Sale of land – Standard conditions of sale (4th ed) – Subsales – Claimant contracting to purchase residential property from defendant – Claimant seeking to effect subsale by direct transfer from defendant to subpurchaser – Defendant refusing to transfer to party other than claimant – Defendant forfeiting claimant’s deposit for non-completion – Whether subsale contrary to clause 1.5 of standard conditions prohibiting transfer of benefit of contract – Whether claimant entitled to return of deposit – Claim allowed
In July 2007, the defendant seller and the claimant buyer exchanged contracts on a sale of leasehold residential property for £2.7m. The contract incorporated the standard conditions of sale (4th ed), clause 1.5 of which provided that the buyer was not entitled to “transfer the benefit of the contract”. The contractual completion date was originally July 2008; the defendant later served notice to bring this forward to June 2008, as permitted by the terms of the contract. During 2008, the claimant decided to subsell the property and found subpurchasers, to whom he proposed to sell the property for the same price he himself had agreed to pay; the two contracts were to be completed by a single transfer from the defendant to the subpurchasers. However, he did not inform the defendant of this at the time. When he became aware of the transaction in early June 2008, the defendant insisted that he would transfer the property only to the claimant. Thereafter, the subpurchasers withdrew from the subsale, for which contracts were not exchanged. That left the claimant unable to complete the purchase from the defendant.
The claimant informed the defendant that he would not be completing the sale because the latter had improperly refused to execute a subsale transfer. The defendant served a notice to complete, with which the claimant did not comply. The claimant instead purported to rescind the contract for the defendant’s alleged breach of contract. Thereafter, the defendant also purported to rescind, in reliance on the claimant’s failure to complete, and forfeited the claimant’s deposit.
The claimant brought proceedings to recover the deposit. He contended that the defendant’s own breach of contract had prevented completion since the defendant had wrongly refused to transfer the property to any subpurchasers. He also alleged a failure by the defendant to provide the necessary licence to assign from the landlord by the relevant date. The defendant submitted that he had been entitled to refuse a transfer to a subpurchaser because a subsale would breach clause 1.5 of the standard conditions.
Held: The claim was allowed.
There was a clear distinction between an assignment of the benefit of the contract and a requirement to effect the conveyance in favour of a third party. In the absence of a contractual provision to the contrary, express or implied, a purchaser was entitled to require the vendor to transfer the property on completion to a third party of his own choosing. He could therefore effect a subsale and require the vendor to execute a conveyance or transfer directly in favour of the subpurchaser: Earl of Egmont v Smith (1871) LR 6 Ch D 469 and Curtis Moffat Ltd v Wheeler [1929] 2 Ch 224 applied.
The standard conditions of sale (4th ed) did not alter that position under the general law. It was notable that clause 1.5 in the standard commercial property conditions of sale (2nd ed) contained an additional subclause prohibiting subsales in express terms; the draftsmen of the commercial standard terms evidently regarded it as commonplace for a vendor of commercial property to want to exclude that possibility. By contrast, the draftsmen of the “non-commercial” standard conditions of sale had not visibly reached the same conclusion with regard to residential conveyancing, and those conditions contained no such express prohibition. It was open to a vendor, when adopting the non-commercial standard terms, to include an explicit exclusion of subsales to the same effect as the commercial standard terms, but, in the absence of such an explicit exclusion, clause 1.5 of the non-commercial standard terms did not exclude subsales. Accordingly, the claimant had been entitled to rescind in reliance on the defendant’s refusal to transfer to a subpurchaser.
On a sale of a leasehold interest, clause 8.3 of the standard conditions obliged the vendor to obtain only a licence to assign to the original purchaser, and it was for the purchaser to obtain consent for the assignment to the subpurchaser. However, that position was not inconsistent with the purchaser being entitled to nominate his subpurchaser as transferee, provided that he obtained the necessary additional consent. In the instant case, the defendant had failed to procure a written licence to assign to the claimant three working days before the contractual completion date, such that the claimant had been entitled to rescind pursuant to clause 8.3.3 of the standard conditions. The claimant was entitled to the return of his deposit.
Timothy Dutton (instructed by Lucas McMullan Jacobs) appeared for the claimant; the defendant appeared in person.
Sally Dobson, barrister
