Phoenix v Phoenix & Anor

An option must be exercised strictly in accordance with its terms, construed objectively in the context of the instrument as a whole. A notice addressed to trustees may be validly served at a single address where the document, read in context and with business common sense, identifies that address as the intended place for service. Where an instalment debt has become overdue and the governing instrument provides no interest on the unpaid instalment itself, statutory interest may be awarded notwithstanding interest calculated as part of the original instalment arrangement. The court should select a fair and relatively neutral rate having regard to the circumstances.

The claimant and first defendant were brothers and co-executors of their mother's estate. The Will granted each brother an option to acquire farmland at a substantial discount. The claimant personally delivered his notice exercising his option to the professional executor at the solicitor's office named in the appointment clause, but did not deliver it separately to the first defendant.

The first defendant disputed the validity of the exercise and counterclaimed for sale or, alternatively, interest on unpaid instalments. The central issues were whether the Will prescribed the solicitor's office as a single address for service and whether interest was recoverable under section 35A of the Senior Courts Act 1981.

1. Valid exercise of option. The option had to be exercised strictly in accordance with its terms. The Will was construed objectively by reference to its natural and ordinary language, overall purpose, other provisions, facts known or assumed when it was made, and common sense, while excluding subjective intention. This was a unitary and iterative construction exercise.
2. Although clause 1.1 was framed as an appointment clause and did not expressly use the words “address for service” or “all of The Pines”, it had to be read with clause 5.3 and the Will as a whole. The absence of any other address, the appointment of an independent professional executor, the self-contained structure of the Will, and its purpose of enabling the brothers to continue farming supported the construction that The Pines was the single address for service on the trustees. Requiring a brother to serve notice on himself would not accord with common sense.
3. Philip therefore validly exercised the option by personally handing the notice to Colin Wright at The Pines. It was unnecessary to determine the alternative argument under section 196 of the Law of Property Act 1925.
4. Interest. Each unpaid annual instalment was a separate debt due on its due date. Section 35A(4) of the Senior Courts Act 1981 did not bar an award of interest because clause 5.3 provided for interest in calculating the instalments but did not provide for interest on an instalment after it became unpaid.
5. It was equitable to award interest. The appropriate rate was 1% above base rate, applied to each unpaid instalment including the contractual interest component, producing a relatively neutral balance between the brothers.
6. The parties were expected to agree a minute of order for approval.