Sale of land — Notice to complete — Claimants refusing to complete — Claimants alleging substantial misdescription of property — Claim for abatement — Whether defendant departing from agreed specification — Whether claimants entitled to rescind contract — Claim allowed
The defendant acquired a site with planning permission for 18 flats and 16 parking places and entered into a joint-venture agreement with the interested parties for their construction. The claimants agreed to purchase the flats on long leases prior to their construction, and subsequently paid deposits and exchanged contracts. The sales brochure advertising the flats stated that they would have balconies, allocated parking spaces and limestone flooring. However, upon completion, there was no limestone flooring, three balconies had not been built and three parking spaces had had to be moved from their original position in the basement to an access ramp.
The claimants refused to complete and the defendant considered that they had repudiated their contracts and forfeited their deposits. The claimants took the view that the forfeiture constituted a repudiation by the defendant and commenced proceedings for breach of contract.
The claimants submitted that the defendant’s failure to follow the original specifications had resulted in a diminution in the value of the flats so that the defendant could not require completion. The defendant argued that, to the extent that there were misdescriptions, they were not substantial and did not therefore give the claimants the right to refuse to complete. It submitted that the claimants were entitled to no more than an abatement of the price. However, the claimants submitted that a vendor could not serve a notice to complete until the abatement price had been determined.
The issues included, inter alia: (i) whether the defendant had made unauthorised departures from the specifications, amounting to a substantial misdescription of the flats, so that the claimants were entitled to refuse to complete; and (ii) the effect of any claim for abatement on the vendor’s ability to be ready and willing to complete.
Held: The claim was allowed.
The claimants were entitled to rescind their contracts on the ground of substantial misdescription and, alternatively, because abatements had not been agreed. Accordingly, they were released from their obligations to complete and were entitled to the return of their deposits.
In considering whether a misdescription was substantial, the question was whether it might reasonably be supposed that, but for the misdescription, the purchaser might not have entered into the contract. In the present case, the limestone flooring, the balconies and the car-parking spaces were major selling features and factors for inducing a party to enter into a contract to purchase a particular flat. Accordingly, there had been substantial misdescriptions: Flight v Booth (1834) 1 Bing NC 370 applied.
The position would have been no different had the claimants been entitled only to an abatement in the price of the flats. In cases where the full purchase price was not payable, there could not be a valid notice to complete until the compensation had been settled. As a matter of principle, where a misdescription reduced the purchase price, the claim for an abatement affected the ability of a vendor to be ready and willing to complete. It therefore impeached the notice to complete: Clowes Developments (UK) Ltd v Mulchinock [1998] 1 WLR 42 and Bechel v Kitsford Holdings Ltd [1989] 1 EGLR 187; [1989] 10 EG 105 considered.
Timothy Dutton (instructed by Howard Kennedy) appeared for the claimants; Helen Galley (instructed by Paul Davidson Taylor, of Horsham) appeared for the defendant; Stephanie Tozer (instructed Lucas McMullan Jacobs) appeared for the interested parties.
Eileen O’Grady, barrister
