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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Middlebank Ltd v. The University Of Dundee & Anor [2006] ScotCS CSOH_202 (28 December 2006)
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Cite as: [2006] CSOH 202, [2006] ScotCS CSOH_202

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OUTER HOUSE, COURT OF SESSION

 

[2006] CSOH 202

 

CA40/06

 

 

 

 

 

 

 

 

 

 

 

OPINION OF LORD DRUMMOND YOUNG

 

in the cause

 

MIDDLEBANK LIMITED

 

Pursuers;

 

against

 

(FIRST) THE UNIVERSITY OF DUNDEE AND (SECOND) THE KEEPER OF THE REGISTERS OF SCOTLAND

 

Defenders:

 

 

ннннннннннннннннн________________

 

 

 

Pursuers: MacColl; Warners

Defenders: Reid, QC, Bartos; Biggart Baillie

 

28 December 2006

 

The Property

 

[1] The present action relates to a tenement property in Perth Road, Dundee. The tenement in question is very typical, of a kind found in every Scottish town. The ground floor and basement premises consist of shops and a storage area; it is indicated in the pleadings that the shops were at the material time occupied by the first defenders as office premises, but that is not significant for present purposes. The upper floors consist of flats which, prior to the sale mentioned below, were used by the first defenders to provide student residences. Access to the upper floors is obtained from the street through a common passage and stair. The street numbers are as follows. On the left of the property, looked at from the street, are basement storage premises numbered 2 and above them at ground floor level a shop or office numbered 2A. To the right of no. 2 is another ground floor shop or office, no. 4. To the right of that is the common entry to the upper flats, numbered 6. To the right of the common entry is a further shop or office, numbered 8.

[2] 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.

[3] In 2003 the first defenders were the proprietors of the whole of the tenement block at nos. 2-8 Perth Road and the upper floors of the block at nos. 10-16. They held the property at nos. 2-8 under a disposition by Millpark Limited in their favour dated 31 January 1968 and recorded in the General Register of Sasines for Angus on 9 February 1968. The property transferred by that disposition comprised the whole of the property at nos. 2-8 Perth Road, including the ground floor and basement shops and storage area as well as the flats on the upper floors, and substantial parts of the property at nos. 10-16 Perth Road; the other parts of the latter property were obtained by another disposition which is not material for present purposes. Towards the end of 2003 the first defenders decided to sell the upper floors of both blocks of tenements, which had been used as student residences. The upper floors of the property were accordingly placed on the market, and particulars of sale were prepared, in terms described below at paragraph [23].

 

Missives

[4] The pursuers are associated with two other companies, Century 21 Homes Limited and Importa Limited. On 21 January 2004, Blackadders, the solicitors who acted for all three of those companies, submitted an offer on behalf of Century 21 Homes Limited to the first defenders' solicitors, Thorntons. The offer was to purchase "the Property", which was defined in the following terms:

"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 6-12 Perth Road, Dundee".

The price offered was г500,000. Substantial conditions were annexed to the offer. On 27 January 2004 Thorntons replied to Blackadders' offer in the following terms:

"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".

[5] The 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 2-8 Perth Road, including the shops and basement storage area as well as the upper floors. The second disposition that is referred to, that by Greenback (in reality Greenbank) Property Co (Dundee) Limited in favour of the Co-operative Permanent Building Society in 1955, related to certain of the subjects forming part of the tenement at 12 Perth Road.

[6] The next letter that passed between the parties' agents was a letter of 3 February 2004 from Blackadders to Thorntons. In this letter the qualifications contained letter of 27 January were accepted subject to certain further qualifications. The third of these, so far as material, read as follows:

"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 10 Perth Road was corrected to 12 Perth Road in a subsequent letter.

[7] Further missive letters passed between the parties' agents on 9 February, 17 February and 2 March. Thorntons' letter of 9 February, in its initial paragraph, referred to the purchase of "the first, second and attic flats at 6-12 Perth Road, Dundee". Blackadders' letters of 17 February and 2 March referred to "the subjects at 6-12 Perth Road, Dundee". Certain qualifications were made to the terms of the missives in those letters, but those qualifications are not material for present purposes. Those letters were followed by a further letter from Blackadders dated 10 March. According to the standard analysis of offers and qualified acceptances in missives (Wolf and Wolf v Forfar Potato Co, 1984 SLT 100), each qualified acceptance is strictly speaking a fresh offer, and it is the final qualified acceptance that constitutes the offer that is ultimately accepted. Blackadders' letter of 10 March is the final qualified acceptance, and is thus the offer that was accepted by Thorntons. It is this letter, accordingly, that must be regarded as the starting point in determining what was agreed between the parties' agents. The letter of 10 March 2004, so far as material, is in the following terms:

"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 12 Perth Road at the price of TWO HUNDRED AND FIFTY THOUSAND (г250,000) STERLING and Middlebank Limited, ..., who will purchase property at 6 Perth Road at the price of TWO HUNDRED AND FIFTY THOUSAND (г250,000) STERLING".

[8] That letter was accepted by Thorntons by a letter of 11 March 2004. In that letter the subjects were described as "the subjects at 6-12 Perth Road, Dundee". The result is that missives were concluded between the parties for the sale of certain subjects. The critical question is what those subjects were.

 

The parties' respective positions following the missives

[9] Following 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 8 Perth Road, and that disposition was executed by the first defenders. The disposition was then sent to the Keeper of the Registers, but was subsequently lost. I was informed that the first defenders had raised proceedings to rectify the disposition, but the action had been dismissed; no written opinion was given. The pursuers then raised the present action against the present defenders to prove the tenor of the disposition that was lost and for decree ordaining the first defenders to vacate the basement store and shops at 2, 2A, 4 and 8 Perth Road. The action was defended and the first defenders lodged a counterclaim in which they sought a number of remedies. The first conclusion of the counterclaim, which is the only conclusion that is material for the purposes of this opinion, is for declarator that in terms of the missives the first defenders are not obliged to sell or dispone to the pursuers the basement store and ground floor former shop, now office premises, at 2, 2A, 4 and 8 Perth Road. In subsequent conclusions the first defenders seek other declarators based on error, but those were not considered in the debate that gave rise to this opinion.

[10] 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 6 Perth Road. 6 Perth Road, it is said, does not comprise or include the subjects on the ground floor and in the basement at 2, 2A, 4 and 8 Perth Road. The pursuers have tabled a plea to the relevancy of the first defenders' averments in the counterclaim and the first defenders have tabled a plea to the relevancy of the pursuers' answers to the counterclaim. After sundry procedure the action was appointed to a debate on those pleas in law, but confined to the issue of whether the first defenders were entitled to decree of declarator in terms of the first conclusion of the counterclaim. The issue in the debate was accordingly whether, on a proper construction of the missives, the subjects referred to in the missives included the ground floor and basement subjects at 2, 2A, 4 and 8 Perth Road, or whether they were confined to the property on the upper floors at 6 and 12 Perth Road.

[11] 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

[12] 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 Dallas"; the extent of the property sold was determined by reference to a plan that had been referred to during negotiations. The same point, however, applies to almost every kind of property; indeed it may assume considerable importance in tenement property, where a description such as "flat first floor left at 100 High Street" may include cellars and a range of other rights. Nevertheless, the starting point in identifying the subjects sold is always the wording used in the missives. The law is summarized by Lord Kinnear as follows (at 1910 SC (HL) 55):

"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.

[13] 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, [1997] AC 313 per Lord Mustill at 384B-C. Secondly, where ordinary words are used, they must be given their ordinary meaning: ibid, and Melanesian Mission Trust Board v Australian Mutual Provident Society, [1997] 2 EG 128. "If their meaning is clear and unambiguous, effect must be given to [the words used] because that is what the parties are taken to have agreed to by their contract": Melanesian Mission Trust Board, per Lord Hope of Craighead at 129F. Thirdly, the court must give effect to the parties' bargain; it must not substitute a different bargain from that made by the parties: City Wall Properties (Scotland) Limited v Pearl Assurance PLC, 2004 SC 214. Fourthly, a contract must be construed objectively, according to the standards of a reasonable man who is aware of the commercial context. Fifthly, it is permissible in construing a contract to have regard to the circumstances in which it came to be concluded for the purpose of discovering the facts which the contract refers and its commercial purposes, objectively considered: Prenn v Simmonds, [971] 1 WLR 1381; Reardon Smith Line Ltd v Hansen-Tangen, [1976] 1 WLR 989. Fifthly, the foregoing rule is subject to certain important limitations and qualifications. In the first place, evidence of parties' discussions while a contract is being concluded is admissible "not to put a gloss on the terms of the contract, but rather to establish the parties' knowledge of the circumstances with reference to which they used in words in the contract": Bank of Scotland v Dunedin Property Investment Co Ltd, at 1998 SC 665F-G; Bovis Construction (Scotland) Ltd v Whatlings Construction Ltd, 1994 SC 351, at 357 C-G. In the second place, it is not usually helpful to have regard to evidence as to what was said in the course of the negotiations over the terms of the contract. In the words of Lord Wilberforce in Prenn v Simmonds, at [1971] 1 WLR 1384G-1385A:

"[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.

[14] 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.

[15] 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 [12] 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 [23] 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 [12] 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

[16] 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 Thorntons dated 10 March 2004 whose terms are set out in paragraph [7] above; that letter is the offer whose terms were accepted. In the letter two references are made to the subjects of sale. The first and more significant of these is found in the main paragraph of the letter, which contains an offer to purchase from the first defenders "the subjects at 6-12 Perth Road, Dundee". The second reference is found in qualification 4 of the letter, in which clause it is stated that Importa Ltd will purchase "the property at 12 Perth Road" and the pursuers will purchase "the property at 6 Perth Road". The first question must accordingly be the meaning of those expressions.

[17] 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 10 March 2004. The main paragraph of the letter refers to "6-12" Perth Road. The use of a hyphen sometimes denotes a series of numbers, or of odd or even numbers, running from the first to the second of the numbers mentioned. That cannot be the present meaning, however, in that the pursuers do not suggest that no. 10 Perth Road (part of the tenement comprising nos. 10, 12, 14 and 16) had been purchased by them, and do not contend that they are entitled to no. 8 but not nos. 2, 2A and 4 Perth Road. Consequently the hyphen must be intended as a simple link between the two numbers, corresponding to the conjunction "and". That is borne out by the second reference in the letter of 10 March 2004, which refers separately to 12 Perth Road and 6 Perth Road but to no other properties. The critical issue is accordingly whether the reference to "6 Perth Road" includes only the upper flats at that address or is rather intended to comprehend the whole tenement, including the ground floor and basement premises that bear the addresses 2, 2A, 4 and 8 Perth Road. In my opinion, on the ordinary and natural meaning of the words used, it is clear that the wording is intended to refer to the upper flats only, and not to the premises at ground and basement levels. The latter premises have different postal addresses, using different street numbers. A street number is perhaps the commonest way of referring to an urban property; its plain and obvious function is to differentiate the property so numbered from other properties that bear different numbers. On this basis alone I have no hesitation in holding that the wording used in the offer of 10 March 2004 was intended to include only the upper flats entered through the stair numbered 6 Perth Road. The other premises bore different numbers; if it had been intended to include those properties those numbers should have been added. Exactly the same reasoning applies to the acceptance letter, dated 11 March 2004, which also refers to "the subjects at 6-12 Perth Road".

[18] The matter does not end there, however. The argument for the pursuers was that the expression "6 Perth Road" was intended to include the whole tenement, including the ground floor and basement premises; on their averments the pursuers offered to prove that proposition. In advancing that argument the pursuers founded largely on the disposition of 1968 by Millpark Limited in favour of the first defenders; that disposition was the source of the first defenders' title, and included all of the properties in the tenement; in addition, it was the disposition that was incorporated by reference into the missive letter of 3 February 2004. In the disposition, however, the subjects are referred to as "the tenement forming Two, Two a, Four, Six and Eight Perth Road, Dundee, and the whole other buildings and erections thereon". Thus in that disposition the properties in the tenement are referred to by their individual postal addresses, and are discretely numbered and identified. The disposition does not refer, for example, to "the tenement known as Six Perth Road, Dundee, and comprising numbers Two, Two a, Four, Six and Eight Perth Road, Dundee". Consequently there is no basis in the disposition for any argument that a reference to "6 Perth Road" includes the whole tenement, including the subjects that bear different numbers. In the operative missive letter, that of 10 March 2004, the description is restricted to the subjects at no. 6 Perth Road. That restriction must in my opinion be significant; it makes it clear that it is only the upper floors, accessed through the entry at no. 6, that are included in the missives. The ground floor and basement properties, which bear different numbers both generally and in the first defenders' title, are excluded.

[19] The parties must be presumed to have chosen the wording used in the letters of 10 and 11 March 2004 deliberately: City Wall Properties (Scotland) Ltd v Pearl Insurance PLC supra, at 229. The expression that is used has a perfectly ordinary meaning, and there is no need to incorporate additional words to make sense of it. The pursuers' contention is that the reference to "6 Perth Road" is truly a reference to something more than that. In the summons in the principal action various expressions are used; typical of these is the expression used in the first conclusion, which is "the tenemental property known as 6 Perth Road, Dundee (comprising the flatted dwelling houses known as 6 Perth Road, together with the basement store and ground floor shops known as 2, 2A, 4 and 8 Perth Road)"; another version is "6 Perth Road, Dundee (comprising 2, 2A, 4, 6 and 8 Perth Road, Dundee)" (an expression taken from the draft Forms 1 and 4 used in subsequent registration procedures). These expressions, however, do not appear in the missives; nor do they appear in the 1968 disposition. Moreover, they involve the addition of considerable wording to the expressions used in the letters of 10 and 11 March 2004. In my opinion the addition of such wording is not warranted; it involves remaking the parties' contract.

[20] Counsel for the pursuers further founded on the terms of condition 3 of Blackadders' letter of 3 February 2004, which is set out in paragraph [6] above. The opening paragraph of that letter, which contains an offer, subsequently superseded, to purchase the property, refers to "the two tenements of flatted dwelling houses at 6 and 12 Perth Road, Dundee". Condition 3 then states an understanding that the property comprises the whole of the subjects described in the 1968 disposition in the first defenders' favour under exception of certain premises in the adjacent tenement; the 1968 disposition of course included the ground floor and basement premises at 2, 2A, 4 and 8 Perth Road. In my opinion the pursuers cannot found on this reference to the 1968 disposition to establish that the missives included the ground floor and basement premises. The primary reason for this conclusion is the rule that in construing a contract regard may not be had to provisions that have been deleted during the course of negotiation. The operative letters are the offer of 10 March 2004 and the acceptance of 11 March 2004. All earlier correspondence merely forms part of the negotiations, and regard may be had to that correspondence only to the extent that it is incorporated into the offer and acceptance and is not inconsistent with those two letters. The letter of 10 March 2004, for the reasons discussed above, amounts in my opinion to a clear offer to purchase 6 Perth Road, that being the upper flats accessed through the entry bearing that street number. The references in the main paragraph of that letter to previous correspondence are convoluted in the extreme; unfortunately they are very typical of the style of missives commonly in use. They appear to amount to an amendment of the terms of Blackadders' letter of 17 February 2004; references to earlier letters seem to be inserted as a pure matter of form. When the amendments are looked at as a matter of substance, however, they appear to be amount to a deletion of qualification 2 of the letter of 17 February 2004, a deletion of conditions 1-6 of the earlier letter of 9 February, an amendment of the date of entry and a statement that the identity of the purchasers is to change. None of these has a bearing on the identity of the subjects. Qualification 2 of the letter of 17 February is concerned with a title indemnity policy, and has no relevance to the present dispute. Paragraphs 1-6 of the letter of 9 February deal with part of the property at 12 Perth Road, the date of entry and the period for acceptance. Once again, none of these has a bearing on the description of the subjects. Nothing in the offer of 10 March 2004 amounts to an incorporation of the terms of the letter of 3 February 2004. In these circumstances, qualification 3 of that letter is a mere part of the negotiations, and for the reasons discussed above it is not relevant.

[21] In addition, even if that letter were relevant, qualification 3 of the letter of 3 February 2004 appears in my opinion to contradict the main operative paragraph of the letter. The latter paragraph refers to "the two tenements of flatted dwellinghouses at 6 and 12 Perth Road, Dundee". That wording points very clearly to the conclusion that it is the upper flats that are to be sold. Qualification 3 refers to the disposition of 1968, which of course includes the ground floor and basement premises. Even if that letter is construed in isolation, I am of opinion that the description in the opening paragraph must prevail. The opening paragraph constitutes the offer to purchase; qualification 3 is, in terms, a mere qualification. The hierarchy of contractual provisions accordingly suggests that it is the former that should prevail.

[22] 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 and 12 Perth Road. That conclusion is further supported, however, by consideration of the circumstances surrounding the conclusion of the missives.

 

Surrounding circumstances

Documentary evidence

[23] 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 6-12 Perth Road". The description of the property relates to "five flats", offered for sale as one lot. There follows a description of the individual flats, specifying the various rooms in each and giving the dimensions of each room. No mention whatsoever is made of the ground floor and basement premises. It is in my opinion clear beyond doubt that the particulars related to the upper flats only, and not to anything else. The second item of documentary evidence that has some bearing on the case is a valuation report prepared by Shepherd, a firm of chartered surveyors; this was based on an inspection carried out on 6 January 2004 on behalf of Century 21 Homes. It was accepted by the parties that this report had been instructed on behalf of the latter company but that the present pursuers had acquired the report and had relied on it. The report refers on its opening page to the address of the property as "6/12 Perth Road, Dundee". The subject type is described as "5 flatted dwellings contained within two adjoining tenement buildings". The individual flats are then described. Once again, nothing whatsoever is said about the ground floor and basement premises.

[24] 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 "6-12 Perth Road" or "6/12 Perth Road". In each case, it is clear that those expressions were intended to refer to the upper flats only. That leads in my opinion to a strong inference that, when the same expression as in the property particulars, "6-12 Perth Road", came to be used in the offer of 10 March 2004 and the acceptance of the following day, the intention was to refer to the upper flats only, and not to the ground floor and basement premises.

[25] 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 21 January 2004 was for the upper floors only, but he submitted that the position had changed during negotiations. I am bound to say that, if the subjects offered for sale did indeed change during negotiations, I would have expected to find an express reference to the change in the correspondence. In the letters that passed between the parties' solicitors, however, there is no express reference to any change, and indeed the expression "6-12 Perth Road" continued to be used. Any change can accordingly only be an inference from the descriptions by reference to the 1968 disposition found in Thorntons' letter of 27 January 2004 and Blackadders' letter of 3 February 2004. In my opinion the absence of any express reference gives a degree of improbability to the pursuers' argument. Instead, it appears to me that the clear and obvious commercial context was an offer to sell the upper flats only; that is an irresistible inference from the property particulars. When missives were eventually concluded, I am of opinion that the plain intention, objectively considered, was that the property described in those missives should be the property that was initially offered in the property particulars, that is to say, the upper flats only.

[26] 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 10 March 2004 must be taken to refer to the upper flats at nos. 6 and 12 Perth Road only, and not to the ground floor and basement premises.

[27] 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 3 February 2004 written by Blackadders to Century 21 (Homes) Limited. In that letter, which was founded on by the pursuers, reference is made to "the tenement property now referred to as Number 6 Perth Road and formerly comprising Numbers 2, 2A, 4, 6 and 8 Perth Road". In my opinion this letter cannot be considered part of the surrounding circumstances because it was a private communication between the solicitors who acted for the pursuers and one of their clients; there was no indication that it was known to the first defenders or their agents. The second document, founded on by the first defenders, was a letter of 5 February 2004 written by Blackadders to the Registers of Scotland. In this letter reference is made to "the purchase of flats at 6 and 12 Perth Road, Dundee". Once again, there was no indication that this letter was made known to the first defenders. For that reason I do not think that it forms part of the surrounding circumstances by reference to which the contract may be construed. The third document, which was relied upon by the pursuers, was the application for first registration (Form 1) sent to the Keeper of the Registers by Blackadders. This document was dated 10 March 2004. In the description of the subjects it referred to the street number and name as 6 Perth Road. Under the heading "Other" relating to the subjects, however, the document continued "Comprising 2, 2A, 4, 6 and 8 Perth Road, Dundee". The fourth document, also relied on by the pursuers and also prepared by Blackadders, was the inventory of writs relevant to the application for registration (Form 4); this referred to the subjects as "6 Perth Road, Dundee. (Comprising 2, 2, 4, 6 and 8 Perth Road, Dundee.)" Both of these documents had been revised and approved by Thorntons; that was clear from a letter from Thorntons to Blackadders dated 11 March which accompanied the acceptance that concluded the missives. In my opinion neither the Form 1 nor the Form 4 can be relied upon as surrounding circumstances. They are rather documents that formed part of the negotiations between the parties, and as such cannot be referred to. In addition, counsel for the pursuers relied on those documents to put a gloss on the letter of offer of 10 March 2004; essentially he attempted to modify the reference to "6 Perth Road" in the offer to read "2, 2A, 4, 6 and 8 Perth Road". A reference to surrounding circumstances may not, however, be used to put a gloss on the terms of the contract concluded by the parties; it should only be used to establish matters of fact extrinsic to the contract in order to indicate the circumstances that formed the subject matter of the contract: Bank of Scotland v Dunedin Property Investment Company Limited, supra, at 1998 SC 665F-G.

 

Commercial reasonableness

[28] 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 21 January 2004 to the final missives. No explanation is given in the pleadings as to why the ground floor and basement premises were added to the residential properties that were originally offered. Nor was there any explanation as to why there was no price increase. Objectively considered, it is strange that there is no explanation of these matters. The absence of any such explanation tends in my opinion to support the construction advanced by the first defenders.

 

Need for proof

[29] 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 [13] 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.

 

Conclusion

[30] 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.

 


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