"GAZUMPING": ENGLAND AND SCOTLAND (Hansard, 27 March 1980)

The Earl of SELKIRK
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone)
My Lords, in my first term of office I commissioned the Law Commission to inquire into the question of subject to contract agreements, and the noble and learned Lord, Lord Elwyn-Jones, will remember that they reported, in their document Law Commission No. 65, to him in 1975. They there pointed out that in Scotland the procedure on house purchase is not unlike a sale by tender and that contracts become binding at an earlier stage than in England and Wales. I do not believe that this is due to any relevant difference in law or legal requirement, but to the deliberate choice of the parties. The Law Commission concluded that, while there is no legal obstacle to the adoption of similar practices in England and Wales, the choice of subject to contract agreements is due to the different conditions prevailing South of the Border which lead parties negotiating deliberately to choose to be bound contractually at a later stage. Resiling from contracts still subject to negotiations is, of course, a risk not confined to contracts for the sale of real property.

The Earl of SELKIRK
My Lords, I thank the noble and learned Lord the Lord High Chancellor of Great Britain for his very valuable Answer. May I assure him that my only reason for putting down this Question is from a sense of sympathy for our colleagues in England. Am I not right in saying that when missives of sale are completed in Scotland that is an effective personal contract, and while it may be subject to survey or to mortgage arrangements it effectively prevents "gazumping" at a later stage, thus avoiding both disappointment and much anguish? Would it not be worth while reminding the Law Society that this course is fully open to anyone in England?

§ The LORD CHANCELLOR
My Lords, I am grateful to the noble Earl for reminding me of my high sounding title, Lord High Chancellor of Great Britain. I have to remind him, however, that although I have this title my knowledge of Scottish law and my responsibilities for it are rather more limited than the 954 title by itself would imply. It is the case that Scottish conveyancing practice does involve the parties choosing of their own volition to bind themselves at an earlier stage in negotiations for the sale of real property than they do in England. But I sought to explain that when the Law Commission, at my request, looked into it they came to the conclusion that this was due to the will of the parties and due to the different conditions prevailing.
I think perhaps the noble Earl underestimated the peculiar differences which arise in Scotland as a result of the provision which there applies, unlike England, for subject to survey contracts. That gives rise to different difficulties which do not arise in England. I know the Law Society is familiar with the problem because, from the very first moment of my first period of office, I have been in touch with the Law Commission and, through them, with the profession on the subject.

§ Lord McCLUSKEY
My Lords, while congratulating the noble and learned Lord on his unaccustomed modesty, may I ask him whether he accepts that, while the Scottish practice of concluding binding contracts by an exchange of missives has the great advantage of eliminating"gazumping"and uncertainty, it involves one serious disadvantage, namely, that each prospective purchaser has, before putting in his offer, to commission and pay for a building survey by a professional surveyor acceptable to the prospective purchaser's building society, with the result that those whose offers are not accepted find themselves heavily out of pocket? Would the noble and learned Lord invite his right honourable friend the Secretary of State for Scotland to approach the Law Society of Scotland, the Royal Institution of Chartered Surveyors and the building societies to discuss this problem, with a view to encouraging the seller, before advertising his house, to commission one such survey by a surveyor acceptable to all the building societies, his fee to be paid by the successful purchaser only, thus eliminating wasteful, expensive and unnecessary duplication?

§ The LORD CHANCELLOR
My Lords, I am grateful to the noble and learned Lord. I always thought I was the most modest of men, so I will not accept that my modesty on this occasion was un- 955 accustomed. I am grateful to the noble and learned Lord for his constructive suggestion. It was precisely that facet of the matter of which I ventured to remind my noble friend Lord Selkirk in my earlier answer. I can see on the Front Bench my noble and learned friend the Lord Advocate, and I feel sure that he will take due note of what the noble and learned Lord, Lord McCluskey, has said, and refer it to the appropriate bodies in Scotland for their consideration. It seems something which is certainly worth looking at.

§ Lord MACKIE of BENSHIE
My Lords, would not the noble and learned Lord the Lord Chancellor agree that the real reason for the lack of "gazumping" in Scotland is the general integrity, virtue, honesty and superiority of the Scots?

§ The LORD CHANCELLOR
No, my Lords. I would accept that all the qualities the noble Lord has suggested inhere in Scotland, but they are also not unknown South of the Border.

Lord JANNER
My Lords, would the noble and learned Lord be good enough to consider this position again? Is he aware—I am sure he must be—that this affects a very large number of people in this country who believe that they have entered into a contract, and at the last moment are deprived of the opportunity of dealing with a matter which they have had under consideration for a very considerable time because someone jumps in and "gazumps", as we call it? The noble and learned Lord, for whom I have the highest regard, might consider the possibility of passing some law whereby an individual knows that once he has been accepted subject to contract—the problem is subject to contract—a period of time should prevail during which no higher amount should be accepted from somebody else for the purchase. It may be that that is a way of coping with the situation. It is an extremely serious position, as those of us in the profession know.

§ The LORD CHANCELLOR
My Lords, with the greatest respect to the noble Lord, Lord Janner, these are precisely the issues which were pursued in very great depth by the Law Commission. Obviously, if a suggestion like 956 that of the noble and learned Lord, Lord McCluskey, were made in relation to English practice, I would submit it either to them or to the Law Society.
However, I was concerned with this matter for many years—indeed, I have myself been subject to this procedure which I do not like to call "gazumping", which seems to me to encourage rather imprecise thinking. It is sometimes the purchaser and sometimes the vendor who does it. On a rising market it tends to be the vendor. In my case it was a falling market and a purchaser who did it. But, in the end, it is due to the fact that the parties do not wish to hind themselves at that stage. They do not want to bind themselves for many reasons, but the first is that the purchaser wishes to ensure that he can find the finance by way of a mortgage from, let us say, a building society or some other institution, and the vendor, equally properly, desires not to be bound until he is sure that the purchaser is financially reliable. We cannot make people enter into contractual relations when they deliberately prefer not to enter into contractual relations. That is the nub of this particular problem.
I ought to add that the Law Society has issued fairly stringent ethical requirements against so-called "contract races", and it is to be praised for having done so, and I believe that the responsible estates agents do the same. But nothing can wholly guarantee that people will act honourably when there is no legal obligation to do something else.

§ Lord ELWYN-JONES
My Lords, is not the noble and learned Lord the Lord Chancellor guilty of excessive modesty in accepting the designation of himself as the Lord High Chancellor of Great Britain? As he now administers the courts in Northern Ireland and appoints the judges there, is not the fitting title, the Lord High Chancellor of the United Kingdom?

§ The LORD CHANCELLOR
My Lords, the noble and learned Lord is loading me with honours, but in fact the title is, for some reason, "of Great Britain". I agree that I have responsibilities in Northern Ireland of an important nature which the noble and learned Lord undertook, with my blessing, from the place where he now sits, but it has not altered the title of the office.