Sale of land – Completion date – Notice to complete served by defendant vendors – Contract providing for completion to take place by 1pm failing which purchaser to be treated as having completed on next working day – Whether completion date in contract to be rectified on grounds of common mistake – Whether failure of claimant purchaser to pay purchase moneys by 1pm on last day permissible under completion notice entitling defendants to rescind – Whether omission of defendants’ legal costs from amount paid having that effect – Claim allowed in part
The claimant agreed to purchase a freehold property from the defendants for £120,000; contracts were exchanged and a deposit of £12,000 was paid. The property was divided into flats, the tenants of which had a right of first refusal, under Part I of the Landlord and Tenant Act 1987, in respect of any such sale. Accordingly, special condition 25 of the contract made the agreement conditional upon the tenants not exercising that right, and provided that completion should take place “10 days after the date upon which the said tenants’ rights to proceed under the Act have expired”. It further specified that: “Such date shall be 24 January 2007.” The offer notices that the defendants had served on the tenants, as required by section 5 of the 1987 Act, specified 1 February 2007 as the date by which the offer of disposal had to be accepted. By special condition 10, the contract further provided that completion should take place by 1pm on the day fixed for completion “and if completion shall take place after that time the Buyer shall be treated as having completed on the next following working day”. By special condition 26, the claimant was responsible for paying the defendants’ legal costs of the sale in the sum of £500 plus VAT.
The tenants did not exercise their right to acquire the defendants’ interest in the property. An issue arose as to the contractual completion date for the sale to the claimant. The defendants maintained that it was 10 days after 24 January 2007, while the claimant argued that it was 10 days after 1 February 2007, namely 12 February as the next available working day. The defendants served various notices to complete, the last of which was given on 12 February. The notice required completion by 26 February, with time to be of the essence pursuant to the terms of the contract. On that day, at 2.44pm, £113,070 was transferred to the defendants’ solicitor by telegraphic transfer. The defendants maintained that the money had been paid too late, since it should have been sent by 1pm on the completion date, and that it should have included the sum for their legal costs. They repaid the money and purported to rescind the sale contract and forfeit the claimant’s deposit.
The claimant brought proceedings for: (i) rectification of the sale contract to state that the completion date was 10 days after 1 February 2007; and (ii) specific performance, on the basis that the payment at 2.44pm had been effective to complete the sale.
Held: The claim was allowed in part.
(1) The date specified in special condition 25, namely 24 January 2007, had been inserted owing to an erroneous belief shared by both parties that the section 5 notices served on the tenants would expire on or by that date, whereas they actually expired on 1 February 2007. The necessary elements for rectification on the ground of common mistake were established. The common intention had been that: (i) the date inserted in special condition 25 should represent the expiry date; (ii) that intention had been a continuing one at the date upon which the contract was entered into; and (iii) the contract had failed accurately to reflect that intention. The parties’ intention had been clear and there had been a more than sufficient outward expression of it in the communications between them. In those circumstances, the fact that they had intended to, and had, inserted 24 January into the contract did not displace the case for rectification: Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 distinguished.
(2) The later payment of the purchase moneys on the final date available for completion did not mean that the claimant was out of time to complete in accordance with the notice. The purpose of special condition 10 was not to set a deadline of 1pm as the latest time by which completion on any given day could be contractually insisted upon, but merely to provide that if payment were made later in the day it was to include a day’s additional interest. The absence of any express reference to the delayed completion being “for the purpose of apportionments and compensation only”, as in certain other clauses of the contract, did not displace that conclusion. Accordingly, it had been open to the claimant to tender the moneys at 2.44pm in fulfilment of his obligation to complete. However, the sum to be paid had to be calculated as though completion had taken place before 1pm on the next working day.
Although the special condition contained no express reference to the payment of the defendants’ legal costs “upon completion”, it had that effect when read with other provisions of the contract, such that the claimant’s failure to include those costs in the moneys paid on the completion date entitled the defendants to rescind. Although that may be a harsh outcome, given the comparatively small shortfall in payment, the claimant had left himself no room for error by paying so late when time was of the essence.
Philip Kremen (instructed by Gelbergs) appeared for the claimant; Tom Weekes (instructed by DKLM Solicitors) appeared for the defendants.
Sally Dobson, barrister
