Case No. UKUT-251-(LC)-UTLC-Case-Number:-LC-2022-218

15.The price in the contract and transfer are, as I said, puzzling; but the motives of the parties are irrelevant to the appeal. Nor is the Tribunal concerned with the fact that Mr Aslam told the bridging lender that a contract had come into being, nor with whether or not he believed at that stage that there was a contract. The single issue in the appeal is: did the judge’s findings of fact justify his conclusion that exchange took place on 14 September 2018?16.In Commission for New Towns v Cooper [1995] Ch 259 Stuart-Smith LJ analysed in six steps the meaning of the familiar expression “exchange of contracts”, at p. 285 C ff. He explained that each party has identical contracts, or “parts” of the contract, and each signs his own part. He went on:“4.At the time of execution neither party is bound by the terms of the document which he has executed, it being their mutual intention that neither will be bound until the executed parts are exchanged. 5.The act of exchange is a formal delivery by each party of its part into the actual or constructive possession of the other with the intention that the parties will become actually bound when exchange occurs, but not before.6.The manner of exchange may be agreed and determined by the parties. The traditional method was by mutual exchange across the table…”17.It is important to note that delivery is a formal act and each party must deliver his part.18.Domb v Isoz [1980] Ch 548 was about telephone exchange by solicitors. In a typical case the parties are separately represented, and each signs his part of the contract and leaves it with his solicitor. In a simple case the solicitors will speak on the telephone, having been authorised by their clients to exchange, and will agree that contracts are now exchanged, recording the date and time. Delivery is not a physical handing over of the document, but is comprised in the fact that from that point on each holds their own client’s part of the contract to the other’s order; each will then physically send or take their own client’s part to the other client’s solicitor. In a slightly more complicated scenario one solicitor, say the seller’s, may hold both parts before exchange, his own client’s part for his own client and the buyer’s part to the order of the buyer’s solicitor; that is what happened in Domb v Isoz where the buyer’s solicitor sent his client’s signed part of the contract to the seller’s before exchange. Delivery has not yet taken place. Again exchange can take place by telephone, and delivery is a constructive event which takes place when the two solicitors agree on the telephone that contracts are exchanged. From then on the seller’s solicitor holds his own client’s part to the order of the buyer’s solicitor and will send or take it to him.19.The appeal in Domb v Isoz arose because the judge at first instance was not satisfied that such a procedure was sufficient to effect exchange, but the Court of Appeal confirmed that it was.20.Reverting to the present appeal, having made his findings of fact the judge in the FTT continued under a heading “Legal issues” and said this at paragraph 69, which I quote in full (substituting the names of the parties for the roles in the FTT):“On the facts as the Tribunal has found them Mr Aslam signed his part of the agreement at the request of Mr Rehman and immediately handed it to Mr Rehman on 14 September 2018. There is no evidence that Mr Rehman handed his copy or offered to deliver his copy to Mr Aslam, as counsel points out. However, in my judgement the trust reposed in Mr Rehman by Mr Aslam at this point meant that Mr Rehman was acting as Mr Aslam’s agent in respect of the impending sale of 189 Walton Road. As I have found, it was Mr Rehman who arranged the appointment with Lynsey Sait and Turner and told them about the agreement to sell 189 Walton Road. Mr Rehman took the lead at the interview but Mr Aslam was named as the client in the invoice. In this sense there was a delivery to Mr Aslam’s agent and this is sufficient to mean there was an exchange. As Buckley LJ said in Domb v Isoz [1980] Ch 548 at 577 when discussing an exchange of contracts by telephone: ‘such possession need not be actual or physical possession. Possession by an agent of the party or of his solicitor in such circumstances that the party or solicitor in question has control over the document and can at any time procure its physical possession will in my opinion suffice. In such a case possession of the agent is the possession of the principal.’”21.To clear off a couple of things: first, it was not the case that there was no evidence that Mr Rehman handed his copy or offered to deliver his part of the contract to Mr Aslam, nor did Mr Gilchrist say so to the FTT (as can be seen because closings were written). Mr Rehman gave evidence that he had given his part of the contract to Mr Aslam. The judge’s wording is inapt, but he clearly rejected that evidence when he found that each party signed his part of the contract and Mr Aslam gave his to Mr Rehman, who kept both.22.Second, Mr Gilchrist on Mr Aslam’s behalf did not challenge the finding of agency in the appeal.23.The judge’s reasoning appears therefore to be that Mr Rehman was Mr Aslam’s agent “in respect of the impending sale of 189 Walton Road” and that “in that sense there was a delivery to Mr Aslam’s agent and this is sufficient to mean there was an exchange.”24.Mr Gilchrist argued that there are two difficulties with the analysis of the FTT in the present case. One is that there is no finding that formal delivery took place. There appears simply to be a finding that the fact of agency meant that there was delivery to Mr Aslam.25.Mr Butler KC argued that it is not open to the Tribunal to disturb the FTT’s finding that there was an exchange of contracts. That was a finding of fact. The judge “has not lifted the veil”, as Mr Butler put it, from what happened during the meeting but he found that exchange took place and therefore delivery must have taken place even though the judge has not explained why he reached that conclusion.26.That is the key difficulty with the finding that exchange has taken place: it is unexplained. Delivery is a formal act which the two parties must each carry out. 27.As to delivery by Mr Aslam, there is no finding of fact that when Mr Aslam handed his part of the contract to Mr Rehman his intention was to deliver it so as to exchange contracts; on the facts as we have them it may well not have been his intention. His intention may have been to leave the undated half with Mr Rehman and authorise him to exchange contracts later; or it may have been to give his part of the contract to Mr Rehman but not to authorise exchange.28.As to delivery by Mr Rehman, there is no explanation as to (a) why the fact of agency meant that Mr Rehman held his own part on Mr Aslam’s behalf and (b) why that constituted delivery. Such a finding is in any case insufficient to amount to a finding that there has been delivery. The fact that A holds part of a contract to B’s order need not happen as a result of delivery and does not mean that contracts have been exchanged, as we saw in Domb v Isoz (paragraph 18) above where the seller’s solicitor held the buyer’s part to the buyer’s order before exchange took place.29.Mr Gilchrist’s second point is that there is no finding that Mr Rehman’s authority as agent extended to authority to exchange contracts on Mr Aslam’s behalf. I agree with Mr Butler KC that the judge did not say that Mr Rehman exchanged contracts on his behalf. Rather, he found that the two men exchanged contracts; but he did not explain how they did so or what it was that led him to find that they did so. There were simply insufficient facts found to lead the FTT to that conclusion; and what we are left with is a very good illustration of the reason why the law requires a formal delivery, whether physical, or attended by clear words that leave no-one in doubt that there has been an exchange.30.Mr Butler KC argued that if there was no exchange on 14 September 2018 then exchange took pace on 20 September 2018 at the offices of Lyndsay Sait & Turner, by virtue of Mr Rehman handing the contracts to the solicitor. I do not understand this submission. It was not part of Mr Rehman’s case and it is not open to him to launch an alternative account of the facts on appeal; and it is not supported by – indeed it is contradicted by – Mr Rehman’s own evidence. There is no evidence that Mr Aslam intended exchange to take place on that occasion. If the idea is that Mr Rehman effected exchange on behalf of them both, as Mr Aslam’s agent, then there is no finding of fact that he had authority to do so. This alternative argument is without substance.31.The FTT’s decision that contacts were exchanged is therefore set aside on the basis both that it was inadequately explained and also that the facts found by the judge could not as a matter of law have justified a finding that exchange had taken place. I substitute the Tribunal’s own decision that contracts were not exchanged, and will direct the registrar accordingly to respond to Mr Aslam’s application as if Mr Rehman’s objection had not been made.Upper Tribunal Judge Elizabeth Cooke21 September 2022