Sale of property — Contract for sale — Breach of contract — Claim for damages — Claimants complaining that construction of apartments of poor quality — Claimants failing to complete — Claimants bringing action to recover deposits — Claimants placing unilateral notices against property at Land Registry — Whether court having power to vacate notices — Application granted
The claimants agreed to purchase long leases on 18 flats and paid the defendant deposits of £25,000 per flat. They complained that the finish of the flats was of poor quality and that they had not been constructed in accordance with the planning permissions and building regulation consents or the relevant specifications. They refused to complete on their purchases and consequently forfeited their deposits.
The claimants subsequently sought declarations that the defendant was in repudiatory breach of contract so that they were entitled to rescind the contracts of sale. They also claimed the return of their deposits and damages. The defendant counterclaimed for the losses allegedly caused by the claimants’ failure to complete.
The defendant remarketed the apartments and agreed to a sale of the 18 flats to a group of investment purchasers. The claimants requested an undertaking that the net proceeds of sale would be paid into court or into an escrow account pending the outcome of their trial on the basis that the defendant would not have any assets of substance following the sale of the flats. The undertaking was refused and the claimants registered unilateral notices with the Land Registry against the freehold title of the flats in order to protect each claim to a purchaser’s lien in respect of the payment of the deposits.
The defendant applied for an order that the notices be vacated to enable the sale to proceed.
Held: The application was granted.
The balance of convenience overwhelmingly favoured the discharge of the unilateral notices. Although the claimants were prima facie entitled to register the notices, since they had a claim in a pending land action, the court had a discretionary power to vacate a unilateral notice in appropriate circumstances: Calgary & Edmonton Land Co Ltd v Dobinson [1974] 1 Ch 102; (1973) 232 EG 1215 and Loubatieres v Mornington Estates (UK) Ltd [2004] EWHC 825 (Ch); [2004] PLSCS 105 considered.
The overriding consideration was as to which course of action, if erroneous, posed the least risk of injustice. Upon the evidence, the registration of the notices was of no practical or positive value to the claimants since, on the figures, the proceeds of sale would go to the bank as first chargee and there would be nothing to which the liens could attach.
It would be unjust to prevent the sale by allowing the notices to remain in force because the defendant would be deprived of its ability to sell and thereby prevented from mitigating any loss.
It would also be unjust to allow the notices to remain since the claimants had failed to give undertakings in the face of a potentially large counterclaim. It would be disproportionate, given that the claimants’ potential losses amounted to £450,000 as against a sale value of over £5m.
Furthermore, the timing of the notices appeared to be an attempt to put commercial pressure on the defendant in the run up to the trial.
Philomena Harrison (instructed by Howard Kennedy) appeared for the claimants; Helen Galley (instructed by Paul Davidson Taylor, of Horsham) appeared for the defendant.
Eileen O’Grady, barrister
