Leasehold interest — Sale agreed — Deposit paid — Purchaser alleging misrepresentation concerning sublease — Purported rescission of contract — Vendor alleging repudiation by purchaser — Whether vendor entitled to forfeit deposit — High Court holding that purchaser wrongfully repudiated contract — Judgment for vendor
The vendor held a leasehold interest in commercial property at 21 Berners Street, London W1. On February 22 1994 they contracted to sell it to the plaintiff, a British Virgin Islands company associated with a property dealer in Hong Kong for the sum of £1.9m. A deposit of £190,000 was paid. The contract was never completed. The vendor forfeited the deposit and the purchaser sued for its recovery, together with damages for misrepresentation. The property was in the hands of Law of Property Act receivers.
Particulars of sale were sent to the purchaser on February 4 1994 which stated that the property was held on a 150-year lease from October 1 1993. The ground rent of £50,000 pa was subject to rent reviews on October 1 1994 and seven yearly intervals thereafter. It was stated to be let to ICO, an inter-governmental body, for a term of 20 years from September 29 1988. The rent they paid was stated as £279,000 pa. The rent payable under the sublease was considerably in excess of that. The purchaser would therefore be buying a substantial income stream. On March 16 1994 the purchaser purported to rescind the contract for misrepresentation and demanded repayment of the deposit with interest. It claimed that the status of ICO had been misrepresented in the particulars. Mutual accusations of repudiation followed.
Held The vendor was entitled to forfeit the deposit.
1. The question whether one party had made a representation during negotiations for a contract depended upon what had actually conveyed by writing, words or conduct. There might be circumstances where the true import of what was said or written was distorted by what was left unsaid, so that even if the representation was literally true it was nevertheless misleading: see Atlantic Estates plc v Ezekiel [1991] 2 EGLR 202.
2. It was inherent in any purchase of property for the benefit of the rental stream, that the security of that stream was dependent upon the tenant continuing to be able and willing to comply with his obligations.
3. However, the particulars sent to the purchaser were concerned only with giving a partial description of certain contractual obligations of the ICO. They were not concerned with assessing, even partially, the likelihood that those obligations would be performed. It followed that when the purchaser purported to rescind the contract on March 16 1994 it was wrongfully repudiating it.
4. A refusal to perform a contract could amount to a repudiation only if it was absolute. The words or conduct said to demonstrate that had to do so clearly and unequivocally.
5. The only reasonable inference which could be drawn from the plaintiff’s conduct subsequently was that they were adhering to their decision to treat the contract as rescinded. Subject therefore to section 49(2) of the Law of Property Act 1925, the vendor was entitled to forfeit the deposit.
6. Section 49(2) provided that the court might, if it thought fit, order the repayment of any deposit. That jurisdiction might in principle be exercised in favour of a defaulting purchaser: see Universal Corporation v Five Ways Properties Ltd [1979] 1 ALL ER 552.
7. However, on the facts fairness between the parties did not require the court to order repayment of the deposit.
Judith Jackson QC (instructed by Frere Cholmeley Bischoff) appeared for the plaintiff purchaser; Michael Briggs QC (instructed by Linklaters & Paines) appeared for the defendant vendor.