Sale of land – Exchange of contracts – Appellant bringing proceedings against respondent for failure to complete purchase of flat in development – Settlement agreement providing for respondent to purchase alternative flat with exchange to take place by specified date – Appellant failing to provide correct CML form by exchange date – Whether appellant in breach of own obligations under settlement agreement – Whether “exchange” referring to bare act of exchanging signed documents or including co-operation in preceding conveyancing steps – Appeal dismissed
In 2010, the appellant brought proceedings against the respondent and his former business partner for damages in respect of their failure to purchase a flat in the appellant’s development in Barnsley pursuant to an earlier sale contract. In February 2012, the respondent reached a settlement agreement with the appellant under which he agreed to purchase a different flat in the same development for £92,000, with the £17,000 deposit already paid under the 2005 sale contract to be credited against the purchase price. It was understood that the respondent would require mortgage finance to complete the new purchase. The terms of the settlement agreement provided for the court proceedings to be stayed for six weeks to enable the respondent to proceed with the purchase and specified a date in late March 2012 by which he was to exchange contracts with the appellant, failing which the proceedings were to continue.
The appellant provided documentation relating to the sale in March 2012, including a CML (Council of Mortgage Lenders) form containing relevant financial information about the sale, but these were drafted on the incorrect basis that the respondent and his business partner would be purchasing together. In response to a request for correction of that matter, the appellant’s solicitors agreed to alter the contract documentation in manuscript and indicated that they had requested a fresh CML from their client. However, despite repeated prompting from the respondent, the replacement CML form was never provided.
In May 2012, the appellant decided that it was unwilling to proceed with the sale to the respondent and sought to pursue its claim for damages for his failure to purchase under the original sale contract. On a trial of a preliminary issue, the recorder held that the respondent’s failure to exchange on the new purchase was caused by the appellant’s own failure, without good reason, to provide the CML form in time. He held that the reference in the settlement agreement to exchange of contracts meant a process in which the co-operation of both parties was required, consisting of the whole of the normal conveyancing process designed to ensure that completion could take place.
The appellant appealed. It contended that “exchange” should be construed as meaning the bare act of exchanging signed documents given that, unlike the normal situation of a sale subject to contract, there was already a binding contractual obligation on the parties and the appellant did not need to do anything to convince the respondent to commit to the purchase.
Held: The appeal was dismissed.
Although the settlement agreement was expressed in terms of imposing an obligation, it in fact imposed no obligation on the respondent to exchange on the new purchase but merely provided for what was to happen if he took a certain course. The obligation was instead on the appellant to co-operate by taking part in the exchange since it could not take place without such co-operation.
The respondent was given six weeks in which to decide whether to proceed with the purchase. It was for him alone to decide whether to proceed and the appellant, as vendor, was committed to selling to him if he wished to purchase on the given terms and within the stipulated time; in that respect, the situation was akin to an option to purchase. As was usual with the sale of units on a development by the developer, there were matters within the appellant’s knowledge and control relating to the particular property, which the respondent would need to know or with which he would need be supplied in order to enable him to decide whether to proceed. It was also for the vendor to take the initiative in providing the draft contract and other related documents. If the respondent was to obtain mortgage finance from a lender who was a member of the CML, the lender would require the CML form to be issued and provided by the appellant in advance of exchange of contracts.
The meaning that the settlement agreement would convey to a reasonable person with the relevant knowledge, in light of the factors set out above, was that the appellant was obliged to collaborate not merely in the process of eventual exchange but also in the normal pre-contract conveyancing procedures, supplying the respondent’s solicitors with the appropriate and necessary documents and answering such reasonable enquiries as they might address. In particular, given the respondent’s known wish to obtain mortgage finance, the appellant was obliged to supply a CML form in the correct terms before exchange. The appellant had breached that obligation by supplying a CML form in the wrong terms and failing to supply a replacement in the correct terms. The respondent’s willingness to enter into the settlement agreement did not mean that he was willing, at the later stage of exchange, to accept the risk that he might have to proceed to purchase without mortgage finance. The preliminary issue had been correctly determined in favour of the respondent.
Jonathan Cohen (instructed by Metis Law LLP, of Leeds) appeared for the appellant; Paul Brook (instructed by Simpson Millar LLP, of Leeds) appeared for the respondent.
Sally Dobson, barrister
