Contract for sale of flats – Claimant purchaser intending to pre-sell flats to individual subpurchasers – Defendant vendor to serve notice when each flat “finished” as defined in agreement – Completion notices served but many subpurchasers failing to complete – Claimant alleging late service of completion notices – Whether claimant entitled to damages on basis of loss of chance that more subpurchasers would have completed had notices been served earlier – Claim dismissed
The defendant’s parent company was involved in a riverside development of two blocks of flats in London E14. In June 2006, the claimant entered into an agreement with the defendant to purchase one of the blocks for approximately £43.5m and paid a deposit of 10%. The block was to comprise two towers containing 171 flats. The claimant intended to pre-sell the flats to individual subpurchasers. It was agreed that the defendant would serve completion notices on the claimant when each flat was “finished”, as defined in the agreement, and completion of the sale would follow shortly thereafter, save that it could not be required before the end of 2008. A flat would be deemed to be “finished” when: (i) it had been constructed to a point where the tenant could take up full beneficial occupation; (ii) the common parts provided reasonable access to and egress from the flat; and (iii) the common parts on the ground floor of the block and the floor on which the flat was located had been finished save for final finishes. On the date for completion of the sale of each flat, the defendant was to grant a lease of that flat to the claimant unless the claimant had notified it that the lease should be granted to a nominated subpurchaser pursuant to a sale contract concluded directly between the defendant and that subpurchaser. If the subpurchaser failed to complete, the claimant would be obliged to take the lease.
During 2006 and 2007, the claimant found subpurchasers for the majority of the flats, many of whom were in the “buy-to-let” market; 152 paid deposits. In January 2009, the defendant served completion notices in respect of the 69 flats in the north tower, but 57 subpurchasers failed to complete.
The claimant brought a claim for damages against the defendant. It contended that the flats in the north tower had been “finished” by November 2008 and that the two-month delay in serving the completion notices had caused it loss because, in the prevailing economic situation, it had increased the number of subpurchasers that had failed to complete.
Held: The claim was dismissed.
(1) Since the word “block” in the agreement meant the entire block, not merely the north tower, no flat could be deemed to be “finished” until the whole ground floor, which served both the north and south towers, had been completed save for final finishes. Flats in the north tower might therefore be individually finished and available for occupation before the work on the ground floor was completed. The ground-floor works were not completed until January 2009 because the works to the common parts were not completed until then. Moreover, not until that date was there reasonable access to and egress from the flats above the second floor, for which lift access was needed, and not all the works had been carried out to the flats that were required before they could be occupied. Accordingly, the defendant had complied with its obligations with regard to the service of completion notices and no liability was established.
(2) Even if liability had been established, the claimant was unable to show that there was a real or substantial chance of additional subpurchasers completing had completion notices been served by November 2008: Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 applied. In assessing damages for loss of a chance to realise the profit on the lost subsales, it was necessary to take into account the likelihood that the claimant itself would have defaulted on the unsold flats and on those on which the subpurchasers had failed to complete. Moreover, the significant drop in the value of the flats by November 2009 was relevant because, if prices had fallen by more than 10%, subpurchasers would be better off financially by forfeiting their deposits rather than proceeding with the purchase. Valuations of the north tower flats between October and December 2008 had fallen between 12% and 30%. Finance was tighter, especially for the buy-to-let market, and was dependent on valuations. Subpurchasers in that market would also have found it more difficult to let the flats. Subpurchasers could not be required to complete before the end of December 2008, and, given the state of the market, it was unlikely that they could have been persuaded to complete early. Accordingly the claimant could not establish the loss for which it claimed.
Elizabeth Weaver (instructed by Fladgate LLP) appeared for the claimant; Timothy Fancourt QC and Daniel Robinson (instructed by Howard Kennedy) appeared for the defendant.
Sally Dobson, barrister
