Vendor and purchaser — Contract at auction — National Conditions of Sale — Alleged misdescription of area of property — Validity of notice to complete — Motion by vendors to vacate caution registered at the Land Registry with a view to protection of purchasers’ interest — ‘Long and lamentable’ history of delays in completion — Notice to complete eventually served by vendors followed by a number of extensions of time and continued failure to complete — Late in the day purchasers’ solicitors complained that the area of the property was not 385 sq ft as stated in the particulars of sale but 240 sq ft only — Finally, vendors stated that they were rescinding the contract and forfeiting the deposit — Purchasers asserted that the contract was still in existence and resisted the motion to vacate the caution — Purchasers submitted that the notice to complete was invalid as the true area was substantially different from that stated in the contract and that consequently the vendors were not ready and willing to fulfil their obligations
as to the true area was received at the hearing of the motion, the case being
argued on the assumption (made for the purpose of the motion only) that the
defendant purchasers’ allegation of misdescription was true — The question to
be decided was whether, if there had been a material misdescription of area, it
was possible to serve a valid notice to complete under Condition 22 — The case
of Pagebar Properties Ltd v Derby Investment Holdings Ltd (where a misdescription of a matter
of title was held to invalidate a Condition 22 notice) was contrasted with the
case of McGrath v Shah (where a misdescription of area was held not to invalidate
such a notice)
notice to complete in the present case was valid and effective, agreeing with
the McGrath decision — The description of the area in the particulars did not
affect the title and was not a feature of the conveyance — The vendors would
fulfil their contract by tendering a conveyance of all the subject property at
255 East India Dock Road — If there were a question of misdescription of area
to be determined, this might lead to an abatement of the purchase price, but in
any event the vendors were ready and willing to fulfil their contract — The
notice to complete had been validly served and the contract was rescinded —
There would be an order for the vacation of the caution
The following
cases are referred to in this report.
McGrath v Shah The Times November 22 1987
Pagebar
Properties Ltd v Derby Investment Holdings Ltd [1972]
1 WLR 1500; [1973] 1 All ER 65; (1972) 24 P&CR 316; [1972] EGD 915; 224 EG
1235
This was a
motion by the plaintiffs, Golda Bechel and Maisie Lebor, for an order vacating
a caution registered at the Land Registry against a property at 255 East India
Dock Road, Poplar, London E14, which the plaintiffs had contracted at auction
to sell to the defendants, Kitsford Holdings Ltd.
G A Zelin
(instructed by G Lebor & Co) appeared on behalf of the plaintiffs; J N E
Behrens (instructed by Guy Clapham & Co) represented the defendants.
Giving
judgment, SIR NICOLAS BROWNE-WILKINSON V-C said: This is a motion aimed at
procuring the vacation of a caution registered at the Land Registry by the
defendant, Kitsford Holdings Ltd, against a property, 255 East India Dock Road,
Poplar, London £14. By a contract made at auction on June 24 1987 the
plaintiffs, Golda Bechel and Maisie Lebor, contracted to sell that property to
the defendant company for £28,000. The contract incorporates the National
Conditions of Sale (20th ed), subject to the modification that the time
specified under National Condition 22 should be 10, not 16, working days as the
time within which completion has to take place. In addition, General Condition
9 provided as follows:
The property
is believed to be, and shall be taken as, correctly described and any incorrect
statement, error or omission found in the particulars or Special Conditions of
Sale shall not annul the sale or entitle the purchaser to rescind the contract,
nor shall the purchaser claim or be allowed any compensation in respect
thereof.
The contract
simply described the property sold as ‘Lot 70’. In the particulars ‘Lot 70’ was
said to be a shop investment; they give the address of the property and the
ground-floor area as being 385 sq ft, but beyond that are silent.
The history
thereafter is long and lamentable. There was considerable earlier failure to
complete and discussion about the form in which title should be made by the
plaintiffs. On November 30 1987 notice under National Condition 22 was served
for the purchaser, as a result of which time became of the essence for
completion of the contract on or about December 16 or 17 1987.
Thereafter
there were extensions of that date. On January 5 1988 it was agreed completion
should be on January 8. It was not completed. On January 18 what was said to be
‘a final extension’ was granted: but again the date passed. On January 21 there
was a further extension permitting completion down to January 29 ‘at the
latest’ and it was said that unless completion took place on January 29 the
contract would be rescinded. January 29 passed and the contract was still not
completed.
On February 5
the vendors’ solicitors wrote, again complaining of the failure to complete,
saying:
We must
therefore give you formal notice that unless we hear from you within the next
seven days with a definite date on which this purchase is to be completed we
shall take such further steps as our clients may be advised in order to enforce
their rights under the contract.
That letter
was acknowledged and it was said by the purchasers’ solicitors that they were
taking immediate instructions: but in fact nothing happened within the
seven-day period.
By a letter of
February 16 the purchasers’ solicitors for the first time (some seven months
after the date of contract) raised an allegation that the surface area of the
property was not the 385 sq ft stated in the particulars of sale but some 240
sq ft. If that be correct, in the context of the size of the property as a
whole, that is a most substantial misdescription, being an error of some 60% in
area.
Notwithstanding
that, on February 19 the vendors eventually said that they were rescinding the
contract and forfeiting the deposit.
This is a motion
to vacate the caution registered protecting the contract which the defendant
purchasers allege is still in existence. I
contract is at an end.
Provided that
at the time the notice to complete was served on November 30 1987 the vendors
were able to say of themselves that they were ready and willing to fulfil their
own outstanding obligations under the contract, a valid notice to complete was
served: there has been a failure to comply with it, as extended, and a
rescission of the contract which is valid. Mr Behrens, for the defendant,
argued the case on that basis.
His defence to
the claim is this. He says that if the true area of the property is, as the
purchaser alleges, most substantially different from that referred to in the
contract, then at the time at which the notice under National Condition 22 was
served the vendors were not ready and willing to fulfil their obligations under
the contract, and therefore the Condition 22 notice could not be validly served
and was invalid.
I should
mention that Mr Behrens asked for an adjournment to put in evidence as to the
area of the property and as to the fact that his clients relied upon the area
stated. I would certainly have granted such adjournment if it had been a
relevant factor for making my decision today. But the plaintiffs accepted that
if no adjournment were granted they would have to argue the case on the footing
that what the defendants allege is true, namely, that there is a material error
in the area of the property stated in the conditions of sale. The case has
today been argued on that assumption, though that assumption is for the
purposes of this motion only.
The short
question, therefore, is whether, if there has been a material misdescription or
misstatement of the area in the conditions of sale, it is possible to serve a
valid notice to complete under National Condition 22. National Condition 22
reads as follows:
At any time
on or after the completion date, either party being ready and willing to fulfil
his own outstanding obligations under the contract may, without prejudice to
any other right or remedy available to him, give to the other party or his
solicitor notice in writing requiring completion of the contract in conformity
with this condition.
It is
unnecessary for me to read the rest of the condition, since nothing turns on
it. If a valid notice is served, then under Condition 22 time becomes of the
essence for the completion of the contract within, normally, 16 working days —
in the present case 10 working days — after service of the notice.
Mr Behrens,
for the defendant, relies upon the decision of Goulding J in Pagebar
Properties Ltd v Derby Investment Holdings Ltd [1972] 1 WLR 1500,
for his contention that in a case where there is a misdescription in a contract
it is not possible for the vendor to serve a valid Condition 22 notice.
In Pagebar
the vendors had contracted to sell a property subject to six leases,
particulars of which were set out in the contract. As with the present case,
the sale was subject to the National Conditions of Sale, which provide that:
No error,
statement or omission in any preliminary answer or in the sale plan or in the
special conditions shall annul the sale, nor shall any damages be payable or
compensation allowed by either party in respect thereof.
The tenancy to
which part of the property was subject was misdescribed in the particulars of
sale. Goulding J held that in those circumstances the vendor could not be heard
to say that he was ready and willing to fulfil his own outstanding obligations
and that accordingly he could not serve a valid Condition 22 notice. It is to
be noted in that case that the matter in question, namely the leases to which
the property was subject, was a matter of title. If one asked of the vendor in
that case, ‘could he fulfil his contract?’ — ‘was he able and willing to fulfil
his contract?’ — the answer was ‘no’: he could not make good title to the
property subject only to the leases to which under the contract the land was
said to be subject.
That case is
to be contrasted with the decision of Mr John Chadwick QC, sitting as a deputy
judge of this division, in McGrath v Shah (The Times, October 22
1987). In that case it was said by the purchasers that the vendors had made a
misrepresentation as to the area of part of the property, and on that ground it
was said that the vendors could not serve a valid notice under Condition 22.
The judge rejected that submission and rejected in particular a submission
that, whenever the circumstances were such that a purchaser might be entitled
to rescind, the vendor was not entitled to serve a notice to complete. The
judge therefore held that there was a valid notice to complete under Condition
22. The question was ‘could the vendors carry out their contract?’ The answer was, ‘yes, they could.’ They could sell the property which they had
contracted to sell and they could make title to it. What they might have been
required to do was to pay damages for misrepresentation.
In the present
case it seems to me one must ask the same question. On the facts of this case,
on November 30 1987, when they served the notice to complete, could the vendors
fulfil the contract they had entered into?
In my judgment they plainly could. The area sold is merely part of the
description of the property and not a matter which would have featured in any
way in the conveyance. To have performed that contract they would have had to
tender a conveyance of all the property at 255 East India Dock Road, and if they
did tender that, that would be a performance of their contract. If, contrary to
the facts, somebody had raised the question that there was a misdescription of
its area, they might have been required to accept an abatement in the purchase
price referable to the reduction in the area stated. But in any event they were
able and willing to fulfil that contract. Accordingly, I can see no ground on
which it can be said that the notice to complete under Condition 22 was
invalidly served on November 30 1987. The contract has been validly rescinded.
It follows that the caution on the register must be vacated.
