Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd

Contract for sale of commercial building at redevelopment value of £1.7m signed day before news of listing of property as building of architectural or historic interest–Purchasers stuck with premises now worth perhaps £200,000–Listing ‘an inherent risk in all properties’–Leave to appeal granted This was an appeal by Amalgamated Investment & Property Co Ltd from a judgment of Plowman V-C dismissing the company’s action for rescission of a contract of purchase of a former whisky-bottling factory and bonded warehouse at 33 Commercial Road, Tower Hamlets, London E1, from the respondents, John Walker & Sons Ltd, for £1,700,000, and granting the respondents an order for specific performance. Plowman V-C’s judgment was reported at (1975) 235 EG 565, [1975] 2 EGLR 145. Mr A J Balcombe QC and Mr B K Levy (instructed by Nabarro, Nathanson) appeared for the appellants, and Mr H E Francis QC and Mr J M Chadwick (instructed by Coward Chance) represented the respondents. Giving judgment, BUCKLEY LJ said that the property in question was advertised by the vendors’ agents as being ‘for sale for occupation or redevelopment.’  Amalgamated made an offer of £1.7m, and on July 19 1973 the agents wrote accepting this figure subject to contract. Inquiries were made by Amalgamated in the ordinary way about the existence of any compulsory purchase orders or any listing of the property as being of architectural or historic interest. A negative answer was given on August 8. The contract was signed on September 25, and one day later, the Department of the Environment wrote to John Walker notifying them that the property had been included in a list of buildings of architectural or historic interest compiled in accordance with section 54 of the Town and Country Planning Act 1971 and that the list was about to be given legal effect. On September 27 the list was signed on behalf of the Secretary of State. The evidence about the method of listing the property was startling. A survey of properties was made by an investigator, a civil servant, who suggested that certain buildings should be listed, and the survey was then forwarded to another civil servant, Miss Dorothy Price, who prepared the list to be signed by the head of the department concerned. It was her responsibility to decide which properties should go into the list, although she disclaimed any professional expertise in the matter. In this case there was a delay of one month in the typing pool. The head of the department then signed the list, relying on Miss Price’s selection. It was very strange that decisions of that kind should be taken without more careful vetting. In other areas there was apparently a blanket listing, leaving the merits to be decided at a later stage when planning permission was sought. The Vice-Chancellor had found that the property with no redevelopment potential was worth £1.5m less than the contract price, so that the effect of the listing of the property was to make it worth £200,000. On December 12 1973 Amalgamated issued a writ against John Walker claiming rescission of the contract on the ground of common mistake, on the basis that both parties believed at the time of the execution of the agreement that the property was suitable for and capable of redevelopment; that the purchase-price demonstrated that fact; and that the listing had prevented or substantially reduced the redevelopment of the property, or alternatively, that the listing had frustrated the purposes of the contract. Amalgamated sought a declaration that the agreement was void and of no effect, or ought not to be enforced. On December 14 John Walker issued a writ against Amalgamated seeking specific performance of the contract, alleging wrongful repudiation and claiming forfeiture of the deposit. The actions were consolidated. The Vice-Chancellor held first that there was no common mistake of fact. He treated the property as having been listed on September 27, the day that the head of the department signed the listing on behalf of the Secretary of State. On the question of frustration, the Vice-Chancellor applied some of the tests proposed by the House of Lords in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, and asked whether Amalgamated could say ‘This was not the bargain we made’ and whether the undertaking, if performed, would be a different thing from that contracted for. He found no frustration of the contract proved, and held that Amalgamated were liable to pay the full purchase-price. He (his Lordship) agreed with the Vice-Chancellor’s decision on common mistake. Mr Balcombe had submitted that there was here a common mistake as to a fact of fundamental importance, namely, the fact that the property was ripe for development. As a result of the listing, said counsel, that was not so, and in consequence the contract ought to be set aside. Mr Balcombe relied on Solle v Butcher [1950] 1 KB 671 and Grist v Bailey [1967] Ch 532, and maintained that a common mistake as to the quality of the subject-matter was sufficient grounds for rescission in equity. However, one of the matters of which the court must be satisfied before there could be an order for rescission on the basis of common mistake was that the mistake was in existence at the date of the contract. Mr Balcombe relied on the date Miss Price decided to put the property on the list, but that was an administrative step, and there was still the possibility that something might have happened before the head of the department signed the document. The day he signed the list was the crucial date, and that created the legal reality. The only mistake was as to the expectation of both the parties, who had expected that all they had to contend with was planning permission. On the question of frustration, he (his Lordship) was prepared to presume that the doctrine of frustration could be applied to contracts for the sale of land, but the necessary facts had not been established in the present case for presuming that the purpose of the contract had been frustrated. The object of the vendors was to sell the property at the contract price and154 show good title. They did not warrant that planning permission was obtainable. No doubt both parties considered that the property could be developed and that planning permission was obtainable, but the vendors gave no warranty to that effect. The risk of a property being listed as an historic building was an inherent risk in all properties. The risk might be remote, marginal or substantial. The effect of listing made the obtaining of planning permission more difficult, and the developer would have to apply for ‘listed building permission.’  The purchaser of property must carry that risk, and any loss as a result must lie where it fell. It was not known whether the listing would have the alleged effect, and perhaps, if listed building permission were given, development could go ahead. The Vice-Chancellor’s decision should be upheld and the appeal dismissed. LAWTON LJ and SIR JOHN PENNYCUICK gave concurring judgments, and the appeal was accordingly dismissed. Leave to appeal to the House of Lords was granted.