Sale of land – Rescission – Repudiatory breach of contract – Contract of sale incorporating standard conditions of sale (24th ed) – Respondent vendors serving notices to complete – Notices incorrectly calculating date for expiry – Respondents prematurely serving rescission notice on appellant purchaser – Whether amounting to repudiatory breach of contract entitling appellant to return of deposit – Appeal dismissed
By a contract of February 2008, which incorporated the standard conditions of sale 2003 (24th ed), the appellant agreed to purchase a property from the respondents for £605,000. The appellant paid a 5% deposit of £30,250. By special condition 6, a total of 10% was payable if completion did not take place by a final completion date of 30 June 2008.
The transaction did not complete on that date. Just after 4pm on 30 June, the respondents’ conveyancer served a notice to complete on the appellant by fax. By clause 1.3.7(a) of the standard conditions, that notice was deemed to have been received one hour thereafter and, by clause 1.3.5(b), became effective the following day. By clause 6.8.2, the period of 10 working days for completion under the notice expired on 15 July 2008.
On 14 July, the respondents’ conveyancer served a formal rescission notice on the appellant on the ground that “completion has not taken place in accordance with the terms of the contract… and the subsequent notice to complete”. The notice requested, “in accordance with the standard conditions”, the balance of the 10% deposit and a completed application form UN2 to remove the appellant’s unilateral notice in respect of the contract.
Following discussion with his solicitor, the appellant agreed to the sending of a completed form UN2 to the Land Registry, but disputed his obligation to pay further sums in addition to the 5% deposit already paid. Later that month, his solicitor asserted for the first time that the July rescission notice was premature, unlawful and amounted to a repudiation of the contract, which the appellant accepted, so entitling him to the return of his deposit.
The respondents sought declarations that the rescission notice was valid, the 5% deposit was forfeited and the remaining 5% was payable. Allowing the claim, the recorder held that the rescission notice did not amount to an abandonment of or refusal to perform the contract and its premature service had not affected the appellant, who was therefore not entitled to accept it as repudiating the contract; alternatively, he had affirmed the contract by returning the form UN2 to the Land Registry. The appellant appealed.
Held: The appeal was dismissed.
(1) In determining whether a contract had been repudiated, the test was whether, from the perspective of a reasonable person in the position of the innocent party, the contract-breaker had clearly shown an intention to abandon and refuse to perform the contract: Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168; [2010] 43 EG 99 (CS) applied. That meant looking at the situation as it would have faced a reasonable person in the position of the appellant on 14 and 15 July 2008 who had received the notice of 14 July and understood the terms of the contract, including the 2003 standard conditions.
First and foremost were the terms of the notice. A statement by one party to a contract that it is seeking to perform the contract, at the same time as it gives notices claiming to be entitled to determine it under its provisions, will not always be treated as a statement that it is intending to perform the contract. However, it should be so treated in the instant case. A reasonable person in the appellant’s position would have known of the technical rules relating to the point from which time ran and the particular day on which the purchaser should complete. It would have been obvious to such a person that mistakes had been made in that regard. Accordingly, it had been obvious that the respondents had intended to perform the contract by invoking the contractual machinery to terminate it but had made mistakes in interpreting its provisions. It was clear that had the error been pointed out to the respondents, they would not have refused to perform the contract by conveying the house to the appellant, if he was in turn willing and able to perform and tendered the balance of the purchase moneys within the time specified by the contract. Therefore, a reasonable person in the position of the appellant could not have regarded the notice of 14 July 2008 as showing an intention not to perform the contract.
That conclusion was reached without examining the parties’ conduct subsequent to 15 July. That conduct would be relevant only in so far as it cast light on the understanding of a reasonable person in the position of the purchaser on 14 and 15 July. It was not permissible to have regard to the advice of the appellant’s solicitor regarding form UN2 since that would involve taking account of subjective matters rather than the objective position. Nor did the sending of form UN2 to the Land Registry assist because, viewed objectively and without reference to the solicitor’s advice, it was consistent with both alternatives.
David Berkley QC and Ian Foster (instructed by Albinson Napier & Co) appeared for the appellant; Michael Ashe QC and Philip Flower (instructed by Harold G Walker, of Bournemouth) appeared for the respondents.
Sally Dobson, barrister
