Holwell Securities Ltd v Hughes

The postal acceptance rule may complete acceptance on posting where use of the post was contemplated. It is displaced, however, where an option requires exercise by notice in writing to the vendor. That language requires an effective written intimation to the vendor; posting a letter which is never received is insufficient.

Where section 196 applies, the deemed-service provisions in Law of Property Act 1925 reinforce that conclusion. A grantee must comply strictly with the stipulated conditions for exercising an option. General knowledge that the grantee wishes to exercise it does not replace the required written notice.

The plaintiffs held an option to purchase the defendant's property. The option was exercisable by notice in writing to the intending vendor within six months. On the final day, the plaintiffs' solicitors properly posted a letter and enclosure which would have exercised the option if received. The letter was lost and never reached the defendant or the property.

The defendant's solicitors received a separate copy and telephoned the defendant, but did not read the notice to him. Templeman J rejected the plaintiffs' claim. The plaintiffs appealed, contending that posting completed the exercise of the option or, alternatively, that the defendant had sufficient notice.

1. Appeal dismissed. Russell LJ, with whom Buckley LJ agreed, held that the parties contemplated use of the post, so that the ordinary postal acceptance rule was potentially relevant. It did not govern this option because its express terms required exercise by “notice in writing to” the vendor. That wording required the exercise to be communicated to the vendor. A letter lost in the post could not satisfy it.

2. Russell LJ held independently that section 196(4) and (5) of the Law of Property Act 1925 applied. The option was an instrument affecting property. The statutory scheme deems service of a registered letter when it would ordinarily be delivered, rather than when posted. That scheme was inconsistent with an acceptance rule which made posting alone decisive.

3. The alternative reliance on the telephone conversation failed. The defendant's awareness that the plaintiffs wished to exercise an option, and of the existence of correspondence, did not amount to a written notice to him. Dickinson v Dodds 1876 2 Chancery Division 463 concerned communication of revocation and did not assist.

4. Lawton LJ reached the same result. An option grantee must comply strictly with its conditions. A notice is an intimation which must make the stated matter known to its recipient. He also considered that the postal rule does not apply where the parties cannot, having regard to the terms and subject matter, have intended a binding agreement before actual communication.

5. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

• Court of Appeal: Dismissed the plaintiffs' appeal and affirmed the order of Templeman J.
• High Court: Templeman J rejected the plaintiffs' contention that the option had been exercised: [1973] 1 WLR 757.