Alexey Samarenko v Dawn Hill House Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice Etherton,Lord Justice Rix |
| Judgment Date | 01 December 2011 |
| Neutral Citation | [2011] EWCA Civ 1445 |
| Docket Number | Case No: A3/2011/2101 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 December 2011 |
[2011] EWCA civ 1445
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
His Honour Judge Purle QC
(Sitting as a High Court Judge)
HC11CO1197
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rix
Lord Justice Etherton
and
Lord Justice Lewison
Case No: A3/2011/2101
MR Kirk Reynolds QC (instructed by Sherrards, London) for the Respondent
MR Jonathan Small QC & MR Greville Healey (instructed by Boardmans, London) for the Appellant
Hearing date: 24 November 2011
The two issues raised by this appeal are:
i) Is a failure to pay a deposit on time under a contract for the sale of land necessarily a repudiatory breach of contract entitling the seller to terminate the contract;
ii) If the answer is no, was time successfully made of the essence of payment in this case with the consequence that, on the facts, the seller was entitled to terminate the contract?
The relevant facts are as follows. On 18 June 2010 Mr Samarenko as seller and Dawn Hill House Ltd ("Dawn Hill") as buyer entered into a written contract for the sale of Dawn Hill Waverley Drive Virginia Water. The purchase price was £5 million; and a deposit of £500,000 was to be paid in accordance with clause 16 of the contract. The contract incorporated the Standard Conditions of Sale (4 th edition). Clause 15 of the special conditions said that the contract was conditional on the buyer obtaining planning permission as set out in planning applications attached to the contract and was also conditional on the buyer obtaining the consent of the Wentworth Estate Roads Committee. Clause 16 provided:
"This Agreement becomes unconditional upon the Buyer obtaining the Planning Permission and the said relevant consent from the Wentworth Estate Roads Committee and within 60 working days from the date of the Planning Permission or within 60 working days from the sate of the said relevant consent from the Wentworth Estate Roads Committee, whichever is the later, the deposit of £500,000 shall be paid to the Seller's solicitors to be held as stakeholders in accordance with 2.2 of the Standard Conditions of Sale."
Clause 17 dealt with the payment of the balance. Dawn Hill obtained planning permission on 2 December 2010; but it was not the permission envisaged by clause 15. So the parties renegotiated. The fruits of their renegotiation were embodied in a supplemental agreement dated 22 December 2010. The purchase price was reduced to £4.5 million. The supplemental agreement went on to provide:
"2 For the purposes of clause 16 of the Contract, the Deposit to be paid shall be reduced to £450,000 and is now due to be paid to the Seller's solicitors on 3 rd March 2011 (being 60 working days after the grant of the Original Permission).
3 For the purposes of clause 17 of the Contract, the sum of £4,050,000 shall be substituted for the sum of £4,500,000 and shall be paid to the Seller's Solicitors on 13 th April 2011 …
4 In all other respects the Contract is confirmed and is now to be deemed to be unconditional."
Mr Samarenko's solicitors were Staal & Staal. They e-mailed Dawn Hill's solicitors, McGuire Woods, on 24 January 2011 to remind them that the deposit was due on 3 March, requesting them to ask their client to put them in funds, and giving details of their own client account. On 9 February 2011 Staal & Staal sent a further e-mail to McGuire Woods. That e-mail recorded that Dawn Hill had asked to carry out a soil survey. The e-mail said that Mr Samarenko was considering that, but that any agreement would be subject to the consent of his mortgagee and insurers and that he would require an indemnity. There was no immediate response; so Staal & Staal chased it up on 21 February. On 2 March Staal & Staal sent a further reminder about the deposit which was due to be paid on the following day. Dawn Hill did not pay the deposit on the due date; so on 9 March Staal & Staal wrote to Dawn Hill referring to the breach of contract and stating:
"Our client is prepared to allow you 5 working days from today within which the pay the deposit, failing which our client will treat the contract with you as repudiated.
On behalf of our client we therefore demand payment of £450,000 to us in cleared funds by no later than 5 pm on Wednesday 16 March, 2011, as to which deadline time shall be of the essence."
No payment was made; and consequently on 21 March 2011 Staal & Staal wrote to Dawn Hill terminating the contract. Dawn Hill's interest under the contract had been protected by unilateral notices at HM Land Registry. Mr Samarenko brought proceedings for the removal of the notices and for a declaration that the contract had been validly terminated. He also applied for summary judgment.
Mr Watford, who is a director of Dawn Hill, gave evidence in opposition to the claim. He said that the letter of 9 March had come out of the blue. He had been waiting for the results of the soil survey, of which Mr Samarenko was aware. On learning that Mr Samarenko had imposed a deadline for payment of the deposit he contacted Savills to arrange for them to inspect the property. The inspection was needed both for his bank (Coutts) and also for his own purposes. He wanted an inspection before funding the deposit out of his own resources. He spoke to Mr Samarenko on 10 March and told him that he would definitely be able to pay the deposit on 16 March. He told Mr Samarenko that he had arranged for Savills to inspect on Monday 14 March. He would than pay the deposit out of his own resources. According to Mr Watford Mr Samarenko said that he would be happy for Savills to inspect; and that he would be at home on that Monday. But he said that he had been advised that he needed the consent of his bridging finance lenders before he could agree to the inspection. Mr Watford queried this, and Mr Samarenko said that he would check with his lawyers. According to Mr Watford Mr Samarenko promised to respond on Friday 11 March or over the weekend. He then called his own lawyer and asked him to speak to Mr Samarenko's solicitor. Dawn Hill's new solicitors, Boardmans, wrote to Staal & Staal on 11 March recording a conversation between Mr Boardman and Ms Staal. He told her that Dawn Hill's financiers required the inspection before they would release the loan; and that the valuer had been instructed to attend on Monday 14 March. The letter asked for confirmation that the valuer would be allowed access. They spoke again on the same day. Boardmans recorded in their second letter of that date that Staal & Staal had refused access. They asserted that:
"… there is an implied term of the contract for the purposes of business efficacy that your client will facilitate any reasonable requirements of our client towards achieving completion, as he has done hitherto."
They said that if inspection were refused that would delay the release of the loan "thereby making it impossible for our client to comply with the deadline imposed by your client to pay the deposit by next Wednesday, 16 March 2011." They alleged that the real reason for refusal was that Mr Samarenko believed that he could sell the property for a higher price. Savills attended at the property on 14 March, but were refused access. Mr Samarenko sent a text message to Mr Watford explaining that this was on the advice of his lawyers.
The application for summary judgment came before HH Judge Purle QC. He gave summary judgment for Mr Samarenko. With the permission of Mummery LJ Dawn Hill appeal. Mr Jonathan Small QC and Mr Greville Healey, appearing for Dawn Hill take three points:
i) Time was not of the essence of the contractual timetable for payment of the deposit;
ii) Although Mr Samarenko was entitled to serve notice making time of the essence of the revised deadline for payment of the deposit a failure to comply with that deadline did not necessarily amount to a repudiatory breach of contract;
iii) The time given by the letter of 9 March purporting to make time of the essence was too short in all the circumstances of the case.
Whether a time limit is of the essence of a contractual provision is a question of interpretation. In Bunge Corp v Tradax Export SA [1981] 1 WLR 711 Lord Wilberforce said:
"As to such a clause there is only one kind of breach possible, namely to be late, and the questions to be asked are: first what importance have the parties expressly ascribed to this consequence? And, second, in the absence of expressed agreement, what consequence ought to be attached to it having regard to the contract as a whole?"
Similarly, Lord Lowry said:
"It is by construing a contract (which can be done as soon as the contract is made) that one decides whether a term is, either expressly or by necessary implication, a condition, and not by considering the gravity of the breach of that term (which cannot be done until the breach is imminent or has occurred)."
Although courts of equity had a tendency to regard time stipulations as not being of the essence of the contract, it is clear that even in equity any presumption that time was not of the essence could be rebutted, either by express words or by necessary implication: United Scientific Holdings Ltd v Burnley BC [1978] AC 904, 930. The maxim that time is not of the essence "never had any application to cases in which the stipulation as to time could not be disregarded without injustice to the parties, when, for example, the parties, for reasons best known to themselves, had stipulated that the time fixed should be essential, or where there was something in the nature of the property or the surrounding circumstances which would render it inequitable to treat it as a non-essential term of the contract": Stickney v...
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