Freehold property – Contract for sale — Rescission – Parties agreeing sale of property conditional on grant of planning permission – Claimant registering unilateral notices at Land Registry — Permission pending by conditional end date – Defendant purporting to rescind contract – Whether contract remaining in force – Whether claimant entitled to specific performance of contract – Whether defendant entitled to removal of notices and inquiry as to damages — Claim dismissed
By a contract dated June 2009, the defendant, a company registered in the Isle of Man, agreed to sell to the claimant, a company registered in the British Virgin Islands, a substantial freehold property in London W1. On 3 July 2009, the claimant registered unilateral notices at the Land Registry in respect of the defendant’s registered title to the property.
The defendant had purchased the property in July 2007 for £6,325,000 and had charged it to the bank to secure its obligations to repay moneys owed by it to the bank. In June 2008, the defendant decided to apply for planning permission to convert the property into a single family dwelling and replace part of the building with a block of seven flats, which involved entering into an agreement under section 106 of the Town and Country Planning Act 1990. That application had not yet been considered when the defendant entered into the sale agreement with the claimant. The sale was conditional on planning permission being granted by a specified date. Under the sale agreement, £500,000 of the purchase price was to be withheld following completion until the defendant had carried out the proposed development and other works to reconvert the property into residential accommodation.
On 18 March 2010, the defendant gave notice to the claimant, purporting to rescind the agreement on the basis that the condition with regard to planning permission had not been satisfied by the condition end date. The claimant applied to the court for a declaration that the agreement, under which it paid a £570,000 deposit, remained in force and for specific performance of the defendant’s outstanding obligations to secure planning permission.
The claimant argued, inter alia, that the deadline was postponed since the council had resolved to grant planning permission by a specified date subject to the section 106 agreement. The defendant maintained that the deadline had not been postponed because the final draft of the section 106 agreement the council had amended with changes to which it did not agree. The defendant sought the removal of the unilateral notices and an inquiry as to damages pursuant to section 77 of the Land Registration Act 2002.
Held: The claim was dismissed.
The final draft section 106 agreement contained new provisions that went beyond those of the earlier draft agreed by the defendant. On the evidence it could not be said that the defendant had agreed the principal terms of the different version of the section 106 agreement put forward by the council. Accordingly, the contract had ended on 18 March 2010, when the defendant rescinded the sale agreement, and the claimant was not entitled to the relief sought.
Therefore, the defendant was entitled to appropriate declaratory relief and an order providing for the removal of the unilateral notices from the defendant’s registered title. However, the defendant was not entitled to an inquiry as to damages pursuant to section 77 of the 2002 Act.
When the claimant applied for the entry of the notices, it had had the benefit of the contract and had been entitled to act as it had. Section 77(1)(b) of the 2002 Act referred to a person exercising the right to apply for entry of a notice without reasonable cause. If that wording was taken literally, the claimant’s application for the entry of notices was justified. The concept involved in a reference to reasonable cause was clear and it was inappropriate to attempt to elaborate or gloss the statutory language: Clearbrook Property Holdings Ltd v Verrier [1974] 1 WLR 243 and Anderson Antiques (UK) Ltd v Anderson Wharf (Hull) Ltd [2007] EWHC 2086 (Ch); [2007] PLSCS 203 referred to.
Applying the statutory wording to the facts of the case, the existence of a reasonably arguable case showed that the claimant had reasonable cause to continue to have the benefit of the unilateral notices against the defendant’s registered title.
Although the defendant might have protected itself by applying to the court for an order removing the unilateral notices, in which case the court’s usual practice was to allow the notices to remain pending trial but on terms that the claimant gave to the defendant an undertaking in damages, it had not done so. Thus, it did not have the benefit of an undertaking in damages. Its attempt to rely on section 77 required the defendant to show that the claimant had acted or failed to act without reasonable cause and it had failed to do so: Tucker v Hutchinson (1987) 54 P&CR 106 referred to.
Martin Rodger QC (instructed by Macfarlanes LLP) appeared for the claimant; Francis Moraes (instructed by Fuglers Solicitors) appeared for the defendant.
Eileen O’Grady, barrister
