Chinnock v Hocaoglu and another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Waller,Master of the Rolls |
| Judgment Date | 29 October 2008 |
| Neutral Citation | [2008] EWCA Civ 1175 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3 2007/2844 |
| Date | 29 October 2008 |
[2008] EWCA Civ 1175
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE BLACKBURNE
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Anthony Clarke, Master Of The Rolls
Lord Justice Waller, Vice-president Of The
Court Of Appeal Civil Division and
Lord Justice Lloyd
Case No: A3 2007/2844
John Bryant (instructed by Gelbergs) for the Appellant
Katharine Holland (instructed by DKLM LLP) for the Respondents
Hearing date: 21 October 2008
In this appeal the court has to consider the meaning and effect of various provisions in a contract for the sale of land which, though residential in nature, was tenanted and was to be bought as an investment rather than for occupation. Two points arise for decision, one of which turns on a provision agreed specifically for this transaction. The other requires the court to examine the interrelationship between various of the special conditions in the contract on the one hand and some of the Standard Conditions of Sale on the other. The appeal is from an order of Blackburne J made on 9 November 2007 whereby he dismissed a purchaser's claim for specific performance, having held that the purchaser had failed to comply in one respect with the requirements of a notice to complete.
The contract was made by exchange on 12 December 2006. The purchase price was £120,000 and a deposit of £12,000 was paid on exchange. It is now common ground that the contractual date for completion was 12 February 2007. It was not completed on that day, and the vendors' licensed conveyancers, Cain Associates, served notice to complete which required completion within 10 working days, namely on or before 26 February 2007. On that day, the purchaser's solicitors, Gelbergs, caused the sum of £113,070.34 to be transmitted by direct bank transfer to Cain Associates' account; it arrived at 2.44 pm. The latter rejected it on two grounds: that it was too late, because it should have been paid by 1.00 pm, and that it was too little, because it failed to include a sum of £599.50 provided for by a special condition of the contract. The judge upheld the latter, but not the former objection. The buyer appeals, with permission to appeal granted by Sir John Chadwick; the Respondents seek to support the decision by arguing that the judge should have decided the other point in their favour, by a Respondent's Notice.
The property which is the subject-matter of the contract, 70 Ommaney Road, Lewisham, is registered in the names of the Defendants as proprietors, as a freehold property subject to and with the benefit of two long leases, of the ground and first floors (99 years from 1985). The basement is, or was, occupied by a tenant at a rack rent. Because of section 5 of the Landlord and Tenant Act 1987, the vendors could not sell the freehold without giving he leaseholders under the long leases the option to buy it, by a written notice of not less than 2 months. The parties had agreed a sale in principle in November 2006, but the need to comply with section 5 then came to light. Optimistic that the qualifying tenants would not wish to exercise their statutory rights, the Claimant was willing to exchange contracts without waiting for the notices to expire, but subject to a suitable condition. Cain Associates gave the necessary notices on 24 November 2006, and a suitable condition was then agreed, to be added to the contract. At the last minute another added condition was agreed, and contracts were exchanged on 12 December.
The contract is subject to a set of special conditions, and it incorporates the Standard Conditions of Sale (4 th edition) insofar as those conditions are not varied by, or inconsistent with, the special conditions. At this stage I need refer only to special conditions 24 to 26, which are all specific to this transaction. Miss Holland pointed out that condition 24 was typed, and the other two were added in manuscript. It is clear that the latter two were afterthoughts, but nothing turns on that.
“24. The purchaser's Solicitors will pay to the vendor's Solicitors upon completion the additional sum of £4,497.91 to recoup the Vendor of the losses incurred to date due to the owner of the Ground Floor Flat which is made up as follows
1. Arrears of Service Charges in the sum of £1,308.08
2. Court Fees in relation to the issuing of proceedings and judgement £135.00
3. S20 Notice repair works £2,467.33
4. The vendor's Solicitors legal fees £587.50.
25. Prior to the date hereof the seller's solicitors have served notice pursuant to Section 5 Landlord and Tenant Act 1987 upon the qualifying tenants of the Property. This agreement is conditional upon the said tenants not exercising their rights under the 87 Act. If the said tenants do exercise their rights under the Act then this Agreement shall be null and void in all respects and the deposit paid hereunder shall be returned in full with interest. If the said tenants do not exercise their rights under the Act then completion shall take place 10 days after the date upon which the said tenants rights to proceed under the Act have expired which date shall be 24 th January 2007.
26. The purchaser will be responsible for the legal costs incurred by the vendor in relation to the sale of the above being £500 plus VAT plus office copies of £12.00.”
Despite the terms of condition 25, in fact the notices served under section 5 had specified 1 February 2007 as the last date by which the qualifying tenants could give notice to exercise their rights. Thus, if the last words of condition 25 were to be taken as a statement of the date on which the tenants' rights under the Act would expire, the statement would be inaccurate. Cain Associates, of course, knew the correct position, but Gelbergs did not. They had seen the letters enclosing the notices, and had been told that they were sent on 24 November 2006, but they did not see the actual notices until 18 January 2007.
Before Blackburne J it was argued for the purchaser that the date of 1 February should be substituted for that of 24 January by rectification. The judge said that he was very far from certain that he could not do so by construction. However, he accepted the invitation of Counsel then appearing for the Claimant to approach the point by way of rectification. He held that the contract should be rectified in that respect, and made an order accordingly. Initially the Respondents challenged that by their Respondent's Notice, but Miss Holland informed us at the opening of her argument on the Respondent's Notice that this point was not to be pursued. For my part I think that the judge's first instincts were correct, and that the result should be achieved by a process of construction, not of rectification. The last seven words of the condition should be read as identifying, inaccurately, what the date would be that was provided for by the earlier words, and the accurate date, ascertainable from the notices under section 5 which are plainly part of the matrix of facts, should be the effective date for the purposes of calculating the date for completion in accordance with the contract. However, since what I regard as the correct end result was achieved and it is not now challenged, I need not take up any more time on that point.
In January Cain Associates, for the vendors, said that they expected completion on 24 January, they sent a completion statement on that date, and a notice to complete on the following day. Miss Holland drew our attention to the fact that the completion statement includes, as payable on completion, the sum of £599.50 which arises under condition 26 and that this attracted no comment at the time. On any basis that notice to complete was premature, and Cain Associates withdrew it when this was pointed out. They then contended that completion was due 10 days after 24 January and served a second notice on 5 February. On further objection, they served a third notice on 12 February, without prejudice to the second notice. It is not now contended that the second notice was valid, though this point was pursued before the judge.
Broadly speaking (I will come to the details later) the effect of the notice to complete was that the buyer had to complete within 10 working days, i.e. no later than 26 February, and faced the risk of the vendors rescinding the contract, forfeiting the deposit and possibly claiming damages if he failed to do so. There appears to have been no effective communication between the parties' representatives during the period of the notice. As I have mentioned, on the tenth day the purchasers' solicitors made a payment by way of completion: the question is whether it was in time and sufficient in amount.
I will take first the point, under condition 26, as to the amount payable. The condition is set out above. Mr Bryant's argument starts from the noticeable difference between condition 24, which expressly provides that the sums there referred to are payable “upon completion”, and condition 26 which merely says that the purchaser is “responsible” for the vendors' legal costs, in a given amount.
In order to review this point in the relevant context I must set out some of the other terms of the contract.
Special Conditions:
“11 If the Sellers Conveyancers serve a Notice to complete the Seller shall not be obliged to complete until the Buyers pay Sellers Conveyancers
a) monies due on completion including interest and
b)...
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