REF//2011/0238

 

THE ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY

LAND REGISTRATION ACT 2002

 

IN THE MATTER OF A

REFERENCE FROM HM LAND REGISTRY

 

 

BETWEEN

 

(1)   MICHAEL TERENCE WHEATLEY

(2)   SUSAN HAYWOOD SMITH

(as Executors of Henry Thomas Cadbury-Brown)

Applicants

and

 

 

 

HARRIET KING

 

 

Respondent

 

Property: 3 and 9 Church Walk, Aldeburgh

Title Number SK243185

 

Before: Ann McAllister, sitting as Deputy Adjudicator

Victory House, London

15 November 2011

 

Representation: Mr Nicholas Caddick QC instructed by Messrs Nicholsons appeared for the Applicant; Mr John Sharples instructed by Humphries Kirk appeared for the Respondent

 

Exercise of options – whether defect waived – ‘The Kanchenjunga’ [1990] Lloyds Law Reports 391 – Peyman v Lanjani [1985] 1 Ch 457, HIH Casualty & General Insurance Ltd v AXA Corporate Solutions [2002] EWCA Civ 153, Forrest & Sons Ltd v CGU Insurance Plc [2006] Lloyds Rep 113, Persimmon Homes v Hall Aggregates [2009] EWCA, Thorner v Major [2009] 3 AER 945.

 

DECISION

 

 

 

Introduction

 

1.                    The Applicants are the executors of Henry Thomas Cadbury-Brown who died on 9 July 2009. By an application dated 8 December 2010 the Applicants sought to cancel two unilateral notices entered on the register of 3 and 9 Church Walk, Aldeburgh dated 2 April 2004, in respect of two option agreements (‘the Options’) made between Mr Cadbury-Brown as the owner of the property and the Respondent on 19 March 2009.

 

2.                    The Respondent objected to the removal of the notices and the matter was referred to the Adjudicator on 8 March 2011. I heard the case on 15 November 2011. By letter dated 10 November 2011 the Respondent stated that she no longer wished to pursue one of the two Options, and accordingly and in any event I will order the Chief Land Registrar to cancel the unilateral notice relating to the building plot on the Property (that is to say, the Option affecting the land tinted pink on the title plan, which I will refer to as ‘the Building Plot’).

 

3.                    For the reasons set out below I will order the Chief Land Registrar to cancel the application to cancel the unilateral notice relating to the Option affecting the main property (referred to as 3 Church Walk in the relevant Option). For ease of reference I will refer to that part of the registered title as ‘the Main Property’.

 

4.                    The effect of this decision is that the Respondent validly exercised the Option in respect of the Main Property, and, (subject only to resolving the correct calculation of the Final Purchase Price , an issue with which I am not concerned) is entitled to enforce the Option.

 

The issue in the case

 

5.                    There is one issue between the parties which can be stated broadly as follows: is the Respondent entitled to enforce the Option relating to the Main Property, notwithstanding the fact that she failed to comply with the terms relating to the payment of the deposit, by virtue of the doctrine of waiver or estoppel?

 

The Options

 

6.                    The Options are identical in all material respects, save for the definition of the land and the price. Each is exercisable independently of the other. As the dispute is now limited to the Main Property, I will consider that option only. The events which occurred subsequently, however, in relation to the purported exercise of both Options, are relevant to the issues in this case.

 

7.                    The relevant clauses of the Option are Clauses 3 and 4, together with the relevant definitions in Clause 1. Clause 3 provides as follows:

 

3 Exercise of the Option

 

3.1 The Option shall be exercisable by the Buyer serving on the Seller’s Solicitors at any time during the Option Period notice in writing in the form set out in the Second Schedule accompanied by or preceded by payment of the deposit in accordance with Clause 4 together with a clear calculation of the Final Purchase Price to include copies of the indicies used for the purposes of the calculation

3.2 On the valid exercise of the Option the Seller’s personal representative shall sell and the Buyer shall buy the Property at the Purchase Price on the terms of this Agreement

3.3 If the deposit has not been paid in accordance with Clause 3.1 the purported exercise of the Option is ineffective

3.4 If the Seller’s personal representatives do not agree the calculation of the Final Purchase Price they should so inform the Buyer within five working days of the exercise of the Option and the parties shall then attempt to agree the calculation and if they fail to agree within a further ten working days the dispute as to the Final Purchase Price shall be referred to the Expert to make a calculation binding on both parties and at their joint expense and the Expert will be instructed to act as speedily as possible and notify the parties hereto as to the his determination in writing

 

4 Deposit

 

The Buyer shall on or before the service of the Option Notice pay a deposit of 15% of the Initial Purchase Price to the Seller’s Solicitors as agents for the Sellers but in the event that completion is delayed beyond the end of the fifth month following the death of the Seller as a consequence of a Grant of Probate not being obtained by that date, the Seller’s Personal Representatives shall pay interest on the deposit at 2% above the Bank of England base rate from that date until the Completion Date.

 

1 Definitions and Interpretations

 

1.3 ‘the Completion Date’ shall be twenty working days following the exercise of the option or if later twenty working days after the date of service to the Buyer of a notice from the personal representatives of the Seller confirming receipt of a Grant of Probate to the Estate of the Seller but if the calculation of the Final Purchase Price has to be referred to the Expert and by such later date the Expert has not notified his decision in accordance with Clause 3.4 then completion shall take place on the tenth working day after the Expert has so notified his decision to the Seller’s personal representatives and to the Buyer

1.7‘the Final Purchase Price’ means the Initial Purchase Price adjusted in accordance with any variation in the HBOS house price index for the region of East Anglia between 26 March 2008 and the publication of the most recent revision of the Index prior to the date of service of the Option Notice and in the event that the HBOS House price index is no longer published at the date of service of the Option Notice the index published by its successors shall be used instead, and if no such index exists at the relevant time either party may apply to the President for the time being of the Royal Institution of Chartered Surveyors fo an appropriate alternative index to be substituted for such index

1.8. ‘the Initial Purchase Price’ means the sum of £437,500.00

1.10 ‘the Option Period’ means the period commencing on the death of the Seller and expiring 4 months thereafter

8.                    The following points therefore arise. The Option was to be exercised by 9 November 2009. The exercise of the Option would be ineffective if the deposit was not paid in accordance with the provisions of the agreement. The deposit was 15% of the ‘Initial Purchase Price’ (itself defined as £437,500.00) and not 15% of the ‘Final Purchase Price’. The calculation of the Final Purchase Price was to be made by the application of a formula by reference to the Initial Purchase Price and the HBOS house price index.

 

9.                    The deposit due was therefore £63,625 for the Main Property. This sum was to be paid together with a ‘clear calculation of the Final Purchase Price’. As will appear below, there are two versions of the HBOS house price index, one seasonally adjusted and one not. Disagreement on which version to be used was the genesis for the dispute.

 

10.                As I have said, the provisions relating to the Building Plot Option were in the same terms, save for the definition of the land and the Initial Purchase Price, which was stated to be £245,000.

 

The exercise of the Options and subsequent events

11.                By letter dated 8 September 2009 the Respondent purported to exercise the Option in relation to the Main Property. The letter was written to Robert Nicholson, of Nicholson Solicitors. The letter is headed Option Agreement: 3 Church Walk, Aldeburgh and reads (so far as relevant) as follows

‘I enclose the Form of Option Notice for the main property under the Second Schedule of the Agreement dated 1 April 2009 [this should have read 1 March 2009].

I have spoken to HBOS who have confirmed the relevant house price indices for East Anglia for the end of March 2008 and end of June 2009. These are:

 

2008 Quarter 1: 641.4

2009 Quarter 2: 477.2

 

The adjustment in the values agreed would therefore be:

2008 Quarter 1: £437,500

2009 Quarter 2: £325,498.91

The deposit of 15% would therefore be £48,825.00

 

I have arranged for a CHAPS payment for the sum of £48,825.00 to be transferred to Nicholsons Client Account

 

12.                It is therefore apparent that the Respondent had calculated 15% of the Final Purchase Price (as she believed it to be) and not 15% of the Initial Purchase Price. The deposit should have been £65,625.00. There was therefore a shortfall of £16,800. If the market had moved the other way, and the indices for East Anglia had shown an increase in house prices, the Respondent would have paid too much by way of deposit, and not too little.

 

13.                Before sending the letter and the accompanying notice, she had sent these to her solicitor, Robin Rowland, of Humphries Kirk, who had approved the letter and the notice. He had been advising her at all material times on the Options (drawn up by the Applicants’ solicitors, Nicholsons).

 

14.                I heard evidence from both the Respondent and Mr Rowland. The Respondent had known Mr Cadbury-Brown for many years: he had studied with her mother in the 1930s. The idea that she should have an option to buy his house was one which went some time , at least to 2001.

 

15.                It is clear that both Mr Rowland and the Respondent made a mistake in calculating the deposit. The negotiations for the grant of the Options had taken many months, and were described by Mr Rowland as ‘tortuous’. In an earlier draft there was only one purchase price. Mr Rowland stated that he could not explain the mistake he had made. He said that the trap he had fallen into was to assume that the buyer was going to pay 15% of the final purchase price.

 

16.                On 11 September 2009 the Respondent sent an email to the Applicants, telling them that she had taken up the option and had paid the deposit. The email concluded by asking whether it would be alright if she wondered round the garden when she was in Suffolk or whether they would like to be notified of her arrival. Mr Wheatley’s wife replied immediately stating that she was free to walk around whenever she liked.

 

17.                On 14 September 2009 Robert Nicholson sent an email to the Respondent. This reads

 

Dear Harriet,

I am sending this email to formally acknowledge your letter of 8^th September. I am not sure that the price calculation is quite correct because according to the calculation that I did on line the Halifax index dropped by 23.9% which would give a purchase price of £333,033.

 

More seriously however I think there may be something wrong with the Halifax figures. The Land Registry index for Suffolk gives a decrease of 18.38% which is consistent with the Halifax figures for adjoining areas, which are in the region of a 17% reduction. The instructions I have received from the executors is to request that the Land Registry Index is substituted for the Halifax indeed on the basis that it is more likely to reflect the actual reduction in prices over the period because it includes every transaction. They feel strongly that this is what Jim would have wanted and it is probably what I would have suggested had I been aware that the Land Registry produced local statistics.

 

I would be happy to discuss this with you or with Robin Rowland but I thought I should let you know the executors’ views in advance of any such conversation.

 

18.                It is clear from this email, and the correspondence which followed, that Mr Nicholson was also unaware that the deposit should have been paid by reference to the Initial Purchase Price. Mr Nicholson gave evidence and he too accepted that he had simply not checked the Options in relation to the deposit, but had assumed that the deposit was to be paid by reference to the Final Purchase Price. He had looked at the Options in order to determine the mechanism for calculating the Final Purchase Price, and for resolving any dispute arising out of this, but had not looked at Clause 4. He also accepted that suggesting that Land Registry figures might be used was outside the terms of the Option. His email set out above was, he said, was in the nature of a counter notice under clause 3.4. In answer to the question as to what he would have done had he realised that the deposit was wrongly calculated he stated that he would have taken instructions and then probably would have informed the Respondent of her error.

 

19.                On 25 September 2009, the Respondent purported to exercise the Option in relation to the Building Plot. Again, the deposit was calculated and paid by reference to the Final Purchase Price (which meant that instead of paying £36,750 the Respondent paid £27,350). On 28 September 2009 Mr Nicholson again formally acknowledged her letter and option notice, and again informed the Respondent that the executors did not agree with her calculation of the Final Purchase Price. The letter continued by saying that the next step would be to refer the issue to an Expert unless an alternative agreement could be reached. As the Respondent was going away for a period, Mr Nicholson suggested that there should be an agreement to extend the period referred to in clause 3.4 of the Option agreements.

 

20.                Mr Nicholson and Mr Rowland had a number of telephone calls. Mr Rowland wrote on 29 September 2009 stating that the Options were clear as to the index to be used, and the index itself was clear, so that he did not consider it appropriate to refer the matter to an expert. Mr Nicholson replied some time later, on 23 October 2009. He stated that the Respondent had used the seasonally adjusted figures, whereas the calculator uses the non seasonally adjusted figures. In relation to the Main Property this produced a difference of £7,534.83 for the Final Purchase Price (and therefore meant that the deposit should have been greater by £1,130.06) ( a similar calculation was made in relation to the Building Plot). The letter ended in this way: ‘It is our view that the reference to the index must mean the index prior to any seasonal adjustment. The executors are prepared to agree to the prices being calculated on the basis of the non-adjusted figures. Is this acceptable to your client? If so we would need a further payment by way of deposit of £1,754.89.’

 

21.                Mr Rowland replied on 4 November 2009, having been away. He proposed, on his clients instructions, that the average of the seasonally adjusted and non seasonally adjusted figures should be used. The overall shortfall on the deposit, on this basis, was £873.32. The letter also stated that Mr Cadbury-Brown had left the Respondent some furniture, on condition that she exercised the Option. The Respondent was therefore concerned to have the items, on the basis that she had exercised the Option, and in any event wanted to know what the position was regarding insurance. The Respondent paid the further sum of £873.32 either on 26 or 30 November 2011.

 

22.                Mr Nicholson replied on 16 November, rejecting this suggestion. He stated that the correct construction of the Options on this point would be a matter for the court to decide, and not the expert.

 

23.                Mr Rowland wrote on 1 December ( I have not seen a copy of this letter) and again on 11 January 2010. The position taken on behalf of his client was that, unless the compromise suggestion was accepted, the matter should be referred to the an expert under clause 3.4 of the Options. The letter again referred to removing certain items from the house, and to the position relating to insurance.

 

24.                Mr Wheatley, one of the Applicants, wrote to Mr Nicholson on 15 January 2010. It is clear from this that he was becoming increasingly irritated with the situation. As he saw it, it was time for the Respondent to accept the non adjusted figures, pay in full, or back off. Mr Wheatley also gave evidence. He had a copy of the Options and had seen the notices, but was not aware of any mistake. He assumed that the options had been exercised, and left matters to the solicitors.

 

25.                In the event, the somewhat tetchy letter from Mr Wheatley caused Mr Nicholson to go back to the Options and read them again. This led to the letter of 20 January 2010. The letter begins by saying: ‘I received an email from Mr Wheatley on Friday evening saying that he considered that your client may have failed to comply with the requirements of clause 3.3 of the option agreements. I did not have time to review the terms of the option agreements until yesterday.’ The letter then referred to the Initial Purchase Price, and stated that, as the deposits paid had been incorrect, the exercise of the options was ineffective. Mr Rowland replied on 26 January 2010, stating that whilst the deposit were not paid strictly in accordance with the option agreements, it was not open to the executors to take the point now, in view of the previous correspondence. The balance of the deposit (£25,326.88) was remitted to Nicholsons account. The total sum paid by the Respondent was returned to her in November 2010.

 

26.                This was the first time any indication had been given that the incorrect deposit had been paid. The option period had expired on 9 November 2009. The executors position thereafter was that they would sell to the Respondent but at a market price. It was their belief that if the options were exercised in accordance with the Options the beneficiaries would have been disadvantaged because, even though prices in East Anglia might have fallen, prices in Aldeburgh had not. This, in my judgment, is an irrelevant consideration: had the parties been concerned to specify that the adjustment mechanism should have been fixed by reference to valuations limited to Aldeburgh (or any other method) they would have done so.

 

The parties’ positions

 

27.                It is common ground between the parties that the deposit was incorrectly calculated. It is also common ground that from the date of the purported exercise until January 2010 both parties proceeded and negotiated in the belief that the Options had been validly exercised by the Respondent. I accept the evidence of Mr Nicholson that he was not aware, until he looked again at the Options shortly before he wrote the letter of 20 January 2010, that the deposit had been wrongly calculated.

 

28.                The Respondent’s case is, as stated above, is the Applicants are prevented from relying on the invalid exercise of the Option by reason of waiver or estoppel. The gravamen of the Applicants’ case is that, whatever basis in law the Respondent relies on (and I will look at the various ways in which she does so below) her fundamental and insuperable difficulty is that the Applicants were unaware of the error. Put shortly, it is said that it not open to rely on any form of estoppel or waiver unless it can be shown that the representor was in fact aware of the error or invalidity relied on by the representee. It is said that this is the case not merely because, evidentially, it will be more difficult to imply a representation from the representor’s conduct that he or she intends to give up rights unless he or she is aware of the rights in question but because as a matter of principle the relevant and only test is whether the representor was aware of the rights he was foregoing and acted accordingly.

 

29.                There are two general points to note in considering these arguments. The first is that there is often an analytical overlap or lack of precision in the categorisation used in this area of the law. The second is that the cases are frequently fact specific and fact sensitive.

 

30.                That said, the Respondent puts her case in one of two broad ways; waiver or election, and promissory estoppel and estoppel by convention.

 

31.                Broadly, waiver by election arises where a party has the right to elect between accepting a breach of contract or insisting on its strict performance. An election must be made as an informed choice: it must, generally, be made with the knowledge of the facts giving rise to the right in question. It may be sufficient that the party electing has the obvious means of knowledge. The waiver must be clear and unambiguous. Unlike estoppel, it is not dependent on reliance by the other party. It is also (in contrast with estoppel) final (and see, generally, ‘The Kanchenjunga’ [1990] Lloyds Law Reports 391).

 

32. The question of knowledge has been considered in a number of cases. In Peyman v Lanjani [1985] 1 Ch 457, Stephenson LJ stated the relevant test in these terms: ‘ Waiver or election is always a question of intention to be decided on the evidence as a question of fact… In fact and in law men’s intentions must be judged by their actions, and a man’s actions may convey to any reasonable person standing in the shoes of the other party to a contract, as clearly as any words, an intention to repudiate or affirm the contract. ‘ As Wilkin and Villiers state in the Law of Waiver, Variation and Estoppel at para 4.26, ‘Intentionality is in any event implicit in the finding that there was an unequivocal representation that X must be taken by its conduct to have waived its rights. However, although waiver by election cannot occur by mistake, it does not follow that X’s subjective intention is a necessary element of waiver. The test is whether there has been ‘an objective manifestation of choice’. A subjective element would be contrary to the established rule that a party’s intention is to be objectively deduced from its conduct.’

 

32.                The Respondent’s case is that the Applicants had the obvious means of knowing that the deposit had been incorrectly calculated and knew (or ought to have known) that this rendered the Option invalid. It is not necessary to show that, subjectively, they (or their solicitors) were aware of the defects: it was enough for them to know that the Respondent had paid, what was due, and what rights a deficient payment would give them. Applying the test: ‘how would their conduct appear to a hypothetical reasonable observer standing in the Respondent’s shoes’ the only answer, it is submitted, is that the Applicants had elected not to insist on payment of the deposit by reference to the Initial Purchase Price. The entire course of correspondence from the option notices onwards proceeded on the basis that the option had been validly exercised (until January 2010), as evidenced, for example, by the application of Clause 3.4. There was a dispute as to the maths, but not as to the principle, of calculating the Final Purchase Price (and therefore the deposit).

 

33.                The Applicants’ case, as I understand it, is that it is unreal to talk of the Applicants being aware of their rights to elect not to repudiate the payment of the deposit when neither side was aware of, or applied their minds to, the correct calculation of the deposit. In these circumstances, there can be no election.

 

34.                In The Kanchenjunga Lord Goff compared election with the doctrine of equitable estoppel and said this: ‘There is an important similarity between the two principles, election and equitable estoppel, in that each requires an unequivocal representation …. But there are important differences as well. In the context of a contract, the principle of election applies when a state of affairs comes into existence in which one party becomes entitled to exercise a right, and has to choose whether to exercise that right or not. His election generally has to be an informed choice, made with knowledge of the facts giving rise to the right. His election once made is final; it is not dependent upon reliance on it by the other party. On the other hand, equitable estoppel requires an unequivocal representation by one party that he will not insist upon his legal rights against the other party, and such reliance by the representee as will render it inequitable for the representor to go back on his representation. No question arises as to any particular knowledge on the part of the representor, and the estoppel may be suspensory only. Furthermore the representation itself is different in character in the two cases. The party making his election is communicating his choice whether or not to exercise a right which has become available to him. The party to an equitable estoppel is representing that he will not in future enforce his legal rights.’

 

35.                Waiver by election therefore requires the communication of a choice: I can either hold you to the terms of the contract or agree not to do so. In order to do so I must at the very least be aware of the facts which entitle me to make that choice. Awareness of those facts, however, is not (in my judgment) limited to instances where, subjectively, I can be shown to have been aware of them. The test is whether there has been an objective manifestation of choice. Waiver by estoppel, in contrast, will only arise if there is reliance by the representee: it is this which makes it inequitable for the representor to resile from the unequivocal representation made, irrespective of whether the representor knew, or was to be taken as knowing, the facts.

 

36.                The Applicants support their case by reference to three decisions (both in the context of waiver by election and waiver by estoppel). The first is HIH Casualty & General Insurance Ltd v AXA Corporate Solutions [2002] EWCA Civ 1253. Both at first instance and in the Court of Appeal HIH’s case based on waiver by estoppel was summarily dismissed. In brief the facts were that HIH had provided insurance against a film company’s losses. Having paid out the claim, it sought to recover a contribution from AXA under a reinsurance policy. AXA relied on breach of warranty as to the number of films the company would make. HIH in turn relied on waiver by estoppel (it was accepted that in the case of breach of warranty there is no scope for waiver by election because the insurer is automatically discharged from liability upon the breach). It relied on the fact that throughout the relevant period AXA had been in receipt of monthly risk management reports which made it clear that the warranted number of films had not been made and would not be made, and no objection was made by AXA.

 

37.                At first instance the judge said this: ‘In my judgment it is of the essence of this plea that the representation must go to the willingness of the representor to forgo his rights. If all that appears to the representee is that the representor believes the cover to be still in place, without the slightest indication that the representor is aware that it could take the point that cover had been discharged (but was not going to take the point) there would be no inequity in permitting the representor to stand on his rights… it is of the essence of promissory estoppel that one side is reasonably seen by the other to be foregoing its rights.’

 

38.                The Court of Appeal held that, on the facts of the case, the question of knowledge or lack of it was important in deciding whether an estoppel had been established. Tuckey LJ said that ‘unless the representation carries with it some apparent awareness of rights it goes nowhere: the representee will not understand the representation to mean that the representor is not going to insist upon his rights because he has said or done nothing to suggest that he has any.’

 

39.                The difficulty for HIH was that AXA’s conduct could at best be characterised as silence or inactivity, not in the face of a claim, but in the context of a continuing contractual relationship where it was not possible to say precisely when the breaches of warranty had occurred. In short, in the context of insurance, conduct from which it might be inferred that AXA still thought they were still on risk does not itself amount to a representation that they would not enforce a right. A further difficulty for HIH was that they were unable to show that they had attached any significance to the representation and had acted on it. The argument based on estoppel by convention failed for the same reasons. The test as to whether it would be unconscionable for a party to be permitted to deny that which knowingly or unknowingly he has allowed or encouraged another to assume to his detriment could not be met: mere silence, inactivity or failure to take a point cannot be enough.

 

40.                In Forrest & Sons Ltd v CGU Insurance Plc [2006] Lloyds Rep I.R. 113 the insurer had noted that an oven on the insured’s premises was a danger. The insured said that the over had been disconnected and was no longer in use. This was not in fact the case. A year later the insurer surveyed the premises. It noted the oven, but did not realise that it was the same oven. A claim under the policy was disallowed because of the insured’s failure to inform the insurer of a change which increased the risk. The court upheld the insured’s position. There was no clear and unequivocal representation made by the insurer that they would not insist on their right to treat the cover as discharged nor such reliance as to make it inequitable for the insurers to go back on it. There was nothing which was more than equivocal when seen in the context of a continuing contractual relationship (one which placed duties on both parties).

 

41.                In Persimmon Homes (South Coast) Ltd v Hall Aggregates [2009] EWCA Civ 1108 the defendant had contracted to perform certain work for the claimant. In the event the claimant did not ask the defendant to do the work but carried it out itself. When sued for damages the defendant claimed that the claimant’s conduct amounted to a representation that the claimant had waived the requirement that the defendant do the work. On the facts of the case, the unexplained and unquestioned actions of the claimant did not amount to an unequivocal representation that they were waiving their obligations to the defendant to perform their obligation.

 

42.                The Respondent, in turn, relies on Thorner v Major [2009] 3 AER 945 and in particular on the passages in Lord Neuberger’s judgment where he said that whilst it is necessary to show a clear an unequivocal assurance for an estoppel, it is also necessary to look at the context. Moreover ‘the court should not search for ambiguity or uncertainty but should assess the question of clarity and certainty practically and sensibly, as well as contextually… at least normally it is sufficient for the person invoking the estoppel to establish that he reasonably understood the statement or action to be an assurance on which he could rely.’

 

43.                The Respondent submits that in the present case, the context is not an ongoing contractual relationship (such as insured and insurer) but the exercise of an option within a relatively short time window. Whilst it is not necessarily the case that the exercise of an option is a hostile act, it is not uncommon for the grantor to seek to resile from the option granted. It is for the grantor to satisfy himself that the option was validly exercised: it is for the grantor to accept or repudiate the notice. The circumstances are very different from the Persimmon case where there was no communication between the parties, and from the other cases cited above.

 

44.                If the notice is accepted without more, and the parties proceed to negotiate on the basis that the option has been validly exercised (including retaining the deposit paid) the Respondent, it is said, is entitled to understand this course of conduct and the representations made as an assurance on which she could rely. The representation that the notices were accepted as valid, that is to say that the options were validly exercised, was clear and unequivocal.

 

45.                Although generally suspensive, the lapse of time in this case meant that it was not possible for the Respondent to cure the mistake made in calculating the deposit by paying the correct amount. This is the detriment she has suffered. In all the circumstances it is inequitable for the Applicants to resile from the representations made in the course of the correspondence between the parties.

 

46.                It is irrelevant that the Respondent was not aware of the defects: it is enough for her to have relied on the acceptance of the notices by the Applicants. Otherwise, it is said, estoppels would only operate in favour of the conscious wrongdoer, which, both as a matter of principle and case law, cannot be right.

 

47.                The third way in which the Respondent puts her case is estoppel by convention. This arises where the parties have a shared, common, communicated assumption by which they regulate their relationship. This kind of estoppel does not require the Applicants to have made any representation to the Respondent: see Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 and The August Leonhardt [1985] 2 Lloyd’s Rep 24 at page 34. There must be a ‘crossing of the line’, that is to say mutually manifest conduct based on a common but mistaken assumption.

 

48.                It is said that this is what happened here. Both parties proceeded on the common but mistaken assumption that the options had been validly exercised: the totality of the correspondence shows that the Applicants assumed this to be so. This continued up to and beyond the date of the expiry of the options. By the time the Applicants realised their own mistake, it was too late for the Respondent to serve fresh notices and/or pay the full deposit.

 

49.                I have summarised the parties’ respective arguments above: these were set out fully in the skeleton arguments and during submissions.

 

Conclusions

 

50.                It seems to me, looking at the totality of the correspondence and course of conduction between the parties between September 2009 and January 2010, that the Applicants are estopped from waiving the defect in the notices. I agree that, for all the reasons put forward by the Respondent and summarised above, there has been a waiver by election but in any event, if I am wrong on that, there is a waiver by estoppel and by convention.

 

51.                I do not accept that the fact that neither party was aware of the mistake made means that (however the point is put) a waiver cannot arise. This seems to me to misunderstand the nature of waiver, and to put a wholly unwarranted emphasis on the subjective knowledge or lack of knowledge of the representor. Even for waiver by election, the question whether the representor knew of the facts which gave rise to his right to choose to hold the other party to the terms of the contract or not is to be viewed objectively. And, as is clear from the analysis of the law above, knowledge of the representor is not in any event relevant to the question whether his conduct clearly and unequivocally led the other party to believe that (in this case) the exercise of the option had been valid. It may be that in some circumstances the fact that neither party was aware of the mistake might make it more difficult to establish either an election or a representation (particularly in the context of an ongoing relationship, such as that between insured and insurer): but this is not, plainly, in my judgment, the case here. The Applicants conducted themselves at all material times as if and on the basis that the Options had been validly exercised: they were reasonably seen as having foregone any rights they might have had to dispute the basis of the payment of the deposits. In all the circumstances it would be inequitable to allow the Applicants to resile from their representation that the Options had been validly exercised.

 

52.                Accordingly, I will order the Chief Land Registrar to cancel the application relating to the Main Property. As I have said above, the Respondent no longer wishes to proceed with the option affecting the Building Plot.

 

Costs

 

53.                In principle, the Respondent is entitled to her costs since the date of the reference (8 March 2011). A schedule in Form N260 is to be served and filed by 14 December 2011. The Applicants may make such representations or objections as they deem appropriate by 6 January 2012. Subject to any reply by the Respondent I will consider what order to make thereafter. If either party wants a detailed assessment to be made by a costs judge, I will consider that application in due course.

 

 

BY ORDER OF THE ADJUDICATOR

 

ANN McALLISTER

Dated this 30th day of November 2011