England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HER HONOUR JUDGE DAVIES
PORTSMOUTH COUNTY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL Thursday 26th July, 2001

LORD JUSTICE MUMMERY:

1. Broadly stated the issue on this appeal is whether a consent order for specific performance of a contract for the sale of land should be rescinded at the instance of the respondent seller, as was held to be the case by HHJ Davies in the Portsmouth County Court on 20 June 2000 ; or whether, as the appellant buyer contends, he remains entitled to enforce the court order made in his favour on the compromise of earlier proceedings between these parties and, if so, on what terms.
2. Mr Paul Webb, the respondent to the appeal, is the registered proprietor of freehold property known as the Westfield Leisure Centre (the Centre), Shore Road, Bonchurch in the Isle of Wight registered at HM Land Registry under Title No IW41604. The Centre was transferred to him on 14 November 1997 by Mr Wadsworth and Ms Thorn. He acquired it with a view to refurbishment and sale.The Centre is subject to a registered charge in favour of Cherrytree Finance Limited.
3. On 20 November 1998 he entered into a written agreement,which incorporated the Standard Conditions of Sale (3rd Edition), to sell the Centre to the appellant, Mr Christopher Paige, for £110,000. A minimum sum of £75,000 was payable at the time of completion of the sale.The balance was to be paid over a period of three years, the first £10,000 to be paid to the seller within six months of the completion date and the balance to be paid in equal instalments over a thirty months period commencing in six months after the completion date.
4. The completion date was initially fixed as 31 December 1998. It was agreed that, if the sale was not complete by that date then, "in addition to interest or other damages, the interest charges incurred in relationship to the finance on the property by Cherrytree Finance Co registered charge on 6 February 1998 shall be paid over and above the purchase price of £110,000 by the Buyer to the Seller these charges may be added to the amount outstanding over a three year period."
5. There was a dispute as to whether the completion date was extended by agreement. It was unnecessary to resolve that dispute, as completion did not take place by the alleged agreed date or by 7 April 1999, that being a later completion date stipulated in a notice to complete dated 23 March 1999 served by Mr Webb's solicitors on Mr Paige. Mr Paige denied that Mr Webb was ready, willing and able to complete. Mr Webb then purported to rescind the contract on 25 March 1999 for non-payment of the deposit.
6. Mr Paige disputed Mr Webb's entitlement to rescind the contract. He began proceedings on 29 March 1999 for a declaration that the agreement remained in full force and effect and for specific performance and damages.
7. A consent order was made by District Judge Cawood on the compromise of those proceedings on 10 December 1999. By consent it was ordered that

" There be specific performance of the agreement dated 20 November 1998 by 31 January 2000 or earlier agreement at the amended price of £83,700."

8. On 31 January 2000 Mr Paige's solicitors tendered payment of £75,000 to Mr Webb's solicitors for the purchase of the property, the balance to be paid subsequently. In their covering letter Mr Paige's solicitors stated that

"The matter of the payments to the Cherrytree Finance referred to in the contract were compromised when the revised price was agreed. The sum of £83,700 was agreed as the total amount to be paid by our clients on completion subject to the instalments provided for in the contract.Bearing in mind that £10,000 was to be paid after six months our clients accept that the balance of the purchase money namely £8,700 will be paid within after six months."

9. The letter also raised the question of a Deed of Rectification. The deed related to a right of way over a roadway connecting the Centre to the public highway. The deed had been executed on 25 June 1999.The parties to it included Mr Wadsworth and MS Thorne, who had sold the Centre to Mr Webb in November 1997. The original deed was, however, still in the hands of a firm of solicitors, Messrs Allens, who had acted for Mr Webb and claimed a lien over it in respect of unpaid fees. The deed was not referred to in the original agreement or in the consent order. The solicitors for Mr Paige stated that their client was "happy for completion to take place subject to the deed being made available and subject to your holding the transfer in agreed form." Unsuccessful efforts were also later made by Mr Paige's solicitors to obtain the signature of Mr Webb to a duplicate signed by the other parties to the original deed.
10. The letter of 31 January 2000 added that "...we stress that your client will not properly deduce title to the property unless and until he is able to hand over the Deed of Rectification."
11. In their reply of 1 February Mr Webb's solicitors acknowledged receipt of £75,000 to be held to the order of Mr Paige's solicitors and noted that

"...you have exercised the alternative option payment arrangements and therefore would like you to confirm that you accept that the Agreement of the 20 November 1998 is still valid and enforceable subject to the amendment as to purchase price and completion date...."

12. The letter went on to argue that Mr Paige was not entitled to the original of the Deed of Rectification, as its absence did not constitute a defect in title and the document was not in existence at the time when the contract was made and was not to referred in it. However, while denying entitlement to the deed, they said that they would use their best endeavours with regard to it.
13. Mr Webb's solicitors wrote two further letters, the first on 4 February contending that Mr Paige was in breach of the agreement in imposing a requirement that the deed must be handed over, and serving a notice to complete, and the second on 8 February querying the contention of Mr Paige's solicitors that the purchase price was £83,700 in full and final settlement and asking why the order did not refer to this and specifically state that the claim for interest and other charges was cancelled.
14. On 7 February 2000 Mr Webb served the notice to complete dated 4 February on Mr Paige requiring him to complete within ten working days. Mr Webb's solicitors purported to serve the notice under Condition 6.8 of the Standard Conditions. As Mr Paige failed to complete by 21 February, Mr Webb's solicitors purported to exercise his right of rescission under Condition 7.5.2.of the Standard Conditions by notice sent on 21 February.
15. On 4 April 2000 Mr Webb issued an application seeking a declaration that Mr Paige had effectively rescinded the agreement of 20 November 1998, as amended, and an order for the cancellation of a caution registered against the property by Mr Paige.
16. On 15 May 2000 Mr Paige issued an application for an order that the consent order of 10 December 1999 be enforced by the court on the ground that Mr Webb had failed to perform the agreement and to comply with the order for specific performance. It is clear from the draft order attached to the application that Mr Paige was contending that he was entitled to complete the purchase on tendering the sum of £75,000. The draft order also contained provisions for the handing over of a deed of rectification.

The Judgment

17. The two applications were consolidated and came before HHJ Davies on 19 June 2000.
18. Mr Webb's position at the hearing was that Mr Paige had failed to pay £83,700 as required by the consent order; that he had tendered less than the total amended purchase price on the date for completion; that the sum of £75,000 had been returned ; and that he had failed to complete in accordance with a notice to complete by 21 February. He, Mr Webb, was therefore entitled to

(1) rescind the contract by notice of rescission dated 21 February 2000; and

(2) an order cancelling the caution registered by Mr Paige on 29 June 1999.

19. The judge made an order on 20 June 1999 declaring that Mr Webb had rescinded the agreement of 20 November 1998 and that the caution should be cancelled.
20. The judge accepted the submission of Mr Webb that the terms of the consent order were clear in requiring the sum of £83,700 to be paid on 31 January and that the consent order superseded the original contract. She rejected the contention of Mr Paige that he was entitled to pay £75,000 by 31 January 1999 and that the balance of the £83,700 was payable by instalments, as allowed in the original contract. She also rejected an argument,, apparently based on the correspondence between the solicitors at the beginning of February 2000 ,that the terms of the consent order had been subsequently varied.
21. The judge also found in favour of Mr Webb on the point of the deed of rectification, holding, first, that it was not part of the original agreement or of the consent order that the deed should be provided and that, secondly, it was not a document of title which Mr Paige could require to be handed over to him on completion.
22. The result,in the judge's word were that

"....the purchaser has failed to comply with the terms of the order of 10 December 1999 and cannot rely on the failure to provide the deed of rectification in any way as justification for that failure."

The Appeal

The Purchase Price Point

23. The main point on the appeal concerns the effect of the consent order of 10 December 1999 on the terms of agreement of 20 November 1998.
24. Mr Holbech, who was instructed at a late stage to appear for Mr Webb, presented helpful written and oral submissions seeking to uphold the conclusions of the judge on this point. He accepted that the 1998 agreement remained in existence and had not merged in the 1999 consent order, but pointed out that the consent order both revised the price and re-fixed the completion date.If it had been intended that Mr Paige should only pay £75,000 by 31 January and the balance of £8,700 within six months, the consent order would have expressly recorded such an agreement. Further, it was inherently unlikely that Mr Webb would have agreed that Mr Paige need only pay £75,000 by 31 January 2000 when, under the terms of the original agreement, he was obliged to pay, in addition to the sum of £110,000, sums for interest and in respect of payments by Mr Webb under the Cherrytree charge. It was far more likely that he had agreed to accept a reduced purchase price in return for a promise to pay it all at once by 31 January 2000.On any other construction it was very difficult to make the detailed provisions concerning payment by instalments fit with payment of the new purchase price.
25. He did not dispute the general principle,as laid down by Sir Robert Megarry V.C. in Singh v. Nazeer [1979] Ch 474 and referred to by the judge ,that, once an order for specific performance has been made by the court, the parties have put it into the hands of the court as to how the contract is to be carried out. The provisions of the order regulate how the contract is to be carried out. The completion notice procedure available under the contract is no longer intended to be applicable: the working out, variation or cancellation of the order is a matter for the court on application made to it .
26. For his part Mr Paige submitted that the contractual provisions concerning payment by instalments remained in force. All that had changed was the total amount of the price and the completion date. The judge had confused the amendment as to the amount of the payment with the manner in which payment could be made. That had not been amended by the order. As appeared from the correspondence, this was the understanding of both firms of solicitors close to the time of the compromise.
27. On balance Mr Paige's construction is probably the correct one. Close attention to the wording of the consent order is required. It was not, it should be noted, an order simply for the payment of a sum of money (£83,700) by the 31 January 2000. It was an order for "specific performance of the agreement dated 20 November 1998 by the 31 January 2000..." As Mr Holbech accepted the 1998 agreement remained in force. It was subject to express amendment only as to the price and the completion date. The amended price of £83,700 meant that that figure was substituted for the figure of £110,000 in the agreement There was no express amendment of any of the other provisions relating to the manner of payment of the price or other sums. It was still possible to apply them after the consent order was made, so that £75,000 was payable on completion and so that the whole of the balance of the price (i.e. £8,700), being less than the £10,000 specified in the contract as the first instalment, should be paid within six months.
28. It also follows, in my judgment, that, subject to the amendment of the completion date from 31 December 1999 to 31 January 2000, the provisions for the payment of interest and of the interest charges incurred by Mr Webb under the Cherrytree charge also remain unamended. The result is that Mr Paige should pay those additional sums, but only in respect of the period of six months from the new completion date, at the end of which the balance of the purchase price was to be paid by Mr Paige. If the parties are unable to agree those figures the matter should be remitted to the County Court to determine them. There should in any event be remitted to the County Court the outstanding matters in the draft order attached to Mr Paige's application, which were not dealt with by the judge at all in view of her decision that the agreement had been rescinded.
29. For the above reasons the judge was wrong in holding that the order should be rescinded because Mr Paige had not paid or been willing to pay the whole sum of £83,700 as a single payment on completion. On the true construction of the agreement as amended by the consent order, he was not obliged to do so. He had not therefore failed to comply with the order and there were no grounds for holding that it was rescinded. In view of the passage of time, however, Mr Paige will, of course, now have to pay the whole sum of £83,700 on completion, together with any other sums due from him under the contract. In default of agreement the amounts must be determined by the county court to which the matter is remitted.

The Deed of Rectification Point

30. The second point is whether Mr Webb was also entitled have the order for specific performance rescinded on the ground that Mr Paige refused to complete unless and until the deed of rectification was handed over to him. Mr Holbech submitted that he was. In summary his arguments were that deed was not referrred to in the agreement or in the consent order; that Mr Paige was not entitled to production of it under section 110(2) of the Land Registration Act 1925; that, even if he was, Mr Webb was not, in the circumstances of this case, in breach in failing to produce the deed to Mr Paige; and failure to produce it does not amount to a defect in title.
31. This point does not arise for decision in view of the conclusion reached on the issue on payment of the purchase price.Mr Webb is not entitled to have the court order rescinded, because he was not willing to comply with it on tender of the sum which Mr Paige was entitled to tender in order to complete. I would add that the notice to complete, which preceded purported rescission by Mr Webb, was given under condition 6.8, which requires that a party giving notice to complete after the completion date must be "ready willing and able to complete." Mr Webb was not willing to complete on the basis of Mr Paige's construction of the consent order. Mr Webb would not have been willing to complete on 31 January 2000 or at the expiration of the period specified in the completion notice on payment by Mr Paige of £75,000 with the balance to follow in six months time, even if Mr Paige had not raised and insisted on the handing over of the deed. It was not a valid notice to complete under Standard Condition 6.8, so there was no effective rescission under Standard Condition 7.5.2.Mr Paige is entitled to enforce the order for specific performance made on 10 December 1999.
32. There should be no practical problem about the deed. It should in fact be possible for completion details to be so arranged that either the original of the deed is released by Messrs Allens to Mr Paige or that Mr Webb executes a duplicate deed to hand over to Mr Paige. Even if the deed is not handed over on completion, it is clear that Mr Paige is contractually entitled to the deed as against Mr Webb. It was brought into existence for the purpose of the sale to Mr Paige and it is needed by him to satisfy the requirements of those who may lend on the security of the Centre.
33. I would therefore allow the appeal. Counsel for Mr Webb is requested to draft an order reflecting the terms of this judgment for the consideration of the court on the handing down of the judgments on this appeal.

LORD JUSTICE LAWS:

34. I agree

SIR ANTHONY EVANS:

35. I also agree
ORDER: Appeal allowed. (Order does not form part of approved Judgment)