Sale of land – Rescission – Contract to sell land subject to standard conditions of sale – Dispute over whether VAT chargeable on purchase price – Appellant purchaser serving notice to complete – Respondent vendor abandoning assertion that VAT chargeable and agreeing to complete – Appellant failing to pay purchase price by expiry of notice to complete – Whether this a repudiatory breach of contract for which respondent entitled to rescind – Whether appellant entitled to delay completion where parties disagreeing over proper amount of completion statement – Appeal dismissed
In October 2010, the respondent contracted to sell a property in London N10, comprising a shop with two flats above, to the appellant for £385,000. The contract was subject to the standard conditions of sale (4th ed). A dispute arose between the parties when the respondent asserted that VAT was payable on the sale. The matter was not resolved by the contractual completion date in November 2010. On that day, the appellant gave notice that it was ready, willing and able to complete six days from then at the contract price of £385,000, which, after making deductions for rent apportionment, would result in a completion figure of £343,884.
The respondent continued in its assertion that it had to charge VAT on the purchase price. Completion did not take place on the appellant’s proposed date. The appellant then served a notice to complete on the respondent, requiring completion within 10 working days. Disputes over the completion sum continued, both on the VAT issue and because the appellant claimed that it was entitled to make deductions from the purchase price to compensate it for losses, damages and costs arising from the respondent’s prior failure to complete. On the last available day for completion under the notice to complete, the respondent faxed a “white flag” letter, notifying the appellant of its willingness to complete on the terms of a revised completion statement, which excluded VAT, although it did not make any allowance for the appellant’s alleged losses. The appellant raised various points in relation to that completion statement and the respondent sent a further amended version in response.
Completion did not take place that day. The following day, the respondent claimed that, having offered to complete within the notice period, and having received no moneys from the appellant by the expiry of that period, it was entitled to rescind the contract on the grounds of the appellant’s repudiatory breach and forfeit the appellant’s deposit.
The appellant’s claim for specific performance of the contract was dismissed in the county court on the ground that the notice to complete had made time of the essence in relation to completion and that, on the expiry of the notice, the appellant had not itself been ready, willing and able to complete. The judge found that the appellant had not put its solicitor in funds to complete until the day after the notice period expired and that the solicitor did not have instructions to complete until the compensation figure was agreed. The appellant appealed.
Held: The appeal was dismissed.
(1) A notice to complete was a powerful weapon in the hands of a conveyancer and needed careful handling. Once such a notice was served, it made time of the essence of the contract for both parties, not just the party on whom the notice was served: Quadrangle Development & Construction Co Ltd v Jenner [1974] 1 WLR 68 applied. Accordingly, the party serving the notice had to be ready to complete by the date fixed in the notice and, if it was not, it would be in breach of an essential condition of the contract. The appellant had failed to pay the purchase price in accordance with the contract on the expiry of the notice to complete and had not in fact been in a position to do so. A failure to complete on time, where time was of the essence, was a repudiatory breach of contract: Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 applied. Because time was of the essence, performance of the contract by the purchaser was no longer possible and, at that stage, the vendor could only be required to accept late performance if there had been some form of waiver or estoppel.
(2) The respondent’s white flag letter, accompanied by the revised completion statement dropping the VAT point, would be understood to mean that the respondent was offering to complete in accordance with the contract. The reasonable recipient would understand that the original objection to completion, namely that the sale price was subject to VAT, had been dropped. Even if, contrary to the above, the letter could be construed as an invitation to negotiate a more leisurely completion, it would not have the effect of discharging the obligation on the appellant to be ready to complete in accordance with the contract and the notice to complete. It was not suggested that the respondent had waived its rights under the contract or was estopped from asserting them. There had been no variation of the contract and any such variation would have had to comply with the requirements of form in section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. Both parties therefore remained bound to complete by the expiry of the completion notice: Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168; [2010] 3 EGLR 165 distinguished.
(3) A failure by the vendor to provide an accurate completion statement did not discharge a party from its obligation to complete. Where a purchaser believed that the amount demanded by the vendor was incorrect, then its answer was attend for completion and tender what it considered to be the correct amount: Schindler v Pigault (1975) 30 P&CR 328, Carne v Debono [1988] 1 WLR 1107; [1988] EGCS 102 and Hanson v South West Electricity Board [2001] EWCA Civ 1377; [2002] 1 P&CR 35 applied. Since, on the judge’s findings, the appellant had been in a position to make the necessary calculations, the respondent’s failure to provide a completion statement that accurately reflected all the matters that remained to be settled was not something that could or should have prevented the appellant from making the necessary preparations to complete and tendering or paying over the sum due. By insisting on final agreement of the completion statement, and insisting on resolution of its claim for compensation, it had placed itself in breach of an essential condition of the contract. The respondent had been entitled rescind the contract on that ground.
Mark Dencer (instructed by Bishop & Sewell LLP) appeared for the appellant; Michael Buckpitt (instructed by Comptons Solicitors LLP) appeared for the respondent.
Sally Dobson, barrister
Clarke Investments Ltd v Pacific Technologies
Sale of land – Rescission – Contract to sell land subject to standard conditions of sale – Dispute over whether VAT chargeable on purchase price – Appellant purchaser serving notice to complete – Respondent vendor abandoning assertion that VAT chargeable and agreeing to complete – Appellant failing to pay purchase price by expiry of notice to complete – Whether this a repudiatory breach of contract for which respondent entitled to rescind – Whether appellant entitled to delay completion where parties disagreeing over proper amount of completion statement – Appeal dismissedIn October 2010, the respondent contracted to sell a property in London N10, comprising a shop with two flats above, to the appellant for £385,000. The contract was subject to the standard conditions of sale (4th ed). A dispute arose between the parties when the respondent asserted that VAT was payable on the sale. The matter was not resolved by the contractual completion date in November 2010. On that day, the appellant gave notice that it was ready, willing and able to complete six days from then at the contract price of £385,000, which, after making deductions for rent apportionment, would result in a completion figure of £343,884.The respondent continued in its assertion that it had to charge VAT on the purchase price. Completion did not take place on the appellant’s proposed date. The appellant then served a notice to complete on the respondent, requiring completion within 10 working days. Disputes over the completion sum continued, both on the VAT issue and because the appellant claimed that it was entitled to make deductions from the purchase price to compensate it for losses, damages and costs arising from the respondent’s prior failure to complete. On the last available day for completion under the notice to complete, the respondent faxed a “white flag” letter, notifying the appellant of its willingness to complete on the terms of a revised completion statement, which excluded VAT, although it did not make any allowance for the appellant’s alleged losses. The appellant raised various points in relation to that completion statement and the respondent sent a further amended version in response.Completion did not take place that day. The following day, the respondent claimed that, having offered to complete within the notice period, and having received no moneys from the appellant by the expiry of that period, it was entitled to rescind the contract on the grounds of the appellant’s repudiatory breach and forfeit the appellant’s deposit.The appellant’s claim for specific performance of the contract was dismissed in the county court on the ground that the notice to complete had made time of the essence in relation to completion and that, on the expiry of the notice, the appellant had not itself been ready, willing and able to complete. The judge found that the appellant had not put its solicitor in funds to complete until the day after the notice period expired and that the solicitor did not have instructions to complete until the compensation figure was agreed. The appellant appealed.Held: The appeal was dismissed. (1) A notice to complete was a powerful weapon in the hands of a conveyancer and needed careful handling. Once such a notice was served, it made time of the essence of the contract for both parties, not just the party on whom the notice was served: Quadrangle Development & Construction Co Ltd v Jenner [1974] 1 WLR 68 applied. Accordingly, the party serving the notice had to be ready to complete by the date fixed in the notice and, if it was not, it would be in breach of an essential condition of the contract. The appellant had failed to pay the purchase price in accordance with the contract on the expiry of the notice to complete and had not in fact been in a position to do so. A failure to complete on time, where time was of the essence, was a repudiatory breach of contract: Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 applied. Because time was of the essence, performance of the contract by the purchaser was no longer possible and, at that stage, the vendor could only be required to accept late performance if there had been some form of waiver or estoppel.(2) The respondent’s white flag letter, accompanied by the revised completion statement dropping the VAT point, would be understood to mean that the respondent was offering to complete in accordance with the contract. The reasonable recipient would understand that the original objection to completion, namely that the sale price was subject to VAT, had been dropped. Even if, contrary to the above, the letter could be construed as an invitation to negotiate a more leisurely completion, it would not have the effect of discharging the obligation on the appellant to be ready to complete in accordance with the contract and the notice to complete. It was not suggested that the respondent had waived its rights under the contract or was estopped from asserting them. There had been no variation of the contract and any such variation would have had to comply with the requirements of form in section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. Both parties therefore remained bound to complete by the expiry of the completion notice: Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168; [2010] 3 EGLR 165 distinguished.(3) A failure by the vendor to provide an accurate completion statement did not discharge a party from its obligation to complete. Where a purchaser believed that the amount demanded by the vendor was incorrect, then its answer was attend for completion and tender what it considered to be the correct amount: Schindler v Pigault (1975) 30 P&CR 328, Carne v Debono [1988] 1 WLR 1107; [1988] EGCS 102 and Hanson v South West Electricity Board [2001] EWCA Civ 1377; [2002] 1 P&CR 35 applied. Since, on the judge’s findings, the appellant had been in a position to make the necessary calculations, the respondent’s failure to provide a completion statement that accurately reflected all the matters that remained to be settled was not something that could or should have prevented the appellant from making the necessary preparations to complete and tendering or paying over the sum due. By insisting on final agreement of the completion statement, and insisting on resolution of its claim for compensation, it had placed itself in breach of an essential condition of the contract. The respondent had been entitled rescind the contract on that ground. Mark Dencer (instructed by Bishop & Sewell LLP) appeared for the appellant; Michael Buckpitt (instructed by Comptons Solicitors LLP) appeared for the respondent.Sally Dobson, barrister