Sale of land – Rescission – Repudiatory breach of contract – Appellant vendor serving notices to complete by reference to standard conditions 6.8 and 7.5 – Notices incorrectly calculating date for expiry of notices – Appellant serving rescission notices prematurely – Whether this amounting to repudiatory breach of contract entitling respondent purchaser to return of deposit – Declaration as to valid forfeiture of deposit refused – Appeal allowed
The respondent contracted to purchase long leases of 13 flats in a block that the appellant freeholder was constructing. The purchase price was £1.47m and the respondent paid a deposit of £36,000. The 13 sale contracts, incorporating the standard conditions of sale (4th ed), were exchanged in December 2007. The contractual completion date fell in December 2008, by which time the property market had suffered a significant downturn.
The respondent did not complete on the contractual completion date. The appellant served a notice to complete, under standard condition 6.8, drawing attention to the consequences prescribed by standard condition 7.5 should the respondent fail to complete within 10 working days. A covering letter stated that the respondent had calculated the final date for completion as being 15 December 2008; this was erroneous, since the 10 working days in reality expired on 19 December. The respondent took no steps towards completion. On 17 December, the appellant gave notice to rescind the contract and forfeit the deposit under standard condition 7.5. However, those notices were premature owing to the mistake over the expiry date of the notice to complete.
The respondent claimed that the premature rescission notice amounted to a repudiatory breach of contract, which he accepted, thereby discharging him from further performance of the contracts and entitling him to the return of his deposit. The appellant sought a declaration that the deposit had been validly forfeited owing to the respondent’s failure to complete by 19 December. Dismissing the claim, the recorder held that the appellant had repudiated the contract since, regardless of the reasons for giving the rescission notices, they showed a clear intention to terminate the contracts immediately.
The appellant appealed. It contended that the premature rescission notices were not an unequivocal repudiation since they had been served erroneously and a reasonable recipient would have known that the appellant still wanted to complete or to exercise the contractual remedies for non-completion. The respondent sought to support the recorder’s conclusion by reference to various propositions derived from case law.
Held: The appeal was allowed.
In the area of repudiatory breach of contract, it was dangerous to attempt to clarify the application of a legal principle by a series of propositions derived from cases decided on their own facts. The legal test of repudiatory conduct was simply stated as whether, looking at the circumstances objectively, from the perspective of a reasonable person in the position of the innocent party, the contract-breaker had shown an intention to abandon and refuse to perform the contract. Whether that was so would be fact-sensitive, which was why comparison with other cases was of limited value. All the circumstances had to be taken into account so far as they bore on an objective assessment of the contract-breaker’s intention. The contract-breaker’s motive, although irrelevant if relied on solely to show its subjective intention, could be relevant if it reflected something of which the innocent party, or a reasonable party in its position, would have been aware, so as to throw light on the way in which such a reasonable party would have viewed the alleged repudiatory breach.
The appellant’s notice of rescission was not a repudiatory breach of the sale contracts. The appellant had been ready, willing and able to complete, as had been confirmed by the notice to complete and the covering letter thereto. Although that covering letter had stated an erroneous date for the expiry of the notice to complete, its wording made it clear that the calculation of the date was based on the contractual provisions and, far from being an attempt to vary the contractual provisions, or an abandonment of them, or a refusal to comply with them, it was an obviously mistaken application of them. No reasonable party would have viewed it in any other way. Neither the respondent nor his solicitor had any reason to think that had the error been pointed out to the appellant, it would not immediately have acknowledged its mistake. The same reasoning applied to the notice of rescission. A reasonable party would have realised that the premature service of the notice was due to a simple error of calculation, analogous to a clerical error, which, if pointed out, would have resulted in the notice being treated as being ineffective and in the appellant waiting until the true date of expiry of the notices to complete before deciding whether to treat the contracts terminated. It was impossible, on those facts, to find an intention on the part of the appellant to abandon and refuse to perform the contracts. The recorder had erred in concentrating on the rescission notices without taking into account all the circumstances: Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 considered; Federal Commerce & Navigation Co Ltd v Molena Alpha Inc (The Nanfri) [1978] QB 927 (CA); [1979] AC 757 (HL) and Dalkia Utilities Services plc v Celtech International Ltd [2006] EWHC 63 (Comm); [2006] 1 Lloyd’s Rep 599 distinguished.
Bernard Livesey QC and Paul Mitchell (instructed by Solicitors Direct, of Leyland) appeared for the appellant; Andrew Clarke QC and Charles Auld (instructed by Foot Anstey Solicitors, of Exeter) appeared for the respondent.
Sally Dobson, barrister
