A770/06
JUDGMENT
OF
SHERIFF PRINCIPAL
JAMES A TAYLOR
in the cause
MARGARET McLAUGHLIN
PURSUER
against
THE NEW HOUSING ASSOCIATION LTD
DEFENDERS
GLASGOW, 1 October 2007.
The Sheriff Principal, having resumed consideration of the cause, Puts the cause out by order of the court for a procedural hearing on 11 October 2007 at 9.30 am to proceed by conference call.
NOTE:
[1] The pursuer was a tenant of the defenders. She sought to exercise her right to purchase the property leased from the defenders as set out in the Housing (Scotland) Act 1987. The parties exchanged formal missives (5/2 and 5/3 of process). In the defenders' offer to sell to the pursuer the defenders say that the market value of the subjects as determined by the District Valuer was £70,000. From this the defenders deducted a discount calculated in terms of the Housing (Scotland) Act 1987 as amended, which discount is said to be £49,000. Accordingly it is then said that the price fixed in terms of Section 62 of the Act as amended is £21,000. Clause one goes on to say "By your acceptance hereof you shall be held (a) to concur in the appointment of the District Valuer as valuer, (b) to be bound by the District Valuer's determination of the market value of the subjects and (c) to accept the correctness of the discount referred to above." There was a de plano acceptance of the offer. After conclusion of the missives but prior to their implementation the defenders ascertained that they had made an error in calculating the discount. The pursuer raised an action seeking implement of the missives. The defenders sought reduction of the missives ope exceptionis. The learned Sheriff came to the view that the intention of the parties was not to conduct an ordinary conveyancing transaction but to engage the mechanism provided by the Act to allow the pursuer to purchase the flat from the defenders at a discount. Accordingly the learned Sheriff held that the offer to sell by the defenders was invalid and therefore no contract of sale was constituted. He went on to say that if he was wrong in coming to that view the missives fell to be reduced ope exceptionis because both parties thought that the price of £21,000 was fixed in accordance with Section 62 of the Act which it had not been. Accordingly both parties were in error. Since the error related to the purchase price of the property, an essential condition of the contract, the learned Sheriff held that the missives should be reduced ope exceptionis.
[2] Mr Grant-Hutchison, Advocate, on behalf of the pursuer submitted that the court could not look at the intention of the parties. A consideration of the missives did not disclose any ambiguity. One could only look outside the four corners of the contract if ambiguity existed. He reminded the court that the defenders did not seek to argue that the transaction was ultra vires the defenders. This was a pure question of construction of the contract. The court had to have regard to what the parties agreed as opposed to what they thought they had agreed. He referred to the well-known passages in Muirhead & Turnbull v Dickson 1905 7F 686; Storer v Manchester City Council [1974] WLR 1403 and Schuler v Wickman [1974] AC 235. Anticipating that reliance might be placed by the defenders on the case of Bovis Construction (Scotland) Ltd v Whatlings Construction Ltd 1994 SC 351 and 1995 SC (HL) 19, Mr Grant-Hutchison submitted that that case should be looked at with great care. In the first place there was an inherent ambiguity in the contract between the parties and furthermore one was there dealing with an exclusion clause the application of which fell to be interpreted strictly. He contrasted the position in Bovis with the unambiguous missives in this case.
[3] Mr Grant-Hutchison went on to submit that even if one could look behind the missives there was no error such as would allow the reduction of the missives ope exceptionis. The pursuer in a case such as this was not concerned about the statutory provisions or what the District Valuer did or did not do. She received an offer to sell her leased premises to her at a price of £21,000 which she accepted. Since the offer says that the price has been calculated in a particular way there was no room for there to be error on the part of the pursuer. But if one was to look at the error, the error was either that the defenders had the erroneous belief that they had power to sell at the price stipulated or put another way that £21,000 was the correct price. Accordingly this was an example of unilateral uninduced error. He referred me to Stewart v Kennedy 1890 17R (HL) 25, Spook Erection (Northern) Ltd v Kaye 1990 SLT 676 and Angus v Bryden 1992 SLT 884.
[4] Mr Grant-Hutchison then submitted that even if his submissions were wrong and the learned Sheriff could look at the Act furthermore and that there was a mutual error, it did not follow that the contract was void. He referred to the case of Cuthbertson v Lowes (1870) 8M 1073 and Bennion: Statutory Interpretation. The primary purpose of the Act was to facilitate the sale of what were then known as council houses. The tenant in such circumstances has no control. If the local authority or housing association make a mistake the pursuer cannot do much about it.
[5] In reply Mr Simpson, Advocate, submitted on behalf of the defenders that there was no contract at common law. Nos 5/2 and 5/3 of process were dependant upon the 1987 Act for their validity. He took me through Sections 61 to 66 of the Act highlighting the fact that in Section 63(2) it is provided that where an application to purchase has been served upon a landlord the landlord has no discretion. He must then serve on the tenant an "offer to sell". He also placed considerable emphasis on the terms of Section 66(2) which is in the following terms:-
"Where an offer to sell (or an amended offer to sell) has been served on the tenant and a relative notice of acceptance has been duly served on the landlord, a contract of sale of the house shall be constituted between the landlord and the tenant on the terms contained in the offer (or amended offer) to sell."
Accordingly, he submitted that the offer to sell (5/2 of process) was no more than a notice under the statute. He did accept that if Section 66(2) did not exist the contract between the parties would nonetheless have been enforceable. No 5/2 of process could be either an offer to sell at common law or a landlord's notice under Section 63(2) of the Act. In his submission it was quite clearly the latter and not the former. It could not be both by virtue of the terms of Section 66(2). If 5/2 and 5/3 of process could be deemed to be a "common law contract" then Section 66(2) would be superfluous. He was not submitting there was no contract simply that any contract was a contract brought about by Section 66(2) of the Act. He also referred to Sections 71 and 72 of the 1987 Act to illustrate the limited scope for negotiation. He then referred to the Housing (Scotland) Act 2001 and in particular to Section 65 and 66 thereof. He explained that the defenders did not plead ultra vires because of the terms of Section 66(4) of the 2001 Act. He did however submit under reference to Section 66 of the 2001 Act that 5/2 and 5/3 of process could not be a common law contract as that sale would be outside the scope of the 1987 Act and would require the consent of Ministers in terms of Section 66 of the 2001 Act. Without their consent there could be no common law contract he submitted.
[6] This was not an invitation to the court to look at the innermost thoughts of the parties but rather what did they intend. The pursuer, he submitted, did not wish to buy at the open market value. She wished to exercise her right under the 1987 Act. One therefore was not in the territory of looking for an ambiguity before one could take account of matters outwith the terms of the contract. One had to ask before interpreting the document what was the nature of the document. One then had to compare the documents to the rules of law which might apply. It was perfectly clear that these documents were documents constituting a sale in terms of the 1987 Act. If there was any doubt as to that one need only look at 6/17, 6/18 and 6/19 of process. It was perfectly clear from these documents that this was an application under the 1987 Act to allow the pursuer to buy her leased property.
[7] Mr Simpson then referred me to the cases of Pfizer Corporation v Ministry of Health [1965] 1 AC 512; Norweb Plc v Dixon [1995] 1 WLR 636 and Reynolds v The Health First Medical Group [2000] Lloyds' L.R. Medical 240. Under reference to these authorities he submitted that there was no common law contract.
[8] Mr Simpson accepted that if there was a unilateral uninduced error that was not a ground for reduction of a common law contract. However in his submission there was in this case a common error in substantials and that was a ground for reduction. The common error, said Mr Simpson, was the pursuer's belief that she was entitled to buy the flat at a price of £21,000 or put another way that £21,000 was the price fixed in accordance with the 1987 Act. Mr Simpson acknowledged that the learned Sheriff had not made findings‑in-fact to support this position but from page 13 of the learned Sheriff's Note it was quite clear, said Mr Simpson, that he would have been prepared to make such findings. In his Note the learned Sheriff explains the mechanism by which the error came to be. The Note says:-
"There was no dispute that the defender had made a mistake in fixing the price at £21,000. Standing my conclusion that the parties were engaging the mechanism provided by the Act, it follows from that that the pursuer wished to exercise her right to buy under the Act. In my view both parties thought the price of £21,000 was fixed in accordance with Section 62 of the Act. It had not been. Both were suffering from the same error. Both were of the erroneous view that the price had been fixed under statute. That being so, I do not regard this, as was submitted by Mr Grant‑Hutchison, to be a case of unilateral uninduced error. It is a case of error common to both parties. Since that error related to the purchase price of the property, an essential condition of the contract, in my view, the missives should be reduced ope exceptionis."
Mr Simpson acknowledged that the Notes of Evidence would require to be extended for the additional findings-in-fact which he proposed to be considered. Mr Simpson thought it better if I ordered the notes to be extended and then put the case out for further submission.
[9] In my opinion 5/2 and 5/3 of process fulfil all the requirements of Scots law to constitute a binding contract for the sale of heritage. The contract would be enforceable even if Section 66(2) had not been enacted. I accept that were it not for the statutory provision the defenders would not have sold the property and the missives would not have been entered into. However, the missives bound the parties. No 5/2 of process may well be a notice under the statute but it also constitutes an offer to sell heritage. Upon 5/3 of process being sent to the defenders by the pursuer a binding contract was entered into. In my opinion it matters not that the pursuer, prior to the exchange of 5/2 and 5/3 of process, might have sent to the defenders an application to buy the property in terms of The Housing (Scotland) Act 2001. The missives constituted by 5/2 and 5/3 of process are enforceable. The parties are not entitled to go behind them and look at any other provisions. There is nothing ambiguous in their terms which requires to be explained. Accordingly what was said by the Inner House in Bovis is of no assistance to the defenders. I can see some force in Mr Simpson's submission that the decision which I have reached deprives Section 66(2) of the 1987 Act of any content. It is not clear what purpose it serves unless it might be said to cure any defect which there might be in the offer to sell and the notice of acceptance which defect might mean that the Requirements of Writing (Scotland) Act 1995 might not be met. I heard no submissions on this potential reason and my observation is thus tentative. I did not find the cases of Pfizer, Norweb and Reynolds to be of much assistance. As Mr Simpson acknowledged, none of these cases deals with statutory provisions similar to Section 66(2) of the 1987 Act. In Pfizer the question was whether an agreement was entered into between the patient in possession of a prescription for a drug, the hospital which supplied the prescription to the patient and the chemist which supplied the drug to the patient in accordance with the terms of the prescription. In Reynolds the issue was whether there was a contract between a patient and his GP. Finally, in Norweb the issue was whether there was a contract between a public electricity supplier supplying electricity to a tariff customer under Section 16(1) of the Electricity Act 1989. None of these cases raised issues such as were presented in the present case.
[10] Given the view to which I have come I could follow the invitation of Mr Simpson and call for the Notes of Evidence to be extended. This would enable Mr Simpson to argue that the learned Sheriff ought to have made additional findings‑in‑fact. The proposed new findings-in-fact-and-law-and-law are:-
"(7) In any event, the pursuer and the defenders were both in error in thinking that £21,000 was the price for the subjects as fixed in accordance with the Housing (Scotland) Act 1987.
(8) In all the circumstances that error was in the substantials of the contract."
During the discussion before me there was little reference made to the learned Sheriff's finding-in-fact-and-law No 4. Finding-in-fact-and-law No 4 is in the following terms:-
"In calculating the price of the flat the defender made an error in that it failed to apply the provisions of Section 66(6A) of the Act, whereby discount allowed to the pursuer should not have reduced the price below the cost of the modernisation work carried out in 2001, namely £49,312."
It might be thought that finding-in-fact-and-law No 4 does not sit easily with the findings‑in-fact which the defenders wish to have added. That finding-in-fact tends to support the pursuer. Mr Simpson suggested that finding-in-fact-and-law No 4 should be treated as only serving to explain how the wrong price came to be inserted in 5/2 of process. That may be how the wrong price came to be inserted but it does seem to me to give the defenders a difficulty. Not only will there require to be new findings-in-fact made, but the existing finding-in-fact-and-law No 4 may require to be amended. A solution might have presented itself if I had found favour with Mr Grant-Hutchison's submission that even if there was mutual error the contract was nonetheless enforceable. Ingenious though the argument presented was, I am afraid I have some difficulty with it. In my opinion what the authors of Bennion on pages 32 and 33 are saying is that if a statute mandates a body to do something and it fails to do that thing precisely according to the statutory provision, it does not follow that the failure should invalidate the thing done. Put another way, it cannot take advantage of its own failure. The passage in Bennion seems to anticipate that the body mandated to act has alone deviated from the statutory procedure. Thus if the wrong price was inserted in the offer to sell, the seller would not be able to rely on that mistake to void the contract regardless of the concept of uninduced unilateral error. I do not think Bennion had in mind a situation where it said that there is mutual error. Further, the purpose of the legislation would not be defeated in this case. If the missives 5/2 and 5/3 of process were declared void it would be open to the pursuer to re‑apply to purchase her house. Thus the object of the legislation will not have been thwarted. I did not find the case of Cuthbertson to be of much assistance. In that case parties had entered into what was at the time a valid contract in which one sold to the other potatoes at a price of £24 per Scots acre. After conclusion of the contract but before full implementation, legislation was passed declaring all contracts relying on local or customary measures, such as a Scots acre, to be null and void. The issue was whether the purchaser, having taken delivery of the potatoes, could avoid paying the balance of the purchase price by relying upon the legislation. Perhaps not surprisingly, the courts found a way round such an outcome. I cannot say that I found the case of much assistance in coming to my decision in this case.
[11] Given that instructing the extension of the notes will give rise to some expense not only in the fee to the firm of shorthand writers but also in the subsequent hearing before me, I have decided to put the case out by order to ascertain that it is still the wish of the defenders that this course of action be taken. I will also be prepared to hear the pursuer as to whether the notes should be extended. Such a by order hearing can be conducted by conference call in order to keep costs to a minimum. Should either party wish the hearing to be in court then they should let my clerk know and that can be arranged.