Vendor and purchaser — Land Registration Act 1925 — Motion by purchasers for removal of caution — Whether certain sums payable by purchasers were part of the purchase price — Caution entered by vendors to protect vendors’ lien — Justification for caution disputed by purchasers — Part of the present judgment deals with the problem of a caution relating to an earlier transaction in which a third party was concerned and the effect of a mistake by the Land Registry — The main issue, however, was as to the effect of special conditions in the contract of sale of the subject premises, a property in Hampstead, London NW3 — The vendors contended that additional sums payable by the purchasers in certain events under the special conditions were in fact part of the purchase price and so proper subjects for protection by a caution — Mervyn Davies J analysed each of the relevant conditions in detail — The first merely provided for the vendors to act as the agents of the purchasers in connection with buying out subsisting leasehold interests in the property and was no more than an agency agreement — The second condition provided for the payment of an additional sum by the purchasers if they decided to carry out a development consisting of two garden flats, which they were under no obligation to carry out — The third condition provided for a payment by the purchasers if they were to carry out a 12-flat development, which, again, they were under no obligation to carry out — None of these conditions was concerned with an addition to the purchase price of the property — The case of Uziell-Hamilton v Keen, cited on behalf of the vendor, was distinguishable — Held, applying the robust approach recommended by Megarry J in Rawlplug Co Ltd v Kamvale Properties Ltd, that an order should be made, in the terms of the notice of motion, for the vacation of the caution against the purchasers’ registered title
The following
cases are referred to in this report.
Rawlplug
Co Ltd v Kamvale Properties Ltd (1968) 20 P
& CR 32; [1968] EGD 554; 208 EG 147
Uziell-Hamilton
v Keen (1971) 22 P & CR 655; [1971] EGD
791; 219 EG 1603
This was a
motion by the plaintiff purchasers, Woolf Project Management Ltd, seeking the
removal of a caution registered by the defendant vendors, Woodtrek Ltd, at the
Land Registry against the plaintiffs’ registered title to property known as 12
Lindfield Gardens, London NW3.
J C Harper
(instructed by Masons) appeared on behalf of the plaintiffs; E Cohen
(instructed by Oliver O Fisher & Co) represented the defendants.
Giving
judgment, MERVYN-DAVIES J said: This is a plaintiff’s motion dated June 23 1987
for the removal of a caution registered on June 6 1985 by the defendant at HM
Land Registry against the plaintiff’s registered title no 163257 to property
known as 12 Lindfield Gardens, London NW3.
The plaintiff
is Woolf Project Management Ltd. The defendant is Woodtrek Ltd. The writ was
issued on June 16 1987 with a statement of claim endorsed. As well as removal
of the caution it seeks damages. The motion, of course, is concerned only with
the removal of the caution. An amended defence dated October 1 1987 has been
served.
By a contract
of sale dated December 20 1984 (Exhibit DHW1) the defendant (‘Woodtrek’) agreed
to sell to the plaintiff (‘Woolf’) the freehold property 12 Lindfield Gardens,
NW3, held under registered title 163257 for £180,000. A deposit of £28,000 was
paid. The contract incorporates the National Conditions of Sale 20th edition together
with a number of special conditions. There will be occasion to refer to the
following special conditions:
J. If the
purchaser proceeds with the development in accordance with the existing
planning permission for two garden flats at the rear of the property the
purchaser shall pay to the vendor an additional sum equal to 50% of the amount
by which the consideration for the sale of the two garden flats on 99 year
leases exceeds either (a) £400,000 (‘the sum’) or (b) in the event that the
purchaser’s construction costs exceed £120,000 the sum plus the amount of the
excess over £120,000.
L. (i) For six
months after the date of completion hereof the vendors will be appointed to act
as agents for the purchasers to negotiate the purchase of leasehold interest of
the flats at the property.
(ii) The vendors confirm that they will at all
times act in the best interests of the purchasers and will not do any act or
thing detrimental to the purchasers.
(iii) The vendors undertake not to harass any
leaseholder at the property and at all times to act in a proper and
professional manner.
(iv) The agents fee payable to the vendors in
respect of any leasehold interest acquired by the purchaser shall be the
greater of (a) one half of the open market value of the relevant leasehold
interest at the property less the total cost of acquiring such leasehold
interest or (b) 3% of the purchase price of the relevant leasehold interest.
(v) In the event that the open market value of
the relevant leasehold interest cannot be agreed between the parties hereto the
matter shall be referred to an Independent Chartered Surveyor agreed upon
between the parties or failing agreement at the request of either party by the
President of the Royal Institute (sic) of Chartered Surveyors. Any such
surveyor shall act as an arbitrator under the Arbitration Act 1950 as amended
and the decision of any such
(vi) The vendors covenant not to negotiate for the
purchase of any of the leasehold premises at the property either on their own
behalf or on behalf of any party other than the purchaser.
N. Should the
vendors secure vacant possession of the property within six months from the
date of completion and should planning consent for the construction of 12 flats
at the property without any unduly onerous conditions attached thereto be
obtained by the purchaser then the purchaser shall pay to the vendors 15% of
the development profit. Within 28 days of obtaining vacant possession and the
said planning consent the purchaser shall pay to the vendors 80% of the 15% of
the development profit referred to above. The final 20% balance to be paid on
completion of the sale of the final unit. In the event of any dispute pursuant
to this clause the dispute shall be referred to a surveyor appointed in like
manner as referred to in Condition L(v) hereof.
The contract
of sale is, as I have said, dated December 20 1984. On the same day the parties
executed a second agreement. The recitals in the second agreement indicate that
the second agreement is supplemental to the contract of sale (called ‘the first
agreement’). The operative parts of the second agreement are as follows:
It is hereby
agreed that notwithstanding the terms of the first agreement,
(1) the vendors covenant to procure the discharge
of the caution referred to in entry number 9 of the Proprietorship Register of
the said Title Number on or before the contractual date for the completion of
the first agreement;
(2) in the event that the said caution is not
discharged on or prior to the contractual date of completion referred to above
the purchaser is hereby authorised and entitled to pay to Cobstar Limited the
necessary money out of the balance of the sale proceeds to satisfy the
agreement in respect of which the caution is registered (being a sum not in
excess of £29,000);
(3) in the event the sum of properly (sic)
necessary to satisfy the agreement referred to above is in excess of £29,000
the purchaser shall be entitled to recover the difference from the vendors on
demand by the purchaser and recover any proper and reasonable costs incurred by
the purchaser in securing the discharge of the said caution.
The contract
of sale was completed on January 8 1985 in the sense that on that day an
executed transfer was delivered to Woolf, and Woodtrek received the balance of
the purchase money (over the deposit) but less the sum of £29,000 referred to
in the second agreement. Thus on January 8 1985 the money received by the
vendors on account of the sale of the property was £151,000 with another
£29,000 owing or the subject of the second agreement. In fact, Woodtrek had not
by January 8 secured the removal of the caution referred to in clause (1) of
the second agreement. This was a caution entered by a company called Cobstar
Ltd in respect of some earlier transactions said to have affected title no
163257. In these circumstances, Woolf and Woodtrek were agreed that the £29,000
should for the time being remain with Woolf to await events. In an affidavit
sworn on October 12 1987 Mr M G Jordan, a partner in the firm of Masons, acting
for Woolf, states — see para 2 — that Woolf were prepared to give Woodtrek ‘a
reasonable opportunity of reaching an agreement direct with Cobstar Ltd for the
removal of the caution’. The correspondence exhibited as MGJ1 to the affidavit
confirms this. So the position was that Woodtrek wished itself to dispose of
the Cobstar caution so that there would be no need for Woolf, using clause (2)
of the second agreement, to pay off Cobstar; with the consequence that Woolf
would pay the outstanding £29,000 to Woodtrek once Woodtrek had got rid of the
Cobstar caution.
On April 2
1985 Woodtrek wrote to Woolf asking for the Woolf solicitors to be ready to pay
the £29,000 to Woodtrek in the event of the Cobstar caution being removed on
April 9 1985. Woolf replied on April 4 stating that they would make immediate
arrangements to pay the £29,000 ‘on our return from the Easter holidays on
April 15’. There followed a difficulty arising from a mistake made at HM Land
Registry. A Land Registry letter dated April 9 1985 written to Woodtrek states
that the Cobstar caution had been cancelled. The Land Registry did effect a
cancellation, but it seems that in doing so they acted in error. A letter dated
April 12 written by an Assistant Land Registrar to Masons (for Woolf) reads as
follows:
Dear Sirs.
Title No 163257. 12 Lindfield Gardens, London NW3. I refer to my telephone
conversation with your Mr Jordan on April 10.
I am writing
to confirm what I said over the telephone. That is, that a letter was received
from the cautioner’s solicitors on April 4, within the time limit set. The
letter was from Messrs Hammond, Fathers & Co of 314 High Holborn, London
WC1V 7DT (Ref 10/X666) which firm the cautioner has now instructed in place of
Messrs Barlow Liam. Unfortunately, because of the change of solicitors, the
letter was not associated with the case until April 10. The caution was
cancelled on April 9 because it was not then realised that the letter had been
received.
In the
circumstances, the caution was cancelled in error. Accordingly, I must inform
you that an application has now been taken out for the rectification of the title
by way of the restoration of the caution to the register. I have attempted to
contact Mr Moschi by telephone to inform him of the position but have been
unsuccessful. I have however sent a telex to Woodtrek Ltd and followed that
with a letter.
I am now
investigating the merits of the caution. I look forward to hearing from you as
soon as possible as to the position regarding the payment of moneys by your
clients.
In the
meantime, may I apologise to yourselves and your clients for the error which
has occurred. Yours faithfully.
In this
situation Woodtrek contended that, since the Cobstar caution had in fact been
vacated, the outstanding £29,000 was payable by Woolf to Woodtrek. But of
course Woolf were concerned by the fact that there was pending in the Land
Registry an application to reinstate the Cobstar caution; and Woolf had always
held the £29,000 for the purpose of obtaining a title cleared of the Cobstar
caution.
As to the
outcome of this situation it is sufficient to say that Woodtrek engaged themselves
in negotiations with Cobstar. At first their negotiations appeared to be about
to result in Woolf paying the £29,000 as to £14,000 to Cobstar and as to
£15,000 to Woodtrek. But no such final result emerged. Then on or about June 3
1985, according to Mr Jordan, he (Mr Jordan) was telephoned by Mr Sachs, the
solicitor acting for Woodtrek. Mr Jordan was told that Cobstar would agree to
the withdrawal of their caution and the cancellation of the application to
rectify the register (by a reinstatement of the caution) in consideration of
Cobstar being paid £20,000. The balance of the £29,000 was to go to Woodtrek. A
meeting was arranged at Mr Jordan’s office for June 3. The meeting took place
and in attendance were Mr Jordan (for Woolf), Mr Sachs and Mr Moschi (for
Woodtrek) and Mr Fathers of the firm of Hammond Fathers, acting for Cobstar. Mr
Jordan had with him a banker’s draft for £20,000 in favour of Cobstar and
another in the sum of £9,000 for Woodtrek. Mr Fathers left the meeting with the
Cobstar draft and the Woodtrek representatives took away the other draft. It is
plain that the Woodtrek representatives knew that Mr Fathers received the
Cobstar draft for £20,000. In his affidavit Mr Jordan includes these words, at
the end:
. . . as the
agreement for the removal of the caution in consideration of the payment of
£20,000 to Cobstar was arranged by Mr Moschi and Woodtrek’s solicitors, I
considered that Woodtrek accepted that my clients were in those circumstances
entitled to pay the £20,000 direct to Cobstar Ltd. Indeed, they requested us so
to do.
Mr Jordan
obtained of course authority from Hammond Fathers to secure the removal from
the Land Register of the Cobstar caution and an assurance that there was no
wish that the caution be reinstated. This authority was in the form of a letter
dated June 3 1985 addressed to the Land Registry signed by Hammond Fathers
& Co and given to Mr Jordan with authority to produce the same to the Land
Registry. In consequence the long-delayed registration of Woolf as registered
proprietors of 12 Lindfield Gardens proceeded in the Land Registry without
there appearing thereon the Cobstar caution.
With the
Cobstar caution thus disposed of, Woodtrek were then minded to register a
caution of their own. Mr Sachs left for registration a caution against 12
Lindfield Gardens on behalf of Woodtrek, the statutory declaration in support
of the caution stating that Woodtrek was interested as ‘having a vendors lien
by virtue of a contract dated December 20 1984 and made between Woodtrek Ltd
and Woolf Project Management Ltd’. I note that the statutory declaration in
support of the caution is dated February 12 1985, so that Woodtrek must have
had in mind the entry of a caution against Woolf for some months and did in
fact enter the caution as soon as Woolf were registered as proprietors. This
Woodtrek caution is said by Woodtrek to have been entered to protect their
vendor’s lien, not only in respect of the unpaid £29,000 but also in respect of
moneys payable or to be payable by Woolf to Woodtrek pursuant to the special
conditions of the first agreement dated December 20 1984 already mentioned,
such special conditions money being said to be part of the purchase price
payable for the property. I will deal later with the issues arising out of these
special conditions. For the present I will deal with the caution as said to be
a protection of the vendor’s lien for an unpaid £20,000.
In short, the
Woodtrek contention is that despite the payment of £20,000 made by Woolf to
Cobstar on June 3 there remains owing
£180,000 and, says Woodtrek, only £160,000 has been paid. See the Woodtrek
letter to the Land Registry dated July 4 1985.
Mr Cohen
appeared for Woodtrek. He took me carefully through the correspondence already
referred to (in exhibit MDJ1) and drew attention to the fact that there was no
express agreement between Woolf and Woodtrek to the effect that if Woolf paid
£20,000 to Cobstar then Woodtrek, on receiving the balance of £9,000, would
regard the £180,000 purchase price as fully paid. So, said Mr Cohen, one gets
back to the contract of sale; and there we find that £180,000 (not £160,000) is
payable. Furthermore, we see from the Woolf letter dated April 4 1985 that
Woolf accepted that if Woodtrek succeeded in getting the Cobstar caution
removed then Woolf would pay to Woodtrek all the outstanding £29,000. Woodtrek
did so succeed, said Mr Cohen, because the Cobstar caution was removed on April
9 1985: see the Land Registry letter dated April 9.
I find this
approach artificial in the extreme. The true position emerges, I think, as a
matter of irresistible inference from the affidavit of Mr Jordan already
referred to together with the correspondence exhibited thereto. I am satisfied
that the £20,000 paid by Woolf to Cobstar was paid with the consent of
Woodtrek, with Woodtrek well realising that Woolf was thereby paying £20,000 of
the £180,000 purchase price to Cobstar. I see nothing in the affidavit evidence
of Mr Moschi or Mr Sachs or Mr Fathers that in any way convincingly goes
against that view. It is idle to contend that Woolf, having paid £20,000 to
Cobstar with Woodtrek standing by, should now have to pay another £20,000 to
Woodtrek simply because by an error of the Land Registry the Cobstar caution
was taken off the register. Since an application to reinstate the caution was
made immediately I cannot regard the Cobstar caution as ever having been
effectively removed until after June 3, pursuant to the application sent to the
Land Registry by Mr Jordan under cover of his letter dated June 3 1985. It
follows that the defendants are not entitled to maintain a caution on the
grounds that any part of the £180,000 purchase price is unpaid.
As I have
mentioned, Woodtrek have sought to maintain their caution, not only by
reference to the £20,000 dealt with above but also by reference to what they
say are further sums of unpaid purchase money. As will be seen from the
contract of sale p 1, the purchase price is said to be £180,000. However, in
the Woodtrek amended defence that sum is alleged to be ‘merely the basic
minimum purchase price’. The purchase price, so it is said, ‘further consisted
of the additional sums payable by the plaintiff to the defendant under the
provisions of special conditions J, L and N of the contract of sale’: see the
amended defence para 1. It follows that one must examine the conditions
referred to for the purpose of ascertaining whether or not all or any one of
them have the effect of causing any money payable thereunder to be regarded as
part of the purchase price paid or to be paid for the property sold. In other
words, one must construe the special conditions against the background of the
contract of sale as a whole.
Counsel before
me considered at some length, and by reference to many documents, what had or
ought to have been done by Woolf at the property since completion. It is not,
in my view, necessary or appropriate to consider those matters. As I understand
the position, one simply reads the contract of sale for the purpose of finding
out whether or not the parties intended that any payments to fall due under the
special conditions were to be regarded as part of the purchase price payable in
the future.
Of the three
special conditions relied upon I take first special condition L as set out
above. This condition provides for Woodtrek acting as agents of Woolf in a
matter of seeking to buy out the various leasehold interests that were
subsisting in 12 Lindfield Gardens at the time of completion. For this work
Woodtrek were to receive a fee: see L(iv). I do not read condition L as
affecting any addition to the purchase price. It merely constitutes a
supplemental agreement for agency.
As to
conditions J and N, it will be seen that condition J contemplates the
possibility of two garden flats being built at the rear of 12 Lindfield
Gardens, whereas condition N contemplates the possibility of 12 Lindfield
Gardens itself being altered so as to comprise 12 flats; there being originally
therein (and now) eight flats.
Reading
special condition J, as at the time when the contract of sale was made, one
sees that Woolf comes under no obligation to build two garden flats; but if
they do so, they will be obliged to pay ‘an additional sum’. An additional sum,
it is said, means an addition to the purchase price; so a sum payable under J
is part of the purchase price and protectable by a caution. I do not read J as
having that effect. It seems to me that at the time when the purchase was
completed, Woolf was free to seek or not to seek to proceed with a two-flat
garden development. If they were to do so, then some further money might become
payable to Woodtrek. If they were not to do so, nothing would be payable to
Woodtrek. In other words, J provides for a payment to Woodtrek emerging as a
possibility only if Woolf, having acquired title to the property, decides to
carry out a garden development, and does so with a certain margin of profit.
That being the situation, I cannot regard any condition J payment as being part
of the purchase price paid for the property. A condition J payment, if
emerging, is a sum ‘additional’ to the purchase price in the sense that, as
well as the £180,000 purchase price, there is to be paid in addition a separate
sum derived from any successful operation of condition J.
Going on to
special condition N one sees again no obligation is imposed on Woolf to seek to
carry out a 12-flat development. It follows that any payment that might arise
under N is not to be regarded as payment of part of the purchase price; a
fortiori since an N payment is not said (compare J) to be ‘an additional
sum’. Looking at the contract as a whole I see it as (a) providing for Woolf
becoming owner of 12 Lindfield Gardens in return for a payment of £180,000, and
(b) embracing three further separate agreements (in J, L and N) giving rise to
the possibility of Woolf being contractually indebted (irrespective of the
purchase price) to Woodtrek in the event of Woolf engaging, if so minded, in
certain defined development activities (J and N) or in the event of Woodtrek
(being obliged to do so) successfully acting as Woolf’s agents under Condition
L.
I was referred
to Uziell-Hamilton v Keen (1971) 22 P&CR 655. That was a case
concerning the sale of a solicitor’s practice together with some office leases,
furniture etc for the sum of £5,000. There was a further condition –condition 8
— in the sale agreement whereby the purchaser was obliged to get in and account
to the vendor for money owing to the practice at the time of the sale. The agreement
was construed as showing the intention of the parties to be that the sale
transaction ‘should be subject, not only to the payment of £5,000, but to the
observance by the purchaser of his obligations under, inter alia, clause
8 of the agreement . . .’. In those circumstances, the lien there alleged
prevailed. There the purchaser was obliged to get in the outstanding moneys and
pay them over to the vendor. Here the purchaser is placed under no obligation
under either J or N. The case is accordingly distinguishable on that, if not on
other grounds. It does not bear upon condition L as to which I have already
expressed my view.
I was reminded
of the well-known words of Megarry J, as he then was, in Rawlplug Co Ltd
v Kamvale Properties Ltd (1968) 20 P&CR 32:
Accordingly,
it seems to me that the speedy form of remedy by way of a motion ought to be
available to a landowner in all cases where there are no substantial grounds
for supporting the registration. I would thus favour a certain robustness of
approach in these motions, of the type to be found in the administration of Ord
14. If there is a fair, arguable case in support of the registration, then the
matter must stand over until trial. But if, though not cloudless, the sky has
in it no more than a cloud the size of a man’s hand, I would clear the register
and leave the purchaser to seek such remedy by way of specific performance or
damages as he may be advised.
By reference
to those words, Mr Harper for Woolf urged me to be ‘robust’, while Mr Cohen
urged that there was ‘a fair arguable case in support of the registration’. I
say in answer to Mr Cohen that despite his persuasive submissions I do not see
here a fair arguable case, in respect of either the £20,000 point or the points
arising from the special conditions.
Mr Cohen also
submitted that removal at this stage was a discretionary remedy and suggested
certain considerations as bearing on a refusal of discretion in Woolf’s favour.
In this connection, in particular, he said that the plaintiffs’ financial
situation was unsatisfactory and that the plaintiffs were in breach of the sale
agreement and so not fitted to be afforded discretionary relief. I do not find
the sum of Mr Cohen’s considerations in this regard as justifying the withholding
of the relief which the plaintiffs claim.
I should add
that the Woodtrek caution has been the subject of previous proceedings between
the parties. See the action 1986 W 2339. That action was disposed of by a
Tomlin Order dated May 19 1986. I raised the point that perhaps those
proceedings precluded the
having read the statement of claim in the earlier case and the statement of
claim in this action, it is apparent that the complaints made and damages
claimed differ in the two actions. Taking that fact into account, and also that
the matter was not fully argued before me with any authorities, I do not feel
justified in withholding relief from the plaintiffs by further consideration of
this point.
There will be
an order in the terms of the notice of motion.
