(1884) 27 Ch.D.

497

[COURT OF APPEAL] PRESTON v. LUCK. [1884 P. 1134.] 1884 June 12. KAY, J. 1884 Aug. 8. BAGGALLAY, COTTON and LINDLEY, L.JJ. Contract from Correspondence - Consensus ad idem - Misunderstanding of Parties as to Subject-matter of Negotiation. A negotiation took place as to the sale by L. to P. of a British patent and certain foreign patents for the same inventions, and ultimately an offer was made for sale at 500 and accepted by letter, but it was not quite clear whether the offer and acceptance related to all the patents, or to the British patent only. P. brought his action for specific performance, treating the contract as including all the patents, and moved for an injunction to restrain L. from parting with them. At the hearing of the motion he asked for leave to amend his writ, and for an injunction as to the British patent only:Held, by Kay, J., that as L. had understood that he was negotiating about the British patent only, and P. that he was negotiating as to all the patents, there never was the consensus ad idem which is necessary to make a contract; that there was, therefore, no contract which P. could enforce; and that an injunction must be refused. Held, on appeal, that an injunction should be granted, for that where a written agreement has been signed, though it is in some cases a defence to an action for specific performance according to its terms that the defendant did not understand it according to what the Court holds to be its true construction, the fact that the plaintiff has put an erroneous construction upon it, and insisted that it included what it did not include, does not prevent there being a contract, nor preclude the plaintiff from waiving the question of construction and obtaining specific performance according to what the defendant admits to be its true construction. IN January, 1884, the Defendant Luck was the patentee in England of an invention for "improvements in apparatus for the gelatinization or conversion of unmalted grain." He had also an interest in patents granted in several foreign countries for the same invention.

On the 25th of January, 1884, Luck, in reply to a letter of inquiry from the Plaintiffs, wrote: "I beg to say that the unsold patent rights consist of the sole right to sell or license to use the converting apparatus to brewers in the United Kingdom, or to license or prohibit any one to make the same in England, and also 15 per cent. of the profits of the patent or apparatus in America, Canada, Germany, France, Belgium, India, and one or (1884) 27 Ch.D. 497 Page 498 two more places." "The sum I am willing to take is 750."

On the 9th of February the Plaintiffs wrote to Luck: "Would you be disposed to accept 500 for your rights in the patent as enumerated in your favour of 25th ult., subject to the approval of our solicitor?" On the 11th of February Luck replied: "If you will make me a decided offer by return of post or telegram of 500 for all my rights in the English patent, 'apparatus for the gelatinization or conversion of unmalted grain,' No. 3881, and will at your option pay the fees for renewal or prolongation of the patent as they fall due, I will accept such offer. I also transfer to you all my interest in the foreign patents for the same invention as enumerated in my letter dated the 25th of January." "I mentioned that Captain William Turner had the option of purchase at a higher sum up to the 27th March. If you close with me now, of course you would occupy the same position as I now hold, and would receive any money paid by Captain Turner in exercising his right of purchase by the 27th March proxo." On the 12th of February telegram from Plaintiff to Luck: "We do not quite understand. Has Captain Turner your offer for England as well as the Continent until March? or are you perfectly free to negotiate for England?" On the same day Luck replied by telegram: "Captain Turner has the option of purchase of the whole of the patents, including England. Option terminates March 27th." On the same day Luck wrote to the Plaintiffs: "A telegram from you just received, and reply sent off. I have by a written agreement given to Captain Turner the option of purchasing the English and foreign patents, always reserving your rights in the English patent" (the Plaintiffs were licensees) "and ditto for vinegar-making purposes in England, and subject to such option, I can sell all my unreserved rights as quoted by me in my last communication to you. If you decide to purchase you acquire all my rights and interests in the foreign and English patents, and take all profits derivable therefrom which would otherwise be due to me." On the same day the Plaintiffs replied by telegram: "We cannot see any advantage to us in your offer. Had Captain (1884) 27 Ch.D. 497 Page 499 Turner no option in the English portion of the patent then we would negotiate. We do not care about the Continent. Should Captain Turner decide not to accept, let us know." On the 20th of February the Plaintiffs wrote: "Please inform us if you are disposed to sell the sole use of the patent for producing saccharine in the United Kingdom, and for what consideration." On the 21st of February Luck replied: "Since writing you last the agreement between Mr. W. Turner and myself has been somewhat modified, and if he does not exercise his option of purchase by the 19th of March I shall be pleased to offer the sale of my patent for conversion of raw grain to you as explained in my former letter, viz., only retaining the right to use for vinegar making. I should have written before, but was waiting to act upon the desire expressed in your last letter, i.e., to write you upon learning whether Mr. Turner would purchase or not. My terms to sell would be the same as quoted in response to your question as to whether I would accept an offer of 500 for the patent. Terms of payment as suggested by yourselves." On the 25th of March Luck wrote to the Plaintiffs: "I beg to inform you that the option of purchase vested by me in parties before named will expire on Thursday, the 27th instant, and if your intentions are unaltered, I shall have pleasure in completing the sale of my English patent for using unmalted grains (reserving, as explained in previous letters, the right to make and use the apparatus for vinegar making)." "P.S. - The terms and conditions of sale I have given in former letters after the receipt of your telegram." On the 31st of March the Plaintiffs replied by telegram: "We accept your offer, subject to approval of our solicitors, as to your rights in patent. Please reply if this is acceptable to you," and wrote in the same terms on the same day. On the same day Luck replied: "I am in receipt of your telegram, and on the terms before stated I receive your acceptance of the offer of my English patent for the conversion of unmalted grain, viz., your acceptance for 500,

and you to pay stamp fees for extension of patent, or allow it to lapse at your option, I retaining the right to make and use the apparatus for vinegar making." (1884) 27 Ch.D. 497 Page 500 The Plaintiffs at once placed the papers in the hands of their solicitors, who wrote to Luck to ask for particulars of the foreign and colonial patents. Luck replied that the Plaintiffs had not purchased them. A correspondence ensued on this subject, the Plaintiffs' solicitors throughout insisting that their clients had purchased both the British and foreign patents, and Luck's solicitors insisting that the agreement only extended to the British patent. Pending this correspondence Turner wrote to the Plaintiffs, stating that his option to purchase was subsisting, and on the 22nd of April Luck's solicitors wrote to the Plaintiffs' solicitors that Turner had given Luck notice that he would purchase, and by a subsequent letter stated that as Turner's option had bee exercised Luck had no power to sell to the Plaintiffs. On the 1st of May the Plaintiffs issued their writ in this action against Luck, claiming specific performance of an agreement for sale to them of the English patent and of the Defendant's share and interest in the foreign patents for the same invention in France, Belgium, and other countries therein mentioned, and for an injunction to prevent Luck from disposing of or parting with his interest in the English and foreign patents, and for a receiver. The Plaintiffs, on the 22nd of May, moved before Mr. Justice Kay for an injunction. Luck, by an affidavit, deposed that since the Plaintiffs' letter of the 20th of February he never intended to sell his interest in the foreign patents along with the English patent, but considered that he was negotiating for the sale of the English patent alone, and that he was advised that in consequence of the subject-matter of the alleged agreement having never been concluded between the Plaintiffs and himself, there was no binding agreement. He further stated the facts relating to Turner; and deposed that he was advised that he was bound to transfer his interest in the English patent to Turner. Leave was given to amend by making Turner a party, which was forthwith done, and the motion was brought on again on the 12th of June. It appeared from Luck's affidavit that the patent had been assigned to Turner for certain purposes which had failed, but he had not re-assigned it to Luck, so that it was at law vested in Turner. (1884) 27 Ch.D. 497 Page 501 Hastings, Q.C., and F. Thompson, for the Plaintiffs:The agreement on its true construction includes the foreign patents, and that was how the Plaintiffs understood it. But if the Court is against us on that, we are content to ask an injunction in respect of the English patent only. Robinson, Q.C., and Lawson, for Luck. W. Pearson, Q.C., and Ingpen, for Turner. [The cases cited are referred to in the judgment.] KAY, J., after referring to the dealings with Turner, and stating the material parts of the correspondence, proceeded as follows:It seems to me that on the true construction of this correspondence there clearly was no contract in respect of the foreign patents. Then it is contended on behalf of the Plaintiffs that, even if they put a wrong construction on the correspondence, they are entitled, although their writ and their notice of motion refer not merely to the English patent but to the foreign patents, to say now at the bar, "If we are wrong the Court is bound to put a construction on the

correspondence, and will give us relief according to the construction it puts on it." I tried to illustrate that argument by putting an analogous case. Suppose a man sold "all that my estate in the county of so and so," which, prim facie, would make a perfectly good contract, because by ascertaining what estate he had in the county, you may render certain that which on the face of the contract is uncertain, but it turned out that the parties were never at one, and that one meant one estate, and the other meant another estate, could it possibly be said that there was a contract? Or again, supposing, to put a case rather nearer to this, it was "all my field in the parish of A.," and there were two closes, and the plaintiff said "By 'field' I meant both closes," but the defendant said "No, the field that was meant was one of those closes alone," and the correspondence was in favour of the defendant's contention that (1884) 27 Ch.D. 497 Page 502 by "field" was meant one of the closes alone, can the plaintiff come forward and say "I insist on specific performance and I insist on having both fields, and yet if the Court is of opinion that the contract means only one field, then I will insist on having one field." A contract means consensus ad idem. Lord Westbury, than whom very few people had greater command of language, puts it thus in the case of Chinnock v. Marchioness of Ely (1): "An agreement is the result of the mutual assent of two parties to certain terms, and if it be clear that there is no consensus, what may have been written or said becomes immaterial." If I may respectfully say so, I concur in every word of that definition, and think it as good a definition of contract as I know of. It is plain to my mind that in this case there never was any consensus. If the Plaintiffs' evidence is to be believed, and I do not wish for a moment to cast any discredit upon it, the Plaintiffs understood that they were bargaining for the English and foreign patents; the Defendant Luck understood (and as it seems to me with very much more reason, because that I hold to be the construction of these letters) that he was contracting to sell not the foreign patents but the English patent only. How is it possible for the Plaintiffs to say that there was a consensus? Reliance is placed on some words of Lord Eldon, which seem to me to be entirely misapplied. In Kennedy v. Lee (2) Lord Eldon said (and that was a case of correspondence from which a contract was sought to be made out), "The Court will, in all such cases, regard, not the form of the agreement, but the substance, whether or not, in point of fact, such an agreement has been entered into." Then he goes on thus, "It must be understood, however, that the party seeking specific performance of such an agreement, is bound to find in the correspondence, not merely a treaty - still less, a proposal - for an agreement; but a treaty, with reference to which mutual consent can be clearly demonstrated, or a proposal met by that sort of acceptance, which makes it no longer the act of one party, but of both. It follows that he is bound to point out to the Court upon the face of the correspondence, a clear description of the subject-matter, relative (1) (2) 4 D. J. & S. 638, 643. 3 Mer. 441, 450.

1884) 27 Ch.D. 497 Page 503 to which the contract was in fact made and entered into." Then come the words on which comment has been made, "I do not mean (because the cases which have been decided would not bear me out in going so far), that I am to see that both parties really meant the same precise thing, but only that both actually gave their assent to that proposition which, be it what it may, de facto arises out of the terms of the correspondence." It is clear that by those words Lord Eldon meant nothing more than this, that if there is written evidence of a contract, and the meaning on the face of it is quite plain, a party cannot defend himself by saying "I did not mean precisely that, I meant something a little different." If the words used are words which, if you read them with a mind desirous of understanding them, are intelligible, a slight difference or a slight mistake will not prevent there being a contract, but where a mistake goes to the greater part of the subject-matter, as here the whole interest in these foreign patents numbering ten, you cannot

say that it is a slight mistake. The Plaintiffs come here saying, "We understood this contract to be not for the English patent alone, but for ten foreign patents into the bargain, and we claim all those ten patents." If the Court should hold that to be a claim which the written evidence of the agreement does not warrant, it is impossible for the Plaintiffs at the bar to fall back on that which is the true construction of the agreement, and say "There is a contract between us for that lesser thing which up to this moment we have utterly repudiated." There is another reason why it seems to me impossible that the Plaintiffs should succeed. Suppose this contract were ambiguous, it is settled by a series of cases, one of the last of which is Tamplin v. James (1), that where there is a mistake contributed to by the plaintiff, it is impossible that the plaintiff can obtain specific performance. Now, if there was a mistake here, whose fault was it? I do not think there was any mistake on the part of Luck; but if there had been, the fault of that mistake is absolutely the Plaintiffs' own, because, after having said "We do not want to have anything to do with the foreign patents," they commence a new negotiation for the (1) 15 Ch. D. 215.

(1884) 27 Ch.D. 497 Page 504 English patent only, and I cannot conceive anything more likely to mislead as to what the intention of the Plaintiffs was than the telegram and the later letters which I have read. Therefore, even if I thought that this correspondence could be construed according to the Plaintiffs' view, I should say that the mistake on the part of Luck would have been contributed to, if not induced or caused by, the telegram and letters of the Plaintiffs, which pointed to a negotiation for the English patent only. It is said that hereafter there may be an amendment. The Plaintiffs may make such amendment as they like, but certainly I shall deal with this matter before me now on the footing of the case which they have set up in their affidavits, and by the indorsement on their writ, and by their notice of motion. I hold that that case fails entirely, and I therefore refuse this motion with costs. Hastings, Q.C.:- Your Lordship understood me as asking for liberty to amend my writ at the present moment, and pray in the alternative? KAY, J. :- Quite so. The Plaintiffs appealed, and the appeal was heard on the 8th of August, 1884. Hastings, Q.C., and F. Thompson, for the Plaintiffs. Robinson, Q.C., and Lawson, for Luck. W. Pearson, Q.C., and Ingpen, for Turner. BAGGALLAY, L.J. :This is an appeal against the refusal of Mr. Justice Kay to grant an injunction restraining the dealing with or assigning certain letters patent. Were it not for the great experience of the learned Judge, who heard this case at considerable length, and came to the conclusion that the application to him should be refused, I should have thought it very clear that an interim injunction ought to be granted. I intend to go as little into the circumstances of the case as possible; but at the same time I (1884) 27 Ch.D. 497 Page 505 must to some extent refer to them for the purpose of explaining my reasons for arriving at that conclusion. [His Lordship then shortly stated the facts, and proceeded as follows:- ]

Mr. Justice Kay's view of the case appears to have been that there was a correspondence of such a nature as, on the face of it, would amount to a contract; but that, inasmuch as Mr. Luck, only considered himself to be selling the English patents, and the Plaintiffs considered that they were buying both the English and foreign patents, there had not been that consensus ad idem which is necessary to make a binding contract between the parties, and that therefore the Plaintiffs had not got a contract which they could enforce. With all respect to Mr. Justice Kay, I think he was in error in proceeding upon that ground, because, after the affidavit of Mr. Luck had been put in, and when the matter was before the learned Judge for his decision, the Plaintiff waived all claim to an injunction as to the foreign patents, and adopting the view of the Defendant, Mr. Luck, that the agreement had reference to the English patent only, he was prepared to ask for an injunction restraining dealing with the English patent alone. Now, so far as the matter rested on the ground on which the learned Judge proceeded, it appears to me that the proper course to have pursued would have been to have allowed an amendment of the writ, so as to limit the action to the alleged sale of the English patent, and then to have granted an injunction restraining parting with that patent until the hearing of the action. [His Lordship then went into the part of the case relating to Captain Turner's alleged right of pre-emption, and stated his view to be that there was a grave question to be decided at the hearing, and that until then matters ought to be kept in statu quo.] COTTON, L.J. :I am of the same opinion. This is an application only for an interlocutory injunction, the object of which is to to keep things in statu quo, so that, if at the hearing the Plaintiffs obtain a judgment in their favour, the Defendants will have been prevented from dealing in the meantime with the property in such a way as to make that judgment ineffectual. Of course, in order (1884) 27 Ch.D. 497 Page 506 to entitle the Plaintiffs to an interlocutory injunction, though the Court is not called upon to decide finally on the right of the parties, it is necessary that the Court should be satisfied that there is a serious question to be tried at the hearing, and that on the facts before it there is a probability that the Plaintiffs are entitled to relief. I shall express no final opinion on the question whether there was a concluded contract between the Plaintiffs and Luck. It may be that when the letters are scanned more narrowly and critically there is no concluded agreement, but my present impression is that there was an offer and an acceptance, though, as is very often the case when a contract has to be made out from letters, the case is not perfectly plain But what Mr. Justice Kay decided was this, that as the Plaintiffs came here contending that what they were to buy, and the Defendant Luck was to sell, were the English and the foreign patents, and the letters on which the contract is sought to be made out referred only in his Lordship's opinion to the English patent, there was no consensus ad idem which is essential to a contract. Now, where parties enter into a written contract, what they have agreed to must depend on the construction of that contract. It is very true that in some cases, if the party against whom specific performance is sought to be obtained, satisfies the Court by clear evidence that what he on the terms of the contract appears to have contracted for was not in his mind the thing in respect of which he was bargaining, the Court will refuse specific performance, but that is only because in cases of specific performance the Court does not grant that special equitable relief if it finds, for any reason, that it would be what is called a hardship or unreasonable to compel the defendant specifically to perform the contract. If here the position of the parties were reversed, and the present Plaintiffs could satisfy the Court that although upon the true construction of these letters the English patent alone was the subject of the agreement, they never intended to offer 500 for the English patent alone, but for the English and foreign patents together, the Court would probably refuse specific performance against them. But if the letters themselves make a concluded agreement in writing, then, in my opinion, the mere fact that down to the time when the parties (1884) 27 Ch.D. 497 Page 507

were before Mr. Justice Kay, the Plaintiffs were contending that on the true construction of those letters they included something more than he has now decided they did include, is no reason for saying that there is not any agreement enforceable in equity against the Defendant, who says that from the very first he intended this to be a contract for the British patent. If the Plaintiffs were to bring their action to a hearing, asking for specific performance of the agreement for an assignment of the English and foreign patents, and the Court decided that they were entitled only to take the English patent, they might say - Then we will have our action dismissed. But the Plaintiffs are ready to amend their writ and confine the relief asked to a specific performance of the contract as regards the English patent. That, in my opinion, if we grant an injunction, they ought to undertake to do, but the mere fact that they put an erroneous construction on a contract in writing existing between them and the Defendant Luck, and insisted that it included what it does not in fact include, is, in my opinion, no ground for saying that there is no contract. As the motion was refused on that ground it is our duty to express our opinion upon it, but we do not give a concluded opinion on any other point. All we can say is that there being prim facie a contract between the Plaintiffs and Luck, what ought to be done is to keep things in statu quo till the hearing. [His Lordship then expressed his opinion that there was great doubt whether Captain Turner had any such right of pre-emption as would defeat the Plaintiffs' claim, and that as regarded him also matters should be kept in statu quo till the hearing.] Under those circumstances I think that we ought to grant an injunction restraining both the Defendants from dealing with the English patent till the hearing or further order. Of course that will be accompanied with an undertaking on the part of the Plaintiffs to amend, and the usual undertaking in damages if at the hearing the Court thinks they are in the wrong. LINDLEY, L.J. :The question we have to consider is what is proper to be done between this time and the hearing of the action. We have not (1884) 27 Ch.D. 497 Page 508 now to decide the rights of the parties any further than is necessary for determining that question. In order to determine that question, it is absolutely essential to see whether the Plaintiffs have any locus standi. They put their case on the agreement, and if there is no agreement, they are out of Court. In my opinion there is an agreement, for I think that the correspondence running through February and March, and ending with the telegram of the 31st of March, amounts to an agreement to sell the English patent. That gives the Plaintiffs a prim facie right to have matters kept in statu quo to this extent, that their rights under that agreement shall not be defeated before the hearing. Without expressing our opinion as to the rights or claims of Captain Turner, it appears to me that we ought not to allow him and Mr. Luck to deal with this patent so as to deprive the Plaintiffs of such rights as they seek to establish. The Plaintiffs must undertake to amend their writ, and they must give the usual undertaking to be answerable in damages, and there will be an injunction restraining Captain Turner and Mr. Luck from assigning or dealing with the patent until the hearing or further order. As to the costs, we all think that the costs of the parties in the Court below ought to be costs in the action, and that the Plaintiffs ought to have the costs here. Solicitors for Plaintiffs: W. W. Wynne & Son. Solicitor for Luck: J. H. Johnson. Solicitor for Turner: E. Kennedy. H. C.J.