Vendor and purchaser — Vendors’ application for summary judgment for specific performance under Order 86 — Contract for purchase by auction of block of flats — Purchasers refused to complete because of alleged non-disclosure of arrears of service charge payments by tenants of flats and of serious condition of roof requiring substantial expenditure to comply with a dangerous structure notice — Purchasers claimed that the matters not disclosed affected the expected income from their investment and therefore the quality of it and amounted to defects of title which justified
The following
cases are referred to in this report.
Belcham
and Gawley’s Contract, Re [1930] 1 Ch 56
Beyfus v Lodge [1925] Ch 350
Caballero
v Henty (1874) LR 9 Ch App 447
Carlish v Salt [1906] 1 Ch 335
Englefield
Holdings Ltd and Sinclair’s Contract, Re [1962] 1
WLR 1119; [1962] 3 All ER 503
Faruqi v English Real Estates Ltd [1979] 1 WLR 963; (1978) 38
P&CR 318; [1979] EGD 986; 251 EG 1285, [1979] 2 EGLR 150
Flight v Booth (1834) 1 Bing NC 370
Forsey
and Hollebone’s Contract, Re [1927] 2 Ch 379
Horsfall v Thomas (1862) 1 H&C 90; 31 LJEx 332; 8 Jur (NS) 721; 6
LT 462; 10 WR 650
James v Lichfield (1869) LR 9 Eq 51
Leyland
and Taylor’s Contract, Re [1900] 2 Ch 625
Nottingham
Patent Brick & Tile Co v Butler (1885)
15 QBD 261
Phillips v Miller (1875) LR 10 CP 420
Puckett
& Smith’s Contract, Re [1902] 2 Ch 258
Shepherd
v Croft [1911] 1 Ch 521
This was an
application by the plaintiffs, Citytowns Ltd, under Order 86 for specific
performance of a contract entered into by the defendants, Bohemian Properties
Ltd, for the purchase by auction of premises known as Forest Lodge, Dartmouth
Road, Forest Hill, London SE10, a purpose-built block of flats.
P Collins
(instructed by Michael Freeman) appeared on behalf of the plaintiffs; R
Beecroft (instructed by Kaufman Kramer Shebson) represented the defendants.
Giving
judgment, JUDGE FINLAY said: This is an application by the plaintiff vendors
for summary judgment under Order 86 in relation to a contract entered into by
the defendants bidding at auction for certain premises there and then sold on
behalf of the plaintiffs known as Forest Lodge, Dartmouth Road, Forest Hill,
London SE10. The auction sale took place on April 9 1986, and the defendants
bid for the property, Lot 22, in the sum of £84,600, and the property was
knocked down to them at that price.
Forest Lodge
is a purpose-built block of 24 flats, apparently of fairly recent structure. Of
these 24 flats, at the date of the sale 19 had been sold on long leases for 99
years from 1977; five flats were let at rack-rent and occupied by the tenants,
and also there were eight garages, of which three had been sold and four had
been let. One was vacant.
On April 24
1986 the solicitors acting for the defendants received a letter from solicitors
acting for the tenant, a Miss Anderson, of one of the flats at Forest Lodge,
namely, Flat 7, which notified the defendants’ solicitors that there was a
dispute between that tenant in relation to service charges sought to be
recovered from her under the provisions of her lease. A reference was made in
the letter (the details of which I need not go into) to the provisions of
section 19 of the Housing Act 1980, which required the landlord to meet certain
requirements before such a service charge could be recovered from the tenant.
The claim against the tenant which she was disputing amounted to some £3,600 in
all.
On about May 7
1986 the defendants became aware, because of some correspondence between
another firm of solicitors and those acting for the defendants at that time,
that the tenant of Flat 24 was in dispute with the vendors in relation to works
required to be done to the roof of Flat 24, which is a flat on the fourth floor
of the block, those works to the roof being required to be done by reason of
the service by the local authority, the Lewisham Borough Council, of a
dangerous structure notice, which had been served at the beginning of February
1986, the notice itself being dated January 31 1986, and requiring the owner of
the structure known as Flat 24 forthwith to take down, repair, or otherwise
secure such parts of the timber roof structure within Flat 24 as were rotting,
and were no longer capable of supporting the load to which they were liable to
be subjected, and to do any further work wherever necessary in consequence of
the foregoing. It appears that the tenant Cowie, later Mrs Davies, claimed that
the landlords were responsible for carrying out these works, although I am
informed — and it seems to be common ground — that under the provisions of the
various long leases on which 19 of the flats were held there would be right of
recovery from the long leaseholders in relation to 19/24ths of the cost, and it
further appears from a letter from the managing agents to those acting for the
defendants that the estimated cost of the works required by this dangerous
structure notice would be approximately £23,000.
In the light
of this information about the dispute with Miss Anderson, and the necessity of
this expenditure of some £23,000, the defendants have declined to complete the
purchase of the property and, as appears from their affidavit filed in these
proceedings, are contending that they are entitled to rescind the contract and
to seek return of the deposit, or alternatively to proceed but with an
abatement in the purchase price to reflect the reduced value of the property by
reason of the dangerous structure notice and scheduled repairs.
There is
another further point; it appears that very substantial arrears of service
charges and rent are due from a number of tenants, but the argument I have
heard has not focused particularly on that aspect of the matter.
Mr Collins,
who appears for the plaintiffs, submits that he relies upon the decision of Eve
J in Re Forsey and Hollebone’s Contract [1927] 2 Ch 379 and that
although, as was the fact, no disclosure was made either in the auction
particulars or otherwise by the plaintiff vendor company of the dangerous
structure notice, or the cost of complying with it, or the matter of dispute
about service charges with Miss Anderson, nevertheless, so far as concerns the
dangerous structure notice the purchasers purchased with notice of it and were
affected by it, because it was registered in the register of local land
charges. It is submitted that notice of the dangerous structure notice carries
with it notice of the state of the roof, even if, as appears to be the case,
there was no inspection of it. He has referred me to a number of cases dealing
with such matters. In one there was a culvert of which the purchaser was
unaware, because, although the property was inspected, it was not revealed:
that was Re Puckett & Smith’s Contract [1902] 2 Ch 258. Also, Shepherd
v Croft [1911] 1 Ch 521, where it was decided that where there was a
latent defect in property, but the defect was not so material as to bring the
case within the principle of Flight v Booth (1834) 1 Bing NC 370
that ‘the purchaser is not entitled to have the contract rescinded, even if the
defect was known to and not disclosed by the vendor’. That was a case where
there was a property that was sold described as residential property, although
it had some potential as a building site, and there was not disclosure in
either particulars or otherwise of a natural underground watercourse which ran
through the grounds. The decision was that the purchaser was nevertheless not
entitled to rescind. Mr Collins also relied upon Re Belcham and Gawley’s
Contract [1930] 1 Ch 56. That was a case where the purchaser had bought
freehold property at an auction, where the particulars and conditions did not
disclose the fact that there were two sewers known to the vendors to exist
running along one side of the premises, with a yard at the back. It was held
that, although the failure to disclose the existence of the sewers materially
affected the description, it did not force upon the purchaser property
substantially different from that agreed to be sold, and that the contract
could accordingly be performed. Shepherd v Croft was followed in Re
Belcham and Gawley’s Contract. Putting it briefly, the burden of Mr
Collins’ submission
furthermore, so far as the dangerous structure was concerned, the purchasers
had notice because of the provisions of section 198 of the Law of Property Act
1925 as amended by the Local Land Charges Act 1975, which provides:
The
registration of any instrument or matter in any register kept under the Land
Charges Act 1972 or any local land charges register shall be deemed to
constitute actual notice of such instrument of matter, and of the fact of such
registration, to all persons, and for all purposes connected with the land
affected as from the date of registration or other prescribed date and so long
as the registration continues in force.
Mr Beecroft
for the defendants put the matter thus: the property which the purchasers were
acquiring was quite manifestly property being purchased as an investment. That
submission was related to another, that there was misrepresentation in two
respects in the particulars of sale. The first misrepresentation was founded
upon the actual use of the term ‘investment’ in the first brief description of
the property, which having described the various flats and given particulars of
which were let and which were sold, ended up with the word ‘investment’.
Furthermore, reliance was placed upon a misrepresentation constituted by the
reference in the particulars in these terms: ‘Each flat contains two bedrooms,
lounge, kitchen, bathroom and wc.’ It
was said that the reference to two bedrooms there, in so far as it related to
Flat 24, was false in that one of them was unfit for use as a bedroom because
of the dangerous structure notice and the condition of the roof timbers, which
I have mentioned.
These
submissions do not appear to me to be such that I need to go into them fully at
this juncture. Mr Collins submitted that when one looks at the particulars it
is quite fanciful to spell out of them an implication that the reference to two
bedrooms carries any misrepresentation along the lines for which Mr Beecroft
contends, and furthermore, that the use of the word ‘investment’ cannot imply
any kind of representation that the investment is an investment of any
particular character. For example, it does not imply that the investment is a
good or a sound investment. It merely means that the property is sold as an
investment. That latter circumstance appears to be quite manifest from the
nature of the property, and the manner in which it is described and the
condition in which the various flats are occupied; a purchaser could be
purchasing only as an investment. That I think is still the case, although one
of the terms of the contract was that upon completion there would be granted to
the vendor a long lease of one of the flats. That really underlines the fact
that that flat, which appears to have been vacant, was not to be acquired for
use by the purchaser, but was immediately to be let to the vendor.
I approach the
matter, therefore, on the basis that what the purchaser was purchasing was an
investment. The submission is then made on behalf of the defendants that that
being so these undisclosed matters — that is the dangerous structure notice,
the condition of the roof, and the dispute with the tenant, Miss Anderson, in
respect of service charges — were all matters which materially affected the
value of the property sold considered as an investment. In short, they are not
merely matters that affect the quality of the property, but because it is being
purchased as an investment they affect the value, and consequently the title of
the purchaser to what is in substance being acquired, because what is in
substance being acquired is the income yielded by the rents and payable by the
various tenants. If that income is affected either by matters of dispute as to
whether or not the sum should be payable, or by a liability to incur substantial
expenditure before the income can be fully recovered, or indeed even if it has
to be incurred after the present income is recoverable, these are matters which
go to the title of the property.
Mr Beecroft
relied in the first place upon the decision of Pennycuick J in Re Englefield
Holdings Ltd and Sinclair’s Contract [1962] 1 WLR 1119. That was a case
where property had been purchased at auction, consisting of two leasehold
flats, one of which was let to a tenant for a rent of 29s a week, and the
vendor did not disclose the certificate of disrepair which had been served
under the Rent Act 1957, the effect of which was that until the repairs were
effected the rent was reduced to 15s 7d a week. Pennycuick J held that the
vendor was bound to disclose that the rent would abate under the certificate
until the repairs were carried out and that consequently was not entitled to
require performance of the contract. The contract in question there comprised a
number of conditions not dissimilar to those found in the present contract,
which arose under the successful bid of the defendants at the auction. Before I
recite what was said by Pennycuick J I return to the contract between the
plaintiff and defendant in this case. There are general conditions of sale said
to be applicable to all the lots, and these commence with the provision that
each lot is sold subject to the General Conditions, and to the conditions known
as the National Conditions of Sale (20th ed), save in so far as varied or added
to by the General Conditions following. There were also special conditions, and
the provision that I have just been quoting from continues:
The
aforementioned General Conditions and National Conditions may be varied or
added to by the Special Conditions.
General
Condition 10(2) provides:
Whether or
not the purchaser has availed himself of the opportunity, he shall be deemed to
have inspected the property and to have made all usual necessary and/or
appropriate searches and inquiries, including local land charges searches, and
shall be deemed to purchase with full knowledge and notice not only of the
conditions subject to which the property is sold, and of all matters which
would be revealed by such searches and inquiries, but also of the precise state
of repair and condition of the property, and the occupation thereof, and of all
other relevant matters, including in particular without derogation the matters
referred to in
certain other
conditions and in General Condition 10. I do not think that I need refer to
these particular matters that have just been mentioned at the end of Condition
10(2). 10(4) provides:
Notwithstanding
anything contained or referred to in these conditions or in the particulars, no
representation warranty or condition either collaterally directly or indirectly
shall be made or implied howsoever arising either as to the state or condition
of the property or any part thereof, or as to whether the same be subject or
liable to be affected by any resolution, scheme, development order, notice,
intimation or proposal. Neither the vendor nor the auctioneers shall be under
any liability to disclose to the purchaser any such matters whether or not the
same are known to either, and the purchaser shall raise no inquiry, requisition
or objection thereon, and neither the vendor nor the auctioneers shall be in
any way liable in respect of any such matters or failure to disclose the same.
In Re
Englefield Holdings Ltd and Sinclair’s Contract Pennycuick
J said:
The vendor
relies on certain provisions in the conditions of sale to which I will now
refer. I would observe at this point that the substantial merits of this
dispute appear to lie wholly on the side of the purchaser. It would require a
condition in clear terms to provide a result so unfair as that for which the
vendor contends. The printed particulars and conditions of sale contain, inter
alia, certain conditions described as general conditions of sale relating
to all the lots. Those which so far appear material are as follows: ‘1. The
property is sold subject to the conditions following and to the conditions
known as the National Conditions of Sale (17th ed) . . . . 3. The properties
are believed to be correctly described and any incorrect statement, error or
omission in the particulars or the conditions shall not annul the sale or
entitle the purchaser to be discharged from his purchase nor shall the
purchaser claim or be allowed any compensation in respect thereof. 4. All lots
are sold subject to and with the benefit of the tenancies affecting the
properties. No representation or warranty is made by the vendor that the rent
payable in respect of any tenancy is that properly chargeable under the Rent
and Mortgage Interest (Restrictions) Acts 1920 to 1939, as amended by the Rent
Act 1957, or any substituted or other statute for the time being in force
regulating the control of rent and the purchaser shall not make any requisition
with regard thereto or as to the standard rents nor require copies of or any
information as to the service of any notice under the said Acts.’
Pennycuick J
continued:
Some reliance
was placed by Mr Waite on behalf of the vendor on general condition 3. This
condition, however, is prefaced by the words ‘The properties are believed to be
correctly described’; and it seems to me clear that that condition can have no
operation where the description was to the knowledge of the vendor incorrect. I
was referred on this point to a passage in the judgment of Russell J in Beyfus
v Lodge [1925] Ch 350.
Condition 3
corresponded with a condition which I have not read, but which occurs in the
auction particulars, 10(1): ‘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 the special conditions shall not annul the sale or entitle
the purchaser to be discharged from his purchase nor shall the vendor or
purchaser claim to be allowed any compensation in respect thereof.’ The observations of Pennycuick J on the
condition he was dealing with in similar terms appear to me to apply equally to
that.
Pennycuick J
continued:
Mr Waite
relied particularly on condition 4. The apparent purpose of this condition is
to protect the vendor, if it should turn out that the rent which the tenant is
paying, at the date of the contract, exceeds the permitted rent under the Act.
I do not think, however, that this condition could reasonably be stretched so
as to cover the position where, at the date of the contract, the tenant is
paying the permitted rent, but, by virtue of a certificate of disrepair
already served, the permitted rent is liable to abatement unless the repairs
are performed.
The crucial
point in that case appears to me to be that the failure by the vendor to
disclose the certificate was a failure to disclose a matter that related to the
title, and consequently the vendor has a duty to disclose, and having not
discharged that duty was not entitled to have the contract performed.
Mr Beecroft
further relied upon Faruqi v English Real Estates Ltd [1979] 1
WLR 963, where Walton J referred to Nottingham Patent Brick & Tile Co
v Butler (1885) 15 QBD 261 in which Wills J said, at p 271:
The fourth
condition provides that the property is sold subject to any matter or thing
affecting the same, whether disclosed at the time of the sale or not. Such a
condition, however, does not relieve the vendor from the necessity of
disclosing any incumbrance or liability of which he is aware, but simply
protects him if it should afterwards turn out that the property is subject to
some burden of right in favour of a third person of which he is unaware . . .
It would be nothing short of a direct encouragement to fraud if a vendor were
at liberty by a condition of this kind to sell to a purchaser as an absolute
and unburdened freehold a property which he knew to be subject to liabilities
which would materially reduce its market value.
That appears
to have a bearing upon the effect of Condition 10(2).
In the Nottingham
Brick case, mentioned by Walton J in the case to which I have just
referred, Lord Esher said at p 786 in (1886) 16 QBD 778:
It is
impossible for a vendor, knowing of a defect in his title, either by himself or
his agent to put forward conditions of sale which are to force upon a purchaser
a bad title of which he knew, but which he did not disclose.
I consider
that the crux of this matter is whether or not the matters not disclosed by the
vendor amount to defects of title. I think it is accepted that, if they are,
there was a duty to disclose them, and the vendor, having failed to do so,
would be disentitled to claim specific performance. That is subject of course
to the effect of section 198. Some light on the question: ‘Can a defect in
quality be also a defect in title?’ is
to be gained from the decision of Joyce J in Carlish v Salt
[1906] 1 Ch 335. That was a case where a party wall notice had been served
under the London Building Act 1894, and an award had been made under the
provisions of that statute. It was held that these were material facts which a
vendor was under an obligation to disclose to an intended purchaser, inasmuch
as they affected the purchase price and value of the property.
Mr Collins
submitted that clearly a party wall notice and award were matters which go to
the title, and he referred me to the reported argument as indicating that that
point was taken in the course of counsel’s submissions. What Joyce J said at p
340 was this:
I have to
determine a question similar to that suggested, but not decided, by Rigby LJ in
Re Leyland and Taylor’s Contract [1900] 2 Ch 625. It is admitted that nothing
was said about the party wall notice or award previously to the date of the
contract, but no fraudulent intent is imputed to the defendants. I hold that
the party wall notice and the award constituted a material fact affecting the
price to be paid, and in so far as they imposed a liability of uncertain amount
at some future time on the owner of the premises, I am of the opinion that they
constituted a latent defect not in the quality of, but in the title to, the
property, and ought to have been disclosed.
I regard that
as authority for what it states, that where the fact that is not disclosed is
one that affects the price to be paid in so far as it imposes a liability of
uncertain amount at some future time on the owner then that is a latent defect
which goes to the title of the property and which the vendor is under a duty to
disclose. Mr Collins also referred me to what was said by Joyce J at p 341:
In the case
of the sale of a chattel, the law as stated by Bramwell B in Horsfall v Thomas
is that if there be a defect known to the manufacturer, and which cannot be
discovered on inspection, he is bound to point it out. Upon consideration of
the authorities, I am of opinion that the vendor of real estate is under a
similar obligation with respect to a material defect in the title, or in the
subject of the sale, which defect is exclusively within his knowledge, and
which the purchaser could not be expected to discover for himself with the care
ordinarily used in such transactions.
Mr Collins
submits that not only because of the registration of the land charge would the
purchaser be in a position to ascertain the matter which the vendor did not
disclose (that is in relation to the dangerous structure notice and the
condition of the roof of no 24) but also his submission goes so far as this,
that the purchaser, had inquiry been made of the tenants, would no doubt have
ascertained the nature of the dispute between Miss Anderson and the vendor
landlords.
The next case
to which I was referred by Mr Beecroft was Beyfus v Lodge [1925]
1 Ch 350, a decision of Russell J. That was a case where the defendant had
purchased from the plaintiff two leasehold houses which were occupied by
tenants paying a rack-rent, and the vendors had received notices from the
landlords calling upon them to carry out certain repairs. The receipt of these
notices was not disclosed prior to the contract, and indeed, although I do not
think that anything turned upon this, was not disclosed when requisitions were
raised which ought to have elicited the information immediately, and it was
only forthcoming at a later date. Russell J said at p 357:
Although
acting in good faith, they withheld from the purchaser knowledge of the fact
that notices had been served before the sale — notices which if disclosed would
have revealed three things: firstly, the extent of the repairs which the
covenantee required to be done; secondly, the amount required by the covenantee
to be expended; and, thirdly, the time available within which the purchaser
could provide the necessary money, do the work and avoid the risk of
forfeiture. In my opinion, and the evidence bears this out, those were all
matters material for the purchase and all intending bidders to know to enable
them to decide whether they should bid at all, and, if so, the amount to which
they would be prepared to go.
This appears
to me a matter directly affecting the value of the property which was within
the vendors’ knowledge, which the intending purchaser could not have
ascertained, and which it was the vendors’ duty to disclose. The value of the
property can only be measured after taking into account the amount required to
be expended on repairs: the purchaser is given no opportunity for forming an
estimate: the vendor knows the exact amount, but fails to disclose a fact which
would have revealed the amount. The vendor cannot, in my opinion, on this part
of the case, derive any assistance from either condition 6 or condition 8. The
former binds the purchaser to assume a state of affairs which the vendor at the
time of the sale knew to be untrue without fairly bringing the fact to the
attention of the purchaser; the latter states only as a contingency what the
vendor knew to be an actual fact.
In my opinion
it would be wrong in the present case to grant specific performance of the
contract against the purchaser.
I take what is
said there, and also recalling what Joyce J said in Carlish v Salt
[1906] 1 Ch 335, fortifying me in the view which I take in this case, that here
the purchasers were purchasing property as an investment on the basis that the
expenditure of their purchase money was going to yield a certain income from
the rents receivable, and it appears to me to be quite clear that information
as to claims by the tenants in relation to moneys alleged to be recoverable by
them and disputes with the tenant as to that kind of matter, and also the
liability to carry out the works of repair of a very expensive character, which
were necessitated by the dangerous structure notice, were clearly matters which
should have been disclosed to the purchaser because they affected the price to
be paid and furthermore are, in my opinion, matters which relate to the title
to the property. What the purchaser was acquiring was the rights of the vendor
landlord as against the tenant, and anything which materially affected those
rights or indicated that there was any dispute about them was in my judgment a
matter relating to the title. Having reached that conclusion I will now have to
turn to the question: how is that affected by section 198 of the Law of
Property Act?
Mr Collins
submits that the effect of that provision is that principally the dangerous
structure notice was registered and the purchasing plaintiffs had notice of it.
Mr Beecroft submits that what was decided in Re Forsey and Hollebone’s
Contract was that where a matter is registered in the land charges
register, or in a local land charges register, the purchaser has notice of the
matter so registered, but he submits there is a distinction between notice and
knowledge. There is first of all a preliminary point with which I should deal.
It was submitted by Mr Beecroft that what was said by Eve J in Re Forsey and
Hollebone’s Contract was mere obiter dictum. Mr Collins submits the
contrary and says that it is part of the ratio of the decision.
The primary
question in Re Forsey and Hollebone which was dealt with by Eve J and by
the Court of Appeal was whether the passing and registration of a resolution by
the local authority dealing with a proposed town planning scheme, operated to
impose on the land a subsisting incumbrance. Both Eve J and the Court of Appeal
held that it did not in that, although it gave notice of something that might
happen in the future, as effect had not been given to the resolution there was
no subsisting incumbrance of the property. Although that was the basis of Eve
J’s decision, he said at [1927] 2 Ch 379, on p 386:
It may well
be that this is a conclusion
that is, that
there was no incumbrance
which will
not meet with approval elsewhere, and I must therefore deal with the other part
of the case, which proceeds upon the footing that this is an incumbrance of
which the purchaser had no knowledge until shortly before
facts entitle her to avoid the contract?
It is common ground that neither the vendor nor the purchaser knew of
the passing of the resolution until all the other questions had been disposed
of and the conveyance actually executed ready for completion. What in these
circumstances was the legal position of the contracting parties? That, as it seems to me, must be regulated by
section 198 of the Law of Property Act 1925
which provides
an ‘in any event’ provision as originally enacted.
By virtue of
that section I think that both parties must be deemed to have contracted with
actual notice of the existence of this resolution.
I leave aside
the question of construction whether the provisions of the Land Charges Act
1925 as they stood at that time, that is at the time of the contract then in
question, did relate to local land charges. Under section 15(7) of the Land
Charges Act 1925 a prohibition or restriction of the kind that it was arguable
the local authority’s resolution constituted was to be deemed to be a restrictive
covenant and fell to be registered by the proper officer as a local land
charge. But that subsection was, at the time when the matter came before the
Court of Appeal, no longer in force, because it had been qualified by the Law
of Property (Amendment) Act 1926. I think there is considerable doubt for this
and other reasons as to whether or not the observations made by Eve J on the
alternative basis that he was considering, that is, on the hypothesis, contrary
to his finding, that the resolution was an incumbrance, is to be regarded as
obiter dictum or as part of the ratio of his decision. His conclusion that both
parties must be deemed to have contracted with actual notice of the existence
of this resolution I will leave aside, whether it was dictum or otherwise, and
turn to Mr Beecroft’s submission in relation to this part. He submits that it
is quite clear that the local land charge is for this purpose equivalent to a
land charge registered under the Land Charges Act 1925, and Mr Beecroft submits
that notice is not the same as knowledge. I think the point can be put in this
way, that although the provisions of the Land Charges 1925 (as amended) have
the effect that if such matter as a dangerous structure notice is registered in
the register of local land charges, then a purchaser of the legal estate takes
with notice of that dangerous structure notice and consequently is affected by
it, and cannot claim as against the party seeking to set it up, that is, for
example, the local authority, that he, the purchaser, is not bound by it, and
that is so whether or not he has any actual knowledge of it at the time when he
completes the purchase of the legal estate. That I understand to be the effect
of the provisions of section 198 as amended. The point taken by Mr Beecroft is
this, that although as between the purchaser and the person entitled to enforce
the registered charge, the purchaser takes with notice and is therefore subject
to it; as between the vendor and the purchaser the section does not procure the
same result. On this matter there appears to be no direct authority. Mr
Beecroft has relied on certain cases before 1925 as indicating that his
submission was well founded, and first of all he referred me to Caballero
v Henty (1874) LR 9 Ch App 447, which was a case where the
subject-matter of the sale was a public house and a brewer agreed to buy the
property, which was in the occupation of a tenant, and afterwards learned that
it was under lease to another brewer for a term of which 8 years were
unexpired. It was held that the purchaser was not bound to ascertain from the
tenant the terms of his tenancy and that in such a case the vendor could not
enforce specific performance. Sir William James LJ said at p 450:
During the
argument I was referred to a passage in Sugden’s Vendor and Purchaser
which seems to show that the purchaser is not bound to go to the tenant to
inquire. At all events the vendor cannot enforce such an agreement as this.
That appears to
me to go to this point, that although the purchaser pre-1926 would take with
notice of the rights of the person in actual occupation he was not bound to
make inquiries of that person and consequently the vendor could not claim that
he was affected with knowledge of the matters which he would have ascertained had
inquiry of the person in occupation been in fact made.
In Phillips
v Miller (1875) LR 10 CP 420 there were three tenants of farms in
Hampshire. The reversion upon their tenancies was put up for sale, and the
plaintiff purchased the property, paid what was due to the tenants under
certain agreements of which he had not been apprised by the vendor defendant,
but then sought to recover the difference between what was payable under those
agreements for hay, straw and manure and what would have been payable had the
matter been dealt with according to the custom of the county. It was held he
was entitled to recover the difference between market and fodder value, these
being the two bases of valuation, from the defendants as money paid for their
use, and the material passages that touch upon the point which I have
considered are to be found in the judgment of Pollock B at p 427, where,
referring to Caballero v Henty, he said:
In the last
case particularly the true limits of the doctrine of constructive notice of a
tenancy as between vendors and purchasers is very clearly laid down. But in no
case of the kind that I am aware of has the Court enforced the contract against
the vendor with indemnity or compensation; and the case of James v Lichfield
(1869) LR 9 Eq 51 is a direct authority against it, and, although some dicta in
that case are open to criticism, as carrying the doctrine of constructive
notice of tenants’ rights as between vendors and purchasers to an unreasonable
extent, and were disapproved of on that account in Caballero v Henty,
I am not aware that the decision has ever been impugned.
Pollock B said
at p 429:
Mr Channell,
in arguing for the plaintiff, admitted that if the effect of the agreements was
that for which the defendants contended, the legal consequence asserted by them
would properly follow. It may be open to some doubt whether, having reference
to the recent decision of the lords justices in Caballero v Henty
this admission would not go too far; but it is unnecessary to consider this
now, because, in my opinion, the view which was presented to us on behalf of
the plaintiffs of the agreements in question is the correct one.
These are
references which I think furnish some assistance to Mr Beecroft’s submission,
but I do not propose upon this application under Order 86 to decide either
whether what was said by Eve J in Re Forsey and Hollebone’s Contract was
dicta or part of the ratio of his decision. Nor do I propose to decide that
what he said is to be taken as deciding that, where a vendor who otherwise
would have a duty to disclose certain matters to the purchaser has not done so,
he can rely upon the registration of the matter in question as affecting the
purchaser, not only as against the person whose rights are protected by
registration but as against the vendor himself as having notice of the matter
that was not disclosed. What I do find is that it is perfectly evident, as it
appears to me upon the authorities, that there is a very real question to be
determined in relation to that issue and that it would not be appropriate to
determine it upon an application under Order 86. Furthermore, the point about
section 198 does not touch the matter of the dispute with Miss Anderson as to
the amount of her service charges. As I have sufficiently indicated already,
that dispute appears to me, having regard to the nature of the property that
was being sold, to go to and affect the title to the property, and there was in
my judgment a duty to make disclosure of these matters. Accordingly, subject to
the last point which I have to consider, there is ground for the defendants
resisting the plaintiff’s claim for specific performance.
Special
Condition 6, to which I have not yet referred, provided that:
If at the
date fixed for the completion of the sale and purchase any tenant of any flat
is in arrears with payment of service charge . . .
and various
other matters
. . . then in
addition to the balance of the purchase money the purchaser shall on completion
pay to the vendor the aggregate amount of such arrears, which shall then belong
absolutely to the purchaser. The vendor should not be obliged or required to
enter into any formal deed of assignment . . .
I do not think
that I need complete the rest of it.
Mr Collins, at
a late stage in the hearing said that he was prepared to waive that condition 6
on behalf of the vendors, and he submitted (as I understand it) — and he
referred me to Spry on Equitable Remedies, p 102, which satisfies me
that the vendor can waive a provision, provided it is not one that benefits the
other party — that, having done that, that disposed of the complaint about
non-disclosure of Miss Anderson’s dispute. I do not think that it does so,
because General Condition 2(5) provides: ‘The purchaser shall on completion pay
to the vendor the full amount of rent and other money properly payable and due
on the date of actual completion from any person that is a tenant of the
property.’
The reference
there to ‘. . . other money properly payable . . .’, it seems to me, would
cover the service charge. Mr Collins said that if it was only what was properly
payable, that eliminated anything that was in dispute. That appears to me to
beg the question, because if there is a dispute it is a dispute because the one
side, the vendor, is saying that x is payable and the other side is saying that
y is payable, and what the purchaser would be invited to do would be to
purchase the law suit to determine which party was right. Even if the question
of the propriety of the charges sought to be levied by the landlords at the
date of actual completion was capable in some way of being
tenant appears to me to be highly material, and falling to be disclosed as
affecting the title, because if there is a dispute at one juncture, then it
indicates that there may be disputes at other times arising out of the same
kind of consideration. Consequently, in my judgment the defendants do establish
that there were matters which should have been disclosed by the plaintiffs — I
decide this of course merely for the purpose of determining whether there are
issues to be tried — and for the purpose of this application under Order 86 I
am satisfied that the defendants do make out their case. There ought therefore
to be a trial of the action, and accordingly the application for summary
judgment fails.
