Sale of land – Repudiatory breach of contract – Measure of damages – Appellant failing to completion purchase of property by agreed date – Court finding respondents entitled to damages for repudiatory breach of contract – Respondents failing to sell property and moving back into it – Property losing significant value in intervening period – Whether respondents entitled to damages based on reduced value of property – Appeal dismissed
The respondents owned a freehold property which they agreed to sell to the appellant for £605,000, for completion by 30 June 2008. The appellant failed to complete on that date. After service of a notice to complete, with which the appellant did not comply, the respondents accepted his repudiation by notice but were anxious to sell the property because it was subject to a mortgage to secure a debt of £500,000 and they had already moved.
They tried to sell it, with the benefit of estate agents’ advice, but failed to do so despite 14 months’ marketing. In October 2009, they let the property to tenants for six months. When the tenants left in late 2010, it was marketed again without success. By the summer of 2011, they gave up and moved back into the property. In the meantime, its value had fallen substantially.
The respondents sued the appellant for damages. On the trial of liability, the court held that the appellant had been in breach of contract and was liable to pay damages to be determined by the court. He appealed unsuccessfully against that order: [2010] EWCA Civ 1346; [2010] PLSCS 301; [2010] 48 EG 85 (CS).
At the hearing to determine quantum of damages, a single expert valuer gave evidence that the value of the property at the date set for completion had been £600,000 whereas, at the date of the valuation in 2010, its value had been reduced to £495,000. The court held that the respondents’ damages should be assessed by reference to the later figure so that, before allowing for the deposit of £30,250, the damages would be £110,000, the net amount being £49,500. The appellant appealed contending that the appropriate date for assessment was the date of breach. He denied any liability for the diminution of the value of the property after the breach date.
Held: The appeal was dismissed.
The availability of a market was relevant to the date for assessment of damages for breach of a contract for the sale of land where the buyer failed or refused to complete. There was rarely a readily and immediately available market for the sale or purchase of land, in that the seller could go out into the market on the date of breach, or the next day, and find a purchaser who could and would proceed to contract at once. The definition of market value involved an assumption that the property had been exposed to the market for a reasonable time, which might well be several months or longer. If the comparison sought to be made was between the contract price and the market value as at the breach date, the assessment of that market value, by an expert valuer on established principles, would have to assume a prior period of marketing, which, by definition, could not have happened.
The breach date would be the right date for assessment of damages only where there was an immediately available market for the sale of the relevant asset or, conversely, for the purchase of an equivalent asset, which was most unlikely to be the case where the asset in question was land. If the defaulting party was the buyer, much would depend on what the seller did in response to the breach. If he resold, the buyer might be able to show that, in so doing, the seller failed to take reasonable steps to mitigate his loss, for example by taking too long or failing to follow proper professional advice. Absent any feature of that kind, the eventual resale price was likely to be the figure to be set against the contract price for assessment of the damages because it showed what loss the seller had suffered, uncomplicated by issues of remoteness or failure to mitigate. If the property market had declined, it was not open to the defaulting buyer to say that that should not be laid at his door. If he had completed the contract, he would have suffered that decline in value, so that was part of the loss for which the seller needed to be compensated: Techno Land Improvements Ltd v British Leyland (UK) Ltd [1979] 2 EGLR 27 and Johnson v Agnew [1979] 2 EGLR 146 considered.
If the vendor did not resell, and took no steps to do so, it might be that the date of the breach was to be taken as relevant, or a date soon after that, when he was shown to have decided to retain the property. In the present case, by contrast, the seller only decided not to resell after taking reasonable steps to find a buyer. There was no basis of policy or principle, in such a case, for imposing on the vendor the value as at the breach date rather than the later date when, after taking steps with a view to mitigating his loss, he finally decided to retain the property upon the failure of his attempt to mitigate. In this case, there had been no suggestion that the respondents had failed to take reasonable steps to mitigate their loss. Accordingly, the appropriate date was when they brought to an end their reasonable attempts to resell and took the property back for their own use.
Nicholas Davis (instructed by Albinson Napier & Co, of Warrington) appeared for the appellant; Philip Flower (instructed by Harold G Walker, of Bournemouth) appeared for the respondents.
Eileen O’Grady, barrister
