Eminence Property Developments Ltd v Heaney

JurisdictionEngland & Wales
JudgeLord Justice Etherton,Lord Justice Sullivan,Lord Justice Mummery
Judgment Date21 October 2010
Neutral Citation[2010] EWCA Civ 1168
Docket NumberCase No: A3/2010/0262
CourtCourt of Appeal (Civil Division)
Date21 October 2010
Between
Eminence Property Developments Ltd
Appellant
and
Kevin Christopher Heaney
Respondent

[2010] EWCA Civ 1168

Mr Recorder Blohm QC (Sitting as a Judge of the High Court) 9BS01211

Before: Lord Justice Mummery

Lord Justice Etherton and Lord Justice Sullivan

Case No: A3/2010/0262

IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION

BRISTROL DISTRICT REGISTRY

Mr Bernard Livesey Q.C., and Paul Mitchell (instructed by Solicitors Direct) for the Appellant

Mr Andrew Clarke Q.C., and Charles Auld (instructed by Foot Anstey Solicitors) for the Respondent

Hearing dates: 5th October 2010

Lord Justice Etherton

Lord Justice Etherton:

Introduction

1

This issue on this appeal is whether a vendor of land, who served a notice to complete making the time for completion of the essence of the sale contract, and then, mistakenly, treated the contract as at an end prior to the expiry of the notice, was thereby itself in repudiatory breach of the contract entitling the purchaser to terminate the contract.

2

Mr Recorder Blohm QC, sitting as a judge of the High Court, held that vendor in the present case, Eminence Property Developments Ltd (“Eminence”), was in those circumstances in repudiatory breach of the contract of sale, and the purchaser, Kevin Heaney, lawfully terminated the contract by accepting that repudiation. This is an appeal by Eminence from the Recorder's order dated 15 January 2010.

The factual background

3

The material facts, largely taken from the Recorder's judgment, may be simply stated. Eminence is the freehold owner of a block of one and two bedroom flats called Carpenters Place in Bristol, which it constructed. Mr Heaney is a property developer. Prior to completion of the flats, Mr Heaney negotiated and agreed with Eminence the purchase by him off-plan of 13 flats for the aggregate price of £1,470,000 and a deposit of 2.5 per cent of the purchase price of each flat, amounting to £36,750 in total. On 10 December 2007 13 separate contracts were exchanged in identical terms, each contract being for the sale of a flat on a long lease.

4

The contracts provided for the contractual completion date to be fixed by reference to the date on which the relevant flat under construction was ready for occupation. It was common ground before the Recorder that, in the circumstances which occurred, the contractual completion date was 4 December 2008.

5

The contracts incorporated the Standard Conditions of Sale (4 th ed) (“the Conditions”), subject to minor amendments. Condition 1.1 contains the following material definitions:

“1.1.1(m) ‘Working day’ means any day from Monday to Friday (inclusive) which is not Christmas Day, Good Friday or a statutory Bank Holiday

1.1.3 A party is ready, able and willing to complete:

(a) if he could be, but for the default of the other party, and …”

6

Condition 6.1.1 provides:

“6.1.1 … time is not of the essence of the contract unless a notice to complete has been served.”

7

Condition 6.8 concerns the service of a notice to complete and provides:

“6.8. Notice to complete

6.8.1 At any time on or after the 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.

6.8.3 On receipt of a notice to complete:

(a) …

(b) if the buyer paid a deposit of less than 10 per cent (no less than £500), he is forthwith to pay a further deposit equal to the balance of that 10 per cent deposit”

8

Condition 7.5 concerns the consequences of the buyer's failure to comply with a notice to complete, and provides:

“7.5 Buyer's failure to comply with notice to complete.

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.”

9

Following the making of the contracts, there was a significant downturn in the property market. By late 2008 Mr Heaney was having difficulty raising the funds necessary to complete at the contract price. There were negotiations between Eminence and Mr Heaney for a lower purchase price and higher specification for the flats, but no concluded agreement was ever reached.

10

Eminence wished to complete the contracts on 4 December 2008, the contractual completion date, but Mr Heaney did not do so. On 5 December 2008 Eminence, by its solicitors, Solicitor Direct, served a notice to complete in respect of each contract pursuant to Condition 6.8. Each notice referred to the relevant contract for the flat in question, stated that the sale had not been completed on the date fixed and that the seller was ready, willing and able to complete, gave “notice under condition 6.8 of the Standard Conditions of Sale 4 th edition (to which the contract was made subject) to complete the contract in accordance with that condition”, and drew “attention to the consequences set out in condition 7.5 of the Standard Conditions” should Mr Healey “fail to complete the transaction within 10 working days of giving [the] notice, exclusive of the date on which it was given.” It is not disputed that the terms of the notices were in accordance with the contracts and the Conditions.

11

The notices were sent under cover of a letter dated 5 December 2008 from Matthew Jones, a solicitor with Solicitor Direct, to Foot Anstey, Mr Heaney's solicitors. In the letter Mr Jones referred to the flats which Mr Heaney had contracted to purchase, and said:

“We are disappointed to note that we have not completed the above and we have had no explanation as to why.”

12

Mr Jones referred to the enclosed notices to complete. He then set out “the contractual daily compensation rate for each flat”, said that Mr Heaney was liable for certain legal costs, and concluded in the last paragraph:

“We calculate the final date for completion under the notice is 15 th December 2008”.

13

That statement as to the final date for completion was incorrect. It is common ground on this appeal that the combined effect of Condition 6.8.2 and the definition of “working day” in Condition 1.1.1(m) was that the notices to complete expired on 19 December 2008. Mr Jones’ evidence before the Recorder, in paragraph 28 of his witness statement, as to why he said in the letter that the final date for completion under the completion notices was 15 December 2008 was as follows:

“I am not sure why I did this. I presume I calculated the ‘days’ rather than the ‘working days’. I can only put this down to human error on my part”.

14

Mr Heaney took no steps to complete the contracts. Eminence decided to rescind them pursuant to Condition 7.5 and to exercise the other remedies specified in that Condition, including forfeiting the deposits. However, it did so prematurely. On 17 th December 2008, under cover of a letter from Mr Jones to Foot Anstey, Solicitor Direct sent notices of rescission in respect of each contract. Each notice said as follows:

“Further to the expiry of the notice to complete served under condition 6.8 of the Standard Conditions of Sale 4 th edition (The Standard Conditions) you have failed to complete the purchase of the above property. Pursuant to 7.5 of the Standard conditions please treat this letter as formal notice of rescission of the Agreement for sale dated 10 th December 2007. Your clients deposit has been forfeited along with accrued interest and our client is entitled to damages for breach of contract, including but not limited to the remainder of the deposit payable under the contract.”

15

In the covering letter Mr Jones asked Foot Anstey to “confirm whether you will be dealing with the claim against your client as well.”

16

Foot Anstey replied by letter dated 18 December 2008. The Recorder described it as “almost by return”. It referred to “each of your letters of 17 December 2008” and to the notices to complete, and the provisions of Condition 6.8, and continued as follows

“1.3. The Notices to Complete that were served by you required completion of the contracts on or before 18 December 2008, which is the date 10 working days after service of the Notices to Complete (assuming it was deemed served on 5 December rather than 8 December for the purpose of standard condition 1.3.

1.4. The act of rescinding contracts under cover of your letters of 17 th December 2008 constitutes a repudiatory breach of contract. Our client accepts your clients’ repudiatory breach of contract and elects to rescind the contracts and is discharged from them.

1.5.Please remit, by return, our client's deposits together with any interest accrued on those deposits.”

17

That letter from Foot Anstey was written by Richard Bagwell, who was a litigator and not involved in the conveyancing. The promptness of the response to the letter from Solicitor Direct enclosing the rescission notices and the fact that the letter was written by Mr Bagwell led the Recorder to speculate that Foot Anstey were already aware, on receipt of Mr Jones’ letter of 5 December 2008 enclosing the notices to complete, that Mr Jones was mistaken in...

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