Clarke Investments Ltd v Pacific Technologies
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Sir Stephen Sedley,Lord Justice Maurice Kay |
| Judgment Date | 21 June 2013 |
| Neutral Citation | [2013] EWCA Civ 750 |
| Docket Number | Case No: A3/2012/1061 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 June 2013 |
[2013] EWCA Civ 750
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
HHJ EDWARD BAILEY
1CL 10240
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Maurice Kay
Lord Justice Floyd
and
Sir Stephen Sedley
Case No: A3/2012/1061
Mr Mark Dencer (instructed by Bishop & Sewell) for the Appellant
Mr Michael Buckpitt (instructed by Comptons Solicitors LLP) for the Respondent
Approved Judgment
Hearing date: June 5 2013
This is an appeal from the judgment and order of HHJ Edward Bailey sitting in the Central London County Court dated 18 April 2012 whereby he dismissed the action of the claimant Clarke Investments Limited ("Clarke") for specific performance of a contract of sale of property between Clarke and the defendant Pacific Technologies Limited ("Pacific"). He did so on the basis that, at the date fixed for completion of the contract, under which time had been made of the essence, Clarke was not ready to perform its side of the bargain. Pacific appeals from that decision with the permission of Jackson LJ at a renewed oral hearing, leave having been refused on paper by Rimer LJ.
The property which was the subject of the contract of sale was a shop, with two residential flats above it, at 3 Muswell Hill, London N10. It was offered for sale in an auction on 4 October 2010, but not sold. The auction particulars had stated that VAT was not to be charged. Thereafter Pacific and Clarke entered into a post auction sale contract on 13 October 2010, at a price of £385,000. The contract was subject to the standard conditions of sale (4 th Edition).
Those conditions provide, so far as relevant, as follows:
"6.1.1 Completion date is twenty working days after the date of the contract but time is not of the essence of the contract unless a notice to complete has been served.
6.8.1 At any time on or after completion date, a party who is ready, able and willing to complete may give the other a notice to complete.
6.8.2 The parties are to complete the contract within ten working days of giving a notice to complete, excluding the day on which the notice is given. For this purpose, time is of the essence of the contract.
7.5.1 If the buyer fails to complete in accordance with a notice to complete, the following terms apply.
7.5.2 The seller may rescind the contract, and if he does so:
(a) he may
(i) forfeit and keep any deposit and accrued interest
(ii) resell the property and any chattels included in the contract
(iii) claim damages
(b) the buyer is to return any documents he received from the seller and is to cancel any registration of the contract.
7.5.3 The seller retains his other rights and remedies.
7.6.1 If the seller fails to complete in accordance with a notice to complete, the following terms apply.
7.6.2 The buyer may rescind the contract, and if he does so:
(a) the deposit is to be repaid to the buyer with accrued interest
(b) the buyer is to return any documents he received from the seller and is, at the seller's expense, to cancel any registration of the contract.
7.6.3 The buyer retains his other rights and remedies."
In the conveyancing steps which followed, Clarke was represented by Mr Martin of Bishop & Sewell and Pacific was represented by Mr Compton of Comptons Solicitors. Although a completion statement was sent on 25 October showing no VAT, Comptons maintained thereafter that there had been a mistake, and that VAT was payable on the sale, a proposition strongly contested by Bishop & Sewell.
Resolution of the VAT dispute had not been achieved by the contractual completion date of 10 November 2010. By a letter dated 4 November 2010 Bishop & Sewell gave notice that they were ready, willing and able to complete on 10 November 2010 at the contract purchase price of £385,000. After making deductions for rent apportionment they said they would be in funds on that day to complete at a figure of £343,884.09.
Comptons remained firm in their stated view that there was some reason why, despite the express words of the contract, VAT was nevertheless payable. On 8 November Mr Compton wrote:
"I see little point in dealing with these issues as the parties are too far apart on the question of VAT.
My clients position is that the contract is void for fundamental mistake and your clients position is that he is entitled to specific performance. If your client is entitled to specific performance then my client has a statutory obligation to charge vat calculated on the purchase price as the contract makes no reference to a vat inclusive price."
Accordingly, on 10 November, the date fixed by the contract for completion, Bishop & Sewell were in funds, and ready willing and able to complete. The judge so held.
Later in the day Comptons responded that the offer to complete was not accepted. Accordingly, also on 10 November 2010, Bishop & Sewell served a notice to complete under condition 6 of the standard conditions. Completion was accordingly required within 10 working days of the notice, not counting the day of service. That period would expire on 25 November 2010.
On 11 November 2010 Comptons acknowledged receipt of the notice to complete. They said:
"We do not of course accept the validity of the Notice to Complete as you have not offered to complete in accordance with the terms of the Contract in that your offer is to complete upon a sum which is inclusive of VAT where no such term is included.
As you of course know our client's position is that the Contract is void for mistake and therefore any Notice pursuant to that Contract is ineffective."
The dispute rumbled on over the course of the next 14 days. Having taken advice from counsel, Bishop & Sewell wrote on 24 November 2010 that they had firm instructions to issue proceedings if the dispute was not resolved before 10 December 2010. The letter concluded:
"Unless your clients complete before the notice to complete expires on 25 th November 2010 with apportionments as at 10 th November and losses, damages and costs arising as a result of your client's prior refusal to complete in accordance with the contract, or pay agreed compensation for loss of bargain and incidental costs and expenses, proceedings will be issued without further notice on 10 th December 2010."
Thus it was Clarke's position that the completion monies should include an allowance for losses, damages and costs due to the failure to complete on the original date. In an email timed at 11.15 the following day (the last date for completion in accordance with Clarke's Notice) Mr Martin said this:
"Would you please let me know if your client agrees in principle to complete on the basis proposed, so that we can discuss details of the additional deductions that we would make to cover the losses and expenses suffered by the buyer. I need to inform the buyer of the amount of funds we will require to complete."
It became clear in the course of the trial that the funds which had originally been placed with Bishop & Sewell to complete in accordance with the contract on 10 November had been returned to Clarke in the meantime. The evidence showed that Clarke was only asked to place Bishop & Sewell in funds again at some time on 25 November, consistent with the terms of the email I have just quoted. The judge also found that the money did not reach Bishop & Sewell until the following day, 26 November 2010.
Following receipt of the letter threatening proceedings, Comptons wrote by fax at 11.21 what became known as the white flag letter. The email of 11.15, which enquired whether there was agreement in principle to "complete on the basis proposed", had, as the judge pointed out, been sent 6 minutes earlier, but it is clear that the faxed white flag letter was written in reply to the letter before action and not the email. Having explained that they disagreed with Bishop & Sewell's letter, Comptons continued:
"Our client has also taken advice and as with all litigious matters there is no certainty of outcome.
However having said that, our client cannot allow this matter to remain outstanding any longer and as your client has rejected all reasonable offers to settle our client has little alternative but to complete. The costs of continuing to dispute the matter will most probably outweigh the difference between our respective clients.
We therefore enclose an amended completion statement."
The letter before action had accordingly caused Pacific to abandon their arguments about VAT. The attached completion statement did not include VAT. However, and unsurprisingly, the letter did not make any allowance for compensation to be paid for the loss and damage suffered by Clarke by the failure to complete on time.
Mr Martin responded by email at 14.28, raising various points on the completion statement. He pointed out that the completion statement did not take account of the deposits paid by tenants or the insurance charged to or due from the tenants. He further enquired whether the rent payable on the 24 November had been paid, and if so for an adjustment to the statement to be made to reflect this. The email also pointed out that compensation was due. He said that a schedule was being compiled of the items for which compensation would be claimed. He continued:
"It may not be possible to complete this matter today now due to differences on the completion statement yet to be resolved. However our client is putting us in funds later today/tomorrow a.m.
"Tomorrow a.m." would, of course,...
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