Vendor and purchaser — Specific performance — Deposit paid to vendors’ agent — Insolvency of agent — Appeal from decision of Scott J — In this case there had been negotiations over a considerable period between the parties and the purchaser had been let into occupation of the property before contracts were exchanged — The position was unusual in that a deposit of £10,000 was to be paid in respect of a purchase price of £22,000 — There had been considerable correspondence about the deposit before the exchange of contracts — The vendors complained that they had not received the deposit and the purchasers asserted that it had been paid to the vendors’ agent — The matter appeared to have been resolved before the exchange of contracts, the vendors accepting that the deposit had been paid — However, cheques given by the agent to the vendors in respect of the deposit were dishonoured and the vendors refused to complete without payment of a fresh £10,000 — The agent subsequently became bankrupt — In proceedings by the purchaser under Order 86 Scott J gave judgment in his favour, rejecting an allegation by the vendors of a fraudulent conspiracy between the purchaser and the agent — On appeal to the Court of Appeal the allegation of fraud was abandoned but a submission was made that any deposit paid to the agent should have been treated as paid conditionally on its being actually handed over to the vendors or their solicitors on the footing that it was an implied term of the contract that such handing over would take place — Held by the Court of Appeal that this submission was as a matter of law untenable — It was well established that when a stakeholder defaults, contracts having been exchanged, the loss falls on the vendor — A fortiori this was the case when the deposit was paid, as here, to the vendors’ agent — It would have been open to the vendors to say before contracts were exchanged that they would not recognise any payments made to the agent and to insist that the money was paid to the vendors if there was to be a contract of sale at all — But it was clear before contracts were exchanged that the vendors had accepted that the deposit had been paid by the purchaser to the agent — There was no defence to the action and the order for specific performance was rightly made — Appeal dismissed
No cases are
referred to in this report.
This was an
appeal by the defendants, Neosale Ltd, from a decision of Scott J granting the
plaintiff Atma Ram Ojelay (the present respondent) specific performance of an
agreement for the sale by the appellants to the respondent of a freehold
property at 16 High Street, Bilston, West Midlands.
J Downing
(instructed by Sahni & Co, of Birmingham) appeared on behalf of the
appellants; D A McConville (instructed by Derby Scott Reece, of Bilston) represented
the respondent.
Giving
judgment, DILLON LJ said: This is an appeal by the defendants in the action, a
company called Neosale Ltd, whose moving spirit is a Mr Sharma, against a
decision of Scott J given on April 17 1986 whereby he granted the plaintiff, Mr
Ojelay, specific performance of an agreement in writing for the sale by the
defendants to the plaintiff of a freehold property known as 16 High Street,
Bilston, West Midlands. That agreement was made on September 12 1985.
The form of
the contract signed by Mr Sharma, on the printed form of the Law Society’s
Contract for Sale (1980) records in a box next to Mr Sharma’s signature:
|
Purchase money |
£22,000 |
|
Less deposit |
£10,000 |
|
Payable on completion (excluding apportionments etc) |
£12,000 |
Against the reference to the deposit of £10,000 the words have been
written in by somebody (it is not clear who) ‘Paid to Agents’.
The issues
sought to be raised in the action by the defendants concern the deposit of
£10,000. The judgment of Scott J for specific performance was granted on a
summons under Order 86. It is said that he was wrong and there are triable
issues in respect of the deposit. It is, of course, unusual for a deposit as
large as £10,000 to be paid by a purchaser of a property at a price of £22,000.
The agent in
question is a Mr Sodhi, who carried on business at the time as Bilston Estates,
from Church Street, Bilston, but who, we are told, is now bankrupt. Mr Sodhi
was the agent of the defendants in respect of various properties for offering
those properties for sale. It seems from the evidence put before Scott J that
Mr Ojelay had paid to Mr Sodhi some £2,700 as a deposit in respect of a
prospective purchase of some other property, but that prospective purchase did
not proceed. He therefore told Mr Sodhi to transfer the £2,700 towards the
deposit on this property, and it was shown that other payments were made by Mr
Ojelay or his father to Mr Sodhi which sufficiently show the payment of the
£10,000.
The objection
of the defendants to completion was that they asserted that the deposit had
never been paid by Mr Ojelay. The difficulty about that is that it was all gone
into before the contracts were exchanged.
There had been
negotiations for some considerable period before contracts were exchanged, and
Mr Ojelay had been let into occupation of the property for the purposes of his
business. The defendants’ solicitors were asking for exchange of contracts.
Then, on June 26 1985, there is a letter from Mr Ojelay’s solicitors which
says:
We refer to
the above matter and to our telephone conversation which took place on the
morning of Friday June 21. Our Client has now signed a Contract and we are
ready to proceed. However, we were very concerned to note that he had paid a
deposit of £10,000.00, to Bilston Estates, of Church Street, Bilston. We note
from the telephone conversation which we had with you that you were not aware
of this deposit having been paid, and if you will please confirm this to us as
soon as possible we will be in a position to proceed. Our instructions are to
proceed to completion of the matter for the end of July.
The vendors’
solicitors write back on July 3 1985, acknowledging receipt of that letter.
They then say:
We have asked
Bilston Estates to confirm in writing that they have received a sum of £10,000
on behalf of Neosale Limited. We are still awaiting confirmation from Bilston
Estates and as soon as we have confirmation from them we shall revert to you.
On August 23
Mr Ojelay’s solicitors write to the defendants’ solicitors:
We refer to
the above matter and now understand that you have received confirmation from
the Agents, that, in fact, our Clients have paid to them direct the sum of
£10,000.00. In the circumstances we enclose herewith the Contract duly signed
by our client and wait hearing from you in exchange. With regard to the
completion date we would suggest on or before twenty-one days from exchange. We
await hearing from you.
On September 4
the defendants’ solicitors reply to Mr Ojelay’s solicitors:
We refer to
your letter dated August 23 and we would point out that our clients are Neosale
Limited and we have been informed by Mr Sharma, one of the Directors of the
Company, that as far as he is concerned, he has not received any money direct
from your client. As far as he is concerned, your clients are in illegal
occupation of the premises.
In the
circumstances, therefore, until this matter is clarified, we are unable to
exchange Contracts. We have been asked by Mr Sharma to ask your client to
vacate the premises if he is unable to complete the matter with full purchase
monies.
On September
10 Mr Ojelay’s solicitors write:
Thank you for
the letter of September 4 1985. We fail to understand how your Client Company
can maintain they have received no funds on account of the purchase price, in
this matter. We have on our file a copy of a letter written to your goodselves
dated July 16 1985, by Bilston Estate Agents, who were held out by your clients
as being their agents in this matter. This letter confirms the payment referred
to.
In fact the
bundle of documents before the court includes letters from Mr Sodhi both to the
purchaser and to the vendors confirming receipt of £10,000.
However, very
shortly after that letter of September 10 1985, on September 12 1985 the
defendants’ solicitors write again to Mr Ojelay’s solicitors as follows:
Further to our
letter of September 4 we are pleased to inform you that that matter has now
been resolved and we therefore enclose herewith our client’s part of the
Contract by way of exchange and look forward to hearing from you with
Completion date.
You have our
authority to inspect the Register —
It was
registered property.
In those
circumstances, as I have already said, the contract is dated September 12 1985.
It is signed by Mr Sharma, and it sets out the purchase money and the deposit
of £10,000. Plainly it was exchanged on the basis that the £10,000 had been
paid by Mr Ojelay to the agent, Mr Sodhi.
The defendants
refused to complete without payment of a fresh £10,000. Their difficulty, apparently,
is that Mr Sodhi gave post-dated cheques, which they or their solicitors
accepted, in respect of the deposit, but those cheques were dishonoured. A writ
was issued by the vendors against Mr Sodhi claiming payment. Mr Sodhi has since
become bankrupt. But, unfortunate though that may be for the vendors, in my
judgment it is no concern of the purchaser.
In the court
below it was contended that in truth there never had been any payment of
£10,000 or any other sum by Mr Ojelay but there was a fraudulent conspiracy
between Mr Ojelay and Mr Sodhi to pretend that a deposit had been paid. That is
a bit difficult to reconcile with the conduct of Mr Sodhi in giving cheques to
the defendants, even if those cheques were in fact dishonoured. That apart,
however, the judge went carefully into the evidence before him. He shows in his
judgment clear evidence of payments amounting to substantially the £10,000 by
Mr Ojelay or his father to Mr Sodhi, and he sets out that there was not a shred
of evidence adduced to suggest that Mr Ojelay was a party to any fraud
whatsoever against anyone.
The allegation
of fraud was maintained in the notice of appeal, but, in opening the appeal, Mr
Downing for the appellants has abandoned it as unmaintainable. He sought an
adjournment of the appeal on the ground that further information might come to
light from whatever papers the Official Receiver has as a result of the
bankruptcy of Mr Sodhi, and for the grounds of appeal to be reformulated, but
this we rejected. The judgment of the learned judge was over a year ago; the
allegation of fraud has been abandoned. There is no conceivable justification
for delaying this matter any longer for yet further investigations to take
place to see if any ground of appeal could be thought of which has not been put
forward so far.
As an
alternative, Mr Downing reformulated his grounds of appeal to claim, though the
point was not argued in the court below and is not raised in the present notice
of appeal, that the judge ought to have held that any deposit paid to the
agents by Mr Ojelay was paid conditionally on its being paid over by the agents
to the defendants or their solicitors, either on completion or when required,
and it was an implied term of the contract between the defendants and Mr Ojelay
for the sale of the property that such payment over would be made. As a matter
of law, however, such a contention is untenable.
Where a
deposit has been paid to a stakeholder and contracts have been exchanged, then
it is well established that if the stakeholder defaults and fails to account on
completion to the vendor, the loss falls on the vendor and not on the
purchaser. It is the vendor who can choose the person to whom the deposit is to
be paid, and it is only just that his default, where contracts have been
exchanged on that basis, should fall on the vendor. A fortiori is that
the case where the person who receives the deposit does so as the vendors’
agent. Moreover, where a deposit is received by an estate agent, there is a
presumption, unless the contrary is made clear, that it is received by him as
agent for the vendor and not as stakeholder. Therefore, there is no basis
whatsoever for implying a term that the £10,000 was paid by the purchaser to Mr
Sodhi at his, the purchaser’s, own risk, once it was accepted that the £10,000
had been paid to Mr Sodhi. That, as I have said, was accepted before contracts
were exchanged. It would have been open to the vendors to say, as they
initially sought to do in August and early September 1985, that they were not
prepared to recognise any payments made by the purchaser to Mr Sodhi, and
insisted that he paid afresh to the vendors if there was to be a contract of
sale at all. If they had so insisted, and as contracts had not been exchanged,
the purchaser would have had to raise money from elsewhere or get his money
back from Mr Sodhi if he could. But that did not happen. It is as clear as it
could possibly be that the defendants accepted before contracts were exchanged
that the deposit of £10,000 had been paid to the agent by Mr Ojelay, and they
accepted that as the deposit for the purposes of the contract.
It must follow
that there is no conceivable defence to this action, and the order for specific
performance was rightly made.
Other grounds
were sought to be raised in the notice of appeal, such as that the writ in the
action was defective because it failed to specify that the premises in question
did not constitute a dwelling-house, a fact well known to both parties; and it
was said that the writ was so defective that the judge had no power to allow it
to be amended to support the application for judgment under Order 86. Mr
Downing has rightly recognised that that suggested ground of appeal is
unarguable. I would dismiss this appeal.
STOCKER LJ
agreed and did not add anything.
The appeal
was dismissed with costs.
