Sale of leasehold property – Standard conditions of sale – Seller to obtain landlords’ consent – Oral consent obtained – Buyer requesting more time to finalise financing arrangements – Written licence unsigned on contractual completion date – Buyer purporting to rescind – Seller rejecting rescission and serving notice to complete – Whether contract effectively rescinded by buyer – Judgment for seller
The defendant company (Lakewood) held commercial premises in London W1 under a recently-granted 125-year lease that prohibited assignment without the written consent of the landlords (two individuals), who, save in certain circumstances, could not withhold consent unreasonably. In August 1999 Lakewood entered into a contract for the sale of the lease to the claimant (Aubergine), a company incorporated in the British Virgin Islands (BVI), for £4.44m, on terms incorporating the standard conditions of sale (3rd ed). Aubergine was required to pay an immediate deposit of 5% and a further deposit of 5% in the event of Lakewood giving a notice to complete in accordance with the contract.The agreed completion date was 30 September 1999, time not to be of the essence unless a notice to complete had been served. Lakewood was bound to use all reasonable efforts to obtain the landlords’ consent. Either party could rescind under standard condition 8.3.4 if consent were not given three working days before the completion date. Aubergine undertook to provide all information reasonably required, to enter into an authorised guarantee agreement, and to give a direct covenant to the landlords to observe the conditions of the lease.
At the beginning of September 1999, Lakewood’s solicitor (J) received from the landlords’ solicitor (S) a letter confirming an earlier statement by the landlords’ agents that the landlords were agreed in principle to the assignment. Over the following three weeks, little progress was made on the landlords’ side because of S’s inexperience in such matters. In the meantime, Aubergine requested that completion be delayed until mid-October in order to finalise its financial arrangements. J insisted that the contractual completion date should stand. On the following day, J intimated to Aubergine’s solicitor (B) that the matter could proceed even if no formal licence were provided. Aubergine then wrote saying that it would “proceed as contracted”, and that it hoped that completion would not be delayed.
S subsequently sent to J a draft licence in duplicate for signature by Lakewood and Aubergine, together with a letter expressed to be “subject to licence”. She also confirmed that the draft authorised guarantee agreement earlier sent by J was acceptable. B later told J on the telephone that she was confident that Aubergine would be able to meet the contractual deadline, and she made no mention of any need for a written licence from the landlords. On 27 September B received from S an engrossment of the licence to assign and of a rent deposit deed, together with a request for confirmation that the execution clause complied with BVI law. B faxed those documents to Aubergine for execution. On the following day, B wrote to J saying that S had confirmed that the sale could proceed as if the landlords had executed the licence, subject only to receipt of the documents to be executed by Aubergine.
On the day before the completion date, B forwarded the executed documents by hand to S, and informed J over the telephone that she was confident that Aubergine’s financing arrangements were complete. At that time, B knew that the signature of one of the landlords to the deed of assignment could not be conveniently obtained before close of business on the following day. On 30 September B wrote to J stating that funds would not be available for a few days as Aubergine’s bank required an opinion letter. J agreed to co-operate, but later that day was surprised to discover that the financing arrangements were far from complete. After close of business on the same day, S sent a fax to B stating that she “had no authority to grant consent” before she had signed documentation back from her landlord clients.
Early the following day, B, acting on instructions from Aubergine, sent a fax message to J informing him that, with the passing of the completion date, Aubergine was exercising its right to rescind under standard condition 8.3.4, as “the landlords’ consent had not been given, through no fault of our client”. J rejected the purported rescission, and served a notice to complete to the intent of terminating the contract 10 working days thereafter under standard condition 6.8.3.
Aubergine brought proceedings seeking the return of its £234,000 deposit, upon the basis that it had validly rescinded the contract. Lakewood claimed that it was entitled to a further £234,000 (the balance of the deposit), together with interest under standard condition 6.8.4. It was not disputed that Lakewood was able and willing to complete when it served its notice to complete.
Held: Judgment was given for Lakewood.
1. The mere fact that the landlords had not given a written consent did not give Aubergine a right to rescind under standard condition 8.3.4, which, in contrast to the lease, did not require the consent to be in writing. It was plain that the landlords’ solicitors had consented on behalf of their clients, in particular by sending out the relevant documents to Aubergine and the landlords for signature. While the earlier statements as to “consent in principle” did not amount to the necessary consent (see Venetian Glass Gallery Ltd v Next Properties Ltd [1989] 2 EGLR 42), there could be no doubt that actual consent had been given by 28 September 1999 at the very latest. Nor was the last letter from S effective to remove that consent. There was no withdrawal (which would have rendered the landlords liable under section 1 of the Landlord and Tenant Act 1988), but simply an insistence that the proper mechanisms be used.
2. In any event, there was no reason for treating 30 September as the completion date for the purposes of condition 8.3.4, as by 27 September the parties had agreed that the actual date of completion was almost certainly going to be some days later. The standard condition should not be interpreted to mean that no date other than the contractual date of completion would suffice, it being wholly unrealistic to set a date that the parties no longer saw as achievable: Spring v O’Flynn [1999] EGCS 79 distinguished.
3. Quite independently of the above reasons, the actions of both parties between 27 and 30 September amounted to an affirmation of the contract, and hence a waiver of any right to rescind. Aubergine was not entitled to act, both with regard to the landlords and Lakewood, as if the conveyance would take place (albeit a few days after the contractual date) and then turn around and purport to rescind when it was itself unable to complete for want of finance: cf Safehaven Investments Inc v Springbok Ltd (1996) 71 P&CR 59. Yet a further bar to rescission was Aubergine’s failure to provide the confirmation, reasonably required by the landlords, that the execution clause was in order: see the proviso to condition 8.3.4.
Elizabeth Weaver (instructed by Fladgate Fielder) appeared for the claimant; Michael Pryor (instructed by Beveridge Milton) appeared for the defendant.
Alan Cooklin, barrister
