Vendor and purchaser — Whether a vendor who had entered judgment for specific performance could resell the land to a third party without obtaining the consent of the purchaser or first applying to the court to dissolve the order and asking it to put an end to the contract — In this case an order for specific performance was made after the purchaser failed to complete — Vendor did not take steps to proceed on the order and purchaser did not do anything amounting to a decision not to complete the purchase in pursuance of the order or to an abandonment or waiver of its right to do so — Vendor, however, entered into an agreement to sell the property to a third party and completed this sale, notifying the (original) purchaser that there would be a claim for damages instead of specific performance — Vendor claimed in the present proceedings that when the purchaser failed to complete he (the vendor) was entitled to resell without obtaining the purchaser’s consent or applying to the court to dissolve the order for specific performance and put an end to the contract — Held that the vendor’s submission failed — If an order for specific performance is not complied with by the purchaser, the vendor may either apply to the court for enforcement of the order or apply to dissolve the order and ask the court to put an end to the contract, the latter application being no mere formality — The principles governing this and other matters relating to the parties’ remedies were authoritatively stated in Johnson v Agnew — An alternative submission put forward on behalf of the vendor was also rejected — Motion dismissed
This was a
motion by the plaintiff vendors, GKN Distributors Ltd, claiming relief in
respect of the sale of a freehold warehouse situated off Richmond Street and
Snowdon Road, Middlesbrough, to the defendants, Tyne Tees Fabrication Ltd.
P Teverson
(instructed by Pinsent & Co, of Birmingham) appeared on behalf of the
plaintiffs; Richard Ritchie (instructed by J B Cordingly & Co, of Bradford)
represented the defendants.
Giving
judgment, NOURSE J said: The main question in this case is whether a vendor who
has entered judgment for specific performance can resell the land to a third
party without obtaining the consent of the purchaser or first applying to the
court to dissolve the order and asking it to put an end to the contract.
By an
agreement in writing dated September 13 1983 and made between the plaintiff,
GKN Distributors Ltd (‘GKN’) of the one part and the defendant, Tyne Tees
Fabrication Ltd (‘Tyne Tees’) of the other part GKN agreed to sell and Tyne
Tees agreed to purchase a freehold warehouse situated off Richmond Street and
Snowdon Road, in Middlesbrough, for the sum of £125,000 with a completion date
of October 11 1983. The sale also included seven travelling cranes and certain
other equipment at no extra cost. The sale was subject to the National
Conditions of Sale, 20th edition, subject to certain express variations, in
particular in condition 22(2) and (3). A deposit of £12,500 was paid to GKN’s
parent company as agent for it.
Tyne Tees
failed to complete on the completion date. On March 22 1984 special notice to
complete under condition 22 of the National Conditions of Sale was served on
Tyne Tees, but the sale was still not completed within the period stipulated in
that notice. On June 13 1984 GKN issued the writ in this action, claiming
specific performance of the agreement of September 13 1983 and ancillary
relief; alternatively a declaration that it is absolved from future performance
of its obligations under the agreement, together with damages for breach of
contract and a declaration that the deposit has been forfeited to it. Tyne Tees
entered an acknowledgement of service and notified an intention to defend, but
failed to serve a defence. On July 27 1984 Warner J, on a motion by GKN for
judgment in default of defence, ordered that the agreement be specifically
performed and carried into execution. The order also provided (inter alia)
that GKN be at liberty to prepare and execute a conveyance of the property to
Tyne Tees or to whom it should appoint and that completion should take place
‘at a time and place to be appointed by the Court after the said conveyance
shall have been so executed’.
Between August
2 and October 23 1984 there was correspondence, much of it without prejudice,
between Tyne Tees’ solicitor on the one hand and GKN’s solicitors or the legal
department of its parent company on the other. I need not go into that
correspondence in detail at this stage. It is only necessary for me to make
three points. First, GKN did not take any steps to proceed on Warner J’s order.
In particular it did not apply to the master for an order appointing a time and
place for completion. Second, although I think it is tolerably clear that its
parent company’s legal department misunderstood the effect of the order, or may
even have been unaware of its existence, GKN in no way abandoned or waived its
right to proceed on the order. The legal department appears to have thought
that GKN had an option either to proceed with the sale to Tyne Tees or to sell
it to some third party. Third, although it was at all times very uncertain
whether Tyne Tees or some associated company of its would be able to find the
money to complete, Tyne Tees never did anything which could have amounted to a
decision not to complete the purchase or to an abandonment or waiver in some
other way of its right to do so in pursuance of the order. I shall return to
that point later.
The next thing
which happened was that on November 8 1984 GKN entered into another written
agreement to sell the property to a third party for the sum of £100,000. That
sale was completed on November 30. The exchange of contracts was notified to
Tyne Tees’ solicitor by the legal department of GKN’s parent company in a
letter of November 9, when it was said that the claim in respect of the
property against Tyne Tees would take the form of a claim for damages instead
of specific performance of the contract. Although GKN’s solicitors appear to
have had a telephone conversation with Tyne Tees’ solicitor on October 18 and
to have received a copy of a letter written by him to GKN’s parent company’s
legal department on the same date, they themselves appear to have taken no part
in the correspondence after a letter which they wrote on September 25. I infer
therefore that GKN’s solicitors may not have been much involved in the decision
to sell to a third party. In any event, at the end of January GKN issued and
served the notice of motion which is now before the court. The form of relief
as originally claimed, which may be of some significance, consisted of
declarations, first, that GKN is entitled notwithstanding the order of Warner J
to treat its agreement with Tyne Tees as terminated and, second, that the
deposit of £12,500 has been forfeited to GKN. There is also a claim for
damages, which is in effect a claim pursuant to condition 22(3) of the National
Conditions of Sale (as varied) for the loss on the resale (£12,500 after giving
credit for the deposit of the like amount), the expenses of the resale and
interest.
Mr Teverson,
for GKN, has put its case in two ways. First, he submits that GKN’s right to
resell under condition 22(3) was not lost or destroyed by Warner J’s order for
specific performance which, he says, covers future enforcement of the contract
but does not remove GKN’s other rights under it. In other words, he says that
once Tyne Tees had failed to complete in conformity with condition 22 GKN was
entitled to resell under para (3) of that condition without obtaining the
consent of Tyne Tees or applying to the court to dissolve the order for
specific performance and asking it to put an end to the contract. He also
relies so far as necessary on a further repudiation which he says Tyne Tees
committed before the end of October, to which I will return later. Second, and
in the alternative, Mr Teverson submits that it is enough for him to show today
that the court would, if application had been made before November 8, have
dissolved the order and put an end to the contract. He submits that I can on
the evidence conclude that that would have been the attitude of the court if
such an application had been made.
I am in no
doubt that Mr Teverson’s submissions fail both in principle and on the highest
authority. In Johnson v Agnew [1980] AC 367 at pp 392E to 394D
Lord Wilberforce, with whose speech all their Lordships agreed, stated five
uncontroversial propositions in regard to questions of this kind of which the
second, fourth and fifth are to the following effect. The vendor has to elect at
trial whether to seek judgment for specific performance or damages. If he seeks
and obtains an order for specific performance the contract remains in effect
and is not merged in the judgment. If the order for specific performance is not
complied with by the purchaser, the vendor may either apply to the court
for enforcement of the order or apply to the court to dissolve the order
and ask the court to put an end to the contract. This last sentence states the
fifth proposition, which was taken from the judgment of Sir Wilfrid Greene MR
in Austins of East Ham Ltd v Macey [1941] Ch 338 at p 341, in
Lord Wilberforce’s own words. It seems to me that the fundamental objection to
Mr Teverson’s submissions, which would allow the vendor to treat the contract
as being at an end without first going back to the court, is that they wholly
ignore those words. Moreover, it is clear from other passages in Lord
Wilberforce’s speech that an application to dissolve the order and ask the
court to put an end to the contract is no mere formality; and that the court
would not accede to the application if to do so would be unjust, in the
circumstances then existing, to the purchaser; see [1980] AC at pp 394E and
399E-F.
In Singh
(Sudagar) v Nazeer [1979] Ch 474 at pp 480-481, Sir Robert Megarry
V-C said this:
By applying to
the court for an order of specific performance, and obtaining it, I think that
the applicant has put it into the hands of the court how the contract is to be
carried out. As the court has become seised of the matter, and has made an
order, it seems to me that subject to anything that the parties may then agree,
the working out, variation or cancellation of that order is essentially a
matter for the court.
I entirely and
respectfully agree with those observations. The court has decreed that the
agreement shall be specifically performed and carried into execution. That is a
regulation of the rights of the parties in a specified manner. If those rights
are subsequently to be regulated in some other manner it is obvious that that
can only be done by agreement or by first obtaining a further order of the
court.
This
fundamental objection to Mr Teverson’s submissions is enough to dispose of the
case. However, I will add this in relation to his alternative submission. In my
view, the court would not have dissolved Warner J’s order if application had
been made to it before the exchange of contracts for the resale on November 8.
In order to explain that view I must return to the correspondence in somewhat
greater detail.
On September
21 1984 Tyne Tees’ solicitor wrote to GKN’s solicitors stating that it would
not seem possible for Tyne Tees to complete the purchase. He went on to say
that it might nevertheless be possible for an associated company to raise
finance independently and acquire the property at a figure less than the
original asking price but taking into account the fact that GKN would, in any
event, forfeit the deposit of £12,500 already paid. Subsequent correspondence I
think makes it clear, and I am certainly prepared to assume, that what was in
the mind of Tyne Tees’ solicitor was not a subpurchase by an associated company
but a new contract entered into between GKN and such a company at a reduced
price of £112,500. On October 18 Tyne Tees’ solicitor wrote a further letter,
this time to the legal department of GKN’s parent company with a copy to GKN’s
solicitors, in which he said that Tyne Tees had been anxious to avoid a
forfeiture of its deposit. He added that it was not, however, ‘in a position to
complete the purchase at this moment in time’. He went on to say that
arrangements had been made for an associated company to obtain the finance
required and that it had been the understanding on the Tyne Tees side from
previous discussions that, provided a bank guarantee was available which would
ensure a new completion, a contract would be forwarded for approval. By that
time he had been informed that there was another interested party and he asked
for clarification of the precise position. That letter was answered on October
23 when the legal department said that they were taking instructions and in due
course would write further. In fact their next letter was the letter of
November 9 notifying the exchange of contracts with the third party.
Mr Teverson in
a persuasive argument urged upon me that that correspondence, in particular the
letters of September 21 and October 18, disclosed that Tyne Tees had committed
an anticipatory breach of the contract. In my judgment, the correspondence does
not go that far. It is undoubtedly correct that Tyne Tees was by that stage
over a year late in completing the contract in accordance with its terms.
However, GKN had elected not to accept the original repudiation and I do not
think that anything which was written on Tyne Tees’ behalf in September and
October amounted to a further repudiation by it. Tyne Tees’ solicitor never
stated unequivocally that it could not or would not complete. In the
circumstances, it seems to me that if application had been made by GKN on
November 1, the court would have been unable to dissolve the order and treat
the contract as at an end. I agree with Mr Ritchie, for Tyne Tees, that the
best it could have done would have been to treat the application as one for a
place and time for completion to be appointed. Accordingly, it seems to me that
even if my short answer to Mr Teverson’s alternative submission is incorrect,
it would in any event have failed on the facts of this case.
In the
circumstances I answer the question posed at the beginning of this judgment in
the negative. It is agreed that on that footing GKN is not entitled to any of
the relief which it claims, and that means that this application must be
dismissed.
The
plaintiff’s motion was dismissed with costs to be taxed if not agreed. The
order made by Warner J was discharged.
