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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Middlebank Ltd v. The University Of Dundee & Anor  ScotCS CSOH_202 (28 December 2006)
Cite as:  CSOH 202,  ScotCS CSOH_202
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OUTER HOUSE, COURT OF SESSION
 CSOH 202
OPINION OF LORD DRUMMOND YOUNG
in the cause
Pursuers: MacColl; Warners
Defenders: Reid, QC, Bartos; Biggart Baillie
present action relates to a tenement property in
 Immediately adjacent to the tenement block described above is another block, broadly similar in its layout. In this case the shop premises are numbered 10, 14 and 16 and the upper floors, which again consisted of flats used by the first defenders to provide student residences, are entered through a common entry and stair numbered 12.
2003 the first defenders were the proprietors of the whole of the tenement
block at nos.
pursuers are associated with two other companies, Century 21 Homes
Limited and Importa Limited. On
"The Property is
as advertised, as described in the written particulars, if any, or as pointed
out to the Purchaser on inspection and comprises first and second floor and
attic flats at
The price offered was
г500,000. Substantial conditions were
annexed to the offer. On
"On behalf of and as instructed by our clients, The University of Dundee, Perth Road, Dundee we hereby accept your formal Offer dated 21 January 2004 on behalf of your clients, Century 21 Homes Limited, to purchase from our clients the first and second and attic flats at 6-12 Perth Road, Dundee",
on certain terms and conditions. The only one of these that is material for present purposes is condition 8; this is as follows:
"The Property is that described in the Disposition by Millpark Limited in favour of the University of Dundee recorded GRS (Angus) 9 February 1968 and Disposition by Eastbourne Mutual Building Society with the consent of Greenback Property Company (Dundee) Limited and Mrs Amelia Emma Davidson in favour of Co-operative and Permanent Building Society recorded GRS (Angus) 23 December 1955".
description of the property in condition 8 is the source of the dispute that
has developed between the parties. The
first disposition that is referred to in that description, that by Milllark
Limited in favour of the first defenders in 1968, in fact included the whole
property at numbers
next letter that passed between the parties' agents was a letter of
"Condition 8 of your said formal letter is held to be deleted. It is understood that the property comprises (1) the subjects described in the Disposition by Millpark Limited in favour of The University of Dundee recorded GRS (Angus) on 9 February 1968 under exception of the shop and basement premises Number 10 Perth Road described in [a disposition of 1989 by the defenders] and the shop premises known as Numbers 14 and 16 Perth Road, Dundee so far as not already excepted described in [a disposition by the defenders in 1984] and (2) the westmost second and third floor property at 12 Perth Road, Dundee described in [the disposition of 1955 by Greenbank Property Co (Dundee) Limited in favour of Co-operative Permanent Building Society]".
The reference to the shop and
basement premises at
missive letters passed between the parties' agents on 9 February, 17 February
and 2 March.
"On the behalf of and as instructed by our clients, Century 21 (Homes) Limited, Importa Limited, ... and Middlebank Limited, ..., the said Importa Limited and Middlebank Limited having been nominated by Century 21 (Homes) Limited as the Purchasers, we hereby delete the whole terms of our formal letter, dated 2 March 2004, and Offer on behalf of the said Importa Limited and Middlebank Limited to amend the terms of our formal letter, dated 17 February 2004, relative to your formal letter, dated 9 February 2004, on behalf of your clients, The University of Dundee, relative to our formal letter, dated 3 February 2004, relative to your formal letter, dated 27 January 2004, being a Qualified Acceptance of our Offer, dated 21 January 2004, on behalf of Century 21 (Homes) Limited or their Nominees to purchase from your said clients the subjects at 6-12 Perth Road, Dundee, at the price of FIVE HUNDRED THOUSAND POUNDS (г500,000) STERLING and on the other terms and conditions stated in said Missives, as follows, and make the following further qualifications:-
(4) The Purchasers will be
Importa Limited, ..., who will purchase the property at
letter was accepted by
The parties' respective positions following the missives
the conclusion of missives a disposition was prepared in favour of the
pursuers. This referred to the property
sold by the first defenders to the pursuers in terms that included the whole of
the tenement comprising nos. 2, 2A, 4, 6 and
 In their counterclaim the first defenders make detailed
averments regarding the layout of the property and its use and occupation in
2003; they also make averments relating
to the particulars of sale that were prepared, the valuation of the subjects,
carried out in January 2004, that was relied upon by the pursuers, and an
inspection of the subjects that was carried out by an architect and a heating
engineer on the pursuers' behalf in February 2004. The essential point that emerges from the
latter averments is that the particulars, the valuation and the inspection
related only to the upper floors of the tenements, and not to the storage and
shop or office premises on the ground floor and in the basement. The first defenders then aver the history and
terms of the missives. On the basis of
those averments, it is contended that the pursuers concluded a contract to
purchase the subjects at
 Counsel for the first defenders submitted that the subjects referred to in the missives did not include the ground floor and basement subjects, and that the first defenders were accordingly entitled to declarator in terms of the first conclusion of the counterclaim. The primary submission was that the matter could be resolved by reference to the language used by the parties in the missive letters themselves and the relevant part of the 1968 disposition in favour of the first defenders. In the alternative, counsel contended that, in construing the missives, it was permissible to have regard to the surrounding circumstances not to put a gloss on the words used but to provide the setting for the contract and in particular its commercial context. Authority for a dual approach of that nature was found in Bank of Scotland v Property Investment Company Limited, 1998 SC 657, at 661G-H per LP Rodger. Counsel submitted that the relevant surrounding circumstances could be determined from the documentary productions. On that basis a proof was unnecessary, and even on the alternative approach I should resolve the issue of construction in the first defenders' favour at debate. Counsel for the pursuers agreed that the primary issue was the construction of the missives themselves; his submitted that on the basis I should decide the question of construction in the pursuers' favour. In relation to the first defenders' alternative approach, counsel submitted that the matter should still be resolved at debate in the pursuers' favour. He accepted that the surrounding context could be determined from the documentary productions, and that there was no need for a proof on the issue of construction. I propose to begin by considering the legal principles that are relevant to the construction of the missives.
Legal principles applicable to interpretation of the missives
 In a sense it is impossible to construe missives for the sale
of heritable property entirely by themselves, without reference to other
facts. The missives inevitably relate to
specific subjects, and those subjects must be identified on the ground. This point is recognized in what is perhaps
the leading authority in this field of law, Houldsworth
v Gordon Cumming, 1910 SC (HL)
49. In that case Lord Kinnear
stated (at 54) that, in the case of landed estates, the title deeds do not as a
rule define the subject in such a way that it can be identified without the
help of extrinsic evidence. In that case
such evidence was admitted to indicate the extent of property described in
missives of sale as "the estate of
"It is manifest, therefore, that if a question arises as to the description to be inserted in a disposition, the first thing to be settled is what is the exact subject sold; and that is to be determined, not by the existing titles, but by the contract of sale, interpreted, as every document whatsoever must, more or less, be interpreted, by reference to the surrounding circumstances".
In most cases, however, while a reference to the physical location and extent of the property is necessary, it will be possible to determine the property sold by reference to the wording of the missives, using a common sense approach.
 The general principles relating to the construction of
contracts are well established and were not significantly in dispute between
the parties. The principles that appear
to me to be particularly relevant for the resolution of the present dispute may
be summarized as follows. First, the
starting point is normally the wording of the document that contains the
parties' agreement: Charter Reinsurance Co Ltd v Fagan,  AC 313 per Lord Mustill
at 384B-C. Secondly, where ordinary
words are used, they must be given their ordinary meaning: ibid,
"[S]uch evidence is unhelpful. By the nature of things, where negotiations are difficult, the parties' positions, with each passing letter, are changing and until the final agreement, though converging, still divergent. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used, nothing is gained by looking back; indeed something may be lost since the relevant surrounding circumstances may be different. And at this stage there is no consensus of the parties to appeal to".
In the third place, words that have been deleted by the parties in the course of the contractual negotiations should not generally be looked at as an aid to construction because they are not part of the agreement: A & J Inglis v Buttery, 1878, 5 R (HL) 87, per Lord Hatherley at 90 and 96-97; Lord O'Hagan at 98-99, and Lord Blackburn at 102; Prenn v Simmonds, per Lord Wilberforce at 1384G-1385 H. This qualification is essentially a development of the previous one, and its rationale is the same. This was expressed by Lord Gifford in the Inner House in Inglis in the following terms, which were quoted with approval by Lord Blackburn in the House of Lords (at 102):
"The only meaning of adjusting a formal contract is that the formal contract shall supersede all loose and preliminary negotiations, that there shall be no room for misunderstandings, which may often arise, and which do constantly arise, in the course of long, and it may be desultory, conversations, or of correspondence or negotiations, in the course of which the parties are often widely at issue as to what they will insist on and what they will concede. The very purpose of a formal contract is to put an end to the disputes which would inevitably arise if the matter were left upon verbal negotiations or upon mixed communings partly consisting of letters and partly of conversations. The written contract is that which is to be appealed to by both parties, however different it may be from their previous demands or stipulations, whether contained in letters or in verbal conversation".
Missives for the sale of heritable property are of course a type of formal contract.
 Two matters in particular assumed importance in the present case. The first is the rule just mentioned, that no regard can be had to words that have been deleted during negotiations. It can be difficult to apply this rule to missives for the sale of heritage because of the traditional practice, exemplified in the present case, of referring in each successive letter to all previous correspondence that can be considered to form part of the negotiations. In this respect there is much to be said for the more modern practice of conducting negotiations in correspondence that does not form part of the missives and then, following the negotiations, confining the missives to a single offer followed by an acceptance. When the older practice is followed, however, I am of opinion that the rules regarding negotiations and deleted wording must be applied with their full force. Consequently the terms of the parties' contract must be sought in the final qualified acceptance that is itself accepted by the other party; it is that qualified acceptance that is the effective offer. If any provision in earlier correspondence is to be included in the missives, there must be sufficiently clear reference to it in that final qualified acceptance.
 The second matter that assumed importance is the use of surrounding circumstances in construing a contract; this was the foundation of the first defenders' alternative argument. This is exemplified by the facts of Houldsworth v Gordon Cumming, discussed at paragraph  above. The critical evidence that was admitted in that case to determine the extent of the subjects sold by missives was a plan that had been used by the parties in the course of their negotiations; the significance of the plan is summarized by LC Loreburn at 1910 SC (HL) 51-52, where it is pointed out that the plan was provided to the buyer's agent during negotiations to indicate the extent of the property offered for sale. The use of the plan in that case is in my opinion paralleled almost exactly by the property particulars that were prepared in the present case on the first defenders' behalf and issued to prospective purchasers and their agents, including the agents who acted for the pursuers and certain associated companies: see paragraph  below. I should also mention certain further remarks of Lord Kinnear in that case. He stated (at 1910 SC (HL) 54-55):
"I agree with the respondent's counsel that a contract to sell the lands contained in a certain title is perfectly possible, and would give the purchaser right to everything which the seller and his predecessors had in fact possessed under that title.... But, if there be any question whether the subject sold is less or more than the whole estate possessed, that cannot be solved by the title, unless the contract has been made with express reference to the title".
It was in that context that Lord Kinnear went on to hold, in the words quoted at paragraph  above, that the subjects sold must be determined by the contract of sale, interpreted according to the surrounding circumstances. In the present case the issue between the parties came, ultimately, to be how the subjects sold had been defined in the missives. The pursuers contended that they had been defined by reference to the first defenders' prior title; the first defenders contended that they had been defined by reference to a postal address, taken along with the layout of the tenement in which the subjects are situated. That issue must in my opinion be determined according to the approach stated by Lord Kinnear. I will accordingly begin by considering the construction of the wording used in the missives, interpreted in the light of the physical configuration of the tenement property and the system of postal addresses used at that property. Thereafter, in the alternative, I will consider the other circumstances that surrounded the conclusion of missives, and whether those circumstances have a bearing on the construction of the wording used in the missives.
Construction of wording in missives
 In construing the missives, the first task is to determine the
operative documents. In this connection,
as indicated above, it is essential to bear in mind the rule, laid down in A & J Inglis v Buttery & Co, supra, and reiterated in Prenn v Simmonds, supra, that no regard should be had to wording that has
been deleted in the course of negotiations over the terms of a contract. In the present case, the starting point must
be the letter from Blackadders to
 In Charter Reinsurance Co
Ltd v Fagan, supra, Lord Mustill stated (at 384B-C) "I believe that most
expressions do have a natural meaning, in the sense of their primary meaning in
ordinary speech.... [T]he inquiry will start, and usually finish, by asking
what is the ordinary meaning of the words used". In my opinion that must be the starting point
in construing the letter of
 The matter does not end there, however. The argument for the pursuers was that the
parties must be presumed to have chosen the wording used in the letters of 10
and 11 March 2004 deliberately: City Wall Properties (
for the pursuers further founded on the terms of condition 3 of Blackadders'
 In addition, even if that letter were relevant, qualification 3
of the letter of
 I accordingly conclude, on the basis of the two critical
missive letters and the system of postal addresses that apply to the tenement,
that the first defenders' construction of the missives is correct and that the
subjects sold are confined to the upper flats bearing the postal addresses 6
 Two items of documentary evidence are in my opinion highly
material; both of these were accepted by
both parties. The more important of
these is the property particulars prepared by the first defenders' agents in
preparation for the sale of the subjects.
These refer at the outset to "5 Flats at
 The property particulars and survey are clearly both important
documents prepared in furtherance of the sale of the property. The property particulars are especially
important because they define the property that was originally offered for
sale. Moreover, they were available to
both parties and their solicitors and other advisers. Consequently they are clearly a critical part
of the circumstances in which the missives came to be concluded. The survey was a document prepared for the
purposes of the pursuers, and there was no indication that it was made
available to the first defenders or anyone acting on their behalf. For that reason it is a document of lesser
significance. Nevertheless, the pursuers
and their solicitors were clearly aware of the terms of the survey at the time
when missives were concluded, and the survey can be regarded as providing
considerable support for the inferences to be drawn from the property
particulars. The property particulars
and the survey relate to property described either as "
 In addition, the fact that the property particulars and survey
related only to the upper floors is a strong indication that, initially at
least, the parties had in mind the sale of the upper flats only. In those circumstances the overall commercial
context in which the correspondence between the parties' agents took place was
a proposed sale of the upper flats.
Counsel for the pursuers accepted that that was initially the case, and
that the initial offer of
 As I have indicated previously, the use of surrounding
circumstances to explain the extent of the property sold by missives is
permissible and indeed, in limited respects, essential; Houldsworth
v Gordon Cumming, supra, is
authority for that proposition. I
consider that the present case is closely analogous to Houldsworth; the property
particulars fulfilled a function that was almost exactly parallel to the plan
furnished to the purchaser's agents in that case. In these circumstances I conclude that, when
the missives are construed in the light of the surrounding circumstances, the
description of the property found in the offer of
 A number of other documents were relied on by both parties as
disclosing the circumstances that surrounded the conclusion of the
missives. The first of these
chronologically was a letter of
 For the reasons discussed in the previous section of this
opinion, I have concluded that the surrounding circumstances, as disclosed by
the documentary evidence, strongly support the construction of the contract
advanced by the first defenders; the
reference in the letter of offer of 10 March 2004 to "6-12 Perth Road" is
a reference to the upper floors at those two addresses, and not to the ground
floor and basement premises. This
conclusion is also supported by certain further factors going to the commercial
reasonableness of the pursuers' construction.
It was accepted by counsel for the pursuers that the ground floor and
basement premises were not included in the property originally offered for sale
by the first defenders. The question
then arises as to the commercial explanation for the addition of the ground
floor and basement premises to the subjects of sale. Those premises were not used for residential
purposes; that was not in dispute between the parties. Nor were they surveyed on the pursuers'
behalf. The price for the subjects of
sale remained exactly the same, г500,000, from the original offer of
Need for proof
 As indicated above, both parties were anxious that the case should be decided if possible without the need for a proof; to the extent that extrinsic evidence was relevant, they agreed that the relevant circumstances could be discerned from the documentary productions. I agree with this view. If a proof took place, the solicitors responsible for concluding missives would not be able to add anything to the terms of their letters. Evidence of what is said in the course of negotiations over the terms of a contract is not admissible, and that would preclude evidence of anything that went beyond the documents: see paragraph  above. So far as the contract itself is concerned, it is the documents that must be construed; what the solicitors who wrote the letters meant would be of no value, and would probably be inadmissible. Neither party suggested that there was any scope for evidence of conveyancing practice, and I am quite unable to see any relevance in such practice. Finally, it would not be necessary for leading evidence as to the system of postal addresses; that is a matter that is well known, and in the present case the system of addresses used at the property was very obvious. All that would be left, accordingly, would be the documents, and I have used the documents for the purposes of the present opinion.
 For the foregoing reasons I conclude that the contract contained in the missive letters of 10 and 11 March 2004 did not include the ground floor and basement premises at 2, 2A, 4, and 8 Perth Road. For that reason I find the counterclaim to be relevant, and I will accordingly repel the pursuers' first plea in law in the answers to the counterclaim, which challenges its relevancy. I further find irrelevant the averment by the pursuers (contained in answer 6 to the counterclaim) that "the concluded missives provided that the pursuers would take title to the subjects at 6 Perth Road, Dundee (including the basement store and ground floor shop premises at 2, 2A, 4 and 8 Perth Road)". To that extent I will sustain the first defenders' plea in law to the relevancy of the answers to the counterclaim. I will further sustain the first defenders' first plea in law in the counterclaim and pronounce decree in terms of the first conclusion of the counterclaim.