Weir v Area Estates Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CARNWATH,LORD JUSTICE MOORE-BICK,LORD JUSTICE WILSON |
| Judgment Date | 20 July 2010 |
| Neutral Citation | [2010] EWCA Civ 801 |
| Docket Number | Case No: A3/2010/0072 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 July 2010 |
[2010] EWCA Civ 801
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT, CHANCERY DIVISION
Mr Robin Knowles Cbe, QC
Before: Lord Justice Carnwath
Lord Justice Moore-Bick
and
Lord Justice Wilson
Case No: A3/2010/0072
HC08CO1471
Jane Evans-Gordon (instructed by Tarbox Robinson & Partners) for the Appellant
Mark Loveday (instructed by Romain Coleman) for the Respondent
Hearing date: Tuesday 29th June, 2010
Area Estates (“the Vendor”) appeals against the order of Mr Robin Knowles QC sitting as a Deputy High Court judge, dated 18 December 2009, granting Mr Weir (“the Purchaser”) summary judgment on his claim to rescind a contract for sale of a property at 22-24 St Andrew Street, Hertford (“the Property”).
Factual background
On 29 January 2008, the Purchaser contracted with the Vendor to purchase the registered freehold property at a price of £400,000 subject to a £40,000 deposit. The property had been subject to a lease in favour of a Mr Airey, granted on 28 April 2004 for a term of 9 years. The existence of the lease was apparent from the schedule to the freehold title. However, Extra Special Condition 7 (“ESC 7”) of the contract of sale provided:
“The Lease dated 28 April 2004 and referred to on Title Number HD431124 determined by operation of law on 31 August 2006. The Buyer shall accept the position and shall not be entitled to require any further proof of the determination or raise any objection or requisition with regard thereto”.
Unfortunately, the statement that the lease had “determined by operation of law on 31 August 2006” was not correct. What had happened was that the lessee, Mr Airey, had moved out of the Property, purporting to surrender the lease. However, that purported surrender was ineffective in law, because he was at the time subject to a bankruptcy petition, presented on 8 August 2006. The consequence was that any disposition of property was void unless made with the consent of the court (Insolvency Act 1986 s 284). The petition was duly registered against the leasehold title under section 86 of the Land Registration Act 2002 on 11 August 2006. A bankruptcy order was made on 11 October 2006, and was registered against the leasehold title on 2 November 2006.
Notice to complete was served on 7 March 2008. In response the Purchaser sought to rescind the contract because of the encumbrance in the form of the leasehold interest. On 16 May 2008, the Vendor secured a disclaimer of the lease from Mr Airey's trustee in bankruptcy. By claim issued on 4 June 2008, the Purchaser sought the return of the £40,000 deposit plus interest, and by application dated 5 March 2009 applied for summary judgment. The application came before the Deputy Judge on 22 October 2009.
The Vendor advanced in substance three defences:
i) Insolvency Act 1986 s 284(4)(a) which provides an exception for property “received before the commencement of the bankruptcy in good faith, for value and without notice that the petition had been presented”;
ii) Condition ESC 7;
iii) That the defect was a “technical conveyancing defect”.
The judge rejected all three defences, and by order dated 18 December 2009 ordered repayment of the deposit with interest and costs. Permission to appeal was granted by Lloyd LJ.
The issues on the appeal
At the start of the hearing Mr Loveday, for the Vendor, indicated that he was no longer pursuing the first issue. This leaves two issues:
i) Whether condition ESC 7 prevents the Purchaser relying on the continued existence of the lease as a ground for rescission;
ii) If not, whether the existence of the lease should be treated as a “technical conveyancing defect” insufficient to justify rescission.
I remind myself that this is an application for summary judgment, and that we must take the facts at their most favourable from the Vendor's point of view. Thus, we must assume that at the time of the contract the Vendor acted in good faith, and in the belief that the lease had come to an end by operation of law.
Condition ESC 7
The judge
The judge looked at ESC 7 in the context of the other provisions of the contract. He referred in particular to General Condition 4.3:
“Unless otherwise stated in the special conditions the seller sells with full title guarantee except that:
(a) all matters recorded in registers open to public inspection are to be treated as within the actual knowledge of the buyer …”
and Extra Special Condition 1:
“Vacant possession will be given on completion…”
He held
“(1) On its true construction Special Condition 7 required Mr Weir to accept as factually accurate the proposition that the Lease had determined by operation of law on 31 August 2006.
(2) This requirement was not an exception to the “full title guarantee” basis of the sale, under General Condition 4.3(a). Rather, it was an affirmation of it in this particular.
(3) Consistently with the requirement, Special Condition 7 ruled out Mr Weir's being entitled to require any further proof of the determination, or to raise any objection or requisition with regards to it.
(4) Although the Land Register and the Land Charges Register (both registers under General Condition 4.3(a)) revealed the Lease and the bankruptcy petition, and did not mention any determination of the Lease, the position remained that Mr Weir was contractually required to accept that there had been a determination. It transpired that there had not.”
He rejected an argument that the Purchaser (by clause 4.3(a)) was fixed with notice of the bankruptcy petition, and therefore able to work out the true position. He did not see how that could help the Vendor on the question whether they were able “to convey at completion the unencumbered title they had contracted to convey.”
The submissions
Before us, Mr Loveday argues that the judge's interpretation of ESC 7 was too narrow. The vendor is permitted to protect himself against the possible uncertainty of the title, particularly with regard to the inevitable uncertainty surrounding the concept of surrender by operation of law. The plain meaning of the condition was that the risk of such uncertainty was transferred to the purchaser, who could not complain about an incumbrance on the title even though the surrender was found to be void.
For the Purchaser, Miss Evans-Gordon submits that the condition did not prevent the Purchaser objecting if, as it emerged, the lease had not in fact been surrendered. Its effect was only that he was not entitled to require further proof from the Vendor, or to take objection with regard to lack of such proof. This was confirmed by ESC 1, which required “vacant possession” on completion and was inconsistent with the existence of someone with a better title to immediate occupation.
Further, she submits, even if the condition would otherwise be construed as the Vendor proposes, that construction cannot overcome two obstacles, one derived from statute and one from case-law:
i) Law of Property Act 1925 section 42(3), which would make a condition as so construed void;
ii) The principle (established by cases such as Re Banister (1879) 12 ChD 131) that such a condition cannot be relied on if it is misleading, or there has been less than full disclosure (see Emmet and Farrand on Title (2010) para 5.008).
Discussion
I have not found this an easy question. I do not share the judge's confidence that the condition is to be read as simply affirming the “full title guarantee” basis of the sale. I see some force in Mr Loveday's contention that it is designed to transfer risk to the Purchaser: to draw specific attention to the issue of the lease, to express the Vendor's position in respect of it, and to require the Purchaser to accept that position without objection. Furthermore, since the Purchaser was taken to have actual knowledge of anything in the register (condition 4.3(a)), he could not claim to be unaware of the potential problem created by the bankruptcy petition. Although I agree with Miss Evans-Gordon that, taken on its own, the condition requiring “vacant possession” would be inconsistent with the existence of an occupational lease, even if the premises were in fact vacant at the time of sale (see e.g. Cumberland v Consolidated Holdings Ltd [1946] KB 264, 270-1), that general provision does not necessarily override the specific provision made by ESC 7 in respect of the lease.
It is necessary therefore to consider the two points presented by Miss Evans-Gordon as obstacles to the effectiveness of ESC 7. Neither is entirely straightforward. I will deal with the case-law principle first, since the ground is much better-trodden.
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Joanne McGarrity and Nigel McGarrity and Sarcon (No. 177) Limited
...of misrepresentation.” [104] A more recent decision in the Court of Appeal in England and Wales is that of Area Estates Ltd v Weir [2010] EWCA Civ 801. In that case, the purchaser contracted with the Vendor to purchase a piece of property which had been subject to a lease. The existence of ......