Appellant vendor negotiating sale of land – Purchaser agreeing to pay deposit – Deposit non-refundable in event of purchaser failing to enter into conditional contract – Deposit held by stakeholder – No contract signed – Both purchaser and vendor claiming deposit – Whether solicitor negligent in failing to secure enforceable bipartite agreement – Appeal allowed
The appellant vendor negotiated a sale of land, and retained the first defendant, L, a solicitor in the second defendant firm, to act for him. They sought a non-refundable deposit from the purchaser, to be held by L, as stakeholder, on the basis that the moneys would be: (i) treated as a deposit if a binding contract were entered into; (ii) paid to the vendor if no contract were entered into for any reason other than the default of the vendor; and (iii) repaid to the purchaser if no contract were entered into owing to the default of the vendor. A meeting was held between the parties, at which the purchaser gave a cheque to L, on the basis that it would be non-refundable if he failed to enter into a conditional contract by 15 December 1993. In the event, no contract was signed. Both the vendor and the purchaser subsequently claimed the deposit. L’s firm issued interpleader proceedings. L recognised that there might be a conflict of interests between him and his client and he ceased to act for the vendor.
At the interpleader proceedings, the vendor asserted that he had given consideration for the purchaser’s agreement to pay a non-refundable deposit in the form of a “lock-out” agreement, under which the vendor promised not to deal elsewhere until 13 December 1993. The judge held that the absence of the only consideration asserted by the vendor, the agreement that the deposit was non-refundable, was unenforceable. Thus, the purchaser was able to reclaim his deposit.
The vendor commenced proceedings for negligence against the defendants on the ground that L should either have ensured that the agreement as to the the deposit was legally enforceable or advised that it was not. The defendants contended that, contrary to the judge’s decision at the interpleader proceedings, the vendor was entitled to receive the deposit. The judge found in favour of L and his firm. The vendor appealed.
Held: The appeal was allowed.
The vendor/purchaser contract (the bipartite agreement) determined entitlement to the deposit. Whether there was an enforceable tripartite agreement between the vendor, purchaser and stakeholder was immaterial to resolving the question of whether the vendor could enforce the purchaser’s promise. The respondents had failed to secure an enforceable bipartite agreement for their client, under which the deposit would be forfeit if the purchaser failed to purchase. That could have been achieved by incorporating an express lock-out clause into the agreement, which L had failed to do. The judge’s decision at the interpleader proceedings was correct. Accordingly, the appellant’s claim in negligence succeeded: Manzanilla Ltd v Corton Property and Investments unreported 9 October 1996, Potters v Loppert (1973) 224 EG 1717 and Chillingworth v Esche [1924] 1 Ch 97 considered.
Nicholas Dowding QC (instructed by Bevan Ashford) appeared for the appellant; David Drake (instructed by Beachcroft Wansbroughs) appeared for the respondent.
Sarah Addenbrooke, barrister
