England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CHANI 96/0117/B

(Mr Martin QC )

Royal Courts of Justice

Strand

London WC2

Thursday, 20th February, 1997

B e f o r e:

LORD JUSTICE STAUGHTON

LORD JUSTICE ROCH

LORD JUSTICE MORRITT

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URBAN MANOR LIMITED

Plaintiff/Respondent

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SADIQ

Appellant/Defendant

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(Handed down transcript of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

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MR G NURSE (Instructed by Messrs Slaters NW3 5JJ) appeared on behalf of the Respondent

MR J NORMAN (Instructed by GH Gelberg & Co N1 1RC) appeared on behalf of the Appellant

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J U D G M E N T

(As approved by the Court )

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©Crown Copyright

Thursday, 20th February, 1997

JUDGMENT

LORD JUSTICE MORRITT: By his order dated 21st December 1995 Mr J.V.Martin QC, sitting as a deputy judge of the Chancery Division declared that a contract dated 2nd December 1994 for the sale of property known as 29 The Drive, Loughton, Essex (“the Property”) by the plaintiff, Urban Manor Ltd (“the Vendor”), to the defendant, Mohammed Sadiq ("the Purchaser"), had been effectively rescinded and that the Vendor was entitled to forfeit the deposit of £16,035. In addition he ordered that the caution registered by the Purchaser against the title to that property be vacated. This is an appeal by the Purchaser from that order brought with the leave of the judge. The property has now been resold by the Vendor. Accordingly if the Purchaser is successful on this appeal the only relief sought is the discharge of the declarations. It is accepted that in that event the question of whether the Purchaser is entitled to the return of his deposit would have to await the outcome of further proceedings.

At the time the Vendor and Purchaser entered into the contract the title to the Property was registered in HM Land Registry under Title No.EX490144, English Real Estates PLC was the registered proprietor thereof and the Vendor was entitled to the benefit of a contract with that company to purchase it. The contract for the sale of the Property was made on 2nd December 1994 between the Vendor and the Purchaser. The price was £95,350. The Purchaser was required to pay a deposit of £9,535 on the signing thereof, which he did. The contractual date for completion was 9th January 1995. The conditions provided that Title was to be deduced in accordance with s.110 Land Registration Act 1925 and that the National Conditions of Sale 20th Edition should apply with certain specified modifications.

The relevant National Conditions are Conditions 9 and 22. The former provides by paragraph (1) that the vendor should deliver the abstract of title, defined in paragraph (11) under the heading “Construction of Conditions” as “such documents as the vendor is required by Land Registration Act 1925 s.110 to furnish” not later than 11 working days after the date of the contract. Paragraph (3) requires the purchaser to deliver his requisitions within 11 days of delivery of the abstract and his observations on the replies thereto within 6 working days after delivery of the replies. As provided for by paragraph (4) time is of the essence for the delivery of such requisitions and observations even if the abstract was delivered late. Paragraph (6) provides that

“Subject to his requisitions and observations, the purchaser shall be deemed to have accepted the title.”

Condition 22 enables either party “being ready and willing to fulfil his own outstanding obligations under the contract” to serve a notice to complete in conformity with that condition. If he does so then it becomes a term of the contract in respect of which time is of the essence that the party to whom the notice is given completes the contract within, in accordance with the contractual modification in this case, ten days. If he fails to do so then the vendor may forfeit the deposit.

The dispute in this case concerns the proper construction and application of s.110 Land Registration Act 1925 and in particular subsection (5). The section is the first in Part X which is described as “Miscellaneous Provisions”. The side note to the section is “Provisions as between vendor and purchaser”. It provides, so far as material, that

“On a sale or other disposition of registered land to a purchaser other than a lessee or chargee

(1) The vendor shall, notwithstanding any stipulation to the contrary, at his own expense furnish the purchaser, if required, with a copy of the subsisting entries in the register...so far as they.. affect the land to be dealt with...

(2) The vendor shall, subject to any stipulation to the contrary, at his own expense, furnish the purchaser with [documents relating to] any subsisting rights and interests appurtenant to the registered land as to which the register is not conclusive...

(3) Except as aforesaid, and notwithstanding any stipulation to the contrary, it shall not be necessary for the vendor to furnish the purchaser with [any other proof of title]:

(4)[Filed abstracts or copies are deemed to be correct]

(5) Where the vendor is not himself registered as proprietor of the land....he shall at the request of the purchaser and at his own expense, and notwithstanding any stipulation to the contrary, either procure the registration of himself as proprietor of the land...or procure a disposition from the proprietor to the purchaser:

(6) Unless the certificate is deposited at the registry the vendor shall deliver the land certificate...to the purchaser on completion of the purchase.....where the certificate has been lost or destroyed, the vendor shall, notwithstanding any stipulation to the contrary, pay the costs of the proceedings required to enable the registrar to proceed without it:

(7)[Exclusion of notice as to certain matters]

On 12th December 1994 the solicitors for the Vendor wrote to those for the Purchaser enclosing the office copy entries on the register relating to the Property and a copy of the agreed form of transfer from English Real Estates PLC to the Vendor. They indicated that Vendor was a contractual purchaser and proposed contemporaneous completion when they would hand over the transfer from English Real Estates PLC to the Vendor and from the Vendor to the Purchaser. Three days before the contractual date for completion, on 6th January 1995, the Solicitors for the Purchaser sent to those for the Vendor a draft form of transfer and their requisitions on title. The form of transfer identified the land being transferred by reference to the transfer from English Real Estates PLC to the Vendor. The Requisitions on title contained nothing to suggest that any request might be made pursuant to s.110(5) requiring the Vendor to complete in one or other of the ways prescribed by that subsection.

On 9th January 1995 the Vendor completed its own purchase from English Real Estates PLC. On the following day the Solicitors for the Vendor wrote to those for the Purchaser informing them of such completion. In addition they sent their answers to the requisitions and returned the draft transfer as approved. By the same letter they purported to give notice to the Purchaser pursuant to National Condition 22 requiring him to complete on, as subsequently agreed, 25th January 1995.

In accordance with National Condition 9 the Purchaser had until 16th January to submit his observations on the answers of the Vendor to his requisitions. He did not do so. On 19th January 1995 the Vendor applied to the Land Registry for registration as the proprietor of the Property. Subsequently, the judge thought on 20th February 1995, he was so registered but with effect from the date of the application.

The Purchaser failed to complete on 25th January 1995 as required by the notice given on 10th January. But instead of rescinding and forfeiting the deposit forthwith the Vendor agreed with the Purchaser for an extension of time. Based on this description neither party contended that the agreement was invalid for failure to comply with the formalities required by s.2 Law of Property (Miscellaneous Provisions) Act 1989. cf McCausland v Duncan Lawrie Ltd (1997) 1 WLR 38. The terms of that agreement were that the purchase price would be increased to £96,850, an additional deposit of £6,500 should be paid, which it was, and that the notice to complete already given on 10th January would expire at 1pm on 3rd February 1995.

On 1st February 1995 the solicitors for the Purchaser sent a fax to those for the Vendor contending that as the Vendor was not registered as the proprietor it had not been and was not then able to complete. The fax continued

“Accordingly the notice served by you is rejected. Whilst our client is endeavouring to complete as soon as possible and indeed hopes to be able to complete this week until such time as you provide copy entries he is of course not obliged to do so pursuant to s.110(5) Land Registration Act 1925.”

The solicitors for the Vendor replied on 3rd February disagreeing with these contentions. They argued that the Purchaser was deemed to have accepted the title of the Vendor pursuant to National Condition 9(6) and that the validity of the notice to complete had been accepted by the Purchaser when agreeing to the terms for the extension of time. The solicitors for the Purchaser did not agree with either of these points. On 3rd February they applied on behalf of the Purchaser for the registration of a caution. After some intermediate correspondence, on 14th February, the solicitors for the Vendor wrote claiming that the contract had been rescinded and the deposits forfeited.

On 20th February 1995 the caution for which the Purchaser had applied on 3rd February was duly registered and notice thereof was given by the Land Registry to the Vendor as the registered proprietor thereof on 22nd February. I infer that it was for this reason that the judge thought that it was not until 20th February that the name of the Vendor was actually registered as proprietor. On 6th March 1995 the Originating Summons was issued by the Vendor under ss.49 and 203 of the Law of Property Act 1925 and s.82 Land Registration Act 1925 seeking declarations that the contract had been rescinded and the deposit forfeited and an order for vacation of the registration of the caution. On 5th April 1995 the solicitors for the Purchaser purported to give notice to the Vendor under National Condition 22 requiring completion ten days later. This notice was not complied with and, as I have already indicated, even if the Purchaser is successful on this appeal, both parties envisage further proceedings concerning the right of the Purchaser to rescind and to recover the deposits in reliance on that condition and notice.

Mr Martin QC handed down his reserved judgment on 21st December 1995 He concluded that the letter from the solicitors for the Purchaser dated 1st February was a request under s.110(5) Land Registration Act 1925. He also considered that the title of the Vendor had been accepted by the Purchaser pursuant to National Condition 9(6) not later than 24th January. On this aspect of the case he said

“It seems to me that the matters with which s.110(5) is concerned are properly categorised as matters of title. On the face of it, a purchaser is entitled to a transfer from the person in whom the legal estate is vested, and in the case of registered land that is the registered proprietor. Although a person to whom the land has been transferred is capable of making an effectual transfer under s.37(2) Land Registration Act 1925, he is no more than the owner in equity of the land. Moreover until he is actually registered the possibility remains that there may be some objection to his registration; that the risk cannot be entirely averted by the scheme of searches suggested in Emmet on Title (19th Ed.) paragraph 5.088. A purchaser may take the view that he will be satisfied with a title made under s.37(2); but if he makes use of s.110(5) he is requiring that a title be made in a way which ensures that both the existing legal owner and the existing equitable owner are bound. An issue of that nature is one which should properly be raised by requisition on title.”

The point, which he described as an interesting one, then arose whether a contractual provision limiting the time within which the purchaser must make his request under s.110(5) is “a stipulation to the contrary” so as to be invalidated by that subsection. He decided that it was not. He said

“Title can be made quite acceptably under s.37(2). It cannot therefore be said that the intention of the legislature was that a vendor who was not the registered proprietor must make title in accordance with s.110(5). In reality the intention was that a purchaser should have a right to require title to be made in a particular way if he wanted it. I see nothing contrary to that intention, or to the words of the subsection itself in allowing the parties to impose a time limit on the purchaser’s request. No doubt the time allowed must be such as to give the purchaser a real opportunity to take advantage of the right the subsection gives him; if he does not have that opportunity he is the victim of a stipulation contrary to the benefit the legislature intended him to have. In the present case however the time permitted for the raising of requisitions gave the defendant ample time in which to make an informed decision as to the manner in which he wished title to be made.”

After considering Walia v Michael Naughton Ltd (1985) 1 WLR 1115, Naz v Raja (Court of Appeal 7th April 1987)(Unreported) and Lee v Olancastle (Millett J 8th July 1987)(Unreported) he concluded:

“That case [Lee v Olancastle] is clear authority for the propositions that the purchaser may make his request at any time up to actual completion and that the vendor’s notice to complete is invalid unless he is able when he serves his notice to complete to comply with the request if it is made. As such it is inconsistent with both the decision of Whitford J in Naz v Raja and the view I have myself formed of the law. If it is correct, it means (as Millett J recognised) that the vendor could never take the risk of a purchaser making a request. Whatever the purchaser had said to lead the vendor to believe that no request would be made, and however late the request was made, the vendor would have to comply. I do not consider that s.110(5) is to be construed so as to lead to that conclusion. For my part I prefer the approach of Whitford J and propose to follow it.”

I did not understand the Purchaser to challenge the judge’s analysis to the effect that whether title is to be made in accordance with s.37(2) or s.110(5) is a matter of title which falls within the requirements of National Condition 9. The issue was whether that Condition could be effective as between the Vendor and the Purchaser to limit the time within which the request was to be made having regard to the terms of the s.110(5).

The Purchaser contends that the judge was wrong to construe the words “a stipulation to the contrary” as not embracing a limitation on the time within which the request might be made. As his counsel put it “nothing may eat into the right conferred by s.110(5)”. For the Vendor it is contended that the judge was right in that respect. In addition it submits that in all the circumstances of the case by 1st February 1995 the Purchaser had waived his right or was estopped from relying on the provisions of s.110(5).

I prefer the submissions for the Vendor. As the opening words make clear the section is dealing with the position on a sale as between vendor and purchaser. Subsections (1) to (4) deal with the obligation of the Vendor concerning the documents of title he must, initially, produce. Subsection (5) then deals with the situation in which those documents do not show the vendor as the registered proprietor. Subsections (6) and (7) are concerned with completion and certain matters in consequence thereof. The events with which subsection (5) deals necessarily come after the initial deduction of title and before completion and the necessary preparations for it. No reason was suggested, and I can think of none, why Parliament should have intended that a purchaser to whom the subsisting entries on the register had been furnished pursuant to subsection (1) should be entitled to wait until the day fixed for completion before requesting the vendor to make title in one or other of the ways provided for by subsection (5).

The obligation in respect of which the subsection precludes any stipulation to the contrary is to make title in one or other of the ways described. That obligation only arises if a request to that effect has been made by the purchaser. Literally a stipulation to the contrary is a contractual provision to the opposite effect. But if the Purchaser is right and he is entitled to make his request right up to the last moment a provision merely limiting the time within which he may make his request is not to the opposite or contrary effect. To be to the contrary effect the stipulation would have to preclude any obligation to make title in one or other of the stipulated ways whenever the request was made. The application of National Condition 9 in the way the judge considered that it should be applied does not have an opposite or contrary effect for it permits the request to be made and the obligation to arise in accordance with its terms at any time up to the specified period after the time for the purchaser’s observations on the vendor’s answers to the purchaser’s requisitions on title. In my view that period is one which gives a real opportunity to a purchaser to make the request in the light of all the relevant information to be provided to him pursuant to subsections (1) to (4). Thus I do not accept the submission of counsel for the purchaser that any provision which “eats into” the ability of a purchaser to make a request at any time is “a stipulation to the contrary effect”.

In Lee v Olancastle Millett J was concerned with a case which was factually similar. Accordingly it is necessary to consider the reasons he gave for reaching, as the judge recognised, the opposite view. The plaintiff was seeking the return of the deposit he had paid under a contract for the purchase of registered land from the defendant. The defendant’s purchase of the property from a third party was completed on 16th December 1985. The contract for its resale to the plaintiff was made on 19th December for completion on 16th January 1986 and the deposit was paid by the plaintiff to the defendant. Special Condition I provided that the title should consist of office copy entries showing the third party to be the registered proprietor and a certified copy of the transfer from the third party to the defendant. On 16th January, the contractual date for completion, the defendants solicitors sent their replies to the requisitions on title. On 23rd January the plaintiff served a notice to complete pursuant to National Conditions of Sale 20th Edition Condition 22 as amended by the contract requiring completion on 5th February 1986. On 31st January the solicitors for the defendant claimed that the notice to complete was invalid. The contract was not completed as required by that notice and proceedings were commenced on 24th February by a writ claiming a declaration that the plaintiffs had rescinded the contract and for the return of the deposit. Thus the issue was whether the notice to complete had been validly given. This depended on whether on that date the defendant was “ready and willing to fulfil his outstanding obligations under the contract”.

Millett J considered that that question fell to be determined as at the date the notice was served. One of the three contentions advanced by the plaintiff was that the defendant was not then or at any time before 5th February in a position either to compel the third party to execute a transfer in favour of the plaintiff nor to obtain the registration of their name as proprietor as required by s.110(5) Land Registration Act 1925 if the plaintiff so required. In regard to that point Millett J said

“The contract has to be read with s.110(5), and in my judgment the defendant’s outstanding obligations under the contract on 23rd January were to complete the sale in accordance with Special Condition I..or if requested in accordance with s.110(5). They had to be ready to complete in either of those two methods. They were not ready to complete, and it cannot be assumed that they could be ready within any short period of time to complete, if requested to do so, in accordance with their statutory obligations. In my judgment, in such a situation as the present, a vendor, before he serves a notice to complete must satisfy himself that he can complete the contract by procuring his own vendor to transfer the land to the purchaser himself, or must obtain his own registration and be in a position to execute the transfer himself direct to the purchaser. For that reason I hold that the defendants were not ready and willing on 23rd January to perform their own outstanding obligations under the contract and the notice to complete was bad.”

It seems to me that that case is, in part, distinguishable. There was no suggestion there that the title of the defendant had been or was deemed to have been accepted by the plaintiff. Accordingly the question whether s.110(5) precluded a stipulation which required, in effect, the request to be made before the acceptance of title did not arise. Millett J did not have the benefit of the argument we have had and did not decide that point. Nevertheless I do not agree that the “outstanding obligations” of a vendor for the purpose of National Condition 22 include an obligation to complete as provided for in s.110(5) when no request to that effect has been made by the purchaser. No doubt the requirement so to complete if requested is a contingent obligation but I do not think that it can properly be described as an outstanding obligation at a time when no request has been made.

Accordingly in my judgment the judge was right. At the time the notice to complete was served on 10th January 1995 there had been no request by the Purchaser for completion in accordance with s.110(5). In consequence the Vendor was ready and willing to fulfil all its outstanding obligations by completing in accordance with s.37(2) Land Registration Act 1925 by the execution of the agreed form of transfer. At the time the notice originally expired on 25th January 1995 the Purchaser was deemed to have accepted the title of the Vendor. National Condition 9 was effective to limit the time within which the Purchaser might request the Vendor to complete in one of the ways prescribed by s.110(5). Thus the request, as the judge construed it, made by the Purchaser’s solicitors on 1st February was of no effect and on 3rd February 1995 when the notice to complete as extended by agreement expired the Vendor was ready and willing to fulfil all his outstanding obligations. It follows that in accordance with National Condition 22 the Vendor was entitled to rescind the contract and forfeit the deposit paid thereunder when it did.

In these circumstances it is unnecessary to consider the alternative case for the Vendor based on waiver or estoppel. I would dismiss this appeal.

LORD JUSTICE ROCH: I agree.

LORD JUSTICE STAUGHTON: I agree that this appeal should be dismissed for the reasons given by Morritt LJ. In particular, (1) I do not share the view of Millett J in Lee v. Olancastle that a vendor cannot serve a valid notice to complete if he is unable to comply with one or other of the requirements of section 110(5), at a time when he has not been requested to do so; and (2) a term that a request for completion under section 110(5) must be made within a reasonable time before completion is not "any stipulation to the contrary" within the subsection.

ORDER: Appeal dismissed with costs.

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