclined to the view that to say that if a knife was displayed in a window like that with a price attached to it was not offering it for sale was just nonsense. In ordinary language it is there inviting people to buy it, and it is for sale; but any statute must of course be looked at in the light of the general law of the country.”
The words are the same here “offer for sale,” and in my judgment the law of the country is equally plain as it was in regard to articles in a shop window, namely that the insertion of an advertisement in the form adopted here under the title “Classified Advertisements” is simply an invitation to treat.
That is really sufficient to dispose of this case. I should perhaps in passing observe that the editors of the publication Criminal Law Review had an article dealing with Fisher v. Bell in which a way round that decision was at least contemplated, suggesting that while there might be one meaning of the phrase “offer for sale” in the law of contract, a criminal court might take a stricter view, particularly having in mind the purpose of the Act, in Fisher v. Bell the stocking of flick knives, and in this case the selling of wild birds. But for my part that is met entirely by the quotation which appears in Lord Parker’s judgment in Fisher v. Bell, that “It appears to me to be a naked usurpation of the legislative function under the thin disguise of interpretation.”
I would allow this appeal and quash the conviction.”
Lord Parker CJ
“I agree and with less reluctance than in Fisher v. Bell, and Mella v. Monahan I say “with less reluctance” because I think when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers for sale. In a very different context in Grainger & Son v. Gough Lord Herschell said dealing with a price-list:
“The transmission of such a price-list does not amount to an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract to supply that quantity. If it were so, the merchant might find himself involved in any number of contractual obligations to supply wine of a particular description which he would be quite unable to carry out, his stock of wine of that description being necessarily limited.”
It seems to me accordingly that not only is it the law but common sense supports it.”
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd
[1953] EWCA Civ 6
Somervell LJ
“Whether that is a right view depends on what are the legal implications of this layout, the invitation to the customer. Is it to be regarded as an offer which is completed and both sides bound when the article is put into the receptacle, or is it to be regarded as a more organised way of doing what is done already in many types of shops — and a bookseller is perhaps the best example – namely, enabling customers to have free access to what is in the shop to look at the different articles and then, ultimately, having got the ones which they wish to buy, coming up to the assistant and saying “I want this”? The assistant in 999 times out of 1,000 says “That is all right”, and the money passes and the transaction is completed. I agree entirely with what the Lord Chief Justice says and the reasons he gives for his conclusion that in the case of the ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shop-keeper or someone on his behalf accepts that offer. Then the contract is completed. I can see no reason at all, that being I think clearly the normal position, for drawing any different implication as a result of this layout. The Lord Chief Justice, I think, expressed one of the most formidable difficulties in the way of the suggestion when he pointed out that, if the Plaintiffs are right, once an article has been placed in the receptacle the customer himself is bound and he would have no right without paying for the first article to substitute an article which he saw later of the same kind and which he perhaps preferred. I can see no reason for implying from this arrangement which the Defendants have referred to any implication other than that which the Lord Chief Justice found in it, namely, that it is a convenient method of enabling customers to see what there is and choose and possibly put back and substitute articles which they wish to have and then go up to the cashier and offers to buy what they have so far chosen. On that conclusion the case fails, because it is admitted that then there was supervision in the sense required by the Act and at the appropriate moment of time. For these reasons, in my opinion, the appeal should be dismissed.”
Birkett LJ
“The short point of the matter was, at what point of time did the sale in this particular shop at Edgware take place? My Lord has explained the system which has been introduced into that shop (and possibly other shops since) in March 1951. The two ladies in this case, Miss Mainwaring and Miss Marrable, who went into that shop, each took a particular package containing poison from the particular shelf, put it into their basket, came to the exit and there paid. It is said upon the one hand that when the customer takes the package from the poison section and puts it into her basket the sale there and then takes place, On the other hand, it is said the sale does not take place until that customer who has placed that package in the basket comes to the exit.
The Lord Chief Justice dealt with the matter in this way, and I would like to adopt these words:
“It seems to me therefore, applying common sense to this class of transaction, there is no difference merely because a self-service is advertised. It is no different really from the normal transaction in a shop. I am quite satisfied it would be wrong to say the shopkeeper is making an offer to sell every article in the shop to any person who might come in and that he can insist by saying ‘I accept your offer'”.
Then he goes on to deal with the illustration of the bookshop and continues:
“Therefore, in my opinion, the mere fact that a customer picks up a bottle of medicine from the shelves in this case does not amount to an acceptance of an offer to sell. It is an offer by the customer to buy. I daresay this case is one of great importance, it is quite a proper case for the Pharmaceutical Society to bring, but I think I am bound to say in this case the sale was made under the supervision of a pharmacist. By using the words ‘The sale is effected by, or under the supervision of, a registered pharmacist’, it seems to me the sale might be effected by somebody not a pharmacist. If it be under the supervision of a pharmacist, the pharmacist can say ‘You cannot have that. That contains poison’. In this case I decide, first that there is no sale effected merely by the purchaser taking up the article. There is no sale until the buyer’s offer to buy is accepted by the acceptance of the money, and that takes place under the supervision of a pharmacist. And in any case, I think, even if I am wrong in the view I have taken of when the offer is accepted, the sale is by or under the supervision of a pharmacist”.
I agree with that and I agree that this appeal ought to be dismissed.
Pitt v PHH Asset Management Ltd
[1994] 1 WLR 327
Bingham MR
“For very many people their first and closest contact with the law is when they come to buy or sell a house. They frequently find it a profoundly depressing and frustrating experience. The vendor puts his house on the market. He receives an offer which is probably less than his asking price. He agonises over whether to accept or hold out for more. He decides to accept, perhaps after negotiating some increase. A deal is struck. Hands are shaken. The vendor celebrates, relaxes, makes plans for his own move and takes his house off the market. Then he hears that the purchaser who was formerly pleading with him to accept his offer has decided not to proceed. No explanation is given, no apology made. The vendor has to embark on the whole dreary process of putting his house on the market all over again.
For the purchaser the process is, if anything, worse. After a series of futile visits to unsuitable houses he eventually finds the house of his dreams. He makes an offer, perhaps at the asking price, perhaps at what the agent tells him the vendor is likely to accept. The offer is accepted. A deal is done. The purchaser instructs solicitors to act. He perhaps commissions an architect to plan alterations. He makes arrangements to borrow money. He puts his own house on the market. He makes arrangements to move. He then learns that the vendor has decided to sell to someone else, perhaps for the price already offered and accepted, perhaps for an increased price achieved by a covert, unofficial auction. Again, no explanation, no apology. The vendor is able to indulge his self-interest, even his whims, without exposing himself to any legal penalty.
The reasons why purchaser and vendor can act in this apparently unprincipled manner are to be found in two legal rules of long standing: first, the rule that contracts for the sale and purchase of land must be evidenced (or now made) in writing; secondly, the rule that terms agreed subject to contract do not give rise to a binding contract. These rules are deeply imbedded in statute and authority. They make possible the behaviour I have described, but the validity and merits of those rules are not, and could not be, the subject of challenge in this appeal.
For the purchaser there is, however, one means of protection: to make an independent agreement by which the vendor agrees for a clear specified period not to deal with anyone other than that purchaser. The effect is to give that purchaser a clear run for the period in question. The vendor does not agree to sell to that purchaser, such an agreement would be covered by section 2 of the Act of 1989, but he does give a negative undertaking that he will not for the given period deal with anyone else. That, I am quite satisfied, is what happened here, as the judge rightly held. The vendor and the prospective purchaser made what has come to be called a “lock-out agreement.” That was a contract binding on them both. The vendor broke it. He is liable to the prospective purchaser for damages which remain to be assessed. I would dismiss the appeal.”
Spencer v Harding
(1870) LR 5 CP 561
“28, King Street, Cheapside, May 17th, 1869. We are instructed to offer to the wholesale trade for sale by tender the stock in trade of Messrs. G. Eilbeck & Co., of No. 1, Milk Street, amounting as per stock-book to 2503l. 13s. 1d., and which will be sold at a discount in one lot. Payment to be made in cash. The stock may be viewed on the premises, No. 1, Milk Street, up to Thursday, the 20th instant, on which day, at 12 o’clock at noon precisely, the tenders will be received and opened at our offices. Should you tender and not attend the sale, please address to us sealed and inclosed, ‘Tender for Eilbeck’s stock.’ Stock-books may be had at our offices on Tuesday morning. Honey, Humphreys, & Co. ”
Willis held that the circular was not an offer, but an invitation seeking tenders only.
Williams v Carwardine
[1833] EWHC KB J44
Assumpsit. The first count of the declaration stated in substance, that the defendant had caused to be published a placard or advertisement, reciting, that Walter Carwardine had been robbed, and that there was great reason to suppose that he had been murdered; and that by this placard the defendant did “promise and undertake, that whosoever would give such information as might lead to a discovery of the murder of the said Walter Carwardine, should, on conviction, receive a reward of £20; and that any person concerned therein, or privy thereto, except the person who actually committed the offence, should be entitled to such reward, and every exertion used to procure a pardon”; and that, by the said placard or advertisement, the defendant “directed that the said information should be given, and application for the above reward be made to him, or Mr. Watkins, solicitor, Hereford.” The plaintiff then averred, that she, “confiding in the said promise of the said defendant,’ and not being the party who actually committed the offence, “did give to the said defendant such information as led to the discovery of the murder of the said Walter Carwardine”; and that, afterwards, at the Hereford Assizes, held on the 20th day of March, 1832, Joseph Pugh, John Matthews, and William Williams, who were guilty of the said offence, to wit, the murder of the said Walter Carwardine, were in due manner convicted of the said murder, “in consequence of such information so given by the said plaintiff as aforesaid.” This count went on to state, that of all this the defendant had notice, and that he became liable to pay the plaintiff £20, which, although requested by the plaintiff, he had not paid her.
The second count was similar, except that it omitted to state to whom information was to be given; and did not aver that the information was given by the plaintiff to the defendant; nor that Pugh, Matthews, and Williams, were guilty of the murder; nor that they were convicted in consequence of the information given by the plaintiff. The third count was similar to the first, except that it omitted the clause respecting the procuring of a pardon for an accomplice, and that it did not aver that the plaintiff was not the person who committed the offence; and that it did not state that J. P., J. M., and W. W. were convicted in consequence of the information given by the plaintiff. The fourth count was similar to the second, omitting that part which related to the procuring a pardon for an accomplice, and the averment that the plaintiff had not committed the offence.
The fifth count stated, that before the making of the promises in that and the two next counts mentioned, the body of Walter Carwardine had been found in the river Wye, with marks of violence on his person, so as to give reason to believe that he had been murdered; and that, for the better apprehending and bringing to justice the person or persons concerned in the murder, the defendant “promised that whoever, except the party who actually committed the offence, would give such information as would lead to a discovery of the murder of the said Walter Carwardine, should, on conviction, receive a reward of £20. The plaintiff then averred, that she, not being the party who actually committed the offence, ” did give such information as led to the discovery of the murder of the said Walter Carwardine”; and that, at the Hereford Assizes, on the 20th March, 1832, J. P., J. M., and W. W., were convicted of the murder; of all which the defendant had notice, whereby he became liable to pay the plaintiff £20, but had refused to do so.
The sixth count was similar, omitting the exception of the person who actually committed the offence, and the averment, that the plaintiff had not committed it. The seventh count stated, that, in consideration that the plaintiff had given such information as had led to a discovery of the murder, the defendant promised, that, “on conviction he would pay her the sum of £20.” It then stated the conviction of J. P., J. M., and W. W., as in the former counts. The eighth count was for work and labour, money paid, money had and received, and on an account stated. Plea-General issue.
On the part of the plaintiff it appeared, that the brother of the defendant had been murdered at Hereford on the 24th of March, 1831, and that his body was found in the river Wye, on the 12th of April; and that, on the 25th of April, the defendant caused the following handbill to be published:
“Ten pounds reward and twenty pounds reward. Whereas, Walter Carwardine, late of Broxwood, in the county of Hereford, farmer, was, on the night of the 24th of March last, or early on the following morning, robbed of a £5 Kington and Radnorshire bank note, at a house of ill fame in Quaker’s Lane, in the city of Hereford; and the body of the said Walter Carwardine was found in the river Wye on the 12th day of April instant, with marks of violence on his person, and there is great reason to believe that he was murdered. And whereas Sarah Coley, late of the city of Worcester, single woman, is charged on oath with having committed such robbery, and being privy to or concerned in such murder, whoever will apprehend the said Sarah Coley, and lodge her in any one of his Majesty’s gaols, shall receive a reward of £10; and whoever will give such information as may lead to a discovery of the murder of the said Walter Carwardine, shall, on conviction, receive a reward of £20; and any person concerned therein, or privy thereto (except the party who actually committed the offence), shall be entitled to such reward, and every exertion used to procure a pardon. Information to be given, and application for the above reward to be made, to Mr. William Carwardine, Holmer, near Hereford, or to Mr. Watkyns, solicitor, Hereford.”
Hereford, April 25, 1831.”
It further appeared, that, at the Hereford Summer Assizes of 1831, two persons, named Pugh and Connop, were tried for the murder, and acquitted, the plaintiff having been examined as a witness against them; and that, shortly after that time, the plaintiff having been dreadfully beaten by William Williams, and thinking herself not likely to recover from the violence she received, she made a disclosure to Mr. Howells, the swordbearer of the city of Hereford, in consequence of which, she, on the 23rd of August, made the following deposition before Mr. Milton, a magistrate:
“The voluntary statement of Mary Anne Williams, made this 23rd day of August, 1831, before me, one of his Majesty’s justices of the peace in and for the said city, who, on her oath saith, that, in consequence of her miserable and unhappy situation, and believing that she has not long to live, she makes this voluntary statement to ease her conscience, and in hopes of forgiveness hereafter. That, on Thursday night in the assize week, in the month of March last, between the hours of eleven and twelve o’clock, I went into Joseph Pugh’s house, in Quaker’s Lane, and there saw Susan Connop, Sarah Coley, Susan Reignart, Mr. Webb, the butcher, and Walter Carwardine. After drinking with them, I left the house with Mr. Webb. I walked as far as the King’s Head Inn, in Broad Street; I returned by the way of Eign Street to the end of Quaker’s Lane, by Eign Gate Turnpike. I went along the lane as far as the gate of Mr. Thomas the coachmaker’s meadow opposite to the Cross Lane, where I heard a noise. I there saw Joseph Pugh, William Williams, a man of the name of Matthews, and Sarah Coley. I heard Mr. Carwardine’s voice very plain. He said, ‘For God’s sake do not murder me.’ I heard Coley say, ‘ I have got his blunt, and if you will keep secret I’ll treat.’ Williams said, ‘ We will soon put him out of the way.’ I then heard a dreadful blow, and Mr. Carwardine fell on the ground on his back. I distinctly heard two long deep groans, as if he was dying. I did not hear him speak. After a moment Williams saw me, he ran to me, and forced me into the turnpike road, near Eign Gate; Williams ran back along the lane to the Cross Lane; I went along the turnpike road to the Red Lion Inn, turned up Townditch Lane into the Cross Lane, but no one was there. I went into Quaker’s Lane, by the end of the barn, and listened. I heard Pugh, Williams, Matthews, and Coley, about Mr. Thomas’s house, the carpenter, three parts down the lane, towards the tan yard, I distinctly heard Pugh curse his eyes, and say, ‘Go on.’ Coley said, ‘Don’t talk so loud; don’t be in a hurry.’ I was very much frightened, and I got into the house, and went to bed.
(Signed) MARY ANNE WILLIAMS.
“Sworn before me, William Milton.”
The record of the conviction of William Williams, Joseph Pugh, and John Matthews, was put in; and it was admitted that there had been a demand of the reward on the behalf of the plaintiff.
Curwood, for the defendant. It is clear, that any person, who, in consequence of this handbill, fairly gave evidence that led to the discovery of the murderers, would be entitled to the reward; but, in this case, it is manifest that the disclosure was made from other motives. Shortly after the finding of the body of the deceased there was an inquest, and after that Pugh and Connop were tried; and, previous to that trial, the plaintiff made a deposition, which was totally unlike what she stated in her second deposition, which has been read. After the first trial, she was severely beaten by Williams, and, being apprehensive of death, she made a disclosure. Does she do this in consequence of the handbill? No. From other and quite different motives. The handbill is published in April, and she makes the disclosure in August. If it was not the handbill, but other circumstances, which operated on her mind, there is no contract between these parties: indeed, her second deposition was of so little value that the magistrate would not act upon it, not only on account of her previous character, but on account of her having before made a different statement. The declaration states, that she, confiding in the promise contained in the handbill, made a disclosure. This is, I submit, a case of what in the civil law is called policitation, that is, an offer by one party not accepted by the other.
Mr. Justice J. Parke: Have you any authority for your position as to the motive? The terms of the handbill are, that “Whoever will give such information as may lead to a discovery,” is, on conviction, to receive the reward. If this information had not been given, these men would not have been convicted.
The first deposition made by the plaintiff, on the 19th of April, 1831, was put in: it was as follows: “Mary Anne Williams states, that, on Thursday night in the assize week, between half-past ten and eleven o’clock, she went into Joseph Pugh’s house in Quaker’s Lane; when she went in she saw Susan Connop, a tall girl, a little girl, a lusty man sitting in a great chair, and Mr. Webb, the butcher. They were drinking spirits; witness staid there half an hour, and left there the persons whom she has described. She went into the town; as she came back she saw the same man that she has described as the lusty man, standing at the corner of Mr. Thomas the coachmaker’s building. A gentleman went by, and spoke to this man, and said, ‘Why, Mr. Carwardine, what brings you there? ‘ He said, in answer, ‘Why, how the devil do you know my name? ‘ The gentleman answered, ‘ Oh, I know you very well.’ This was very near twelve o’clock; witness does not think it had struck twelve.”
Mr. Howells, in answer to a question put by the learned Judge, said, that the second deposition of the plaintiff was the material information that led to the discovery of the murderers; but he also stated that the plaintiff did not attend the inquest; and that the magistrate declined granting any warrant upon her statement, unless some other person was brought to confirm it; and that a person, named Elizabeth Powell, was sent for, and she confirmed the statement in many respects.
Ludlow, Serjt., amicus curies. In a case tried before Lord Chief Justice Gibbs, at Bristol, which was an action for a reward, his Lordship laid down, that either the person claiming the reward must shew a title to it in himself alone, or all who are concerned in making the disclosure must join in bringing the action.
Talfourd, Serjt., for the plaintiff. My client gives the information, and a conviction follows. If the case went to the full extent of the doctrine stated by Mr. Serjt. Ludlow, no one could recover unless he or she were the only witness examined. I submit that the plaintiff was the sole moving cause; and that the person who gives the first information, is the one who leads to a discovery.
Mr. Justice J. Parke. The person who makes the first disclosure is certainly the person who leads to a discovery; for, if she had said nothing, no discovery would have been made.
Talfourd, Serjt. If the plaintiff had herself known nothing, but had said A. B. knows all about it, and that had led to a discovery, it would have been sufficient.
Mr. Justice J. Parke. There is only one reward to be paid. If two persons had come together to give the information, the action must have been joint; but, as the plaintiff alone gave the first information, she alone is entitled to the reward.
Curwood. There is then the question of motive. In the declaration it is averred, that the plaintiff, “confiding” in the promise, gave certain information, which is alleging that as the motive. Talfourd, Serjt.-That is mere form of pleading, the same as the words “fraudulently contriving and intending.”
Mr. Justice J. Parke. If the plaintiff comes within the conditions of the handbill, I think she is entitled to the reward. The jury will probably find that the £20 was not the motive. We may, I think, assume that it was not. The motive was the state of her own feelings. My opinion is, that the motive is not material; and that, if she comes within the terms of the handbill, that is sufficient.
Curwood. Will your Lordship give me leave to move to enter a nonsuit?
Mr. Justice J. Parke. Yes; I will give you leave to move. It is to be taken as found by the jury, that the plaintiff gave the information which led to the discovery of the murderers; but that she did not give that information for the sake of the £20 reward, nor in consequence of the handbill, but from stings of conscience.
Verdict for the plaintiff-Damages £20.
Talfourd, Serjt., and Godson, for the plaintiff.
Curwood and C. Phillips, for the defendant.
Minister for Industry and Commerce v. Pim Bros. Ltd.
[1966][ IR 154
Davitt P.
“In pursuance of these provisions of the Act the Minister, on the 25th August, 1961, made the Hire-Purchase and Credit-Sale (Advertising) Order, 1961 (S.I., No. 183 of 1961). By Article 4 (a) that order provides that it applies to any advertisement that relates to goods offered or available for sale by way of hire-purchase agreement and includes any one or more of six specified indications. By para. (b) it provides that it applies to any advertisement which relates to goods offered or available for sale by way of credit-sale agreement and includes any one or more of six specified indications. Article 5, so far as it is material in these proceedings, provides in para. 1 that no person shall publish or display, or cause to be published or displayed, an advertisement to which the Order applies unless it complies with the provisions of the Order.
Article 6 (1) provides that an advertisement to which the Order applies shall include a statement of the price at which the goods to which the advertisement relates may be purchased for cash; and in case the goods are offered for sale by hire-purchase agreement or by credit-sale agreement shall in each case contain statements as to certain matters therein specifically set out. Article 6 (2) provides that these statements shall be set out in the advertisement clearly, legibly and in such manner as will ensure that no statement is given undue prominence in comparison with any other statement.
Article 7 of the Order provides that where an advertisement to which it applies relates to goods that are offered for sale alternatively by several methods of hire-purchase or credit-sale agreement as therein specified, the statements referred to in Art. 6 shall be set out in the advertisement in such manner as to distinguish clearly between the statements relating to each agreement.
It is to be noted that the only requirement imposed by the Order in the case of an advertisement which relates to goods available for sale by way of hire-purchase agreement or credit-sale agreement, as distinct from one which relates to goods so offered for sale by such means, is that it should include a statement of the price at which the goods may be purchased for cash.
In the Case Stated, 1964, No. 118 S.S., the relevant facts as stated are as follows:the defendants, Messrs. Pim
“If the advertisement was one relating to goods available for sale, whether by way of hire-purchase agreement or by way of credit-sale agreement, it would be one to which the Order applies; but it would comply with the provisions of the Order in as much as it includes a statement of the price at which the coat could be purchased for cash. What the defendants were really charged with was displaying an advertisement relating to goods offered for sale, by way of hire-purchase agreement or credit-sale agreement, which failed to include certain statements required by the Order. Before one could determine whether the advertisement related to goods offered for sale by way of hire-purchase agreement or to goods offered for sale by way of credit-sale agreement one would have to decide whether it related to goods offered for sale at all; in other words, whether the advertisement constituted an offer by the defendants to sell the coat. In one sense it could be described as an offer to sell. In popular terms the coat could properly be said to be on offer to the public. In the strictly legal sense, however, the advertisement was merely a statement of the cash price at which the defendants were prepared to sell the goods, with an indication that certain credit facilities, the exact nature of which were unspecified, would be available. This would not constitute an offer to sell which could be made a contract of sale by acceptance: Harvey v. Facey (1). This appears to have been the view taken by the learned District Justice and to be the real ground of his decision to dismiss. If the expression, “offered for sale,” in Article 6 (1) of the Order is to be construed in the strict legal sense, then the learned District Justice was clearly correct in his decision. In my opinion, it should be so construed. Apart from any other consideration the distinction made in the Order between advertisements relating to goods offered for sale and goods available for sale, a distinction which does not appear in the relevant sections of the statute, indicates, to my mind, that the expression, “offered for sale,” as used in the Order should be construed in its strict legal sense. In the case of Case Stated No. 118 it was essential to prove that the coat was offered for sale in this sense. The learned District Justice was not satisfied that this had been established; and in my opinion he was correct in the view he took.
If he could have been satisfied that the coat had been offered for sale in this sense he would have then had to decide whether or not it had been offered for sale by way of hirepurchase or credit-sale agreement. Before the Order can be contravened and an offence committed, the goods must be offered for sale by one means or the other. If the position were that he was satisfied that they were offered for sale by one means or the other, but that he could not say which, it may be that he would not be entitled to dismiss the summons since it would be clear to him that the Order had been contravened and an offence committed. A similar position, no doubt, sometime arises where it is clear that a person found in possession of recently stolen goods has either stolen them or received them knowing them to have been stolen, and a Court or a jury is in doubt as to which is the true explanation of his possession. In such circumstances it may be that the Court or jury is not bound to acquit but can select which explanation they consider the more appropriate, and convict accordingly. In this case, however, it is, I think, clear that the learned District Justice, if he could have been satisfied that the goods had been offered for sale, would not have been satisfied that they had been offered for sale by way of hire-purchase or credit-sale agreement; and here again he would in my opinion have been correct in his view.
In the case of all the other summonses (1), it was also essential to prove that the goods in each case had been offered for sale and by way either of hire-purchase agreement or credit-sale agreement. The same considerations apply in each case. In my opinion the learned District Justice was correct in the view he took as regards all the summonses.
The appeals will therefore be dismissed.
Howberry Lane Ltd v. Telecom Éireann; Radio Telefís Éireann and NTL Inc;
[1999] 2 ILRM 232
Morris J.
“Counsel for the plaintiff has sought to rely upon a series of Canadian cases in which the courts have inserted an implied term into the contract which effectively overrides provisions similar to those herein before referred to so as to require the vendor to complete the transaction with the highest bidder. I am satisfied that in all of those cases special circumstances existed in which the courts saw it appropriate to introduce such an implied term. I am also satisfied that under no circumstances is such a term to be implied under the present law in this jurisdiction. Sweeney v. Duggan [1997] 2 IR 531 ; [1997] 2 ILRM 211 is clear authority for the following proposition; per Murphy J at pp. 539–540/217:
Whether a term is implied pursuant to the presumed intention of the parties or as a legal incident of a definable category of contract it must be not merely reasonable but also necessary. Clearly it cannot be implied if it is inconsistent with the express wording of the contract and furthermore it may be difficult to infer a term where it cannot be formulated with reasonable precision.
In the present case such an implied term is not necessary and moreover it would be clearly inconsistent with the express wording of the contract.
Accordingly I do not accept the Canadian authorities as any indication of an emerging jurisprudence in this jurisdiction.
Even if I am wrong in assuming that the principal relief sought by the plaintiff is as stated above, namely that the first and second named defendants be directed to sell Cablelink to it and if it be a fact that the principal relief sought is that the third named defendant’s bid be declared invalid and that the first and second named defendants be precluded from selling to it, then in those circumstances it appears to me that the only possible reason for seeking such relief would be to discommode the third named defendant to such an extent that the plaintiff would find it possible to steal a march on it and acquire Cablelink while the third named defendant was under the disability of an injunction.
It is my view that under no circumstances should a court of equity render relief to a plaintiff seeking to achieve such an unfair advantage.
Counsel for the plaintiff has advanced an argument again based upon a series of Canadian authorities which, summarised amount to this. It is submitted that upon submitting a bid in a transaction such as this the bidder enters into a contract, in the authorities referred to as contract A, and that under the terms of this contract providing that his bid is otherwise satisfactory, for instance that he is the lowest bidder, he is entitled to enter into a second contract for the carrying out of the relevant work or provision of the relevant goods.
It is submitted by counsel that in the present case the plaintiff is entitled to regard himself as having entered into contract A with the first and second named defendants and that he is entitled to be offered contract B which will be the contract for the sale of the shares.
Even if, as counsel submits, this is a recognised emerging jurisprudence in Canada I do not accept it as representing the law in this jurisdiction. Moreover I am satisfied that it cannot apply to the circumstances of this case since the vendors have at all stages reserved for themselves the right to withdraw from the tendering procedure.
Finally, on this aspect of the case, counsel for the plaintiff has submitted that the conduct alleged by Mr O’Brien of Mr Gregg in that it is alleged that he attempted to form a ‘ring’ so as to destabilise the bidding procedure should disentitle the third named defendant from participating further in the bidding procedure. I can see no circumstance in which this submission can affect the first and second named defendants’ rights to negotiate the sale of the shares with whomsoever they consider appropriate and I am not satisfied that the complaints referred to in the affidavit of Mr O’Brien, even if they are established would disentitle the third named defendant from acquiring the shareholding in Cablelink.
Accordingly I am not satisfied that the plaintiff has discharged the onus of proof of satisfying me that he has a fair case to make so as to entitle him to the injunctive relief sought.”
Smart Telecom Plc trading as Smart Telecom v Radio Teilifis Eireann & Anor
[2006] IEHC 176
Kelly J.
“In my view the authority which comes closest to the facts of this case is the decision of the House of Lords in Harvela Limited v. Royal Trust Company [1986] A.C. 207.
THE HARVELA CASE
In this case Royal Trust invited Harvela and Sir Leonard Outerbridge to submit offers by sealed tenders by a specified deadline to a named party who undertook not to disclose the sealed tenders before the deadline. The tenders were to be a single offer for all the shares of a company that were held by Royal Trust and were for sale. Royal Trust bound itself to accept the highest offer that complied with the terms of the invitation. Before the invitation expired, Harvela and Sir Leonard made the offers which resulted in the litigation. Harvela offered US$2,175,000. Sir Leonard offered US$2,100,000 “or US$101,000 in excess of any other offer which Royal Trust may receive which is expressed as a fixed monetary amount, whichever is the higher”. Royal Trust purported to accept Sir Leonard’s offer. Harvela challenged that decision. The case went to the House of Lords where the principal speech was that of Lord Templeman.
His Lordship analysed the difference between a sale by auction and a sale by fixed bidding. He said:-
“Where a vendor undertakes to sell to the highest bidder, the vendor may conduct the sale by auction or by fixed bidding. In an auction sale each bidder may adjust his bid by reference to rival bids. In an auction sale the purchaser pays more than any other bidder is prepared to pay in order to secure the property. The purchaser does not necessarily pay as much as the purchaser was prepared to pay to secure the property. In an auction a purchaser who is prepared to pay US$2.5 million to secure a property will be able to purchase for US$2.2 million if no other bidder is prepared to offer as much as €2.2 million.
In a fixed bidding sale, a bidder may not adjust his bid. Each bidder specifies a fixed amount which he hopes will be sufficient, but not more than sufficient, to exceed any other bid. The purchaser in a fixed bidding sale does not necessarily pay as much as the purchaser was prepared to pay to secure the property. But any bidder who specifies less than his best price knowingly takes a risk of being outbid. In a fixed bidding sale a purchaser who is prepared to pay $2.5 million to secure the property may be able to purchase for $2.2 million if the purchaser offers $2.2 million and no other bidder offers as much as $2.2 million. But if a bidder prepared to pay $2.5 million only offers $2.2 million he will run the risk of losing the property and will be mortified to lose the property if another bidder offers $2.3 million. Where there are two bidders with ample resources, each determined to secure the property and to prevent the other bidder from acquiring the property, the stronger will prevail in the fixed bidding sale and may pay more than in an auction which is decided, not by the strength of the stronger, but by the weakness of the weaker of the two bidders. On the other hand, an open auction provides the stimulus of perceived bidding and compels each bidder, except the purchaser, to bid up to his maximum.
Thus auction sales and fixed bidding sales are liable to affect vendors and purchasers in different ways and to produce different results. The first question raised by this appeal, therefore, is whether Harvela and Sir Leonard were invited to participate in a fixed bidding sale, which only invited fixed bids, or were invited to participate in an auction sale, which enabled the bid of each bidder to be adjusted by reference to the other bid. A vendor chooses between a fixed bidding sale and an auction sale. A bidder can only choose to participate in the sale or to abstain from the sale. The ascertainment of the choice of the vendors in the present case between a fixed bidding sale and an auction sale by means of referential bids depends on the presumed intention of the vendors. That presumed intention must be deduced from the terms of the invitation read as a whole.”
The exercise prescribed in the latter part of this quotation is precisely the one which I have conducted. I have sought to deduce R.T.E’s intention from the terms of the R.T.E offer read as a whole.
Lord Templeman went on to identify three provisions which he said were only consistent with the presumed intention to create a fixed bidding sale and which were inconsistent with any presumed intention to create an auction sale by means of referential bids. He said:-
“By the first significant provision, the vendors undertook to accept the highest offer; this shows that the vendors were anxious to ensure that a sale should result from the invitation. By the second provision, the vendors extended the same invitation to Harvela and Sir Leonard: this shows that the vendors were desirous that each of them, Harvela and Sir Leonard, and nobody else should be given an equal opportunity to purchase the shares. By the third provision, the vendors insisted that offers must be confidential and must remain confidential until the time specified by the vendors for the submission of offers had elapsed; this shows that the vendors were desirous of provoking from Sir Leonard an offer of the best price he was prepared to pay in ignorance of the bid made by Harvela and equally provoking from Harvela the best price they were prepared to pay in ignorance of the bid made by Sir Leonard.”
All of these elements have been identified by me as being present in the R.T.E offer. They point inexorably to the conclusion which I reached and which is fully supported by the same conclusion reached by Lord Templeman in the Harvela case.
Later in his speech Lord Templeman identified four consequences which might arise if referential bids had been permitted in the Harvela case. They are identified at pages 231 and 232 of his speech. They can be summarised as follows:-
(a) If referential bids were permissible there was a danger, far from negligible, that the sale might be aborted. The shares could only be sold if at least one bidder submitted a fixed bid and the other bidder based his referential offer on that fixed bid.
(b) If referential bids were permissible, there was a possibility that one bidder would never have an opportunity to buy.
(c) The vendors object of provoking the best price that Harvela and Sir Leonard were each prepared to offer in ignorance of the rival bid was frustrated.
(d) He said “if referential bids were permissible by implication, without express provision in the invitation for that purpose, and without any indication in the invitation of the nature of the referential bids which would be acceptable, the results could have been bizarre”.
He then gave an example of such bizarre results. It is not necessary to set it out here in detail save to comment that his Lordship was dealing with a two bidder process. The results would be even more complicated and potentially more bizarre in the case of a four bid contest, as in the instant case.
These four consequences are similar, if not identical, to the ones which I have identified as ones which might occur if the R.T.E offer were construed as permitting referential bids.
It appears to me that the conclusions which I have reached concerning the inappropriateness of referential bids in the context of the R.T.E offer are supported by the unanimous views of the House of Lords in the Harvela case.
In explaining his conclusions Lord Templeman followed a number of other decisions which are worthy of mention. The first was South Hetton Coal Co. v. Haswell Shotton and Easington Coal and Coke Co. [1898] 1 Ch. 465. In that case, the owner of a coalmine proposed to receive sealed tenders from two parties who were competing to purchase. The vendor undertook to accept the highest “net money tender”. One of the competitors purported to offer “such a sum as will exceed by £200 the amount…offered… by the other proposing purchaser”. That approach was rejected by the Court of Appeal. Lindley M.R. said:-
“Does the offer fairly answer the description of what the liquidator had bound himself to accept – in other words does it answer the description of being ‘highest net money tender I receive’? It appears to me obviously not. Whether it was a tender at all depended…not upon the construction of that letter, but upon whether other people tendered. That is not what the liquidator wanted, and that is not what he bound himself to accept.”
Lord Templeman said of this decision that it was “decided by a powerful court, has stood unchallenged for over 80 years and was binding on the Court of Appeal in the present case”.
He also cited with approval a decision of the New York Court of Appeals in SSI Investors Limited v. Korea Tungsten Mining Co. Limited [1982] 449 N.Y.S 2d173. He said as follows:-
“The majority judgment at pages 174-175, succinctly and cogently summarised the reasons for rejecting referential bids as follows:-
‘The very essence of sealed competitive bidding is the submission of independent, self contained bids, to the fair compliance with which, not only the owner, but the other bidders are entitled…To give effect to this or any similar bidding practice in which the dollar amount of one bid was tied to the bid or bids of another or others in the same bidding would be to recognise means whereby effective sealed competitive bidding could be wholly frustrated. In the context of such bidding, therefore, a submission by one bidder of a bid dependant for its definition on the bids of others is invalid and unacceptable as inconsistent with and potentially destructive of the very bidding in which it is submitted’.”
In my view those considerations are equally applicable in the present case.
CONCLUSIONS ON QUESTION 1
I hold that on the true construction of the R.T.E offer the making of a referential bid was impermissible. That finding is supported by reference to the wording of the offer itself and by high judicial authority from England and Wales and from New York. I find those authorities persuasive and in my view they are supportive of the conclusion which I have reached.
Furthermore, I am of the view that there is much to be said for the opinion of Lord Templeman to the effect that where referential bids are sought there ought to be an express provision in the invitation permitting such bids to be made. Patent unfairness results unless that is done. Such unfairness would be inconsistent with the object which was sought to be achieved in the R.T.E offer.
The first question is therefore answered in the negative. The referential bid submitted by Smart was not a valid bid in response to the R.T.E offer.
this action is dismissed.
Joseph P. Billings v. Arnott & Co., Ltd.
(1945) 80 ILTR 50
The plaintiff was employed by the defendants. By a minute of the defendants made 6th June, 1940, a notice was posted offering employees who joined the Defence Forces one half of their salaries up to the sum of £2 per week. Plaintiff informed the defendants of his intention to avail of this offer but was told that he could not do so as another employee from the same department as his had joined and that he could not then be spared. Plaintiff nevertheless joined the Defence Forces and at an interview with a director of the defendant company, he was informed that the offer was withdrawn in so far as he was concerned. Defendants refused to pay plaintiff pursuant to their offer. Held, in an action for £366 salary due for 31/2years on foot of the notice, that plaintiff was entitled to succeed as defendants could not properly plead revocation once plaintiff had acted on their offer.
Apricella and another v. Scala and others
(1931) 66 ILTR 33
A. C. and S.agreed to combine for the purpose of purchasing and acquiring tickets in the Irish Hospitals Sweepstakes. They purchased a number of books of tickets and entered into a written agreement with regard to them. They decided to acquire more tickets and S. wrote for two more books. He then told A. and C. that he wished to sell some of these tickets to his friends and relatives. A. and C. objected as the books were for the partnership, and said that if he wanted to sell any tickets to his friends or relatives he should procure another book. He was to be at liberty to sell any tickets he might wish to sell out of such book, and any not so sold were to be taken up by the partner-ship. S. agreed to this and wrote accordingly for, and procured, not one but two more books. On the 5th or 15th February, 1931, a written agreement was entered into which comprised the last mentioned two books. Unknown to A. and C., S. retained the previous two books for his own use. One of the tickets in the books so retained by S. drew the first prize in the said sweepstakes. In an action by A. and C. to recover one two-third share of the monies accruing to S. from the purchase, acquisition or ownership of the said winning ticket. Held, that the purchase of a ticket in such a sweepstake and the sending in of the money and counterfoil was an offer, and not an acceptance of an offer. Held, further, that deciding on the number of books to be sent for was no evidence of intention to contract, the parties did not mean to bargain, but merely arrived at a conditional or revocable decision as to the number of books required for the guidance of the party writing for the tickets. Held, further, that if the arrangement to purchase two books was a contract for some two books, such contract was certainly discharged by the joint purchase of the two books to which the agreement of the 5th or 15th of February, 1931, was expressed to relate, as there was no appropriation of the two books first procured to that contract. The mere refusal of A. and C. to allow S. to dispose of one of the two books which had been procured was not a determination that the transaction should relate to those particular books in any event. Held, further, that the book of tickets which contained the winning ticket was, as a mere chattel, the property of A., C.and S., and was of some value; S. did not derive the prize from the use of the book, but by chance and as a subscriber to the sweepstake; and therefore the bare ownership of the book did not entitle A. and C. to share in the prize money.
“There is,” says Sir Frederick Pollock (1), “a material distinction, though it is not fully recognised in the language of our authorities, between the acceptance of an offer which asks for a promise, and of an offer which asks for an act, as the condition of the offer becoming a promise. When the acceptance is to consist of a promise, it must be communicated to the proposer. But when the acceptance is to consist of an actas despatching goods ordered by postit seems that no further communication of the acceptance is necessary than the performance of the proposed act, or at any rate the proposer may dispense with express communication, and an intention to dispense
Brennan v. Lockyer and Others.
[1932] IR 100
FitzGibbon J.
Supreme Court.
In the present case the plaintiff requested McGirt and Hoare to propose him “for enrolment.” In the same document, reciting that he was already a member of the M.B.S., which he could not be until after the election and enrolment, he nominated his wife to receive all benefits, etc., and on the same day, by a separate document, again reciting that he was a member of the M.B.S., and purporting to exercise a privilege confined to members, he proposed his wife as a member of the Branch.
These actions are in my opinion wholly inconsistent with an intention or belief on his part that he was not to become a member or possess any of the rights or privileges of membership unless and until the fact of his election had been communicated to him. If he had expressly said,”I ask you to act on my request, and I waive all necessity for communication,” there is no doubt that immediately upon enrolment he would have become a member of the Benefit Society, and in my opinion the nomination, and still more clearly the proposal for membership, of his wife, indicate a plain intention on his part to exercise the rights of membership at the earliest possible moment, and to dispense with any necessity for communicating his election to himself as a condition of his becoming a member. The rules of the Society make liability to payment of levies depend upon the date of enrolment. “All new members shall pay every levy announced after the date of their enrolment,” and in my opinion a proposer who asked to be enrolled could not legally resist payment of a levy, announced after the date upon which he had in fact been enrolled, upon the ground that the fact of his enrolment had not come to his knowledge. It has been proved that Thomas Brennan was enrolled a member of the Mutual Benefit Society upon the 29th of March, upon the proposal of McGirt, a member, and Hoare, the Secretary, and that his wife, Sarah, was, upon the proposal of himself as a member and Hoare as Secretary, enrolled as a member upon the same day. In my opinion the contract of membership was completed in London by the act of the Management Committee in accepting and acting upon the proposal of Thomas Brennan.
I agree with the view of the Chief Justice that the total lack of candour in the affidavit upon which leave to issue the summons was obtained by the plaintiff ex parte from O’Byrne J. would justify the Court in setting aside the order which he was induced to grant.”
I am also of opinion that there is no sufficient evidence
Gerson (Leasing) Ltd v Michael Wilkinson & Anor
[2000] EWCA Civ [2000] 3 WLR 1645, [2000] 2 All ER (Comm) 890, [2001] 1 All ER 148, [2001] QB 514, [2000] EWCA Civ 250, [2000] CLC 1720
Clarke J
3. Both Sir Roy and Mr Lerego submitted that the instant case is on all fours with Gamer’s case and indeed Forsythe. However, in my judgment it is not. In both those cases the constructive possession being considered was the kind of possession envisaged by section 1(2) of the Factors Act 1889, which provides so far as relevant:
“For the purposes of this Act … (2) A person shall be deemed to be in possession of goods or of documents of title to goods where the goods or documents are in his actual custody or are held by any other person subject to his control or for him or on his behalf”.
In Forsythe I held, consistently with Gamer’s case, that possession within the meaning of section1(2) of the Factors Act would also be possession within the meaning of section 24 of the Sale of Goods Act 1979 and that on the facts the charterers were in possession of bunkers after the determination of a charterparty because from that time the owners were holding them subject to the charterers’ control or on their behalf : see page 1344D to E and the discussion of the relevance of the Factors Act at pages 1344E to 1345C.
14. There was considerable debate during the course of the first part of the argument in this appeal as to whether on the facts of Gamer’s case the dealer was holding the cars on behalf of and subject to the control of Natwest. Sir Roy submitted that it was whereas Mr Lerego submitted that it was not. Before the end of the argument it was ascertained that the dealer was indeed holding the cars on behalf of and subject to the control of Natwest because the report of the case in the Court of Appeal of the Supreme Court of New South Wales in [1985] 3 NSWLR 475 shows that the contract between the dealer and Natwest (then Lombard) included an express provision that Lombank or its authorised agents `may at any time take possession of any unit without notice’. When that report came to light Mr Lerego properly conceded that Natwest was in constructive possession of the cars which were in the actual custody of the dealer because of the control exercised by Natwest under the contract.
15. Mr Lerego submitted that the majority of High Court did not put their decision on that basis because none of the judges referred to the clause, but in my judgment that was the basis of the decision: see for example per Dawson J at page 263. In these circumstances I do not think that it is necessary to consider the facts of either Gamer’s case or Forsythe in any detail. They were both cases where A was held to be in possession of property in the actual custody of B because of the nature and extent of the control which A exerted over the property. The instant case is not such a case, at any rate after the leaseback by State to Emshelf. Thereafter Emshelf was holding the schedule 3 goods in its own right as lessee of State. State had no control over the goods at that time. It was not in the same position as Nat West in Gamer’s case or of the charterers in Forsythe.
16. As I see it the analysis here is somewhat different. The way in which State puts its case can be summarised as follows, by reference (at least in part) to a helpful note supplied by Mr Lerego.
(i) Emshelf sold the schedule 3 goods to State, which leased them back to Emshelf under a contract of hire, which is a form of bailment.
(ii) State could not lease the schedule 3 goods to Emshelf unless it both owned them and was entitled to possession of them.
(iii) State’s ownership of the goods was expressly recognised by clause 4 of the lease.
(iv) State’s right to possession and thus to transfer possession to Emshelf was either an express term of the lease or was an implied term of it by reason of section 7 of the Supply of Goods and Services Act 1982.
(v) State could only discharge its obligation to transfer possession of the schedule 3 goods to Emshelf under the lease if there was a delivery, albeit constructive, by Emshelf to State.
Mr Lerego submits that constructive delivery of that kind is recognised by both the textbooks and the authorities.
17. I accept Mr Lerego’s analysis of the facts. The precise contractual position is not entirely clear but it is sufficient to enable reasonably firm conclusions to be reached on the critical questions. It is common ground that the sale of the schedule 3 goods by Emshelf to State and the leaseback by State to Emshelf were both part of one transaction. Thus the sale would not have taken place without the leaseback and the leaseback could not of course have occurred without the sale.
18. There is no clear evidence of the sale, which is evidenced only by an invoice dated the 19th August 1996 and the agreement by way of leaseback which is signed by both parties and dated the 28th August 1996. The invoice simply states that the buyer is State and that the seller is Emshelf and sets out the nature of the goods and the price, which was £168,025 inclusive of VAT. State only paid the price on signature by Emshelf of the lease. The lease is between Emshelf as lessee and State as lessor. On the first page of the lease there are set out the period of hire and the rent and in a box just above the signatures of two directors on behalf of Emshelf, Emshelf stated:
“We wish to hire the goods for the purpose of a business carried on by us and request you to buy the goods from the supplier named above for this purpose.
We did not rely on your judgment but relied on our own judgment in selecting the goods. We understand we are responsible for taking delivery of the goods on the date of this Agreement. We shall accept delivery of the goods at the address shown above and we shall carefully examine and test the goods before accepting them and establish that they are suitable for our purposes.
Mr Lerego points to the fact that Emshelf was promising to take delivery of the schedule 3 goods. I accept his submission that such delivery could only be taken from State and, moreover, that State would only have the right to deliver them to Emshelf if Emshelf had (at least notionally, symbolically or constructively) delivered them to State.
19. There are other terms of the lease which confirm that view. Thus the agreement is expressed to be a leasing agreement and expressly provides for a hiring which by clause 1a is expressed to commence on the date that the lease is signed. Clause 2 sets out the lessee’s responsibilities in detail and includes, for example, in clause 2h a term that the leasee shall:
“Not assign sub-let pledge mortgage charge or sell the goods or any part thereof nor abandon or part with possession or the control of the goods or any part thereof or the benefit of this agreement or attempt to do such things nor allow any other person or persons to obtain any lean or charge upon the goods or allow to be done any other thing which in State Securities opinion may prejudice or jeopardise its rights of ownership thereto.
Clause 4 provides:
“the goods shall all times remain the property of State Securities and nothing herein contained or otherwise communicated to the leasee in writing or orally shall be construed to imply that ownership of the goods will or may pass under any circumstances to the Lessee
RISK IN THE GOODS WILL PASS TO THE LEASEE ON THE DATE OF THIS AGREEMENT”.
The agreement contains a number of provisions which are typical in a lease.
20. In my judgment the lease is consistent only with ownership of the schedule 3 goods by State and with a right of possession in State sufficient to transfer possession to Emshelf under the lease. That is explicit or implicit in the terms of the lease. In any event section 7(1) of the Supply of Goods and Services Act 1982 provides:
“In a contract for the hire of goods there is an implied condition on the part of the bylaw that in the case of a bailment he has a right to transfer possession of the goods by way of hire for the period of the bailment and in the case of an agreement to bail he will have such a right at the time of the bailment”.
By section 11(1) that implied term can be negatived or varied by express agreement, or by the course of dealing between the parties or by such usage as binds both parties to the contract. However, no such express agreement, course of dealing or usage has been suggested in this case. It follows that State had a right to transfer possession to Emshelf.
21. The question is whether in these circumstances there was constructive delivery of the schedule 3 goods by Emshelf to State so that State could deliver them to Emshelf under the lease. Mr Lerego submits that there was just such a constructive or (as it is sometimes put) symbolic delivery and relies upon statements both in textbooks and in the authorities.
22. As to the textbooks, he relies in the first place upon An Essay on Possession in the Common Law by Pollock and Wright published in 1888. In section 7 of chapter II beginning at page 71 Pollock & Wright discuss `Delivery of goods by attornment’. At pages 72-3 they say this:
“The authorities both on acceptance and actual receipt within the Statute of Frauds and on the rights of unpaid vendors show that in several ways there may be a change of possession without any change of the actual custody. Such a change of possession is commonly spoken of as constructive delivery.
1. A seller in possession may assent to hold the thing sold on account of the buyer. When he begins so to hold it, this has the same effect as a physical delivery to the buyer or his servant, and is an actual receipt by the buyer; and this whether the vendor’s custody is in the character of a bailee for reward or of a borrower. The important thing is his recognition of the purchaser’s right to possess as owner, and his continuing to hold the goods either as the purchaser’s servant or as his bailee with a possession derived from that right. On the other hand, acts of the buyer which treat the seller as his agent or bailee are evidence of receipt and acceptance as against the buyer: though payment of warehouse rent, for example, to an unpaid vendorretaining the custody of the goods is far from conclusive to show that he has lost possession and his lien. Accordingly as the seller holds as servant or bailee, the transaction amounts to simple delivery, or to deliver to the buyer immediately followed by redelivery to the seller as bailee.
2. Possession may be delivered, while the goods are in the custody of a third person, by the agreement of the seller and buyer, with the assent of that person, that they shall be held in the name or on account of the buyer. This is described by the modern authorities as an `agreement of attornment.’
…
3. Lastly, it is a possible though not very common case that the buyer is in possession of the goods as the seller’s bailee.”
23. Mr Lerego submits that the facts here are essentially those contemplated in paragraph 1 of that extract. He also relies upon the following statement in paragraph 8-170 of the 16th edition of Bowstead & Reynolds on Agency:
“Attornment. An attornment in respect of goods occurs where the possessor of goods, whether himself the transferor or the bailee of the transferor, acknowledges that he holds, and possesses, for another. There is authority that such an attornment creates a fresh bailment by means of a constructive delivery and redelivery.
24. As to the authorities, Mr Lerego relies in particular upon Marvin v Wallace (1856) 25 LJQB 369, which is cited by Pollock & Wright and upon Dublin City Distillers Limited vDoherty [1914] AC 823, 852, which is the first authority cited by Bowstead in the above passage.
25. In Marvin v Wallace the question was whether the buyer of a horse had received it for the purposes of compliance with section 17 of the Statute of Frauds 1677. The seller sold the horse to the buyer and then, after that contract had been made, asked the buyer if he could borrow it for a time. The buyer said that he could, provided that he took care of it. As I read the facts, the loan was to be for a specific period, so that it was not a bailment at will. The horse remained in the physical possession of the seller. The question was whether the buyer had received the horse. It was held that he had. Coleridge J said (at page 370):
“The 17th section of the Statute of Frauds requires an actual receipt of the goods, which implies a delivery of the goods on the one hand and an acceptance of the goods on the other hand. It is admitted that, if for one minute they are in the actual visible possession of the vendee, as vendee, it would be sufficient; also; it must be admitted, that if they were in the possession of a third party, for and on behalf of the vendee, the statute would be satisfied. But it is contended that, unless some act was done entirely unambiguous, indicating a change of possession, the question as to the intention of the vendee to accept cannot arise. The jury have found that the bargain for the purchase of the horse was complete, and then the vendorasked the vendee as a favour to lend the horse to him for a certain time and special purpose: the vendee said, “Yes”, I will lend him to you, if you will take care of him”; and in consequence of that the vendor retained apparent possession of the horse and made use of it as bailee, and at the end of the time agreed upon returned it to the vendee. It appears to me that the statute has been satisfied. Try the case on the first point, whether there has been a sufficient delivery. Elmore v Stone furnishes an answer: there the horse was passed from one stable of the vendor to another stable of a different character. Though the vendor had as much possession of the horse when in the one as in the other, the character in which he held it was changed. Here, though the defendant had the same apparent possession of the horse, the evidence shews that the character of the possession was entirely changed. He ceased to hold it as owner, and continued to hold it only as bailee. As to the question, whether the right of lien has been retained by the vendor, it is only a consequence of the other point. If the bargain is complete, and the possession has passed, the right of lien is gone; and if not, it is retained. I think, therefore, that question cannot be used as a test of the character of the possession.
Erle J, Crompton J and Lord Campbell CJ gave judgments to similar effect.
26. The crucial point for present purposes is that the court treated the horse as having been delivered to the buyer. The delivery occurred because the buyer loaned the horse to the seller and the seller acknowledged that he was holding the horse, not as seller, but as bailee. Erle J put it in this way, at page 371:
“There must be an actual contract of purchase and sale; and then, if the buyer exercises any act of ownership, though by words only, inconsistent with any other supposition than that he intended to assume dominion over the chattel as owner, he has accepted and actually received it within the meaning of the statute. Applying that doctrine to the facts of this case, according to the finding of the jury, the defendant, as owner in possession of the horse, permitted the plaintiff to take and ride it for two or three journeys. That is a decided transmutation of possession, and so the plaintiff’s lien was gone, and the requirements of the Statute of Frauds complied with.
27. The passage from the Dublin City Distillers’ case relied upon by Bowstead is in the speech of Lord Parker at page 852:
“The respondent contends that these documents operate by way of pledge. It is quite certain that at common law a pledge cannot be created unless possession of the goods the subject of the pledge be delivered to the pledgee. When the goods in question are in the actual possession of the pledger, possession of them is, as a rule, given to the pledgee by actual delivery of the goods themselves. There are, however, cases in which possession may pass without actual delivery, for example, whenever there is some agreement between the parties the effect of which is to change the possession of the pledger from a possession on his own account as owner into possession as bailee for the pledgee: see Meyerstein v Barber LR 2 CP 38. Such an agreement operates as a delivery of the goods to the pledgee and a redelivery of the goods by the pledgee to the pledger as bailee for the purposes mentioned in the agreement. A mere book entry cannot, however, have that effect.
28. In my judgment the legal position is as set out by both Pollock & Wright and Bowstead. Thus, where a seller in possession of the goods sold acknowledges that he is holding the goods on account of the buyer in circumstances where (as Pollock & Wright put it at page 72) he recognises the purchaser’s right to possess as owner and his continuing to hold the goods thereafter as the bailee with a possession derived from that right, then (as Pollock & Wright put it at page 73) the transaction amounts to delivery to the buyer immediately followed by redelivery to the seller as bailee and that is so whether the seller’s custody is `in the character of a bailee for reward or of a borrower’. There is a change of the character of the seller’s possession when he holds the goods for the buyer and, indeed, when he subsequently becomes, say, the bailee from the buyer for reward.
29. Mr Lerego submits that an application of those principles establishes a delivery by Emshelf to State and a redelivery by State to Emshelf. Sir Roy Goode, on the other hand, submits that the facts of this case are distinguishable from those in Marvin v Wallace because in that case the contract of sale was made before the horse was loaned to the seller whereas here the sale and leaseback were all part of one agreement. He further submits that there was no acknowledgment here by Emshelf of State’s right of possession of the schedule 3 goods and no sufficient voluntary act of delivery by Emshelf to State. As he put it in argument, there was no time at which State could instruct Emshelf what to do with the goods and thus no time at which State could decide whether or not to lease the goods to Emshelf. For example, State could not at any stage have instructed Emshelf to deliver the goods to it or to a third party on its behalf.
30. It is true that there was no identifiable moment at which State could have given those instructions. However I prefer the submissions of Mr Lerego to those of Sir Roy on this point. I do not think that it is necessary to identify a moment at which the goods were delivered to State by Emshelf. The effect of the sale and leaseback arrangement was that the goods must be taken to have been delivered to State because State could not otherwise have leased them back to Emshelf. Although on the facts of Marvin v Wallace the loan arrangement was made after the contract of sale, I do not think that in principle it would or should have made any difference if the sale agreement and the bailment had been contained in the same contract. I can see no reason why it should be held that there was a delivery and redelivery in the one case and not in the other.
31. Equally it seems to me that there was here an acknowledgment by Emshelf that it held the goods on behalf of State in the lease itself. I have already set out the relevant facts. The terms of the lease are consistent only with such an acknowledgment, since (as I have already stated) State would not otherwise have been able to lease the goods back to Emshelf. The principles set out above therefore seem to me to establish that there was a delivery and a redelivery on the facts here.
32. Sir Roy submits that there was no voluntary act of transfer and that State’s case fails for that reason, as the owners’ case failed in Forsythe. However, it seems to me that the making of the agreement for sale and the entering into of the lease was a sufficient voluntary act on the part of Emshelf to satisfy the requirement in section 61(1) of the Sale of Goods Act 1979 that in order to amount to `delivery’ there must be a voluntary transfer of possession from one person to another.
33. Finally Sir Roy submits I think that the effect of the above analysis is to hold that State had possession in circumstances in which it would not have possession under section 1(2) of the Factors Act 1889. He further submits that if it would not have possession under that Act it should not be held to have received the goods within the meaning of section 24 of the Sale of Goods Act 1979. It is true that there are a number of cases in which it has been held that for many purposes the Factors Act 1889 and the Sale of Goods Act 1893 and its replacements should be treated as a code: see for example the discussion in Forsythe at pages 1344E to 1345B.
34. I am, however, unable to accept the submission that unless State’s possession was possession within the meaning of section 1(2) of the Factors Act 1889 it cannot have received the goods within the meaning of section 14 of the 1979 Act. While such possession is sufficient to amount to receipt, the buyer can in my opinion receive the goods in the way which I have described. It seems to me that such receipt probably amounts to possession by State within the meaning of section 1(2) because, in order to lease them from State, Emshelf must have held the goods for State or on its behalf, albeit symbolically. However, if that is wrong, there was nevertheless a delivery and redelivery of the goods sufficient to amount to receipt of them by State.
35. Although the Factors Acts and the Sale of Goods Acts can for some purposes be regarded as part of a code, the definition in section 1(2) was not incorporated into the Sale of Goods Act 1893. As Mr Lerego pointed out, section 1(2) is expressed to be `for the purposes of this Act’, that is the Factors Act 1889. Moreover, while the provisions of section 1(2) were not expressly incorporated into the Sale of Goods Acts, the provisions of section 1(1) were. Thus section 26 of what is now the Sale of Goods Act 1979 defines `mercantile agent’ in the same terms as section 1(1) of the 1889 Act. In these circumstances I do not think that the question whether a buyer has received goods within the meaning of section 24 depends wholly upon whether he is in possession of the goods within the meaning of section 1(2) of the Factors Act 1889.
36. Finally, it seems to me that the conclusions set out above make sense in modern conditions. This and other cases show that purchase of goods is commonly financed by sale and leaseback arrangements such as those entered into by both Gerson and State in the instant case. It seems to me that it makes commercial sense to hold that such arrangements involve a transfer of constructive possession to the finance company who buys the goods and leases them back, such that the innocent finance company can take advantage of the provisions of section 24 of the 1979 Act. The distinctions suggested on behalf of Gerson seem to me to be too narrow to make commercial sense.
37. For all these reasons I would hold that, on the evidence before the judge, Emshelf delivered the schedule 3 goods to State under a sale and that State received them in good faith and without notice of the sale from Emshelf to Gerson. It follows that State acquired good title to the schedule 3 goods under section 24 of the Sale of Goods Act 1979 and that it is not liable for conversion. I would dismiss the appeal on this point.
Contract between Gerson and Sagebush.
38. The judge held that Gerson sold all the goods to Sagebush on the 28th February 1997. He held that Gerson offered to sell the goods by a fax dated the 27th February and that the offer was accepted by a reply fax of the next day. Those faxes must of course be considered in their context but, before considering the surrounding circumstances, it is appropriate to quote the faxes. The fax of the 27th February was sent by Mr Gerson of Gerson to Mr Smith of Sagebush; It was in these terms:
“I have spoken to Ken Grieg and am satisfied that they have no objection to a sale of the equipment leased to Emshelf even if the sale price appears to represent an apparent undervalue.
Accordingly I am willing to make an outright sale for £319,000 plus VAT.
This figure is made up of £269,000 (259,000 plus £10,000 interest as per termination statement) plus £50,000 (retention of 5% of sale proceeds under sales agency agreement under original lease based on estimated true market value of £1m.
Sagebush replied by fax on the next day in these terms:
“With reference to our various telephone consultations and your penultimate fax of yesterday.
Pleas supply an invoice in the sum of £319,000 plus VAT to Sagebush (1997) LTD in consideration of all that plant and equipment which was the subject of your terminated lease agreement with Elmshelf LTD.
Many thanks for your assistance in this matter.
39. The context in which those faxes came to be sent may be summarised as follows. As the judge explained, by the beginning of 1997 the payments due from Emshelf under the lease with Gerson were seriously in arrears. Mr Gerson had a meeting with Mr Joseph Hayes, whom he believed to be an adviser to and spokesman for Mr Greig, who was both a director of Emshelf and one of the guarantors of Emshelf’s obligations under the lease. Mr Gerson also believed Mr Hayes to be a shadow director of Emshelf. Mr Hayes told Mr Gerson that there was an investor on the horizon who was interested in taking over Mr Greig’s companies and investing money in them. Gerson terminated the lease on the 25th February 1997. Very soon after that Mr Smith telephoned Mr Gerson and introduced himself. Mr Gerson checked with Mr Greig and Ms Bean (who was also a director of Emshelf and the other guarantor of its obligations under the lease) whether Mr Smith was the person intending to put money into Emshelf and obtained their approval to a sale to Mr Smith or Sagebush Limited.
40. It was in these circumstances that Mr Gerson sent the fax of the 27th February to Mr Smith which I have quoted above. The goods were thought to be worth much more than the £319,000 plus VAT which Mr Gerson proposed to Mr Smith, but the amount outstanding on the lease, inclusive of all charges and VAT, as at the 25th February was £314,574.39. It was at least partly because of the potential difference between those figures and the figure of £1 million which the goods were said to be worth that Mr Gerson obtained the consent of Mr Greig and Ms Bean first to discuss with Mr Smith of Sagebush Limited the details of the lease and of the goods and then to make an arrangement with Mr Smith.
41. There is no evidence that there was any more extensive conversation between Mr Gerson and Mr Smith than as found by the judge and as described above. Thus Mr Gerson did not enquire of Mr Smith as to his or Sagebush’s financial position. Nor did he carry out any investigation as to their creditworthiness. Moreover, he did not know whether Mr Smith had seen the goods and he did not provide him with a schedule of them. He had never done business with Mr Smith before.
42. In these circumstances Sir Roy Goode submits that it is almost inconceivable that Mr Gerson, as an experienced businessman, would have made an offer to sell the goods outright to Mr Smith on such terms that there would be a binding contract between them. He also says that Mr Gerson would certainly not have done so on the basis that property in the goods would pass to Mr Smith or his company immediately on acceptance and before the goods were paid for. Sir Roy further submits that it is equally inconceivable that Mr Smith would have agreed to buy and pay for the goods before he had made appropriate financial arrangements. Finally he submits that it is permissible to take these factors into account in deciding whether the faxes relied upon establish a contract between the parties.
43. I accept Sir Roy’s submission that it is permissible to take account of the probabilities in deciding that question. I further accept his submissions as to the position of Mr Gerson. It does seem to me to be most unlikely that when he sent his fax of the 27th February he intended that an acceptance of it would lead to a binding contract, but, even if that is wrong, it is, in my judgment inconceivable that he intended that the property in the goods should pass by an acceptance of it. The position of Mr Smith is less clear. It is I suppose possible that he would have been willing to buy the goods without having finance in place because of the perceived difference between the price and the true values of the goods, but it seems more likely that he would have wanted to make financial arrangements to enable him to pay for them before committing himself or his company to do so.
44. All of course depends upon the true construction of the two faxes, together in principle with what was said in the telephone conversations and, perhaps, the last fax sent on the 27th February. Such a fax is referred to by inference in the fax of the 28th February quoted above because of the reference in it to “your penultimate fax of yesterday”. Mr Gerson gave oral evidence but Mr Smith did not. Mr Gerson said in evidence that he had no knowledge of another fax sent on the 27th February and that he did not know what document was being referred to. Also he gave no evidence about the telephone conversations which were also referred to in the fax. We do not of course know what Mr Smith might have said if he had been called.
45. If the problem is approached as one of offer and acceptance, the first question is whether the fax of the 27th February is an offer which was capable of acceptance. In the light of the considerations outlined above, I would not hold that it was an offer which was intended to be accepted. It simply says that “I am willing to make an outright sale for £319,000 plus VAT”.It is not couched in the terms of an offer and seems to me to be consistent with being an invitation to treat. However I recognise that it is capable of being regarded as an offer, in which case the next question is whether the fax of the next day was an acceptance. This is not an easy question to answer without any knowledge of the contents of either the telephone conversations or the other fax referred to in the reply fax.
46. The reply fax is not couched in terms of acceptance, but merely asks for an invoice. Also it was sent by Sagebush (1997) Limited and I am not sure that until then Gerson had any knowledge of such a company. However that may be, the fax can to my mind only be construed as an acceptance if the request for an invoice is an unequivocal acceptance of Gerson’soffer to sell for £319,000 plus VAT and that it is a promise to pay that sum for whatever plant and equipment was the subject of the lease. I do not think that it is. It seems to me to be consistent simply with a request for an invoice setting out the relevant plant and equipment so that Sagebush could make financial arrangements to pay it, no doubt on the basis that if such arrangements were made the deal would become firm.
47. The contrary view is that the request for an invoice is consistent only with a promise to pay it. I do not think that the mere request for an invoice without any other evidence of agreement, whether by telephone or otherwise, amounts to an unequivocal acceptance. By way of example, I note that it is by no means clear that the invoice dated the 19th August 1986 form State to Emshelf is evidence of a binding agreement between them. On the contrary it appears to me to be probable that, notwithstanding the invoice, there was no binding agreement of sale and leaseback between Emshelf and State until the lease was signed on the 28th August. In these circumstances, if the reply fax is construed in its context and in the light of the surrounding circumstances which I described earlier, I do not think that it can fairly be regarded as an acceptance of an offer to sell the goods for £319,000 plus VAT. I have thus far reached that view on the basis of the events prior receipt by Gerson of the reply fax.
Lawlor v. Ross
[2001] IESC 110 (22nd November, 2001)
THE SUPREME COURT
316/00
Keane C.J.
Geoghegan J.
Fennelly J.
[Judgments delivered by Keane C.J. and Fennelly J.]
JUDGMENT delivered the 22nd day of November, 2001 by Keane C.J.
1. The facts in this case are comprehensively stated in the judgment which will be delivered by Fennelly J and need not be set out by me.
2. The applicable legal principles are not in doubt. This is not a case, as Mr. Frank Clarke SC conceded on behalf of the appellants, in which it could be successfully contended that the statement of claim itself disclosed no reasonable cause of action or one that was frivolous or vexatious. The appellants say, however, that the proceedings should have been struck out in the exercise of the inherent jurisdiction of the High Court to take that course where it is clear that the plaintiff’s claim must fail.
3. That such a jurisdiction exists is beyond doubt. However, as was made clear by Costello J, as he then was, in Barry -v- Buckley [1981] IR 306 and by this court in Sun Fat Chan -v- Osseous Limited [1992] 1 IR 425, it is a jurisdiction which should be sparingly exercised by the High Court. As McCarthy J observed in the latter case :
“Experience has shown that the trial of an action will identify a variety of circumstances perhaps not entirely contemplated at earlier stages of the proceedings ; often times it may appear that the facts are clear and established but the trial itself will disclose a different picture.”
4. Since the defendant who brings such a motion must satisfy the court that, even assuming that all the facts pleaded and relied upon by the plaintiff in his statement of claim are established in evidence, his or her action will nonetheless inevitably fail, the burden resting on the defendant in bringing such a motion is undoubtedly a heavy one.
5. It remains to consider the application of those principles to the facts of the present case. As I understand the statement of claim and particulars, the plaintiff claims that he entered into what he describes as “a joint venture partnership agreement” with the defendants and a Mr. Peter Dwyer under which a company was to be formed for the purpose of acquiring and developing certain lands known as “ The Guinness lands” in West County Dublin. If the lands in question could be acquired for £8 million, the project was to go ahead and the shareholding in the company and the distribution of profits which, it was hoped, would result from the venture were to be divided in the proportions of 40% to the defendants, 40% to Mr. Dwyer and the remaining 20% to the plaintiff. If it transpired that the purchase price of the lands was in excess of £8 million, the parties would not be bound to proceed with the acquisition and development of the lands. If, however, the parties were willing to proceed with the acquisition of the lands, even though the purchase price was in excess of £8 million, the company would then be formed with the shares held in the agreed proportions. The plaintiff’s case is that the lands were subsequently acquired for a sum admittedly significantly in excess of £8 million, i.e., £19 million, but that, in breach of the agreement he had arrived at with the defendants and Mr. Dwyer, he was given no opportunity of participating in their further development through the medium of the proposed new company.
6. It is undoubtedly the case that, as pleaded in the statement of claim, certain aspects of the alleged agreement remain remarkably vague. There was no agreement as to the details of the development to be carried out on the lands and the entire question of how the project was to be financed seems to have been left in the air. It may be that at the trial of the action, if it is allowed to proceed, the plaintiff will be able to establish that there was an agreement between himself, the defendants and Mr. Dwyer that the company in question was to be formed, that the lands when acquired were to be vested in the company and that the profits of any development were to be divided in the agreed proportions. It is conceded on behalf of the plaintiff, however, that there was no agreement as to how the project was to be financed and that the details of the proposed development were also, in effect, left for further agreement. Accordingly, even making every assumption in favour of the plaintiff as to the stage which negotiations had reached, they remained negotiations. None of the parties would be in a position to hold the other parties to whatever arrangements in principle were envisaged, if it was not possible to reach agreement on matters such as finance and the nature of the proposed development. In these circumstances, it seems to me that this constitutes one of those cases in which, making every assumption in favour of the plaintiff, the contract relied on could not possibly constitute a concluded contract between the parties which would give rise to any action at law.
7. I would allow the appeal and substitute for the order of the High Court an order dismissing the plaintiff’s claim.
THE SUPREME COURT
Record No. 316/00
Keane C.J.
Geoghegan J.
Fennelly J.
BETWEEN
LIAM LAWLOR
PLAINTIFF/RESPONDENT
AND
SEAMUS ROSS MENOLLY HOMES LIMITED AND
MENOLLY PROPERTIES LIMITED
DEFENDANT/APPELLANTS
JUDGMENT delivered the 22nd day of November, 2001 by FENNELLY J.
8. The defendants/appellants (hereinafter “the appellants”) have appealed against the refusal of Mr Justice McKechnie in the High Court to accede to their motion to dismiss the plaintiff’s claim for being frivolous or vexatious, an abuse of the process of the court and not being maintainable in law. They rely on the inherent jurisdiction of the court to strike out proceedings which are doomed to fail. This jurisdiction was first fully explained by Costello J in Barry v Buckley [1981] IR 306.
9. It is agreed that the court may exercise this jurisdiction only if it is demonstrated beyond argument that the plaintiff’s claim must fail. As a corollary, it must be assumed that the facts will be established as the plaintiff alleges them. With those strictures in mind, I will endeavour to describe the plaintiff’s claim.
10. The plaintiff is an engineer and businessman, residing near Lucan, Co Dublin. The proceedings concern an alleged joint venture project for the development of substantial areas of land in West County Dublin.
11. The plaintiff pleads, in the statement of claim, that prior to March 1997, he and one Peter Dwyer were “in the process of developing certain lands at or near but not limited to those lands situate at the Phibblestown/Castaheany and Allendale areas of County Dublin for residential purposes and, in addition, were engaged in the process of evaluating the overall future development potential of the entirety of the lands ….”
12. It is here necessary to quote in full certain paragraphs of the statement of claim:
“5. Furthermore and with a view to the overall development of the lands as aforesaid, and in particular certain other additional lands hereinafter referred to as “the Guinness lands”, which same were situate at or near those outlined in the previous paragraph hereof, (all such lands being more particularly delineated in the map annexed hereto), it was decided between the Plaintiff and the said Mr Peter Dwyer, to act in co-operation with the First and/or Third Named Defendants herein for the purposes of the future development of all such lands, which said Defendants were in the process of developing certain additional lands in the Castaheany/Phibblestown area of County Dublin, which they had purchased previously.
6. Prior to embarking upon their intended/proposed development of the lands as aforesaid, the Plaintiff, together with the said Mr Peter Dwyer and the First and/or Third Named Defendants, decided and so agreed that the most appropriate manner by which they should proceed with the development of the Guinness Lands referred to previously, was by way of a joint venture partnership business. It was at all times material hereto envisaged by the said parties that the said joint venture partnership would be established through the vehicle of a limited liability company.
7. Accordingly, by way of a joint venture partnership Agreement made on or about the 5th day of March 1997 between the Plaintiff of the one part, the First and/or Third Named Defendants of the second part and the said Peter Dwyer of the third part, the said parties agreed to acquire and develop the aforesaid lands, which said development was to include, inter alia, the construction of residential properties on the lands situate at Phibblestown/Castaheany and Allendale, County Dublin, together with the installation and provision of all road connections and underground services connections both to the said lands as well as to all other lands adjacent thereto which could then, or would in future, avail of such services.
8. At all times material hereto, it was an express and/implied term or condition of the aforesaid Agreement, which said term or condition was evidenced by way of a note and/or memorandum in writing, that all profits and financial benefits on the aforesaid lands at Phibblestown/Castaheany and Allendale, County Dublin, as well as such similar profits and financial benefits arising from the provision of both road connections and all underground services connections to the said lands, together with all other lands in the vicinity thereof, which same either availed of the provision of the said underground services connections or would do so in the future, (with all such profits and benefits accruing and being calculable subsequent to the discharge of all reasonable expenses and outgoings incurred in the development of the said lands); would be divided between the aforesaid parties on the basis of their agreed shareholding in the aforesaid body corporate identified at paragraph 6 hereof, which same was to be in the following manner, namely:-
In a reply to a request for particulars, it is alleged that the shareholding in the body corporate to be formed was to be in the ratios: 40% each to the first named appellant and Mr Peter Dwyer, and 20% to the plaintiff. The shareholdings were to be applicable to:
“(i) to the totality of the Guinness lands
(ii) to any Agreement entered into by the First and/or Second and/or Third Named Defendants, or one or other of them or any combination thereof with a Company known as Manor Park Homes Limited and/or its nominee whereby the said Manor Park Homes Limited and/or its nominee availed of the aforesaid underground services connections and road connections.
(iii) to any Agreement entered into by the First and/or Second and/or Third Named Defendants, or one or other of them or any combination thereof with the owners and/or developers of those lands knows as the Greene Bros. lands whereby the said owners and/or developers of the said lands availed of the aforesaid underground services connections and road connections.”
13. The essence of the plaintiff’s claim is that the appellants did not perform the agreement so pleaded. Instead, the first named appellant caused the second/named appellant to be formed as a subsidiary of the third/named appellant and to purchase the so-called “Guinness lands” and to have them developed for the benefit and profit of the appellants and without making any provision for the 20% share claimed by the plaintiff. The plaintiff claims a number of declarations regarding the existence of the agreement pleaded as well as specific performance and other relief.
14. The terms of the alleged agreement and the circumstances surrounding its negotiation were further particularised in a reply to a request for particulars made by the appellants. Two aspects of these particulars merit attention, namely the nature and extent of the intended development and the means by which it was to be financed.
The Development
15. The lands were to be all lands mentioned which would benefit from the installation of an underground infrastructure which could provide all necessary services and connections, including road connections. The development was to involve the construction of residential properties on the Guinness lands as well as the installation of the underground infrastructure necessary to drain those lands as well as all other lands in the near vicinity. The plaintiff states that he and Mr Peter Dwyer had already retained the services of experts to design the underground infrastructure. The particulars state that there were to be two large surface water mains together with foul sewer drains, manholes and the requisite pipe work to drain all the lands in the natural catchment in the Castaheany/Phibblestown area. They also state that all this was explained to and discussed in detail with the first named appellant at a meeting in February 1997, whereupon the latter asked to be allowed to co-operate with the plaintiff and Mr Dwyer in order bring into effect their advices, apparently in relation to these services.
Finance
16. The particulars state that the plaintiff and Mr Peter Dwyer had in late 1996 taken professional advice with a view to assembling a package to finance the acquisition and development and installation of services they then envisaged. They also state that, prior to the meeting of 5th March 1997, the first named appellant had expressed serious concern about his existing indebtedness and his unwillingness to provide finance for the underground services envisaged by the plaintiff. In reply to a question about financing of the acquisition, the particulars further state that the matter was raised by the plaintiff at the meeting on 5th March 1997 at the behest of the appellants and was to be discussed at a later stage as stipulated in a document of 5th March 1997, to which I will next refer, and which is central to the present issue.
17. It is agreed that a handwritten document was prepared by the plaintiff at the meeting of 5th March and subsequently signed by the first named appellant and Mr Peter Dwyer, but not by the plaintiff. In so far as is necessary, the plaintiff relies on this document to satisfy the requirements of the Statute of Frauds.
18. The parties differ fundamentally regarding the contractual value of this document. The plaintiff pleads that it represents evidence of a concluded agreement; he swears in one of his affidavits that the purpose of his “writing the terms which had been agreed between the parties was to formalise those terms.” The first named appellant says that the entire discussion was tentative and that many matters were uncertain, queried or to be discussed or agreed. These are issues that cannot be determined on a motion of this kind. The plaintiff’s version must be preferred for present purposes.
19. The handwritten document contains, firstly, some very general calculations of acreages and prices, producing a sum of £7.9, meaning £7,900,000, rounded up to “£8m.” The words, Newco Ltd, next appear, followed by an informal note of 50% each to “SR” (Seamus Ross) and “PD” (Peter Dwyer), – (minus) 10%, followed by a question mark, being written under each. Finally, there appears “Finance to be Discussed.” As already mentioned, the plaintiff, in the particulars supplied, acknowledges that the financing of the acquisition was raised by the first named appellant, but that it was “to be discussed at a later stage as stipulated in the document …”
20. The general tenor of the contract pleaded in the statement of claim and the particulars is that it involved the acquisition by the joint venture, through the vehicle of a company to be formed, in which the plaintiff, the first named appellant and Mr Peter Dwyer would be the shareholders in agreed shares, of the Guinness lands upon which the company would construct a housing development. In addition the joint venture would construct an underground infrastructure and foul and surface water services, which would serve both the Guinness lands and extensive other lands in the area, including some lands already in the ownership of the first or third named appellants and lands owned by third parties. The revenue earned by any of the parties from the provision of such services to other developers would accrue to the joint venture company.
21. In his affidavit grounding the motion to dismiss the claim, the first named appellant maintains that there was no concluded contract between the plaintiff and any of the defendants. He agrees that he signed the handwritten document of 5th March and does not contest any of its contents. He implicitly accepts that one or other of the defendants subsequently acquired the Guinness lands, but says that the price was £19,000,000 and not £8,000,000, as mentioned in the document. The plaintiff says that the latter sum was discussed as the minimum price at the meeting of 5th March. The first named appellant says that Mr Peter Dwyer did not do anything subsequent to 5th March “to advance negotiations or tender requisite capital.”
22. By way of reply, the plaintiff repeats that it was the first named appellant who requested that the issue of finance be dealt with at a later time. He merely adds that the latter “was aware that [the plaintiff] and Mr Peter Dwyer were at an advanced stage of finalising the financial arrangements,” that these arrangements were then discontinued but that the first named appellant said that the raising of finance would not be a problem for “Newco.”
23. The legal principles to be applied on an application of this kind are not in dispute. As explained by reference to the judgment of Costello J in Barry v Buckley, at page 308, it must be clear that the plaintiff’s claim must fail. The learned judge continued:
“The jurisdiction should be exercised sparingly and only in clear cases; but it is one which enables the court to avoid injustice, particularly in cases whose outcome depends on the interpretation of a contract or agreed correspondence. If, having considered the documents, the Court is satisfied that the plaintiff’s case must fail, then it would be a proper exercise of its discretion to strike out proceedings whose continued existence cannot be justified and is manifestly causing irreparable wrong to the defendant.”
This Court, in Sun Fat Chan v. Osseous Ltd. [1992] IR 425 abstained from ruling on the existence of this kind of jurisdiction, as its existence was not disputed. McCarthy J commented that the “High Court should be slow to entertain an application of this kind.” In reality, the Court exercised the jurisdiction.
24. Hardiman J, giving judgment in Supermacs Ireland Limited and another v Katesan (Naas) Limited and another [2000] IR 273, dismissing an application of the kind at present before the Court, approved a dictum of Keane J, as he then was, in Lac Minerals v Chevron Corporation (High Court, unreported, 6th August 1993):
“The judge acceding to an application to dismiss must be confident that no matter what may arise on discovery or at the trial of the action the course of the action will be resolved in a manner fatal to the plaintiff’s contention.”
Hardiman J commented that this was a very difficult hurdle to clear. This and the similar remarks of Costello and McCarthy JJ underline the strictness of the applicable test, namely that the plaintiff’s claim is bound to fail. In Barry v Buckley, Costello J found that the test had been satisfied: the offer to contract and all relevant solicitors’ correspondence were expressed to be “subject to contract.” In Sun Fat Chan v. Osseous Ltd , this Court approved the decision of the High Court to dismiss a claim for specific performance of an agreement for the sale of land, which was expressly subject to a condition as to the obtaining of planning permission. The High Court had rejected the plaintiff’s argument that the condition in question was for the benefit of the purchaser only. This Court agreed. Supermacs Ireland Limited also concerned a contract for the sale of land. This Court, in declining to exercise the jurisdiction, rejected a number of submissions regarding the enforceability of contracts where certain terms had not been agreed. These included the claimed need to have an agreement on the amount of a deposit, on the completion date and on the obtaining of vacant possession. Clearly, all of these points were debatable, to say the least. The exercise of the jurisdiction to strike out could not have been justified. Where the claim is, as postulated by the test, clearly bound to fail, the court will normally exercise its jurisdiction to strike out.
25. It is also clear, and I accept, that the Court should be willing to assume in favour of the plaintiff that an appropriate amendment of the pleadings might save his case. Furthermore, it may be difficult to succeed on such a motion based only on the absence of a note or memorandum which satisfies the requirements of the Statute of Frauds. Something may be found on discovery. It is different where, as in Barry v Buckley, there is a note but it is headed “subject to contract.”
26. The question is whether the plaintiff’s claim in the current case is so deeply flawed that it cannot succeed. I assume, in the plaintiff’s favour, that there was an agreement, as pleaded: a joint venture agreement, where a company was to be formed between identified persons in agreed shares, for the purchase of an identifiable holding of land at an agreed minimum price; that housing development was to be carried out on those lands and that the opportunity of that development was to be used to carry out agreed and identifiable drainage and similar works and to plough the proceeds into the joint venture. I merely say that I assume that, because none of that is the decisive consideration in my mind. I would, in fact, have serious doubts about the uncertainty of the description of the agreed development – what density; what type of housing? – and of the sewerage and drainage works: over whose lands and according to what specification? How could the agreement be binding if the land could not, as envisaged, be bought for the assumed price of £8,000,000?
27. The fatal defect in the plaintiff’s claim is, in my view, the clear evidence, not disputed by the plaintiff, that an integral part of the agreement of 5th March 1997 was that how the entire joint venture was to be financed was left over for discussion at a later date. The plaintiff has described this term, in the particulars furnished as a stipulation and from his affidavit, it is clear that he wrote down the terms in order to formalise them. To his credit, therefore, he does not seek to escape the implications of the signed handwritten document, from which it is abundantly clear that the issue of finance was left over for future discussion. That the matter of finance was of importance to both parties is agreed to be the case. The plaintiff and Mr Peter Dwyer had been investigating it for some considerable time. All parties knew that considerable capital investment would be required to finance the intended project. This was not a case of a straightforward sale of property from vendor to purchaser, where the law would not import or imply, in the absence of express reference, any need for financial provision. The purchaser would be assumed to have the means. The agreement in this case was for the formation of a company. The parties did not address the question of the capital of that company at all. Most crucially, they agreed in the terms which the plaintiff was so careful to formalise that this issue would be discussed at a later date.
28. This provision was, indisputably, an important part of any arrangements between the parties for the purchase and development of lands. In effect, the development could not take place without finance. The parties may well have reached an agreement in principle to enter into a joint venture and on their respective shares. However, they remained in negotiation so long as they had not agreed on finance. Hence, there was no concluded contract. I would allow the appeal and dismiss the plaintiff’s claim.
29. There are a number of alternative pleas in the statement of claim. In my view, these are all subsidiary to the central question of whether there was a concluded agreement. In particular, the claim based on negligent misstatement is, in reality, a restatement of the contract claim. It is not a genuine claim in negligence for misstatement of fact. It relates to the future.
30. For these reasons, I would allow the appeal. I would dismiss the plaintiff’s claim in its entirety.
Bank of Scotland PLC -v- Mansfield
[2011] IEHC 463
JUDGMENT of Mr. Justice Kelly delivered on the 21st day of December, 2011
The Claim
1. The plaintiff (the Bank) seeks summary judgment against the defendant in the sum of €206,396,577.74 and interest.
2. The claim is made on foot of guarantees given by the defendant to the Bank in respect of the liabilities of three companies of which the defendant was a director or shareholder.
3. The companies in question were HSS, Jeffel and Parke.
4. The defendant does not deny that the funds in question were advanced to those companies nor does he deny that the companies have defaulted in repaying the sums to the Bank.
5. No issue arises as to the validity of the guarantees executed by the defendant in favour of the Bank, nor on the demand made on the defendant to honour the guarantees. In each case, the guarantees were “all sums due” and the amount claimed in respect of each of them is as follows:-
under the HSS guarantee the sum of €151,564,739.24;
under the Jeffel guarantee the sum of €41,222,647.70; and
under the Parke guarantee the sum of €13,609,191.30.
6. As no issue was raised by the defendant touching upon the liability of the three companies in question and their failure to discharge it or on the validity of the guarantees or the lawfulness of the demands made on foot of them, prima facie he is obliged to discharge the amounts due to the Bank.
7. On this application for summary judgment, however, he contends that he has a defence to this claim and I must now examine that proposition.
The Test
8. The test to be applied by this Court on an application for summary judgment is well established. It has been stated and restated by the Supreme Court and this Court on many occasions in particular in recent times where applications for summary judgment, very often in respect of large amounts, are a commonplace.
9. The most recent statement from the Supreme Court on the topic is to be found in the judgment of Denham J. (as she then was) in Danske Bank A/S trading as National Irish Bank v. Durkan New Homes & Ors [2010] IESC 22.
10. Having recited the provisions of O. 37, r. 7 of the Rules of the Superior Courts that judge when on as follows:-
“Several cases were opened before the Court which have addressed this jurisdiction. These included Bank of Ireland v. Educational Building Society [1999] 1 IR 220 where Murphy J. emphasised that it was appropriate to remit a matter for plenary hearing to determine an issue which is primarily one of law where a defendant identified issues of fact which required to be explored and clarified before the issues of law could be dealt with properly. He stated at p.231:-
‘Even if the position was otherwise, once the learned High Court Judge was satisfied that the defendant had ‘a real or bona fide defence’, whether based on fact or on law, he was bound to afford them an opportunity of having the issued tried in the appropriate manner.’
In Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, Hardiman J. reviewed Irish cases and concluded at p.623:-
‘In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?’”
11. At para. 22 of her judgment Denham J. stated as follows:-
“As stated in Banque de Paris v. de Naray [1984] Lloyd’s Rep. 21, by Acker L.J. at p.23:-
‘It is of course trite law that O. 14 proceedings are not decided by weighing the two affidavits. It is also trite that the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendants having a real or bona fide defence.’”
12. In Bank of Ireland v. Walsh [2009] IEHC 220, Finlay Geoghegan J. set out the principles applicable to the determination of an application such as this by reference to a decision of McKechnie J. in Harrisgrange Limited v. Duncan [2003] 4 IR 1. It is not necessary for me to repeat yet again the twelve considerations which he set out in that judgment but I do call attention to one of them where he said:-
“the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’, which latter phrase I would take as having as against the former an equivalence of both meaning and result.”
13. Finlay Geoghegan J. said in relation to this:-
“As appears from sub-paragraph (vii) above, the threshold is one of an arguable defence and is, in relative terms, a low threshold. However, in making that determination, the Court should have regard to whether what the defendant is saying is mere assertion and whether the proposed defence is credible in the sense explained by Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607.”
14. In view of the nature of the defence which is sought to be relied upon here, I ought to address the principles applicable where a defence by way of set off or counterclaim is sought to be advanced. This whole question was considered by Clarke J. in Moohan & Ors v. S&R Motors (Donegal) Limited [2008] 3 IR 650. He summarised the principles applicable as follows:-
“4.1 The test to be applied in deciding whether a party should be given leave to defend a summary judgment application was most recently addressed by the Supreme Court in Aer Rianta Cpt v. Ryanair Limited, [2001] 4 I.R.607. In that case the court indicated that the test is as to whether, looking at the whole situation, the defendant has satisfied the court that there is a fair and reasonable probability that he has a real and bona fide defence. As pointed out by Hardiman J., the test does not mean that the party must establish that he has a defence which will probably succeed; rather he must establish that it is probable that he has a bona fide defence.
4.2 Where the nature of the defence put forward amounts to a form of cross claim slightly different considerations may apply. In those circumstances the court has a wider discretion. Where the defendant does not establish a bona fide defence to the claim as such, but maintains that he has a cross claim against the plaintiff, then the first question which needs to be determined is as to whether that cross claim would give rise to a defence in equity to the proceedings. It is clear from Prendergast v. Biddle (Unreported, Supreme Court, 21st July, 1957) that the test as to whether a cross claim gives rise to a defence in equity, depends on whether the cross claim stems from the same set of facts (such as the same contract) as gives rise to the primary claim. If it does, then an equitable set off is available so that the debt arising on the claim will be disallowed to the extent that the cross claim may be made out.
4.3 On the other hand if the cross claim arises from some independent set of circumstances then the claim (unless it can be defended on separate grounds) will have to be allowed, but the defendant may be able to establish a counter claim in due course, which may in whole or in part, be set against the claim. What the position is to be in the intervening period creates a difficulty as explained by Kingsmill Moore J., in Prendergast v. Biddle in the following terms at p. 24:-
‘On the one hand it may be asked, why a plaintiff with a proved and perhaps uncontested claim should wait for a judgment or execution of judgment on this claim because the defendant asserts a plausible but unproved and contested counter claim. On the other hand it may equally be asked why a defendant should be required to pay the plaintiffs demand when he asserts and may be able to prove that the plaintiff owes him a larger amount’.
4.4 The courts’ discretion is to be exercised on the basis of the principles set out by Kingsmill Moore J. later in the course of the same judgment in the following terms:-
‘It seems to me that a judge in exercising his discretion may take into account the apparent strength of the counter claim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims, the nature of their claims and also the financial position of the parties. If, for instance, the defendant could show that the plaintiff was in embarrassed circumstances it might be considered a reason why the plaintiff should not be allowed to get judgment, or execute judgment on his claim, until after the counter claim had been heard, for the plaintiff having received payment may use the monies to pay his debts or otherwise dissipate it so the judgment on a counter claim would be fruitless. I mentioned earlier some of the factors which a judge before whom the application comes may have to take into consideration in the exercise of this discretion’.
4.5 It seems to me that it also follows that a court in determining whether a set off in equity may be available, so as to provide a defence to the claim itself, also has to have regard to the fact that the set off is equitable in nature and, it follows, a defendant seeking to assert such a set off must himself do equity
4.6 On that basis the overall approach to a case such as this (involving, as it does, a cross claim) seems to me to be the following:-
(a) It is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross claim to amount to a defence as such, it must arguably give rise to a set off in equity, and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendants case, it would not be inequitable to allow the asserted set off;
(b) If, and to the extent that, a prima facie case for such a set off arises the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);
(c) If the cross claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle.”
The Defence
15. The principal affidavit which is relied upon by the defendant is sworn by Richard Mahon, who is the former financial controller, “of the group of companies referred to as the Mansfield Group and for the Mansfield family”.
16. At para. 3 of his affidavit sworn on 21st October, 2011, he set out the defence as follows:
“In simple terms, the plaintiff agreed, in early 2008, to advance substantial funding to the Mansfield Group for the completion of a very substantial new Convention Centre at Citywest, which had full planning permission from the local authority. In anticipation of that funding, the Mansfield Group committed its own funds towards the construction of the new Convention Centre. Some €10m was spent on the Convention Centre from a combination of Mansfield Group cashflows, monies personally borrowed by the Mansfield family and from the sale of Group assets. Subsequently, the plaintiff reneged on that agreement, causing considerable delays in the construction, and significant difficulties with both cashflow and working capital for the Mansfield Group. Had the plaintiff complied with its commitment and agreement to provide these funds, the Mansfield Group would not have collapsed in the manner in which it did, and the plaintiff would not now be maintaining these proceedings against the defendant.”
17. Paragraph 8 of the same affidavit fleshes the matter out in the following way:
“I say that in early August 2008, the defendant and his son, Jimmy Mansfield, travelled to the offices of Bank of Scotland (Ireland) Ltd., at Stephen’s Green, where we (sic) met Mark Duffy and the Bank of Scotland (Ireland) Ltd. management team. At that meeting, the defendant sought funding for the construction of the Convention Centre and the plaintiff’s Mark Duffy unequivocally agreed to provide such funding and assured the defendant this would be given. The agreement reached with Bank of Scotland (Ireland) Ltd. was that finance of €17-€20m would be made available to the hotel for the construction of the new Convention Centre. On foot of this agreement, the defendant was advised to go ahead and start construction as finance was forthcoming.”
18. At para. 4 of his affidavit sworn on 9th November, 2011, the defendant says, in respect of this topic, as follows:
“I say and believe that I, along with my son, Jimmy, attended at the offices of Bank of Scotland (Ireland) Ltd. in early August 2008. The purpose of this attendance was to meet with the then senior management team of the plaintiff that was dealing with the Mansfield Group, namely, Mr. Niall King, Ms. Niamh Cuneen and Mr. Simon English, to discuss the proposed Convention Centre and the financing thereof. On presenting ourselves at the plaintiff’s offices, we met by chance the then CEO of the plaintiff, namely, Mr. Mark Duffy, in the covered car park of the plaintiff. He enquired as to the purpose of our attendance and enquired as to how things were going for the Mansfield Group. I outlined, in broad terms, the matter to hand. We proceeded to meet the management team, as arranged, and Mr. Duffy attended the meeting from its beginning. We discussed in detail our plans and financing requirement. At this stage, we advised that we would require €17-€20m to fund the new Convention Centre build. Mr. Duffy stated that this would not be a problem and that the required financing would be made available. He addressed the management team and requested that they speedily conclude matters to enable the financing to be released. In this regard, he advised that he would give a personal letter to expedite matters. As the meeting was breaking up, Mr. Duffy commented that we could go ahead and start the build as financing would be put in place.”
19. An affidavit was also sworn by James Mansfield Jnr. In his affidavit, he says, on this topic:
“I confirm that in early August 2008, the defendant and I travelled to the offices of Bank of Scotland (Ireland) Ltd., at St. Stephen’s Green, where we met Mark Duffy and the Bank of Scotland (Ireland) Ltd. management team. I confirm that we sought funding for the construction of the Convention Centre and the plaintiff’s Mark Duffy unequivocally agreed to provide such funding and assured us that this would be given. The agreement reached with Bank of Scotland (Ireland) Ltd. was that finance of €17-€20m would be made available to the hotel for the construction of the new Convention Centre. On foot of this agreement, we were advised to go ahead and start construction as finance was forthcoming.”
20. These are the facts which are relied upon to assert the existence of a contractual obligation on the part of the Bank to advance monies of between €17-€20m to some element of what is described as the Mansfield Group. There is no legal entity known as the Mansfield Group. The argument goes that this contractual obligation was breached by the Bank, thereby giving rise to a counterclaim by the Mansfield Group or some element of it, which would excuse in whole or in part the defendant’s obligations as guarantor.
21. The Bank contends that even if one takes the defendant’s affidavits at their height and ignores all of the Bank’s evidence, the facts relied upon by the defendant could not give rise to a contractual obligation on the part of the Bank.
22. If the Bank is wrong in that assertion, the terms of such an alleged contract are, it is said, undermined by such documents as were generated (some of them by the defendant), so as to make this line of defence unstateable.
Is there evidence of a Contract?
23. A contract for a loan of money is defined in Chitty (29th Ed.), Vol. 2, paras. 38-223, as being, “a contract whereby one person lends or agrees to lend a sum of money to another, in consideration of a promise express or implied to repay that sum on demand, or at a fixed, determinable future time, or conditionally upon an event which is bound to happen, with or without interest”.
24. It is a basic principle of contract law that an agreement which is so vague or uncertain may not give rise to binding obligations (Chitty, 29th Ed. Vol. 1, paras. 2-136.
25. As is clear from the authorities which I have already cited, mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend. I am obliged to look at the whole situation and decide whether the defendant has satisfied me that there is a fair or reasonable probability of him having a real or bona fide defence.
26. Taking the defendant’s averments concerning this alleged contract as they stand, a number of questions fall to be answered.
27. First, what is the amount of money that the Bank was allegedly obliged to provide on foot of this loan contract? It is, apparently, between €17m and €20 million. The difference of €3m between the lower and upper limits of this alleged contractually binding obligation is a very substantial sum.
28. Second, it is to be noted that there are no terms in the alleged contract which address the circumstances in which the loan is to become repayable.
29. Third, the period or term of the loan is not addressed.
30. Fourth, the interest to be payable on the loan is not mentioned.
31. Fifth, the provision of security for a loan of such magnitude is not addressed.
32. Sixth, the entity to whom the loan is to be made is not identified.
33. These shortcomings are so many and so serious as to render the so called contract or agreement devoid of legal effect. The alleged contract is on its own terms incapable of amounting to a binding legal agreement. Thus, the whole foundation upon which the defendant’s counterclaim is based is fundamentally flawed.
34. On this basis alone, I have come to the conclusion that the defendant has failed to demonstrate an arguable case or triable issue sufficient to warrant the plaintiff’s application being refused.
The Contracting Party
35. Lest I am wrong in the conclusion which I have arrived at concerning the non-existence of the alleged contract, I proceed to consider some other aspects of the case.
36. The absence of an identified party with whom the Bank allegedly contracted was fairly acknowledged by counsel for the defendant as a difficulty which he faced in trying to assert the existence of a binding contract. When asked to identify the entity to whom the Bank allegedly owed this contractual obligation, he opted for HSS. He did so by reference to what he described as the Bank’s own internal documentation.
37. If, therefore, there was a contractual obligation owed to HSS, it means that there was none owed to the other two entities namely Jeffel and Parke who were guaranteed by the defendant. It follows, therefore, that any counterclaim which might exist is at the suit of HSS. Thus there is no reason why the Bank should not have judgment in respect of those liabilities of Jeffel and Parke guaranteed by the defendant.
38. In order to identify HSS as the party to whom the contractual obligation was owed, counsel referred to the Bank’s internal documents. There is no evidence in those documents that I can see evidencing support for the contract contended for by the defendant. On the contrary, there is evidence emanating from HSS itself which is totally inconsistent with the alleged contractual obligation of the plaintiff to it.
39. On 7th May, 2009, HSS wrote to Ms. Avril Deasy of the Bank. In the course of the letter the following was said:-
“I acknowledge the statement in your letter of 29th April last that interest payments and fees totalling €6,342,732.73 are currently overdue in respect of loan facilities to HSS, Jeffel and Parke Associates. I was nonetheless of the opinion that we had previously agreed that in December 2008 the Bank approved interest capitalisation facilities of €10,475,000 in order to meet 75% of the interest projected to fall due on the referenced accounts to 01 December 2009 and that some items of security in relation to same remained unsatisfied at the time of our meeting on Tuesday last.
You will recall that I undertook to have Seán deal immediately with this matter. I am pleased to inform you that a meeting between our solicitors and the solicitors for Irish Nationwide has been confirmed for Monday 11th May next at 11am. I understand that the purposes of the meeting is to conclude the relevant documentation thereby ensuring your securities are in place as agreed.
In respect of our request for you to consider further funding of €5m towards completion of the new Conference Centre at City West for which you require a full valuation of the secured assets (at City West, Finnstown and Palmerstown demesne) to be carried out. I hereby inform you of my agreement to same and I wish to confirm that Seán Whelan and Richard Mahon spent a considerable amount of the time on site yesterday with the CBRE valuers Olivia Farrell and Annemarie O’Byrne to facilitate this evaluation. CBRE confirmed to me before departing City West that their work will be completed in the next ten days or so. (My emphasis)
In your letter of 29th April and our previous meeting you requested a comprehensive trading and operational review of the hotel operations at City West and Finnstown. Seán Whelan has furnished a detail pack re this matter to you and I am confident that when you have had the opportunity of studying same you will agree with me that the need for me to spend in the region of €37,500 plus VAT for BDO Simpson Xavier to complete this task for the Bank is not necessary at this point. Should you wish to pass on our documentation to BDO for their study is of course your prerogative and acceptable to me on the clear assumption of strict confidentiality and on the assumption that no cost will ensue to my companies for any such study.
I very much welcomed to the opportunity of meeting with you and your colleagues yesterday. I would also welcome the opportunity of hosting a visit of your Chief Executive Mr. Joe Higgins to City West and our other facilities in the near future. Perhaps you might revert to me with a suggested date for his visit.
In conclusion I outline a summary of my proposals and request to the Bank at this time.
(1) I would appreciate if it can again look at reducing the current interest rates charged to our accounts.
(2) I would request that we defer interest payments until 1st January, 2010 as previously agreed.
(3) I would propose paying 50% of interest due on a monthly basis from January 2010 to June 2010 inclusive by means of monthly payments.
(4) I would propose making full monthly interest payments from 1st July, 2010 onwards.
(5) I would also propose that all proceeds from any asset disposals within the group would be lodged with Bank of Scotland against the principles (sic) outstanding on loan accounts at the Bank in moving forward.
(6) I would also request that the Bank confirm the sanction of €5m to complete the conference centre at City West.
I look forward to your favourable response.
Yours sincerely
Jim Mansfield.”
40. That letter is completely at variance with the contract which is alleged to exist for the advancing of €17 – €20m. Far from having a firm contract with the Bank for €17 – €20m to be advanced, it demonstrates that in May 2009, Mr. Mansfield on behalf of HSS, was requesting sanction of a €5m loan to complete the Conference Centre at City West.
41. This letter is consistent with what appears in both internal bank documents and correspondence from the Bank to HSS and/or Mr. Mansfield all of which is demonstrative of nothing more than a request for €5m to be advanced. It was a request which was never acceded to by the Bank.
42. The defendant’s own correspondence is completely at odds with the contract now sought to be advanced. Counsel for the defendant fairly accepted that throughout all of the correspondence exchanged prior to the action, the defendant never alleged the existence of the contract he now asserts. Indeed, this line of defence was advanced for the first time on the application to transfer this litigation to the Commercial List when counsel outlined it.
43. It is easy to understand why the line of defence now relied upon was not advanced prior to then because the correspondence emanating from HSS is completely inconsistent with the case which is now sought to be made.
44. I am, therefore, satisfied that the affidavits of the defendants contain nothing more than a mere assertion of the existence of a counterclaim by way of defence. On examination that assertion is found to be without substance.
45. Given my findings to date in this judgment it is not necessary to consider a number of other legal arguments made by the Bank to demonstrate the non-existence of any arguable defence on the part of the defendant.
Counterclaim
46. If I am wrong in all that I have dealt with to date and there is some form of enforceable agreement, it is clear that it justiciable only as between HSS and the Bank. Such a claim cannot give rise to a defence on the part of the defendant to the Bank’s claim whether by way of equitable set off or otherwise.
47. In Donnelly on The Law of Banks and Credit Institutions (2000) the following is to be found under the heading “Right to Raise the Principal’s Defences”:-
“A guarantor to whom a demand for payment has been made is entitled to raise any defences which would have been available to the principal debtor at the time the demand was made. These defences include the rights of counterclaim and set off acquired by the principal debtor against the creditor. However, this right does not extend to allow the guarantor to claim unliquidated damages, either by way of set off or a counterclaim, which arise from an action for breach of contract or any other unliquidated claim between the creditor and the principal debtor. This means that the guarantor may not rely on any action which the principal debtor has not yet taken against the creditor. The policy behind this restriction is that permitting a guarantor to rely on the principal debtor’s defences in this situation would limit the ways in which the principal debtor could take his or her own action against the creditor. However, this limitation can be overcome by the guarantor joining the principal debtor to an action brought by the creditor against the guarantor and in this way forcing the principal debtor to rely on his or her defences.”
48. It is thus clear that the defendant cannot seek to rely on a cross claim which any of the principal debtor companies may have against the Bank arising out of a transaction or transactions entirely separate and distinct from the ones in suit. The thrust of the defendant’s case is that HSS has an unliquidated claim for damages against the plaintiff. Such a claim cannot be invoked by the defendant in these proceedings.
49. As it is clear that such counterclaim as may exist will be at the suit of HSS and arises from an entirely different transaction to the one in suit, the dictum of Clarke J. in Moohan’s case applies where he said:-
“If the cross claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle.”
50. Applying those principles, the counterclaim which is mooted in these proceedings (such as it is) is not one which would persuade me that any stay should be placed upon the plaintiff’s entitlement to execute and register the judgment to which it is entitled.
51. In this regard I bear in mind, amongst other things, the fact that the terms of the guarantees in suit constituted the defendant not merely a guarantor but a principal obligor in respect of the debt and the implausibility of the defence case made by him.
Disposal
52. It follows that the plaintiff is entitled to judgment for the full amount claimed with no restriction being placed upon the execution of that judgment by virtue of the alleged defence by way of counterclaim.