Sale of land – Contract – Specific performance – Claimant seeking specific performance of contract for sale of property by defendant – Whether contract void for non-compliance with Law of Property (Miscellaneous Provisions) Act 1989 – Whether defendant relying on misrepresentation by claimant – Whether contract procured by undue influence – Claim dismissed
The claimant was an investment company. The defendant owned a property at 7 Gunstor Road, London, N16. At the time of the material events, she was 86, turning 87, and living on her own at the property.
A dispute arose between the parties whether a valid exchange of contracts took place between the claimant as buyer and the defendant as seller of the property. The key terms of the contract were that the purchase price was £840,000, the deposit was 5% of the price (£42,000) and the completion date was 8 February 2019.
In March 2019, the claimant commenced proceedings for specific performance of the contract.
The defendant argued that the contract was void for non-compliance with Law of Property (Miscellaneous Provisions) Act 1989, the purchase price was shown as £840,000 whereas the agreed price was £940,000; alternatively the true purchaser was another company (S), and the contract was not signed on its behalf; alternatively at the date of exchange, the claimant’s conveyancing solicitor did not hold a signed contract.
The defendant also argued that she had entered into the contract in reliance upon a misrepresentation by the claimant that it was a cash buyer and the contract was to be rescinded in consequence.
Furthermore, the contract was procured by undue influence exercised on behalf of the claimant and should be set aside.
Held: The claim was dismissed.
(1) Section 2 of the 1989 Act provided that a contract for the sale or other disposition of an interest in land could only be made in writing and only by incorporating all the terms which the parties had expressly agreed in one document or, where contracts were exchanged, in each.
The terms might be incorporated in a document either by being set out in it or by reference to some other document. The document incorporating the terms or, where contracts were exchanged, one of the documents incorporating them (but not necessarily the same one) had to be signed by or on behalf of each party to the contract.
On the evidence, the contract did not show an incorrect purchase price or that the claimant was not the true buyer of the property. However, the claimant’s solicitor did not hold a signed contract when he purported to exchange contracts. It followed that the requirements of section 2 of the 1989 Act were not satisfied, and there was no valid exchange and the claim failed for that reason.
(2) The defendant alleged a dishonest (fraudulent) misrepresentation, which if established, entitled her to rescind the contract. To establish fraudulent misrepresentation, the representee had to prove that the false representation was made knowingly; or without belief in its truth; or recklessly, careless whether it be true or false.
The representor had to intend the representation to be acted on.
The misrepresentation must have induced (materially influenced the representee to enter into the contract) but need not be the sole cause.
In cases of fraudulent misrepresentation, it was no defence for the representor to show that if the misrepresentation had not been made, the representee might still have made the contract: It was enough that it had some impact on his thinking.
Although the legal burden of reliance was on the representee, there was an evidential presumption of reliance which was very difficult to rebut: Edgington v Fitzmaurice (1885) 29 ChD 459, BV Nederlandse Industrie v Rembrandt Enterprises Inc [2020] QB 551 and Goose v Wilson Sandford & Co [2001] Lloyd’s Rep PN 189 considered.
(3) The misrepresentation alleged by the defendant was that the claimant was a cash buyer. The ordinary and natural meaning of “cash buyer” was a person who intended or expected to buy a property without the assistance of a secured loan or finance.
The proper inference was that the defendant understood that expression to have its ordinary and natural meaning. The expression was not ambiguous and was not capable of meaning someone who intended to pay in cash if they needed to, ie, if they could not obtain a mortgage.
The claimant’s stated preferred course was to buy the property using mortgage finance (as was its usual practice), but that if finance could not be commercially obtained, then a cash purchase would be progressed with. Such a person was not a cash buyer.
On the evidence, the natural (and uncontradicted) inference was that the claimant’s representative made the representation to the defendant’s agent for the purpose of it being communicated to the defendant and her solicitors.
It was to be inferred that the claimant did not wish the defendant to know that it was intending to obtain a mortgage or some other form of secured finance, ie, that it was not in fact a cash buyer. It followed that the representation was not true when made.
In any event, there was no evidence before the court from which it could be inferred that the claimant was able to complete in cash, without obtaining a secured loan.
(4) The claimant had positively alleged that it would pay in cash by the time of completion if required, so had the burden of proving that allegation.
The only documents in evidence relevant to the claimant’s financial position were its accounts filed at Companies House (comprising only balance sheets).
The claimant realistically accepted that on a balance sheet basis the claimant was not able to complete in cash. There was no evidence before the court showing that the claimant would have been able to complete in cash.
It was clear that the claimant’s intention and expectation throughout was that it would fund the purchase using secured finance. The only conclusion was that the claimant knew that it was not in fact a cash buyer. That was sufficient for the representation to be fraudulent.
The defendant believed that the claimant was a cash buyer at all relevant times which materially influenced her decision to go ahead with the claimant and she had established her defence of fraudulent misrepresentation, so that if necessary, she would have been entitled to set aside the contract.
However, the defence based on undue influence failed at the first hurdle as the defendant had fallen far short of showing an agency relationship.
Samuel Hodge (instructed by Clarke Mairs LLP) appeared for the claimant; Nigel Woodhouse (instructed by Simons Rodkins Solicitors LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Shill Properties Ltd v Bunch
