B e f o r e :
LORD JUSTICE PETER GIBSON
LORD JUSTICE WALLER
LORD JUSTICE CARNWATH
||BOLTON METROPOLITAN BOROUGH COUNCIL
||GEOFFREY RALPH TORKINGTON
(Transcript of the Handed Down Judgment of
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MR IAN LEEMING QC (instructed by Berg & Co, Manchester M2 5BG) appeared on behalf of the Appellant.
MR PAUL CHAISTY and MR WILSON HORNE (instructed by Central Services, Department of Bolton Metropolitan Borough Council) appeared on behalf of the Respondent.
HTML VERSION OF JUDGMENT
Crown Copyright ©
Friday, 31st October 2003
LORD JUSTICE PETER GIBSON:
- The Defendant, Geoffrey Torkington, appeals from the order made on 31st January 2003 by Lloyd J, the Vice Chancellor of the County Palatine of Lancaster, giving the Claimant, Bolton Metropolitan Borough Council ("the Council"), possession of certain property in Bolton owned by the Council but occupied by Mr Torkington. The judge required Mr Torkington to pay damages for his use and occupation of that property from 1st February 1991 until possession was given. The judge refused permission to appeal to this court. On application to this court, Aldous LJ, considering the application on paper, granted permission. I will come back later to what he said when giving permission.
- The history of this dispute is long and complex and is set out in detail in the judge's judgment. I will attempt to summarise the background facts relevant to the issues raised by this appeal.
The background facts
- The property which was the subject of the judge's order is a site formerly consisting of houses known as 5 to 29 (odd numbers) Croft Street (known at the trial as Plots A and B) together with parts of Back Croft Street identified on a plan annexed to the Council's re-amended particulars of claim. Croft Street runs roughly east-west, meeting at its western end Manchester Road, which runs roughly north west to south east across the end of Croft Street. If in 1985 one came down Manchester Road in a south easterly direction towards Croft Street, there was an open space ("the 283 Plot") on the east side of Manchester Road adjacent to 283 Manchester Road. The 283 Plot fronts onto Manchester Road. A little further on down Manchester Road on its east side are 287 and 289 Manchester Road, which are premises owned by Mr Torkington and from which he carries on a motor car business called Park Motor Company (Bolton). 289 is on the corner of Manchester Road and Croft Street. Behind 287 and 289 is Back Croft Street. This runs from Croft Street, just behind the end of 287, and then takes a right-angled turn to the east, extending behind 5 to 29 (odd numbers) Croft Street and parallel to Croft Street. Going further south-east down Manchester Road one comes to a terrace of houses known as 301 to 315 Manchester Road, the site of which was known at the trial as Plot C. Plot C backs onto a road, Back Manchester Road East, which, at its north-west end, joins Croft Street.
- In 1985 Croft Street was an adopted public highway as far as a line extending from the eastern boundary of Back Manchester Road East, itself an adopted public highway, as was Back Croft Street. The Council by a compulsory purchase order acquired Plots A, B and C. This acquisition prompted interest from potential purchasers who wished to acquire those plots from the Council. One of them was Mr Torkington, who expressed an interest in Plots A and B.
- The responsible officer for the Council was Mr Burrows, a senior assistant to the Council's Chief Estates Surveyor, Mr Disley. Mr Burrows was authorised to negotiate with the three interested purchasers. There then followed extensive negotiations between the Council and Mr Torkington, who conducted the negotiations, for the most part, without professional representation. For the Council Mr Burrows, Mr Cresswell (the Assistant Borough Solicitor), Mr Tipping (a senior conveyancer for the Council) and, in the later stages, Mr Collinge (the Council's Chief Executive) all at various times took part in the exchanges with Mr Torkington. The subject of the negotiations was a 125-year lease of (initially) Plot A but later of Plots A and B with an annual rent of £2,500 (later agreed to be reduced for the first year only) for the first five years and rent reviews every five years thereafter. The Council was to demolish the existing buildings, which it did, and to obtain a Street Clearance Order for that part of Back Croft Street which ran along the backs of Plots A and B and there was to be an option for Mr Torkington to commute the rent after five years. The correspondence between the parties was expressly made subject to contract, though it became an important part of Mr Torkington's case at trial that he was told by Mr Burrows that the Council always used that phrase on its letters, but that Mr Torkington should not worry about that because, once a committee of the Council had taken a resolution, it would not go back on its word. The judge rejected that part of Mr Torkington's case.
- Mr Torkington's evidence was that in 1985 he went onto Plot A on which he did some preliminary work, levelling areas and putting up a barrier, and that in 1987-9 he had some drainage works done, put a new surface on Plots A and B and fenced them, and that the Council knew that he was on the land. The Council's evidence that it did not know that Mr Torkington was on the land until February 1989 was accepted by the judge.
- Another factual dispute related to the status of the unadopted part of Croft Street and what was said to Mr Torkington about it. The Council's position was that this part of the street was a public highway but was not maintainable at public expense and so was not adopted. Mr Torkington said that he was told by a Mr Banks of the Council that it was a private road but not a highway. Mr Banks' evidence was that he told Mr Torkington that the eastern part of Croft Street was a highway but privately maintainable. The judge accepted Mr Banks' evidence.
- There was significant delay before the Council got to work on the documentation for Plots A and B, partly because the Council wanted to complete the statutory processes for the closure of part of Back Croft Street first.
- It is unnecessary for the purposes of this appeal to go through all the detailed negotiations on the proposed lease of Plots A and B before the events of June 1990. On 19th June Mr Torkington wrote to Mr Burrows about the Council's position on that lease. He also raised the question of what was to happen to the 283 Plot. He claimed an agreement in principle that he would take a lease of the 283 Plot and said that he had planning permission to use it in conjunction with Plots A and B. He proposed that the 283 Plot be included in the lease of Plots A and B at the same rate per square yard on the usable area as for Plots A and B.
- Mr Burrows and Mr Torkington then met. On 5th July 1990 Mr Burrows wrote to confirm the details of what Mr Torkington proposed so that the Council's approval could be sought. Mr Torkington was not happy with some of what was said, and proposed a timetable including an irrevocable commitment by the Council to the terms which, he said, were agreed with Mr Burrows, and requiring completion of the lease for Plots A and B by 9th August 1990 and the lease for the 283 Plot by 4th September 1990.
- On 25th July the Land Sub-Committee resolved that the Council's solicitor was to complete the necessary legal documentation for Plots A and B, but consideration of the request for a lease of the 283 Plot was to be deferred until the lease for Plots A and B had been completed. The Sub-Committee also resolved that back rent from when Mr Torkington took possession of Plots A and B at the rate payable in the first year should be recovered. Mr Disley on 26th July wrote to Mr Torkington to report that decision. Mr Torkington's reply showed that he had not understood or accepted the decision, as he asked for a lease of the 283 Plot to be completed by 16th August. On 2nd August 1990 Mr Disley responded, reiterating that the question of the 283 Plot had not been addressed by the Council.
- On 13th August Mr Tipping sent Mr Torkington the draft lease amended to take account of what had been provisionally agreed. He was told that completion would be conditional on him paying to the Council on completion the sum due for his occupation of Plots A and B from 6th February 1989 until completion. On 31st August Mr Torkington wrote making further requirements, which were not accepted, and on 18th September 1990 returned to Mr Tipping a copy of the draft lease with various amendments.
- In that situation Mr Tipping on 25th September tried to bring matters to a conclusion. He wrote to Mr Torkington, enclosing an engrossed counterpart lease with a completion statement. He said:
"I have also arranged for the Lease to be sealed on behalf of the Council in readiness for completion, which should take place on or before the 1st October. If you cannot or will not complete by that date, I shall have no alternative but to refer the matter back to the Council on the basis of your refusal to complete."
He also repeated what Mr Torkington had already been told that the Council had decided to make up Croft Street beyond the adopted part as and when funding became available and that adoption would take place after completion of all necessary work.
- The completion statement was prepared as at 1st October 1990. It showed £2,463.86 as due on completion, the largest part being in respect of occupation from 6th February 1989 at £1,125 per annum.
- Mr Torkington did not reply on or before 1st October. Nevertheless, on that date the Council's seal was affixed to the engrossed lease, as had been indicated by Mr Tipping in his letter of 25th September. The lease was not dated. The procedures of the Council required the seal to be placed on the document in the presence of the Mayor, and that an authorised sealing officer (in this case Mr Cresswell) sign the lease. Those procedures were followed. An appropriate entry was made in the sealing book of the Council. The lease was retained in the Council's custody and remained there at the time it was disclosed in the proceedings.
- On 5th October 1990 Mr Burrows wrote to Mr Torkington that, as he had not responded to the letter of 25th September, the Council's instructions would be sought on the basis of his refusal to complete. On 23rd October the Council's Management and Finance Committee resolved to withdraw the offer of the lease and authorised proceedings to recover possession.
- There then followed further lengthy and at times highly acrimonious exchanges between Mr Torkington and the Council. In the course of them Mr Torkington tried to obtain completion by belatedly responding on 16th February 1991 to the letter of 25th September 1990. He sent the counterpart which he had signed. He also tried to obtain the Council's acceptance of a lesser sum than that which the Council claimed was outstanding. More than once the counterpart was returned by the Council but resubmitted by Mr Torkington. Mr Torkington was given further opportunities to complete by complying with the Council's terms, but he was not prepared to accept those terms as they stood without further stipulations, such as the completion of a lease of the 283 Plot. The Council lost patience with him and decided not to proceed to grant a lease to him. It also decided to take proceedings for possession.
- The proceedings commenced as long ago as 1992. The Council disclosed the sealed lease of Plots A and B. When the proceedings came on for trial before His Honour Judge Howarth, he took the point, which had not previously been taken, that there may have been a delivery of the lease in escrow. The case was adjourned and pleadings were amended. Mr Torkington by his amended defence resisted the claim for possession, alleging that the lease was agreed, that the Council was estopped from denying the grant of the lease to him on the agreed terms and that the Council had executed the lease. By his counterclaim Mr Torkington pleaded that the Council had breached the covenant for quiet enjoyment and had derogated from its grant and he claimed damages.
- The resumed trial, regrettably, did not occur until the beginning of this year before Lloyd J. However, no point is taken by either side in respect of the delay. In his judgment the judge records that yet another attempt was made in March 2001 to reach a compromise enabling Mr Torkington to take a lease, but the proposed terms were not acceptable to him. All the while Mr Torkington has remained in occupation.
- The judge in his judgment said that the Council, as owner of the property possession of which it was seeking to recover, was entitled to possession unless Mr Torkington could show some right to be in possession. The case for Mr Torkington was put on three bases: agreement, estoppel and a concluded lease. The judge found against Mr Torkington on all three. As the first two are not the subject of appeal, I need say nothing further about them. The third way in which Mr Torkington's case was put was that the lease was sealed and that by reason of section 74(1) of the Law of Property Act 1925 ("the 1925 Act") it was duly executed and delivered; that the lease was held thereafter in escrow on the condition that Mr Torkington should execute and hand over to the Council the counterpart of the lease within a reasonable time, and that that condition was fulfilled.
- The judge then considered the legal principles concerning deeds. The first question was whether the lease when sealed by the Council was delivered either unconditionally or as an escrow. Mr Torkington relied on section 74(1) of the 1925 Act, which provides:
"In favour of a purchaser a deed shall be deemed to have been duly executed by a corporation aggregate if its seal be affixed thereto in the presence of and attested by its clerk, secretary or other permanent officer or his deputy, and a member of the board of directors, council or other governing body of the corporation, and where a seal purporting to be the seal of a corporation has been affixed to a deed, attested by persons purporting to be persons holding such offices as aforesaid, the deed shall be deemed to have been executed in accordance with the requirements of this section, and to have taken effect accordingly."
- The judge assumed in favour of Mr Torkington that he was a purchaser. But, after considering the authorities, he rejected the submission that section 74(1), where applicable, dispensed with the need for delivery in the sense of some act by which the party executing the instrument shows that it intended to be bound by the instrument. In so doing the judge followed the obiter dicta of Nourse LJ in Longman v Viscount Chelsea (1989) 58 P&CR 189. The judge held on the facts that what took place on 1st October 1990 was the sealing of the lease but not its delivery, which was to await completion, as Mr Tipping said in his letter of 25th September 1990. The judge said that in the present case delivery could not be inferred and had not been proved.
- If wrong on section 74(1), the judge said that the lease was executed in escrow subject to the conditions set out in Mr Tipping's letter, that is to say that the counterpart be executed by 1st October 1990, and that by that date £2,463.86 be paid. As neither condition was satisfied, the escrow had no continuing effect.
- The judge finally dealt with the counterclaim by Mr Torkington for damages if the judge was wrong on the lease. The judge found no breach of the covenant for quiet enjoyment nor derogation from grant to entitle Mr Torkington to any damages. Accordingly he dismissed the counterclaim.
- Six grounds of appeal are set out in the Appellant's Notice. They are, in summary:
(1) Section 74(1) deems a document complying with its requirements to have been duly delivered, or no delivery of it is required;
(2) on the evidence the delivery of the lease was to be presumed or had been established;
(3) the only condition of the escrow was the execution and delivery by Mr Torkington of the counterpart or such execution and delivery within a reasonable time, and that condition was fulfilled on 16th February 1991;
(4) alternatively to (3), if there was a further escrow condition as to the payment of money, the lease in escrow became binding on the Council on the happening of one or more of a number of events when monies were tendered or offered;
(5) the time for performance of any escrow condition was extended by certain act by the Council;
(6) there was an arguable case for breach of the covenant for quiet enjoyment and of the obligation of the Council not to derogate from its grant by denying the lease.
- The judge refused permission to appeal. On application to this court for such permission Aldous LJ, in giving permission, said only that the third and fifth grounds of appeal had sufficient merit to provide a reasonable prospect of success. It is to my mind open to question whether he intended to give permission to appeal on all the remaining grounds of appeal, but the Lord Justice did not expressly refuse permission on those grounds and Mr Chaisty QC for the Council accepts that it would appear to be the case that permission was granted on all grounds. In the circumstances, I proceed on the footing that the Lord Justice must be taken to have intended to allow all the grounds of appeal to be argued on appeal.
- I shall consider the grounds, so far as necessary, in turn.
Ground 1: Section 74(1)
- Mr Leeming QC for Mr Torkington relied on the words of section 74(1) that a qualifying deed "shall be deemed to have been duly executed". He submitted that this must include what is to be deemed any delivery that would otherwise be required, with the result that the common law requirement of delivery is dispensed with. He further relied on two decisions by Buckley J. In Beesly v Hallwood Estates Ltd  1 WLR 549 at 562 that judge said that he was bound to treat an instrument complying with section 74(1) as "having been not only sealed but also delivered". In D'Silva v Lister House Developments Ltd  Ch 17 at 29 Buckley J described as fallacious the submission that section 74(1) does not extend to or answer the question whether the document has ever been delivered, saying:
"The section says that the document is to be deemed to have been duly executed and execution imports not only sealing the document, but also delivering it as an executed document."
- Mr Chaisty submits that the judge was right to follow what was said in this court in the Longman case. Nourse LJ, with whom Kerr and Taylor LJJ agreed, after referring to Beesly and D'Silva, pointed out that in the latter case the decision of Cross J in Windsor Refrigerator Co. Ltd. v Branch Nominees  Ch 88 had apparently not been cited to Buckley J and that Cross J had said (at page 98):
"A deed, whether executed by a corporation or by an individual, does not necessarily bind the grantor as soon as it is sealed. It only becomes binding when it has been 'delivered' by the grantor as his deed, i.e., when the grantor has indicated by words or conduct that he intends the deed which he has executed to be binding on him."
- Nourse LJ reverted to section 74(1) at the end of his judgment, although he made clear that it was unnecessary for his decision on the appeal. He said (58 P&CR at 199):
"I respectfully think that Buckley J's view of the subsection was incorrect. I prefer the view which Cross J appears to have held. The sole purpose of section 74(1) was to make it unnecessary for a purchaser to require proof of the corporation's formal compliance with the provisions of its memorandum and articles of association or its charter. I am confirmed in that view by Sir Benjamin Cherry's own note to the subsection in the twelfth edition of Wolstenholme & Cherry's Conveyancing Statutes (1932), of which he was still the principal editor. Both the problem and the solution to it are in my opinion correctly stated by Professor Battersby [in Williams on Title, 4th ed., (1975) pp. 656,7]:
'Delivery is necessary to give effect to a deed. It is a difficult question whether this applies to the case of execution by a corporation. At common law there is a rebuttable presumption that sealing by a corporation imports delivery. A difficulty, however, arises from section 74(1) of the Law of Property Act 1925 … There is conflicting authority whether this provision dispenses, in favour of a purchaser, with the need for delivery. It is submitted that section 74, like section 73, is concerned only with the formalities of sealing, and does not dispense with delivery. It seems highly unlikely that such a radical change would have been intended, that it would need much clearer language to bring it about; nor does there seem to be any good reason for applying to a corporation a rule so different from that applied to all other persons.
I entirely agree with those observations."
- The note to section 74(1) in both the 12th edition and the 13th edition (1972) of Wolstenholme & Cherry states:
"The subsection removes the necessity for enquiry as to the formalities required under the memorandum, articles, charter, etc., of the corporation; independently of this section the deed would be void unless such formalities were observed: Cope v Thames Haven Dock and Railway Co. (1849) 3 Ex. 841."
- The judge gave the following reasons for following Nourse LJ's approach:
(1) It was supported by the ordinary conveyancing practice of all corporate entities, in particular of local authorities. Instruments cannot always be sealed at the moment when they are intended to be effective immediately. If delivery is needed for execution by a corporation to have effect as a deed, as it is for execution by an individual, the corporation can seal the instrument at its convenience and only be bound upon delivery. The technical difficulty that prior to the enactment and coming into force of section 1(5) Law of Property (Miscellaneous Provisions) Act 1989 it was necessary for an agent delivering a deed to have been appointed under seal (Powell v London and Provincial Bank  2 Ch 555) was surmountable by corporations giving officers authority by deed.
(2) The mischief at which section 74(1) was aimed was (i) to standardise the method by which a corporation validly affixes its seal, and (ii) to render unnecessary any enquiries by a purchaser as to the seal and the office-holders. That justifies a deeming provision as regards the valid sealing by a corporation of an instrument, but provides no explanation for dispensing with delivery.
(3) section 74(6) provides:
"Notwithstanding anything contained in this section, any mode of execution or attestation authorised by law or by practice or by the statute, charter, memorandum or articles, deed of settlement or other instrument constituting the corporation or regulating the affairs thereof, shall (in addition to the modes authorised by this section) be as effectual as if this section had not been passed."
Thus the use of a mode of execution or attestation by a corporation in accordance with its own constitution is an alternative to compliance with section 74(1). In such a case there could be no statutory deeming of delivery. That suggests that section 74(1) is limited to the sealing process.
- Subject to section 36A Companies Act 1985 relating to companies formed and registered under the Companies Acts (to which I will return), the formalities required for a deed under the present law, whether the maker is a corporation or an individual, are (i) that it is in writing, (ii) that the person or parties making it make clear in the instrument that it is intended to be a deed, (iii) that the instrument is validly executed as a deed by the person or one or more of the parties making it and (iv) that it has been delivered. The crucial question is whether (iii) and (iv) are separate requirements in the case of a corporation executing an instrument in accordance with section 74(1).
- As the Law Commission explained in its Consultation Paper: The Execution of Deeds and Documents by or on behalf of Bodies Corporate (1996) No. 143 at paragraph 6.4, conflicting views were long held as to whether the affixing of the seal implied delivery by the corporation. The Law Commission said that the weight of authority was that a separate act of delivery was necessary. However, it said that the sealing of a deed prima facie imported not only due execution but also delivery. In Mayor, Constables and Company of the Merchants of the Staple v Bank of England (1887) 21 QBD 160 at 165-6 Wills J said:
"The affixing the seal is not enough; there must be delivery of the deed also …. Prima facie, putting the seal imports delivery; yet, if it be intended otherwise, it is not so …."
- A deed is delivered "as soon as there are acts or words sufficient to [show] that it is intended by the party to be executed as his deed presently binding on him" (Xenos v Wickham (1866) LR 2HL 296 at 312 per Blackburn J) That is so even if the deed is delivered in escrow.
- The term "execution" may or may not include delivery. Nourse LJ in Longman at page 195 thought a signed, sealed and delivered deed was correctly described as executed. Mr Leeming fastened on that as being the ordinary meaning of execution. But whether or not that is the ordinary meaning, we are concerned with its meaning in the 1925 Act. In my judgment, the better view is that in section 74(1) it excludes delivery. When section 74(1) came into effect, it did so as a new provision which was part of a group of provisions relating to the execution of deeds. Thus section 73(1) refers to execution of a lease by an individual, requiring for that purpose that the individual must sign or place his mark upon the deed. Nothing is said about delivery, but no one suggests that delivery is not a requirement for the instrument to be a deed. Section 74(1) similarly says nothing about delivery and only deems the execution and the taking effect accordingly of the deed if the prescribed conditions are satisfied. Similarly section 74(3) provides for execution by a corporation through an agent, and if the conditions of the subsection are satisfied, "such execution shall take effect and be valid in like manner as if the corporation had executed the conveyance". I have already referred to the point made by the judge on section 74(6). Like Nourse LJ, I attach significance to the views of the chief draftsman of the 1925 Act, as indicated in the 12th edition of Wolstenholme & Cherry.
- In the Beesly case the lease contained an option to renew. Both the lease and the reversion were assigned for value. The assignee of the lease exercised the option and a new lease and counterpart were engrossed. The tenant executed the counterpart. The assignee of the reversion, a company, sealed the lease, but then sought to avoid granting the lease. Buckley J held that where a deed is intended to be executed in duplicate to give effect to a transaction by which each of the two parties undertakes obligations to the other, prima facie a party executing the lease does so in escrow conditionally on the other party executing his part of the lease. He said ( 1 WLR at 562) that the sealing of a deed by a corporation prima facie imported delivery of the deed either conditionally or unconditionally, and he saw no reason in the case before him to conclude that the sealing of the lease by the company "did not import delivery so as to constitute due execution either unconditionally or in escrow". He then expressed the view on the effect of section 74, to which I have referred. Thus, as Lloyd J pointed out, Buckley J was saying two different things: (1) delivery prima facie is inferred from sealing by a corporation; (2) the statutory presumption under section 74(1) extends to delivery.
- An appeal to this court was dismissed: see  Ch 105. Harman LJ, giving the main judgment, referred to Buckley J's holding that the lease was delivered as an escrow. He also referred to Buckley J's further holding that, in view of section 74, he was bound prima facie to hold that there had been execution and went on to consider an argument that an escrow can be withdrawn before the condition of the escrow is performed. At page 116 Harman LJ said:
"Of course, if there had been no delivery, as was pleaded, the matter would be wholly different, but that, by the time the action came to this court, had been decided as a fact by the judge and accepted by the defendants."
Lloyd J rightly observed that that comment appears not to proceed on the footing that execution in accordance with section 74(1) imports delivery and suggests that Harman LJ regarded delivery by a corporation as a separate question to be determined on the facts.
- The Windsor case was decided by Cross J a month after Buckley J decided Beesly, and there is no reference to Beesly in the report of Windsor. I need not repeat what Cross J said. It plainly indicates that delivery by a corporation is required for the instrument which it has executed to be a deed.
- In Vincent v Premo Enterprises Ltd  2 QB 609 a lease and counterpart were engrossed and the counterpart was sealed by the defendant tenant company. The company raised with its solicitors the question as to the date from which rent was to run. Before the point was settled, the company sought to withdraw. The trial judge held that the company had delivered the counterpart as an escrow but that it was too late for the landlords to claim that the escrow condition had been fulfilled. The court allowed the appeal by the landlords. The company argued that there was no delivery. The landlords relied on Beesly at first instance and in this court, arguing that "sealing by a company imports delivery". Lord Denning MR made no reference to section 74 or to Buckley J's reasoning, holding that the trial judge was entitled to find delivery of the counterpart as an escrow. Winn LJ agreed. He said (at page 623) that "[a]part altogether from the technical point under section 74", what Harman LJ said in Beesly in the passage I have cited was to be noted. Fenton Atkinson LJ agreed that the trial judge was entitled to find delivery of the counterpart as an escrow. I do not obtain any assistance from that case on the point in issue.
- In D'Silva the defendant landlord company sealed an engrossment of the lease. The tenant executed the counterpart and was already in possession and had paid the first quarter's rent when the company, on learning that its head landlord would not consent to the underletting, sought to withdraw. Buckley J referred to section 74 and to the due sealing of the lease, and said that the deed must be taken to have been duly executed by the company. He rejected an argument that section 74 does not deem delivery of the executed lease. He held that the lease was binding as an escrow, the only condition of the escrow being the execution of the counterpart, and that had been satisfied. There is no reference to Windsor in the report.
- In the Longman case the court was concerned with the question whether a landlord, who was an individual, was bound by signing and sealing a lease, where there had been no exchange and the negotiations for the grant of the lease had been expressed to be subject to completion of the lease. The trial judge was held to have been correct to conclude that the signing and sealing of the lease in accordance with normal conveyancing practice in anticipation of exchange did not demonstrate an intention to deliver the deed as an escrow. Nourse LJ considered Beesly, Windsor, Vincent and D'Silva. He pointed out that in D'Silva negotiations for the lease were expressed to be subject to contract, that the decision depended entirely on section 74(1), there being no evidence that the company had intended to deliver the lease and that Buckley J thought the company's deemed intention to deliver the deed as an executed document had overtaken what he called the "subject to contract" qualification. Nourse LJ disagreed with that view. It was in that context that he went on to express his obiter opinion that Buckley J was wrong in his views on section 74(1). Mr Leeming sought to cast doubt on the correctness of the decision in Longman because the description of the normal conveyancing practice by Nourse LJ made no mention of the need, as the Powell case showed, to confer authority by deed on the solicitor or other agent of the party who was validly to deliver the deed after it had been signed and sealed. That need had been shown by the Powell case. However, in Windsor, to which Nourse LJ had referred, the need for such a deed authorising the agent to deliver had featured prominently (see  Ch at page 98) and Nourse LJ expressly refers to the Powell point (see 58 P&CR at page 98). In any event, we are bound by the reasoning of the court in Longman and the correctness of Nourse LJ's observation on section 74 is unaffected by Mr Leeming's point.
- Buckley J's views have not escaped criticism (see, for example, (1978) 89 LQR 14, a case note on D'Silva by Michael Albery QC). However, one may perhaps detect a note of disapproval of Nourse LJ's remarks in Emmet on Title paragraph 20.003.2, where the editor refers with apparent approval to Beesly, Vincent and D'Silva as establishing that once a document had been sealed by a company within section 74 it would be treated as executed either as a deed immediately binding or else as an escrow, but continues:
"However, a submission to that effect has been rejected virtually out-of-hand by the Court of Appeal apparently unanimously but obiter in Longman …. As with individuals, a separate act of delivery by or rather on behalf of the company must be shown."
- Finally, I should refer to the Report of the Law Commission: The Execution of Deeds and Documents by or on behalf of Bodies Corporate, Law Com. No.253 (1998), in which the Law Commission refers to what it said in its consultation paper about the previous conflicting views on the subject and says (at paragraph 6.1):
"However, it now seems clear that delivery remains a distinct requirement in all cases, although at common law the sealing of a deed raises a rebuttable presumption of delivery."
The Law Commission recommended changes to make this clearer in the context of section 74(1).
- Subject to one qualification, I respectfully agree with the Law Commission's view, although it is with natural diffidence that I differ from the views expressed by Buckley J. It appears to me that on the natural construction of section 74(1) in its context in the 1925 Act, that subsection was not dealing with delivery at all. There are strong pragmatic reasons for that interpretation, as in many cases the affixing of the seal by a corporation prior to it being intended to bind the corporation is the only practical course. I cannot see any sufficient justification for the law requiring delivery of a sealed instrument by individuals but irrebuttably deeming delivery in the case of corporations without express statutory provisions to that effect. I take comfort from the fact that Parliament appears to have adopted the same view by enacting section 36A(5) and (6) of the Companies Act 1985 (inserted by section 130(2) of the Companies Act 1989 as from 31st July 1990) in which express provision is made for delivery in addition to execution. Those subsections provide, so far as material:
"(5) A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.
(6) In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed."
- The one qualification that I would make is that at common law to describe the sealing by a corporation as giving rise to a rebuttable presumption may go too far, implying, as that does, that the burden of proof is on the corporation affixing the seal. In the Bank of England case Wills J only says that prima facie putting the seal imports delivery and that a contrary intention by the corporation may be proved. In the Longman case at page 198 Nourse LJ rejected any presumption imposing a burden of proof in the case of an individual who signed and sealed a lease, saying that the system would be unworkable if that were so. I will return to this point when I deal with the second ground.
- For these reasons, as well as those given by the judge I reject the arguments for Mr Torkington on the first ground of appeal. It is therefore unnecessary to consider a point which Mr Chaisty has taken on the correctness of the assumption made by the judge that Mr Torkington was a purchaser for the purposes of section 74(1). The Council has put in no Respondent's Notice and it would serve no purpose to consider this point in view of the conclusion I have reached on the first ground of appeal.
Ground 2: Presumption of delivery
- Mr Leeming submits that on the evidence delivery has been established or is to be presumed. He relies on the observations of Buckley J in Beesly at page 562 that the sealing of a deed by a corporate body prima facie imports delivery of the deed either unconditionally or conditionally. Mr Leeming no longer suggests unconditional delivery took place in this case. He points out that Buckley J relied in support of his proposition on Norton on Deeds, 2nd Edition 1928 pages 12-13 and the remarks of Wills J in the Bank of England case to which I have referred. He refers to the formalities which were gone through when the Council sealed the lease, and said that it would be surprising if the instrument with the seal attested was nothing more than a piece of paper with no legal effect whatsoever.
- Mr Chaisty took a preliminary objection to this ground which, he said, raised a matter not argued below nor raised in the pleadings. If it had been, evidence might have been directed to the question. Mr Leeming accepts that it was not pleaded, but he says that it was argued and points to his opening skeleton argument in which he had said, after dealing with section 74:
"In any event in the present case delivery by Bolton should be either deemed or inferred."
He said that the judge was responding to that argument in finding that delivery could not be inferred and had not been proved.
- I need not go into the objection further, because it seems to me plain that on the facts and in the light of the decision of this court in Longman the Council did not intend to be bound immediately. Nor, for the same reason, is it necessary to decide whether the sealing of an instrument by a corporation not affected by section 36A of the 1985 Act creates a rebuttable presumption of delivery in the sense of casting a burden of proof on the corporation. In Norton on Deeds 2nd Edition at pages 12-13 on which Buckley J had relied, reference is made to Derby Canal Company v Wilmot  9 East 360 and the remarks of Lord Ellenborough CJ that:
"... in order to give 'the deed' of a corporation 'effect', the affixing of the seal must be done with intent to pass the estate, otherwise it operates no more than a feoffment would do without livery of seisin."
- In the Bank of England case Wills J had referred to the Derby Canal case as the authority for the requirement of delivery by a corporation which has sealed an instrument, and he did so immediately before the remarks to which I have referred that prima facie sealing imports delivery. It is clear from those two cases that the intention of the corporation in sealing the document is the crucial matter.
- Mr Chaisty relied on the letter by Mr Tipping of 25th September 1990 as negating any intention that the Council should be bound immediately. That letter, marked "subject to contract", indicated that the Council was to seal the lease in readiness for completion on or before 1st October 1990. In fact we know that the Council did seal the lease on 1st October 1990.
- It would be surprising, in my view, if in the course of subject to contract negotiations which the parties know and intend will not cause them to be bound unless and until contracts are exchanged, the act of one corporate party in sealing the lease in readiness for completion was intended to bind that party. As Waller LJ pointed out in the course of the argument, if one was to infer an intention to deliver from the act of sealing and both parties were corporations one would have the bizarre situation that both, by sealing the lease and counterpart respectively, would be bound, despite having made clear by the negotiations being subject to contract that they were not to be bound until completion. In the context of local authority practice, it would be remarkably inconvenient if a local authority which was conducting subject to contract negotiations were to be bound when, to prepare itself for completion, it caused its seal to be affixed at a moment convenient to the Council. I can see no reason why it should wish to be bound at that time particularly when the other party with which it has been negotiating is not correspondingly bound. In my judgment that supports the view that until completion neither party would be bound.
- That approach is supported by the decision of this court in Longman, that where negotiations for the grant of a lease are expressed to be subject to contract, the signing and sealing of the lease, in accordance with the normal conveyancing practice in anticipation of exchange, does not disclose an intention to deliver the deed as an escrow. Nourse LJ at page 195 referred to three ways in which a signed and sealed instrument may be delivered:
"First, it may be delivered as an unconditional deed, being irrevocable and taking immediate effect. Secondly, it may be delivered as an escrow, being irrevocable but not taking effect unless and until the condition or conditions of the escrow are fulfilled. Thirdly, it may be handed to an agent of the maker with instructions to deal with it in a certain way in a certain event, being revocable and of no effect unless and until it is so dealt with, whereupon it is delivered and takes effect; as to this method, see Governors and Guardians of the Foundling Hospital v Crane  2 KB 367; and Windsor Refrigerator Co. Ltd. v. Branch Nominees Ltd, case per Cross J  Ch at pages 100 to 102. It is implicit in the ordinary conveyancing practice now under consideration that it is the third method which there applies."
- Mr Leeming rightly pointed out that the circumstances of the Foundling Hospital case were unusual, but that cannot alter the fact that the reasoning of this court in Longman is that the subject to contract qualification imposed in negotiations is inimical to an intention to be bound forthwith prior to completion. So also here.
- I therefore conclude that the judge was right to find that there has been no delivery and accordingly the second ground of appeal fails.
- In the light of these conclusions, it was unnecessary for us to hear, and we did not hear, argument on the further grounds of appeal.
- I would dismiss this appeal.
- LORD JUSTICE WALLER: I agree that for the reasons given by my Lord this appeal should be dismissed.
- LORD JUSTICE CARNWATH: I agree. I would only add a brief comment on the Council's procedure for sealing documents, as described in the evidence of Mr Cresswell, Assistant Borough Solicitor and the authorised sealing officer. The judge summarised his evidence as to the sealing procedure as follows:
"The seal has to be placed on a document in the presence of the Mayor. Mayors have extensive commitments outside the Town Hall, so there are regular appointments, about once a week, for sealing. Documents have to be made ready for such an opportunity, which may well be in advance of the date on which they are needed. There may be lots of documents to be sealed on one occasion, although on this occasion there was only the one."
Mr Cresswell in his evidence explained how on certain occasions there might be between 20 and 50 documents for the Mayor to seal. Following that sealing process the sealing officer would cause an entry to be made in the sealing book. The judge noted that the entry in this case simply referred to the fact of sealing and said nothing about delivery or otherwise about the legal effect. He said:
"That was all that ever happened as regards this document. It went back into the Council's custody and remained there until it was disclosed on discovery in the action."
- I would make two points. First, neither we, nor apparently the judge, were referred to any standing orders or internal regulations of the Council explaining this procedure or precisely what those involved thought to be its legal significance, although I am sure such a document must exist. I would emphasise how important it is for those directly involved, as well as for the public (and, where a dispute occurs, for the courts) to be able to refer to a formal document which sets out the approved procedures and their legal purpose.
- Secondly, I think the Mayor might have been surprised to hear it suggested that in carrying out this apparently mechanistic process he was not merely doing something required by the Council's internal procedures, but was taking an irrevocable step in relation to other parties. Indeed, if that were the effect, the bulk procedure described by Mr Cresswell would be difficult to support. This consideration cannot, of course, influence our interpretation of the 1925 Act. The Council might have got its procedures wrong. However, it illustrates the practical significance of the issue in relation to section 74, and the importance for authorities of knowing what is the correct legal position. I hope that our decision in this case will help to achieve that result.
Order: Appeal dismissed with costs, the Appellant to pay £10,000 on account. There will be a stay of possession for 28 days, subject to a requirement that the Appellant pay £3,000 within seven days, or until disposal of the leave petition, or, if permission is granted, disposal of the appeal, on the footing that it is pursued in a timely fashion. The Appellant will also require payment of £300 per month until disposal. If there is no such payment, the stay will come to an end. Permission to appeal to the House of Lords refused.
(Order does not form part of approved judgment)