Aribisala v St James Homes (Grosvenor Dock) Ltd

Contract for sale of land – Deposit – Contractual provision purporting to exclude application of section 49(2) of Law of Property Act 1925 – Claimant purchaser failing to complete – Claimant bringing action to recover deposit under section 49(2) – Defendant applying for summary dismissal of claim – Whether claim having prospect of success – Whether possible to exclude section 49(2) by agreement – Application dismissedThe claimant purchaser and the defendant vendor entered into two contracts for the sale of two leasehold properties. Both contracts incorporated the standard conditions of sale (4th ed), save that clause 1.2 of each contract provided that “section 49(2) of the Law of Property Act 1925 shall not apply”. Section 49(2) conferred a power on the court, in an action for the return of a deposit, to make an order for the return of any deposit.The claimant paid a deposit of 10% of the purchase price as required by the contract. He then failed to complete on the contractual completion date or to comply with a notice to complete served by the defendant. The defendant purported to rescind the contract and forfeit the deposit. The claimant brought an action for the return of his deposit under section 49(2). He contended that clause 1.2 had been ineffective to contract out of section 49(2) since any such provision would be void on established principles as an agreement to oust the jurisdiction of the court contrary to public policy.The defendant applied, under CPR 24, for summary dismissal of the claim on the ground that it had no real prospect of success since clause 1.2 had excluded the application of section 49(2). It submitted that: (i) section 49(2) conferred a benefit on purchasers, which, in the absence of any other public policy considerations, they were entitled to waive according to established principles; and (ii) had parliament wished to prevent contracting-out, it could have included a provision that the section was to apply “notwithstanding any stipulation to the contrary” as it had done in section 146 of the same Act.Held: The application was dismissed.It was not possible for the parties to a contract for the sale and purchase of land to exclude the application of section 49(2) by agreement: Schindler v Pigault (1975) 30 P&CR 328 and Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552 considered; Country & Metropolitan Homes Surrey Ltd v Topclaim Ltd [1996] Ch 307 distinguished. Section 49(2) did not confer a right on any party, but conferred a jurisdiction on the court in the exercise of its discretion to order the return of a deposit paid by a purchaser. A contractual term, such as clause 1.2, that purported to exclude section 49(2) was a provision that purported to oust the court’s jurisdiction and was accordingly void and of no effect on grounds of public policy: Hyman v Hyman [1929] AC 601 and Re Wynn’s Will Trusts (No 1) [1952] Ch 271 considered. Section 49(2) did not confer a benefit on a purchaser but only conferred a jurisdiction upon the court that could be exercised in the purchaser’s favour. It was not open to a purchaser to waive that jurisdiction, which was equivalent to the jurisdiction to grant relief from forfeiture.That conclusion was not affected by the absence from section 49(2) of any express provision that it should apply “notwithstanding any stipulation to the contrary”. The inclusion of those words in section 146, in a completely different part of the Act dealing with different matters, did not indicate that their absence from section 49(2) made contracting out possible.Chima Umezuruike (instructed by Osibanjo & Co) appeared for the claimant; James Hanham (instructed by Hexstalls LLP) appeared for the defendant.Sally Dobson, barrister