Repudiatory breach of contract — Acceptance of repudiation — Collective enfranchisement — Claimant lessee joining with defendants to acquire freehold of small block of flats — Claimant failing to produce agreed share of acquisition cost — Defendants excluding claimant from acquisition — Whether notice from defendants had made time of the essence — Whether claimant entitled to relief
In November 1999, the claimant bought from W the 43-year unexpired residue of a lease of a flat in a small block in London SW3, owned by the Cadogan Estate. The purchase price of £210,000 took into account the simultaneous assignment of W’s rights under an agreement (the October agreement) made with three other lessees in the block (the defendants), relating to the steps taken, and intended to be taken, towards acquiring the block under the collective enfranchisement provisions of the Leasehold Reform, Housing and Urban Development Act 1993. The October agreement obliged the parties (the lessees) to pay “as and when the same shall fall due” their respective agreed shares of the acquisition costs (the costs obligation), such shares corresponding to the benefits they expected to receive. W’s share was fixed at 16.03%. The claimant did not move into the flat, it being his intention to resell it, together with his rights under the October agreement, as soon as a profitable opportunity arose.
Over the following months, the solicitor dealing with the freeholder on the lessees’ behalf informed them that the intended acquisition would be at risk if completion did not take place within the four-month time limit laid down in section 24 of the 1993 Act, and that cleared funds would accordingly have to be in place. During the first two weeks of July 2000, the claimant failed to respond to urgent requests for him to remit the sum of £46,530, being his share of the amount required upon completion, the deadline for which was 24 July. By a faxed letter dated 18 July, the same solicitor informed the claimant that a failure to provide that money by 20 July (subsequently extended to 24 July) would be treated as a repudiatory breach of the October agreement. Completion took place on 21 July, the claimant’s share of the purchase price having been contributed by two of the other lessees. On 25 July, the claimant forwarded £46,500 to the solicitor, but was subsequently informed that the other lessees wished to exclude him from the transaction. The claimant sued for specific performance of the October agreement. The defendants contended that their obligations to him had been discharged by their acceptance of a repudiatory breach on his part.
Held: The action was dismissed.
1. The claimant was in serious and repeated breach of the costs obligation, which, on its true construction, was an innominate contractual term, where the legal consequences of the breach would depend upon the particular circumstances. Applying the principles affirmed in Behzadi v Shaftesbury Hotels Ltd [1991] 2 All ER 477, time was effectively made of the essence by the solicitor’s letter of 18 July 2000 and the communications that followed. The very short notice was entirely reasonable in the circumstances. The claimant’s failure to produce his share of the price on the very last day upon which completion could take place, without imperiling the whole transaction, was as radical a breach as one could imagine. The repudiation was plainly accepted when the claimant was informed of the position taken by the other lessees, who were in no way obliged to accept the late tender made on 25 July: see Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514.
2. Having been validly excluded from participating in the purchase of the freehold, the claimant could not contend that his case fell within the inherent jurisdiction of the court to grant relief against forfeiture. That jurisdiction, as derived from the decision of the House of Lords in Shiloh Spinners Ltd v Harding [1973] 1 All ER 90 (as recently affirmed in On Demand Information plc v Michael Gerson plc [2002] 2 All ER 949), was never meant to apply generally to contracts not involving any transfer of proprietary or posssessory rights in land or other property: see per Lord Diplock in Scandanavian Trading Tanker Co AB v Flota Petrolera Ecuatoniana (The Scaptrade) [1983] 2 AC 694 at p702. For the reasons given by Lord Hoffmann in Union Eagle Ltd, relief could not be granted by way of specific performance against the breach of an essential condition as to time.
Mark Warwick (instructed by BSG) appeared for the claimant; Martin Rodger (instructed by Dewar Hogan) appeared for the defendants.
Alan Cooklin, barrister