Conveyancing — Contract for sale of land — Law Society’s Conditions of Sale — Default in title — Delay in completing sale — Compensation for late completion — Whether general condition 22 incorporated into particular contract of sale — Whether vendors in default
The plaintiffs were vendors and the defendant was the purchaser under a contract for the sale of 9.29 acres of formerly agricultural land at Lugg’s Farm, near Exeter, for £1,117,500. Clause 8 of the contract provided that on the completion date (fixed at December 5 1988) “… the balance of the purchase monies shall be paid and if not so paid shall bear interest at the rate of 5 per cent above the base lending rate …”. The defendant contracted to resell the property to a subpurchaser whose solicitors were involved in the conveyance and the arrangements for completion. The contract provided that the Law Society’s General Conditions of Sale should be incorporated in so far as “not inconsistent” with the contract terms. Condition 22 provided for the payment of compensation for late completion. Para 2 stated that if the sale was completed after the contractual completion date, the party in default (if any) should be liable to compensate the other for loss occasioned to him by reason of that default.
Completion of the contract did not in fact take place on December 5 1988 because the title was unregistered and the search of the subpurchasers’ solicitors in the Land Charges Registry disclosed registrations against the plaintiffs. There were then about two weeks from acquiring knowledge of the registrations to contractual completion for the many steps necessary to cancel those registrations. Completion took place on January 20 1989.
The plaintiffs claimed against the defendant interest under clause 8 over the period from December 5 1988 to January 20 1989 for £22,815.08. The judge rejected that claim on the ground that if the plaintiffs had used appropriate diligence they could and should have resolved the difficulty for delay in completion. In contrast the defendant claimed against the plaintiffs to be entitled to deduct from the balance of the purchase money on completion a separate sum of £22,815.08. That was computed by reference to clause 8 but was claimed under condition 22 on the basis that the whole of the delay was the plaintiffs’ delay within condition 22. The judge rejected the defendant’s claim on the ground that condition 22 was inconsistent with clause 8 and so was not incorporated into the contract.
Held The appeal by the defendant purchaser was dismissed. The cross-appeal by the plaintiff vendors was allowed.
1. The provision in clause 8 operated as an agreement by the purchaser to pay the balance of the purchase money on the completion date and interest if it was not so paid. There was no comparable covenant by the plaintiffs as vendors to pay interest to the defendant. However, the purchaser’s obligation to pay interest did not apply where the delay was attributable to default on the vendor’s part; a vendor could not take advantage of his own wrong to compel a purchaser to pay interest: see Re Woods and Lewis’ Contract [1898] 2 Ch 211 at p 213. But it did apply where the delay was due to the purchaser’s default or due to something which was not the fault of either party.
2. Condition 22 was incorporated into the contract only in so far as it was “not inconsistent” with the terms of the contract. But there was inconsistency between the two in this case, in particular in the treatment of the vendor. Under clause 8 the plaintiffs were entitled to interest provided that their own default had not caused the delay in completion. Under condition 22 they would only be entitled to compensation if their loss was attributable to default on the purchaser’s part. Accordingly, condition 22 was not incorporated into the contract.
3. In the present case, the plaintiffs did not know of, nor had reason to suspect, the existence of the registration against them. It was probable that the defect in the plaintiffs’ title was merely technical. None the less the defendant was entitled to require the registrations to be canceled: see section 43(1) of the Law of Property Act 1925 and section 10(4) of the Land Charges Act 1972. The registration constituted a blot on the plaintiffs’ title which they were bound to remove but a blot closely analogous to the merely technical blot considered by the Court of Appeal in Re Woods and Lewis’ Contract.
4. The judgment in Raineri v Miles [1981] AC 1050 scotched the previously prevailing notion regarding contracts for the sale of land that if time was not of the essence, expressed time-limits did not matter and it was enough if each party acted with reasonable dispatch. However, Lord Fraser accepted that a purchaser could not recover for delay where a vendor had delayed completion as a result of a defective title or other conveyancing difficulty. That qualification had to be accepted because of the rule in Bain v Fotbergill (1874) LR 7 HL 158, which provided a special exception to the general rule that in relation to claims for damages for breach of contract it was immaterial why the defendant failed to fulfill his obligation.
5. The rule in Bain v Fotbergill was abolished by the Law of Property (Miscellaneous Provisions) Act 1989 in relation to contracts entered into after September 26 1989, ie subsequent to the contract date in the present case. In those circumstances, it was not open to the Court of Appeal to hold that the rule was inapplicable to this contract.
6. In a future case arising under a contract entered into after September 26 1989, the vendor would be in default if he failed to clear before the contractual completion date any defect in his title which became apparent between contract and completion of which he had been unaware at the contract date — however reasonable his conduct might have been. Any prudent vendor would therefore have, in his own interest, to search in the Land Charges Register for unexpected registrations against his title before he exchanged contracts for sale. In the present case the applicable law was different and consequently the plaintiffs were not at any stage in default and their cross-appeal for interest under clause 8 of the contract succeeded. Conversely, the defendant’s appeal in relation to condition 22 failed because: (a) that condition was not incorporated into the contract; and (b) there was no default on the part of the plaintiffs.
John V Martin QC (instructed by Bevan Ashford, of Exeter) appeared for the appellant plaintiffs (the vendors); and Michael Templeman (instructed by Crosse & Crosse, of Exeter) appeared for the respondent defendant (the purchaser).
