Strada Invs Ltd v Temora Invs Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Murphy, J.) |
| Judgment Date | 22 October 1996 |
| Date | 22 October 1996 |
| Court | Grand Court (Cayman Islands) |
(Murphy, J.)
P.A. Broadhurst for the plaintiff;
G.A. Locke for the defendants.
(1) -Branca v. Cobarro, [1947] K.B. 854; [1947] 2 All E.R. 101.
(2) -Clifton v. Palumbo, [1944] 2 All E.R. 497; (1944), 88 Sol. Jo. 437.
(3) -Cohen v. Nessdale Ltd., [1982] 2 All E.R. 97.
(4) -Elias v. George Sahely & Co. (Barbados) Ltd., [1983] 1 A.C. 646; [1982] 3 All E.R. 801.
(5) -Gibson v. Manchester City Council, [1978] 1 W.L.R. 520; [1978] 2 All E.R. 583; on appeal, [1979] 1 W.L.R. 294; [1979] 1 All E.R 972, dicta of Lord Denning, M.R. not followed.
(6) -Gray v. SmithELR(1890), 43 Ch. D. 208.
(7) -Hussey v. Horne-PayneELR(1879), 4 App. Cas. 311, dicta of Lord Selborne applied.
(8) -Jarrett v. HunterELR(1887), 34 Ch. D. 182.
(9) -Lovesy v. Palmer, [1916] 2 Ch. 233.
(10) -Ridgway v. Wharton(1857), 6 H.L. Cas. 238; 10 E.R. 1287, dicta of Lord Cranworth, L.C. applied.
(11) -Timmins v. Moreland Street Property Co. Ltd., [1958] Ch. 110; [1957] 3 All E.R. 265, dicta of Jenkins, L.J. applied.
(12) -Tiverton Estates Ltd. v. Wearwell Ltd., [1975] Ch. 146; [1974] 1 All E.R. 209.
Legislation construed:
Registered Land Law (1995 Revision) (Law 21 of 1971, revised 1995), s.37: The relevant terms of this section are set out at page 258, lines 19–40.
Contract-offer and acceptance-consensus ad idem-signed accept-ance of offer may be insufficient agreement in business context if offer contemplates future contractual document and omits vital com-mer-cial terms-sale of land normally concluded by exchange of contracts only
Land law-contract of sale-memorandum or note in writing-signed document referring to terms in earlier draft may satisfy Registered Land Law (1995 Revision), s.37(2)-parties to be identified by name in either document
The plaintiff sought a declaration that it had made a valid contract with the defendants for the purchase of some land, and damages for breach of that contract.
The plaintiff, following preliminary discussions through an agent as to some land belonging to the defendants which it wished to buy for development, sent the defendants a letter setting out the terms verbally agreed so far. The document, which identified the plaintiff only as ‘our clients’ and which was not seen by the plaintiff”s attorney, contained brief details of payment by an initial down-payment, the balance of which was to be paid over a suggested period with interest which would commence ‘immediately the contract is signed and the down-payment made.’ It was signed by each of the defendants and returned.
The first and third defendants” attorney then drew up a draft contract based on the letter including additional terms such as security for the deferred payment, and leaving blank spaces for other terms to be negotiated. In subsequent months, he and the plaintiff”s attorney incorporated amendments into the draft by correspondence marked ‘subject to contract.’ Later, when the first and third defendants had already signed the final draft of the contract and the second defendant”s attorney, under a power of attorney granted by the company”s director, had signed other collateral documents and raised a number of queries on the contract, the second defendant decided not to proceed with the sale and revoked his authority.
None of the terms contained in the original letter of proposal was complied with.
The plaintiff submitted that (a) the defendants had by signing the original letter of proposal, accepted its offer to purchase the land, giving rise to a contract which contained all the terms necessary for its own enforcement and the validity of which was unaffected by later drafts and amendments thereto; (b) the letter was also a sufficient written memorandum of the terms agreed and so was capable of enforcement under the Registered Land Law (1995 Revision), s.37(2); (c) alternatively, that section was satisfied by reference to a combination of correspondence negotiating further terms and amendments and the final contract document which referred back to the draft contract, or, by implication, to the terms agreed in the letter; and (d) in either case, the second defendant”s failure to sign the final draft of the contract was remedied by its attorney”s signature on final amendments, or by its director”s resolving to sell the company”s land and granting a power of attorney to allow this.
The defendants submitted in reply that (a) the original letter could be regarded as no more than an indication of their willingness to sell, since its wording implied it was subject to contract, and it left too many important financial issues unresolved to be workable as a commercial agreement to proceed with the sale; (b) even if agreement had been reached by the letter, its terms were too uncertain to make the agreement enforceable under the Registered Land Law (1995 Revision), s.37(2). In particular, by referring to the plaintiff only as ‘our clients’ it did not sufficiently identify the purchaser, nor was there any previous document connected with it by which the plaintiff could be identified; (c) nor could the plaintiff, by reference to the letter or the draft contract read with other correspondence, point to a document signed by the defendants which referred to another containing the agreed terms which would satisfy the requirements of s.37(2); and (d) the final act of showing agreement could only be an exchange of contracts, rather than the piecemeal approval of individual terms, and neither the second defendant”s attorney”s approving final amendments, nor its director”s authorizing him to conclude the sale sufficed to perfect the agreement.
Held, dismissing the suit:
(1) The signed letter of proposal did not constitute a firm agreement to sell the land, but was rather only the first stage in negotiations between the parties. Its wording not only clearly contemplated a future contract but it omitted to address several issues vital to a business contract-some of which were indeed dealt with in later ‘subject to contract’ negotiations between the parties (page 255, line 39 – page 256, line 4; page 256, lines 9–21; page 256, line 36 – page 257, line 5).
(2) By reason of this uncertainty, even if the letter did represent an agreement, that agreement was unenforceable since there was no sufficient memorandum of the transaction to satisfy the requirements of the Registered Land Law (1995 Revision), s.37(2). In particular, the
document did not identify the parties by name but merely as ‘our clients,’ and since the defendants were at this time unaware of the purchaser”s identity, there was no pre-existing connected document which could rectify this deficiency (page 259, lines 6–21; lines 28–31; page 260, lines 6–12).
(3) Nor could compliance with s.37(2) be achieved by reading the letter together with later drafts and lawyers” correspondence, since the parties” negotiations were for the most part ‘subject to contract’ and related to the terms set out in the draft contract rather than the letter, which only the drafting attorney had seen. These later documents alone also did not evidence an agreement to sell in the absence of the second defendant”s signature of the contract, since in the context of a bargain between sophisticated businessmen, final agreement was normally evidenced only by exchange of contracts and by no other means (page 253, line 45 – page 254, line 6; page 261, lines 5–41; page 262, lines 3–20).
(4) Accordingly, there was no enforceable contract between the parties, and the plaintiff”s suit would be dismissed (page 262, lines 1–2).
| MURPHY J.: This is an action for certain declaratory relief and | |
| 5 | damages as a result of the breach of an alleged agreement to sell two |
| parcels of land to the plaintiff. | |
| On a consent application at the outset of trial, I ordered that there be a | |
| split trial. As a result, the evidence at trial dealt only with liability issues. | |
| In a nutshell, the legal issues are whether the parties intended to be bound | |
| 10 | by a document dated May 18th, 1994 (‘the May 18th document’), |
| whether the May 18th document together with other documentation relied | |
| upon by the plaintiff satisfied the test for a memorandum in writing under | |
| s.37(2) of the Registered Land Law (1995 Revision) and whether a | |
| binding contract was formed by a combination of other documents alone. | |
| 15 | |
| The facts | |
| At trial, I heard the evidence of the following witnesses: two of the | |
| principals of the plaintiff, Gareth Forster and William Peguero; an estate | |
| agent, Tony Thompson; the plaintiff”s attorney in this transaction, Waide | |
| 20 | DaCosta; a principal of the third defendant, Coast Hill Development |
| International Co. Ltd. (‘Coast Hill’), Herbert Peintner; the attorney for | |
| the first and third defendants, John Barry Smith; and the attorney for the | |
| second defendant, James Frank Banks. I also admitted into evidence brief | |
| witness statements of the other two principals of the defendants. As is | |
| 25 | common in cases of this kind, the bulk of the evidence consisted of the |
| documents relating to the transaction. It can fairly be said that there were | |
| relatively few, if any, significant factual disputes. | |
| The property in question (‘the property’) consists of two parcels of | |
| land known as ‘Prospect, Block 23C, Parcels 43 and 94.’ At all material | |
| 30 | times the property was owned by the defendants. Adelphi Realty Co. Ltd. |
| (‘Adelphi’) had a 60% interest, and the other two defendants had a 20% | |
| interest each. | |
| Throughout this transaction, it appears that Quality Realty Ltd. was | |
| acting for the principals of the plaintiff, Forster and Peguero, as well as | |
| 35 | for the defendants. A representative of Quality Realty Ltd. had made |
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