Sale of land – Notice to complete – Rescission of contract – Appellant agreeing to purchase leases of flats from respondent – Appellant to seek sub-sales of flats and purchase those left unsold at contractual completion date – No sub-sales achieved – Respondent serving notice to complete and later rescinding contract – Whether breach of contract by respondent – Whether entitled to serve notice to complete – Appeal dismissed
In June 1995, the appellant reached an agreement with the respondent developer whereby it would purchase 14 flats that the respondent was to build at scheduled premiums totalling £2.25m. The agreement provided that the appellant could, prior to the contractual completion date, sub-sell the individual flats at a price exceeding the scheduled price and complete on such sub-sales. Its obligation at the contractual completion date was to purchase a lease of any of the flats that it had not sold.
The appellant encountered difficulties in finding purchasers for sub-sales at an enhanced price. It sought to renegotiate the deal with the respondent and refused, in the meantime, to proceed with the agreement or to pay the balance of its deposit. The respondent informed the appellant that it proposed to protect its position by marketing the flats itself. In September 1995, an agreement was reached under which the completion date was extended, the appellant paid the balance of the deposit and the respondent agreed to cease marketing the flats and to allow access for valuation and marketing purposes.
In the event, the appellant did not achieve any sub-sales. The respondent served a notice to complete on the appellant, which did not comply. The respondent thereupon purported to rescind the contract and forfeit the appellant’s deposit of £112,750.
The appellant brought proceedings for damages and the return of its deposit, contending that the respondent had not been entitled to serve a notice to complete since it was itself in breach of contract by, inter alia, marketing the flats before and after the September agreement. It relied upon: (i) an implied term in the original June agreement (which point was not raised in its pleadings before trial); and (ii) the September agreement, on the ground that, although that agreement did not comply with the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, it none the less gave rise to an estoppel in the appellant’s favour. The judge rejected those submissions and dismissed the claim. The appellant appealed.
Held: The appeal was dismissed.
In the light of the appellant’s pleaded case, it was doubtful whether the judge should have entertained a new and unpleaded case based upon an implied term in the June agreement. The September agreement, which contained an express term requiring the respondent to cease marketing the flats, was void since it purported to vary the terms of the June agreement as to the completion date and it did not comply with section 2 of the 1989 Act. Any estoppel to which it gave rise would be an estoppel by convention, any reliance upon which would be likely to fail as being inconsistent with section 2: Yaxley v Gotts [1999] 2 EGLR 181, per Clarke LJ at p182, considered. There was no identifiable legal basis upon which the appellant could assert that the respondent’s marketing activities constituted a breach of contract. Moreover, the appellant had put forward no evidence that the marketing of the flats by the respondent had caused it any loss. In circumstances where the appellant was not entitled to assert a breach of contract, or that any putative breach was causative of its failure to complete, it could not argue that the respondent was not ready, able and willing to complete so as to entitle it to serve the notice to complete.
Harry Hodgkin (instructed by Elliott Stephens & Co) appeared for the appellant; the respondent did not appear and was not represented; Edward Peters appeared to assist the court at its request.
Sally Dobson, barrister
