England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE YEOVIL COUNTY COURT
(HIS HONOUR JUDGE COTTERILL)

		Royal Courts of Justice Strand London WC2 Friday, 27 July 2001

Friday, 27 July 2001

1. LORD JUSTICE SEDLEY: Lord Justice Dyson will give the first judgment.
2. LORD JUSTICE DYSON: This is appeal from the decision of His Honour Judge Cotterill sitting in Yeovil County Court made on 24th November 1998 whereby he dismissed the appellant's claim inter alia for a declaration that a notice to complete the purchase of land that had been served by the respondent on 21st March 1997 was invalid. By an agreement in writing dated 7 November 1996 ("the agreement"), the appellant agreed to buy and the respondents to sell that part of the Malthouse, Lyme Regis, Dorset which was then occupied by the appellant as his dwelling house. The remaining part of the property has at all material times been an electrical transformer belonging to the respondent.
3. The following terms of the agreement are material.

"1. Definition clause:

"The completion date" means the later of the following dates

(a) 19 March 1997

(b) the date which shall be 10 working days after this Agreement shall become unconditional under clause 19.

2. The Vendor shall sell and the Purchaser shall purchase the Property for the price of THIRTEEN THOUSAND FOUR HUNDRED AND TWENTY EIGHT POUNDS (£13,428).

4(1) The purchase of the Property shall be completed before 1.00pm on the Completion Date at the offices of Messrs Osborne Clarke or elsewhere as they may reasonably direct.

(3) The Vendor shall not be bound to complete unless the Purchaser either

(a) tenders at completion the amount then required to be paid to the vendor in pounds sterling in the form of a banker's draft issued by a clearing bank in London or

(b) has by means of a telegraphic or other direct transfer transferred and the Vendor's Solicitors have received as cleared funds before 1.00pm the amount required at completion to the credit of the Vendor's Solicitors' client account...

14. The National Conditions of Sale (20th Edition) ("General Conditions") shall apply to this Agreement so far as the same are applicable to a sale by private treaty and are not varied by or inconsistent with the provisions hereof save that...

19(1) This Agreement is conditional upon the completion of the following works

(a) the laying of two cable ducts under that part of the Property which is shown coloured brown on the Plan

(b) the removal of the existing wall between the Property and the Retained Property and its replacement with a more substantial wall which complies with all statutory requirements and the requirements of all relevant competent authorities

(c) the replacement of the existing three phaseelectricity supply to the Property with a domestic supply the meter board to be installed adjacent to the main door of the building on the property

(d) the provision of a direct water supply to the Property.

(2) The Vendor will carry out or procure the carrying out of the Works at its own expense and as soon as reasonably practicable. If despite using all reasonable endeavours the Works shall not have been completed by 25th December 1996 the Vendor shall be entitled to rescind this Agreement by giving notice in writing to the Purchaser to that effect and thereupon the provisions of General Condition 10(2) shall apply.

[then]

(4) For the period commencing on the date on which the Purchaser shall give to the Vendor vacant possession of the working area and reasonable access to the remainder of the property and ending on the date 48 hours after the Vendor shall notify the Purchaser that the Works have been completed the Vendor will pay the Purchaser a sum equal to the cost of accommodation on a full board basis and the Alexandra Hotel Lyme Regis.

(5) The Agreements shall become unconditional upon the Vendor or its solicitors giving written notification to the Purchaser or his solicitors that the Works had been completed. Upon the Agreement becoming unconditional the Vendor shall pay to the Purchaser a contribution of £500 plus Value Added Tax to the Purchaser's solicitors costs in relation to this Agreement."

4. The following conditions of the national conditions of sale are material:

"22(1) At any time on or after the completion date, either party, being ready and willing to fulfil his own outstanding obligations under the contract may (without prejudice to any other right or remedy available to him) give to the other party or his solicitor notice in writing requiring completion of the contract in conformity with this condition."

5. By letter dated 4 February 1997, the respondent served a notice of completion of works pursuant to Clause 19(4), and on 5 February their solicitors wrote to Messrs Nantes Wylde, the solicitors then acting on behalf of the appellant, saying that, by reason of clause 19(5) the agreement therefore became unconditional on 4 February. They enclosed a cheque for £587.50 in settlement of the respondent's liability to contribute to the appellant's costs as required by Clause 19(5). The appellant denied that the respondent had properly completed the works referred to in Clause 19(1). A consequential dispute arose as to the correct completion figure. This dispute centered principally on the correct amount that was payable under Clause 19(4) for the cost of the accommodation.
6. On 26 February, an internal memorandum was produced by the respondent about the problems of outstanding work at the property. The writer said that "things have gone badly awry" and recorded that the appellant was still unhappy that the work was still not complete. The memorandum listed nine items of incomplete work which were:

"1. Remove rubbish from site (SWEB)

2. Move out SWEB doors (SWEB)

3. Burning fuel to stay

4. Clear broken glass, remove temporary screen and sweep through the floor (SWEB)

5. Adjust the doors so they shut (Hanson Contract)

6. Provide mahogoney filetts around the edge of the doors and the oak feather edging to make weatherproof (Hanson Contract)

7. Plumbing to be completed (SWEB Contract)

8. Fill the hole in floor (SWEB Contract)

9. Fit a new door handle so doors can be closed and fit a security chain (Hanson contract)."

7. Towards the end of the memorandum appear the words "we are working in somewhat of a shambles here."
8. It is convenient at this stage to refer to what the judge said about these items of work. At the hearing below, Mr Hanson, who appeared in person, argued that the combined effect of these nine items was that the notice of completion of works was invalid, since the work had not in fact been completed. The most serious of his complaints related to the doors (items 5, 6 and 9). The judge held that the problems with the doors were not attributable to the respondent. There has been no challenge to this finding before this court. He also made findings adverse to the appellant in relation to items 2 and 3. There is no appeal from that part of his judgment either. There is, however, a challenge to the way in which he dealt with items 1, 4, 7 and 8. What he said was this:

"The first item relates to rubbish on the site and clearly that was the responsibility of SWEB or their contractors but the scale of this problem is perhaps to be measured by Mr Hanson, the plaintiff, saying that he himself removed that rubbish in the course of various other activities over a week. The scale of the task, in my view, was minimal.

The second item refers to the moving of SWEB doors. This has apparently been done and ceases to be a matter of concern.

Items 3 says 'burning fuel to stay', which relates to the plaintiff's election to retain the timber component of a temporary structure which was erected in the building and is not a matter of complaint at all.

Item 4, 'clear broken glass, remove temporary screen and sweep through the floor'. The scale of the problem with broken glass is not at all clear to me but the temporary screen was erected to protect the plaintiff's part of the premises from the dust and the like generated by the contractor's work. It is quite clear from the correspondence that the defendants were willing to remove that temporary screen at a far earlier date than the plaintiff was prepared to see it go because he found from it he enjoyed a degree of protection, not merely from the works but from the risk of unlawful entry by somebody who took advantage of the insecurity of the doors to which I shall come. The fact that the temporary screen was not removed seems to me to be not a matter which can be laid at the door of SWEB.

Turning to item 7 'plumbing to be completed', as to this there is some complaint as to the point at which the pipework is brought out of the ground and the ease with which it can or cannot be concealed from view. It seems to me, from the description given to it by Mr Hanson, to be a matter of little account and certainly something which could be corrected by a very few hours of work. He complained to me that the plumbing leaks and, as he says, needs to be re-laid. The scale of that problem was described by him as a minor leak to which he had not found it necessary to have attention given by any independent contractor and I dismiss that as trivial and of no account whatsoever.

Item 8 requires the filling in of a hole in the floor. The size of that has been described by the plaintiff. It is clear that it would occupy a tradesman no more than a few moments to make good, and a half-competent DIY man could do the same in only marginally more time.

The last item involves fitting a new door handle so that the door can be closed and a security chain fitted. That relates back to items 5 and 6."

9. Having disposed of the complaint about the doors the judge said this (at page 7E).

"... the execution of the works, was at the very, very lowest substantially performed and the service of the notice of completion was, as I find, wholly justified."

10. On 7 March, Messrs Nantes Wylde wrote to Messrs Osborne Clark, the respondent's solicitors, saying that "with completion approaching" it was sensible to try to agree the completion figure. They identified two figures that were to be deducted from the purchase price. The first is not material for present purposes. The second was the sum due to the appellant under Clause 19(4). They said that if no further work was carried out to the property, the appellant would accept payment under Clause 19(4) up to 19 March, and be responsible for all remedial work thereafter. Correspondence ensued between the solicitors as to the sum to be deducted under clause 19(4). There was an issue as to the weekly rate, and as to the date to which the sum was to be calculated. On 14 March, Nantes Wylde wrote saying that the figure due under Clause 19(4) was £10,105 (calculated up to 19 March). On 18th March, Osborne Clark wrote saying that the sum due under Clause 19(4) was £5,738 (calculated up to 4 February). By their reply of the same date Nantes Wylde wrote that the appellant was in a position to complete on the basis of the letter of 14 March, and that they would be serving a notice to complete. They added that unless the completion figure could be agreed there would be no alternative but to refer the matter to the court. On 21st March, Osborne Clark wrote to the appellant saying that they understood from Nantes Wylde that he had withdrawn his instructions to them to act on his behalf. They enclosed with the letter a notice to complete the contract within ten days. On 27 March, Osborne Clark sent a completion statement showing the amount that they required to complete the matter as £6,056. This sum was calculated on the basis that the figure payable under Clause 19(4) was £5,728.
11. On 5 April, the appellant wrote an important letter to Osborne Clark, and sent a copy of it to Nantes Wylde. He wrote:

"Accordingly, the difference between us is now £3093 ½ for completion after 19.3.97 and I hereby instruct Nantes Wylde to complete forthwith @ £2962 ½ and hold the balance of £3093 ½ pending the court's decision on the correct figure for completion."

12. He attached to his letter a completion statement showing that he had arrived at his figure by deducting £8,531.50 under Clause 19(4) for the period 11 November 1996 to 21st March 1997. This produced the following response from Osborne Clark on 7 April:

"They [that is the respondents] do not agree your completion statement and they will not complete the sale of this property to you unless they receive in full the sum of £6,056 as set out in our letter of 27 March. You will be wasting your time if you instruct Nantes Wylde to send us less than this sum."

13. Neither the appellant nor Nantes Wylde paid or tendered any sum on the date fixed for completion. On 11 April, Osborne Clarke wrote to the appellant saying that the respondent had forfeited the deposit and regarded the contract as at an end.

The issues

14. On behalf of the appellant, Mr Bragiel accepts that the notice of completion of works dated 4 February was a valid notice. But he submits that the respondent was not entitled to serve the purported notice to complete on 21st March for the following reasons:

(a) the notice was invalid because at the time that it was served, the respondent was not willing to fulfil its outstanding obligations under the contract as required by condition 22(1) of the National Conditions of Sale: there was an implied term of the contract pursuant to which it was obliged to carry out the outstanding items of work, and it was in breach of that obligation;

(b) even if the notice was valid, the appellant's letter to Osbourne Clark of 5 April (copied to his solicitors) was a sufficient performance of his completion obligation as to payment. He genuinely believed that the sum that he instructed his solicitors to pay was all that he was obliged to pay;

(c) it is not open to the respondent to say that he did not even tender the sum to which he referred in his letter of 5 April, because the failure to tender that sum was caused by the respondent's letter of 7 April.

15. I shall deal with these issues in turn.

The first issue

16. On behalf of the respondent Mr Morsehead submits that there was no implied term of the contract that the work referred to in clause 19(1) would be done in a proper manner. I do not agree. In view of the decision that I have reached on the remaining issues, I shall state my view quite shortly. This was a hybrid contract. By clause 19, it provided for the execution of works. If that part of the agreement was performed, then it became a contract for the sale of land. It is axiomatic that, unless excluded expressly or by necessary implication, a term will be implied in any contract for the carrying out of work that it will be done in a proper manner. If my view, there is nothing in the circumstances of this contract to exclude such an implied term.
17. The next question is whether there was any breach of that implied term. Mr Morsehead submits that the judge's findings that the four matters now relied on by the appellant were "trivial matters" is determinative. In effect, he argues, the judge found that these complaints were de minimis and should be disregarded. Mr Bragiel does not challenge the primary findings of fact made by the judge, but he submits that it is open to him to seek to overturn the judgment of the judge that these matters were "trivial". He points out that the judge himself pointed out that the appellant removed the rubbish "in the course of various other activities over a week", and that the plumbing could be corrected by "a very few hours work."
18. I do not think that the judge's conclusion on this issue can be impugned. But it is important to appreciate in what context he was considering the question whether the items were "trivial". It was in the context of whether the notice of completion of works was valid. He was not considering the issue of whether the notice to complete the contract was valid. Nor was he addressing the question whether the respondent was unwilling to fulfil its outstanding obligations under condition 22(1). That issue was not argued before him.
19. It is to that issue that I must, therefore, turn. I am in no doubt that the four items of outstanding work did amount to breaches of the implied term to which I have referred. Moreover they were not de minimis: they were capable of giving rise to a cause of action and a claim for damages for breach of contract. But were they outstanding obligations within the meaning of condition 22(1) such that they debarred the respondent from serving a valid notice to complete? In my view, the answer to this question is no.
20. Mr Bragiel submits that the procedure allowed by condition 22(1) is only available to a party who is not in default. He relies on Pagebar Ltd v Derby Investment Ltd [1972] 1 WLR 1500. In that case, the plaintiff company contracted to buy property subject to and with the benefit of certain specified leases and tenancies. Counterparts of the tenancy agreements and leases were made available to the plaintiff. The vendor failed to disclose all existing tenancies. It was held that for that reason the vendor was not entitled to serve a notice to complete under condition 22. At page 1505E Goulding J said:

"However, in the context of these conditions and the ordinary framework of a contract of sale and purchase of land, it is, in my judgment, clearly intended that the procedure allowed by condition 22 is only available to a party who is not in default; and just as a vendor who had not delivered a complete abstract of title could not serve a notice under condition 22, so, in my judgment, a vendor who has not yet disclosed existing tenancies cannot serve a valid notice."

21. Mr Bragiel also drew our attention to Wood v Berkeley Homes (Sussex) Ltd [1992] P&CR 311 where this court held that since the vendors, in breach of the contract, had provided photocopies of entries on the register instead of office copies, they were not ready and willing to fulfil their contractual obligations when the notice to complete was served. Accordingly, the notice to complete was ineffective.
22. In my view, these authorities are not relevant to the present contract and the circumstances of this case. Mr Morsehead is right when he submits that the scheme here was to divide this contract into two phases. Under the first phase, the only obligation was on the respondent, and it was to use all reasonable endeavours to carry out the work referred to in 19(1). The end of that phase was marked either by the respondent rescinding the contract if it was unable to complete the work by 25 December 1996, or (as occurred) by the respondent giving a notice of completion under Clause 19(4). Once a valid works notice was given, that was determinative of the question whether the Clause 19 works had been completed. There were no further contractual obligations for the respondent to perform in relation to the Clause 19 works. It is important to distinguish between (a) the primary obligation to carry out and complete the Clause 19 works, and (b) the secondary obligation to pay damages for breach of the implied term that the work should be done properly. There is no dispute in this case that the primary obligation was performed. In my judgment, the obligations referred to in condition 22 do not include any secondary obligation to pay damages for breach of contract. They can only refer to outstanding primary obligations. It follows that when condition 22 speaks of the respondent being ready and willing to perform its outstanding obligations under the agreement, on the facts of this case, that could only be a reference to obligations outstanding under Phase 2 of the contract.

The second issue

23. I shall consider this issue without reference to the respondent's letter of 7 April. It is common ground that the net sum payable to the respondent at completion was £5,927. This figure is to be compared with the sum of £2,962 referred to by the appellant in his letter of 5 April, and £6,056 referred to by Osborne Clark in their letter of 27 March. The appellant made the mistake of believing that he was entitled to accommodation costs under Clause 19(4) until the date of completion, notwithstanding the fact that the notice of completion of works had been served on 4 February. Osborne Clark made the mistake of overlooking the fact that the sum payable under clause 19(4) was for a period up to 48 hours after the service of the works completion notice.
24. The appellant did not tender the sum £2,962 or any sum at completion. Mr Bragiel submits that the writing of the letter of 5 April (coupled with the fact that the appellant genuinely believed that the sum due at completion was no more than £2,962) was sufficient performance to entitle him to complete and to preclude the respondent from terminating the contract.
25. I cannot accept Mr Bragiel's submissions. It is to be recalled that Clause 4(3) of the agreement expressly provided that the respondent was not bound to complete unless (a) the appellant tendered at completion "the amount then required to be paid", or (b) had transferred "the amount required at completion" to the respondent's solicitors. Those words are clear enough. The appellant did not satisfy either (a) or (b). On the face of it, therefore, the respondent was not bound to complete and was entitled to rescind the contract upon the expiry of the notice to complete. In my view, there is no basis in fact or in law for holding that the letter of 5 April was in some way equivalent to the performance required of the purchaser under Clause 4(3). It is not alleged that Clause 4(3) was varied. Nor is it suggested that the respondent is in some way estopped from relying on the clause. I would therefore hold that the letter of 5 April did not amount to performance by the appellant sufficient to entitle him to have completion.
26. I would in any event add that, even if the appellant had tendered the sum of £2,962, I am not persuaded that this would have entitled him to complete the contract. Mr Bragiel submits that where there is a bona fide dispute as to the sum due at completion, a purchaser is entitled to completion if he tenders the sum that he genuinely considers to be due. In support of his argument, he refers to Carne v Debono [1988] 1 WLR 1107 and Schindler v Pigault [1975] P&CR 328. In Carne, the vendor sent an incorrect completion statement. The purchaser refused to complete because he took issue with the statement. It was held that a purchaser who received an incorrect completion statement was nevertheless under a duty to attend at the time and place fixed for completion, and tender the correct amount. Since the purchaser had failed to tender any sum on the day fixed for completion, the vendors were entitled to rescind the contract and forfeit the deposit. Sir Nicolas Browne-Wilkinson. V-C gave the main judgment. He referred to the judgment of Megarry J in Schindler (where a similar point arose), and at page 1112H said:

"Megarry J, in addressing that point held, at p335, that notwithstanding the error in the completion statement, it was the purchaser's duty to attend at the time and place fixed for completion and to tender the correct amount of the purchase moneys.

I agree with that view. There being no contractual obligation to provide a completion statement, in my judgment, it is not a repudiation by the vendor if in the completion statement he asks for more than that to which he is entitled. So to hold would give rise to great disputes in vendor/purchaser matters since the exact calculation of the purchase money is often a matter of some difficulty. The completion statement is often the subject of negotiation between the parties to arrive at the correct figure.

What then happens if there is no agreement as to that amount? In my judgment, there would be a complete stalemate in the conveyancing procedure if it were open to the purchaser merely to say: 'I do not agree your statement and I will therefore do nothing.' In my judgment, Megarry J was right in saying that the duty then is for the purchaser to come forward and tender the money which he says is the amount due if he wishes to avoid being in breach of contract. It may be, although I express no concluded view on the matter, that if a purchaser is unable to calculate the amount which is due under the contract without information provided from the vendor (for example, in working out any necessary apportionments) the vendor might be deprived of his ability to rely on the default in tendering, but that is not this case. It is clear in this case that the purchaser could make his calculation of the sums which he said were due on completion."

27. In Schindler too, the vendor was claiming too much by his completion statement. At page 335 Megarry J said:

"I can see no answer to Mr Lightman's contention that, apart from my decision on the first point, the purchaser's answer was to attend for completion on November 5 and tender whatever he accepted as being the correct sum. I cannot see that the demand for too much was any ground for not attending at all on November 5, and making no attempt to complete until November 6."

28. In my judgment neither of these passages is authority for the proposition that a purchaser is not in breach of contract provided that he tenders the amount that he considers to be due even if that amount itself is wrong. In neither case does there appear to have been any issue as to whether the amount which the purchaser considered to be due was correct or not.
29. If a purchaser tenders the incorrect amount, he is in breach of contract and on the face of it, upon expiry of a notice to complete under condition 22(1), a vendor is entitled rescind. Where a purchaser believes that the amount demanded by the vendor is incorrect, then he may tender what he considers to be the correct amount. If he takes that course, he takes the chance that he may be wrong. If it turns out that he is wrong and the vendor serves a notice to complete and the purchaser refuses to complete except on his own terms, he will have no answer if the vendor rescinds the contract. Where a purchaser is unwilling to complete on the vendor's terms, he may be able to protect his position by issuing a vendor and purchaser summons under section 49 of the Law of Property Act 1925 and seeking a resolution of the dispute from the court. It is worthy of note that this was the very solution foreshadowed by Nantes Wylde in their letter of 18th March. It is a pity that the appellant did not take that course.
30. I would hold, therefore, that the letter of 5 April cannot be considered to have been as good as performance in accordance with Clause 4(3) of the agreement.

The third issue

31. This turns on the effect of the letter from Osborne Clark dated 7 April in which they said that the appellant would be "wasting your time if you instruct Nates Wylde to send us less than this sum" (ie £6,056). Mr Bragiel submits that it is reasonable to assume that, but for this letter, Nantes Wylde would have carried into effect the instructions that he gave in the letter of 5 April. In other words, the letter of 7 April was the reason why those instructions were not implemented. I am prepared to assume that Nantes Wylde would have tendered £2,962 at completion. The judge is not to be criticised for failing to make any findings as to this: the point was not taken before him. But even on that assumption, there are two answers to Mr Bragiel's argument. First, the letter of 7 April did not prevent the appellant from attending at completion and tendering what he considered to be due. In this respect, the case differs from the example given by the Vice-Chancellor in Carne of the purchaser who is unable to calculate the amount that is due without information from the vendor. The appellant did not terminate the contract by alleging that the letter of 7 April was a repudiatory breach of contract. The contract, therefore, continued in being, and the executory obligations imposed on both parties remained to be performed.
32. The second answer is the one that I already given in relation to the second issue. Even if the appellant had attended and tendered the sum of £2,962, that would not have availed him for the reasons that I have given. Accordingly, put at its highest from the appellant's point of view, the letter of 7 April caused him to do something which would not have been sufficient to save him from being in breach of contract, and which would not have afforded him an answer to recission by the respondent.

Conclusion

33. For all these reasons, Mr Bragiel's arguments fail on each of the three issues. I would dismiss this appeal.
34. LORD JUSTICE SEDLEY: I agree, with one reservation, with the judgment of my Lord, Dyson LJ. It is a reservation immaterial to the outcome but it is this. On the third issue I agree with the second of the answers he offers to the contention made by Mr Bragiel; I am less certain for my part about the first. For present purposes, however, this has no consequences, and the appeal will therefore be dismissed.
35. Lest it be thought that there has been unaccountable delay in our giving judgment in this case, it ought to be recorded that we were about to sit in order to give judgment in late May, shortly after the hearing, when we were told that the case had settled. When we sat, however, it turned out that the claimant was asserting, but the defendant was denying, that there had been a binding compromise. We therefore deferred our judgment in the knowledge that it might or night not be necessary one day to give it, and sent the question of compromise for trial at the Central London County Court.
36. A few days ago we were notified that the claimant was no longer taking his stand upon a compromise. We accordingly listed the appeal for delivery of judgment today.
(Appeal dismissed with costs assessed at £14,000)