Specific performance — Conditions of sale — Forfeiture of deposit — Contract for sale of flats and shares — Purchaser failing to complete by agreed date — Vendor serving completion notices and subsequently purporting to rescind contract — Purchaser bringing claim for specific performance — Whether completion notices valid — Appeal dismissed
The claimants entered into seven contracts with the defendants. Five contracts were for the purchase, from the defendants, of the unexpired residue of a registered 125-year leasehold term in five flats that formed part of a freehold property that had been subdivided. The remaining contracts were for the purchase of issued share capital in D Ltd and IP Ltd, which were the registered proprietors of, respectively, the freehold of the property and leasehold terms in 12 of the flats.
Each of the five flat-purchase contracts contained a term to the effect that completion was conditional upon simultaneous completion of the other four and of the sales of shares in IP Ltd and D Ltd. Each flat was sold free from any mortgages made by the defendants, and incorporated the National Conditions of Sale (20th ed), subject to the amendment that any notice served under condition 22 would call for completion within 10, rather than 16, working days after service of the notice, excluding of the day of service. Each contract provided for the payment of a 10% deposit upon exchange, together with a proviso to the effect that if less than 10% were paid, the claimants failed to complete and the defendants became entitled to forfeit the deposit, then the purchaser had to pay forthwith the balance of the 10% deposit to the vendors’ solicitor. As regards the share-purchase contracts, it was common ground that the contractual intention of the parties was that charges in favour of the bank should be discharged on or before completion.
Completion did not occur on the date specified in the contracts. Overall, there was a deposit shortfall. Taking the view that the claimants were taking no steps to complete their purchases, the defendants served notice on the claimants, requiring completion within 10 working days. When the claimants failed to comply, the defendants rescinded the contracts and declared the deposits forfeit. The claimants issued a claim, under CPR Part 8, seeking: (i) a declaration that the notices to complete were invalid; (ii) a declaration that the purported repudiations were invalid; and (iii) specific performance of each of the contracts, or damages. Master Bowman dismissed the claims for specific performance and gave judgment to the defendants for the amount of the deposit shortfall, plus interest. The claimants appealed to the High Court.
Held: The appeal was dismissed.
1. It was not necessary for a vendor to be ready to complete when serving notice on the purchaser to complete. A vendor serving notice to complete was entitled to a sufficient period within which to set up the necessary administrative arrangements regarding completion: Edwards v Marshall Lee (1975) 235 EG 901 and Oakdown Ltd v Bernstein & Co (1985) 49 P&CR 282 considered.
2. If a purchaser served with notice to complete under condition 22 wished to argue that, at the time of service, the vendor was not ready to fulfil his outstanding obligations and that the notice was invalid, he had to adduce evidence to show either that the vendor was in breach of some obligation under the contract, or that the vendor would not have been able, within the time required, to set up the necessary administrative arrangements to enable completion to take place. The evidence before the master fell far short of establishing that the defendant vendors would not have been able to ensure that the outstanding mortgages would be discharged, and the relevant charge certificates and Land Registry forms handed over upon completion.
3. On its true construction, the clause in the share contracts requiring the vendor to deliver up to the purchaser all land certificates, charge certificates and title deeds etc only obliged the defendants to deliver, upon completion, such documents as were in their possession. It made no sense to suppose that the defendants were contracting to hand over documents not in their possession.
Robert Levy (instructed by Saunders Bearman) appeared for the claimants; Philip Kremen (instructed by JJ Goldstein & Co) appeared for the defendants.
Eileen O’Grady, barrister
