Introduction
1. This judgment follows the trial of revised preliminary issues in an action in which the claimants seek declarations that there was no contract, alternatively no enforceable contract, alternatively rescission of any contract, for the purchase of a 999 year lease of a hotel room at the Park Plaza Westminster Bridge Hotel, and the refund of deposits paid by them to the defendant; the defendant counterclaims for declarations that there were valid and binding contracts and that the deposits have been forfeited, and for damages.
2. 4 of the 5 contracts in issue were allegedly made at a sales fair held over 2 days on 22nd – 23rd October 2005 at another hotel, the River Bank Park Plaza, on the Albert Embankment. The last contract was allegedly made at a similar, although more low key, event held at the same hotel on 25th February 2006.
3. Sales fairs are held to launch sales of property developments consisting of many units, such as a large development of flats, by securing concluded contracts on the same day. This is achieved by having gone through the process of pre-contract enquiries with a firm or firms of solicitors, well in advance of the launch, and reaching agreement with them as to the appropriate contract terms. They are then present at the sales fair, available to represent prospective purchasers and to enter into contracts on their behalf, by exchanging with the developer’s solicitors on the same day at the sales fair. Sales fairs have been common events since at least the 1990s (a recent example was the sale of flats at the old Arsenal football ground), but so far as I am aware no such event has resulted in a dispute, or at least not one involving a reported decision.
4. The sales fairs in this case did not concern flats, but individual rooms in a hotel which, in 2005, was still to be constructed, and is now situated on the island site at the southern end of Westminster Bridge formerly occupied by the not universally admired GLC finance office building. The concept of an “apart-hotel”, in which each room is separately held on a 999-year lease, pre-sold off-plan to investors, was in 2005 relatively recent. There had been one about two years earlier in nearby Addington Street, and one or two others, but all on a smaller scale. In this development, there were 1,021 rooms, of which 225 were sold before, at, or shortly after the October sales fair; considerably fewer were sold at the February event, which was described as a seminar.
5. There is no doubt that there was an exchange of (to put it neutrally) documents, between solicitors at the sales fairs representing the claimants and Howard Kennedy Fsi, the defendant’s solicitors.
6. The claimants however assert that no contract was concluded for a variety of alternative reasons which can be summarized broadly as (1) that there was no contract, (2) that any contract was void for uncertainty, (3) non-compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 because the agreed terms were not all in one signed document at the time of exchange and (4) (in the case of unit 687) that Mrs. Laditi (C3) did not become a contracting party. In the further alternative, the claimants allege that the contracts, if they existed, were unconscionable bargains, essentially because they were mis-sold by the defendant’s representatives to the financially naive and inexperienced claimants; they claim that they are entitled to rescind, and also that the 25% deposits paid were a penalty and are recoverable. I am not concerned with the further alternative issues.
7. For the reasons set out below, and subject to the claims for rescission, I hold that there were valid and enforceable contracts between C1, C4-5 and C6 and the defendant for units 540, 906, 688 and 587, but no contract between C2-3 and the defendant for unit 687 because C3 did not become a contracting party.
The course of the hearing
8. The evidence was heard over two periods, from 11th to 15th April 2013 and from 29th April to 1st May 2013. This arose as follows. The claimants’ written evidence was that the solicitors who had represented them had done so in a perfunctory and wholly inadequate manner. The claimants had had to queue for some time to see them and there was pressure to take as little time as possible; they had had only a few minutes and had signed only a single piece of paper, not a contract; they had only reserved a unit, not committed themselves to buy one. The defendant had not obtained witness statements from the solicitors, so that it did not seem that there would be any direct contradiction of the claimants’ account. That led me to express the provisional view that, in considering whether a contract had been concluded, it might be necessary to take into account, as part of the information allegedly available to both parties, the evidence that the process did not give the claimants a proper opportunity for an explanation of what they were signing; while normally the defendant could not know how the purchaser was advised, here the vendor might be said to have observed the process. That in turn led to a discussion of the issues, in the course of which it became apparent that the list of preliminary issues did not fully reflect the parties’ intentions, which had been to exclude only the issues relating to rescission, return of the deposit and the quantum of the counterclaim for damages; this was so even without the point I had raised, which I do not think had been anticipated by either party, although it was within the claimants’ pleaded case.
9. In these circumstances, after discussion with counsel, I decided that the trial should be adjourned at a suitable point, so that the list of issues could be revised, and that the defendant should be permitted, if so advised, to recall the claimants for further cross-examination, and to call all or some of the solicitors involved. It was obvious that privilege would not be an issue in relation to events at the sales fairs; clearly, the claimants’ evidence constituted a waiver. In the event, the defendant did both at the resumed hearing.
The role of Galliard
10. Galliard Homes Ltd. (“Galliard”) is a well-known developer, but on this occasion acted as agent for the defendant, the developer and the vendor of the leases, in which Galliard had earlier been a shareholder. Galliard managed the sales fairs as the defendant’s agents, but it was also a party to the agreement for a lease, with an obligation to enter into an income guarantee in favour of the purchaser. The defendant’s name was not featured in any of the pre-launch marketing or at the launch. However, there has been full disclosure of the defendant’s documents, but not of Galliard’s.
The claimants’ evidence
11. I will discuss the individual claimants’ evidence in detail later in this judgment, but I should say at the outset that its accuracy was adversely affected by four factors. First, inevitably, by the lapse of time, some 7 or 8 years. Secondly, as regards C1, 2, 4 and 6, by the fact that the sales process had put them all in a state of excitement, in which they were not fully concentrating on what they were told about the purchase, other than its financial aspects. Thirdly, C3 and C5 had little real recollection, in the case of C3 because she was outside for most of the time and, when inside, was looking after 2 small children, and C5 because she disliked what was going on and wished to be elsewhere. Fourthly, once a dispute was anticipated, the claimants had meetings and telephone conferences at which they discussed what had happened, and this has led to recollections being aligned to the recollections of others. For example, on an otherwise irrelevant detail, all remembered the solicitors as having been seated by the wall at the back of the room, whereas photographic evidence shows this not, or largely not, to have been the case. Similarly, on a point of more significance, their evidence was that the solicitors had computers on their desks, and printed out a page which doubled as a reservation form and the first page of the contract, known as the Particulars page, which again was not correct. It has therefore been necessary to treat the claimants’ evidence, although honestly given, with considerable caution. Having now heard the evidence of several members of the solicitors’ teams, I do not accept that the claimants were advised in the negligently cursory way they allege.
The one piece of paper issue
12. Before going further, I should mention, and state briefly my conclusions on one issue of fact that featured prominently in the evidence. All the claimants, except for Dr. Rabiu (C1) as regards his second purchase of unit 906 in February 2006, said that they signed only the Particulars page, printed out by the solicitors on their computers; this was not by itself a contract and did not refer to any contract terms. The claimants allege that it was not stapled or otherwise attached to the remainder of the contract at the time they signed the single page or at the time of exchange. For the reasons explained in more detail below, my conclusions on this are (1) that the Particulars page was not printed out by the solicitors, but was provided to them by the defendant’s solicitors, Howard Kennedy, (2) that except in the case of unit 688 (C4-5), it was stapled to the remainder of the contract at the time it was signed, (3) that in all cases the solicitors clearly advised (whether or not the advice was heeded) that there were detailed contract terms that would be exchanged, (4) that there was an exchange of the full contract terms, (5) that in the case of C4-5, the Particulars page was handed over together with the rest of the contract on exchange, and then stapled together by Howard Kennedy and (6) that in all cases except for unit 906 (C1), agreed riders were part of the contract terms at the time of signature and at the time of exchange, and that in the case of unit 906 it was part of the contract terms at the time of exchange.
Law of Property (Miscellaneous Provisions) Act 1989
13. Section 2 provides as follows:-
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“2 Contracts for sale etc. of land to be made by signed writing.
(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, whether contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract. …
(4) Where a contract for the sale or other disposition of an interest in land satisfies the conditions of this section by reason only of the rectification of one or more documents in pursuance of an order of a court, the contract shall come into being, or be deemed to have come into being, at such time as may be specified in the order.”
14. The purpose of the section was to impose an obligation to include all the agreed terms in a single document signed by all the parties, in order to avoid disputes and the need for extrinsic evidence: per Peter Gibson L.J. in Firstpost Homes Ltd v. Johnson [1995] 1 W.L.R. 1967 at 1971. Nevertheless it has given rise to an impressive volume of reported decisions in its relatively short life. Amongst the points decided by the authorities (including some authorities on earlier legislation) are the following:-
•
(a) Section 2 is not complied with unless the signed document contains all the agreed terms. If it does not, it is void: Keay v. Morris Homes (West Midlands) Ltd [2012] 1 W.L.R. 2855 at [9] per Rimer L.J..
(b) As a matter of ordinary language a document may comprise more than one page or piece of paper, provided that they are to be regarded as an integral whole; whether they are to be so regarded may be a matter of first impression: see Firstpost, supra, at 1573A-E per Peter Gibson L.J..
(c) Despite the objective of doing away with the need for extrinsic evidence, section 2 does not affect the court’s approach to construction; the usual principles, involving evidence of relevant background facts where appropriate, apply. See Westvilla Properties v. Down Properties Ltd [2010] P. & C.R. 19 at [18-21].
(d) In particular, nothing in section 2 affects (i) corrective interpretation of a contract, where an error or omission is obvious on the face of the contract or (ii) the rule that extrinsic evidence is admissible to identify the subject matter of the contract, or a party to it, provided that he is referred to in such a way that his identity cannot be fairly disputed. See Westvilla at [21, 25]; Megarry and Wade 8th ed., 2012, para. 15-029; Goldsmith Ltd v. Baxter [1920] Ch. 85 (a case on the Statute of Frauds).
(e) Section 2 does not affect the law of agency. A contract signed by an agent who has been duly authorised (either orally or in writing) to sign on his principal’s behalf binds the principal: McLaughlin v. Duffill [2010] Ch. 1 (C.A.).
(f) The time to consider whether a document complies with section 2 is the time of the agreement: Koenigsblatt v Sweet [1923] 2 Ch 314 (a case on of the Statute of Frauds), per Lord Sterndale M.R. at 326:-
“The real point of time to look at with regard to the document is the time when it becomes an agreement”
(g) There is no rule preventing the exchange of a document which has been assembled, or altered, by the signatory or with his authority, after signature: see Koeningsblatt supra and per Russell J. at 320; Gavaghan v. Edwards [1962] 1 Ch. 220 (C.A.), a case in which the solicitor was authorised to, and did, insert a completion date agreed between the parties.
15. Subsection (4) recognizes that the law of rectification is unaffected by the Act, except that the Court is given power to specify a date from which the contract, as rectified, comes into effect. Since the section only applies at all where an agreed term has been omitted, this is potentially an important provision, the effect of which should be to enable an accidental, (but not a deliberate) mistake to be remedied: see Domb v. Isoz [1980] Ch. 548 at 559 C-D per Buckley L.J.; Megarry and Wade at 15-032.
The contractual documents
16. The documents on which the defendant relies as constituting its contracts with the claimants (and many others) are:-
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(1) the Particulars page;
(2) the remainder of the contract;
(3) in some cases, a rider; and
(4) a draft lease; and
(5) an income agreement by which Galliard was to guarantee an income of 6% for a limited period.
17. The Particulars page was intended to be the front page of the agreement, and was in the following form:
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“Precedent Form of Contract for UK Launch
HOTEL UNITS AT THE SECOND SITE WESTMINSTER BRIDGE LONDON SE1
Date: …. 2005
1. Initial Deposit [£1,000]
2. Rent Guarantee [Yes]
3. Property Unit Number …
4. Purchase price £…
5. Purchasers Name and Address
….
6. Purchasers Solicitors
….
……………………………………….. …………………………………………… ……………………………………..
Signed for and on Behalf of the Vendor Signed for and on Behalf of the Purchaser Signed for and on Behalf of Galliard”
18. The remainder of the contract started, at page 2, in a conventional way, as an agreement between the vendor, the purchaser and Galliard.
19. By clause 2 the defendant agreed to grant, and the purchaser to take, the lease for the purchase price. The lease is defined as–
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“A Lease to the Purchaser in the form of the draft supplied to the Purchaser’s solicitor prior to the date hereof with such reasonable amendments as shall be required by the Vendor and approved by the Purchaser (such approval not to be unreasonably withheld or delayed).”
20. The claimants contend that, since there are several such drafts, the agreement is void for uncertainty, alternatively does not comply with section 2.
21. The main provisions of the agreement can be summarised as follows:-
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(a) By clause 3, it is governed by the Standard Commercial Property Conditions (First Edition), subject to some alterations.
(b) By clause 4, the purchase was to pay the Initial Deposit or 5% of the purchase price, whichever was greater, to the defendant’s solicitors as stakeholders, a further 5% deposit within 21 days, a further 5% within 6 months and a further 10% within 24 months, in each case from the date of the agreement, and in each case time to be of the essence with provision for termination of the agreement and forfeiture in the event of non-payment.
(c) By clause 5, title was to consist of defined Documents of Title; these having been previously supplied to the purchaser’s solicitors, the purchaser was deemed to purchase with full knowledge of them.
(d) By clause 7, completion was to take place at the defendant’s solicitors’ offices following a Completion Notice served when the property was “Finished”.
(e) By clause 8, the property was sold with vacant possession.
(f) Clause 10 imposed obligations on the defendant as regards the quality of construction, and provided for an adjustment of the price if the usable area of the property was reduced by over 5%.
(g) By clauses 18 and 19, the defendant was to procure that a management company, I Westminster Bridge House Management Co. Ltd., became a party to the lease, and the purchaser was to take a ‘B’ share in it.
(h) By clause 29, “if the Rental Guarantee was defined as “Applicable” on the Particulars (but only if so defined)” it was agreed between Galliard and the purchaser that they would enter into an income rental agreement in the form of the draft at annexe 2.
22. In some cases, there was a rider, containing additional provisions which were commonly agreed e.g. in sales above £300,000 in value, provision for the purchaser to have 10 free nights in a room at the hotel each year, without affecting the income guarantee. Such riders were written out and photocopied.
23. It is common ground that the text of the draft lease which the defendant contends was the form of lease specified by clause 2 of the agreement was not available at the sales fair. There was correspondence between Howard Kennedy and the firms intending to participate in the sales fair, in which amendments to a draft lease were discussed; eventually Howard Kennedy wrote to LMJ and AWP on 21st October enclosing the “most up-to-date version of the lease” incorporating amendments. In the letter to LMJ they said that they hoped that the documentation “can now be treated as being in an agreed form.”
24. The draft lease provided for the management company to appoint a hotel operator or to act as such itself. The management company was the purchaser’s agent for the purpose of finding occupiers for the room; in the event of the termination or frustration or interruption of the agency, it was open to the defendant to bring forfeiture proceedings. This might arise, for example, if the management company became insolvent; this potential pitfall was not explained to any of the claimants, and I doubt if it was known to any of the individual solicitors advising purchasers on the day.
The defendant’s evidence
General
25. I heard evidence as to how sales fairs were promoted and organized from, amongst others, Mr. David Philips, a partner at the firm of Howard Kennedy (as it was in 2005), and now a partner at Howard Kennedy Fsi LLP, from Mr. David Galman, Galliard’s sales director since 1995 and from Mr. Andrew Georgiou, who was in 2005 a member of Galliard’s sales team. Mr. Galman was Mr. Georgiou’s line manager. None had any specific recollection of the alleged sales in dispute, but they all gave clear and credible evidence about sales fairs generally and, in the case of Mr. Galman and Mr. Georgiou, this sales fair.
26. The sales fair, or launch, to be held on 22nd and 23rd October 2005 was widely advertised in London, and anyone expressing an interest was pre-registered with a number, and was sent a card to facilitate “fast track entry”. They were also sent an information memorandum or sales brochure, the first page of which was as follows:
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“Westminster Bridge Park Plaza
Suites from just £175,000
You now have the opportunity to own a deluxe suite in what is set to be a magnificent new UK landmark ApartHotel overlooking Big Ben and The Houses of Parliament in London.
• There will be over 900 ApartHotel suits and upper level penthouse suites, each available for sale with a 999 lease.
• The hotel facilities will include 24 hour concierge, one of London’s largest conference rooms, business lounges, executive meeting rooms, a ballroom, 2 restaurants, a brasserie, bars, health spa, gymnasium an indoor pool.
A concept
Westminster Bridge Park Plaza will be a luxurious ApartHotel situated directly opposite London Waterloo tube and rail stations, occupying a commanding location with unrestricted views over The Thames, Big Ben and The Houses of Parliament. Documentation is being finalised for the ApartHotel to be managed by Park Plaza Hotels Europe – part of the rapidly emerging, contemporary Park Plaza Hotels & Resorts brand.
The offer
There will be a guaranteed 6% nett income return, a proportion of which will be effective on your deposit between exchange and completion (anticipated 2010) and then 6% on the purchase price until 2015. Prices start from £175,000 with £1000 initial deposit to exchange contracts.”
The remainder of the brochure gave further details of the proposed development.
27. For some months before the sales launch, there was correspondence between Howard Kennedy and four firms of solicitors (including LMJ and AWP) which had been selected from Galliard’s panel to act as purchasers’ solicitors. They were given the title documents and the form of the agreement and the terms of the lease were negotiated with them, so that they would be in a position to advise purchasers at the sales launch, with a view to exchanging contracts on the same day.
Mr. Philips
28. Mr. Philips made it clear that he had no recollection of this particular sales fair. His evidence as to sales fairs generally was as follows:-
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(a) He had been familiar with sales fairs since 1995, and had attended about 10 such events annually since then for different clients; they were a common means of marketing and selling developments off plan; they were usually held at weekends to maximize public response and in 2005 were exceptionally busy events due to the “frenetic” state of the market.
(b) “Fractional sales” of hotels, involving leases of individual rooms, was a fairly new concept, analogous to a “buy to let” investment, which had been used only 2 or 3 times before. Income guarantees, in buy to let investments, were however common.
(c) An important objective was to conclude agreements by exchange of contracts on the day. In order to do this, it was necessary to have solicitors there who would be in a position to advise prospective purchasers and exchange contracts on their behalf if they wished to proceed. Advertisements stressed that contracts could be exchanged at the launch in return for a modest deposit.
(d) Galliard would decide which firms were to attend their launches, sometimes aided by advice from Howard Kennedy. On this occasion, because of the size of the development, and the probable level of interest, there were 4 firms, including LMJ and AWP, with a total of 12 to 14 solicitors. As he put it in his oral evidence in chief:-
“… when we have sites being marketed we prepare a bundle of title documents for the purpose of solicitors that includes the title, service charge, information, planning, replies to inquiries and a package of searches, and what we do is prepare a section at the very beginning which would explain any unusual peculiarities of a specific site, whether it is in respect of a peculiar title, provision, or a peculiarity in respect of planning, or a modern structure, and that would be provided to all purchasers’ solicitors as the first section of our bundle of title documents.”
(e) Before the sales fair, Howard Kennedy would prepare 2 identical contracts, in the agreed form, for each unit with a view to exchange. He could not recollect running out of contracts at a fair, but photocopying facilities were available anyhow.
(f) There were two ways of dealing with the front page, the Particulars page (see paras. 12, 13, 17 above). One was, include it as an integral part of the contract, as page 1, at the outset, with the details left blank. The details of the purchaser, price etc. would then be handwritten. The other way was to use this page as the reservation form; details would be typed in at the time of reservation, with a copy given to the prospective purchaser and 2 copies to Howard Kennedy, the vendor’s solicitors. Howard Kennedy would then have to staple both their copies to the remaining pages, pages 2 onwards, of the contracts. Both methods were in use in 2005, but the stapling was difficult and this method was used less often and eventually not at all.
(g) Whichever method was used, Howard Kennedy would assemble two complete copies of the contract, one would be given to the purchaser’s solicitor and then they would be exchanged. The first method was used in February 2006, for unit 906, the second in October 2005, for all the other units.
(h) There were sometimes agreed concessions in specified circumstances or ad hoc. If they were known in advance, a rider would be prepared, with sufficient copies, for attachment to the contract; if not, it would be written out at the launch and photocopied, and then stapled to the contracts to which they applied.
(i) Galliard’s sales fairs followed the same pattern. They were usually held at weekends, and there were sales representatives and mortgage advisers. The sales representatives would explain the amenities of the property, the payment terms and any inducements (such as guaranteed income) or concessions on offer. Investors could reserve units; whether, if they later withdrew, it would be returned was a grey area and might depend on the circumstances.
(j) The solicitors at the launch would already be familiar with the agreement and the draft lease and would be able to advise. Investors could either choose one of the firms at the launch or (more usually) queue for the first available one. They could also instruct other solicitors, but the time which such solicitors would have to take to make the usual enquiries would be likely to result in them losing the property.
(k) His impression of the time normally taken by solicitors with individual purchasers, based on having attended many sales launches but not on any specific recollection of this one, was that it would be of the order of 30 to 60 minutes and occasionally substantially more.
29. Mr. Philips also gave evidence that the draft lease for this development circulated on 21st October 2005 (see para 24 above) was agreed between Howard Kennedy and all 4 firms of solicitors and was intended to be used at the launch.
Mr. Gilman and Mr. Georgiou
30. Mr. Galman was in charge of the sales fair on 22nd-23rd October, and his evidence about it can be summarised as follows:-
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(a) It was expected to be, and was, very well attended; Galliard had hoped that there would be queues and there were; prospective purchasers had to queue to get into the building, to register (unless they had pre-registered), to get to the closing area where they saw a Galliard representative and could reserve a unit and finally to see a solicitor. There were roping arrangements, and Galliard representatives available to usher purchasers to the queue for solicitors.
(b) He had given everyone, including Galliard staff and the solicitors, a briefing on the first morning, as he always did, as to the procedure to be followed by a prospective purchaser; he was quite clear (and would have said at the briefing) that a reservation fee, which might be paid to a Galliard representative or to a solicitor, would be refundable if the prospective solicitor, purchaser withdrew at any time before exchange:-
“At the sales briefing in the morning of the sales exhibition the instruction from me to the entire sales team there was a that a purchaser could – would choose their unit; go to the closing desk; be told that if they wished to purchase that unit there were solicitors there to exchange contracts on the day a per all of the advertising material, and that that was the way they could guarantee getting that unit. If they wished to simply reserve the unit and take a chance that it would not be exchanged by someone else, they could do so. Those were the specific instructions.”
(c) The Galliard representative in the closing area would input the relevant details on to a blank first page of the contract (the Particulars page) and several, probably four, copies would be generated; he was not sure of the exact distribution process, but copies would be made available to the prospective purchaser, the purchaser’s solicitors and Howard Kennedy.
(d) There were 4 firms, and between 10 and 20 individual solicitors; the firms had all participated in previous sales fairs; their fees were generated entirely by sales, and it was in their interest for there to be as many sales as possible.
31. Mr. Georgiou’s witness statement provides a good picture of the sales process:-
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“3. I set out below the general procedures followed at all sales fairs. I cannot recall the details of the sales fair attended by the Claimants. However, I recall a clear distinction between the first sales fair in October 2005, and the subsequent sales fairs.
4. The first sales fair was significantly busier than subsequent sales fairs. At the first sales fair, prospective purchasers were greeted by GH receptions who would direct them to an available sales representative such as me. In the first sales fair, I was tasked with giving general information about the development to prospective purchasers and ascertaining their requirements. For example, I would outline how a unit may make a return on the investment, outline the state of the hotel industry and explain GH’s income guarantee scheme. There was a large overhead screen, which enabled all GH’s representatives to see at a glance which units were still available for sale. Each member of staff had a handheld unit which assisted in identifying each individual suite with their full details and sales status.
5. Once I had answered the questions of a prospective purchaser then I would try to ascertain their requirements, the most important of which was how much they could, or would be prepared to, pay for a unit. Once I had that information, I checked the overhead screen or handheld unit for availability of a unit matching the purchaser’s requirements, then I took them to the model of the development so the purchaser could identify the location of the available unit.
6. I have read and confirm I agree with paragraph 5 of David Galman’s Witness Statement (dealing with the way that the details of the purchaser and the proposed purchaser were inputted at the different sales fairs).
7. At the sales fair a prospective purchaser would have been seen first by a GH receptionist, who would check whether that purchaser had pre-registered their interest in purchasing a unit. If not, they would then take their details (ie name and address) there and then.
8. Upon leaving the reception area the prospective purchasers would have been ushered to the sales team, of which I was a member. We discussed with each prospective purchaser the nature of their commitments (eg to paying a deposit, the completion monies etc) if they decided to proceed to exchange contracts. Additionally, at the first sales fair we would have given general information about the state and nature of the hotel industry, and the nature of the investment. Each GH representative was told to make clear (and I always did) to a prospective purchaser, that there was no requirement to either exchange contracts or make a reservation at the sales fair, and indeed it was also made clear that the availability of units might change. If, at the first fair, a prospective purchaser paid a reservation fee but did not wish to proceed to exchange of contracts on the day and subsequently another prospective purchaser wished to exchange on that unit, if exchange took place the first prospective purchaser would receive a refund in full. Indeed, cheques for reservation fees would be destroyed on the following Monday if contracts were exchanged with another purchaser.
9. Once the prospective purchaser left the sales team they would be shown to the closing room. This is described in David Philip’s statement; I confirm I concur with the definition set out therein.
10. Upon joining the queue for the closing room the GH sales representative would write the name of the unit and the prospective purchaser on a whiteboard outside the closing room, in order to avoid the same unit being double sold. It was in the closing room that all details of the sale were collated (eg the purchaser’s personal details, the unit, the deposit, any concessions etc). The collection of the prospective purchaser’s personal details before they entered the closing room (whether by pre-registration or at the entrance to the sales fair) therefore streamlined this process. On leaving the closing room the close (ie the GH representative in the closing room) would have instructed a solicitor at Howard Kennedy to proceed to exchange contracts.
11. The subsequent sales fairs were much smaller than the first, they were also slightly different to the first fair. At those fairs, Gerard Nolan, a consultant to GH with excellent knowledge of the hotel industry, gave presentations every hour on the hour on the hotel industry, and the nature of the investment. This meant the GH representatives did not have to cover those topics. Secondly, if at the subsequent sales fairs a prospective purchaser reserved a unit, GH gave them the right of first refusal on that unit if another purchaser wished to exchange on the unit.”
32. In his oral evidence he added the following:-
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(a) The marketing before the launch included widely distributed promotional material and radio advertisements. It was intended to suggest a great investment opportunity, with units selling fast, and to create “hype” that would encourage people to come. There was an element of “hard sell”.
(b) About 700-800 people did attend, and there was a buzz; this was the largest of the many such events that he had attended.
(c) Prospective purchasers’ details would be input at registration, and would be available on the computer system.
(d) There was a large screen, available to all, showing which units were still available; units were shown as unavailable once they were reserved, unless and until the purchaser withdrew; if a purchaser had not exchanged, he would be contacted on the Monday to ascertain his intentions.
Other Howard Kennedy evidence
33. Two more members of Howard Kennedy gave evidence. The first was Sharon Frey who was, in 2005, a qualified solicitor working in the plot sales division. She was the team leader for Galliard sales and attended many sales fairs, including the one on 22nd – 23rd October 2005. She managed the Howard Kennedy team, which on this occasion numbered about 10 people, including some trainees.
34. In her witness statement, she explained her procedure for giving her team instructions before sales fair:-
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“8. Before each sales fair I gave instructions to the Howard Kennedy personnel who attended. I explained how the sales fairs worked, and the procedure for exchange of contracts. I stressed the need to check carefully and agree with the purchaser’s solicitor the purchaser’s name, the purchase price and the unit. I also instructed the team to review carefully with the purchaser’s solicitor the deposit clause, as this feature was at times the subject of negotiation between GH and the purchasers and the resulting amended deposit clause inserted into the contracts.
9. The first page of the contract sets out the initial deposit (usually £1,000). However in the body of each contract was set out the mechanism for payment of the whole deposit (usually staggered payments or 5% or 10% of the purchase price, over a period of 24 months from exchange). This mechanism is in clause 4 of the standard contract (exhibited at SNF1). Therefore to check the agreed deposit structure both the purchaser’s solicitor and the Howard Kennedy representative would have had to look at the body of the contract. They would also have had to check whether any rider was attached, for example, relating to a free stay at the Hotel.
10. In my talk before a sales fair I always reminded the team that in order to be binding, the parties must exchange two parts of the entire contract. Although this is basic, it was so important that I always reminded the team of that prior to each sales fair. Had I spotted anyone trying to exchange a single sheet of paper during the fair, I would have intervened.
11. I believe that it is inconceivable that anything other than the whole contract would have been given to a purchaser’s solicitor or exchanged with the purchaser’s solicitors.”
35. In her oral evidence in chief, she added two points. First, at sales fairs there were piles of blank contracts, and lever arch files with plastic folders with unit numbers, which would in due course be filled by exchanged contracts. Secondly, where the team knew in advance that a rider would be included in the contract in certain cases (for example in sales above £300,000), as soon as the team received two sheets of the particulars from Galliard, they would prepare two contracts with the riders attached. If they only learned subsequently that there was a rider, then it would be attached later, but in any event before the exchange of contracts.
36. In cross-examination, she said that this was the only sales fair she could recollect at which the particulars were prepared by Galliard, rather than handwritten by Howard Kennedy. The procedure was that Galliard retained one copy, and gave another copy to the purchaser and two copies to Howard Kennedy. When the other procedure was used, Howard Kennedy only received one copy, from which Howard Kennedy would hand write the details on the contract. On this occasion, Howard Kennedy had to attach the two copies, rather than hand write the details themselves. Without being certain, she thought that the various parts of the contract were stapled together, with big staplers that they had, rather than attached with some form of clip. She had herself been involved with stapling.
37. The other Howard Kennedy witness was Mr. D’Este Hoare, who was a trainee at the time. His initials are on the front page of the contracts for units 687 and 688, indicating that it was he who exchanged contracts. In his witness statement, he referred to the fact that the front sheet of these contracts had the details of the purchasers typed on, and said that he believed that Galliard employees would have done this, and would have given the pages to other Howard Kennedy employees, who would have attached the front sheets to the body of the contracts before exchange. He confirmed that Sharon Frey had briefed the team, and could think of no reason why he would have done anything other than exchanged the whole contract.
38. In cross-examination, he said that he had attended one other launch. His role was to assist with the exchange of contracts and that, so far as he could recollect, there would be standard contracts in boxes, which could be used for any unit and the front page, as well as the photocopy rider for extra nights were appropriate, would be added. He had been busy all day. He believes (without having any specific recollection) that the particulars, the agreement and (where there was one) the rider would all have been handed out at the same time to the purchaser’s solicitors, either paper clipped or bulldog tagged, so that it was clear that they were altogether. Howard Kennedy would have known when the rider was to be attached, because the price was apparent from the front page. He accepted that he should have questioned the single signature on unit 687.
LMJ evidence
39. There was evidence from three members of LMJ. The first was Mr. Lucas, who was and is one of the principals. LMJ and its predecessor firm had been on the Galliard panel of solicitors, and he had acted for Galliard in connection with any previous developments. Mr. Lucas attended the sales fairs on the 22nd-23rd October 2005 and 25th February 2006, managing the LMJ team of 4 or 5 people and exchanging some contracts himself.
40. Before the sales fair, LMJ saw and corresponded about the draft contract and the draft lease, as well as a large volume of title documents. The purpose of this was to clear what would have been normal pre-contract enquiries before the sales fair. There was correspondence about the matters with Howard Kennedy. LMJ was not paid for any of this work, save to the extent that purchasers later instructed them to act.
41. Mr. Lucas also prepared a legal report, copies of which would be given to the members of the LMJ team and he said, to purchasers but only after they had signed. The legal report contained a copy of the agreement and dealt with the following matters:-
•
(a) The structure of the transaction and the parties involved.
(b) The main terms of the contract.
(c) VAT.
(d) Very brief details of the lease.
(e) Planning.
(f) Searches and enquiries.
(g) Warnings that the client cannot change his mind after exchange, and that the contract is not conditional on obtaining finance.
(h) Details of LMJ’s charges.
42. Mr. Khaled Mughal, an assistant solicitor with LMJ at the time, also prepared a crib sheet for interviews with clients, which is an important document and is reproduced below:-
•
“Westminster Bridge Report Summary
Contract (Page 4)
• 1. This is a binding legal contract – no cooling off period nor subject to mortgage and not an option to purchase.
• 2. The Contract – £1,000 today
• Balance of 5% in 21 days
• Another 5% in 6 months
• 3rd deposit of 5% in 12 months
• 4th deposit of 10% in 24 months Total: 25% (page 5)
• 3. VAT is payable on purchase price. So if property is £200,000 – then total price is £235,000. You have to complete all necessary forms to register for VAT. (page 7) If you are unable to register, the Seller has right to cancel contract, or fund the VAT for you to complete the transaction.
• 3. (i) Stamp Duty is payable on full purchase price (inc of VAT) – e.g. – £200,000 plus VAT is £235,000 and therefore stamp duty is £235,000 and therefore stamp duty is £2,350. NB – 3% threshold
Income Guarantee – (page 4)
• 4. You will get a 6% net income guarantee from Galliard Homes for 5 years from the completion of the lease or up to 01.01.2015 (whichever is later). The only deductions will be – if you are a non UK resident – basic rate of income tax. VAT will also be deducted and paid to the Customs and Excise direct.
• Up to completion – you will also receive 6% interest on the deposit you have made (simple interest).
• Note – if you don’t complete – contract will be rescinded and you will not get back any interest.
• 5. Contract can be assigned but not in first 60 days.
• 6. Size can be varied up to 5% – no change in price. Anything more than 5% the price will be reduced by the percentage (not including 5%) (bottom of page 3).
• 7. If hotel has a balcony – the Seller has to get a licence. If licence not obtained, within 12 months – both parties can rescind contract (page 6).
• 8. Completion takes place within 10 working days of a Completion Notice. (As long as your hotel unit is ready without furniture, you will have to complete.) (page 6)
• 9. Hotel has to be built in accordance with planning permission and building regulations.
• 10. If completion has not taken place by 31.12.2012. Contract can be rescinded and your deposit will be returned with simple interest.
Hotel (pages 2.34)
• 11. You will be granted a share in the Management Company. You will eventually get a right to vote in the management company after certain criteria are followed and in any event by 31.12.2017.
• 12. You will pay a service charge – as in a standard lease for repair and maintenance of the Block. You will also be responsible for the Hotel running costs – known as the Business costs.
• 13. Any income generated by your Hotel Unit will be paid to the Management Company (less Service Charge and Business Costs). And they will forward the monies due to you 10 working days after the expiry of each quarter day.
• 14. There is no pooling of income. You will only be entitled to the income generated by your particular Hotel Unit.
• 15. Note – if Business Costs and Service Charges exceed the income generated by your Hotel Unit – then you will have to pay the difference.
• 16. The Hotel Unit is strictly a Hotel room. You DO NOT HAVE ANY RIGHTS TO OCCUPY IT except at commercial rates.
• 17. If you are getting the option and only then you will be allowed to stay at the Hotel for 30 days a year after completion but you must advise Galliard of the exercise of this Option within 3 months and after completion your RGA will be reduced by 1% and you have to give at least 1 months notice subject to availability and all extras to be paid for.
• 18. If you are getting the option and only then – you will be allowed to stay 2 nights per year at the Rivebank Plaza prior to completion provided you have paid a 10% deposit and given 1 month’s notice and subject to availability and all extras to be paid for.
The Lease (page 9)
• 17. Is for 999 years. And no ground rent is payable.
Planning –
• 18. Planning has been granted for a 953 room and the Seller has made an application for 913 room Hotel. If acceptable planning consent has not been made with 12 months, then both parties can end the contract and deposit will be repaid with simple interests.
CONCLUSION:
We cannot advise you as to whether or not to buy. From a legal point of view, the title and paperwork are acceptable.
If you are not getting £1,000 fees allowance, half of our fees are due now (£587.50) as we have already carried out a lot of the work and we will be looking after your file for the next few years and will be corresponding with you on various occasions.
Note – this summary has only be created as headings for the conveyancer advising you and strictly for their own use and should you pick this up, you are NOT entitled to rely on it and you should read the Report before coming to a decision to purchase. Jane/text/Westminster Bridge/Report summary -.”
43. Where the above document refers to a page, the references are to a page of the legal report. The Note at the end was there because some clients asked for, and were given, a copy of the document, and it was necessary to make its status clear.
44. It was also LMJ’s practice to ask purchasers to sign an instruction memorandum in the following terms:-
•
“Dear Sirs
Re: Hotel Unit No. … Westminster Bridge London SE1.
I/We hereby instruct you to act on our behalf in connection with our purchase of the above mentioned property at the price of £… plus VAT. I/We further instruct you to proceed to an immediate exchange of contracts in connection with the purchase of the above flat (sic) at the aforementioned price. I/We confirm that you advised me/us fully of the consequences of entering into this contract before I/we did so and would confirm that I/We have read and understood the contents of your report (dated 18.10.05) that you handed to me/us before giving you these instructions and instruct you on the basis of that report.” (my emphasis)
45. Despite the terms of this letter, it is unlikely that purchasers could have read the legal report in full. It is not clear whether they were given it before they had signed, but even if they were it was too long and complex for them to read it then and there. On the other hand, the crib sheet seems to have been designed to assist solicitors to take clients through the main points, according to Mr. Mughal (see below) with the text in front of them.
46. Mr. Lucas said that he gave his sales team a pep talk before sales fairs:-
•
“At each sales fair venue, before the sales fair began, I gave a pep talk to the personnel present from LMJ. The thrust of this talk was to run through the crib sheet before the sales fair to highlight the main points of the contract. I expected each of the personnel to run through every item on the crib sheet when advising a prospective purchaser.”
47. Mr. Lucas confirmed that he had approved the crib sheet, and that members of staff knew that full contracts had to be exchanged. It was his clear recollection that all the different parts of the contract (that is the particulars page, the main body of the contract and in some cases a rider) would be stapled together. There was no way in which a purchaser would have signed a single piece of paper. He estimated that interviews with prospective purchasers would normally take between 20 or 30 minutes and 90 minutes; LMJ was seeking authorisation to exchange, but would seek the vendor’s agreement to amendments if asked to do so.
48. Mr. Mughal also gave evidence. He was responsible for the exchange of contracts for Dr. Rabiu’s second transaction in February 2006, relating to unit 906. At the time he was an assistant solicitor at LMJ, where he had trained in the 1990s. In his witness statement, he described his role at sales fairs in the following terms:-
•
“7. Following the instructions given to me by Garry Lucas at the start of each sales fair I was obliged to discuss the LMJ Legal Report with each prospective purchaser. I prepared a crib sheet which was used by all LMJ conveyancers at the Westminster Bridge sales fairs. A copy of the crib sheet is at exhibit KM2 to this Witness Statement. The crib was for use as a guide for the discussions and advice to purchasers but it did not prescribe everything that I would have discussed with a prospective purchaser.
8. It should be mentioned that the purchaser had a copy of the Legal Report in front of them. Therefore the discussion would have focused on the Legal Report itself in addition to the items on the crib sheet. I would have reviewed the Legal Report with each purchaser paragraph by paragraph. The time it took to review with the prospective the Report and the crib sheet items with a prospective purchaser would definitely have been at least 30 minutes.
9. After I had finished reviewing the Legal Report I would have asked the prospective purchaser whether they had any questions and would then answer those. I would then asked if they wished to proceed to exchange. If they did, I would go to one of the Howard Kennedy desks and ask for a copy of the contract for the unit in question. I would then go back to my desk and have the prospective purchaser sign the memorandum instructing LMJ to proceed to exchange. I believe in a belt and braces approach so before asking the prospective purchaser sign the memorandum instructing LMJ to proceed to exchange. I believe in a belt and braces approach so before asking the prospective purchaser to sign the contract itself I would ask them again whether they were sure they wanted to contracts to purchase a unit. After the prospective purchaser had signed the contract, i would ask the purchaser if they wanted me to exchange contracts and advised them that they would be legally bound after I had exchanged the contract on their behalf. I would to go the Howard Kennedy desk to effect exchange, then i would return to the LMJ desk to confirm to the purchaser that exchange had now taken place and that I would shortly be writing to them confirming the exchange of contracts and notifying them when the next tranche of deposit was due.
10. I can state with certainty that no purchaser would have signed just the front page of the contract, without the body of the contract behind it. No purchaser could have signed without realising that they were signing a binding contract to purchase. Neither would I have ever tried to exchange “contracts” which were just a single sheet of paper.”
49. In his oral evidence, he stressed that his instructions were to go through the legal report, with the assistance of the crib sheet to make sure nothing was missed out, so as to avoid any problems; he thought that he would have done so with Dr. Rabiu at the February event, even if he was an existing purchaser and knew the form. So far as the different parts of the contract were concerned, his evidence was that they would have been attached for exchange, probably with a staple, as the pages would be less likely to be separated, but possibly with some kind of clip.
50. The final LMJ witness was Margot Fisher, who was in 2005 a qualified solicitor of some 13 years standing who was working for a locum agency, which placed her with LMJ for the sales fair. She had been with a firm which specialised in residential conveyancing. She handled the alleged exchange for unit 540 on 22nd October 2005. Her witness statement is dated 22nd April 2013. Her memory of the sales fair was, not unnaturally, fairly hazy, and she had no recollection of Dr. Rabiu.
51. In her witness statement, Ms. Fisher said that she had received a briefing when she arrived at the sale fair. She vaguely remembered the crib sheet and being asked to use it as the basis for the advice she was to give, and piles of documents probably including the legal report, drafts of the contract and instructions to LMJ to proceed.
52. As regards her advice, she said that she would have spent at least half an hour with each purchaser, discussing the legal report:
•
“8. I would have spent at least half an hour with each purchaser. I did not, as I remember proceed to exchange many contracts on that day. I do not recall there being either a printer, or even a computer, on my desk. I see that this recollection is borne out by the photograph attached at exhibit MF1.
I attach … a copy of a legal report prepared by LMJ, which I would have discussed with each prospective purchaser. Specifically, there is no doubt whatsoever in my mind that I would have told whatever prospective purchaser I saw that by signing the front (particulars) page they would be entering into a binding legal agreement and that contracts would be exchanged on the day. I would have explained that by doing so it committed them to paying deposits over the course of the next few years, and I would have explained the deposit structure. I further would have explained that by doing so it committed them to paying deposits over the course of the next few years, and I would have explained the deposit structure. I further would have explained that if the purchaser were not a cash purchaser they would need to obtain a mortgage to complete the purchase, and if they failed to complete having been given notice to do so by the seller, they would lose their deposit. My professional approach to all conveyancing matters both now and then is to review the documentation with the client meticulously and explain fully their commitment in signing the contract. There is no reason why I would not have done so this time.”
53. In cross-examination, Ms. Fisher said that the pre-sales briefing had not been rushed, and that she had had sufficient time to familiarise herself with her task despite not previously having attended such a sales fair, or having been concerned with leases of hotel rooms.
54. She said that she exchanged two or three contracts in all, although she probably spoke to others. As a solicitor, she would have gone through everything with the client, and would not have cut corners; it would have taken at least half an hour, and Dr. Rabiu was wrong to say that she had seen him for only ten to fifteen minutes; that was not possible. There was no way in which she would have taken so little time. Equally there was no way she would not have explained that he was entering into a binding legal agreement, and about the deposit and the need for a mortgage.
AWP evidence
55. Two members of AWP gave evidence. Mr. Peace was one of the partners, but it was Mr. Winter who was responsible for Galliard sales and he was not called. Mr. Peace said that AWP had been on Galliard’s panel for some years, but otherwise his evidence did not take matters any further.
56. Isabel Henriquez was a solicitor who was employed by AWP at the time, and was involved in the exchange of unit 587 for Mr. Olajide although she had no specific recollection of it. Her experience was in conveyancing. There had been a meeting about 2 weeks before the sales fair at which those who were to be involved with it were given a legal report setting out the points to be explained to prospective purchasers, and were encouraged to complete as many sales as possible. She had to go through it “in the way you have to explain the contract to the client” and that is what she did on the one contract which she had exchanged. She had definitely made it clear to the client that he was entering into a binding contract. She said that the Particulars page had to be completed, and that it was probably still loose at the time it was signed by the purchaser.
57. More generally, it was clear from her evidence that she was not impressed with AWP’s performance at the sales fair. One of the team had been rude to a client; Mr. Winter, the partner in charge, had left early; she was not happy about the process of signing a contract on the same day. She herself had not been successful in completing more than one transaction, probably because she was too “outspoken”.
58. AWP also had a standard instruction letter or memorandum, as follows:-
•
“I/WE HEREBY INSTRUCT Alan Winter Peace & Co of Newbury House 900 Eastern Avenue Newbury Park Ilford Essex IG2 7HH to act on my/our behalf with regard to the purchase of the above property and to proceed to an immediate exchange of contracts, completion to be on notice as more particularly set out in the Report on Title.
I/We am/are aware that I/we could obtain legal advice from other firms of solicitors and I/we have chosen Alan Winter Peace & Co.
I enclose herewith cheque/remittance in the sum of £500.00 plus VAT being on account of Local Authority Search fees, initial disbursements and contribution towards legal fees as set out in the Legal Report attached hereto.” (my emphasis)
59. AWP’s legal report was if anything more comprehensive than LMJ’s, and covered the following matters:-
•
(a) The structure of the transaction.
(b) Title.
(c) The main terms of the contract.
(d) Brief details of the lease.
(e) Service charges.
(f) Insurance.
(g) Completion date.
(h) Drainage connections.
(i) Postal addresses.
(j) Facilities.
(k) VAT.
(l) The management company.
(m) Planning.
(n) Overhand of balconies.
(o) The hotel operator
and various other matters including fees.
Conclusions on the defendant’s evidence
60. As is clear from the above, I heard evidence only from some of the LMJ and AWP solicitors who were present at the sales fair and in particular Mr. Winter, the partner in charge of the AWP team, was not called. He had been out of the country in the weeks preceding the restored hearing, although Mr. Peace (unknown to the defendant) had met him for lunch the day before he gave evidence.
61. Mr. Rainey Q.C., on behalf of the defendant, submitted that the claimants should have called the solicitors who had acted for them and that this was a case in which an adverse inference should be drawn from their failure to do so: see Wisniewski v. Central Manchester Health Authority [1998] P.I.&R. 324; Re Coroin [2012] EWHC 2343 (Ch). He submitted that the defendant should not have had to call the solicitors, and had done well to locate those they did call in the limited time available after the adjournment on 15th April.
62. In Wisniewski, an adverse inference was drawn where the defendant in a medical negligence case had not called its resident house officer, that is a witness who might have been expected to give evidence, if he could, defending his conduct of the plaintiff’s birth, and therefore to be a witness for the defendant. Brooke L.J. (with whom Roch and Aldous L.JJ. agreed) set out the principles at 340:
•
“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”
63. He also referred with approval to the summary of the English and Australian authorities given by Gillard J. in O’Donnell v. Reichard [1995] V.R. 916 at 521:
•
“Looking at the authorities from Blatch v. Archer (1774) 1 Cowp. 63 right up to Earle v. Eastbourne District Community Hospital [1974] V.R. 722, it may be accepted that the effect of a party failing to call a witness who would be expected to be available to such a party to give evidence for such party and who in the circumstances would have a close knowledge of the facts on a particular issue, would be to increase the weight of the proofs given on such issue by the other party and to reduce the value of the proofs on such issue given by the party failing to call the witness.”
64. In Re Coroin Ltd, David Richards J., in declining to draw an adverse inference, stressed the need to consider all the particular circumstances of the case before drawing any adverse inference:-
•
“259. It is of course well settled that in civil proceedings the court may draw adverse inferences from a party’s decision not to give or call evidence as to matters within the knowledge of the party or of witnesses who, it is reasonable to conclude, would have given evidence if asked to do so. Whether or not in any particular instance it is appropriate to draw an adverse inference from the absence of a witness and, if so, the weight to be attached to such inference will always depend on the particular circumstances of the issue to which the evidence would go. In Murray v DPP [1994] 1 WLR 1, a case to which Mr Marshall referred me, Lord Mustill made observations at p.5 which, although said in the context of criminal proceedings, are in my view applicable also in civil proceedings:
“Everything depends on the nature of the issue, the weight of the evidence adduced by the prosecution on it …… and the extent to which the defendant should in the nature of things be able to give his own account of a particular matter in question. It is impossible to generalise, for dependent upon circumstances the failure of the defendant to give evidence may found no inference at all, or one which is for all practical purposes fatal.”
65. Even in my limited experience, submissions of this kind are commonplace, but the cautious approach indicated by Lord Mustill is entirely justified. Caution is needed because it is often difficult to know why a witness has not been called. It is necessary to keep in mind that, in a procedural system in which, sensibly or otherwise, a party cannot, save in very exceptional circumstances, cross examine his own witness, it is usually dangerous to call a witness whose evidence is unlikely to be favourable, or who has not been willing to provide a witness statement. There is a risk of being stuck with unhelpful evidence without the ability effectively to challenge the witness. In other cases, the witness may not be called because his evidence is partly supportive, partly not, so that to infer that he would have been unsupportive across the board would be wrong. Often, it is impossible to explain a decision not to call a witness without a substantial waiver of privilege.
66. The first question, as Gillard J. suggests, is whether the witness might reasonably have been expected to give evidence for the party who, it is suggested, should have called him. If not, in the procedural system as it is, it seems to me unarguable that any inference can be drawn. In this case, all the claimants were severely criticising the solicitor witnesses and they were not witnesses who would have been likely to give evidence for them whatever the truth. It would not have been reasonable to expect the claimants to call them. In any event, the claimants’ solicitor, Mr. Tysh, has provided a reasonable explanation for not calling such of the potential witnesses as he was able to contact.
67. On the other hand, I can see no reason why the defendant should not have called these witnesses, or at least some of them, at the outset. They were all members of firms which had been on the panels for the defendant’s developments for years, and there could have been no question of legal professional privilege preventing the solicitors from providing them with an account of the sales process. There was a clear waiver, as Miss Stevens-Hoare rightly and promptly accepted when the point arose. They would always have been natural witnesses to give evidence for the defendant. However, I think that the reason for the defendant’s failure to call any of the claimants’ solicitors until the second stage of the hearing was probably that the defendant’s advisers did not see it the way I do, and I draw no adverse inference against the defendant. The defendant’s solicitor has explained that 3 of the Howard Kennedy solicitors who exchanged contracts were unwilling to give statements; I do not think that it can be inferred that this was because they felt that they had not performed their duty. It could equally well be that they had no recollection, or just did not want to get involved. It was reasonable for the defendant not to call them, when what they would say was unpredictable.
68. I must therefore assess the evidence which I heard, without drawing any inference adverse to any of the claimants or to the defendant from the absence of other evidence. The evidence I have heard satisfies me that both Howard Kennedy and LMJ dealt with matters efficiently and conscientiously, although that of course does not preclude the occasional human error. The evidence from AWP was less substantial, but the fact that they had been panel solicitors for several years, and Ms. Henriquez’ evidence about the legal pack and the meeting in advance of the sales fair, make it likely that they too fulfilled their role at these events responsibly.
69. In summary, there was credible evidence of an efficient system, common to Howard Kennedy, LMJ and AWP whereby:-
•
(a) Prospective purchasers paid the Galliard employees in the closing room a fee of £1000 to reserve a unit, and were given a print of the Particulars page to confirm this.
(b) They were then led to the queue for solicitors, while copies of the Particulars page were passed to Howard Kennedy.
(c) The solicitors (whether employed by LMJ or by AWP) explained the transaction from a pre-prepared legal report.
(d) If the prospective purchaser wished to proceed, Howard Kennedy would provide the contract terms, with one of their copies of the Particulars page attached to the front, to be signed by the purchaser and duly exchanged with Howard Kennedy’s copy of the same contract terms.
70. As to (c), the explanation given by the solicitors, Mr. Rainey made the telling point that it would be very surprising if several different individual solicitors had, as the claimants allege, completely failed in their duty to their clients, by providing no proper advice and failing even to make it clear to them that they were entering into binding agreements on the detailed terms in front of them. I do not believe that there was any such failure.
The expert evidence
71. The parties have obtained expert reports on the documents from Dr. Audrey Giles, which all accept as authoritative. Her main conclusions, on the issue of whether the Particulars pages were accompanied by the remainder of the agreements at the time of signature, are that in all cases except unit 588 (C 4-5) the Particulars page was lying on top of the remainder of the agreement in the same configuration. There were imprints of the signature and other handwritten details on the page of the agreements lying underneath the Particulars page.
C1, Dr. Rabiu – unit 540
The documents
72. The exchanged documents disclosed for this unit included:-
•
(a) The Particulars page signed by Howard Kennedy for the vendor and for Galliard, disclosed by C1, which:-
(i) is initialled by Ms. Fisher and Miss Mahmood of Howard Kennedy (not a witness) and is timed 12.45 on 22nd October 2005;
(ii) has the word “Yes” (not “Applicable”) against the Rent Guarantee line; and
(iii) does not identify the purchaser’s solicitors.
(b) The Particulars page signed by C1, disclosed by the defendant, which:-
(i) is similarly initialled and is timed 12.45 on 22nd October 2005;
(ii) is annotated” Formula B”, meaning exchanged when the solicitors were in each other’s presence;
(iii) also has the word ‘Yes’ against the rent guarantee; and
(iv) identifies LMJ with their full name and address.
(c) The remaining 29 pages of the contract, disclosed by C1 and the defendant; Ms. Fisher said that the date at the top of page 2 was in her handwriting, and that pages 1 and 2 must have been together at the time C1 signed.
(d) The legal report, (see para. 42 above), disclosed by C1.
73. C1 also signed an instruction memorandum (see para 45 above).
74. On 25th October 2005, Mr. Mughal wrote to C1 on behalf of LMJ confirming that “in accordance with your written and verbal instructions … contracts have been exchanged” on “540 Westminster Bridge”, and asking for £9,875 for the next deposit instalment and £587.50 on account for LMJ’s fees.
75. On 19th November 2005, C1 contacted about 20 other purchasers by email to set up a group which could operate as a forum for discussion of any concerns about their investment, opportunities for future investments, and future strategy once the hotel was built. In the letter, he refers to “1-Westminster bridge investments (which we have all signed up to).”
76. Following C1’s purchase (or apparent purchase) of another unit in February 2006 it was agreed that the price for this unit would be reduced by £5,000, and memoranda of agreement, signed by C1 and Howard Kennedy, were exchanged:-
•
“This Memorandum of Agreement is made the 17 day of May 2006….and is supplemental to an agreement dated the 22 October 2005 (“the Agreement”) between the parties hereto in respect of the sale and purchase of the property at an agreed price of £217,500.00 situate at and known as Unit 540 at The Island Site, Westminster Bridge London, SE1 (“the Flat”) a copy of which is annexed hereto…
WHEREAS in consideration of the parties hereto (“the Parties”) entering into this Memorandum of Agreement the Parties have agreed to vary the Agreement such that the Agreement shall henceforth be read and construed as though the definition of the Purchase Price in Clause 4 of the Particulars in the figure of £212,500.00 in substitution of £217,500.00.
4. Purchase Price £212,500.00
AND THE PARTIES further agree that save as varied by this Memorandum of Agreement the provisions of the Agreement shall remain in full force and effect and shall be deemed to be incorporated herein”.
77. On 15th February 2010, C1 assigned the benefit of its contract for unit 540 to a company he had formed, Budrooms Limited.
78. In all, C1 paid deposits totalling £50,125, before adverse financial conditions and the impossibility or difficulty of getting a mortgage caused him to consider his position.
C1’s evidence
79. Dr. Rabiu is a highly educated man, with a PhD from Darwin College, Cambridge; he works in the pharmaceutical industry. Before 2005, he had bought four residential properties, one of which he had let out, but no commercial property. In his witness statement, he described seeing an advertisement for the development, pre-registering, queuing for a long time to get in to the sales fair, listening to various presentations and discussing an investment with Mr. Georgiou and another representative. Eventually, he chose unit 540 and paid £1,000, but was not given a reservation form. He was then ushered by the sales representative to whom he had most recently spoken to the queue for solicitors and, when he reached the head of the queue, he saw a representative of LMJ. He described a brief interview as follows:-
•
“31 The solicitor spoke to me for about 10 minutes, certainly not more than 15. I do remember being asked about the property number I had reserved. I told the solicitor the number. Then, after taking some of my personal details I was told their fee was £587.50 and agreed I would pay that. He had a computer and printed off something which I presume were the two single page documents which we then dealt with, one of which had my details and that of the unit. The documents were the Particulars and their authority document that I was asked to sign. The solicitor spent the next few minutes explaining the breakdown of the deposit instalments i.e. how much I would be asked to pay and when. The majority of the conversation between us was him breaking down the amounts and telling me that I needed to make the first instalment of £9,875 in 2 weeks. This was the first time I knew I would have to make the payments within a few days and complete them within 2 years. Until then I had thought that I had till 2015 to find the deposit. He did not talk about the terms of the purchase or the lease or tell me anything about the structure of the investment or how it would work. He did not say anything about entering into a contract that day. He did not ask me at any point if I had funds or was satisfied I could raise funds to pay for the unit allocated to me. He did comment that it was a good investment.
32. I remember being asked to sign the sheet that he had printed off. It was a single sheet of paper which the solicitor put in front of me with instructions to “sign here”. I have been shown the “Particulars” sheet for Unit Number 540 signed by me and can confirm that is the sheet the LMJ representative asked me to sign. A copy appears at “BR 1”, page 7, I was not told what the document was. I looked at it quickly and could see it just had the date, my details and the unit number price and £1,000 deposit on it. I can confirm that the single sheet of paper was not attached to anything else at that point and no mention was made about what it was or any other documentation related to it. There was no suggestion it was a contract or that it incorporated any other documents.
33. I was also asked to sign the other document that he may have also printed off. I do not recall being given any detailed explanation about it and no indication I needed to sign it so LMJ could act. I have since seen a copy of that document and now know it to be an authority for LMJ to act on my behalf. A copy of that document appears at “BR 1”, page 8. I do not recall which of the two documents I was asked to sign first.
34. I remember that when I had signed the two single page documents the solicitor stood up and walked away, I think towards my right. He took at least one of the pages I had signed with him. He did not have any other documents with him. He was gone for about 3 minutes or so. I watch him go and saw that he went over to another area of the large hall. Then he came back to the desk I was still sitting at and then told me that was all fine. He said I could now go and see the IFAs. The only documents he gave me to take away were a copy of a document headed Legal Report and a blank Particulars sheet. It was not told anything about what the documents were or what would happen next.”
80. In cross-examination he maintained that he had not been given anything when he paid the reservation fee of £1,000; it had not been explained to him that he would be entering into a contract; he had not understood that the effect of “exchange” was that there would be no going back; he had not read the instruction memorandum that he had signed – it was like a car hire contract which one would not read; the solicitor (according to his recollection a male) did not go through the points in the legal report with him; he did not tell him that by signing the front of the particulars page he would be entering into a binding legal contract or that contracts would be exchanged that day; he had no recollection of being told that he would be committed to paying the deposits.
Conclusion on the facts
81. I do not accept C1’s evidence. I find that it was Ms. Fisher, not a male solicitor, who acted for him; she went through the crib sheet, explaining the various points by reference to the legal report, she told him that, by signing the Particulars page, he would be committing himself to a binding legal agreement on the terms which were in the document before him, which she had explained, and that she would exchange contracts immediately, which she proceeded to do once he had signed. I also find that, at the time Dr. Rabiu signed the Particulars page, it was stapled to the remainder of the agreement, and that it was exchanged with Howard Kennedy in the same state.
82. My main reasons for these findings are as follows:-
•
(a) The LMJ evidence establishes that they were experienced and efficient solicitors with a well-tried system for sales fairs, including written material enabling individual solicitors to cover the main points of the transaction.
(b) Ms. Fisher was an impressive witness; I believed her evidence that she would never have acted in a less than conscientious way, let alone in the way alleged by Dr. Rabiu.
(c) Howard Kennedy’s evidence established that they too were experienced and efficient solicitors, with long experience of Galliard and other sales fairs; even though I did not have the evidence of the individual solicitor who exchanged the contract, given the need to comply with section 2, it is inherently probable that they provided purchasers’ solicitors with complete contractual documents, attached together probably by stapling; it is improbable in the extreme that they would have exchanged single pieces of paper.
(d) This is supported by Dr. Giles’ evidence (see para. 72 above); it is possible that the Particulars pages were placed on top of the rest of the agreements without being stapled or otherwise attached, but far more likely (both inherently and by reason of the evidence of the Howard Kennedy witnesses) that it was attached. It is also supported by Mrs. Fisher’s evidence about the contract she handled.
(e) Although Dr. Rabiu made a good impression as a witness, this was seriously undermined by what were clearly inaccuracies in his recollection, for example that he had been seen by a male solicitor, who had had a computer and had printed out the Particulars page.
83. As I have said earlier in this judgment, I do not think that C1 was a dishonest witness. In common with the other male claimants, he was in a considerable state of excitement, possibly engendered by the general atmosphere of hype produced by the defendant, and he may well not have fully understood, or fully remembered afterwards, all that was said to him. Nevertheless, I am satisfied that, on any objective evaluation of what happened, (a) he was clearly informed that he was entering into a contract with detailed terms and (b) he expressly authorized LMJ to exchange it on his behalf, thereby committing him to its terms.
C1’s arguments – general
84. On these findings of fact, it seems at first sight clear that a binding contract came into existence when Ms. Fisher exchanged contracts with Howard Kennedy at 12.45p.m. on 22nd October 2005, having been authorized to do so by C1.
85. However, Miss Stevens-Hoare Q.C. puts forward the following arguments on his behalf:-
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(a) that no contract was entered into because C1 did not, by signing the Particulars page, contract on the terms of the remainder of the contract, even if they were stapled to it;
(b) that, even if C1 did enter into a contract containing all the terms, it was void for uncertainty because there was no identifiable lease satisfying the contractual definition;
(c) that, even if there was a binding contract, it was not contained in one document so as to satisfy section 2; the Particulars page and the rest of the agreement were separate documents; and
(d) that section 2 was not satisfied on another ground, namely that, because the Particulars page used the word “yes” instead of “applicable” in relation to the income guarantee, the income guarantee was not implemented; therefore, the contract omitted a term agreed between the parties.
Time of signature or time of exchange?
86. On the first and third of these points Miss Stevens-Hoare’s argument concentrated on the time when the client signed the Particulars page. She submitted that the Particulars page was prepared and printed as a single separate page, was used for a different purpose, to reserve the unit, and contained no reference to the rest of the contract or indication that it was part of a larger document. Therefore, whether the Particulars page was in proximity to the rest of the contract or not, the client’s signature authenticated only the Particulars and not the terms. Therefore there was no contract or, if there was, no compliance with section 2.
87. I do not think that the focus of this argument on the time when the client signed the Particulars page was correct. The alleged contract was entered into by solicitors acting for C1 at the time of exchange. Therefore it is necessary to consider first, whether they intended to contract on behalf of C1, and if so on what terms and, secondly, whether they had actual or ostensible authority to do so. See paras. 14(e) to (g) above.
88. In considering these questions, I do not think that the state of the documents at the time of the signature by the client is of central importance. For example, if the solicitor had told the client, at the time of signing the Particulars page, that it would later be attached to a detailed set of contract terms, the main effect of which he had just explained, and then exchanged with the vendor, and if the client was content to proceed on that basis without reading the detailed terms, that would result in a perfectly good contract, entered into by the solicitor on behalf of his client with actual authority. It would not matter that the document was incomplete when signed because the solicitor would have authority to complete it. Nor would section 2 give rise to any difficulty if the contract was complete by the time of exchange: the contract as exchanged would comply with it. Section 2 does not require compliance at any time before the contract is entered into.
89. Miss Stevens-Hoare relied on the decision of the House of Lords in Caton v. Caton (1867) 2 App. Cases 127 and on the decision of Fry J. in Kronheim v. Johnson (1877) 6 Ch. D.60 for the proposition that the signature must authenticate all the material terms of the document. That proposition is undoubtedly correct, but those cases were both concerned with the proper construction of the instruments in question, as signed by the defendant, not with a difference between the state of the instrument as signed and a later point in time. They are not relevant to the issue.
90. Mr. Rainey submits, in my opinion correctly, that the order in which the document is assembled, up to the point of exchange, is immaterial. A solicitor who is instructed to exchange contracts is impliedly authorised to do so by such means as he thinks fit: see Domb, supra, at 563C per Templeman L.J.. That may include adding a missing term, if it has been agreed: Gavaghan, supra. Otherwise, a party to an apparent contract, entered into by exchange is the usual way, could never be sure that there was a contract; it would always be open to the other party to show that the terms were incomplete or different at the time of signature. To be sure, it would be necessary for each party to investigate all the dealings between the other party and his solicitor. That cannot be the intended effect of section 2.
91. What I have set out at para. 88 is in substance what happened in all the cases I am considering (except for C2-3). Whether or not the Particulars page was attached to the other contract terms and, if it was, whether or not the claimants were told this, I am satisfied that the solicitors explained that there were detailed contract terms, and the effect of the main ones, that the claimants knew that, by signing the Particulars page, they were instructing them to enter into a contract on their behalf on those terms, and that they chose not to read them. It then became the solicitors’ duty to do whatever was required to conclude an effective contract on those terms, which meant one which complied with section 2. What matters is whether the contract complied with section 2 at the time of exchange.
Was there a contract?
92. (a) The alleged contract was entered into by an exchange of documents between solicitors acting for C1 and the defendant. Therefore, as explained in the last section, it is necessary to consider, first, whether at the time they exchanged documents they intended to contract on the terms exchanged and, secondly, if so, whether they had actual or ostensible authority to do so. Both questions are to be considered objectively, by reference to what a reasonable observer equipped with all the facts would consider to have taken place.
•
(b) As to the first question, there is no doubt that LMJ and Howard Kennedy intended, by exchanging the Particulars page and the remainder of the contract, to enter into a contract on those terms. That would be so even if, contrary to my finding, the Particulars page was not stapled to the remainder of the contract at the time.
(c) As to the second question, on the facts I have found it is clear that C1 authorised LMJ, both orally and in writing, to contract on his behalf on the terms which Ms. Fisher had explained to him. It is possible that C1 was not concentrating sufficiently to take in the fact that the contract terms lay underneath the page which he signed, but I am sure that an outsider listening into the conversation would have concluded that C1 had been told, and understood, that Ms. Fisher would be proceeding to enter into a contract on his behalf on the terms discussed, which were in front of him, and that he was content for her to do so without reading through the terms himself.
(d) The evidence of the claimants, including C1, depicted their solicitors performing little more than a charade, and suggested that this would have been apparent to the defendant and to any reasonable observer at the scene: having heard all the evidence, I do not think that this was a true picture of what occurred.
(e) There is some force in Miss Stevens-Hoare’s criticism of the Particulars page. It is not obvious that it forms the first page of a multi-page contract, there is nothing in its wording to explain this, and purchasers are not invited to append their signature to the last page of the contract, which would make the position quite clear. Also, there is nothing explicit on the Particulars page itself to the effect that the purchaser will purchase the property. However, this does not affect the contractual analysis. C1 was told that the rest of the contract terms lay underneath what he was signing, and he certainly understood, or must be taken as having understood, that these were detailed written terms governing the contract which LMJ was about to enter into on his behalf. Whether or not they were physically attached to the Particulars page, and if so by what means, is of no significance, since C1 did not choose to read them anyhow.
(f) As to C1’s evidence that he did not read the instruction memorandum, while I accept that this is his present recollection, I do not believe that it represents the truth. C1 is a highly intelligent man and it is inconceivable that he did not read and understand a six line document. His own email shortly afterwards suggests that he did. When Mr. Mughal wrote a few days later to say that contracts had been exchanged, he did not protest. In any event, even if he did not read it, he is clearly bound by it: see L’Estrange v. Graucob [1934] 2 K.B. 394.
Void for uncertainty: no identifiable lease?
93. (a) The main point made on behalf of C1 and the other claimants on the lease is that the correspondence between Howard Kennedy and the firms of solicitors which had been asked to attend the sales fair shows that there were at least 5, and possibly up to 10, forms of draft lease; therefore, since clause 2 referred to a lease to the purchaser “in the form of the draft supplied to the Purchaser’s solicitor” prior to the date of the agreement, there was uncertainty because the definition could apply to any one of different drafts which had been supplied to LMJ. Clause 2 did not refer to the last of the drafts supplied to the purchaser’s solicitor.
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(b) I reject this. I accept Mr. Philips’ evidence, which the letters dated 21st October 2005 referred to at para. 24 and 30 above fully support, that by the date of the sales fair both Howard Kennedy and the 4 firms of solicitors attending the sales fair intended the draft lease enclosed with the letters of 21st October 2005 to be the operative draft. This was a travelling draft or, as Mr. Philips said, a “movable feast”, but between 21st and 23rd October it had ceased to move. As in any other contract case, the court is reluctant to hold a contract to be void for uncertainty, and there was no uncertainty; any reasonable observer of the scene would conclude that what was meant was the operative draft supplied to the purchaser’s solicitor, and thus identify the 21st October 2005 draft as the one referred to in clause 2. It was held by Vos J. in Westvilla that parole evidence was admissible to identify the property that was the subject matter of the contract; a fortiori the relevant lease referred to in clause 2.
(c) The provision for reasonable amendments was explained by Mr. Philips as being necessary to cover such matters as, for example, changes in long-term contracts for facilities, no doubt could, in theory, give rise to a dispute as to whether a proposed amendment was unreasonably objected to by the purchaser, but Miss. Stevens-Hoare, correctly, did not suggest that this feature of the definition rendered the contract void for uncertainty.
(d) A second point taken in relation to the draft lease, again on behalf of all claimants, was that none of the solicitors could, on 21st October 2005, be described as “the purchaser’s solicitor”, because they all only began to act for a purchaser when approached at the sales fair itself. There is nothing in this point. To start with, reading the definition literally, its wording does not require that the draft lease should have been supplied to the purchaser’s solicitor at a time when he was already the purchaser’s solicitor. In any event, since both parties to any of these contracts knew perfectly well that the solicitors had only begun to act on the morning of the sales fair, the only realistic meaning of the definition is that it refers to a draft lease previously supplied to a solicitor who, on the morning of the sales fair, became the purchaser’s solicitor.
(e) Both (c) and (d) above apply in all other cases; I will not repeat them.
(f) In relation to C1, Miss Stevens-Hoare advanced a third argument relating to the lease, which was a section 2 point rather than an uncertainty point. She submitted that, because the Particulars page signed by Howard Kennedy did not identify LMJ as the purchaser’s solicitors, the contract fell foul of section 2(3). One of the contracts exchanged did not incorporate all the terms: one could not tell from the written terms alone who the purchaser’s solicitors were, and therefore one could not identify the draft lease. Again, I do not think that there is anything in this argument. The 1989 Act has not affected the ordinary rules of construction. Both versions of the contract include the relevant contract term, identifying the draft lease as the one supplied to the purchaser’s solicitor: both parties to the contract would be able to identify the firm from their common background knowledge without anything further being stated in writing. In any event, even if the solicitor’s identity were to be regarded as omitted, this could be corrected: see Westvilla at [20], [25].
One document or two?
94. (a) Both parties approach this on the basis that the question is to be decided by reference, not only to the physical presentation of the pieces of paper, but also to their content and the surrounding circumstances.
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(b) I do not accept Miss Stevens-Hoare’s argument (outlined above) for several reasons. First, it focuses on the circumstances surrounding the document at the time it is signed by the client in the course of his dealings with his own solicitor, not on those prevailing at the time of the exchange. In my view, the right approach is to consider the position as it is at the moment the contract is entered into.
(c) Secondly, the fact that a print of the document originally served as a reservation form is of little importance. The document signed by the purchaser, and subsequently exchanged with Howard Kennedy, was another print provided by Howard Kennedy to the purchaser’s solicitors and used for a different purpose.
(d) Thirdly, both at the time of signature and, more importantly, at the time of exchange, the Particulars page was intended to serve as page 1 of a contract, to which it was stapled. The next page was page 2. The Particulars page itself was actually defined in the contract as “Particulars”, and there were several references in the body of the contract to the Particulars: see for example clauses 1(m), 1(n), 29.
(e) On any sensible view, this print of the Particulars page (as opposed to the earlier one used as a reservation form) can only be regarded as an integral part of one contract, including any rider referred to on it; alternatively, of course, the rider would be incorporated by reference. I would take the same view if, instead of being stapled together, all the pages were handed over at exchange in a block, but not attached to each other; this is what happened in the case of C4-5.
“Yes” instead of “applicable”
95. (a) There is no doubt that the agreement requires the use of “applicable”, but it does not follow that “yes” is of no effect. Whether failure to use a prescribed word or formula invalidates the notice is a question of construction, on which there are numerous authorities, dealing mainly with statutory and contractual notices, including Newbold v. The Coal Board [2013] EWCA Civ. 584 at [69-72]; Petch v. Gurney [1994] 3 All E.R. 731; R. v. Soneji [2006] 1 A.C. 340; Yates Building Co. Lord v. Pullegn (RJ) and Sons (York) Ltd. [1975] 237 E.G. 183; Rennie v. Westbury Homes (Holdings) Ltd. [2007] EWCA Civ. 1401 at [13-6].
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(b) These authorities establish the following principles:-
(i) The principles apply equally to statutory and contractual notices: see Newbold para. 69-70.
(ii) Where the statute or the contract term provides that a non-compliant notice will be invalid or ineffective, that is of course the end of the matter: see for example section 26(3) of the Landlord and Tenant Act 1954.
(iii) Where it does not, the court must assess the statutory or contractual intention by the usual objective criteria, including the background and purpose of the provision, and the effect if any of non-compliance.
(iv) Where the notice is provided for by a statute or by a professionally drafted contract, and the draftsman has not provided, either way, for the consequence of non-compliance, one may reasonably assume that this is deliberate, and that it has been left to the court to decide; while it may go too far to say that there is a presumption, it is natural to conclude that it was intended that the notice should, at least in some circumstances, but not necessarily in all, survive non-compliance.
(v) The use of “must”, “shall” etc. is not decisive, as Millett L.J. indicated in Petch v. Gurney. I do not think Lord Denning M.R. was going any further in Yates than to say that the provisions of that lease which were so worded were mandatory. The court will look to the substance, not the form.
(vi) What is often decisive in practice is the effect of the non-compliance: see in particular per Lord Steyn in Soneji at 350 and the passage in Rennie cited above. Was the omitted information material which it was essential for the other party to have? Has the non-compliance prejudiced the other party? For this reason, notice provisions are sometimes what might be called hybrids, sometimes “mandatory”, sometimes not, depending on the nature and extent of the error, and its effect.
(c) In this present case, I do not consider that the parties can sensibly be taken to have intended that “Applicable” was an essential magic word which alone could open the box containing the income guarantee. So long as it was made clear on the Particulars page that it was intended that the income guarantee was to apply, it could make no difference to the parties what precise word was used; were it otherwise, there would of course be a readily available remedy under sub-section (4): see para 15 above.
(d) Again, the same applies to all the other cases. I will not repeat the above.
Variation agreement
96. Mr. Rainey submits in the alternative that, in any event, the variation agreement (see para. 76 above) was a valid contract which complied with section 2. On the assumption that, as I have held, there is nothing in the points on the draft lease and “yes” instead of “applicable”, this is unanswerable. The variation agreement clearly includes or incorporates by reference all the agreed terms.
Constructive trust and estoppel
97. It is unnecessary to discuss the defendant’s alternative case on these topics in relation to this case.
Conclusion
98. For all these reasons I hold that C1, Dr. Rabiu, is bound by the agreement relating to Unit 540.
C2-3, Dr. and Mrs. Laditi – unit 687
The documents
99. The documents exchanged for this unit included:-
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(a) The Particulars page signed by Howard Kennedy for the vendor and for Galliard, disclosed by C2-3, which:-
(i) is initialled by Mr. Graham Bloom of LMJ (not a witness) and Mr. D’Este-Hoare for Howard Kennedy and is timed 4.00p.m. on 23rd October 2005;
(ii) has the word “Yes” at the end of the Rent Guarantee line;
(iii) shows the purchaser’s name and address as follows:
• “Purchaser 1 Purchaser 2
• Mr. Mobolaji Laditi Mrs. Olutola Laditi
• (followed by address) (followed by address)”
(iv) identifies the purchaser’s solicitors as “LMJ”; and
(v) has an additional line in Mr. D’Este Hoare’s handwriting reading “7. See Rider – 10 day”.
(b) The Particulars page signed by C2 only, above the words “Signed for and on Behalf of the Purchaser”, but otherwise identical except that LMJ’s full name is handwritten, but not in Mr. D’Este Hoare’s handwriting.
(c) The remaining 29 pages of the agreement, plus the Rider for the 10 days free stay, disclosed by both C2/3 and the defendant, with the words “36 SEE RIDER” in Mr. D’Este-Hoare’s handwriting under clause 35.
100. A copy of the legal report (see para. 42 above) has been disclosed by C2-3.
101. C2 (but not C3) also signed an instruction memorandum (see para. 45 above).
102. On 26th October 2005, Mr. Mughal wrote on behalf of LMJ to C2 and C3 to confirm that contracts had been exchanged, and to remind them of the next instalment of the deposit due on the 8th November 2005. Like C1, C2 and C3 did not protest.
103. On 20th January 2010, Howard Kennedy wrote two letters to LMJ, the first to give advance notice of the projected dates for completion and the anticipated date for Notice to Complete and a completion date, the second stating that their records showed the buyer’s name and address for insertion into the lease as Mobolaji and Olutola Laditi, and seeking confirmation that this was correct. On 25th January 2010, LMJ sent this on to C2-3, stating that, unless they notified LMJ of any amendments, the lease would be prepared as set out in Howard Kennedy’s letter.
104. By February 2010, C2 was seeking to arrange a mortgage, and kept in touch with Mr. Mughal to advise him of the progress. There was no suggestion that the purchaser’s name should be other than as specified by Howard Kennedy.
105. On 11th May 2010, C2 wrote to the mortgage brokers, asking for an update on progress, and this included the following passage:-
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“Myself and wife, Olutola are the joint applicants for the mortgage. Notice for the completion has now been served and the completion notice set for 24th May 2010. The vendor’s solicitor has emphasised that failing to complete on the date may lead to the contract being rescinded and consequently our (my emphasis) deposit being forfeited plus the possibility of facing legal action”.
106. On 14th May 2010, C2 sent an email to Mr. Mughal, to keep him up to date with the situation with regard to “our mortgage application”, and this was signed “Mobolaji & Olutola”.
107. On 24th May 2010, NatWest wrote a letter relating to finance for the purchase, referring to a valuation which had just been received, and this was addressed to “Dr. M. & Dr. O. Laditi”. Similarly, the valuation, dated 13th May 2010, named both as the Customer.
108. C2 and/or C3 have paid deposits totalling £78,750.
C2-3’s evidence
109. Both C2 and C3 are medical doctors, but for convenience C3 has been referred to as Mrs. Laditi. They too, in 2003, had been parties to residential, but not commercial, property transactions.
110. The evidence of C2 and C3 covers two principal topics, first the sales process and whether C2 understood that he was entering into a contract and, secondly, whether he signed on behalf of C3 and if so whether he had authority to do so.
111. As to the first of these topics, having described how he became interested by an advertisement for the ApartHotel, and the sales presentation when he arrived, C2 said the following in his witness statement:-
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“20. After choosing the apartment, I was led to the cashier by the representatives of Galliard and a reservation of £1,000 was paid using a credit card. A receipt was provided.
21. Subsequently, I was directed to the queues of people waiting to see solicitors present at the sales launch. A Galliard representative advised that the firms of solicitors present at the meeting had experience in Apart Hotel projects and would be ready to represent investors that day i.e. 23rd October 2005.
22. I joined a long queue of investors waiting to see solicitors with ushers acting on behalf of Galliard directing people to the solicitors that were free at any point in time. As I got to the front of the queue, I was directed to Lucas McMullan Jacobs solicitors (‘LMJ’) being the firm of solicitors free at the time. There was no question asked by the ushers with regard to whether I had any preference for a particular solicitors firm. I had no previous knowledge or any information regarding the firms of solicitors present at the sales launch on 23rd October 2005. As I recall, I met Mr. Khalid Mughal representing LMJ.
23. Mr. Mughal asked me for my details and that of my wife being a joint purchaser. He confirmed that apartment 687 had been reserved for me and my wife. He asked me to pay his firm’s fee of £587.50 and this was paid using my credit card. He provided me a sales voucher/receipt for the payment. He informed me of the instalment payments of 25% of the purchase price of the apartment spread over two years and that the first payment of 5% deposit was due soon. He had a computer into which he fed some information in relation to the details which I provided him but I have no recall if he had a printer or of being conscious whether or how he produced any particular document whilst I was there.
24. He advised that he would be writing to my wife and me shortly after the sales launch. He asked me to sign one document or possible two documents. I clearly recall signing one being the “Particulars” which was a single page and think I probably signed another being an authorisation for LMJ solicitors to act on my behalf and that of my wife.
25. As I recall, during my meeting with Mr. Mughal, he did not inform me that I was exchanging contracts that day and neither did he tell me that once I signed the documents he was asking me to sign, I was legally committed to buying the apartment or what the consequences of failing to proceed with the purchase would be. I have been shown the “Particulars” sheet for Unit Number 687 signed by me and can confirm that is the sheet Mr. Khalid Mughal asked me to sign. A copy of that document appears at “ML1”, page 5.
26. The “Particulars” sheet I signed was not attached to anything else. I was not told that the Particulars formed part of any other document and there was no suggestion that what I signed was a contract or that it incorporated any other documents.
27. My stay with LMJ solicitors lasted approximately 15 minute and I left the firm’s station with copies of a legal report and the “Particulars” with no signatures.”
112. In his oral evidence in chief, he said that he had been mistaken in naming Mr. Mughal (with whom he had had later dealings) as the solicitor whom he had seen on the day of the sales fair.
113. In cross-examination, C2 said that he knew from his experience with domestic property what was meant by an exchange of contracts. He also accepted that he had seen an advertisement before the sales fair, when he had been discussing with his friend, C4, whether to go to it. Galliard’s advertisements all stressed that there could be an exchange on the day.
114. Nevertheless C2 maintained that he had never imagined that he would enter into a contract on the same day. He left thinking that he had paid £1,000 to reserve the unit and no more. He expected to have a later and more leisurely meeting with his solicitor, as had been the case in his previous property transactions. His evidence is encapsulated in the following passage:-
•
“Q. I assume that you have been told that Dr. Giles can see the imprint of our signature and, indeed, the imprint of where it says “Lucas McMullan Jacobs: see rider 10 days”; you can see all those imprinted through on to the page below?
A. Yes.
Q. Do you have an explanation for that? In particular do you have a explanation as to how it is that your signature has gone through on to the page below?
A. It is possible my recollection is wrong, but what made me to be fairly convinced until the report from the expert came to light was that on 23 October 2005 when particulars were signed I have long-standing habit of ensuring that everything involving documents I need to sign in any situation I would make sure that I go through thoroughly, sometimes to the frustration of (inaudible) and I can’t imagine sitting down with multi pages document and I was advised to sign the front page without having to look at the rest of the pages. It is not my style of operation when it comes to contracts or any other document where it is legally binding, so I am surprised that I signed a document which appears to contain some other document based on the expert report if we say we could take the expert report as being valid. Other than that, you know, the only thing I can say is perhaps my recollection was wrong. Given the pressure situation on day one or the day I went there, potentially possible papers were just shoved in front of me and I signed and I didn’t have the time, which if I had enough time maybe I would have looked into it and made the time and I read through the documents. The atmosphere was very (inaudible) and the solicitor could not wait to get you out of his way as soon as possible to allow other customers to be attended to and obtain his fee. That was my impression which is very much distant apart from the experience with the solicitors when we bought our property in 2001 and we went for quite a number of hours looking at the contract, identifying what was acceptable to us and then defined which bits we were not happy with and taking necessary action to make sure the contract was amended. I don’t think anyone would say there was sufficient time with any solicitor going through the contract and ensuring that everyone was happy with the contract.
I can say to you now that if indeed I signed particulars laid on top of other documents, it was probably shoved in front of me and I was requested to sign. Yes, I did sign it, you know, but did I know signing a contract? I would maintain I did not know that I was signing a contract and if I had known that a contract was what I was being have to sign, I would probably have taken some measures to look at all the pages carefully before signing, so that is my view in relation to the question which you advance me.”
115. There are two difficulties with his account. The lesser difficulty is that he did not react to Mr. Mughal’s letter of 26th October 2005. He said that he was surprised by it, but did not protest, and paid the further deposit, because he wanted to proceed and had in the meantime looked through the legal report and had found nothing untoward. Even so, it is still difficult to understand why he did not go to see Mr. Mughal to discuss the situation.
116. The greater difficulty however is his signature of the instruction memorandum instructing LMJ to proceed to an immediate exchange, as to which his evidence was as follows:-
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“[THE DEPUTY JUDGE] Q. Do you normally read documents before you sign them?
A. I do, and I’m obsessively known to read documents line by line, but on this occasion what happened, don’t know, my Lord.
Q. But if you had read that, line by line, you would have understood what it meant, would you not?
A. I would.
Q. Yes. Thank you. Do you have any questions arising out that, Mr. Rainey?
MR. RAINEY: Just the one, just so that we are clear. (To the witness). This is the final question. Are you saying that you did not read it, do not remember, what? Can we just be very clear.
A. It’s very unlikely that I would not have read before I signed it, but at the time I wrote my statement I said it was probably possible that I signed an instruction to the solicitor. On the day of the fair did I fully read and – I’m sure I read it, you know. I can’t make any excuse at all. I’m sure I did.
Q. Can I ask you whose handwriting is it with the address and your email and telephone number?
A. That’s my handwriting.
Q. Because it follows from that that the document must have been in front of you for long enough for you to fill all that in, does it not?
A. (No audible reply)”
Conclusion on the facts
117. My conclusion on this issue is the same as in the case of C1, and for similar reasons. C2 was an honest witness, who believes that he acted as he would normally have acted. But I think that, anxious to secure the property and in the fevered atmosphere of the sales fair, he threw caution to the wind. Indeed, this is clear from the fact that he signed the Particulars page (as I find) without the consent of his wife, which he would not normally have done.
118. In her evidence, describing her annoyance that he had paid over £1,000, as she understood it, to reserve the property, C3 said that he had located a unit in a certain spot and had had to act fast; the board showed desirable units disappearing fast. I think that this explains his uncharacteristic behaviour. Although I did not have the evidence of Mr. Bloom, I think it probable that, as an employee of Howard Kennedy and operating in the midst of his colleagues, he would like them have followed the legal report and the crib sheet. As in the case of C1, the signature of the instruction memorandum is both conclusive on the issue of whether LMJ had authority to exchange, and compelling evidence that C2 understood at the time that LMJ would be entering into a contract on his behalf.
119. In addition to the points on the draft lease and the income guarantee, which I have already dealt with, Miss Stevens-Hoare submits that the handwritten words on the Particulars page and at clause 36, and the rider itself, were added after C2’s signature, and that section 2 was therefore not complied with. I reject this submission for two reasons. First, it is clear from the evidence that the 10 days free stay concession for units over £300,000 was agreed at the latest by the beginning of the sales fair, so that multiple copies of the rider written out by Mr. Philips would have been available. I accept Mr. D’Este-Hoare’s evidence that there is no reason why the contract would not have been handed to LMJ in its complete form, with the rider attached to the rest (taking into account other evidence, by staple), and would have remained in that form at the time of C2’s signature. The physical evidence suggests that this may not have been so in the case of C4-5, but there is no such evidence in this case. Secondly, even if the rider had not been attached, it would have been LMJ’s duty, as Mr. Rainey submits, to ensure that the contract was complete, including the absent concession in favour of their client, at the time of exchange. If the concession was absent from the contract at the time C2 signed, it was their job to add it, and they had authority to do so: cf Gavaghan and see para. 14(g) above.
120. It is true, as Miss Stevens-Hoare submits, that best practice has not been followed, because Mr. D’Este Hoare’s annotations are not initialled, but it does not follow that they were not present when C2 signed and it is in any event clear that they were present by the time of exchange, as they are on the copy in LMJ’s files.
The evidence on C2’s authority to contract for C3
121. On the other question, relating to C2’s authority to sign for C3, it is unnecessary to rehearse the evidence in great detail. I accept C2’s and C3’s evidence that C3 was, throughout the day, looking after their two children, aged 1 and 2, was outside the hotel for most of the time, was paying little attention to what was going on even when inside, and was anxious to get away, having other plans for the day and no intention of staying so long.
122. I also accept C2’s and C3’s evidence that, whilst any purchase of a property would normally be made by them jointly, C3 never authorised C2 to enter into a contract on her behalf without her consent, and that she did not on this occasion know that he was entering into a contract, or consent to his doing so on her behalf. All she knew was that C2 had paid £1,000 to reserve the unit, and she was quite annoyed about that. It is not entirely clear when she was told this, but it seems probable that it was either when she was outside, by telephone, or during one of her sporadic visits inside. It may well have been before C2 had signed the Particulars page. In any event, I accept her evidence that she was unaware that C2 had entered into a contract, let alone that he had purported to do so on her behalf, on that day. I also accept C2’s evidence that Mr. Bloom did not ask him whether he had authority to sign for his wife.
123. It is clear from both C2’s and C3’s evidence that she was angry about the whole thing from the start, and increasingly so when she learned (as she did) that further and more substantial deposits had to be paid, for which she had to make some contribution. She did not think that the family could afford it, and the tension over this resulted in C2 telling her as little as possible. He was away working during the week, and she had a full-time job as well as two small children to look after. Dealing with a contentious matter was the last thing that either of them needed. Obviously, he ought to have told her that he had signed the Particulars page on her behalf, but he did not do so; he was anxious to minimise trouble, and hoped that she would eventually be reconciled to what he expected to be a good investment. So she probably would have been but for the wider events of 2008, resulting eventually in the failure in 2010 to get a mortgage.
124. C3 was a patently honest witness, and I accept her evidence as what happened later, which can be summarised as follows:-
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(a) She did not see, and was not aware of, the letter of 26th October 2005 in which Mr. Mughal referred to a contract having been entered into by C2 and herself.
(b) She knew about the more substantial deposits which had to be paid, and realized that they must denote “some kind of commitment”, but did not appreciate that there must be a binding contract, let alone one to which she was a party.
(c) She knew of and participated in the attempts to raise the finance during 2010 and intended, if they resulted in the successful purchase of the property, that she and C2 would own it jointly.
125. Clearly, C3 must have become aware, at some time before the proceedings were brought, of the Particulars page and of the letter of 26th October 2005, since they were referred to in the Particulars Claim. But there is no evidence that she was aware at any earlier stage of the fact that C2 had signed a document showing her as Purchaser 2, and it has of course always been both C2’s and her own case that the Particulars page did not incorporate any other contractual terms.
126. Therefore, the defendant’s difficulty in establishing its case on ratification (discussed below) is that it has not been established that C3 knew, at the time she participated in the mortgage application, or at any other relevant time, that C2 had purported to enter into a contract on her behalf. The closest one gets to such knowledge is the following exchange in cross-examination.
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“MR. RAINEY: Let us take it from there. You now know sitting here today that there was a contract exchanged on the day?
A. Yes.
Q. And you knew when the claim was issued a couple of years ago, so you knew then. I am just trying to go back in time. There comes a point in time between the sales fair and now which you realised there was a contract. Can you tell us at what point you say you realised there was a contract.
A. I think for sure some time early in about 2010 when we moved to Inverness.
Q. Is there anything which sticks in your mind as to how you can place the moment in time roughly when you found out?
A. Yes, what happened then was we had just, I think we just purchased a house in Inverness I think my husband was saying something about employing him to source for a mortgage for this project.
MR. RAINEY: Fill in the gap then. So how does that lead you to discover that there was is a contract for the room at the Park Plaza Hotel?
A. Well, I remember him saying the he has to get a mortgage, another mortgage and that is what (inaudible) all right, so now it is a contract I think. I mean I didn’t, there was not any need for me to think about it really, it was just okay. I had the feeling that okay.
DEPUTY JUDGE STRAUSS: You had what feeling?
A. That it had become our property, kind of; if you see what I mean.
MR. RAINEY: I think you have already told us this; you considered your property as in yours and his?
A. Yes.
Q. We have seen at least one, during the search for mortgages there is one email on the bundle which is copied to you to a personal email address?
A. Yes. …
MR. RAINEY: When you were searching for a mortgage your husband told us this morning that there was one point when he I think referred to a feeling of elation that an offer had been obtained which was quite a good one, which he then told us had later been reduced in value because the valuation report came in and the bank dropped the amount of money it was going to lend. Do you remember that?
A. All I remember is he was saying he needs to get a mortgage and looking for a mortgage and the person helping us saying you might be able to, it is hopeful. Some days he would say oh looks promising and then suddenly it was like oh no, it is not going to happen and that was it.
DEPUTY JUDGE STRAUSS: Dr. Laditi, you knew that your husband was using these mortgage brokers to try and get a mortgage for the project?
A. Yes.
DEPUTY JUDGE STRAUSS: And you went along with that?
A. I didn’t feel at that stage there was much I could do or there was any way I could influence anything so I didn’t know that I had a choice really.
DEPUTY JUDGE STRAUSS: Presumably if a mortgage had been obtained, then purchase of the property would have been completed?
A. Most likely.
DEPUTY JUDGE STRAUSS: Looking back to that time, was it your expectation that if a mortgage was obtained and if the purchase was completed, the property would be transferred into both your names.
A. Yes, probably yes.”
127. However, I do not think that this establishes any more than that she knew in 2010 that C2 had entered into a contractual obligation binding on him at some time (not necessarily in 2005, possibly at the time of the further deposits). It does not establish that she knew that he had purported to enter into a contract on her behalf at any time, as opposed to having the intention to ensure that the property which he was buying was transferred into her name.
Ratification
128. I have found that C2 had no actual authority to contract on behalf of C3. It is not suggested that he had any ostensible authority. Mr. Rainey accepts that, if that is the finding, there was no contract, unless and until there was ratification: see Suleman v. Shahsavari [1989] 1 E.G.L.R. 203. However, he submits, if C3 subsequently ratified (a) the contract would become valid with retrospective effect and (b) section 2 would be satisfied as C2’s signature on behalf of C3 would also be retrospectively validated. The first of these propositions is uncontroversial, but the second is not.
129. Mr. Rainey’s argument starts with the proposition that, on the proper construction of the Particulars page, C2 purported to sign the contract for and on behalf of himself and C3. The term “Purchaser” is defined in the agreement as “as set out in clause 5 of the Particulars”, and the Particulars clearly name C2 and C3 as Purchaser 1 and Purchaser 2. The obvious meaning of “Signed for and on Behalf of the Purchaser” immediately below C2’s signature is that he was signing for and on behalf of both the persons encompassed by that term as shown on that page. I agree with this submission, and I think that it is also supported by a background fact known to both parties (and therefore to a hypothetical objective observer), namely that no effort had been made to obtain a separate signature from C3.
130. Mr. Rainey’s next proposition is that ratification would validate with retrospective effect a contract which complied with section 2. This is because there would then be a contract, signed by C2 on behalf of himself, and on behalf of C3 with her authority, containing all the terms agreed between them and the defendant, which is all that section 2 requires. Nothing in section 2 alters the law of agency and the retrospectively validated signature by an agent, acting within the scope of his actual or ostensible authority, is sufficient.
131. Miss Stevens-Hoare submits that this is wrong. She submits that there is no authority on the relationship between section 2 and ratification, but that in principle the effect of section 2 is to render the contract void, in which case it cannot be revived by ratification. One cannot bring to life a void contract, and section 2 had rendered this contract void at the time of exchange.
132. I agree with Mr Rainey’s submissions on this point. I can see no flaw in their logic, and the underlying basis of Miss Stevens-Hoare’s submission, namely that it was section 2 that made the contract void on 23rd October 2005, is in my view incorrect. Section 2 is not engaged unless there is first an agreement which would, subject to compliance with it, be a binding contract: see Commission for New Jersey v. Cooper (Great Britain) Ltd [1995] 2 E.G.L.R. 113 at 123 J-L. In this case, there was no such contract on 23rd October 2005, because one of the parties to the intended contract did not enter into it. Therefore, no question of compliance with section 2 arose, and non-compliance with section 2 was not the reason why the intended contract was void or ineffective.
133. However, for reasons indicated earlier, I cannot see how it can be said that there has been any ratification by C3 once I believe, as I do, her evidence that she did not see or know of Mr. Mughal’s letter of 26th October 2005, which would have told her that C2 had entered into a contract on her behalf. Mr. Rainey submits that C3’s evidence that she participated in the efforts to obtain a mortgage with the intention of becoming a joint owner of the property is conclusive on the question of ratification, and it certainly would have been if she had known that a contract had purportedly been entered into on her behalf. But, as Miss Stevens-Hoare submits, it is trite law that there can be no ratification unless the party concerned knows the circumstances relating to that which he is said to have ratified: see Bowstead on Agency para. 2-067. The extent of the knowledge of the circumstances required may in some cases be debatable, but in the absence of any evidence that C3 knew even that C2 had entered into a contract purportedly on her behalf at the sales fair, or at any other time, it cannot be said that she had knowledge of the act which it is claimed she ratified. For this reason, she never became bound by the contract.
134. Mr. Rainey also submits that C3’s counterclaim for the return of the deposits (or such part of them as she provided) was an act of ratification, but this cannot be right. The suggested act of ratification, i.e. the counterclaim, is a document which denies the existence of the contract which requires ratification in order to be effective.
Constructive trust and estoppel
135. Mr. Rainey submits in the alternative that there is a constructive trust in favour of the defendant, alternatively that the claimants are estopped from asserting any rights to repayment of the deposits, essentially on the ground that it would be unconscionable or inequitable for them to do so having regard to the fact that they maintained the contract in being until it proved difficult or impossible to obtain a mortgage in 2010. These submissions cannot apply to C3, for the reasons discussed earlier, and there would have to be an enquiry as to how much of the deposits she provided. But in any event, I reject both submissions for the following reasons:-
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(a) The defendant has chosen not to pursue its obvious remedy, namely an action for breach of warranty of authority against C2, which would have enabled it to recover its exact loss, whether greater or smaller than the amount of the deposit attributable to C2, and to set off any amount recovered against C2’s claim. The natural assumption is that the reason for the absence of such a claim is that the defendant cannot prove loss.
(b) Although the defendant has argued that the unit could have been put up for sale at any time, the units have not all been sold and there is no evidence that there would have been a purchaser for this unit who did not buy another unit. Nor is there any evidence of the current price of units. Therefore, the defendant has not established either (i) that there is any actual loss or (ii) that it would suffer a loss if it now resold the unit.
(c) In these circumstances, even assuming that the principles of constructive trust and estoppel are of potential application:-
(i) as to constructive trust, I can see nothing unconscionable in leaving the defendant to pursue a claim for damages against C2, which would enable it to recover its actual loss if any;
(ii) as to estoppel, no detriment has been established; and
(iii) the application of either principle would enable the defendant, in effect, to enforce the contract and to recover a sum which might well be greater than any loss or detriment it has suffered.
(d) The normal case in which constructive trust arises is one in which the claimant has acted to his detriment (e.g. carried out work) in reliance on an informal promise of an interest in land: see for example Yaxley v. Gotts [2000] Ch. 162.
(e) Whether or not a constructive trust of this kind could ever exist in relation to a sum of money, it is clear that it does not in this case for at least the following reasons:-
(i) the circumstances in which the defendant was to be entitled to the deposits are prescribed by the said agreement i.e. if and only if the claimant, in breach of contract, failed to complete; to permit the claimant to take the deposits in the present circumstances would be to enforce the agreement outside the circumstances for which it provided; and
(ii) what makes the retention of the property unconscionable in cases of this kind is that the claimant has provided the consideration for the informal and therefore void contract, which is now irretrievable; the defendant in this case seeks to have the deposit and keep the property, providing nothing. No doctrine based on unconscionability could support this.
(f) As regards estoppel, this might be established if the defendant relied to his detriment on a promise by the claimant not to rely on the statute, but to seek to establish it on the basis only of a continuing promise to perform the void contract would in effect override section 2 and reintroduce, and expand, the abolished doctrine of part performance: cf. Actionstrength Ltd. v. International Glass Engineering IN.GL.EN SpA [2003] 2 A.C. 541.
Conclusion
136. For these reasons, whilst a binding contract was purportedly entered into by C2 on behalf of himself and C3, it fails because he had no authority to enter into it and C3 never ratified it. C2’s and C3’s claim therefore succeeds.
C4-5, Dr. and Mrs. Majekodunmi, unit 688
The documents
137. The documents exchanged for this unit include the following:
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(a) The Particulars page signed by Howard Kennedy for the defendant and for Galliard, initialled by “PW” for AWP (not a witness, and cannot be further identified) and Mr. D’Este Hoare for Howard Kennedy, timed at 3.44 p.m. on 23rd October 2005, showing:-
(i) C4 and C5 as Purchaser 1 and Purchaser 2;
(ii) “Yes” against the rent guarantee line;
(iii) “AWP” as Purchasers’ Solicitors;
(iv) “See Rider – 10 day” in Mr. D’Este Hoare’s handwriting.
(b) The Particulars page signed by both C4 and C5 in an identical form, except that there is a stamp with AWP’s name and address in full.
(c) The remainder of the draft contract including the 10 days free stay rider, disclosed by C4-5 and by the defendant, with “36. See Rider” written by Mr. D’Este Hoare on the one signed by Howard Kennedy in C4-5’s disclosure.
(d) C4 states that he received the Particulars page and the rest of the contract by post from AWP about a week later.
138. Dr. Giles’ evidence establishes that there are impressions of the exchange annotating in the top right hand corner and of “7. See Rider 10 day” on the next page of the contract, but not of C4’s and C5’s signature. Therefore, the Particulars page was not in contact with the rest of the contract at the time C4 and C5 signed, but was at the time of exchange.
139. The line “7. See Rider 10 day” is slanted upwards as if to avoid C5’s signature.
140. No correspondence following 23rd October 2005 between AWP and C4-5 has been disclosed. The first letter disclosed is a letter from her solicitors, Anjorin & Co., dated 3rd October 2008, stating that it has taken over the file. However, there must have been some correspondence, as (in addition to having been sent a copy of the contract) C4 states that he paid the next deposit of £14,750 in November 2005 at AWP’s request.
141. C4-5 have paid deposits totalling £78,750.
C4-5’s evidence
142. C4 is a medical practitioner. C5 is a civil servant. They are friends of C2 and C3. They have bought four residential homes since 2005 and have let three of them. They completed a purchase shortly before 23rd October 2005. C4 understood the meaning of exchange.
143. After describing the earlier stages of his attendance at the sales fair, C4 described his interview with the solicitor at AWP as follows:-
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“15. We were directed to a sales representative. She asked us to which of the units we wanted. We pointed to unit 688 on the booklet which had been given to us. Having chosen unit 688, we were directed to the cashier to pay a reservation fee of £1000, which I did. After paying we were ushered to join a queue to speak to one of the solicitors. When we got to the front of the queue my wife and I were directed to Alan Winter Peace & Co (‘AWP’). We were not given an option to choose a solicitor but directed to the next available solicitor, which happened to be AWP. We spoke to a solicitor from AWP. The Galliard staff appeared to be directing people to solicitors depending on which one was free when you got to the front of the queue.
16. The solicitor told us about the scheme He did not talk about the terms of the purchase. He did not tell us about the lease or anything about the structure of the investment. He did not say anything about entering into a contract that day. The solicitor did not advise us on the legal implications of signing any particular document. He did not ask me at any point if I had funds or was satisfied I could raise funds to pay for the unit allocated to me. He told us how lucrative the investment was and gave us a thumbs up for choosing that particular unit. He jokingly said I may have to do extra hours as a doctor to come up with the deposit. My wife and I spent less than 10 minutes with the solicitor from AWP. We issued a cheque, for £587.50 to the solicitors.
17. The solicitor had a computer and a printer. My wife and I then signed a sheet of paper headed “Particulars” that he gave us. It was definitely a single sheet, not attached to anything else. Nothing was said to us about any other document being incorporated in the sheet. In fact, no other document was mentioned. I cannot recall being told that I was signing a contract. We were not shown any other documents by the AWP solicitor. The solicitor handed the signed sheet to a lady who gave it to (as I thought at the time) one of Galliard’s solicitors. That solicitor signed the sheet and handed it back to the lady who brought it back to our solicitor. I have been shown the “Particulars” sheet for Unit Number 688 signed by me and that the one we signed was handed to the solicitor who appeared to write something on it and I am not sure which of them then held on to that document. My wife and can confirm that is the sheet we were asked me to sign. A copy appears at “OM 1”, page 1. We were not give any other document to read. The solicitor said they would post a copy of what we had signed to us.
18. The rider on the “Particulars” sheet was handwritten. It was added by the solicitor while we were with him at my request because I had been told that if you bought a suite for more than £300,000 you would be entitled to 10 days a year in the unit at the hotel for free.
19. … We received some documentation the “particulars” by post from AWP after about a week. [Identifies the Particulars page and the rest of the contract] …
30. As I have said above, at the end of October 2005 I was sent a copy of the contract by AWP including the particulars with NK’s signature on it. This was the first time I had seen the body of the contract. It was also the first time I had been anything with NK’s signature on it or reference to the Defendant.
31. As I have set out above, on the days of the sales fairs all I saw and all I signed was a single sheet of paper. I did not see or sign a multiple page document.”
144. C5’s witness statement supports her husband’s, but she said in cross-examination that (like C3) she had been unhappy about the whole thing and had wanted to get away as soon as possible. She was there in body but not in mind. I cannot therefore place much reliance on her evidence.
145. In his evidence in chief, C4 said that he was no longer sure that the solicitor he saw had a computer and printer. He added that, when they were about to leave, and had reminded the solicitor of the 10 free nights, the rider was produced and pulled together with what he demonstrated as a kind of stacking motion (whether by the solicitor or someone else was not clear); the solicitor then said that they would be sent a copy.
146. It was clear from C4’s cross-examination that his recollection was hazy, but:-
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(a) He was adamant that all he saw at the time of signature was a piece of paper with a few lines i.e. the Particulars page.
(b) He was adamant that he did not sign an authority or instruction to AWP to act.
(c) He knew what ‘exchange’ meant namely that “you were going to buy” but all that he had exchanged was the Particulars page.
(d) The solicitor had given little or no advice, but had referred to the deposit and had joked that he would have to work harder.
(e) It was the solicitor who pulled the pages of the rider together with the Particulars page with both hands; he rejected the suggestion that it was a much thicker stack of paper.
(f) He understood that the process was one of exchange; he came away believing that he was obliged to raise the 25% deposit, and that Galliard was not entitled to sell the unit to anyone else.
(g) When he received the letter with his Howard Kennedy signed version of the contract, it was no surprise as it was what he expected; he and C5 then made the various deposit payments.
Conclusion on the facts
147. Because of the peculiarities in the documents and the absence of “PW” (even Ms. Henriquez’ evidence does not identify him/her), it is difficult to be sure exactly what happened in this case, but on the balance of probabilities I find that it was as follows:-
•
(a) The Particulars page was not attached to the rest of the contract at the time of signature; it is possible, as Mr. Rainey submits, that some other document was placed between the Particulars page and page 2 at the time of signature, but in my view this is the less likely explanation.
(b) However the rest of the contract was on the table and PW explained its main terms to C4 and C5. I can believe that there was a failure to carry out the difficult stapling, or that the documents came temporarily adrift, but not that there was a complete failure by Howard Kennedy, not noticed by AWP, to hand over all the terms to be exchanged.
(c) I accept C4 and C5’s evidence that the rider was missed out, and the reference to it on the particulars page and the rider itself added after signature – at C4’s request.
(d) It is clear from Dr. Giles’ evidence (para. 138 above) that the contract was assembled in complete form by the time of exchange.
(e) It is more likely than not, despite C4’s evidence, that C4 and C5 completed an instruction letter in the form reproduced at para. 59 above.
(f) C4 and C5 knew that there were detailed contract terms which had been at least outlined to them and which they would be bound by once they signed the Particulars page; hence C4’s expectation that they would be sent exactly what they received, and his understanding that they were obliged to pay the further deposits. He did not choose to read the terms, and nor did C5.
(g) It is difficult to reach a conclusion as to exactly when the contract was assembled; it is likely that AWP handed it over in loose form, stacked but unstapled, and Howard Kennedy stapled it.
Conclusion
148. On these facts, I conclude that AWP concluded a contract on C4-C5’s behalf by exchanging the Particulars and the other contract terms and had actual authority to do so.
149. On section 2, I do not consider that the lack of a staple any difference. Given the content of the relevant pages, and the intention of both solicitors who were parties to the exchange to conclude a contract on these terms, they constituted one document.
150. On the detailed points:-
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(a) I consider that AWP sufficiently identified the purchaser’s solicitors.
(b) It does not matter that the references to the rider were added after signature (but before exchange); AWP were explicitly asked by C4 to add them.
(c) Nothing turns on the absence of “36. See Rider” on the contract signed by C4-5. This adds nothing to the reference to the rider on both particulars. A material difference between exchanged documents invalidates the contract, but this is not a material difference: see Harrison v. Battye [1975] 1 W.L.R. 58 at 60 per Lord Denning M.R..
C6, Mr. Oladjide – Unit 587
The documents
151. The documents exchanged include the following:-
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(a) a Particulars page initialled IH/NB (Mr. Bolland, not a witness) dated 23rd October 2005 and timed at 1.58 signed on behalf of the vendor and Galliard, disclosed by C6 and showing:
(i) “yes” in the rent guarantee line;
(ii) AWP as the purchaser’s solicitors and “7.10 day Rider – see attached Rider.”, partly (up to “Rider –”)in the handwriting of Mr. D’Este Hoare, and partly in a different handwriting.
(b) The corresponding Particulars form similarly dated and timed and signed by C6, disclosed by the defendant showing:-
(i) “Yes” in the rent guarantee line.
(ii) An AWP stamp with its full name and address.
(iii) An additional line “Rider 1 – 10 free days in hotel (see attached rider)” in Ms. Henriquez’ handwriting.
(c) The remainder of the contract, including the 10 free days rider attached, disclosed by both C6 and the defendant with, “36. See Rider” handwritten by Mr. D’Este Hoare on the agreement in C6’s possession.
152. Dr. Giles’ evidence about the contract is that, in addition to the imprint of the signature on the Particulars page, the next page also has the imprint of another signature (possibly the instruction letter: see below).
153. On the back of a document given to Mr. Oladjide during the presentation stage of the sales fair, one of the Galliard representatives has written some notes, and next to the words “Unit 587 £305,000”, Mr. Oladjide himself has written “Isabel”, which is the first name of Ms. Henriquez. Ms. Henriquez also signed a receipt on behalf of AWP for payment of £588 by debit card on account of their fees.
154. C6 also signed an instruction letter in the form set out at para. 55 above, and he has disclosed a copy of the legal report referred to at para. 60 above.
155. On 26th October 2005, Louise Ward of AWP wrote to C6 about the purchase. The opening words of the letter were:-
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“Further to your exchange of Contracts on 23 October I now enclose herewith a full copy of the Contract duly signed on behalf of the Vendor. As you are aware under the terms of the Contract which you have entered into you are liable to pay the balance of the 5% deposit within 21 days…which means that the balance of £14,250.00 is payable on 13 November next.
156. There followed confirmation that AWP’s fees would be £1,000 + VAT + disbursements, details of the further deposits due subsequently and a standard Purchase Questionnaire Form and Standard Power of Attorney relating to stamp duty.
157. C6 paid deposits totalling £76,250.
C6’s evidence
158. C6 was by profession a senior auditor with Cineworld. He had bought both residential and buy to let properties in the past, properties for himself. He knew what was meant by the exchange of contracts.
159. After dealing with the early stages of the sales fair in his witness statement, he described seeing AWP in the following terms:-
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“25. At about 1.15PM I joined the queue to the cashier’s desk to pay £1,000 reservation deposit. This took about 5 minutes. My credit card details were recorded by a manual franking machine and I received the top copy of the credit card paper showing 587 One Westminster and £1,000. The slip appears at “BO 1”, page 12. I was asked to take this to one of the solicitors.
26. I then joined the queue to the solicitors’ desks. I was not informed I could choose any particular solicitor or use a different one. It took about 15 minutes before I came to the front of the queue. There was a Galliard representative at the front directing people to a particular solicitor as they became free. When I reached the front of the queue, I was directed to AWP’s desk. The reason I was directed to AWP was because another person had just got up after having finished with them. There were 3 people at the AWP desk and I spoke to the person who was free when I was directed to go to them.
27. The solicitor at the AWP desk, Mr. Nicolas Peace, checked the credit card slip to confirm payment and the unit number reserved. He then asked for my full name and address and entered this on his computer. I recall he had a printer because he printed out two copies of the one page ‘Particulars’ sheet and then applied their stamps to both.
28. I asked Mr. Nicolas Peace for his opinion of the Project. He said he believed it to be a good investment and that there was a huge potential for capital appreciation by the time for completion came in 2010. He said that by the time of completion, the apartment would have increased in value enough to enable me to take out a loan large enough to complete the purchase and still walk away with some cash. He did not say anything about the possibility or the consequences in case I would not be able to secure a mortgage.
29. He told me when the deposit instalments would be due, saying I would be notified well in advance of the due dates to enable me prepare and pay on time. He did not talk about the lease or its terms or refer to any legal report. He did not show me any lease, draft lease or any legal report. I asked where their offices were based. He gave the address and also gave me a AWP document wallet. I did not look inside the document wallet, neither was I told to look at it then or later.
30. He then gave me the one page “Instruct Solicitor” sheet and two one page “Particulars” sheets and asked me to sign them. I signed the “Instruct Solicitor” sheet and one of the one page “Particulars” sheet and he took these back. I have been shown the “Particulars” sheet and the “Instruct Solicitor” sheet for Unit Number 587 signed by me and can confirm that these are the two sheets of paper Mr. Peace asked me to sign. Copies appear at “BO 1”, pages 13-14. I can confirm that both were single sheets of paper when I signed them and that they were not attached to anything else. Mr. Peace did not mention any other documentation. There was no suggestion that the “Particulars” sheet was a contract or that it incorporated any other documents.
31. The rider was not on the “Particulars” sheet that I signed, nor on the unsigned copy which I kept in the document wallet. I recall that Gerard Nolan said during the presentation that there was an offer available for apartments of £300,000 and above for purchasers to stay 10 nights per year free. I do not recall seeing anything in writing about that on the day of the fair.
32. I kept one unsigned “Particulars” sheet in the document wallet, namely the copy which appears at “BO 1”, page 15. Mr. Peace then informed me that they would need to take a payment of £558.00 towards their fees for acting for me on this matter. I paid this by debit card on a manual franking machine. I was given a copy of the franked slip and a handwritten receipt which I kept in the document wallet. A copy appears at “BO 1”, page 12. I spent about 15 minutes with AWP solicitors. I left them around 1.50pm. When I got up to go, Mr. Peace also got up. He took the front page “Particulars” sheet which I had signed and walked over to place it on a desk a few paces towards the presentation area. I did not know whose desk it was at the time. I saw him place the single sheet on this other desk and he returned to his own desk.
33. I hung around for a few more minutes and left the event just before 2pm.
34. I want to make it clear that I did not think for a second that I had purchased unit 587. I thought I had reserved unit 587 to purchase at a later date and that I had instructed AWP to act for me in that purchase. I did not appreciate at all that anyone would suggest the single sheet of paper I signed was the contract for the lease. That was not explained to me and it was not what I understood happened.
35. The AWP document wallet and the Galliard promotional literature were the papers I brought back with me on the day. At a later date, I discovered that the legal report was in the wallet but it was not shown to me or mentioned on 23rd October 2005 when I attended the sales launch.”
160. In his oral evidence in chief, he said that he was not certain that the solicitor had a printer, or printed the form he still maintained that he had had a computer.
161. C6 was cross-examined at length on 2 occasions. Again I do not think that he was deliberately untruthful, but I did not find his evidence to be satisfactory or reliable:-
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(a) He was adamant that the person he saw was Nicholas Peace, but that cannot have been so as Mr. Peace did not take any part in the sales fair except for helping to set it up. It is clear that the person who saw him was Isabel Henriquez, who initialled the exchange, and who said that, if this is the exchange with which he was concerned, she would also have advised the client about it.
(b) At one point in his evidence, C6 said that, if a woman dealt with him, it would or might only have been to take the payment; I think that this was a desperate guess, not a genuine recollection.
(c) His initial evidence about the printer and the computer, his evidence about the solicitors having their backs to the wall and his evidence that he had no piece of paper at all by the time he reached the solicitor are all wrong.
(d) C6 was also adamant that he left without any piece of paper evidencing the 10 days free stay; it is inherently improbable that he would have done so.
(e) I do not believe that C6 would not have read and understood the letter of instruction.
(f) C6 had no real explanation for not in any way reacting to AWP’s letter of 26th October 2005 (“I … just thought it was the next thing you had to do…”), if in fact he had no idea that he had done any more than reserve a unit, or for paying the deposits without question.
162. While I doubt if Ms. Henriquez would have been able to cover all the points in the complex legal report, I accept her evidence that, in substance, that is what she did. Having heard her evidence, I find it inconceivable that she would not have made it quite clear to C6 that he was, by signing, contracting to buy the unit. I find, as I have in the other cases, that it was explained to C6 that there were detailed contract terms attached to the Particulars page that he was asked to sign, that she explained the substance of the terms to him, and told him that she would proceed to exchange contracts on his behalf. I find that the Particulars page was attached, probably by a staple, to the contract terms including the references to the rider and the rider itself, and that C6 was told this. Even if contrary to my finding, the Particulars page had not been attached to the other contract terms, Ms. Henriquez had authority to assemble the document before exchange; it was her job to proceed to exchange on the terms that she had explained in accordance with C6’s written instructions.
Conclusion
163. For the above reasons, I hold that there was a contract between C6 and the defendant, and that it complied with section 2. “AWP” sufficiently identifies the purchaser’s solicitors and the minor differences between the references to the rider are of no significance, as they do not result in a material difference between the exchanged documents.
C1, Dr. Rabiu – Unit 906
164. In this case, the usual method of producing the Particulars page was employed, and the details were handwritten (see para. 29(f) above). There is no doubt that it was one complete document at the time of signature, printed on both sides so that page 2 was on the back of – and not separable from – the Particulars page. Also, C1 knew by now from previous experience, even if he had not known in October, that he was entering into an immediate contract. So most of the issues discussed above do not arise. C1 paid deposits totalling £48,750.
165. There are two issues on the contract in this case. The first is whether an unsigned Rider providing for a contribution towards C1’s legal fees was part of the contract at the time of exchange. The Rider was not referred to in the Particulars on the first page of the contract, as was the practice in October. However, both of the exchanged copies of the contract did have a handwritten reference to the Rider in the same position as was employed in the October contracts. Miss Stevens-Hoare concedes that, if this was there at the time of exchange, then the Rider is incorporated by reference, and there can be no question but that, if it was, this was done with the authority of C1. Mr. Rainey submits that it is likely, given the efficiency of both firms’ operations, that this would have been done at the time of exchange and was not an afterthought; there is no evidence to support the suggestion that it was.
166. Miss Stevens-Hoare submits that the procedure adopted in this high pressure situation was not infallible, as the mistakes made in the case of C2-3 demonstrate, and that there are indications that there was a mistake here too:-
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(a) Amendments to clause 4 of the contract terms were carefully initialled by both solicitors on both of the exchanged documents: the addition to the contract referring to the rider was not.
(b) The evidence shows that another change was probably made to a copy of the contract sent by Howard Kennedy to LMJ on 3rd March 2006, inserting C1’s first name.
(c) The expert evidence suggests that when the contract was disclosed by C1, the terms were not located in the same place in the contract as when Howard Kennedy signed it.
167. It is impossible to be certain, but I have concluded that, despite the undoubted oddities in the documents, the correct conclusion, on the balance of probabilities, is that the references in the contract terms to the rider were added by the time of exchange.
168. Even if I had concluded otherwise, the defendant would have succeeded on the second point. There was again a variation agreement dated 15th May 2006, reducing the price of this unit, in the same form as is set out in para. 76 above. By this stage, the copy of the contract which was annexed to the Memorandum of Agreement must on any view have included the words referring to the rider. Therefore, there would then have come into existence a binding contract which complied with section 2.
Conclusion
169. For the reasons stated above:-
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(1) I reject the claimants’ arguments on the identity of the purchaser’s solicitors, the identification of the draft lease, and the use of “Yes” instead of “applicable”.
(2) I hold that there were valid contracts between the defendant and C1 (units 540 and 906), C4-5 (unit 688) and C6 (unit 587), which complied with section 2.
(3) I hold that there was no contract between the defendant and C2-3 (unit 687), because C3 never became a party to the proposed contract.
170. I have not thought it necessary to answer the Revised Issues one by one, but I hope that the answers are contained in the above. If not, counsel are invited to let me know, and I would be grateful if they would seek to agree a draft order.
