Auction — Sale of properties — Successful bidder’s failure to complete — Whether the latter had a defence to vendors’ claim to forfeiture of deposit and damages for breach of contract — Appeal by defendant from judge’s order striking out defence and counterclaim — Appellant’s assertion of contractual term varying auction particulars and obliging vendors not to enforce contract — No grounds for appellant’s claim — Appeal dismissed
the present case was against orders of Mr Michael Wheeler QC, sitting as a
deputy judge of the Chancery Division, dismissing appeals by the appellant from
orders of two registrars — The appellant, defendant in the action and appearing
as a litigant in person in this appeal, had become involved in a multiplicity
of proceedings — The action by the vendors and the subsequent litigation arose
out of an auction at which four properties, constituting a single lot, were
knocked down to the appellant at the price of £22,000 — The auction contract
was signed by the auctioneers on behalf of the appellant as successful bidder
in accordance with the normal practice and he paid the deposit of £2,200 — The
appellant, however, did not complete the contract on the stipulated date and
failed to do so down to the commencement of the action — The vendors,
respondents to this appeal, claimed a declaration that the deposit had been
forfeited and that they were entitled to damages for breach of contract — The
appellant in reply served a defence and counterclaim, the latter asking for
specific performance of the contract and for the auctioneers to be joined as
third parties — There were proceedings before registrars, but the next main
step was the decision of Mr Michael Wheeler QC refusing leave to defend and
striking out the defence and counterclaim — The judge was of the opinion that
the appellant’s defence and pleadings showed no reasonable defence
appellant’s main submission was that he had been given an assurance before the
sale that if he purchased the properties at the auction he would be able to
inspect and value them and consider the position in relation to his finances
before completion — He alleged, in other words, that there had been a
contractual term agreed before the auction varying the particulars and
conditions and binding the vendors not to enforce the contract until he had
been given time to inspect and evaluate the properties
could not discover any grounds for establishing the existence of such a term —
The appellant had consequently not put forward an arguable defence and the
decision of the judge below to strike out the defence and counterclaim was
correct — The court also rejected submissions that the contract signed by the
appellant had been an illegal agreement because of certain alleged infractions
of the Companies Act 1985 — Appeals dismissed
The following cases are referred to in
this report.
Collins v Howell-Jones (1980) 259 EG 331,
[1981] 2 EGLR 108
Overbrooke Estates Ltd v Glencombe Properties Ltd
[1974] 1 WLR 1335; [1974] 3 All ER 511
These were appeals by the defendant,
Abdul-Ghaffar Khan-Ghauri, from a decision of Mr Michael Wheeler QC, sitting as
a deputy judge of the Chancery Division, whereby he dismissed appeals from
orders made by Mr Registrar Cliffe and Mr Registrar Hebbert on summonses issued
by the defendant and the plaintiffs respectively. The various proceedings arose
out of an auction sale held by Barnard Marcus & Co at which four properties
belonging to the plaintiffs in the action, respondents to this appeal, Robert
Paul Moore and Jennifer Ann Zazzeroni, were put up for sale. The properties
were 188, 190, 194 and 202 Wheatland Lane, Wallasey, Cheshire.
The appellant, Abdul-Ghaffar Khan-Ghauri,
appeared in person: Gilead Cooper (instructed by Coles & Stevenson, agents
for Clarksons & Steele, of Halifax) represented the respondents.
Giving judgment, DILLON LJ said:
Mr Khan-Ghauri, who has appeared in person and tells us that he is by
profession an electronics engineer, appeals, in so far as he has been given
leave on the papers by Nicholls LJ to do so, against two orders made by Mr
Michael Wheeler QC, sitting as a deputy judge of the High Court in the Chancery
Division on December 15 1989.
By one of those orders, Mr Wheeler
dismissed an appeal by Mr Khan-Ghauri against an order made by Mr Registrar
Cliffe in the Leeds District Registry on June 30 1989. By the other order, Mr
Wheeler effectively dismissed, but varied in the process, an appeal by Mr
Khan-Ghauri against an order of Mr District Registrar Hebbert of October 13
1989.
The plaintiffs in this action, Robert
Paul Moore and Jennifer Ann Zazzeroni, are the owners of four properties, 188,
190, 194 and 202 Wheatland Lane, Wallasey, Cheshire. Those four properties
constituted lot 121 at an auction sale held by Barnard Marcus & Co on May
20 1987 and at that auction sale lot 121, the four properties, was sold to Mr
Khan-Ghauri at a price of £22,000 and he paid the auctioneers a deposit of
£2,200. The auction, as may be readily concluded from the fact that these
properties constituted lot 121, involved a large number of other properties
also sold on behalf of other vendors. The plaintiffs were the vendors of lot
121, selling through Barnard Marcus, the auctioneers. The signed contract
signed by the auctioneers on behalf of Mr Khan-Ghauri in the usual way at the
end of the sale is, of course, a contract between the vendors and Mr
Khan-Ghauri and not between the auctioneers and Mr Khan-Ghauri.
The statement of claim in the action
pleads the contract made at auction and that the plaintiffs agreed to sell and
the defendant agreed to buy the four properties in the single lot and pleads
also the signing of the memorandum of the sale and the payment of the deposit.
It then sets out that:
By virtue of condition 2 of the special
conditions applicable to the sale the date for completion of the sale was, in
the events which happened, 2nd July 1987
and that, as is not in dispute
The defendant failed to complete the sale
on 2nd July 1987.
It is then pleaded in the statement of
claim that:
By a notice to complete dated 27th July
1987 and served on the Defendant and his solicitors, Messrs Phillips &
Buck, the Plaintiffs required the Defendant to complete the contract in
conformity with Condition 22 of the National Conditions of Sale to which the
contract was subject, namely within 16 working days after service of the notice
exclusive of the day of service.
It is then pleaded, and this also is not
in dispute, that:
The Defendant did not complete the
contract within the said period and has failed and neglected so to do down to
the date of issue of the present action.
It is then pleaded that title has been
deduced and no requisitions have been served and that, by virtue of certain
conditions of the National Conditions of Sale, the defendant is deemed to have
accepted the title.
The plaintiffs then claim:
A declaration that the Defendant’s
deposit has been forfeited to the Plaintiff
and
Damages for breach of contract.
There was an order for directions in the
county court on February 22 1989. The plaintiffs had signed judgment in default
at an earlier date, but that was wrong, because the papers had been served on
Mr Khan-Ghauri at a wrong address and that was set aside. Directions were then
given, when the judgment was set aside, for Mr Khan-Ghauri to serve a defence
within 14 days and there were the usual further directions for inspection of
documents and so forth, limiting expert evidence, and provision for the action
to be listed for hearing in the usual way.
Mr Khan-Ghauri has argued that that precludes
the plaintiffs’ making the application, which they subsequently did make, to
strike out his defence because that was inconsistent with the court’s other
directions. That cannot be a valid submission because, of course, the district
registrar’s order of February 22 giving those directions was made before the
defence had been served and, of course, the defence could not be challenged as
not disclosing any proper cause of defence until after it had been served. On
February 29 1989 Mr Khan-Ghauri served a defence and counterclaim and I will
have to come back to setting out what he was there setting up.
On March 20 1989 he issued the summons
which came before Mr Registrar Cliffe on June 30 1989. By that summons he
asked, first for access to the four properties, 188, 190, 194 and 202 Wheatland
Lane for purposes of survey and valuation and, second, that the auctioneers,
Barnard Marcus, be made party to these proceedings in consequence of the
defendant’s counterclaim and that the matter be transferred from the Leeds
District Registry to the High Court of Justice, Chancery Division in London,
and for a declaration as to the payment of his deposit into court. As to that,
Mr Registrar Cliffe refused all that relief and para 1, seeking access to the
properties, was a matter in respect of which Nicholls LJ refused leave to
appeal to this court. Mr Wheeler had simply dismissed the appeal against Mr
Registrar Cliffe’s order. So the question of access is not before us. One
reason why it is not before us is that three of the properties, nos 188, 190
and 202, have since been sold by the vendors to third parties. The titles are
registered titles. The third parties no doubt now have registered titles to the
properties and, accordingly, specific performance is not remotely possible. If
Mr Khan-Ghauri has any claim at all it would be a claim for the return of his
deposit and possibly damages.
As to the other relief sought and refused
by Mr Registrar Cliffe, it does not really have to be considered now if the
order of Mr Wheeler stands in relation to the striking out of the defence and
counterclaim. If the defence and counterclaim are struck out, then there is no
purpose whatsoever in joining Barnard Marcus & Co into these proceedings
and there is equally no purpose in transferring the matter to the High Court of
Justice in the Chancery Division. That at any rate was the order of Mr
Registrar Cliffe of June 30 1989.
Mr Khan-Ghauri had given notice to appeal
to a judge in the Chancery Division against Mr Registrar Cliffe’s order and
while that appeal was pending a fresh application was issued by the plaintiffs,
which was the one that came before Mr District Registrar Hebbert. The notice of
application was a summons of August 22 1989. What was applied for was relief on
the basis that the defence and pleadings served by the defendant disclosed no
reasonable cause of defence to the action. That is put forward under Ord 18, r
19 of the Rules of the Supreme Court, which provides that:
The Court may at any stage of the
proceedings order to be struck out or amended any pleading or the indorsement
of any writ in the action, or anything in any pleading or in the indorsement,
on the ground that (a) it discloses no reasonable cause of action or defence,
as the case may be;
That came before Mr Registrar Hebbert and
he made an order which did not follow the rule. He declared that the
defendant’s deposit in the sum of £2,200 had been forfeited to the plaintiffs.
He ordered that there be unconditional leave to defend as to the balance of the
claim. He ordered that the plaintiffs have leave to serve an amended statement
of claim to allege that the plaintiffs had suffered damage and he ordered that
further directions be adjourned sine die. He could, of course, have
granted only the first part of the order, that the deposit had been forfeited
to the plaintiffs, if he were satisfied that the pleading which had been served
disclosed no reasonable cause of action or defence, the pleading being the
defence and counterclaim.
Mr Khan-Ghauri appealed to Mr Wheeler and
in the course of the argument reference was made to observations in another
authority that it is necessary to deal separately and specifically with
counterclaim as well as defence, and Mr Wheeler by his order varied the
registrar’s order by refusing leave to defend the action and striking out the
defence and counterclaim. Refusal of leave to defend was not wholly appropriate
because the application was not under Ord 14. But striking out the defence and
counterclaim was, in my judgment, the correct order to make if the court was
satisfied that the defence and pleadings served by the defendant disclosed no
reasonable cause of defence to the action. The counterclaim is in effect, in
the present case, the counterpart of the defence. I therefore turn to it to see
what Mr Khan-Ghauri is seeking to set up.
He says this in the first part, which is
headed DEFENCE TO CLAIM:
the answers to the statement of Claim of
Plaintiff are submitted para by para thereof as follows;
1 The Para 1 thereof is denied to the extent
that this clause also refers as to ‘subject to inspection and survey and
valuation of the properties in question’ ie 188, 190 194 and 202 Wheatland
Lane, Wallasey, Cheshire, which has not been fulfilled down to date.
2 Para 2 the memorandum of sale was signed
by the defendant, subject to above condition to which selling Agent Auctioneers
had agreed to before the auction, that they would allow him, the purchaser, the
keys, and access for the purpose of inspection and survey and valuation of the
properties in issue.
That is amplified in further and better
particulars as follows:
The name of the individual, who agreed on
behalf of the auctioneers is not known. He appeared to be one of the Executives
at 66-68 Shepherds Bush Road, Hammersmith, London W6; offices . . . The essence
of the words used by such person was ‘We don’t have the keys for many of the
properties right now, but if you buy any property at any of our auctions, we
shall be too pleased to allow you to have the keys and access to your purchased
properties, as soon as the auction is over. If there is still no keys available
immediately after the auction, we will arrange the access for inspection and
valuation and Surveys, through the vendors or their solicitors’. The Defendant
accepted the Oral Contract and said OK.
Para 3 of the defence to claim goes on:
3a
Para 3 is contradicted to the effect that the condition 2 of the Special
Conditions of sale is not applicable in the circumstances.
Plainly, we are entitled to look at the
contract to see what condition 2 which is thus pleaded said. That is under the
heading IMPORTANT NOTICE TO BE READ BY ALL BIDDERS.
2. Prospective Purchasers shall be deemed
to have inspected the relevant property and made all usual and necessary
searches and enquiries, with all relevant authorities and other bodies.
The defence goes on:
3b
by their selling agent auctioneers M/s Bernard [sic] Marcus letter dated
4th June 1987 wherein they admitted with regard to lot 121 (the properties in
issue) Wheatland Lane, that the vendor is in the process of having the locks
changed as soon as he receives the keys these will be forwarded to you, they,
by the principle of ‘estoppel’ admitted that the sale was subject to inspection,
survey and valuation and that the keys were not still available to the
defendant as to have satisfaction of the condition in question here, they did
not fulfil their part of the contract before the exchange of contracts or in
any event before the completion date if there was any to occur after the said
satisfaction. As the said satisfaction did not take place, the vendors were
liable under the contract and not the defendant, and hence no application of
the Condition 2 of the Special Conditions.
Then the defence continues:
4
Para 4 is contradicted to the effect that as the Plaintiffs failed to
fulfil their part of the contract, the defendant was not bound — it was rather
detrimental to his interests — to complete the sale on 2nd July 1987.
5
The Notice mentioned in para 5 is therefore not applicable in the
circumstances as mentioned above.
6
Para 6. The defendant was not bound to complete the contract, on the
other hand the plaintiffs have been liable down the date for not performing
their part of the contract.
7
Para 7 is denied that the plaintiffs have deduced the title as they have
failed to satisfy the requirements of condition 9(2) of the National
Conditions, hence, contrary to their para 7.
and it is asserted that the defendant
cannot be deemed to have accepted the title. Then,
8
As to para 8, it is denied that the plaintiffs have ever been ready or
willing and able to perform their obligations under the contract, and the
defendant hereby reserves his right to give them notice to perform their part
(obligations) under the contract as stated above.
COUNTER CLAIM
1
In support of his Counter Claim, the defendant applies that the Vendors’
Auctioneers, Ms Bernard Marcus be made (third party) to join the Plaintiff on
the point of Liability for the loss and damages he has suffered under the
contract.
2
Specific performance of the contract is invoked to be ordered.
It cannot be, of course, as some of the
properties have been sold.
3
The facts supporting his Counter Claim can be stated as under:
(a)
Before the auction of the properties in issue, the vendors agent,
auctioneers Ms Bernard Marcus agreed to permit the inspection, survey and
valuation of the properties which they said that the keys of these properties
were not available and that it could be done anytime before the completion of
the contract.
(b)
by their (Auctioneers, Bernard Marcus) subsequent letter dated 4th June
1987, (after the signing of contract on 20th May 1987 through auction sale held
at Hilton Hotel, Kensington London) they admitted that the vendors were in the
process of changing the locks of properties in issue and as soon as the keys
were available to them those would be forwarded to the defendant.
(c)
in the Plaintiffs’ Solicitors’ Notice of Completion dated 27th July
1987, Para (b) thereof (last sentence) it has been submitted that the vendors
were ready and willing to fulfil their own outstanding obligations under the
contract, but these obligations have not been fulfilled down to the date.
(d)
The letter from Prudential Property Services (Valuers and Surveyors for
the defendant) dated 22nd October 1987, to the defendant’s financial agents, Mr
Sabir, of Able Eye Ltd, shows that by the time a key for only one property No
188 Wheatland Lane, was available yet these surveyors were not able to gain
access to the rear of this property and hence no completion of valuation even
of that property No 188. There was no letter of authority or even keys
available for other properties, and hence no access of them to those
properties.
That pleading of the letter of October 22
1987 is in fact inaccurate in that the letter sets out in para 1: ‘Please find
enclosed the Valuation Report on’ 190 Wheatland Lane, but that is a detail
which is immaterial for present purposes. The point is that there was no
valuation report made available on the other three properties because of the
position as to access. The counterclaim continues:
(e)
Letter of the defendant’s Solicitors Ms Phillips & Buck dated 11th
November 1987 to the Vendors Solicitors to ensure and co-operate with the
people mentioned therein so that the outstanding survey and valuation Reports
could be available to the defendant’s Mortgagees (financiers) without further
delay.
That, of course, was after the notice to
complete, if valid, had expired.
4
By the rule of ‘estoppel’ the Vendors/their agents were, on the strength
of above facts, obligated to fulfil their part of performance before the
completion which they have failed down to date and hence the defendant has
suffered loss and damages to which he hereby makes counter claim.
AND THE DEFENDANT COUNTER CLAIMS
(a) specific
performance of the outstanding Contractual obligations by the plaintiffs, as
stated above,
(b) completion
of sale . . .
(c) declaration
as to payment of the defendant’s deposit money £2,200 into the court,
(d) damages
for breach of contract,
(e) further
or other relief,
(f) costs.
So the crucial question is whether he has
established an arguable defence to this action which is, arguably, also the
basis for a counterclaim. What he is relying on is what was said to him before
the sale as constituting an assurance that, if he purchased the properties at
auction, after the auction and before completion he would be able to inspect
the properties and have a survey and valuation, so as to be able to raise the
price which he would have to produce on completion. But that assurance has to
be an assurance having contractual effect as a term of the contract between him
and the plaintiffs, the vendors, for the sale of the properties.
I am wholly unable to see that the case
pleaded about the keys and the meeting at Barnard Marcus’ offices before the
sale can conceivably amount to a contractual term varying the auction
particulars and binding the vendors not to enforce the contract, ie making it a
condition of the contract that it should not be enforced until there had been
time accorded to the defendant to have the keys and inspect the four
properties. It is to be noted that two of the properties were occupied by
sitting tenants; the other two were offered for sale with vacant possession.
Mr Khan-Ghauri has incidentally referred
us, in the course of presenting this appeal, to para 7 in the auction brochure,
under the heading IMPORTANT NOTICE TO BE READ BY ALL BIDDERS, where it is said:
‘Inspection of investment properties by courtesy of the Tenants. Inspection of
properties with vacant possession only by arrangement with the
Auctioneers.’ I do not see that anything
is pleaded which could be construed as amounting to a conditional term of the
contract for sale by the plaintiffs to the defendant.
Apart from that, however, if we are
entitled to look at the whole of the auction brochure, and, for the other
reasons to which I will come, Mr Khan-Ghauri has referred us to various other
parts of it, we find under the heading GENERAL CONDITIONS OF SALE, general
condition 16 (which is p 173 of the bundles lodged with the court by Mr
Khan-Ghauri):
The Vendor does not make or give any
representation or warranty in relation to the property nor has the Auctioneer
or any person in the employment of the Auctioneers any authority to do so on
his behalf.
The effect of a condition of sale in such
terms as cutting down the authority of the auctioneers and their employees was
considered by Brightman J in the case of Overbrooke Estates Ltd v Glencombe
Properties Ltd [1974] 3 All ER 511, and he upheld the clause and held that
it precluded a purchaser from relying on anything said by the auctioneer, or an
employee of the auctioneer, from constituting a representation or warranty or
contractual term binding the vendor. That decision of Brightman J was approved
by a two-judge division of this court, Waller LJ and Dame Elizabeth Lane in Collins
v Howell-Jones (1980) 259 EG 331, [1981] 2 EGLR 108.
It follows, therefore, if we can pass to
the terms of the auction particulars, that it is quite plain that the
auctioneers had no authority to bind the vendors even if, contrary to my
interpretation of the pleadings, they had purported to do so. That being so, Mr
Khan-Ghauri’s pleading cannot stand.
He has taken a further point under the
Companies Act and he has said that the effect is that the auction contract is
an illegal contract which the vendors cannot enforce. That is a matter which
has not so far been pleaded at all. What he says is this. The auctioneers,
Barnard Marcus & Co, are, according to the auction particulars, an
unlimited company. He says that the auction particulars which they have issued
on behalf of the vendor fail to comply with the provisions of the Companies Act
1985 and in particular with section 349, which requires that every company
shall state its name in legible characters on business letters, notices and
other official publications and so forth; section 351, which requires the
publication of its name and registered office and which country it is
registered in, in legible characters on all business letters and order forms;
and also section 305, which requires that the company must state the name of
all the directors in any business letter.
In the present case it is said that
Barnard Marcus & Co failed to do that in their auction particulars. They do
not say anything until one gets to the back page, where there is in prominent
letters at the head, ‘Barnard Marcus Auctioneers and Estate Agents’. Then there
are the names of some directors; and then the address and telephone number, in
large letters, of the auction office; the addresses and telephone number of
various other offices; and, in small letters at the foot, ‘Barnard Marcus &
Co is an unlimited company. Registered office: 205 Lavender Hill, London SW11’
(that is the Battersea office given a bit higher up) and the registration
number. It is said that that is not in sufficiently legible characters. It
fails to state whether Barnard Marcus & Co are incorporated in England or
Scotland and if one looks at the list of directors on the back of the auction
particulars and compares it with the names on the letters written by Barnard
Marcus & Co at and around that time and immediately after the auction, one will
see that the back page of the auction brochure omits the name of a Mr John
Gibbs who on the letter heading of Barnard Marcus is named as a consultant. We
have no evidence that Mr John Gibbs was in truth a director. But be that as it
may, I take the view that these various points under the Companies
Act do not bear at all on the legality of the contract made between the
vendors, who are not a company, and Mr Khan-Ghauri. It may or may not be the
case that Barnard Marcus & Co have incurred some penalty under the
Companies Act for the way in which they have set out the particulars of
themselves on the auction brochure, but that is irrelevant to the validity of
the contract between the vendors and Mr Khan-Ghauri.
Accordingly, I agree with the conclusion
of Mr Wheeler that the defence and counterclaim must be struck out and I would
dismiss both these appeals.
Agreeing, NOURSE LJ said: I add a
few observations in relation to the points taken on the Companies Act 1985. We
have not been referred to the text of that Act. We have been shown by Mr
Khan-Ghauri a copy of some official notes prepared as a guide to the material
provisions. He relies mainly on sections 349 and 351. I have seen nothing in
that paper nor have I heard anything in the submissions of Mr Khan-Ghauri which
satisfies me that there is any obligation on a company, when acting as agent
for vendors of land in circumstances such as these, to state in the contract
(which they enter into not on their own behalf but on behalf of the vendors)
either the name of the company or any of the other particulars which are
referred to in those sections.
For this additional reason, as well as
for those stated by Dillon LJ, I agree that this appeal must be dismissed.
SIR DAVID CROOM-JOHNSON also agreed and did not add
anything.
The appeals were dismissed with costs.
