England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(His Honour Judge Brian Knight QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		19/12/2007

Lord Justice Rimer :

Introduction

1. This is the claimant's appeal against an order made by His Honour Judge Brian Knight QC on 23 January 2007 in the Central London County Court. The claimant is Eyestorm Limited ("Eyestorm") and the dispute arose out of differences between it and the defendant, Hoptonacre Homes Limited ("Hoptonacre"), as to their respective rights and duties under an agreement dated 24 June 2005. By that agreement Eyestorm agreed to take a lease from Hoptonacre of each of 14 residential flats at premiums totalling £2.255m. The agreement also provided that, prior to the contractual completion date, Eyestorm could sub-sell each flat and also complete any such sub-sale. Its obligation at the contractual completion date was to take and pay for any of the flats that it had not so sub-sold.
2. The scheme did not work out as Eyestorm had hoped and it did not complete any such sub-sales. Hoptonacre served a notice to complete and, following Eyestorm's non-compliance with it, purported to rescind the agreement and forfeit the deposit of £112,750. Eyestorm's case at trial was that Hoptonacre was itself in breach of the agreement and so was not entitled to serve the notice or to rescind. Its claim was for damages and for the return of the deposit. Its primary case was that, in breach of contract, Hoptonacre had prevented Eyestorm's proposing sub-purchasers from having access to the flats for mortgage valuation purposes and had thereby frustrated the achieving of sub-sales. It also argued that Hoptonacre was in breach of contract by itself marketing the flats.
3. The judge rejected Eyestorm's claims. He held that Hoptonacre had validly rescinded the agreement and forfeited the deposit. He made orders against Eyestorm for the payment of interest, costs and damages. By its appeal Eyestorm seeks the setting aside of those orders, an award of damages and the return of the deposit. Its case is that the judge was wrong to reject its case based on Hoptonacre's marketing of the flats. It does not say he was wrong to reject its complaint that Hoptonacre wrongfully denied it access to the flats.
4. Mr Harry Hodgkin represented Eyestorm on the appeal. He did not represent it at the trial. Mr Edward Peters, who represented Hoptonacre at the trial, was also due to represent it on this appeal and we had been provided with his skeleton argument. A day or so before the hearing, in circumstances of which the court is unaware, Hoptonacre withdrew its instructions from its solicitors, as a result of which Mr Peters's instructions to appear on the appeal were also withdrawn. The court learnt of this only shortly before the hearing. Mr Peters attended the hearing to explain what had happened. There were features about the case which were obscure and the court felt that it would be disadvantaged without his assistance. The court therefore asked whether he would be prepared to remain during the hearing and lend the court his assistance. Having discussed the matter with his former instructing solicitors and client, Mr Peters agreed to do so. For myself, I found his able assistance to be of the greatest help and I would express my own considerable gratitude towards him.

The agreement dated 24 June 2005

5. Eyestorm is a general trading company. Hoptonacre is a building development company. The 14 flats are in a building at Iris Court, 61 Keir Hardie Way, Barking, Essex. Hoptonacre started marketing that property in March 2005 and its negotiations with Eyestorm started in about April 2005. Hoptonacre was represented in them by a director, Ashley Southgate. Eyestorm was represented by a consultant, Joseph Ogunbusola, and a director, Ms Abiose Adeegbe. At the commencement of the negotiations the building was still under construction. The works were finished in August 2005.
6. The negotiations resulted in the agreement of 24 June 2005 ("the June agreement"). The schedule to it identified the 14 flats in Iris Court by reference to their number and floor and identified the price payable for each. They ranged from £133,000 to £171,500, with the prices for all 14 flats totalling £2.255m. By clause 1 Hoptonacre agreed to grant Eyestorm or its nominees a lease of each flat in consideration of the payment of the scheduled price. Each lease was to be in the form of the attached draft. Vacant possession was to be given on completion.
7. Clause 2 showed that, prior to the contractual completion date, Eyestorm could sub-sell each lease to a tenant at a price exceeding the scheduled price. It provided that "completion of each lease" was to take place on Eyestorm giving Hoptonacre not less than seven days' written notice specifying various matters, including (i) the relevant flat, (ii) "the Additional Premium" to be specified in the lease, and (ii) details of the sub-purchaser. The "Additional Premium" was the excess over the scheduled contract price paid by the sub-purchaser.
8. Clause 3 recorded that Eyestorm had paid a deposit of £50,000 to Hoptonacre (in fact it paid it two days later, on 26 June) and that it was to pay a further sum of £62,750 as a deposit on 15 July 2005. That totalled £112,750, or 5% of the total purchase price. Clause 3 wrongly described it as a 10% deposit.
9. Clause 4 provided that on 31 August 2005 Eyestorm would take in its own name leases of any flats that had not by then been the subject of completion pursuant to a notice under clause 3. Eyestorm's obligation under clause 4 was to pay the balance of the aggregate scheduled prices. 31 August 2005 was therefore in the nature of a long-stop contractual completion date.
10. Clause 5 provided that on the working day following the completion of the last of the leases, Hoptonacre would transfer the freehold of Iris Court to Eyestorm for £1. The freehold title is registered at HM Land Registry.
11. Clause 6 required Hoptonacre to provide Eyestorm as soon as practicable after the date of the agreement with the current form of NHBC Buildmark cover in respect of each flat. Clause 7 incorporated The Standard Conditions of Sale (Fourth Edition), excluding Standard Condition 1.5.

Subsequent events

12. Like the judge, I regard it as necessary to summarise the correspondence between the parties from mid-July 2005 down to 17 October 2005, when Hoptonacre purported to rescind the June agreement. It reflects the allegations that the parties made at various stages although it does not of course necessarily prove that they were well founded.
13. The background was that, before the June agreement, Hoptonacre had retained Bairstow Eves, valuers, to value each flat. The schedule to the June agreement did not, however, reflect those values. It reflected those values as discounted on the basis that Hoptonacre was selling all 14 flats to Eyestorm on a "wholesale" basis, it being to its commercial advantage to do so rather than to sell each flat to individual tenants at their market value. The scheme of the June agreement was that Eyestorm would then sub-sell each flat at its higher market value. Eyestorm's intention was so to sub-sell each flat (and complete each sub-sale) prior to the long-stop completion date. That would result in its purchase being both self-financing and profitable.
14. Unfortunately Eyestorm ran into early difficulties in so sub-selling the flats. As the judge explained in paragraph 12 of his judgment, Eyestorm discovered that the June agreement had proved to be a bad commercial deal because it appeared to commit Eyestorm to paying Hoptonacre more than the flats were worth. That was because its expectation that it could sub-sell the flats at enhanced prices was not materialising. Eyestorm foresaw the incurring of a loss of £126,000 if it proceeded with the June agreement.
15. By mid-July 2005 Eyestorm had determined not to proceed with it. It wanted to renegotiate its terms. The first manifestation of that was its failure to pay the balance of the deposit of £62,750 due on 15 July. That led to the opening of the relevant correspondence. Hoptonacre's then solicitors, Justin Nelson ("JN"), asked Eyestorm's solicitors, Elliott Stephens & Co ("ES"), why it had not been paid, to which the response was that ES had neither instructions nor money on account. On 21 July JN made a demand for payment within seven days of the balance of the deposit plus interest. They warned that, if payment was not made, Hoptonacre would rescind the contract, forfeit the paid deposit and re-sell the property, and would or might claim damages for breach of contract and payment of the balance of the deposit.
16. Mr Ogunbusola of Eyestorm responded directly to Mr Southgate of Hoptonacre on 22 July. He wrote that "[w]e exchanged contract on good faith not on basis of prices that were arbitrary. The only logical conclusion from this would be that exchange was done by deception." He said that two flats, 8 and 13, had been valued "through" Bairstow Eves earlier in July at values lower than the prices Eyestorm was asking for them. He said flat 13 had been so valued at £170,000, as compared with Eyestorm's price of £183,750. The contract price for flat 13 in the June agreement was £171,500. He said flat 8 had been valued at £165,000, as compared with Eyestorm's price of £181,750. The contract price for flat 8 in the June agreement was £170,000. Valuations of that order would plainly make it difficult for the proposing sub-purchasers to raise loans on mortgage. He wrote:

"From the commercial point of view, it will be difficult to commit to further exchange without addressing the issue of valuation. All my clients will complete within 3 weeks of valuation but the biggest thing it [sic] to get it valued at the price you claimed it worth when we exchanged contracts.

I will be willing to talk to you on a constructive way to progress things. But your recourse to legal loopholes that because we have exchanged contracts, then we must do whatever you want is rather counter productive.

It was clear from the outset that the flats were to be sub sales hence you owed us a duty of care to ensure that your prices are very accurate and reflects the true market price."

17. Insofar as Eyestorm was alleging any deception as regards the prices scheduled to the June agreement, it did not persist in that. Nor did it persist in the suggestion that Hoptonacre was under the duty of care alleged in the last quoted paragraph. But Eyestorm's reference to the valuations having been made "through" Bairstow Eves was levelling a criticism at Hoptonacre in which it did persist, the implied assertion being that Bairstow Eves were still acting on its behalf and were producing valuations which were so low as to make sub-sales at Eyestorm's prices impracticable. In fact, that criticism was unfounded. The valuations themselves show that they were not by Bairstow Eves but by valuers instructed by the proposing purchasers' mortgagees. Contrary to Mr Ogunbusola's letter, it also appears from them that Eyestorm was asking prices of £199,100 for flat 13 and £196,750 for flat 8.
18. JN wrote on 26 July to ES in reply to Mr Ogunbusola's letter. They explained that Bairstow Eves had originally provided valuation figures to Hoptonacre in the nature of "gross market prices", which were then discounted for the purpose of arriving at the "wholesale" price to Eyestorm scheduled to the June agreement, a matter to which I have referred and which was not in dispute at the trial. They asserted that if Bairstow Eves and/or Eyestorm had misjudged the market so that the latter would not make as much profit on the sub-sale of the flats as it had hoped, that was not something for which Hoptonacre was responsible. They reminded Eyestorm that it was bound by the June agreement. They pressed for the balance of the deposit and interest, saying that "[i]f and when that is done, [Hoptonacre] will be prepared to consider proper constructive proposals to alleviate the difficulty [Eyestorm] is experiencing, but this will be without prejudice to [Hoptonacre's] existing rights."
19. Mr Ogunbusola wrote further with various proposals, but on 4 August JN replied that Hoptonacre would not discuss any proposals until Eyestorm had remedied its breaches of contract. They wrote "Please also inform [Eyestorm] that [Hoptonacre] is taking steps to mitigate the losses it will suffer if it does rescind the contract, by marketing the flats itself for sale." I have referred to Eyestorm's case being in part founded on a complaint about such marketing.
20. ES responded on 5 August, asserting that "the property is being sold at a manifest undervalued price. There is a duty to sell based on the market rate." They said that on the basis of such sale prices, Eyestorm stood to lose about £9,000 per flat. They did not in terms raise an objection to Hoptonacre's marketing of the flats. Their letter was, however, sufficiently imprecise to provoke JN on 8 August to ask for an explanation of it. On 12 August ES wrote in more concrete terms. They complained that Bairstow Eves had valued two flats at values lower than the prices at which Eyestorm would like to sell them. Prospective purchasers were said to be accepting the Bairstow Eves valuations. That was, again, a reference to the two July valuations of flats 8 and 13, which were not valuations by Bairstow Eves. Again, Eyestorm's theme was that their effect was to depress the prospect of sub-selling the 14 flats at a profit. ES said that Eyestorm would like to defer completion under the June agreement until 15 September and wanted Hoptonacre to withdraw instructions from Bairstow Eves. JN's response, on 15 August, was that any difference of opinion as between Bairstow Eves and Eyestorm as to the current values of the flats was not of Hoptonacre's doing. They reminded ES that Eyestorm was still in breach of contract with regard to the payment of the balance of the deposit.
21. ES responded on 16 August with a complaint that Hoptonacre was "marketing the property below the market rate." They said that the balance of the deposit would be paid as to £30,000 on 19 August and as to £32,750 on 15 September and proposed that completion in respect of all 14 flats should be deferred to 30 September. JN replied on 23 August, counter-proposing an extension until 26 August for the payment of the full balance of the deposit, provided that all Hoptonacre's other proposed terms were agreed. Those terms included (i) an extension of the long-stop completion date to 30 September, and (ii) payment of various items of interest and costs to Hoptonacre. Item 7 of the proposed terms explained that, by way of attempted mitigation of its loss, Hoptonacre had "instructed another selling agent to market the properties and their eight week contract period has seven weeks still un-expired, so they will be entitled to commission or an abortive transaction fee (full details of which I am awaiting), and [Eyestorm] must reimburse [Hoptonacre] for this." That agent was Spicer McColl, and the inference is that they had been instructed on about 16 August. ES replied on 24 August, saying that Eyestorm did not agree the terms and making counter-proposals of their own. They made the point that the delay to date "was brought about by the properties being valued at substantially lower prices than those on exchange, as confirmed in valuations carried out by two primary lenders." They also wrote that they had willing sub-purchasers for all 14 flats. JN replied on 26 August saying that Eyestorm's proposals were not agreed, that the payment of the outstanding balance of the deposit was an existing contractual commitment and that "[v]aluations are nothing whatsoever to do with [Hoptonacre]."
22. Agreement on a variation of the June agreement was not reached. On 31 August, the long-stop contractual completion date, JN wrote to ES (i) stating again that Hoptonacre was not responsible for valuations given by Bairstow Eves, who had ceased to be its agents for the purpose of marketing the flats upon the signing of the June agreement; and that Hoptonacre was not preventing Eyestorm from effecting valuations of the flats; and (ii) enclosing a notice to complete requiring completion on 14 September. It was served pursuant to condition 6.8.1 of the Standard Conditions of Sale, one providing that "At any time on or after completion date, a party who is ready, able and willing to complete may give the other notice to complete." ES's response, on 1 September, was that Eyestorm's "block valuations" were scheduled for that day and they understood access for that purpose was being denied. They said they would transfer the outstanding funds to Hoptonacre subject to confirmation that (i) the keys would be immediately released to Eyestorm in order for the valuations to be carried out, (ii) all advertising boards would be removed from the property and Hoptonacre would immediately cease marketing the flats, and (iii) Hoptonacre would proceed only with Eyestorm in the matter. Hoptonacre declined to give that confirmation, which JN said amounted to "fresh extra-contractual requirements".
23. On 2, 5 and 6 September ES proposed that completion should be deferred to, respectively, 31 October, 5 October and 30 September. Hoptonacre declined to agree. On 8 September JN explained that Hoptonacre would not extend the completion date beyond 14 September, when the notice to complete would expire. That put Eyestorm under pressure: they foresaw the prospect of the June agreement being rescinded on 14 September and, with it, the forfeiture of the part deposit so far paid (and perhaps worse).
24. There was, however, a change of climate by 12 September. Mr Ogunbusola had written an apologetic letter to Mr Southgate on 8 September. He there proposed a deferment of completion to 30 September, with an immediate payment of the balance of the deposit. He said Eyestorm would "unequivocally agree to all the 8 points raised in [JN's] letter of 23/08/05" (one of which was continued marketing by Spicer McColl). He would "transfer my clients to you, 14 in total, some now have mortgages and the mortgage offers on the rest are subject to second valuations." He indicated that he was prepared "to give-up the freehold if this will facilitate the process."
25. By 12 September terms were agreed, recorded in an exchange of letters of that date. They included the payment of the £62,750 balance of the deposit, which Eyestorm paid on that day. Hoptonacre agreed to withdraw the notice to complete, and the contractual completion date was extended to 30 September on terms that completion of the sale of all the flats was to take place simultaneously (Eyestorm was no longer to be entitled to sub-sell on a piecemeal basis prior to completion). Hoptonacre was immediately (i) to cease marketing the flats and (ii) to give Eyestorm access to the flats for valuation and marketing purposes. I will call these terms "the September agreement".
26. The peace that had broken out was still not total. On 13 September ES complained that Eyestorm was still being denied access to the flats and that Hoptonacre's agents were still marketing them, with "their advertising boards plastered all around the compound." JN replied on the same day, saying that access could be obtained by contacting "Chris", who was either on site or next door; and that Spicer McColl were no longer marketing the property, although their boards had not yet been removed.
27. On 16 September ES pressed JN to supply them with copies of the NHBC documentation and other relevant conveyancing material, saying that the ultimate purchasers would only exchange contracts for their sub-purchases after considering all such material. The response, on 16 September, was that no conveyancing solicitor would need to see the NHBC Buildmark pack before exchanging contracts, and that packs would be issued to ES when JN knew that contracts had been exchanged with sub-purchasers. ES stood their ground and on 20 September JN released to ES 14 NHBC packs together with a copy of a planning consent and insurance details relating to Iris Court (JN had apparently forgotten that clause 6 of the June agreement required Hoptonacre to deliver the NHBC material to Eyestorm "as soon as practicable after the date of this agreement"). They also enclosed 14 engrossed counterpart leases for execution by the sub-purchasers. They followed that on 22 September with 14 engrossed leases executed by Hoptonacre, to be held by ES to JN's order until completion. On 23 September JN sent ES a completion statement. The amount claimed was £2,287,502.29. In addition to the £2.255m, the total of the scheduled prices for the flats, it added various heads of interest and costs, including "[s]elling agents' abortive transaction fees commission" in respect of sales negotiated for flats 3, 6, 8, 10, 13 and 14. It did not appear to give credit for the deposit.
28. On 23 September R.C. Hall, solicitors for various sub-purchasers, informed ES that their clients could not complete on 30 September and asked for an extension to 17 October: the clients needed time to consider the documentation recently supplied and to obtain mortgage loans. On 29 September, the eve of completion, ES wrote to JN saying that the delays in access for valuation purposes had caused mortgage offers for the sub-purchasers to run "slightly behind schedule" and that Eyestorm "will appreciate [Hoptonacre's] co-operation should we fail to receive all funds tomorrow." They were asking for more time.
29. JN replied on 30 September, saying they were taking Hoptonacre's instructions. They also enclosed a notice to complete expiring on 14 October. On 3 October, by when Hoptonacre's instructions had still not been obtained, JN sent ES an updated completion statement for 17 October, the completion date requested by Eyestorm. That reflected, in part, "[t]he amendment of the price negotiated by Spicer McColl to sell Flat 10, which is in fact £185,000, and the consequent adjustment to the commission payable by you." The revised amount payable on completion was £2,292,932.42 (still with no credit for the deposit). On 5 October JN wrote to ES notifying that Hoptonacre agreed to extend the completion date to 17 October. They added that "[i]f [Eyestorm] are unable to complete all the transactions on or before 17 October then [Hoptonacre] must take alternative steps to minimise [its] losses."
30. On 12 October ES wrote to JN that nine proposing sub-purchasers had received mortgage offers and they were awaiting confirmation "on the other three." They said it remained Eyestorm's opinion that "[o]ffers would have by now been in place had access to the properties been given on time." They said:

"We will stress in relation to the Notice to Complete that [Hoptonacre] was clearly still marketing the properties, and [its] agents apparently obstructing the valuation process for over a week after Agreement was reached with [Hoptonacre], and [Eyestorm] still reserves its rights in this regard.

We also find it extremely disturbing to be informed by [Eyestorm] that the selling agents contacted the new buyer for Plot 14, who is Mr Kola Ojo … and offered him Plots 9 and 13 yesterday."

31. The assertion in the second quoted paragraph in relation to flat 13 is supported by letters of 13 October from Spicer McColl to Mr Ojo recording his offer to buy flat 13 for £183,750 and confirming that it was acceptable.
32. 17 October arrived. Predictably, the June agreement was not completed. On the same day JN gave notice to ES that Hoptonacre thereby rescinded the June agreement, forfeited the deposit and reserved its rights to claim for any further losses that might be recoverable.
33. On 18 October ES wrote to JN, challenging the validity of the purported rescission. JN responded on 20 October, disputing ES's assertions and saying:

"… I would point out that [Eyestorm] was, very early in the transaction, in flagrant breach of contract and [Hoptonacre] was under an obligation to take all reasonable steps to mitigate [its] loss. Obviously, these steps would include marketing the flats for sale, and for [Eyestorm] to object to [Hoptonacre] doing so when this was the direct result of [Eyestorm] being in breach of contract is inappropriate, to say the least."

34. That was an admission that Hoptonacre had been marketing the flats. Eyestorm stood its ground that Hoptonacre's rescission of the June agreement was invalid and on 21 October it registered a unilateral notice at HM Land Registry against the title of Iris Court preventing dealings with it. Hoptonacre was notified of that on 29 November and JN protested about it on 1 December.
35. On 14 December ES wrote to The Stevenage District Land Registry explaining Eyestorm's objection to Hoptonacre's requested cancellation of the notice. After summarising the correspondence, the letter recorded that Hoptonacre "had rescinded the contract and forfeited the deposit." It said that Eyestorm proposed to sue for the return of its deposit and interest on the basis that Hoptonacre had frustrated its ability to complete the June agreement on the due date "by not allowing it to effectuate valuations on the property." The Land Registry's response, on 19 December, was that Eyestorm's acceptance that the June agreement had been rescinded meant that it had disclosed no interest in Iris Court justifying the maintenance of the notice. It gave Eyestorm until 22 December to explain why the notice should not be cancelled. On 20 December, ES had another go, this time asserting that it was clear from the facts that Hoptonacre had not been entitled to rescind or forfeit the deposit. Their point was that Eyestorm's inability to complete had been caused by Hoptonacre's breach of contract in failing to permit Eyestorm to have access to Iris Court for valuation purposes; and that "it is trite law that a party cannot procure a breach and rely on such breach to rescind the contract." The Land Registry accepted that Eyestorm had justified its objection to the removal of the notice.

The proceedings

36. Eyestorm issued its claim form against Hoptonacre on 11 January 2006. The focus of the particulars of claim was that Hoptonacre had denied Eyestorm access to the flats for valuation purposes. They alleged such a denial during the period 16 July to 26 August, resulting in Eyestorm being unable to market the flats to buyers. They asserted that (i) on 24 August Eyestorm cancelled a proposed valuation of flats 10, 12 and 13 because Hoptonacre denied access; (ii) on 1 September Eyestorm was denied access to flats 1, 12, 10 and 13 for valuation purposes; (iii) on 8 September valuations were cancelled as Hoptonacre denied Eyestorm access to the same four flats; and (iv) on 12 September Hoptonacre denied access to flat 3 for valuation purposes.
37. Eyestorm pleaded the essential terms of the September agreement, including that Hoptonacre "ceases all marketing of the property." Down to paragraph 21 of the pleading, the case repeatedly made was based on a denial of access. Paragraph 7 had asserted that Bairstow Eves, as Hoptonacre's agents, had "intercepted the sub-buyer of [Eyestorm] and offered him the same at a lower price." It did not, however, allege that that involved a breach of the June agreement. Paragraph 22 asserted that:

"Contrary to [Hoptonacre's] solicitor's confirmation that it had ceased marketing the property, on the 11^th of October an agent of [Hoptonacre] Spicer McColl, approached one of the sub-buyers of [Eyestorm]. And confirmed that it indeed still had [Hoptonacre's] instructions to continue acting."

38. That was the first, and only, allegation of marketing in respect of the period following the September agreement. In paragraph 26 Eyestorm identified the breach of contract of which it was accusing Hoptonacre. It there pleaded that the giving of access for mortgage valuation purposes was an implied term of the June agreement. It did not allege that there was also an implied term that Hoptonacre would not market the flats. Paragraph 26 appeared to assert that it was the breach of the access obligation, and that alone, that had caused Eyestorm damage, and that it was the commission of that breach that precluded Hoptonacre from rescinding the June agreement. Paragraphs 27 and 28 purported to give particulars of the breach. Paragraph 27 was somewhat confused, but appeared to focus exclusively on the rights arising under the September agreement, under which Hoptonacre "would cease marketing the property, and most importantly, grant access for the valuation of the units." Paragraph 28 asserted that "[Hoptonacre] through their agents did not desist from marketing and [Eyestorm] was denied access to valuation. Thereby frustrating the prospects of completion by [Eyestorm]."
39. Eyestorm then pleaded an odd case claiming rectification of the June agreement by asking for "the substitution of the completion date agreed on the 12^th of September 2005 with a new suitable date to be determined by the court" and seeking specific performance of the June agreement as so rectified. That claim was not pressed at the trial. What was pressed was Eyestorm's alternative claim for damages for Hoptonacre's "breach of [the September agreement]" in refusing to allow it to have access to Iris Court for valuation purposes so as to enable it to sub-sell the flats, that being the only breach identified in paragraph 31 that Eyestorm was asserting had caused it loss and damage. Eyestorm claimed total damages of £327,865, made up fees, interest, penalty charges and damages for loss of profit on sub-sales. It also asked for repayment of the deposit of £112,750 plus interest.
40. Hoptonacre's amended Defence and Counterclaim summarised the correspondence. Paragraph 24 denied that under the June agreement it was obliged to grant access to the flats to valuers. But it also denied that it had in fact refused to grant access, and it pleaded its factual case in answer to the allegations against it in that respect. As to the marketing activities of Spicer McColl, it asserted that it instructed them by fax on 7 October to cease marketing the property, and had done likewise by telephone a few days earlier. It accepted that Spicer McColl may nevertheless have continued their marketing activities for a few days after 7 October. Its case was that it had validly rescinded the June agreement upon Eyestorm's failure to comply with the notice to complete served on 30 September. It had, in consequence, also been entitled to forfeit the deposit. By a counterclaim, Hoptonacre sought interest and costs under various heads, damages totalling some £95,000 and the cancellation of the notice registered at HM Land Registry.
41. Eyestorm's Reply repeated the assertion that it was an implied term of the June agreement that Hoptonacre should give access to the flats for valuation purposes. It made no like assertion in relation to marketing by Hoptonacre. It did, however, assert that Hoptonacre had admitted that it had engaged in marketing the flats in breach of the September agreement. It asserted that Hoptonacre's breaches (including of the agreement not to market the property) precluded it from serving the notice to complete dated 30 September.

The judge's judgment

42. The judge identified the issues, observing that Eyestorm's rectification and specific performance claims were not advanced with force. The essential issues were: (i) had Hoptonacre validly rescinded the agreement and was it entitled to forfeit the deposit, to have Eyestorm's notice against the title to Iris Court cancelled and to recover damages; (ii) if it had validly rescinded, was Eyestorm entitled to the return of the deposit; and (iii) was Eyestorm entitled to substantial damages under its claim based on the September agreement?
43. As for Eyestorm's claim to be entitled to access for valuation purposes, the judge held (in paragraphs 40 and 49) that the June agreement conferred no express or implied such right upon it. He had earlier noted (in paragraph 19) that Eyestorm had made no suggestion in the correspondence that it had been prevented from enjoying any necessary access between 16 July and 26 August; and its case at the trial was that it could not obtain access on 24 August and 1 and 8 September. The terms of the September agreement dealt expressly with access. The judge's finding (in paragraph 47) was that, contrary to Eyestorm's case, Hoptonacre was not in breach of those terms as regards granting access. He referred (in paragraph 45) to Mr Ogunbusola's evidence that by 29 September Eyestorm had unrestricted access for valuations to all 14 flats. There is no challenge to the judge's findings of fact as to access.
44. As for Eyestorm's complaint that Hoptonacre engaged in marketing the flats, the judge found (in paragraph 43) that, following the September agreement, Spicer McColl were still engaged in selling the flats and he inferred they were doing so on behalf of Hoptonacre. I interpret this as a finding that, in that respect, Hoptonacre was in breach of the September agreement.
45. The judge's further decision was, however, that any such breach by Hoptonacre (and also any breach of any duty to provide access, although he found there had been none) did not mean that Hoptonacre was not "ready, able and willing" to complete the June agreement on 17 October, when it purported to rescind the June agreement following the expiry of the second notice to complete. For this the judge relied on Prosper Homes Ltd v. Hambros Bank Executor and Trustee Co. Ltd. (1980) 39 P & CR 395, in particular on a passage in the judgment of Browne-Wilkinson J at page 400. The judge held that Hoptonacre had validly rescinded the agreement.
46. In paragraphs 51 to 53 the judge dealt with arguments from Eyestorm that both parties had been in breach of the June agreement, with the suggested consequence that neither was entitled to terminate it. The judge rejected that submission, saying it was clear that "the breaches alleged against Hoptonacre were not repudiatory breaches …." He referred to, without dealing expressly with, Eyestorm's submission that the conditions of the September agreement were "conditions precedent to completion". He rejected the argument that the notice to complete served on 31 August was invalid because, in breach of clause 6 of the June agreement, Hoptonacre had not provided Eyestorm with the NHBC cover packs. He said there had been no breach of clause 6 in that respect and that there had been no reasonable requirement upon Hoptonacre to provide those packs before it eventually did so on 20 September. He dealt next with an argument that the notice to complete served on 30 September was invalid on the grounds that the terms of the September agreement, one of which was to vary the long-stop contractual completion date to 30 September, were invalid for want of compliance with the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, a submission based on McCausland and Another v. Duncan LawrieLtd. [1997] 1 WLR 38. The judge's answer to that was that, if it was right, it meant that the long-stop contractual completion date of 30 August remained unvaried and Hoptonacre had been "ready, able and willing" to complete on that earlier date.
47. The judge then turned to the issue as to Eyestorm's claim for the return of the deposit. This arose against his finding that Hoptonacre had been entitled to serve the notices to complete and to forfeit the deposit. Eyestorm's claim for its return therefore depended upon the exercise by the court of the jurisdiction under section 49(2) of the Law of Property Act 1925. The judge referred to Eyestorm's conduct, including its delay in paying the balance of the deposit and its reluctance to proceed with the June agreement because of its commercial difficulties. He regarded the case as one in which Eyestorm could not perform the June agreement and thus as one in which it would require exceptional circumstances to justify the return of the deposit. In that respect he applied the approach of Arden LJ in Omar v. El-Wakil [2002] 2 P & CR 36, at paragraphs 35 to 37, and refused to order a return of the deposit.
48. Finally, the judge ordered Eyestorm to cancel the notice entered against the title to Iris Court and awarded Hoptonacre under its counterclaim various sums by way of interest and costs totalling £12,494.39. He also awarded damages of £88,607.55 against Eyestorm. That was because the lodging of the notice had prevented Hoptonacre from disposing of Iris Court as a result of which it had had to continue its borrowing of £1.75m and incur continuing interest charges. The judge dismissed Eyestorm's claim and ordered it to pay Hoptonacre's costs of the claim and counterclaim.

The appeal

49. The appeal was based on two propositions. First, Mr Hodgkin submitted that the judge was in error in failing to hold that Hoptonacre was in breach of contract by marketing the flats. That submission presented Mr Hodgkin with some difficulty. First, to the extent that he sought to argue that the June agreement incorporated an implied term preventing Hoptonacre from engaging in such marketing, that was not part of Eyestorm's pleaded case and nor had Eyestorm pleaded that Hoptonacre's activities in this respect amounted to a breach of any such implied term. Any such case was, therefore, not one that Hoptonacre had come to court to meet. Despite this, as Mr Peters confirmed, counsel for Eyestorm nevertheless did argue before the judge that there was such an implied term in the June agreement. In particular, he cited Trego v. Hunt [1897] AC 7 in support of that proposition. In paragraph 49 the judge referred to that citation and held that (as I read that paragraph) it did not support the argument that there was an implied term as to a right of access. It is not apparent that the judge understood that Trego had been cited in support of an implied term barring marketing. In the light of Eyestorm's pleaded case, I anyway doubt whether the judge should have entertained a new, and unpleaded, case at trial based on an implied term of this nature in the June agreement.
50. Mr Hodgkin might perhaps be regarded as on firmer ground insofar as it was Eyestorm's case that Hoptonacre's marketing exercise constituted a breach of the September agreement, which included an express term that Hoptonacre was to cease marketing the flats. But he was in difficulty there as well, because (in agreement with Mr Peters as to the law) he conceded that the terms of the September agreement were void because (a) they purported to amend the terms of the June agreement (in particular as to the completion date), but (b) did not comply with the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Mr Hodgkin regarded his concession as compelled by this court's decision in McCausland and Another v. Duncan Lawrie Ltd. [1997] 1 WLR 38.
51. Mr Hodgkin did not, however, regard his concession as putting Eyestorm out of court on its case that Hoptoncare was in breach of the September agreement by its marketing activities. He suggested that it was entitled to circumnavigate the section 2 problem on the basis that Hoptonacre must be regarded as estopped from denying that it was bound by the September agreement. He did not identify the nature of the claimed estoppel beyond suggesting that it might be a promissory estoppel. That would not, however, help because Eyestorm was seeking to use the September agreement as a sword, in support of a case that Hoptonacre had breached one of its terms, whereas the conventional view is that a promissory estoppel cannot be so used and Mr Hodgkin did not argue otherwise. If anything, I would think that, if there were any arguable estoppel, it was more probably an estoppel by convention. We were, however, referred to Yaxley v. Gotts and Another [2000] Ch 162, in which this court considered the extent to which an estoppel can be invoked in answer to a want of compliance with section 2. In view of the saving provision in section 2(5), the court held that the assertion of a right arising under a constructive trust by virtue of the operation of a proprietary estoppel is not inconsistent with the statutory purpose of section 2. But as to whether other estoppels would or might be so inconsistent, the position is less clear, Clarke LJ expressing the view (at [2000] Ch 162, at 182) that an attempt to rely on an estoppel by convention would be likely to fail as being inconsistent. Mr Hodgkin did not suggest that anything that happened under the September agreement gave Eyestorm any interest under a constructive trust, and nor did he develop any argument that Eyestorm had the benefit of an estoppel which would enable it to assert and establish a breach by Hoptonacre of that term of the September agreement relating to the non-marketing of the flats.
52. At the end of the argument it appeared to me that there was no identifiable legal basis, or at any rate none had been demonstrated, on which Mr Hodgkin either could assert, or was asserting, that Hoptonacre's marketing activities during the post-12 September period constituted a breach of contract. But even if there was, there was also another hurdle in Eyestorm's path. That is because it was no part of its evidential case at the trial that any marketing of the flats by Hoptonacre had caused it any problem, let alone loss. As Ms Adeegbe explained in cross-examination, following 12 September 2005 the only obstacle in the way of a due completion by Eyestorm of the June agreement was said to be the lack of access for mortgage valuation purposes. She said that Eyestorm had sub-purchasers for all 14 flats; and that all that was preventing them from exchanging contracts was that they could not get access for valuation purposes. Whilst both she and Mr Ogunbusola referred in their witness statements to Hoptonacre's marketing of the flats, neither gave evidence that it either caused or contributed to Eyestorm's inability to complete. Their case was that that inability was caused exclusively by the access problem. That was the case that ES made to JN on 29 September 2005 when explaining why Eyestorm could not complete on 30 September 2005; and it was also the case that they made to the Land Registry in their letter of 20 December 2005. But the judge rejected that case on the facts. That meant that, insofar as there was also an alternative case based on the marketing point, it was one that at most established a breach that caused no loss.
53. Mr Hodgkin's argument was that Hotptonacre's alleged breach of contract in marketing the flats meant that as at 30 September it was not "ready, able and willing" to complete the contract such as to entitle it to serve the notice to complete it then served. For the reasons given, I take the view that (i) Eyestorm was not entitled to run this point insofar as it was relying on an alleged breach of an implied term of the June agreement, (ii) nor did it show that it was entitled to assert a breach of the September agreement, and (iii) any breach of contract proved under either alternative was anyway not causative of Eyestorm's failure to complete. In these circumstances I cannot accept that it can be said against Hoptonacre that this alleged breach meant that it was otherwise than "ready, able and willing" to complete when it served the notice to complete on 30 September and when it purported to rescind on 17 October. There was some discussion as to whether, assuming that Hoptonacre's alleged breach in respect of the marketing activities had been both established and also been proved to have been causative of Eyestorm's inability to complete, this would have meant that Hoptonacre was not so "ready, able and willing". I have reservations as to whether that would have followed but, since the question does not arise and we did not have a full argument on it, I prefer to express no view upon it. I should perhaps say, though, that (a) I do not regard Prosper Homes Ltd v. Hambros Bank Executor and Trustee Co. Ltd. (1980) 39 P & CR 395, to which the judge referred, as necessarily providing a conclusive exclusion of such a consequence, although it certainly does not assist the contrary argument; and (b) Mr Hodgkin accepted that he had found no authority which supported that argument.
54. The second issue raised by Eyestorm's appeal was as to its claim to recover the deposit. This arises on the basis that Hoptonacre was (i) entitled to rescind the June agreement following Eyestorm's repudiation by failing to comply with the notice to complete dated 30 September and (ii) was, in consequence (as Standard Condition 7.5.2(a)(i) provided), entitled to forfeit the deposit. Eyestorm's case for its return was based on an appeal to the court's discretionary jurisdiction under section 49(2) of the Law of Property Act 1925. The judge declined to exercise that jurisdiction. The only basis on which Mr Hodgkin suggested that we might take a different view was because it was said that the flats either were, or must be assumed to have been, worth more at the date of the trial than at the date of the rescission. There was no evidence as to that before the judge; and the manner in which he exercised his discretion cannot be criticised because he did not take into account material that was not before him. Hoptonacre's right to forfeit the deposit arose in consequence of Eyestorm's repudiation of the June agreement. There is nothing in Eyestorm's appeal against the judge's refusal to order the return of the deposit.
55. I would dismiss Eyestorm's appeal.

Lord Justice Lawrence Collins

56. I agree.

Lord Justice Tuckey

57. I also agree.