Midill (97PL) Ltd v Park Lane Estates Ltd and another
| Jurisdiction | England & Wales |
| Judgment Date | 16 January 2008 |
| Neutral Citation | [2008] EWHC 18 (Ch) |
| Docket Number | Case No. HC06C03472 |
| Court | Chancery Division |
| Date | 16 January 2008 |
[2008] EWHC 18 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
His Honour Judge Mackie Qc
(sitting As A Judge Of The High Court)
Case No. HC06C03472
Mr Steven Thompson (instructed by David Wineman) appeared for the Defendants
Mr Peter Crampin QC and Mr Adrian Davies (Instructed by Osman & Osman) appeared for the Claimant
Was the vendor of shares in a company owning a single property, who had served notice to complete on the purchaser, itself ready, able and willing to complete? That, together with an issue about return of the deposit, is the question in this case.
The parties and the transaction
On 24 December 2005 the Claimant (“Midill”) agreed in writing (“the Agreement”) to pay the Second Defendant (“Gomba”) £4,000,000 for all the shares in the First Defendant (“Park Lane”) a company whose only asset was a commercial property at 97 Park Lane, London. The price was to be paid in three tranches, £400,000 (i.e. 10%) as a deposit on signing the Agreement, £800,000 on 8 February 2006 and the balance on 8 April 2006 when completion was due to take place. The deposit of £400,000 and the second tranche of £800,000 were paid by Midill to Gomba. But Midill was unable to complete on 8 April or on the later date of 27 April the date by which a notice to complete, given on 11 th April, expired. On 5 May 2006 Gomba sought to rescind the Agreement by a solicitor's letter. Midill later responded that it considered the notice to complete to have been invalid. Gomba was still willing to negotiate but only at a higher price. On 14 September 2006 Park Lane sold the property to an unconnected company Wundervoll for £4,300,000. On the day that sale was completed Midill sought and obtained from this court, without notice, an order to freeze £1.2 million of the proceeds of sale.
The action proceeded. After a pleading amendment Gomba repaid the £800,000 but a dispute about interest remains. Although Midill had claimed in its Reply that Gomba had been unable to complete at either relevant date this did not become part of its substantive claim until amendments were made by consent about a month before the trial. Midill claims that the sale to Wundervoll was a breach of the Agreement and that it is entitled to a repayment of the deposit of £400,000 plus interest, to interest on the £800,000 repaid and to damages for breach of contract valued at £300,000, the equivalent of the difference between what it agreed to pay for the property and what Park Lane obtained from Wundervoll. In contrast Gomba denies that it was unable to complete or was in breach of the Agreement and claims that it is entitled to forfeit the deposit of £400,000 irrespective of the profit which it made as a result of the sale to Wundervoll. Justice does not seem to cry out in favour either of Midill which seeks the profit on a resale brought about by its inability to complete its obligations under the agreement or of Gomba which seeks to retain a deposit of £400,000 despite having made a profit of £300,000 as well.
The Agreement
I next refer to the Agreement in more detail. By clause 2 the Seller was to sell the shares with full title free from all liens and so on and the Buyer was to purchase relying on the Seller's representations and warranties. The purchase price which I have already mentioned was set out in clause 3.1 with the final £2,800,000 to be paid “on the 8th day of April 2006 or any time before that date (“the completion date”).
Clause 3.2 provided that the initial sums of £400,000 and £800,000 would, when received by the Seller's solicitors, be held by them as Agents for the Seller to be paid by them to Barclays Bank under a Legal Charge secured on the Property and identified in clause 5.9.
By clause 3.5 conditions 6 and 7 of the Law Society's Standard Conditions of Sale (Fourth Edition) were to apply “in so far as they are applicable” and “subject to clause 5.9.1 hereof”. The provisions of the Standard Conditions relevant to this dispute are as follows:-
“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
(b) in the case of the seller, even though the property remains subject to a mortgage, if the amount to be paid on completion enables the property to be transferred freed of all mortgages (except any to which the sale is expressly subject).
6.2 Arrangements and place
1 The buyer's conveyancer and the seller's conveyancer are to co-operate in agreeing arrangements for completing the contract.
Notice to complete
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.
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.
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.
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.
7.6 Seller's failure to comply with notice to complete
1 If the seller fails to complete in accordance with a notice to complete, the following terms apply.
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.”
Clause 5 is the provision most at issue in this case and I therefore set it out in full:-
“5. Completion
Completion shall take place on the 8 th day of April 2006 at the offices of the Seller's solicitors and only when the transactions mentioned in the following sub-clauses shall take place
The Seller shall deliver to the Buyer Stock Transfer Forms in respect of the Shares in favour of the Buyer or as it shall direct duly executed together with certificates for all the Shares
The Seller shall deliver to the Buyer the resignations of the Directors and Secretary of the Company from their respective offices together with a written acknowledgement under seal from each of them that he has no outstanding agreement with the Company nor any claim whatsoever against the Company whether actual or contingent including but not limited to compensation for loss of office, damages, pensions, loans or otherwise
A board meeting of the Company shall then be held at which such persons as the Buyer may nominate shall be appointed additional directors and secretary of the Company. There shall be submitted and accepted and accepted the resignations of the directors referred to in Clause 5.2
An extraordinary general meeting of the Company shall then be held at which there shall be proposed and passed resolutions adopting new articles of association in such form as the Buyer may require
The seal, statutory books, certificate of incorporation, books of account and other books (including cheque books), title deeds, documents of record and other documents and papers of the Company shall be handed over to the buyer and
The Company's Bankers shall be instructed to honour only the signatures of such persons as the Buyer shall designate and all the Company Bank Mandates shall be altered accordingly
Against such delivery the Buyer shall deliver a Bankers Draft for the balance of the Purchase Price payable to the Seller's Solicitors or at the Seller's option the balance of the purchase price shall be paid by way of direct credit to the Seller's solicitors' client account at Completion whose receipt shall be a sufficient discharge for the Buyer.
5.8 There shall be submitted and accepted the resignations of the directors of the directors referred to Clause 5.2
The Seller shall procure that on completion the Seller's solicitors will remit to Barclays Bank plc the amount required to discharge the Legal Charge dated 27th August 2004 secured on the Property and will provide to the Buyer a Form DS1/END1 as soon as it is to hand and confirms that this is or will be the only legal charge borrowing or similar on the Property
5.9.1 If in any respect the provisions of Clauses 5.1 to 5.6 inclusive and 5.8 are not complied with on the date of Completion set by this clause the Purchaser may defer Completion to a date (“the Postponed Date”) not more than 28 days after the date set by Clause 5 provided that if Completion does not take place on the Postponed Date by reason of the failure of the Seller to comply with the provisions of Clause 5.1 to 5.6 and 5.8 then either party may by notice in writing rescind this Agreement whereupon the deposit shall be returned to the Buyer together with interest thereon at the rate of 4% above the base rate of Barclays Bank plc whereupon neither party shall have any claim against the other, or
5.9.2 Proceed to completion as far as practicable (without prejudice to its rights under this Agreement).”
Ready, willing and able to complete – The Law
I will consider the relevant law first in order to focus only on the relevant facts.
It is common ground that the Vendor must be ready and willing to deliver the instrument of a transfer of property (including shares in a company which holds property) to the...
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