Vendor and purchaser — Sale by auction — Failure of purchaser to complete — Alleged misrepresentations in catalogue inducing sale — Purported rescission — Planning permissions — Exclusion clauses — Whether representations relied on — Forfeiture of deposit — Decision in vendor’s favour — Section 49(2) of Law of Property Act 1925 considered
proceedings arose from the abortive sale by auction of a freehold property, a
listed building — Property was knocked down at the auction to the defendant for
£275,000 — The deposit of £27,500 was paid after the defendant’s first cheque
had bounced — Sale never completed — Vendor sought a declaration that defendant
had wrongfully failed to complete and claimed the forfeiture of the deposit,
interest and damages — Defendant alleged that the contract had been rescinded
on the ground of misrepresentation and non-disclosure and claimed the return of
the deposit and other relief — The auction took place on April 23 1987 — After
a second abortive auction sale to another purchaser whose cheque for the deposit
was not honoured, the vendor sold the property by private treaty for £360,000
defendant’s case, which was in large part rejected by the judge, was that he
had relied on misrepresentations of various kinds inducing him to enter into
the contract of sale — Some of these allegations fell to the ground during the
hearing; those that remained concerned mainly alleged misrepresentations as to
the existence of planning permissions — It became evident that the defendant
wished to get out of his bargain, which he had entered into with little
forethought or experience, and was looking round for various grounds to cover
his withdrawal — These included alleged failures to bring matters to his
attention, including an enforcement notice, the fact that the hotel started in
the subject premises was not a going concern, and certain special conditions;
and in the end he complained particularly about alleged misrepresentations
concerning the number of bedrooms likely to be available — The judge concluded
that, even if any of the alleged misrepresentations could be established, the
defendant had clearly failed to demonstrate that he had relied on them
was that there had been no effective rescission of the contract of sale by the
defendant — It followed that the plaintiff was entitled to forfeit the deposit
unless there were any grounds for exercising discretion in his favour under
section 49(2) of the Law of Property Act 1925 — It was suggested on behalf of
the defendant that as the plaintiff had made a ‘profit’ of £85,000 on the
eventual sale of the property by private treaty for £360,000, the deposit
should be returned to the defendant with only deductions for the plaintiff’s
expenses on resale — The judge rejected this suggestion — He also rejected a
claim for damages under section 2(1) of the Misrepresentation Act 1967 —
Finally, although this was not necessary to decide in view of the grounds of
his decision, he rejected a submission by the defendant that the plaintiff was
not entitled to rely on certain exclusion clauses incorporated in the auction
contract on the ground that they were unreasonable — The judge would have held,
if it had been necessary, that the plaintiff had demonstrated their
reasonableness
was declared forfeited to the plaintiff and the agreement for sale held to be
terminated — The plaintiff was entitled to interest and an inquiry as to
damages — The defendant’s counterclaim was dismissed
The following
cases are referred to in this report.
Dimsdale
Developments (South East) Ltd v De Haan
(1983) 47 P&CR 1
South
Western General Property Co Ltd v Marton [1982]
EGD 113; (1982) 263 EG 1090, [1982] 2 EGLR 19
Walker v Boyle [1982] 1 WLR 495; [1982] 1 All ER 634; (1981) 44
P&CR 20; [1982] EGD 1149; 261 EG 1090, [1982] 1 EGLR 133
In this action
the plaintiff, Raymond John Peter Swingler, sought against the defendant, Hukam
Chand Khosla, a declaration that a deposit of £27,500 paid by the defendant
under the contract for the sale to him by auction of Wicken Hall, Wicken,
Cambridgeshire, was forfeit to the plaintiff and that he was entitled also to
other relief. The defendant claimed the return of the deposit and damages on
the basis that he had been entitled to rescind the contract for
misrepresentation.
Nicholas Le
Poidevin (instructed by Rustons & Lloyd, of Newmarket) appeared on behalf
of the plaintiff; Wayne Clark (instructed by Hillman Trivedi & Co)
represented the defendant.
Giving
judgment, MR JOHN LINDSAY QC said: This case concerns the sale by
auction on April 23 1987 by the plaintiff, Mr Swingler, of his freehold
property known as Wicken Hall, Wicken, Cambridgeshire. The property was knocked
down to the defendant, Mr Khosla, for £275,000. The 10 per cent deposit was
eventually paid. The sale did not proceed. Mr Swingler says the deposit is
forfeit to him and claims a declaration that that is so and also some other
relief. Mr Khosla claims that he was entitled to rescind the contract for
misrepresentation and that the deposit should be repaid to him and that damages
for that misrepresentation should also be paid to him.
I shall first
describe the parties and their respective witnesses in a little more detail. Mr
Raymond John Peter Swingler is the plaintiff. He is the assistant director of
the Press Council and was in the employ of the Press Council at the time of the
auction. Before that he had been a journalist. His planning consultant and
professional designer at all material times was Richard Thomas Ambrose, a sole
practitioner who provides an architectural, planning and design service under
the name Richard Ambrose Associates. Mr Swingler’s solicitor in connection with
the sale of Wicken Hall was Michael John Drake, a partner in the firm of
Rustons & Lloyd, of Newmarket. The auctioneers he used in the sale were
Barnard Marcus and the auction was conducted from the rostrum by their Mr Robin
Douglas Cripp, an experienced auctioneer, with the assistance, of course, of
other members and staff of that firm.
All I have so
far named gave evidence before me, as also did John Weatherall, Nathan Anthony
Smith and Derek Michael Bishop, all of Barnard Marcus. Mr Weatherall apart,
their evidence was largely directed to points which ceased to be contentious
and which for that reason I shall not need to refer to in any detail.
On the
defendant’s side there were three witnesses only: the defendant himself, Mr
Hukam Chand Khosla gave evidence. He has been a factory worker at Ford’s
factory for over 20 years. While his spoken English is not good it has not been
suggested that he does not understand either written or spoken English. His
son, Sunil Khosla, also gave evidence. He is a self-employed site manager, now
27 years of age. The defendant’s wife is the sister of the third witness on the
defendant’s side, Mr Arjundev Ghai, a successful property developer who came to
this country in the 1950s with next to nothing and who now has companies with
gross assets in the order of £4 to 5m.
The property
with which the case is concerned, Wicken Hall, is a listed building set in its
own four acres of land in the village of Wicken, Cambridgeshire. It is some 10
miles from Cambridge and six miles north-west of Newmarket. It is said to date
back in part to the 14th and 15th centuries, although it was largely remoulded
in the 1760s and is, accordingly, Georgian in style. It had, when the relevant
events begin, a driveway stretching in a straight line from close to the house
to the nearby road. The driveway ran towards the eastern side of the Hall’s own
land, meeting the public highway close to the church land immediately to the
east.
Mr Swingler
acquired the property in 1966. It was for a time during his ownership used
partly as his, his wife’s and their family’s home and partly for temporary
accommodation for up to 26 US Air Force personnel to whom, I think, rooms were
let, room by room. Mrs Swingler died in 1980 and it was thereabouts that
thoughts of selling the property came to Mr Swingler’s mind. He hoped to keep
the property, and indeed his children wished that he should. He thus turned his
mind to devising ways in which he could either keep the house or, if he had to
sell it, sell it to best advantage. He thought the grant of planning permission
for its use as an hotel would be likely to increase its sale value.
In May 1980
there was a planning application for change of use from multi-occupancy
accommodation, which referred to the US Air Force short-term lettings, to use
as an hotel. Mr Swingler had, in March 1980, consulted Mr Ambrose as planning
consultant and he had prepared the application. The local authority granted
such planning permission on August 1 1980. The grant referred to the plans
which had then been submitted. It was a condition of the grant that the old
straight driveway’s access to the highway should be closed ‘permanently and
effectively’ before any development work was commenced. The plan referred to in
the grant showed a new crooked driveway. It also showed a projected house for
the manager of the hotel. It showed the site of the existing building,
describing it as follows: ‘Existing three-storey building, The Hall, contains
sleeping accommodation to 10 people.’
The plan also
showed what might be described as three prospective extensions, to the east, to
the west and to the south of the existing building. As to the eastern
development, this was shown on the plan and was described as ‘New two-storey
wing with five double bedrooms over public rooms.’ The western development was shown and
described as ‘New two-storey wing with five double bedrooms over reception
rooms, bar etc.’ A dining-room and
kitchen were also indicated as part of the western development. The southern
development, an L-shaped development joining the eastern development at the
southern end of that development and then running first north/south and then
dog-legging westwards, was described as to the north/south stretch as ‘New
two-storey wing with staff accommodation over garaging’, and as to the dog-leg
as ‘New single-storey stabling for six horses.’
Although the
1980 planning permission was in terms as to use only ‘Change of use from
multi-occupancy accommodation to hotel’, a number of the conditions related to
the developments shown on the plans. Condition 1 required that no work should
begin until detailed plans and elevations had been approved. Condition 7
specified the facing materials to be used in the development. Another condition
described the application as having been made for outline permission only and
stated that it gave, in some respects, perhaps as to parking, insufficient
detail of the proposed developments.
On a fair
reading of the 1980 planning permission, the reader would take it that subject
to the provision of further detailed drawings and to the making of suitable
arrangements for joining the highway and some other minor details, the local
authority had no objection to substantial development of the Wicken Hall site
along the lines broadly shown as the eastern, western and southern
developments, nor to the use of the existing building, nor as and when
developed, the extensions, as an hotel. Mr Ambrose’s evidence was that the 1980
planning consent would expire on August 1 1983.
Notwithstanding
the grant of the 1980 planning permission, Wicken Hall continued to be
described as being used for multi-occupancy occupation. At any rate it was so
described in the next relevant planning application, which was made, again as
prepared by Mr Ambrose, in December 1983. On February 13 1984 the local
authority gave permission for ‘Renewal of application for change of use to
hotel incorporating alterations and extensions.’ The grant referred to a plan dated December
19 1983. As had been the case in the 1980 grant, the local authority were
concerned about access to the highway and required the then still existing
straight driveway’s junction with the highway to be permanently closed and the
new one to be opened prior to the commencement of the proposed works of
development.
This 1983
grant was not for a change of use only but, more plainly than had been the 1980
one, gave consent for the extensions shown on the accompanying plan. Moreover,
it was not expressed in any way as being merely an outline consent. Mr Ambrose
saw this permission as running to February 13 1989. It was thus current at the
date of the auction. There were in fact four plans describing the approved
proposals and they, as it were, amended and fleshed out the proposals for the
eastern development as proposed in 1980. The plans did not deal with the
proposed southern development at all and only barely with the development to
the west of the existing house.
Plan 10, E1,
showed detailed proposals for the ground-floor level. Plan 11, E2, showed the
proposals for the first-floor level. These included five bedrooms within the
existing building, one bedroom as being a new first storey over an existing
ground-floor building, and another bedroom, and a large hall-like area with
three double French windows leading on to a terrace. This area was marked
‘Billiards’. There was also provision for male and female lavatories and the
staircase. It thus showed seven bedrooms as such and the large hall at
first-floor level. The second floor plan, E3, plan 12, showed, inter alia,
a further three bedrooms, all within the existing building. Accordingly,
detailed planning permission was in 1983 obtained for, inter alia, a
large area marked ‘Billiards’ and for 10 bedrooms, of which two were in new
buildings and eight in the existing building. The billiards area would,
however, be capable of amendment within its exterior size and shape to contain
another five bedrooms and associated corridor space. Mr Ambrose said it had
been designed so it could be converted. New windows would be necessary if
bedrooms were to be installed in that area, and an amendment to the approved
plans would be needed for that. Mr Ambrose said a new planning application
would not be warranted.
The five
bedrooms would be double rooms, each surpassing in area the then requirements
of the East Anglian Tourist Board. The layout would need fire approval, but in
view of the proposals containing a reference to a terrace at first-floor level
and a staircase to the ground floor, Mr Ambrose thought the conversion from
proposed billiards area to proposed five bedrooms had the potential to comply
with the fire prevention officer’s requirements. Mr Ambrose said that the local
authority as planning authority were in general not concerned with the interior
layout of the proposed buildings and he saw the amendment for five bedrooms in
the area marked ‘Billards’ as a minor amendment which the planners would
indicate would be an acceptable one.
Accordingly,
as far as bedrooms and detailed planning permission are concerned, the position
in February 1984 was that there was planning permission for the use of 10
bedrooms as hotel bedrooms, two of which were unbuilt, eight of which were in
the existing building, and there was detailed planning permission for the erection
of a building originally described for billiards which could be expected, by
simple amendment, readily to achieve permission for use as a further five
bedrooms, making 15 in all — eight in the existing building, and seven in areas
as yet unbuilt.
In July 1985
Mr Ambrose, on Mr Swingler’s instructions, made another planning application.
It was for a renewal of the 1980 permission for change of use from
multi-occupancy to hotel. The permission, which referred to a plan, was granted
subject to conditions on October 10 1985. It was still current at the date of
the
driveway access was to be provided and the old one to be closed within 28 days
after the bringing into use of the new one. As in 1980, although nominally
relating only to use, the conditions included ones relating to building works.
The grant made reference in one of its conditions to the application having
been for outline planning permission only. Mr Ambrose regarded it as a grant of
outline planning permission.
The plan
referred to in this grant was the same as that in the 1980 grant which had by
then lapsed. It thus contemplated, inter alia, the western and southern
developments which I have earlier explained. In the western development five
bedrooms could be provided as the plan indicated. Indeed, Mr Ambrose was of the
view that five was not the maximum there, but eight to nine bedrooms to Tourist
Board standards could be contained in the exterior shell indicated on the plan
and which I described as the western development.
As for the
southern development, Mr Ambrose was of the view that notwithstanding the
description ‘Staff accommodation over garaging’, the permission did not
restrict the building to that purpose but the consent was for a building for
the broad planning purpose of an hotel and that at least a further 20 bedrooms
to the Tourist Board standard could be contained in the exterior shell of the
L-shape which I have called the southern development. He was of the view that
more than 20 double bedrooms to Tourist Board standards, and with their own en
suite bathrooms and wcs, could be accommodated within the outline, even if the
dog-leg stretch originally described as stabling was kept as a single-rather
than a double-storey building.
Mr Ambrose’s
view was that the 1985 outline planning consent was for further accommodation
‘On the lines of what was shown on the plan’. He would not expect an outline
consent to specify the precise number of bedrooms consented to unless a number
had been specified in the application, which had not here been the case. The
1985 consent was thus, in his view, a consent which, although expressed only as
to use, was properly to be regarded in practical terms as an outline approval
for further hotel accommodation of the order of five double rooms, and perhaps
as many as eight or nine in the western development, and at least 20 in the
southern.
I have had no
evidence other than from Mr Ambrose on planning matters. In particular, I have
heard nothing from the local authority. I accept Mr Ambrose’s evidence. To
collect the effect of his evidence and of the planning permissions so far as
concerns the number of hotel bedrooms as they stood at the time of the auction,
and dividing the effect between existing buildings, the eastern and western
developments together, and the southern development, the position is as
follows:
(a) Detailed permission
(i) eight in the existing
building;
(ii) two in unbuilt areas
designated as bedrooms within the eastern development;
(iii) the prospect of five in
the area designated as the billiards area, but for which bedroom conversion
would be obtainable upon a simple amendment of the eastern development.
(b) Outline permission
For
development on the lines of:
(i) five at least, and possibly eight to nine in
the western development;
(ii) at least 20 in the southern development.
On September
19 1985 Mr Swingler had been served with Notice Requiring Provision of Sanitary
Appliances served under the Local Government (Miscellaneous Provisions) Act
1976. It required the installation of two water closets and three wash-hand
basins and efficient hand-drying facilities. On November 7 1985 Mr Swingler was
served with an enforcement notice specifying breaches of planning control and
requiring the permanent closure of the straight access route and the
construction of the proposed crooked one. This enforcement was the next day
entered upon the register of planning charges at the local Land Charges
Registry. There was later some correspondence with the local authority on the
subject of these notices and a threatened prosecution.
The position
was finally dealt with by Mr Swingler’s giving a personal undertaking on March
18 1987 that he would not open the premises as an hotel unless ‘An apposite
lavatory block is erected and the driveway completed’. An alteration was made
to the course of the driveway. Instead of running as it had in a straight line,
two bends were put in it so that moving from the Hall to the road one would
first travel down the old straight driveway and then bend first left and then
right and meet the road not at the eastern end of the Hall’s land, as had
previously been the case, but very close to its western boundary. The work had
been completed by the summer of 1986.
The plan on p
71 of the auction particulars showed this new crooked driveway. That plan did
not show the superseded northernmost part of the erstwhile straight driveway.
That northernmost part had not been permanently closed. There were iron gates
at the point at which the old driveway (to call it that) met the road. The
siting of these gates occasioned some difficulty, with both the local authority
and those responsible for the adjacent church taking an interest in their
position. Eventually Mr Swingler gave an undertaking to remove the gates. He
had to close off the old driveway in order to comply with his undertaking.
At the time of
the auction the new driveway had long since been constructed but the old one
had not been finally blocked off. Wicken Hall had operated as an hotel only
briefly while in Mr Swingler’s hands. It was closed as an hotel several months
before the auction.
At some stage
Mr Swingler decided to sell Wicken Hall. He chose to sell it by auction and he
chose Barnard Marcus of Shepherd’s Bush, London W6, as the auctioneers. They
sent a representative to the property. Mr Swingler showed him the planning
permissions which Mr Swingler had obtained, and also a brochure which had been
prepared in 1984 when there had been a proposal for the property to be
developed by some third parties with Mr Swingler participating. The text of the
page which later became the page in the auction particulars referring to Wicken
Hall and headed ‘Planning’ was prepared by Mr Swingler in association with
Barnard Marcus’s representative. Mr Swingler believed the southern development
could contain a further 20 bedrooms. He sanctioned the descriptions used.
In this way
the auction catalogue references to Wicken Hall were prepared. Wicken Hall was
one only of over 180 lots being offered for sale in the same catalogue. On p 70
of the catalogue there were four colour photographs, one of the exterior and
three of the interior, of Wicken Hall. The lot, which was lot 109, was headed
‘Substantial Freehold Period Hotel, Freehouse and Restaurant set in
approximately four acres with planning permission/vacant possession’. There
then followed a general description which, so far as concerns bedrooms, wrote
of two on the second floor, described as ‘owner’s private accommodation’, and
five on the first floor. On p 71 there was a coloured axonometric drawing, a
colour key to that drawing, and a small plan. The drawing, key and plan had
been prepared by Mr Ambrose. The small plan showed the existing building in
blue, the eastern and western developments in pink and the southern in yellow.
The prospective manager’s house was shown in pink. The only driveway shown was
the new crooked one.
The
axonometric drawing used the same colour scheme. It had lines pointing to parts
of the building with words purporting to describe them; hence, of the blue of
the existing building it said ‘Hotel bedrooms’ and ‘Bar’. Of the eastern
development it said ‘Functions Room’. Of the western it said ‘Hotel reception
and entrance, dining room and kitchen, bedrooms over’ and ‘Conservatory bar’.
The southern development which, as to its dog-leg, was now shown as a
two-storey building, was described as ‘Motel bedrooms’. Alongside the drawing
and the plan was a colour key with three boxes. Blue indicated ‘Existing house’;
pink showed ‘Detailed planning permission, 10 further bedrooms’; and yellow
‘Outline planning permission’.
Square
footages were given for the existing house and for each of the eastern and
western developments. None was given for the southern one. This key was
inaccurate. As I have explained above, there was no detailed planning
permission in the pink areas for 10 further bedrooms but only for two with the
prospect of an added five in the so-called billiards area, and outline planning
permission for at least five but possibly up to eight or nine in all in the
western development.
The pink was
further inaccurate in showing the western development as being the subject of
detailed planning consent in respect of its whole area. In fact, only its
conservatory had received detailed planning consent. Inaccuracy was
unfortunately also found in the text. It read as follows: ‘Planning permission
has been granted by the East Cambridgeshire District Council for the erection
of an extension comprising 14 bedrooms, bar, restaurant, functions room and
kitchen, and a separate manager’s/owner’s home. Outline
plans and planning permission are available for inspection at the auctioneer’s
office.’
I shall later
need to refer to this subject in some detail, but when I refer to the
14-bedroom point and to the 20-bedroom point, it is to argument relating to
these references and to those numbers of bedrooms that I shall be referring.
There was no
detailed planning permission for the manager’s house. The extensions for which
detailed consent had been obtained did not comprise 14 bedrooms and the
southern development’s outline planning permission did not in terms refer to ‘a
further 20 bedrooms’. Mr Ambrose said the 14 figure was incorrect, as was, he
also accepted, the reference to 10 further bedrooms in the key. He accepted the
pink colouring of the western development was wrong in its signification of
detailed planning permission, whereas only outline had, for the large part,
been obtained. There was also, of course, a conflict between the key’s
reference to 10 further bedrooms in the east and west developments, and the
text’s reference to ‘An extension comprising 14 bedrooms’. Plainly there were a
number of inaccuracies in the descriptions given in the auction particulars.
Next I turn to
the terms on which and the manner in which Barnard Marcus offered properties
generally, and Wicken Hall in particular, for sale. The auction was one of a
series of regular auctions conducted by Barnard Marcus. Their auction office is
in the Shepherd’s Bush Road. The sale in question was a two-day sale. The range
of properties sold was wide, from relatively inexpensive single freeholds with
vacant possession to blocks of flats, freehold ground rents issuing out of
blocks of properties, commercial properties and development plots. The public
which the auction aimed to attract was no doubt correspondingly wide.
The auction
particulars contained a notice at its p 4 headed in red ‘Important notice to be
read by all bidders’. It draws to the reader’s attention that general and
special conditions were to be found at the back of the catalogue. It stated
that prospective purchasers were deemed to have made all usual and necessary searches
and enquiries with all relevant authorities. It pointed out that as the gavel
fell there would be a binding contract to buy in accordance with the provisions
of the catalogue. It stated that a memorandum of contract would need to be
signed and a 10 per cent deposit paid.
Prospective
purchasers were strongly advised to check all matters to which the properties
were expressed to be subject and of which they were to have the benefit. At the
back of the catalogue, on its p 96, was a further notice in red in large print
headed ‘Notice to all bidders’. It read: ‘Please ensure that you have your copy
of the general conditions and special conditions as these are now printed
separately from the catalogue’. The final page of the catalogue was the form of
memorandum which, upon its being suitably completed, a successful bidder would
be required to sign.
The general
and special conditions so referred to were comprised in a separate document
some 56 pages long. The first two pages thereof were described as ‘General
conditions of sale applicable to all lots’ and the rest dealing with different
lots respectively were headed ‘Special conditions of sale’. Of those general
conditions I need refer to general condition 1(i), which incorporated National
Conditions of Sale, 20th ed with certain provisions as to amendments and
inconsistency; general condition 1(iii), by which the purchaser was deemed to
have full knowledge of the conditions subject to which the property was sold;
general condition 6, the 10 per cent deposit to be held by Barnard Marcus
Estate Holders; and general condition 10(i), completion four weeks from the
date of the auction.
General
condition 11 at subpara (i) stated that the purchaser must himself take all
steps which may be necessary to verify the accuracy of the statements in the
particulars and conditions of sale. It warned that any incorrect statement
would not annul the sale or entitle the purchaser to be discharged from his
purchase. It stated at subpara (ii) that the purchaser would be deemed to have
made local land charge searches and enquiries and to have knowledge of the
matters that would thereby be disclosed. At subparas (iii) and (vi), and para
12 there were further provisions to which I refer but need not summarise.
At general
condition 16 there was a provision relating to the Misrepresentation Act. As
for the National Conditions of Sale, 20th ed, thus incorporated, condition 17
is entitled ‘Errors, Misstatements and Omissions’. I need not refer to it in
any more detail at this stage.
It will have
been seen that, leaving aside how far they took effect, the broad tenor of the
auction general conditions was to cast upon the prospective purchasers the
requirement that they should ‘look before they leap’ and to deny them remedy
should they fail to do so.
The special
conditions relating to lot 109, Wicken Hall, were, in the initial print, quite
short. However, I find on the evidence that it is far from unusual for there to
be modifications in special conditions and that when that occurs it is dealt
with in a number of ways. First of all, there are addendum sheets put on each
seat in the auction room and laid out in piles at the back and front of that
room. This was done in this case. The addendum sheet in the present case is two
pages long and states as to lot 109 that ‘There are revised special conditions
of sale containing details of outstanding notices on the property’. It advises
prospective purchasers to obtain a copy prior to the auction and warns that a
copy of them will be attached to the contract to be signed by the purchaser.
Second, an
announcement is made orally by the auctioneer at the beginning of the session
of the auction. That, too, was done in this case, at a little after one o’clock
in the afternoon. Mr Cripp referred to the addendum sheets for that day’s sale.
The text of what he said is available because a tape recording is habitually
made and one still exists. The text is not disputed. It makes specific
reference to there being revised conditions of sale as to Wicken Hall and that
they were available at the auctioneer’s right hand.
Third, the
auctioneer, if there has been an amendment relating to a particular lot, makes
an announcement to that effect when he comes to that lot. In the present case
when Mr Cripp came to lot 109 he made such an announcement. Its text is not in
dispute, nor is it disputed that it was adequately broadcast throughout the
auction room. It draws attention, inter alia, to the fact that there are
revised special conditions for lot 109. It mentioned a prosecution in respect
of the driveway and sanitary provisions as having been withdrawn. The
auctioneer said he presumed the revised special conditions had been read by
proposed purchasers.
The revised
special conditions so referred to, the text of which Mr Cripp had received from
the vendor’s solicitor about two weeks before the sale, stated that an
enforcement notice had been issued on December 7 1985 under section 87 of the
Town and Country Planning Act 1971 and went on ‘in respect of which the vendor
has given and has had accepted an undertaking that the property will not be
used as a hotel until such time as the enforcement notice is complied with’.
Copies of these revised special conditions were available at the auction itself
and had been made available to those making enquiries of the auctioneers ahead
of the auction.
It is
difficult to see what more could, in practical terms, be expected of
auctioneers in connection with drawing to the attention of those likely to bid
that there were revised special conditions of sale applicable to lot 109.
Mr Khosla had
never been to any property auction before this one. A couple of days before the
auction his son, Sunil Khosla, brought him a copy of the Barnard Marcus
catalogue. He telephoned his brother-in-law, Mr Ghai, the evening before the
auction. He had not spoken to him before that on the subject of Wicken Hall.
Throughout the rest of the events as they unfold it is to be remembered that Mr
Khosla and Mr Ghai were closely associated in the venture which I shall describe.
Both were emphatic that it was Mr Khosla who bid for Wicken Hall and that he
did so in his own right and not as nominee for or partner of Mr Ghai. I accept
that, but even so Mr Ghai’s role is hereafter that of close associate as well,
of course, as brother-in-law, of Mr Khosla.
Mr Khosla saw
the ‘Notice to all bidders’ in the catalogue. He saw the general conditions of
sale but did not read them. He saw the original print of the special conditions
relating to lot 109. He arranged to meet Mr Ghai at the auction itself. When Mr
Khosla arrived the auction, which was held at the Kensington Hilton Hotel, was
already in progress. He would, therefore, have missed the announcement made by
Mr Cripp shortly after 1 pm. Mr Ghai was already there and as Mr Khosla arrived
was at the refreshment counter. The auctioneer was operating from a rostrum
with a desk or table to his left and right at which auction staff were present.
The table to the right of the auctioneer had papers on it. The one on the left
had ladies of the auctioneers’ staff sitting at it. They keep files on the
properties coming up for sale and keep them with them throughout the sale.
Addendum sheets were available in piles at the back of the room by the entry
and at a desk or table at the front.
The auction
was very well attended. Many, if not all, of the seats were occupied. There was
no problem in hearing the public address
Ghai took seats. By then any addendum sheets placed on or near to their chairs
had been picked up by earlier occupants and had not been replaced with fresh
ones. Mr Cripp told me that auctions of this kind ran at about 20 lots an hour.
The day’s sale began with lot 81 at or about 1 pm, so I can take it that lot
109 came up somewhere roughly between 2.15 and 2.30 pm. I hold that the
existence of special conditions of sale referable to lot 109 was adequately
brought to the notice of those in the auction room by the time lot 109 was bid
for and that those persons included Mr Khosla and Mr Ghai.
Bidding for
lot 109 was reasonably brisk. Mr Khosla had not discussed borrowing with any
banker before the auction. He had not visited Wicken Hall or even Wicken before
the auction, nor had he instructed any solicitors or others to make searches or
enquiries on his behalf. He tells me that he was looking for a business, one to
be run by him and his family. However, he had no experience of running an
hotel, nor was it suggested there was any such expertise among his immediate
family. His business experience was limited to the shared running of a shop in
Nuneaton. He had not looked at any other hotel businesses with a view to
buying. He would, he said, have hoped to develop the business gradually,
implementing the indicated planning permissions for extensions over a period.
He would borrow to pay for the extensions.
He did not
know the difference between outline and full planning permission at the time.
He did not know whether the bedrooms mentioned in the catalogue as having
attracted planning permission were large or small, or with or without their own
bathrooms or showers. While he regarded the on licence which the premises still
had as valuable, he made no enquiries as to whether it could be transferred.
He had, at the
time of the auction, no idea what any of the extensions would cost. He had no
idea what profits the business would generate. He did not know what rate of
interest he would have to pay on his borrowings. He had no idea whether he
could attract a lot of customers. He thought he probably could because of the
proximity of Cambridge University but he did not know what other hotels there
were in the area. He did not know what staff might be available in the area. He
expected to repay borrowings by instalments paid out of the business, both the
sums borrowed to buy and those to extend. He recognised that, limited to the
existing building and occupying part of it as his own and his family’s home, he
could not at first let more than six bedrooms.
He had never
run a restaurant, nor was I told he had ever run a bar. He did not know whether
the premises would need repairs. He said at first, and incredibly, that he did
not expect to make a living from the letting of only seven bedrooms, but this
of course led him into difficulties as how in that case he would ever have
become able to expand and develop and turn to the implementation of the
planning permissions.
Later, his
evidence was that he did expect to be able to make a living out of a business
consisting of a maximum of six bedrooms with the possibility of a restaurant
and possibly a bar. Mr Ghai’s view was that if Mr Khosla could let six bedrooms
then he was positive that Mr Khosla could make a living. Bearing in mind the
large number of factors unknown to both of them, I cannot accept these
unsubstantiated assertions, but even if I had, merely making a living could not
lead to the generation of such profits as would enable the building extensions
to be embarked upon.
When they met
at the auction Mr Ghai was, for the first time, made aware that Mr Khosla was
interested in a particular lot, lot 109. Mr Khosla said it looked very nice to
him. Mr Ghai tells me he told Mr Khosla that lot 109 seemed nice because it had
outline planning permission for 20 bedrooms, and also that he mentioned to Mr
Khosla that there was planning consent for a further 14 bedrooms. Mr Ghai had
good contacts with a Mr Manning, the manager of a branch of Barclays Bank at
Stevenage, and Mr Ghai was confident that the bank would lend money to Mr
Khosla. Mr Ghai said he told Mr Khosla that the bank would lend because of the
planning permissions. Mr Ghai tells me that he could get a loan to the extent
of 70 to 75 per cent of the surveyor’s valuation from Barclays provided the
particulars given in the auction catalogue were true. I do not accept that Mr
Ghai believed that. As an experienced property man he would have known that the
bank would be likely to require and would be guided by a professional
valuation. That being so, I see no reason why the bank should add that proviso.
I shall return to this point later. If, as I hold, Mr Ghai did not believe
that, he would have had no reason to say it to Mr Khosla.
Mr Ghai told
Mr Khosla that he would reckon to go to about £280,000 to £285,000 on the lot.
They were together in the auction room for at least 10 to 15 minutes before the
lot came up. Mr Ghai also told Mr Khosla after the sale that he would get him
the shortfall between what he could borrow from the bank and the purchase
price. Mr Khosla bid for lot 109. In doing so he relied on what Mr Ghai had
told him was his, Mr Ghai’s, idea of what the value of the property was. Mr
Ghai did not bid. Lot 109 was knocked down to Mr Khosla for £275,000. A deposit
of £27,500 was accordingly payable forthwith. Mr Khosla gave his cheque in that
sum to the auctioneers’ staff. He knew that he did not have the funds in his
account sufficient to meet it.
At the time,
Mr Khosla was earning about £190 a week net after all deductions. He had less
than £1,000 in the bank, although he had more, but not enough to enable him to
meet the deposit, at a building society. Mr Ghai told me that while at the
auction, but after lot 109 had been knocked down to Mr Khosla, he, Mr Ghai,
noticed the discrepancy between the reference in the catalogue to planning
permission for 14 bedrooms and the pink box referring to only 10 further
bedrooms. He claimed he did not tell Mr Khosla of this discrepancy because in
his, Mr Ghai’s, view there was no point in grumbling at that stage. Mr Khosla
had by then left his side to sign and had signed the memorandum, and the
property was, thought Mr Ghai, worth the price paid, even with detailed
permission for only 10 further bedrooms.
I do not need
to find whether Mr Ghai did or did not notice the discrepancy, but I do not
believe his evidence that if he had, as he claimed, he would not have mentioned
it to Mr Khosla. If, as he told me he had, he had specifically told Mr Khosla
that there was planning permission for a further 14 bedrooms, I have no doubt
that he would have drawn the discrepancy to Mr Khosla’s attention, either the
moment he noticed it or, at any rate, when, as will later appear, Mr Khosla
began, to Mr Ghai’s knowledge, to make complaints as to the contract. Yet he
plainly did neither.
Mr Michael
Drake, as vendor’s solicitor, had taken the trouble to attend the auction with
an assistant of his. After the auction Mr Drake indicated that his office would
send a wad of details to Mr Khosla’s solicitors. I have no evidence that
shortly after the auction of lot 109 any request was then made by Mr Khosla or
by any of the auctioneers’ staff to Mr Drake for any copy of the relevant
planning consents, or indeed any other information relating to Wicken Hall.
This is a case
in which witness statements were exchanged before the hearing and form part of
the material put before me. Mr Khosla’s witness statement makes no mention of
his seeking but failing to obtain a copy of the planning permissions at the
auction. His solicitors made no such point in their correspondence. His
pleadings, even in the form as amended after the plaintiff’s case was
concluded, make no such allegation, nor does the affidavit he swore herein on
March 11 1988. The allegation that he had so tried and failed was not put to
any of the plaintiff’s witnesses. However, a number of the auctioneers’ staff,
having very credibly told me during the plaintiff’s case that they had no
specific recollections of dealings with lot 109, there was then made for the
first time the allegation by Mr Khosla that he had tried and failed to see the
planning permissions at the auction.
Mr Ghai
claimed to have heard Mr Khosla’s request and also to have himself made a
request for the outline planning permission to Mr Weatherall before the lot had
come up. I do not accept Mr Khosla’s or Mr Ghai’s evidence on this point. The
auctioneers’ staff at one of the tables by the rostrum generally held all
particulars relating to the various properties for sale, kept in order for ease
of reference. Mr Weatherall, an auctioneer’s assistant, would have been called
over to the table had any query arisen which had not been there and then
satisfied, and he had no recollection of being called over in relation to lot
109, nor, it would seem, was any difficulty mentioned to Mr Drake, as I have
mentioned.
Moreover, Mr
Weatherall, whom I permitted to be recalled, said that if Mr Ghai, who was well
known to him, had said he had needed to see the planning details and
they had not been available at the auction room itself, he would have
remembered this event as he would then have sent someone round from the auction
room to the office to get them.
Mr Khosla
signed a copy of the revised conditions of sale relating to lot 109,
specifically referring to the enforcement notice of December
sale as to lot 109 and he signed a printed memorandum as to his purchase of lot
109 at £275,000. These three signed papers are comprised in exhibit P1 marked
‘Auction Contract’ which also repeats the ‘Important notice to be read by all
bidders’, the photographs and text in the auction catalogue referring to lot
109, the page headed ‘Planning’ which I have already described, and the general
conditions of sale all bound together in the form in which such of them as were
signed were presented for his signature.
The day after
the auction Mr Khosla asked Sunil to go to the auctioneers’ office to pick up
the planning permissions and all other papers relating to Wicken Hall. Mr
Khosla did not indicate to his son that he was worried about planning
permission. He did not leave Sunil with the view that it was a topic of
importance to him. There is no evidence that he indicated that he had already
tried to see, but had failed to obtain a sight of, the planning permissions,
which would have been a natural thing to mention had it been so.
Sunil went to
the office and asked a female member of the staff. She made further inquiries
within the office but returned to say the papers had been sent back to the
vendor’s solicitor. That, indeed, would have been the usual course and it was
followed here. There was no evidence from Sunil that his father was concerned
at this news, nor were any letters then written on the subject.
The next
relevant event occurred on Sunday, April 26 1987 when, by arrangement, a party
visited Wicken Hall. It consisted of Mr and Mrs Khosla, Sunil Khosla and Mr and
Mrs Ghai. While it is likely, and I accept, that from the purchaser’s side request
was made (be it in response to Mr Swingler’s offer or not does not, I think,
matter) that they be supplied with such documents containing information as to
the property generally as Mr Swingler might have, I accept Mr Swingler’s
evidence, first, that no particular interest was then shown in planning as an
immediate matter and, second, that as at that visit the premises quite plainly
did not contain a trading business, a going concern. Further, I accept Mr
Swingler’s evidence that by the date of that visit the new roadway had long
since been completed, that both routes were then open and that barring off the
old route involved only a minor effort or expense.
During this
visit there was no complaint that there was no hotel in operation, yet it must
have been quite obvious that that was so. The subject of the enforcement notice
and Mr Swingler’s personal undertaking came up. There was no complaint about
either’s existence, or that its existence was then being learned of for the
first time. Mr Swingler explained that the undertaking was easy to resolve and
that no great financial outlay was involved. Mr Swingler had made up bundles of
papers for the information of whoever transpired to be the purchaser. On April
27, in response to the request made at the visit, he sent some documents to 161
Sharrard Road, E7, the Khoslas’ address. It was addressed to S Khosla because
Mr Swingler mistakenly thought S was the initial letter of the defendant’s
forename.
While Mr
Swingler was in the witness box being cross-examined, Mr Sunil Khosla produced
to his father’s advisers what he said was the bundle which he had received from
Mr Swingler. It includes an incomplete version of the planning permission of
October 1985 without plans and a copy of Mr Swingler’s undertaking of March 18
1987. Mr Khosla had not, when it was received, looked through it to see if any
planning permission was in it. Sunil had not had the impression that his father
was worried about planning permission, and Sunil had not checked to see what,
as to planning permission, was in the bundle he had received.
Mr Swingler
could not recollect whether one or more of the planning permissions had been
included in the papers which he had sent. He sent everything that seemed to him
relevant but he could not be certain on that particular point. At all events,
his letter of April 27 attracted no response. There was no complaint that
planning permissions were not included or were incomplete, or that they had
transpired not to be what they had been described as being.
On April 28 Mr
Swingler’s solicitor sent a number of documents, including copy planning
permissions and the enforcement notice, to Mr Khosla’s solicitors. The
associated plans were not sent. This letter and its enclosures was acknowledged
on April 29 by a letter which said: ‘We are taking our client’s instructions
and will write to you as soon as possible’. I have no evidence of any delay or
difficulty experienced by Mr Khosla’s solicitors in their obtaining those
instructions. There was, however, no early complaint as to the planning
permissions or the enforcement notice, which one might reasonably have expected
had the terms of the former or the existence of the latter furnished any
grounds for complaint or doubt. Nor was the point taken that the plans had not been
included — a reaction one might perhaps expect in a recipient interested in
planning.
The £27,500
cheque given for the deposit by Mr Khosla was dishonoured on presentation. He
told me it bounced because of his confusion about planning permission. He would
have obtained assistance from Mr Ghai towards the deposit cheque earlier, he
said, had there not been this confusion. I find that it bounced simply because
there were not funds to meet it and without that being related to any planning
difficulties or confusions. Mr Swingler’s solicitors had sent the copy planning
permissions to Mr Khosla’s solicitors on April 28 1987. Had Mr Khosla been then
confused on the subject, I have no doubt they would have raised the subject on
his behalf. However, they had made no request for clarification and no
inquiries at that stage, yet the deposit cheque was not met until second or
subsequent presentation on May 7. I do not accept Mr Khosla’s reasons for the
dishonouring of the cheque. The deposit was met after Mr Ghai gave Mr Khosla
£7,500 to help him meet it. Mr Ghai has not been repaid.
Mr Ghai
telephoned and visited his bankers in Stevenage after the auction and, on the
second visit, in the second week after the auction, Mr Khosla went with him.
There was a discussion as to the bank lending to assist or enable Mr Khosla’s
purchase. The bank manager telephoned surveyors for valuation purposes while Mr
Ghai was there. I hold that the bank said that it would lend 70 to 75% of a
valuation of the premises. I do not believe that the bank indicated that it
would, without more, lend 70 to 75% of the purchase price nor, as I have
previously mentioned, do I accept evidence that the bank indicated that it
would lend, or lend any particular proportion (either of the price or of a valuation),
if and only if the descriptions given in the catalogue were correct, as Mr
Khosla told me it had. If the bank manager had determined, as apparently he
had, to rely on the valuation, I can see no reason for his further stipulating
as to the accuracy of the catalogue conditions.
Mr Khosla
sought to persuade me that the bank’s view was that if the particulars in the
catalogue were correct then the bank would lend one proportion but only a lower
one if they were not correct. I do not accept that evidence either. It makes no
commercial sense in the context of a bank which was insisting and intending to
rely upon a valuation. I add that Mr Khosla did not form any impression of what
the lower proportion would be.
Mr Khosla told
me that he did not think that the bank would be greatly interested in the
building on the site as it was, but rather in the potential of the site. I
cannot accept that evidence as being the bank’s position, nor do I believe that
Mr Khosla had any reason to believe it to be so. The bank may well have been
interested in both what was the actual and what was the potential in the
premises and would have been concerned, I would expect, to see a valuation
which dealt with both, but I cannot see why the bank should pay little or no
regard to the premises as they stood when considering whether to lend and what
to lend. The premises as they stood, after all, would be their only initial
security. Mr Khosla told me that the bank sent a surveyor to the premises but
it could, I think, have been arranged through Mr Ghai. The valuation was to be
for the bank, whoever arranged or paid for it.
Mr Khosla’s
solicitors by letter required that Mr Swingler should be registered as
proprietor of a sliver of the land sold as to which his registered title was formally
incomplete. They were thus indicating an insistence on full and literal
performance by Mr Swingler of his side of the contract. I shall need to refer
later to this letter, which I shall call the May 12 letter. The sliver of land
was duly registered, but this need to register it delayed the point at which
the plaintiff was able to describe himself as ready, willing and able to
complete.
On May 13
there was a hint of trouble. Mr Khosla’s solicitors wrote on that day to
Barnard Marcus. The complaint was three-fold. First, that the revised special
conditions had not been drawn to Mr Khosla’s attention prior to his bidding;
second, that they were not drawn to his attention when he signed the contract;
and third, that the contents of the enforcement notice were not drawn to his
attention. No point was taken as to the nature of the planning permission,
neither as described in the auction particulars nor as had transpired to be the
case.
Barnard Marcus
answered that letter on May 22. They sent a transcript of the opening oral
announcement which had been made at the auction drawing attention to the
revised conditions of sale. They
sale as part of the auction contract which is now exhibit P1. Mr Ghai told me
that in the second week of May his architect had advised him that there was, as
Mr Ghai put it, no planning, by which I think he meant not that there was no
planning permission at all but that the ones literally as described in the
catalogue did not exist. He said he passed the information to Mr Khosla shortly
thereafter and that both of them visited Mr Khosla’s solicitor towards the end
of May.
If all this
was so it would put difficulties in the way of accepting that Mr Khosla was,
and was to Mr Ghai’s knowledge, relying on the catalogue description on the
20-and 14-bedroom points because no complaint as to those points was raised
until July 30. On May 26 Mr Khosla’s solicitor, still corresponding with the
auctioneers, stated that Mr Khosla was interested in the property ‘as a going
concern’ which he expected to be able to ‘run almost immediately’. It must have
been glaringly apparent from what all the purchaser’s party had seen on their
visit on April 26 that there was no going concern, yet no comment had been made
until this letter. The complaint was made that the premises could not be used
as an hotel because a roadway had to be constructed first and that Mr Khosla
was entitled to withdraw on the basis of the vendor’s misrepresentations, which
were not spelled out.
The letter
made no complaint as to the terms of the planning permissions and proceeded on
the basis, which was false, that a roadway had to be constructed. It had not.
It had already been substantially constructed. All that remained were the very
minor works involved in closing off the old roadway. That, too, must have been
apparent at the visit on April 26.
On the same
day, May 26, Mr Khosla’s solicitors wrote to Mr Swingler’s enclosing the
Barnard Marcus correspondence. Their letter includes the sentence ‘It seems to
us that the whole point‘ (my emphasis) ‘of our client’s disappointment
is the matter of the roadway which will prevent anyone from opening an hotel
until it is built.’ No complaint was
made as to the number of bedrooms for which planning permission had, in full or
in outline, been obtained.
On May 29
Rustons & Lloyd, on Mr Swingler’s behalf, served a condition 22 notice to
complete. By a letter of June 11 Mr Khosla’s solicitors argued that the notice
to complete was invalid because Mr Khosla had been induced to enter into the
contract ‘by a number of misrepresentations’. They requested the return of the
deposit although, of course, it was not the plaintiff’s solicitors but Barnard
Marcus who held it. There was no suggestion that the misrepresentations
included matters not already raised in the correspondence.
Mr Khosla told
me at one stage that his solicitors had told him that there was no planning
permission for 20 bedrooms before they asked for the deposit back, in other
words before June 11. However, the point was not taken in the letter at this
stage. If Mr Khosla’s evidence was correct and he had been so told by his
solicitors, then it would have been remarkable, he having relied on the
20-bedroom representation, that they should not have complained on that score
at this time. Later, Mr Khosla told me that he found out about the inaccuracy
of the 20-bedroom point sometime around July 28 when he saw or heard of a
letter I shall refer to later. I find Mr Khosla’s evidence unreliable on these
points.
On June 18
1987 Mr Swingler’s solicitors indicated that the deposit was forfeit. Despite
this, a little later in June Mr Swingler was approached to permit an inspection
of the premises with a view to their valuation. This was agreed on a ‘without
prejudice’ basis. It seems a Mr Jeremy Whitton-Spriggs [FRICS] was instructed
to prepare a report and valuation for Barclays Bank, Stevenage Branch, and that
he did visit the premises. Before preparing the report he took up the question
of the planning permission with the local authority. What he discovered is set
out in a letter of July 28 1987 from Smith-Woolley [chartered surveyors] to Mr
Ghai, a copy of which was sent on July 30 to Mr Swingler’s solicitors by Mr
Khosla’s, who say: ‘You will see that there is no record of any planning
permission for a further 20 bedrooms’. They go on to say that that had been a
representation ‘upon which our client would be entitled to rescind the
contract’. They asked for the return of the deposit. The only complaint in
relation to planning was the absence of outline planning permission for a
further 20 bedrooms.
It may be that
Mr Whitton-Spriggs did not complete any written report or valuation. It looks
as if he did not. At all events, I have seen none. Mr Khosla’s evidence was
that he knew from the letter of July 28 1987 that the 14-bedroom representation
was wrong. He had no explanation of how, that being so and he having, as he
claimed, relied upon that representation, his later affidavit sworn for Ord 14
purposes had not mentioned the point. There would also be the difficulty of
why, if that had been so, the point was not pleaded until after the plaintiff’s
case was concluded — a point to which I shall later come. I do not accept Mr Khosla’s
evidence on this point.
Mr Ghai told
me that he knew of the information in Smith-Woolley’s letter of July 28 before
its receipt, perhaps three weeks before.
The sale to Mr
Khosla did not, of course, proceed. Mr Swingler put up the property for auction
again on September 23 1987. It was knocked down to a purchaser for £290,000,
but the cheque for the deposit was not honoured and the sale did not proceed.
The purchaser under the contract was not pursued. There was, it seems, some
difficulty as to his mental capacity. Finally, perhaps disillusioned with
auctions, Mr Swingler sold the property by private treaty for £360,000 on June
9 1988. It might be thought at first blush, as he eventually sold the property
for substantially more than Mr Khosla would have paid, that Mr Swingler had
lost nothing and indeed had gained from Mr Khosla’s not having proceeded. That
does not follow. Given the market conditions of the period, which Mr Khosla
described as ‘booming’, it does not follow, especially in terms of the ability
to buy other property out of the proceeds, that the £360,000 received in the
summer of 1988 was better than £275,000 which should have been received in May
or so of 1987.
Mr Swingler
launched these proceedings in August 1987. The defence with a counterclaim was
served on October 7 1987. Little has been said in the argument about the
availability of innocent misrepresentation as being a ground for rescission. It
has, I think, been tacitly accepted that this is so. Further, it was I think
common ground that if Mr Khosla was entitled to rescind and had rescinded the
contract which he had made at the auction room then he would have been entitled
to require the repayment of his deposit. The defence in its earliest form
relied as grounds for rescission on, inter alia, the following:
(i) the falsity of a representation in the
auction particulars as to outline planning permission for a further 20
bedrooms;
(ii) non-disclosure of the enforcement notice.
Rescission of
the contract was said to have occurred upon the defendant’s solicitor’s letter
of June 11 1987. The counterclaim was for return of the deposit and other
ancillary relief. There have been Ord 14 and other interlocutory proceedings,
both as to the claim and the counterclaim. I have not seen them in any detail,
but in each case I understand unconditional leave to defend was granted. In the
course of the Ord 14 proceedings Mr Khosla swore evidence, inter alia,
that:
(i) he was interested in purchasing the property
as a going concern;
(ii) he was particularly interested in the fact
that outline planning permission had been granted for a further 20 bedrooms;
(iii) he had relied on the representation as to 20
bedrooms;
(iv) there had been a failure to disclose the
enforcement notice.
Very shortly
before the hearing before me, the defence was amended upon leave being given in
that behalf by the master. The defence was amended substantially, but I need
draw attention to only four points arising out of the amendments, namely:
(i) there was no allegation of any reliance upon
any representation as to 14 bedrooms;
(ii) there was an allegation that although the
revised special conditions were attached to the written acknowledgement of
contract signed by Mr Khosla, they had not been brought to his attention before
he signed and he did not know what they contained;
(iii) there was a new complaint of non-disclosure
as to the property not being able to be used as an hotel until the enforcement
notice was complied with;
(iv) there was a new plea of fundamental mistake
based on the inability to use the premises as an hotel.
The plaintiff
had not amended his reply in defence to counterclaim before the hearing began
before me, but on the first day Mr Le Poidevin, for the plaintiff, applied to
amend, and the defendant did not — indeed, in view of his own late amendments,
could hardly — object. I gave leave to the plaintiff. The amended reply took
the point which I shall call the waiver point, that by requiring the plaintiff
fully to perform his side of the bargain after the plaintiff’s undertaking as
to not using the premises as an hotel had been brought to the defendant’s
notice, the defendant had waived any right to rescind
exclusion clauses and the reasonableness of their terms.
After the
plaintiff had completed his case, Mr Clark, for the defendant, applied to amend
the defence and counterclaim by adding a reliance upon the falsity of a representation
that planning permission had been granted for the erection of an extension
comprising, inter alia, 14 bedrooms. He said he wished to add this
complaint because of Mr Ambrose’s evidence. Despite Mr Le Poidevin’s
understandable objections to amendment at so late a stage, I allow the
amendment.
Happily, a
number of matters canvassed in the pleadings and in the evidence ceased to be
materially in issue. For example, it is now common ground that on the fall of
the hammer an oral contract was made. Its terms can be collected from the
various documents circulated before the sale and to which a reference was made
by the auctioneers. Mr Le Poidevin argued in his opening that the revised
special conditions were incorporated into the contract as made on the basis, inter
alia, that reasonable steps had been taken to draw them to Mr Khosla’s
attention. Mr Clark accepts this, so this, too, is now common ground.
Moreover, the
enforcement notice and its non-disclosure fell away as complaints when, after
the plaintiff’s case was concluded and during the examination in chief of Mr
Khosla, Mr Clark conceded that as the new access way had been constructed
before the auction and the further steps needed to comply with the notice were
so insubstantial, the matter was not such as to amount to a complaint of a kind
such as could lead to rescission. At the same time, the defendant’s allegations
as to misrepresentation and mistake as to the premises being an hotel were
abandoned.
The remaining
significance of the enforcement notice and hotel points is that on the facts
both must have been seen by Mr Khosla to have been bad points as early as the
group visit to the site on April 26. It must have been then apparent that the
enforcement notice needed only insubstantial things to be done for it to be
complied with and that the premises were plainly not in business as an hotel,
yet both complaints were initiated and persisted in until the late stage that I
have mentioned.
The
defendant’s arguments from this point on were those and only those relating to
a misrepresentation as to planning in relation to 14 bedrooms, a
misrepresentation as to planning in relation to 20 further bedrooms and, third,
as to the exercise of the statutory discretion conferred by section 49(2) of
the Law of Property Act 1925. As for one of the plaintiff’s arguments, the
waiver point, Mr Clark accepts that if the May 12 letter represents a true
waiver then Mr Khosla could not have rescinded on June 11. He refutes, however,
that the May 12 letter could represent a true waiver. One cannot waive, he
said, what one does not know, and he goes on that as the falsity of the 14 and
20 bedroom representations was not known to Mr Khosla on May 12 it could not
then have been waived by him or on his behalf. He argues that Mr Khosla’s own
evidence shows him not to have been aware of the planning discrepancies until
the Smith-Woolley letter of July 28 1987. He goes on to argue that in any event
the terms of the May 12 letter were neutral in character and do not amount to so
clear an affirmation of the contract as is necessary if it is to be taken to
have waived earlier grounds for complaint or avoidance.
I need make no
further findings on these points, as in his final speech Mr Le Poidevin
indicated that, the complaint as to the enforcement notice having been
abandoned, the waiver point is no longer maintained.
I have, in the
course of my judgment so far, made a number of observations on the evidence of
witnesses on specific points. My views of the oral evidence I have heard have
not been based solely on any such analyses of what has been said because I have
also, of course, had the advantage of seeing and hearing the witnesses in the
course of their evidence. Even making every allowance for the possibility, or
even the likelihood, that some of Mr Khosla’s hesitancy arose from a weak
command or understanding of spoken English, I have formed a poor view of both
Mr Khosla and Mr Ghai as witnesses. I did not see either as much concerned with
assisting the court in its task of arriving at the truth. I regard neither as a
reliable witness.
Mr Swingler I
find to be a man doing his best truthfully to recall events and conversations
to which there was no particular reason to attach much importance at the time
and which are already over two and a half years old.
A number of
matters having fallen away, as I have mentioned, the remaining issues may be
broadly summarised as follows:
1 Were there any, and if so what,
representations made as to 20 and 14 bedrooms?
2 How far, if at all, were any such
representations as were made materially false?
3 Had the defendant relied on the truth of what
transpired to be false?
4 If he had, was he thus entitled, exclusion
clauses apart, to have rescinded the contract before the supposed forfeiture of
the deposit to the plaintiff, and, if the defendant was so entitled, did he
duly exercise that right?
5 Is the defendant, exclusion clauses apart,
entitled to damages for misrepresentation?
6 How far, if at all, would the exclusion
clauses operate on the above matters?
7 How ought the discretion under section 49(2)
of the Law of Property Act to be exercised?
Mr Clark
properly accepts that the burden of the case as to misrepresentation, be it to
ground rescission or for damages, falls upon the defendant.
First, then,
there is the 20-bedroom point. Page 71 of the auction catalogue contains a
clear statement that outline planning permission has been granted for a further
20 bedrooms. That I hold to have been a representation of fact. Mr Swingler
believed it to be true. Was it a false representation? Mr Clark helpfully drew my attention to Halsbury’s
Laws of England, 4th ed, vol 31, paras 1044-1047. From those paragraphs I
conclude that for a representation to be false for present purposes it must be
false in substance. Put another way, if the picture the representation would
convey to a reasonable representee is accurate in substance, in the sense that
he would not consider the discrepancy between that picture and the actual
position as it is to be material, then no relevant falsity is shown.
I hold that
the 20-bedroom representation was not literally true. There was no outline
planning permission which in terms specifies 20 further bedrooms as
permissible. However, accepting as I do Mr Ambrose’s evidence as to how the
1988 grant was in practical terms to be regarded as permitting at least 20
further bedrooms in the southern development, I do not find the representation
to have been false in substance. It must be noted that I have heard no evidence
from the local authority or any other planning expert to disturb my reliance on
Mr Ambrose’s views on this point. Mr Khosla made no approach to the local
authority to find out just what they would permit within the permissions which
they had granted and it is certainly not established that 20 bedrooms would not
be permitted to be erected in the southern development upon an implementation
of the present outline planning permission by anyone who chose to present
drawings and to ask for detailed permission for that number.
Thus, while
there is a representation as to the 20 bedrooms, it is not, for present
purposes, a misrepresentation.
Next there is
the 14-bedroom point. Page 71 of the auction catalogue states: ‘Planning
permission has been granted . . . for the erection of an extension comprising
14 bedrooms’. That is clear enough, but the colour key adds a degree of
confusion by referring to only ’10 further bedrooms’ in the pink area, which
was plainly the extension being referred to. I think I should in the circumstances
assume against the plaintiff that the key’s reference to 10 did not qualify the
earlier clear reference to 14. I thus find there to have been a representation
of fact that there had been a grant of planning permission for an extension
comprising 14 bedrooms.
As the
14-bedroom point was not raised until after the plaintiff’s case had been
concluded, there was no evidence from Mr Swingler on the subject of whether he
believed that the catalogue was correct. There was no application that he
should be recalled to deal with this point and in the circumstances I think I
ought to assume that he believed the catalogue to be correct. I have certainly
no reason to think otherwise.
Was there a
false representation? I hold it was not
literally true. Leaving aside the southern development separately referred to
in the catalogue, and again referring to the effect of Mr Ambrose’s evidence
which I have accepted, there had been detailed planning permission for two
bedrooms in the eastern development with the prospect of a further five therein
upon a simple and acceptable amendment being sought, and outline planning
permission on the lines of five, or indeed up to eight to nine, bedrooms, in
the western development. Thus, although it might well have proved easy to
obtain full planning permission for the erection of the extension comprising 14
bedrooms, no such permissions, be they detailed or outline, had in fact been
granted by the date of the auction.
Was the
representation false in substance? Would
a reasonable representee consider the discrepancy between a grant of full
planning permission for an extension of 14 bedrooms on the one hand, and
detailed planning permission for two with full planning permission to be
readily obtainable for a further five, and existing outline for between five
and nine, as material? The answer may
depend on what characteristics one is to give the reasonable representee. It
would seem right to attribute to him some of Mr Khosla’s features. I thus have
in mind a reasonable representee looking for a business to run, needing to
borrow and hoping gradually to develop his premises out of future profits. Such
a man would recognise that whether he would be financially able to develop the
premises and, if he was, when he would become so able, and what shape any
developments he would then wish to make or would need to take would all be
matters lying in the unknowable future. He would, I think, recognise that the
planning permissions the property actually had permitted substantial
development, quite as much as he could hope to afford or would wish for for
quite a while, and that they showed that the planning authority was in
principle agreeable to substantial development. This subject is inevitably
related to the discussion I shall come to later as to whether Mr Khosla in fact
relied on certain misrepresentations. Reverting to the reasonable representee,
I am unconvinced that such a representee would consider any such planning
discrepancy material. However, I shall proceed with the matter on the basis
that the 14-bedroom point was materially false, or false in substance; in other
words, that it was a misrepresentation.
Accordingly, I
turn to the next question — reliance. Although I have held neither the
14-bedroom nor the 20-bedroom representations to be false for the present
purposes, I shall assume for the moment and go ahead on the basis that they
were both misrepresentations.
More fully
spelled out, the issue of reliance is this: Was the truth of the 20-and/or
14-bedroom representations one of the factors which induced Mr Khosla to make
the contract which he did? Mr Clark
urged upon me that Mr Khosla’s evidence and other evidence clearly showed that
Mr Khosla had relied on the truth of the 20-bedroom and 14-bedroom representations
as conferring benefits upon him in three ways:
1 because the planning permissions they
describe conferred upon Mr Khosla the opportunity to expand;
2 because they conferred upon him, if they
existed, an ability to obtain finance, because the obtaining of finance would
be easier if there was a development potential in the premises;
3 because, should he fail as an hotelier, their
existence would make the premises more attractive than would otherwise be the
case and so would attract a better price from, and a readier sale to, the next
owner.
Given my
observations about the quality of Mr Khosla’s and Mr Ghai’s evidence, I am not
able to accept that there was reliance simply because it has been asserted that
there has been; nor did that simple assertion become more acceptable upon its
frequent repetition. Moreover, the reliance claimed is not that without thought
of why he should do so Mr Khosla simply believed that he would benefit in these
three ways. It is not said, for example, that an examination of the three ways
of benefit is irrelevant because they were relied on without regard to whether
they were possible. Rather, the claim is that these three ways of benefit were
believed in and relied on because they were true and because their truth was
apparent to Mr Khosla. In other words, I am asked to examine not only Mr
Khosla’s state of mind but also the alleged facts said to lie behind and to
bring about that state of mind.
It is a
consequence of the way the matter has been put to me that if the facts do not
support the claimed state of mind I will have some reason to doubt the state of
mind. I therefore turn to the three forms of benefit.
As for an
opportunity to expand, the planning permissions which in fact existed gave
ample opportunity to expand. While I would accept that Mr Khosla may have been
in part attracted or induced to buy by the opportunity to expand, it seems to
me to be in the highest degree improbable that he should have been at all
influenced by the truth or falsity of the excess of the represented planning
situation over the factual planning situation. Indeed, given the long catalogue
of relevant matters as to which he had no information and had made no
inquiries, I see no good reason to treat planning as such a marked exception to
his general uninformed and unreflective approach to the purchase. It will be
remembered that he did not know of the difference between full and outline
planning permission.
In any event,
given that any expansion was to be paid for by further borrowings which, as
well as the borrowings for purchase, were to be repaid out of profits generated
by the business, I am not satisfied that such planning permission as there was
would have inhibited the carrying out of any such expansion as would have been
at all likely to have been attempted over the whole of the then foreseeable
future.
As for the
existence of the represented planning permissions enabling or facilitating the
financing of the purchase or of any extension, I have had no independent or
credible evidence that the discrepancy between the represented and actual
position would have had any effect at all on any banker or other lender. Mr
Khosla told me that if the premises had not had planning permission for a
further 20 bedrooms then the bank would not have lent him enough to enable him
first to buy and then to develop. I do not accept that evidence. I have heard
nothing from the bank on any subject at all, let alone to suggest either that
they would have lent Mr Khosla enough, however much that might be, if the
represented planning permissions had existed or that they would not if it did
not. A bank may well have been influenced by the existence of an opportunity to
expand, but that opportunity did exist. I would need clear and credible
evidence before me if I was to be able to hold, given the non-existence of a
going concern at Wicken Hall and Mr Khosla’s lack of research and information
relative to any future business at the premises, that the bank or its surveyors
would have been at all affected by the opportunity to expand being limited to the
forms of expansion described in the actual rather than in the represented
planning permissions. There was no such clear evidence.
As to resale
should the business have failed, I have had no informed evidence that, either
in the booming conditions of the time or later, the discrepancy in the planning
representations would have had any effect on either the ability to resell or
the speed or price at which a resale could be effected. I can quite see that a
prospective purchaser might be affected by the ability to expand, but, as on
other aspects, I would have needed clear and credible evidence, which I have
not received, before I could accept that the discrepancy would have had any
effect.
Nor is there
anything in the way in which Mr Khosla has dealt with the planning point which
leads me to believe that there was any material reliance. The planning
permissions were sent to Mr Khosla’s solicitors on April 28, even if they had
not formed part of the bundle sent to Sunil on April 27. The defendant did not
trouble even to look at the documents sent to Sunil. They excited no questions
or complaints of any kind that one might expect if the 20- or 14-bedroom
representations were indeed being relied upon.
Mr Khosla
never saw the plans referred to in the permissions. I have had no evidence of
any approach to the local authority to find whether, whatever the present
planning permission, permission for extension for 14 and 20 bedrooms could be
obtained or would be likely to be obtainable, if not immediately at least by the
time at which a purchaser, having re-established an hotel business at Wicken
Hall, might become minded to expand. I have had no independent evidence of the
likelihood of any extension of the premises as an hotel being or becoming
commercially viable in Mr Khosla’s circumstances.
When complaint
was first made by the defendant, as it was on May 13, it was not as to these
representations but as to the enforcement notice. When the complaint was
amplified, as it was on May 26, still these representations were not mentioned.
For a period it could be argued that naturally enough there was no
investigation of the planning documents as they came to light and there was no
complaint as to their contents because the catalogue representations were being
relied on as true. Indeed, the absence of complaint, it could be argued, was an
indication of the reliance that had been placed on the catalogue. It may be
said that it is only he who does not rely on the catalogue who scrutinises the
planning documents and so finds he has grounds for complaint.
However,
leaving aside the uncertain evidence about when first the catalogue
descriptions were known to be inaccurate, even in very late July 1987 when the
defendant had certainly been advised as to planning consent, it was only the
20-bedroom representation that was referred to, rather than the 14-bedroom one.
The 14-bedroom point was unmentioned in Mr Khosla’s Ord 14 affidavit or in his
witness statement exchanged with the other side. It was added only after the
plaintiff’s side had completed its evidence and the amendment was applied for
because the inaccuracy of the 14-bedroom representation had emerged from Mr
Ambrose’s evidence. While I would not wish to attach any blame to Mr Clark in
his seeking to make the amendment, I cannot see the supposed reliance on the
14-bedroom point as being other than opportunistic. My overriding impression
upon the hearing and sight of the witnesses, in particular of Mr Khosla, is
that Mr Khosla, having determined, for whatever quite different reason of his
own, that he either could not or ought not to proceed, he then looked about him
for whatever reasons ex post facto might clothe his failure to proceed
with respectability. He lit upon the enforcement notice, a supposed failure to
have constructed the new driveway, the 20-bedroom point, the personal
undertaking, the fact that the hotel was not a going concern, the alleged
failure to bring the revised special conditions to his notice and finally, as I
have explained, upon the 14-bedroom point.
The fact that
the other assertions came to nothing does not deny his reliance on the
representations as to bedroom numbers and, had reliable evidence been given,
then whatever doubts the failure of his other assertions might have created,
could have been dispelled. However, I heard no evidence from Mr Khosla’s
bankers, or from any surveyor or any other expert, or from Mr Ghai’s
architects. I add that, detecting signs of what I thought might prove to be
unreliability, at the conclusion of Mr Khosla’s evidence-in-chief — and he was
the defence’s first witness — I mentioned that consideration would need to be
given by the defence to whether it would be necessary or desirable for the
defence to call someone from the bank or surveyors.
I am not
satisfied that Mr Khosla relied on either the 20-bedroom or the 14-bedroom
representations. Indeed, at one point in his evidence Mr Khosla told me that if
he could get 20 bedrooms into the yellow, the southern, development, then he
would have no complaint. I hold on the evidence of Mr Ambrose that he could
have got 20 bedrooms into the yellow.
Accordingly,
innocent misrepresentation fails as a ground either for rescission or for
damages because, even if one assumes misrepresentation, I am not satisfied that
the reliance by Mr Khosla that needs to be shown has been demonstrated.
As for the
exercise of any right to rescind, it is common ground that if there was no
effective rescission by the defendant, then the plaintiff’s forfeiture takes
effect subject only to section 49(2) of the Law of Property Act 1925. I do hold
there was no effective rescission. Had there been due grounds for rescission I
would have held that the defendant’s letter of June 11 1987 requesting the
return of the deposit was a sufficient election for or notice of rescission.
Its terms may be precatory, but as between solicitors the clear request for the
return of the deposit should, in my judgment, have been fairly taken to be an
election to rescind. Rescission thus fails not because of want of notice of it
but for want of due grounds for it.
Accordingly,
unless section 49(2) of the 1925 Act otherwise provides or requires, the
deposit is forfeit to the plaintiff.
As for damages
for misrepresentation under section 2(1) of the Misrepresentation Act 1967, in
the light of my findings on other aspects of the case I make no award in the
defendant’s favour. Even assuming or accepting that Mr Khosla entered into a
contract after a misrepresentation had been made to him by another party to it,
I have no material on which I could hold that as a result thereof he suffered
loss, nor could I conclude in the light of my other findings that had the
representations only been made fraudulently the other party would have been
liable to him in damages.
As for the
exclusion clauses, having regard to my conclusions on other points, I believe I
may deal with the exclusion clauses far more shortly than I would otherwise
have had to. Mr Le Poidevin bowed to Mr Clark’s argument that National
Condition 17 is inconsistent with general condition 11(i), that the latter
takes precedence and hence that National Condition 17 is not available to the
plaintiff. That leaves only, in effect, general conditions 11, 12(3) and 16
(which I shall call ‘the remaining exclusion clauses’) as required to be considered.
Put simply,
the defendant’s case is that the plaintiff cannot rely on the remaining
exclusion clauses as they are not reasonable within the Misrepresentation Act
1967 and the Unfair Contract Terms Act 1977. The burden is put by statute on
the plaintiff to demonstrate their reasonableness and, says Mr Clark, that the
plaintiff has failed to do. In the course of his thoughtful argument he has
drawn my attention in detail to South Western General Property Co Ltd v Marton
(1982) 263 EG 1090, [1982] 2 EGLR 19 and to Walker v Boyle [1982]
1 WLR 495. I shall not refer to the statutory provisions, which are fully set
out in the cases to which I shall now turn.
In the South
Western General case Croom-Johnson J was dealing with a defendant who
claimed to have been induced to enter into a property contract at auction by
false though innocent representations made in the auctioneer’s catalogue. The
land there sold had been described as ‘Long leasehold building land’. The
exclusion clauses the learned judge was there dealing with, though not
identical to those in the present case, were to substantially similar effect.
Croom-Johnson J said: ‘I have to deal with this contract, with the
parties to this contract in the circumstances in which this contract was
made’ (my emphasis). He was not, in other words, purporting to describe or
apply some rule of general application. He was also plainly affected by the
consideration that the exclusion clauses he was considering, if they were
permitted to take effect, would in that case exclude liability for a failure
adequate to inform the purchaser on a subject — the ability to build on the land
— which was plainly central to the whole contract.
While the case
is, of course, instructive, I do not regard it as binding me to arrive at a
like conclusion in the different circumstances of the present case in which,
even if I were to be wrong about reliance, it would on the facts be impossible
to elevate the 14-and 20-bedroom representations and the degree to which they
were inaccurate to the central position with which Croom-Johnson J was dealing
in his case.
As for Walker
v Boyle, it dealt with National Condition 17, 19th ed, in relation
to an innocent misrepresentation that the vendor was not aware of any boundary
dispute. Dillon J (as he then was) held that to the representor’s knowledge
there was such a dispute. He held that in the circumstances of the case he did
not regard that form of condition 17 as satisfying the statutory requirements
of reasonableness: see p 507. Again, no general test was said to exist or
purported to be applied, and indeed it may be that, given the nature of the
type of case and the statutory language, an ad hoc case-by-case approach
is unavoidable. I would thus have regarded myself as materially unbound by
authority and, thus free, I would, had it been necessary, have held that in the
circumstances of this case the remaining exclusion clauses did satisfy the
statutory test of reasonableness and hence could be relied on by the plaintiff.
It is
important to note that here the representor is to be taken to have believed in
the truth of the representations. Moreover, the purchaser, even had he —
contrary to my earlier findings — relied on the 20-bedroom representations,
would not have relied upon them to the extent demonstrated in Walker v Boyle,
namely that had the truth been disclosed there would have been a refusal to
complete a contract which otherwise would have been completed. I should add
that in reaching this conclusion I have considered the remaining exclusion
clauses not generally or in the abstract as to what remedies or liabilities
they might have excluded but specifically in relation to their exclusion of the
remedy of rescission on the specific ground of such falsity as there was in the
20- and 14-bedroom representations. I believe the statute enables or requires
such a specific approach, but if that were to be wrong and a general or
abstract approach was necessary, I would have found the test of reasonableness
not satisfied.
Viewing the
remaining exclusion clauses as I have done, I would, had it been necessary,
have then gone on to hold that the remaining exclusion clauses, having survived
the statutory test, would have been effective to deny any claim for rescission
or damages based on such falsity as there was in the 20- or 14-bedroom points.
I am conscious that I have not done full justice to all the arguments I heard
on the exclusion clauses, but as, in the light of other findings, they have
been relegated to the periphery of the case, I hope I shall be forgiven in not
further lengthening an already long judgment.
Finally, as to
issues, I turn to section 49(2) of the Law of Property Act 1925*. Mr Clark
urges upon me that as Mr Swingler made a ‘profit’ upon his later resale of some
£85,000, it would be right that the deposit should be returned to Mr Khosla,
albeit with deductions to meet expenses incurred by Mr Swingler incidental to
there having been a resale. He drew my attention to the decision of Mr Gerald
Godfrey QC, sitting as a deputy High Court judge, in Dimsdale Developments
(South East) Ltd v De Haan (1983) 47 P&CR 1. In that case the
learned deputy judge took the view that the vendor had made a profit on the
resale in the market in 1980-81. However, I am unconvinced that in the market
circumstances at the time I am dealing with, Mr Swingler did indeed make a
‘profit’ from Mr Khosla’s failure to complete and from the consequential later
resale.
*Editor’s
note: The subsection reads: (2) Where the court refuses to grant specific
performances of a contract, or in any action for the return of a deposit, the
court may, if it thinks fit, order the repayment of any deposit.
It seems to me
simplistic to point to the increase in the price received and to say ergo there
was a benefit to Mr Swingler. I would have needed to be told more about what Mr
Swingler would have done with the net proceeds had he received them punctually
from Mr Khosla. Would he have reinvested them in another home or, for example,
in the Stock Exchange? By the time he
did eventually receive the proceeds of sale, could he still have bought the
property he might have bought earlier or the investments he might have chosen
earlier if only he had been paid on time?
If Mr Khosla
wishes to assert that the statutory discretion should be exercised in his
favour because of the profit Mr Swingler had made, then he must accept, too,
that it was incumbent upon him to explore these and other similar questions.
There was no such exploration and I am unconvinced that any great or sufficient
weight should be attached to this possibility.
Doing the best
I can to consider all relevant factors in exercising this admittedly broad
discretion, I do not feel able to exercise it by ordering the return of the
whole or any part of the deposit to Mr Khosla.
Turning, then,
to the relief claimed by the parties, and dealing first with the counterclaim,
I do not make the declaration sought at para 1. Para 2 thus falls away and I do
not make any award of damages under para 3. Paras 4 and 5 fall away. I thus
dismiss the counterclaim.
Turning to the
claim, I am prepared in principle to declare under para 1 of the prayer that
the deposit has been forfeited and the agreement for sale terminated. I order
under para 2 that the defendant do join in instructing Barnard Marcus to
release the deposit to the plaintiff. Moreover, the parties are, I think,
agreed that an award should be made in the plaintiff’s favour as to interest.
Mr Clark conceded the principle on this subject, which arises under para 3 of
the prayer, but I was not told of any figures which had been agreed. I would
expect that such figures could be agreed.
As for the
other relief claimed in the prayer to the statement of claim, while there was
some mention of a number of other ways in which the plaintiff has allegedly
suffered from the defendant’s wrongful failure to complete, there was nothing
further explored before me. As to such damages, I direct an enquiry under para
4 of the prayer, while expressing the hope that, having come this far, the
parties would see their way to agreeing figures without the expensive pursuit
of all claims to their utterance. I would think that the most convenient course
would be for me to direct a minute to be drawn by Mr Le Poidevin and circulated
to Mr Clark for his agreement. If the parties are agreed, the minute can be
initialled by me and the matter need be restored for hearing only if agreement
cannot be reached.
