Where there is a total failure of consideration, a purchaser is entitled to recover the deposit paid.
The High Court has considered such a proposition, refusing permission to appeal in Rarity Holdings Ltd v Parkhill [2024] EWHC 1637 (Ch); [2024] PLSCS 117.
Rarity entered a property at 33 High Street, Chipping Sodbury, Gloucestershire, into a public auction to be held on 15 April 2021. David Parkhill became aware of the sale and contacted Rarity’s agent prior to the auction and offered to purchase the property. His offer of £275,000 was accepted, he paid a deposit, the agent signed the contract on his behalf and the property was withdrawn from the auction.
Subsequently, Parkhill discovered matters – additional charges and a lower-than-advertised yield on rental income – which led him to seek to withdraw from the agreement. Rarity served notice to complete, which Parkhill’s solicitors rejected on the grounds that the contract was invalid as it did not comply with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. Parkhill claimed in restitution to recover the deposit, which required a total failure of consideration.
Following a trial in June 2023, the Recorder concluded the contract was void for failure to comply with section 2(1) because the written agreement did not incorporate all the terms expressly agreed by the parties. Since the sale was not made at the public auction, it was not exempt from section 2(1) and the consideration for payment of the deposit having wholly failed, Parkhill was entitled to recover the deposit paid.
Rarity sought to appeal the recovery of the deposit. Parkhill had paid the deposit to have the property taken out of the live auction, which he admitted in cross-examination. He had benefited from avoiding the risk of the price being driven higher because the property was removed from the auction. This was inconsistent with the Recorder’s conclusion that there was no evidence that Parkhill wanted anything other than to secure the property at the agreed price.
The High Court decided Rarity had no real prospect of establishing that Parkhill had received any benefit independent from and additional to the transfer of legal rights in the property. The benefits described simply flowed from the agreement to purchase the property. There was no inconsistency between Parkhill’s admission in cross-examination and the Recorder’s conclusion. The fact the property was taken off the market only benefited Parkhill if the property was sold to him at the agreed figure.
Louise Clark is a property law consultant and mediator
