Sale of land – Completion – Notice to complete – Compliance – Contract providing for completion by 1pm on completion date failing which appellant purchaser to be treated as having completed on next working day – Whether failure of appellant to pay purchase moneys by 1pm on last day permissible under notice to complete entitling respondent vendors to rescind – Whether failure to include respondents’ legal costs in sum paid having that effect – Appeal allowed
The appellant agreed to purchase a freehold property from the respondents for £120,000; contracts were exchanged and a deposit of £12,000 was paid. The contract incorporated the standard conditions of sale (4th ed), together with various special conditions. The contractual completion date was governed by special condition 25, which made the agreement conditional upon the tenants of the property not exercising their right of first refusal under Part I of the Landlord and Tenant Act 1987. In the event, the tenants did not exercise that right. By special condition 10, completion was to take place by 1pm on the completion date “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 appellant was to pay the respondents’ legal costs of the sale in the sum of £500 plus VAT.
A dispute arose as to the contractual completion date. The respondents served various notices to complete, the last of which was given on 12 February requiring completion by 26 February, with time to be of the essence. At 2.44pm on 26 February, £113,070 was transferred to the respondents’ solicitor. The respondents maintained that the money had arrived too late and did not include the sum for their legal costs referred to in special condition 26. They repaid the money and purported to rescind the sale contract and forfeit the appellant’s deposit.
In proceedings between the parties, it was held that: (i) the correct contractual completion date was 12 February, so that the last notice to complete was effective; (ii) payment after 1pm on 26 February was not too late to complete in accordance with that notice, but merely meant that an additional day’s interest was to be added to the sum paid; and (iii) the respondents were none the less entitled to rescind owing to the appellant’s failure to pay the respondents’ legal costs, which were payable on completion: see [2008] 29 EG 92. The appellant brought an appeal to challenge the third of those findings, while the respondents challenged the second.
Held: The appeal was allowed.
(1) Special condition 26 did not have the effect of making the sum in question payable upon completion, in the sense of being moneys that the purchaser had to pay as a condition of completion. It contained no provision as to when and in what circumstances the sum would be payable. If the condition had been intended to make completion conditional upon the payment of the moneys, it should have done so clearly rather than leaving the time of payment and the consequences of non-payment open to doubt. It was not necessary to decide for present purposes whether the sum was payable on the completion date or within a reasonable time of completion, since the respondents’ position depended upon it having to be paid as part of the money due on completion.
(2) Payment at 2.44pm on 26 February had not been out of time, but for different reasons from those found by the judge below. The wording of special condition 10 pointed to one day, and only one day, as the date “fixed for completion”, namely the contractual completion date of 12 February. To specify 1pm as the cut-off time for completion on the contractual completion date would not enable the vendor to decline to accept completion later in the day, since time was not normally of the essence at that stage. The purchaser would be in breach of contract by not having completed within the stipulated time, but the vendor could not rescind the contract for that reason. Once that date had passed and a notice to complete had been served, no further day would be “fixed for completion”. The purchaser had to complete within 10 working days or risk losing the deposit and the contract, but it could not be said that any one of those days was “fixed for completion”. It was not possible to regard the last date for compliance with a notice to complete as being the date fixed for completion. Since special condition 10 did not apply after the contractual completion date, the vendor was entitled to an extra day’s interest under standard condition 6.1.2 but was not entitled to rescind the contract. The appellant was entitled to an order for specific performance of the contract.
John Bryant (instructed by Gelbergs) appeared for the appellant; Katharine Holland (instructed by DKLM Solicitors) appeared for the respondents.
Sally Dobson, barrister
