England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
MR NICHOLAS STRAUSS QC
HC11C02783

		Royal Courts of Justice Strand, London, WC2A 2LL
		24/05/2016

Lady Justice Gloster:

Introduction

1. This is an appeal by Marlbray Limited, the defendant in the action ("the appellant"), against the decision of Mr Nicholas Strauss QC sitting as a deputy judge of the High Court on a preliminary issue given in a judgment dated 28 October 2013 ("the Judgment"). The appellant also appeals against the judge's refusal of its application for permission to amend its counterclaim as set out in his judgment dealing with consequential matters dated 10 December 2013 ("the 2^nd Judgment").
2. There were six claimants in the court below; the 1^st and 2^nd respondents to this appeal, Dr Mobolaji Laditi ("the 1^st respondent"), and his wife, Dr Olutola Laditi (the 2^nd respondent") were the 2^nd and 3^rd claimants (together "the respondents"). The appellant was successful as against the other claimants in relation to the preliminary issue which is why they are not respondents to this appeal.
3. The appeal in my judgment (although not as a analysed by counsel) raises issues as to:

i) whether a contract for the sale of land, signed by the 1^st purchaser on behalf of himself and purportedly on behalf of the 2^nd purchaser, is "void", "invalid" or "unenforceable":

a) because the 2^nd purchaser never gave authority to the 1^st purchaser to sign the contract on her behalf; and/or

b) because of alleged non-compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 ("the 1989 Act); and

ii) whether, in the event that the purchasers fail to complete the contract, the vendor can insist on retaining the deposit as against the purchaser who signed the contract and paid the deposit.

4. On the appeal Mr Romie Tager QC and Mr Henry Webb appeared as counsel on behalf of the appellant; they did not appear below. Miss Brie Stevens-Hoare QC and Miss Lina Mattsson appeared as counsel on behalf of the respondents. They also appeared below.

Factual background

5. The proceedings concern the 1,021-bed, 4-star Park Plaza Westminster Bridge Hotel ("the Hotel"), which is located in the former GLC finance office building (the Island Site) at the south end of Westminster Bridge. The ownership structure is what is sometimes referred to as an "aparthotel". The claims and counterclaims which are the subject of the appeal concern Unit 687, one of many hundreds of individual hotel room units which were pre-sold off-plan on long 999-year leases at a launch day "sales fair" organised by Galliard Homes Ltd, as agent for the appellant, over the weekend of 22/23 October 2005. Solicitors were available at the sales fair to represent buyers. Exchange of contracts could, and usually did, take place at the sales fair.
6. The respondents were among the many hundreds of people who attended the October 2005 sales fair. 225 units were sold or purportedly sold at, or shortly after, the 22/23 October 2005 sales fair (see the judgment at paragraph 4).
7. The respondents attended the fair on 23 October 2005. They, or at least the 1^st respondent, were interested in the purchase of unit 687. At the fair:

i) The 1^st respondent, but not the 2^nd respondent, signed an "instruction memorandum" to Lucas McMullan Jacobs ("LMJ"), one of the firms of solicitors acting on behalf of purchasers at the fair, who acted on behalf of the respondents, or at least the 1^st respondent; the instruction memorandum was in the following terms:

"Re: Hotel Unit No 687 Westminster Bridge, London SE 1

I/We hereby instruct you to act on our behalf in connection with our purchase of the above mentioned property at the price of £315,000 plus VAT. I/We further instruct you to proceed to an immediate exchange of contracts in connection with the purchase of the above at the aforementioned price. I/We confirm that you advised me/us fully of the consequences of entering into this contract before I/we did so and would confirm that I/we have read and understood the context of your report (dated 18. 10. 05) that you had it to me/us before giving you these instructions and instruct you on the basis of that report."

ii) After the 1^st respondent's signature, the 1^st respondent set out his contact details.

iii) The 1^st respondent also signed what purported to be a contract between the appellant, the respondents and Galliard Homes Ltd ("Galliard") for the grant of a long lease of unit 687. This contract consisted of a first page headed "Precedent Form of Contract for UK Launch" and then, on the next line the statement "Particulars" ("the Particulars)". There were then set out the following particulars:

"PARTICULARS"

HOTEL UNITS AT THE ISLAND SITE WESTMINSTER BRIDGE LONDON SE1

Date: 23 October 2005

1 Intitial Deposit	£1,000
2 Rent Guarantee	Yes
3 Property	Unit Number [687]
4 Purchase Price	£315,000
5 Purchasers Name and Address
Purchaser 1	Purchaser 2
Mr Mobolaji Laditi	Mrs Olutola Laditi
59, Taunton Close	59, Taunton Close
Bexleyheath	Bexleyheath
Kent	Kent
DA7 6NN	DA7 6NN
6 Purchasers Solicitors
Lucas McMullan Jacobs
7 See Rider - 10 day

-------------------------------------------------------------------------------------------------------

Signed for and on Signed for and on Signed for and on Behalf Behalf of the Vendor Behalf of Galliard of the Purchaser"

8. Attached, or backing on, to the particulars was a standard form of agreement for the sale of a lease of the unit stated to be between "the Vendors of the first part" and "the Purchaser of the second part" and Galliard of the third part. The following provisions are material for present purposes:

i) a definition of "Purchaser" - "As set out in clause 5 of the Particulars";

ii) a provision at clause 4 requiring that "The Purchaser shall pay to the Vendors' Solicitors on the date hereof a deposit equal to Initial Deposit to be held as stakeholders";

iii) further provisions at clause 4 requiring "The Purchaser" to pay in stages further deposits amounting in total to 25% of the purchase price of the unit;

iv) a provision at clause 24 in the following terms:

"Where two or more persons constitute the Purchaser all obligations contained in this Agreement on the part of the Purchaser shall be joint and several obligations on the part of such persons";

v) provisions whereby Galliard provided an income guarantee in favour of the Purchaser (see paragraph 10 of the judgment in relation to the role of Galliard).

9. Howard Kennedy ("HK") likewise signed Particulars in identical form on behalf of "the Vendor" (i.e. the appellant) and on behalf of Galliard.
10. The 1st respondent paid the initial deposit or reservation fee of £1000 by way of credit card. He also paid LMJ's solicitors fees of £587.50 on his credit card.
11. Pursuant to the instructions given by the 1^st respondent to LMJ in the instruction memorandum, the contracts were physically exchanged as between HK, as agent for the appellant and Galliard, and LMJ, as agent purportedly for the respondents.
12. On 26 October 2005, a Mr. Mughal of LMJ wrote to the 1^st and 2^nd respondents to confirm that contracts had been exchanged, and to remind them of the next instalment of the deposit due on the 8 November 2005. The respondents did not protest.
13. On 20 January 2010, HK wrote two letters to LMJ, the first to give advance notice of the projected dates for completion and the anticipated date for Notice to Complete and a completion date, the second stating that their records showed the buyer's name and address for insertion into the lease as Mobolaji and Olutola Laditi, and seeking confirmation that this was correct. On 25 January 2010, LMJ sent this on to the 1^st and 2^nd respondents, stating that, unless they notified LMJ of any amendments, the lease would be prepared as set out in HK's letter.
14. By February 2010, the 1^st respondent was seeking to arrange a mortgage, and kept in touch with Mr. Mughal to advise him of the progress. There was no suggestion that "the Purchaser's" name should be other than as specified by HK.
15. On 11 May 2010, the 1^st respondent wrote to the mortgage brokers, asking for an update on progress; this letter included the following passage:-

"Myself and wife, Olutola are the joint applicants for the mortgage. Notice for the completion has now been served and the completion notice set for 24 May 2010. The vendor's solicitor has emphasised that failing to complete on the date may lead to the contract being rescinded and consequently our deposit being forfeited plus the possibility of facing legal action."

16. On 14 May 2010, the 1^st respondent sent an email to Mr Mughal, to keep him up to date with the situation with regard to "our mortgage application", and this was signed "Mobolaji & Olutola".
17. On 24 May 2010, NatWest wrote a letter relating to finance for the purchase, referring to a valuation which had just been received, and this was addressed to "Dr. M. & Dr. O. Laditi". Similarly, the valuation, dated 13 May 2010, named both as the customer.
18. The evidence relating to payment of the 25% deposit appears to be that the 1^st respondent actually paid the balance of the 25% deposit over the next two years in stages amounting to £78,750, but that, although the 2^nd respondent denied that she had paid any deposit monies, the judge held that she had at least indirectly contributed to them by topping up the 1^st respondent's bank balance on his request. The deposit monies were paid to HK as stakeholder. After the Judgment, the respondents re-amended their pleadings to plead that the deposit monies had been paid by the 1^st respondent alone.
19. As it transpired, the respondents were unable to obtain a mortgage and so, when the hotel was completed and they were given notice in May/June 2010 requiring them to complete the purchase of unit 687, they were unable to do so. On 30 November 2010 the appellant gave notice rescinding the contract and forfeiting the deposit.
20. On 8 August 2011, the respondents, together with 4 others, issued a claim form against the appellant and subsequently served it and the particulars of claim on the appellant. The particulars of claim were subsequently supplemented by Part 18 responses dated 6 October 2011. In the claim form the claimants claimed:

"(a) declarations that they have not entered into contracts/enforceable contracts with the Defendant for the purchase of leases of apartments in the Defendant's hotel recently opened as the Park Plaza Westminster Bridge, (b) alternatively rescission of such contracts, together with (c) return of the deposits they paid to the Defendant or (d) damages".

21. The respondents' case originally was the same as that of the other claimants: viz. that the sales fairs were a deliberately created high-pressure environment in which they fell for an orchestrated hard sell of a product which was in truth such a bad investment as to be an unconscionable bargain; that there was no contract, alternatively the contract was void for uncertainty and or alternatively void for non-compliance with section 2 of the 1989 Act in a number of respects; the principal allegation in relation to non-compliance with section 2 was that what was exchanged was not a complete contract document, but merely the single sheet of paper headed "Particulars". All the claimants claimed the return of their deposits on the grounds of no contract and/or unconscionable bargain and/or penalty, and/or in reliance on section 49(2) of the Law of Property Act 1925 ("the LPA 1925"). In the respondents' case they originally claimed jointly for the return of the money, although, after the trial of the preliminary issue, their pleadings were re-amended so that only the 1^st respondent claimed for repayment of the deposit.
22. There was no suggestion at that initial stage, prior to the amendment of the particulars of claim, that the 2^nd respondent was not party to the contract for unit 687 or that she had not authorised its exchange. On the contrary, it was (among other things) expressly pleaded that the 2^nd respondent had signed an authority to LMJ, who had exchanged contracts on behalf of both respondents.
23. The appellant's case is and was that, far from being an unconscionable bargain, units at the Hotel were in fact outperforming the income guarantees given to the purchasers. The appellant accepted, however that the banking crisis led to the disappearance of 75% mortgages secured on the units and that capital values had fallen since the contract date. Further the appellant's case was that, contrary to what the respondents and the other co-claimants alleged, there was a valid exchange of contracts as the documents showed, that the buyers failed to complete, and that there was valid rescission and forfeiture of deposits. Alternatively the appellant contended that a constructive trust / estoppel arose as the buyers did not assert "no contract" until 2010 by which time the market had turned. There was also a counterclaim by the appellant for damages for breach of contract.
24. On 30 April 2012 Master Teverson ordered that the court should determine as a preliminary issue: "Whether Contracts between the Defendant and the Claimants are valid and enforceable?" and ordered a stay of the remaining issues in dispute pending such determination. The preliminary issue was limited to the contractual validity of the agreements, whether any constructive trust arose or whether there was an estoppel. (The agreed scope was later clarified by an agreed List of Issues shortly before the trial of the preliminary issue). The issues as to whether or not contracts for the purchase of units at the Hotel were an unconscionable bargain, whether the 25% deposits were a penalty, or whether they should be returned pursuant to section 49(2) of the LPA, and the appellant's counterclaim for damages were all outside the scope of the preliminary issue. The reason for the preliminary issue was that those other claims would all require for their resolution a decision on the counterclaim and hence expert evidence of the market value of the units, but that, if there were no contract at all, those points would not arise.
25. The trial of the preliminary issue was fixed for a hearing beginning on 8 April 2013.
26. On 2 October 2012, the appellant's solicitors were provided for the first time with a copy of the Particulars as signed by the 1^st respondent. The respondents contend that the appellant's solicitors were in breach of their disclosure obligations in this respect. On 11 December 2012, the respondents' solicitors noticed for the first time that the 2^nd respondent's signature was not on the Particulars.
27. At the start of the trial, on 10 April 2013, the respondents, with the leave of the judge, amended the particulars of claim to plead for the first time that the 2^nd respondent had not in fact signed the contract for unit 687 (although a copy of the proposed amendment had been served in draft some 3 weeks before the trial started).
28. The 2^nd respondent's case at trial went further – her case was that not only had she not signed the contract, but she had not authorised her husband, the 1^st respondent, to sign the contract on her behalf and that she had not authorised solicitors to act for her either. Her evidence also turned out to be that the deposit monies came from the 1^st respondent alone, although as I have said, the judge found that she had indirectly made a contribution by topping up her husband's bank account on request.

The judgment

29. The judge rejected all the claimant buyers' factual and legal contentions, except the case on the agency/ratification/estoppel issue. He rejected the respondents' argument that the 1^st respondent did not understand at the time of exchange that LMJ would be entering into a contract on his behalf or that LMJ did not have authority on his behalf to exchange. The judge also rejected certain technical arguments in relation to what terms were included in the contract at the time of exchange and the consequential arguments based on section 2 of the 1989 Act (which are not relevant for present purposes).
30. The judge dealt with the 2^nd respondent's position in relation to the issue of the 1^st respondent's authority to sign the contract on her behalf at paragraphs 121-127 of the Judgment. He said:

"121. On the other question, relating to C2's authority to sign for C3, it is unnecessary to rehearse the evidence in great detail. I accept C2's and C3's evidence that C3 was, throughout the day, looking after their two children, aged 1 and 2, was outside the hotel for most of the time, was paying little attention to what was going on even when inside, and was anxious to get away, having other plans for the day and no intention of staying so long.

122. I also accept C2's and C3's evidence that, whilst any purchase of a property would normally be made by them jointly, C3 never authorised C2 to enter into a contract on her behalf without her consent, and that she did not on this occasion know that he was entering into a contract, or consent to his doing so on her behalf. All she knew was that C2 had paid £1,000 to reserve the unit, and she was quite annoyed about that. It is not entirely clear when she was told this, but it seems probable that it was either when she was outside, by telephone, or during one of her sporadic visits inside. It may well have been before C2 had signed the Particulars page. In any event, I accept her evidence that she was unaware that C2 had entered into a contract, let alone that he had purported to do so on her behalf, on that day. I also accept C2's evidence that Mr. Bloom did not ask him whether he had authority to sign for his wife.

123. It is clear from both C2's and C3's evidence that she was angry about the whole thing from the start, and increasingly so when she learned (as she did) that further and more substantial deposits had to be paid, for which she had to make some contribution. She did not think that the family could afford it, and the tension over this resulted in C2 telling her as little as possible. He was away working during the week, and she had a fulltime job as well as two small children to look after. Dealing with a contentious matter was the last thing that either of them needed. Obviously, he ought to have told her that he had signed the Particulars page on her behalf, but he did not do so; he was anxious to minimise trouble, and hoped that she would eventually be reconciled to what he expected to be a good investment. So she probably would have been but for the wider events of 2008, resulting eventually in the failure in 2010 to get a mortgage.

124. C3 was a patently honest witness, and I accept her evidence as what happened later, which can be summarised as follows:-

She did not see, and was not aware of, the letter of 26th October 2005 in which Mr. Mughal referred to a contract having been entered into by C2 and herself.

She knew about the more substantial deposits which had to be paid, and realized that they must denote "some kind of commitment", but did not appreciate that there must be a binding contract, let alone one to which she was a party.

She knew of and participated in the attempts to raise the finance during 2010 and intended, if they resulted in the successful purchase of the property, that she and C2 would own it jointly.

125. Clearly, C3 must have become aware, at some time before the proceedings were brought, of the Particulars page and of the letter of 26th October 2005, since they were referred to in the Particulars Claim. But there is no evidence that she was aware at any earlier stage of the fact that C2 had signed a document showing her as Purchaser 2, and it has of course always been both C2's and her own case that the Particulars page did not incorporate any other contractual terms.

126. Therefore, the defendant's difficulty in establishing its case on ratification (discussed below) is that it has not been established that C3 knew, at the time she participated in the mortgage application, or at any other relevant time, that C2 had purported to enter into a contract on her behalf. The closest one gets to such knowledge is the following exchange in cross-examination.

"MR. RAINEY: Let us take it from there. You now know sitting here today that there was a contract exchanged on the day?

Yes.

Q. And you knew when the claim was issued a couple of years ago, so you knew then. I am just trying to go back in time. There comes a point in time between the sales fair and now which you realised there was a contract. Can you tell us at what point you say you realised there was a contract.

I think for sure some time early in about 2010 when we moved to Inverness.

Q. Is there anything which sticks in your mind as to how you can place the moment in time roughly when you found out?

Yes, what happened then was we had just, I think we just purchased a house in Inverness I think my husband was saying something about employing him to source for a mortgage for this project.

MR. RAINEY: Fill in the gap then. So how does that lead you to discover that there was is a contract for the room at the Park Plaza Hotel?

Well, I remember him saying the he has to get a mortgage, another mortgage and that is what (inaudible) all right, so now it is a contract I think. I mean I didn't, there was not any need for me to think about it really, it was just okay. I had the feeling that okay.

DEPUTY JUDGE STRAUSS: You had what feeling?

That it had become our property, kind of; if you see what I mean.

MR. RAINEY: I think you have already told us this; you considered your property as in yours and his?

Yes.

Q. We have seen at least one, during the search for mortgages there is one email on the bundle which is copied to you to a personal email address?

Yes. ...

MR. RAINEY: When you were searching for a mortgage your husband told us this morning that there was one point when he I think referred to a feeling of elation that an offer had been obtained which was quite a good one, which he then told us had later been reduced in value because the valuation report came in and the bank dropped the amount of money it was going to lend. Do you remember that?

All I remember is he was saying he needs to get a mortgage and looking for a mortgage and the person helping us saying you might be able to, it is hopeful. Some days he would say oh looks promising and then suddenly it was like oh no, it is not going to happen and that was it.

DEPUTY JUDGE STRAUSS: Dr. Laditi, you knew that your husband was using these mortgage brokers to try and get a mortgage for the project?

Yes.

DEPUTY JUDGE STRAUSS: And you went along with that?

I didn't feel at that stage there was much I could do or there was any way I could influence anything so I didn't know that I had a choice really.

DEPUTY JUDGE STRAUSS: Presumably if a mortgage had been obtained, then purchase of the property would have been completed?

Most likely.

DEPUTY JUDGE STRAUSS: Looking back to that time, was it your expectation that if a mortgage was obtained and if the purchase was completed, the property would be transferred into both your names.

Yes, probably yes."

127. However, I do not think that this establishes any more than that she knew in 2010 that C2 had entered into a contractual obligation binding on him at some time (not necessarily in 2005, possibly at the time of the further deposits). It does not establish that she knew that he had purported to enter into a contract on her behalf at any time, as opposed to having the intention to ensure that the property which he was buying was transferred into her name."

31. In the light of his conclusion that the 1^st respondent had signed on behalf of the 2^nd respondent, but that he had not had her authority to do so, the judge held:

i) that consequently LMJ had no authority to exchange contracts on behalf of the 2^nd respondent;

ii) that, as was apparently accepted by Mr Philip Rainey QC (leading counsel then appearing on behalf of the appellants), there was no binding or effective contract (irrespective of any section 2 point) concluded on 23 October 2005 because one of the parties to the intended contract did not enter into it (see paragraphs 128 and 132 of the judgment); this conclusion was apparently based on the case of Suleman v Shahsavari [1988] 1 WLR 1181;

iii) that, if the 2^nd respondent had indeed ratified the contract by her subsequent conduct, then there would have been a binding contract which would apparently (and this is implicit in the judge's acceptance of Mr Rainey's submissions) have complied with the provisions of section 2; see paragraphs 130-132 of the judgment;

iv) but the 2^nd respondent had not, on the evidence, affirmed or ratified the contract; and

v) neither of the respondents were bound by any estoppel or constructive trust.

32. In relation to the issue as to whether or not there was a binding and enforceable contract, capable of ratification, the judge said as follows:

"Ratification

128. I have found that C2 had no actual authority to contract on behalf of C3. It is not suggested that he had any ostensible authority. Mr. Rainey accepts that, if that is the finding, there was no contract, unless and until there was ratification: see Suleman v. Shahsavari [1989] 1 E.G.L.R. 203. However, he submits, if C3 subsequently ratified (a) the contract would become valid with retrospective effect and (b) section 2 would be satisfied as C2's signature on behalf of C3 would also be retrospectively validated. The first of these propositions is uncontroversial, but the second is not.

129. Mr. Rainey's argument starts with the proposition that, on the proper construction of the Particulars page, C2 purported to sign the contract for and on behalf of himself and C3. The term "Purchaser" is defined in the agreement as "as set out in clause 5 of the Particulars", and the Particulars clearly name C2 and C3 as Purchaser 1 and Purchaser 2. The obvious meaning of "Signed for and on Behalf of the Purchaser" immediately below C2's signature is that he was signing for and on behalf of both the persons encompassed by that term as shown on that page. I agree with this submission, and I think that it is also supported by a background fact known to both parties (and therefore to a hypothetical objective observer), namely that no effort had been made to obtain a separate signature from C3.

130. Mr. Rainey's next proposition is that ratification would validate with retrospective effect a contract which complied with section 2. This is because there would then be a contract, signed by C2 on behalf of himself, and on behalf of C3 with her authority, containing all the terms agreed between them and the defendant, which is all that section 2 requires. Nothing in section 2 alters the law of agency and the retrospectively validated signature by an agent, acting within the scope of his actual or ostensible authority, is sufficient.

131. Miss Stevens-Hoare submits that this is wrong. She submits that there is no authority on the relationship between section 2 and ratification, but that in principle the effect of section 2 is to render the contract void, in which case it cannot be revived by ratification. One cannot bring to life a void contract, and section 2 had rendered this contract void at the time of exchange.

132. I agree with Mr Rainey's submissions on this point. I can see no flaw in their logic, and the underlying basis of Miss Stevens-Hoare's submission, namely that it was section 2 that made the contract void on 23rd October 2005, is in my view incorrect. Section 2 is not engaged unless there is first an agreement which would, subject to compliance with it, be a binding contract: see Commission for New Jersey v. Cooper (Great Britain) Ltd [1995] 2 E.G.L.R. 113 at 123 J-L. In this case, there was no such contract on 23rd October 2005, because one of the parties to the intended contract did not enter into it. Therefore, no question of compliance with section 2 arose, and noncompliance with section 2 was not the reason why the intended contract was void or ineffective."

33. In relation to the issue of alleged affirmation/ ratification, the judge said as follows:

"133. However, for reasons indicated earlier, I cannot see how it can be said that there has been any ratification by C3 once I believe, as I do, her evidence that she did not see or know of Mr. Mughal's letter of 26th October 2005, which would have told her that C2 had entered into a contract on her behalf. Mr. Rainey submits that C3's evidence that she participated in the efforts to obtain a mortgage with the intention of becoming a joint owner of the property is conclusive on the question of ratification, and it certainly would have been if she had known that a contract had purportedly been entered into on her behalf. But, as Miss Stevens-Hoare submits, it is trite law that there can be no ratification unless the party concerned knows the circumstances relating to that which he is said to have ratified: see Bowstead on Agency para. 2-067. The extent of the knowledge of the circumstances required may in some cases be debatable, but in the absence of any evidence that C3 knew even that C2 had entered into a contract purportedly on her behalf at the sales fair, or at any other time, it cannot be said that she had knowledge of the act which it is claimed she ratified. For this reason, she never became bound by the contract.

134. Mr. Rainey also submits that C3's counterclaim for the return of the deposits (or such part of them as she provided) was an act of ratification, but this cannot be right. The suggested act of ratification, i.e. the counterclaim, is a document which denies the existence of the contract which requires ratification in order to be effective."

34. In relation to the appellant's alleged constructive trust and estoppel arguments, the judge said as follows:

"135. Mr. Rainey submits in the alternative that there is a constructive trust in favour of the defendant, alternatively that the claimants are estopped from asserting any rights to repayment of the deposits, essentially on the ground that it would be unconscionable or inequitable for them to do so having regard to the fact that they maintained the contract in being until it proved difficult or impossible to obtain a mortgage in 2010. These submissions cannot apply to C3, for the reasons discussed earlier, and there would have to be an enquiry as to how much of the deposits she provided. But in any event, I reject both submissions for the following reasons:-

(a) The defendant has chosen not to pursue its obvious remedy, namely an action for breach of warranty of authority against C2, which would have enabled it to recover its exact loss, whether greater or smaller than the amount of the deposit attributable to C2, and to set off any amount recovered against C2's claim. The natural assumption is that the reason for the absence of such a claim is that the defendant cannot prove loss.

(b) Although the defendant has argued that the unit could have been put up for sale at any time, the units have not all been sold and there is no evidence that there would have been a purchaser for this unit who did not buy another unit. Nor is there any evidence of the current price of units. Therefore, the defendant has not established either (i) that there is any actual loss or (ii) that it would suffer a loss if it now resold the unit.

(c)In these circumstances, even assuming that the principles of constructive trust and estoppel are of potential application:-

(i) as to constructive trust, I can see nothing unconscionable in leaving the defendant to pursue a claim for damages against C2, which would enable it to recover its actual loss if any;

(ii) as to estoppel, no detriment has been established; and

(iii) the application of either principle would enable the defendant, in effect, to enforce the contract and to recover a sum which might well be greater than any loss or detriment it has suffered.

(d) The normal case in which constructive trust arises is one in which the claimant has acted to his detriment (e.g. carried out work) in reliance on an informal promise of an interest in land: see for example Yaxley v. Gotts [2000] Ch 162.

(e) Whether or not a constructive trust of this kind could ever exist in relation to a sum of money, it is clear that it does not in this case for at least the following reasons:-

(i) the circumstances in which the defendant was to be entitled to the deposits are prescribed by the said agreement i.e. if and only if the claimant, in breach of contract, failed to complete; to permit the claimant to take the deposits in the present circumstances would be to enforce the agreement outside the circumstances for which it provided; and

(ii) what makes the retention of the property unconscionable in cases of this kind is that the claimant has provided the consideration for the informal and therefore void contract, which is now irretrievable; the defendant in this case seeks to have the deposit and keep the property, providing nothing. No doctrine based on unconscionability could support this.

(f) As regards estoppel, this might be established if the defendant relied to his detriment on a promise by the claimant not to rely on the statute, but to seek to establish it on the basis only of a continuing promise to perform the void contract would in effect override section 2 and reintroduce, and expand, the abolished doctrine of part performance: cf. Actionstrength Ltd. v. International Glass Engineering IN.GL.EN SpA [2003] 2 AC 541.

Conclusion

136. For these reasons, whilst a binding contract was purportedly entered into by C2 on behalf of himself and C3, it fails because he had no authority to enter into it and C3 never ratified it. C2's and C3's claim therefore succeeds."

35. As can be seen from paragraph 135(a) of the judgment, the judge took the view that the appellant had not pursued what he called its "obvious remedy", namely a claim for damages against the 1^st respondent for breach of warranty of authority which he said would have enabled the appellant to recover its exact loss, whether greater or smaller than the amount of the deposit attributable to the 1^st respondent, and to set off any amount recovered against 1^st respondent's claim.

Proceedings following judgment

36. The particulars of claim, the response to the Part 18 request and the reply and defence to counterclaim had to be further amended subsequent to the judgment to be consistent with the findings made at trial. This included an amendment to the particulars of claim to plead that the 1^st respondent alone made the deposit payments to HK as stakeholder.
37. The result of the judgment on the preliminary issue was that the other claims/counterclaims, including the counterclaim for damages were proceeding to trial in any event as between the appellant and the other claimants, including the counterclaim. Accordingly, at the same time as seeking permission to appeal, the appellant also applied to the judge to amend its existing counterclaim for damages for breach of contract and the accompanying equitable set-off defence so as to claim against the 1^st respondent the same damages on the basis of breach of warranty of authority, and consequently to extend the set-off against the 1^st respondent's claim to the return of the deposits to the same extent.
38. The 1^st respondent contended in response that such a claim was statute-barred. The appellant relied upon section 35 of the Limitation Act 1980 ("LA 1980") and CPR 17.4(2), contending that such claim arose out of the same or substantially the same facts as already pleaded and that section 35 applied to extend the relevant limitation period. The judge allowed the amendment to the defence to add the breach of warranty damages to the already-pleaded equitable set-off (as he accepted that there was no limitation period applicable to equitable set-off), but he rejected the s.35/CPR17.4(2) argument (that the claim for damages for breach of warranty arose out of the same or substantially the same facts as already pleaded and section 35 would apply to extend the limitation period) and so refused permission to amend the counterclaim for damages for breach of contract to include a claim for the same loss as damages for breach of warranty. The judge also imposed a costs condition to the effect that the appellant paid at least 80% of the 1^st respondent's costs of the issue relating to the set-off defence and did not seek an order for its own costs of the issue.
39. Thus the order made by the judge on 10 December 2013 ("the December order") was in the following terms:

"IT IS ORDERED that

1. There is no valid or enforceable contract for the purchase of a lease of Apartment 687 in the Park Plaza Hotel…. between the Defendant for the 1st part and the 2nd and 3rd Claimants for the 2nd part.

……

3. The Claimants have permission to amend the Amended Particulars of Claim pursuant to their oral application and in the form attached hereto and to make such consequential amendments to their Reply to Requests for Further Information and Reply and Defence to Counterclaim as are necessary to ensure the same are consistent with the Re-amended Particulars of Claim. The Claimants shall file and serve the Re-amended Particulars of Claim and amended Replies to Requests for Further Information by 4pm on 10 January 2014 and the Amended Reply by 4 pm on 7 February 2014.

4. Save for the declaration set out in paragraph 1 herein, the Release Issue and the defence of equitable set off for breach of warranty as against the Second Claimant the claims and counterclaims by and against the Second and Third Claimants be dismissed.

5. On condition that the Defendant pays at least 80% of the Second Claimant's costs in these proceedings of and occasioned by the defence of equitable set off based on breach of warranty, and that it does not seek and is not entitled to an order for its own costs of this issue, whatever the outcome, the Defendant has permission to amend the Amended Defence and Counterclaim pursuant to CPR 17.1(2)(b) and/or CPR 17.4 in the form attached to the Defendant's application dated 6 November 2013 save that the amendments be revised to plead breach of warranty as an equitable set off but not a counterclaim. The Defendant shall file and serve the Re-Amended Defence and Counterclaim by 4pm on 17 January 2014.

……

8. The Defendant be granted permission to appeal against paragraph 1 and 4 of this Order on the basis of its claim that the Third Defendant ratified the contract signed by the Second Defendant and/or estoppel. There be a stay of paragraphs 1 and 4 of this order (and any further order made in respect of the return of the Second Claimant's deposit) pending the disposal of the appeal.

……"

40. I comment that, although the judge does not appear to have determined any issue in relation to section 2 of the 1989 Act, on the grounds that he appears to have concluded that, in the absence of any authorisation given by the 2nd respondent to the 1st respondent to sign the contract on her behalf, there was no contract at all (see paragraph 132 of the judgment), the declaration he made nonetheless suggests not merely that there was no contract at all but rather that there was no "valid" or "enforceable" contract - which by implication appears to have been some sort of reference to non-compliance with section 2.
41. On 10 March 2014 the judge made a further order ("the March order") in the following terms:

"IT IS ORDERED that

42. Subject to the outcome of any appeal the entitlement to the return of the Deposits paid by the Second Claimant in the sum of £78,750 together with such interests as has accrued on the same from the stakeholder Howard Kennedy FSI LLP arises only after the issue of equitable set-off of the breach of warranty claim is determined.
43. The defendant is refused permission to appeal against (1) the costs conditions imposed on the grant of permission to amend the Defence to plead breach of warranty by way of equitable set-off and (2) the refusal of permission to amend the Counterclaim.
44. The costs of the Preliminary Issue as between the Defendant and the 1st, 2nd, 4th, 5th and Claimants are reserved for determination of the remaining issues in these proceedings.
45. The costs of the claim as between the Defendant and the 3rd Claimant are adjourned to be decided at the determination of the remaining issues between the Defendant and the other Claimants proceedings."

The orders against which the appellant is appealing and its grounds of appeal

46. Pursuant to permission granted by the judge, and subsequently by Rimer LJ, by its notice of appeal the appellant appeals against:

i) the declaration made by the judge that "there is no valid or enforceable contract for the purchase of [the unit]" between the respondent for the first part and the 1^st and 2^nd respondents for the second part, as contained in paragraph 1 of the December order;

ii) the judge's dismissal of the appellant's counterclaims against the 1^st and 2^nd respondent, save for the "Release Issue" and the defence of equitable set-off for breach of warranty as against the 1^st respondent, as contained in paragraph 4 of the December order;

iii) the judge's refusal to permit the appellant to re-amend its amended defence and counterclaim to plead breach of warranty by way of counterclaim; and

iv) his imposition of a costs condition in relation to the permission to plead a claim for breach of warranty by way of equitable set-off, as contained in paragraph 5 of the December order.

47. In its notice of appeal, the appellant sought the following orders from the Court of Appeal:

i) a declaration in substitution for paragraph 1 of the December order that the contract for the purchase of a lease of the unit between the appellant for the 1^st part and the 1^st and 2^nd respondent for the second part "is valid and enforceable subject to their [the respondents'] claims for rescission on the grounds of unconscionable bargain and/or for the return of the [respondents'] deposit on the grounds of penalty and/or pursuant to section 49 (2) of the Law of Property Act 1925";

ii) an order in substitution for paragraph 5 of the December order that the appellant has permission to amend its amended defence and counterclaim to enable it to plead a claim for damages for breach of warranty of authority by way of counterclaim and that the costs so doing, and of its defence of equitable set-off, be reserved to the trial judge.

48. At the hearing of the appeal, the appellant presented arguments to support these grounds.

The respondents' notice

49. By their respondent's notice, the respondents sought to uphold the judge's "declaration that there is no valid or enforceable contract" not only for the reasons given by the judge, but also on the following grounds:

Ratification

i) The judge was right to find that the 2^nd respondent did not ratify the contract for the following additional reasons:

a) on the proper construction of the 1^st respondent's signature above the words "Signed for and on behalf of the Purchaser" on the Particulars, such signature did not purport to be a signature for and on behalf of the 2^nd respondent;

b) even if the 1^st respondent's signature properly construed purported to be a signature on behalf of the 1^st respondent and the 2^nd respondent:

i) that signature was not a representation by the 1^st respondent to the appellant that the former had authority on behalf of the 2^nd respondent to contract, whether by exchanging contracts or otherwise;

ii) that signature alone did not amount to an authorisation by the 1^st respondent to LMJ to act on behalf of the 2^nd respondent to contract, whether by exchanging contracts or otherwise on her behalf;

iii) ratification of the contract depended on the 2^nd respondent's ratification of the acts of LMJ , which she did not do and which had not been pleaded or alleged by the appellant;

iv) the appellant did not plead nor argue in opening or closing submissions that the 2^nd respondent had ratified the contract by erroneously pleading in the particulars of claim that she had signed the Particulars or authorised exchange of contracts;

v) the particulars of claim were amended, by consent to remove the 2^nd respondent's erroneous statements that she had signed the Particulars and authorised exchange of contracts;

vi) the 2^nd respondent's erroneous pleadings did not amount to ratification of the contract because:

(a) she did not plead that the 1^st respondent signed the contract on her behalf or that he contracted on her behalf;

(b) at all times from 3 September 2010 and in the particulars of claim the 2^nd respondent's position was that there was no valid enforceable contract between her and the appellant; and

(c) prior to the particulars of claim and therefore the alleged ratification, the 2^nd respondent elected to exercise claimed right to rescind and treat any valid or enforceable contract as terminated.

Estoppel

ii) The judge was right to find that the 1^st and/or the 2^nd respondents' claims were not barred by estoppel for the following additional reasons:

a) there was no basis nor any evidential basis for finding that at any point any of the parties intended to be bound in the absence of a valid written agreement;

b) the appellant called no or no sufficient evidence in support of any claimed detriment.

The amendment of the appellant's defence and counterclaim

iii) The judge was right to refuse the appellant's permission to amend its counterclaim against the 1^st respondent to plead a claim for damages for breach of warranty of authority and wrong to allow the appellant permission to amend to plead breach of warranty as an equitable set-off against the 1^st respondent's claim for the following reasons (in addition to those given by the judge when refusing permission):

a) the plea of breach of warranty had no reasonable prospect of success, even on the defendant's own case and evidence;

b) the 1^st respondent's signature on the Particulars was not a representation or warranty by him of authority to contract for the 2^nd respondent;

c) the appellant's evidence did not enable the court to conclude on the balance of probabilities that the appellant relied upon the 1^st respondent's signature either:

i) as a signature on behalf of the 2^nd respondent; or

ii) as a representation that the 1^st respondent had authority to contract on behalf of the 2^nd respondent;

d) there can be no equitable set-off against the 1^st respondent's entitlement to the return of the deposit held by a stakeholder because that is not a money claim against the appellant, as the appellant contended and the 1^st respondent conceded.

The reservation of the respondents' costs of the preliminary issue

iv) The judge was wrong to reserve the respondents' cost of the preliminary issue to be determined at the trial of the remaining issues between the appellant and the 1^st respondent and the remaining claimants (other than the 2^nd respondent) because:

a) the respondents succeeded on the preliminary issue;

b) the appellant wrongfully withheld disclosure of certain documentation;

c) the appellant made a conscious decision not to raise or plead breach of warranty of authority against the 1^st respondent until after the trial of the preliminary issue. I just wondered whether you are going up for lunch and if so when you take a letter to the temple for me

50. At the hearing of the appeal, the respondents presented arguments to support these grounds.

The issues arising on the appeal and the cross-appeal

51. Because of the Court's perception of the potentially wide breadth of the issues raised by the appellant's grounds of appeal (in particular, in relation to the challenge to the judge's declaration that there was no valid or enforceable contract for the purchase of a lease of the unit between the appellant for the first part and the 1^st and 2^nd respondents for the second part), the Court requested counsel to provide a list of the issues which they respectively contended arose on the appeal and the respondent's notice. In summary counsel articulated these as follows:

i) Was the 1^st respondent's signature, properly construed, a signature purportedly signing the contract on behalf of the 2^nd respondent as well as himself? ("The construction issue".)

ii) Did the 2^nd respondent ratify the 1^st respondent's signature on the contract on her behalf by:

a) the way she claimed the alternative relief (jointly with the 1^st respondent) in:

b) the respondents' solicitors' letter dated 3 September 2010;

c) the original claim; and/or

d) the amended claim; and/or

e) not taking the point that she was not a party to the contract, from her discovery in 2010 that she was a party to the contract until shortly before the 2013 trial? ("The ratification issue.")

iii) Given the judge's finding that the 1^st respondent signed the contract purportedly on behalf of the 1^st respondent and the 2^nd respondent without the 2^nd respondent's consent, is the 1^st respondent estopped from denying the validity of the contract either:

a) at all; or

b) for the purpose of recovering the deposit? ("The estoppel issue".)

iv) Was the judge correct to refuse the appellant permission to re-amend the amended defence and counterclaim to plead a new counterclaim for breach of warranty of authority on the ground that the claim does not arise out of the same or substantially the same facts as those already in issue in the proceedings? ("The amendment issue".)

v) Was the judge correct to grant the appellant permission to plead a claim for damages for breach of warranty of authority as a set-off to the 1^st respondent's claim in respect of the deposit? In particular, was he correct in holding that:

a) the claim has a real prospect of success; and

b) the claim was to be treated as a set-off (or otherwise to be taken into account) in respect of the 1^st respondent's claim for a declaration in respect of the deposit? (" The set-off issue")

52. If so, was the judge correct to grant permission to the appellant only on the basis of the costs condition as set out at paragraph 15 of his judgment dated 16 April 2014? ("The costs condition issue.")
53. Should the judge have reserved the costs of the preliminary issue? ("The costs issue.").

Preliminary concerns about the judge's analysis


 


54. Having heard the arguments in this case, and considered the case fully after the hearing, I had real concerns about the assumptions made by the judge as the starting point of his legal analysis, apparently on the basis of concessions made by Mr Rainey QC, who was acting on behalf of the appellant at trial. At the oral hearing of the appeal before us, Mr Tager did not seek to go behind the judge's analysis, or Mr Rainey's concessions, in this respect and did not address the issues which I am about to raise ("the new contractual issues"), despite the fact that, subject to a withdrawal of the concession which had been made at first instance, the appellant's notice and grounds of appeal (namely that the judge was wrong to make the declaration "there is no valid or enforceable contract for the purchase of [the unit]" between the respondent for the first part and the 1^st and 2^nd respondents for the second part), were, in my judgment, wide enough to encompass argument on the new contractual issues.

The new contractual issues

55. The new contractual issues are these. As I have already set out, the judge held that because the 1st respondent had no actual, or ostensible, authority to contract on behalf of the 2nd respondent, then (as apparently accepted by Mr Rainey) on the basis of Suleman v. Shahsavari [1989] 1 E.G.L.R. 203, there "was no contract", unless and until there was ratification; see paragraphs 128 and 132 of the judgment. Because he held there was no ratification by the 2nd respondent and no estoppel precluding the 1st respondent from denying the existence of what the judge referred to as a "void contract", he concluded that the binding contract purportedly entered into by the 1st respondent on behalf of himself and the 2nd respondent failed "because he had no authority to enter into it and the 2nd respondent never ratified it"; see paragraph 136 of the judgment. On this basis the judge granted a declaration that there was "no valid or enforceable contract" for the purchase of a lease of the unit between the appellant for the first part and the 1st and 2nd respondents. The judge's variable use of terminology (i.e. "void" in some passages, and not "valid or enforceable" in others) is confusing. If, as he held, there was no contract at all, because the 2^nd respondent never authorised the 1^st respondent to sign the contract on her behalf, that was a different conclusion from a finding that the contract was "void".
56. This analysis appeared to have been based on two propositions, both of which I considered in my draft judgment (and subject to further argument from counsel on the point) to be wrong: the first is that there was "no" contract at all, or that it was "void", in circumstances where the 2^nd respondent had not authorised the 1^st respondent to sign it, and had not subsequently ratified it; the second is, by implication from the judge's conclusions in relation to the estoppel argument (see, in particular paragraph 135 (f) of the judgment), that any contract signed by the 1^st respondent alone would not have satisfied the requirements of section 2.
57. Accordingly, in a Draft Judgment dated 22 February 2016 ("the draft judgment") which the court agreed should be circulated to the parties, I set out my provisional conclusions (subject to further argument from counsel) in relation to the new contractual issues. These were as follows (numbering as per the draft judgment):

"53. As to the first proposition, I see no reason why, in circumstances where, as here, the contract expressly provided that, where there were two or more persons constituting "the Purchaser", the obligations of each of them should be joint and several, the several obligations of the one "Purchaser", who clearly did sign the contract and authorise the solicitors to exchange, should not be contractually binding on him to purchase the property and to pay the deposits, and the balance of the purchase price on completion.

54. As stated in Chitty on Contracts, 32nd edition, Volume 1, paragraph 17 – 003:

"Joint and several liability gives rise to one joint obligation and to as many several obligations as there are joint and several promisors."

55. In a joint and several contract, the obligation is said to be either joint or several at the election of the promisee, and he may, if he chooses, sue all the promisors in one action or bring separate actions against any one or more of the promisors in respect of their several obligations; see Glanville Williams, Joint Obligations (1949), at §20 and cases there cited. That being so, the appellant could have sued the 1^st respondent alone on the several contract between himself and the appellant without joining the 2^nd respondent or relying upon the joint contract as between the appellant, the 1^st respondent all the 2^nd respondent.

56. As to the second proposition, again subject to further argument from counsel, my brief researches suggest that the old case law on section 40 of the Law of Property Act 1925 (although not precisely on point) supports the proposition that a memorandum in writing which adequately documented the essential terms of the several contract between the appellant and the 1^st respondent would be sufficient for the purposes of section 2, notwithstanding that the appellant knew from what was written on the Particulars that the 1^st respondent was also purporting to sign the joint contract on behalf of himself and his wife, and indeed her several contract on her behalf. If, as a matter of analysis, there is no obligation on the appellant to sue both respondents together or under the joint contract, it follows in my view that section 2 is not infringed in relation to the several contract entered into between the appellant and the 1^st respondent. The Particulars contain all of the terms which the parties have agreed in relation to that several contract. See, by way of analogy, cases such as Basma v Weekes [1950] AC 441 and Davies v Sweet [1962] 2 QB 300, where the Court of Appeal held that a memorandum will be sufficient even though one of the parties to the contract is not identified, provided it does identify someone will be bound by the contract, such as an agent who has incurred personal liability.

57. I have considered the case of Suleman v. Shahsavari, upon which the judge apparently relied. It is necessary to read the case as reported at (1989) 57 P. & C.R. 465, where the reasons of Mr Andrew Park QC, sitting as a deputy judge, in relation to his refusal of the purchaser's claim for specific performance, are fully set out. In my judgment Suleman v. Shahsavari provides no basis for the judge's conclusion that, in the absence of the 1st respondent having any authority to sign the Particulars on his wife's behalf, there was no contract at all as between the appellant and the 1st respondent.

58. Suleman v. Shahsavari was a case where the defendant vendors, Mr and Mrs Shahsavari, were joint owners of the property in question. No question of compliance with section 40 of the Law of Property 1925 (the predecessor to section 2) arose; see page 472. The judge found that Mrs Shahsavari had purportedly given authority to the solicitor to sign and exchange contracts, but since she had in fact no actual, ostensible or implied authority from her husband to authorise the solicitor to exchange contracts, she had only effectively given authority on her own behalf. In those circumstances counsel for Mr and Mrs Shahsavari contended that, since authority to exchange from both vendors was required, there was no contract which bound them. In the relevant passage for present purposes at page 473, the judge said:

"Mr. Hurst (counsel for Mr. and Mrs. Shahsavari) says in the alternative: (i) he [Mr Martinez, the vendors' solicitor] had no authority at all, and indeed was expressly instructed by Mrs. Shahsavari not to sign and exchange the contract; or (ii) if he had authority from Mrs. Shahsavari, he did not have any form of authority from Mr. Shahsavari, and, since authority from both vendors was required, there was no contract which bound them.

I will first deal with Mr. Hurst's first argument. I reject it because, as I have said earlier, I accept Mr. Martinez's evidence about the telephone call on July 8. I therefore take the view that Mr. Martinez had express authority from Mrs. Shahsavari to sign and exchange the contract.

Mr. Hurst's second argument, however, based on the absence of authority from Mr. Shahsavari, is a different matter, and I have concluded that I must accept it. Before saying why I consider that there was no sufficient authority from Mr. Shahsavari I should say this. Neither Mr. Geldart nor Mr. Hamlin has disputed the proposition that, if Mr. Martinez was authorised by Mrs. Shahsavari but not by Mr Shahsavari, there is no contract. It has not been suggested to me that there could be a contract which bound Mrs. Shahsavari, and on which she is liable in damages. I think this must be right. Suppose that, instead of an exchange of part and counterpart, a single contractual document was drawn up, to be signed by all three; Mr. Suleman and Mrs. Shahsavari signed it, but Mr. Shahsavari refused to sign. There would have been no contract. The position is the same if Mr. Martinez had no authority from Mr. Shahsavari." [My emphasis.]

59. Having decided on the evidence that the solicitor had not been authorised by Mr Shahsavari to exchange, the judge concluded that the purchaser's claim for specific performance against Mr. and Mrs. Shahsavari failed. However apart from the fact that the relevant point for present purposes was conceded and not argued in Suleman v. Shahsavari (see highlighted passage above), the facts of that case are, in my judgment, wholly distinguishable from those of the present case. In the former case, unlike the present case, there was, not surprisingly, no question of either of the joint vendors being in a position to convey the property individually; there does not appear to have been any provision, such as that in the present case, imposing several (as well as joint) liability on each of the purchasers. In contrast, in the present case, there was no reason why the 1st respondent, as one of the proposed two "Purchasers" of a unit, and given the express provisions of the contract, should not be contractually liable on his separate and several obligation to purchase the unit, given that he had certainly signed the Particulars and authorised exchange on his own behalf.

60. Moreover, there is nothing in the authorities relating to agency which would preclude a person, who contracts on his own behalf as principal, and who also purports to sign the relevant contract as agent for another party, from being contractually bound in his capacity as principal under a contract imposing joint and several liability, notwithstanding that, in the particular circumstances, he had no authority from his principal to sign the relevant contract on the latter's behalf. It all depends on the terms of the relevant contract: see for example Bowstead on Agency, 20th Edition, paragraph 9-006.

61. Accordingly, as a matter of first principle, and subject to such further reference to relevant authority as counsel would wish to present to the court, I would have concluded, contrary to the judge's conclusion based on Mr Rainey's concession, that there was indeed a binding contract, between the 1^st respondent on the one hand and the appellant on the other, imposing several obligations on the former.

62. That would give rise to the second issue, namely whether there was a sufficient document in writing "incorporating all the terms which the parties have expressly agreed" "signed by or on behalf of each party to the contract" for the purposes of section 2 of the 1989 Act.

63. Section 2 of the 1989 Act provides as follows:

"2 Contracts for sale etc. of land to be made by signed writing.

(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.

(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.

…

(5) This section does not apply in relation to—

…

and nothing in this section affects the creation or operation of resulting, implied or constructive trusts."

64. As I have already said, it appears to have been implicitly accepted by the judge that, in the absence of 2^nd respondent's authorisation or ratification, there was no sufficient document in writing to satisfy the requirements of section 2(3). Again, if that is what the judge decided, for the reasons given above, I would disagree as a matter of analysis.

65. Unfortunately, because of counsel's acceptance of the judge's starting point (i.e. that there was no binding contract), we were not referred to any authority in relation to a situation such as the present, where as a matter of analysis it must be arguable that there was a separate contract as between the 1^st respondent and the appellant, reflecting his several obligations, which was adequately documented in writing so as to satisfy the requirements of section 2 of the 1989 Act. In the absence of any such authority, in my judgment, the terms of the contract adequately documented in writing the provisions of the several contract as between the appellant and the 1^st respondent.

66. Accordingly, in my judgment the 1^st respondent was contractually bound under his several contract with the appellant to purchase the property, notwithstanding that paragraph 13 (iv) of the amended particulars of claim pleaded that "at no point was it intended that [the 1^st respondent] would proceed with any proposed purchase without the [the 2^nd respondent]". Likewise, as I have already said, in my judgment that contract satisfied the requirements of section 2 of the 1989 Act. Accordingly, upon the 1^st respondent's repudiation of the contract, the appellant is entitled to claim the retention of the deposits pursuant to the contract between it and the 1^st respondent, subject to the latter's defences that he is entitled to the return of the deposit, on the grounds that the contract was an unconscionable bargain, on the grounds that the deposit provisions were a penalty, or pursuant to section 49(2) of the Law of Property Act 1925, - issues which were raised in the respondents' pleadings but which have not yet been determined. Therefore, if my analysis is right, no question of estoppel arises."

58. In my draft judgment I also considered that, even if I were wrong in my analysis of the new contractual issues, there was in any event an additional issue which arose prior to, and required determination before, the estoppel issue. That additional issue was whether the 1^st respondent was precluded from claiming the return of the deposit which the appellant had paid, on the grounds that, properly analysed, his claim was one for unjust enrichment and he could not show that the Appellant had been unjustly enriched ("the unjust enrichment issue").
59. In the circumstances, the court directed that counsel for the respective parties should be afforded the opportunity of addressing the new contractual issues and the unjust enrichment issue (together "the new issues") by means of further written submissions in the first instance, confined to the new issues, with the court deciding on receipt of such submissions whether a further oral hearing was necessary. Further extensive written submissions from both parties were received over the period 11 March to 8 April 2016. Having considered such submissions, on 21 April 2014 the court directed that no further oral hearing was necessary.

I turn now to consider, in the light of the parties' respective submissions in relation to the new issues, the various issues in their logical sequence.

The construction issue

60. I agree with the judge's conclusion as set out in paragraph 129 of his judgment that, on a proper construction of the contract, including the definition of "the Purchaser" in the Particulars, the 1^st respondent's signature was clearly, and on any objective basis, a signature by the 1^st respondent, not only on his own behalf, in respect of his joint and several obligations, but also a signature purporting to be one on behalf of the 2^nd respondent, in respect of her joint and several obligations. That is clear from the layout of the Particulars page and also the definition of "the Purchaser". Accordingly I reject Miss Stevens-Hoare's submissions to the contrary which reflected the respondents' grounds of appeal as set out above in relation to this issue.

The ratification issue

61. It was common ground that, for ratification to occur:

i) there had to be an act, or an omission, showing an intention to adopt the transaction;

ii) that it is necessary that the party concerned should have knowledge of the full circumstances relating to that which he is said to have ratified: see Bowstead on Agency paragraph 2-069;

iii) that in cases of implied ratification from conduct, the words or conduct must be unequivocal: see ibid, paragraph 2-075.

62. Because of the judge's finding that the 2^nd respondent did not appreciate that she herself was a party to the contract, Mr Tager effectively had to rely on the earlier correspondence and the respondents' pleadings before amendment to support his case of ratification. Despite his careful analysis of the correspondence and the pleadings, I am not persuaded that there was any sufficient act on the part of the 2^nd respondent, in the light of full knowledge on her part, to constitute the necessary unequivocal conduct to amount to implied ratification of the 1^st respondent's signature on the Particulars purportedly on her behalf.
63. Whilst it is clear from cases such as Celthene Pty Ltd v WKJ Hauliers Ptd Ltd [1981] 1 NSWLR 606 at 614 that a pleading which denies liability is capable of ratifying a contract (in that case ratifying a contract to the extent of relying upon an exemption clause), the circumstances of this case were very different from those in Celthene. It was only very late in the day that the 2^nd respondent and her solicitors first appreciated that she had not in fact signed the contract (on 11 December 2012) and it was the realisation of that fact which led to the consequential amendments to the particulars of claim and the reply and defence to counterclaim. The respondents suggested that their late appreciation of this fact was because of defects in disclosure by the appellant, but whether that was the case or not, it is impossible on the judge's findings of fact to conclude that the averments in the un-amended pleading were made in the full knowledge of the situation on the 2^nd respondent's part (i.e. that she had not signed the contract but that only her husband had purported to do so on her behalf). It was clear that she and her husband had not, until what was certainly the very late disclosure of the document, had in their possession a copy of the Particulars as signed by the 1^st respondent.
64. Furthermore, in any event it is difficult, if not impossible, to read the averments in the un-amended pleadings as amounting to unequivocal statements that the 2^nd respondent was ratifying the authority of the 1^st respondent to sign the contract on her behalf. As the judge pointed out, the respondents' primary claim was that the documents "purportedly exchanged" did not give rise to a valid or enforceable contract (albeit on what were ultimately held to be unsustainable grounds); thus the context was not simply one where the respondents were relying on the contract, but denying liability under it and seeking rescission, and the return of their deposits, on the grounds of unconscionable bargain.
65. Nor was there any argument on the part of the appellant, at the time of the amendment to the respondents' pleadings, that the respondents should not have permission to amend, because the 2^nd respondent had effectively ratified the authority of the 1^st respondent to sign the contract on her behalf by her previous pleading and accordingly she should not be entitled to withdraw that admission so late in the day.
66. For all those reasons I would uphold the judge's decision that there was no ratification by the 2^nd respondent of the 1^st respondent's signature on the Particulars purportedly on the former's behalf.

The new contractual issues – (1) was there a valid contract between the appellant and the 1^st respondent?

67. I would allow the appellant to resile from the concession apparently made by Mr Rainey, apparently based on Suleman v Shahsavari, to the effect that there was no binding or effective contract concluded on 23 October 2005 because one of the parties to the intended contract did not enter into it (see paragraphs 128 and 132 of the judgment). It was not suggested that such concession was some sort of strategic "trade off" made in the course of litigation to obtain a benefit and Mr Tager has provided a satisfactory explanation as to why he did not revisit the concession when preparing for the appeal. The original concession was, in my judgment, based on a wrong view of the law, and since a correct legal analysis is critical for the resolution of this case, I have no hesitation in allowing the appellant to withdraw it. Having carefully considered the supplemental skeleton arguments I have concluded that my preliminary analysis as set out in paragraphs 52 -55 and 57-61 of the draft judgment was correct in relation to this issue.
68. In her supplemental written submissions on this issue, Miss Stevens-Hoare essentially submitted that a valid contract of sale (whether of land or goods) could never come into existence between A as vendor and B as purchaser, in circumstances where it was intended at the time of signing the contract that C would also be the purchaser, and C did not in fact subsequently sign the contract. That, she submitted, was irrespective of the fact that the putative contract provided that the obligations of B and C should be joint and several; that, she said, was irrelevant to whether or not a valid contract had been formed.
69. The answer, in my judgment, is that there is no such universal rule as that suggested by Miss Stevens-Hoare. Whether or not a valid contract has come into force as between A and B, both of whom have signed the contract, notwithstanding that contemplated party C has not signed the contract, will depend on the common intention of the parties as may be objectively ascertained from the circumstances surrounding the transaction. Put another way, the issue is whether, objectively, B's agreement to execute and his execution of the contract was, expressly or impliedly, conditional upon C likewise signing the agreement.
70. The issue has arisen most frequently in the context of guarantee and surety cases where recalcitrant guarantors have sought to argue that their liability depended on the signature of another party, or the execution of another security. Even in that context, whether a surety is liable will depend upon an objective analysis of all the circumstances including the putative contract. The following cases contain helpful analyses of the relevant principles with regard to sureties: Hansard v Lethbridge (1892) 8 TLR 346; James Graham & Co. (Timber Ltd) v Southgate Sands [1986] 1QB 80: Byblos Bank Sal v Al-Khudhairy [1987] BCLC 232; TCB Ltd.v Gray [1988] 1 AER 108; and Capital Bank Cashflow Finance Ltd. v Southall [2004] EWCA Civ 817 and are illustrative of the general principle which I have articulated above.
71. Assistance can also be derived from the authorities referred to in the respective parties' skeleton relating to agents and those dealing with contracts made between X on the one part and Y and Z of the other part, where Z was an infant and was not able to contract. As Mr Tager points out, there is nothing to prevent an agent from entering into a contract on his own behalf as principal as well in his capacity as agent for another; see Bowstead, op.cit. at paragraph 9-006 and cases cited at footnotes 32 and 34.
72. If one considers all the circumstances of the present case, including the standard procedure for the signing and exchange of contracts at the sales fair and the putative contract itself, there is nothing to support an objective analysis that the 1^st respondent signed the contract on the understanding, or condition, that he would only be liable if the 2^nd respondent had authorised him to sign on her behalf, was contractually bound or subsequently ratified it. Still less is there any support for an
    analysis that the appellant, or Galliard, was only contracting on the basis that the 2^nd respondent was a joint purchaser. The joint and several provisions of the contract make it clear that the 1^st and 2^nd respondents are not being regarded as what Miss Stevens-Hoare described as a "composite" purchaser. In contrast to the position where property is owned jointly by X and Y as legal joint tenants and trustees, where the obvious inference (in the absence of express wording) is that both have to be contractually bound to sell the property in order for a purchaser to be able to enforce the contract for sale, there was nothing in the objective factual matrix relating to the purchase of the unit from which a similar requirement could be inferred. It was irrelevant that the 1^st respondent's subjective evidence was that he did not intend to proceed with the purchase without the 2^nd respondent; see paragraph 13(iv) of the amended particulars of claim.
73. Accordingly I confirm my preliminary view that there was, subject to resolution of the point which arises in relation to section 2 of the 1989 Act, a valid contract between the appellant, Galliard and the 1^st respondent for the sale of the unit.

The new contractual issues – (2) did the contract comply with section 2 of the 1989 Act?

74. The issue under section 2 of the 1989 Act is (a) whether the contract and particulars sheet signed by the 1^st respondent "for and behalf of the Purchaser" (and the corresponding particulars sheet signed on behalf of the appellant and Galliard) incorporated "all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each" and (b) was signed "by or on behalf of each party to the contract" in the absence of any authority having been given by the 2^nd respondent to the 1^st respondent to sign on her behalf.
75. In my judgment the answer to both these questions, as a matter of common sense, is "yes". The contract clearly contains all the terms of the several contract between the 1^st respondent and the appellant and it is irrelevant that the 1^st respondent did not expressly sign the particulars identifying the precise capacity in which, in the circumstances, he was doing so – i.e. as principal obligor under his several contract.
76. It is of course the case that section 2 introduced a stricter regime than that which previously prevailed under section 40 of the Law of Property Act 1925; see, for example,: Firstpost Homes Ltd. v. Johnson [1995] 1 W.L.R. 1567, at page 1571 per Peter Gibson L.J 1571 who explained that section 2 was intended to effect a major change in the law; and McCausland and Another v Duncan Lawrie Ltd. and Another [1997] 1 W.L.R. 38, at page 44 per Neill L.J., and at pages 46-47 per Morritt LJ. However, there is nothing in any of the cases cited by Miss Stevens-Hoare which suggests that, in circumstances such as the present, section 2 has to be construed in the artificial way which she suggests, to enable the 1^st respondent to escape from his liabilities under the several contract. For example, when Peter Gibson LJ said in Firstpost Homes Limited v. Johnson "all contracts must be signed by or on behalf of all the parties", he was contrasting that requirement of section 2 with the previous requirement under section 40 that only the party to be charged had to sign. It is quite plain that, in context, he did not have in mind a situation where a purchaser proposes that another join him as co-purchaser and purports to sign on her behalf, but does not in fact have authority to do so.
77. Such authorities as we were referred to that were potentially relevant to the circumstances in the present case (and none were precisely on point), tended to support an interpretation of section 2 that is consistent with my analysis. Thus, for example, in Braymist Limited & ors v. Wise Finance Co Limited [2001] 11 EG 174 (CS); [2001] NPC 55, a contract for the sale of land was purportedly entered into with a company, as vendor, before it was incorporated. Etherton J (as he then was) held that, pursuant to section 36C(1) of the Companies Act 1985, it was enforceable by the solicitors, William Sturges, who had purported to sign as agents for the non-existent company. The defendant purchaser argued that the contract was unenforceable under section 2 of the 1989 Act on the grounds that the contract did not state that William Sturges, the persons liable under section 36C were the vendors, because they had signed as agent. Etherton J dismissed that argument at [30] as follows:

"In my judgment, section 2 of the 1989 Act is not to be so narrowly construed. William Sturges did, in fact, sign the Agreement, and the effect of section 36C(1) of the 1985 Act is that they are deemed to be the vendors, even though they signed as agents. If Mr Blackett-Ord's argument is correct, it would make the provisions of section 36C(1) entirely useless in the case of all contracts for the sale or other disposition of land. In relation to all those contracts, it would deprive parties to pre-incorporation contracts of the protection intended to be effected by the Directive. Nor is the purpose of sub-sections 2(1) and (3) of the 1989 Act served by such a remarkable result. The purpose of sub-sections 2(1) and (3) of the 1989 Act was broadly similar to that of section 40 of the Law of Property Act 1925, namely to prevent reliance upon or enforcement of oral or informal contracts for the sale of land. The Agreement, however, is a comprehensive written contract signed by the statutory deemed vendors." (All emphasis in this citation and other citations in this judgment are supplied.)

There was therefore no need to name the agents as vendors, and the agreement in question was enforceable as complying with section 2 of the 1989 Act because it was signed by a party who was deemed to be entitled to enforce it under section 36C(1).

78. An appeal against Etherton J's decision was dismissed by the Court of Appeal; see [2002] Ch 273; [2002] EWCA Civ 127. Arden LJ dealt with the s.2 issue at [67], adopting Etherton J's reasoning and adding: "I agree with the judge that this cannot be the policy of section 2." Latham LJ did not disagree and Judge LJ agreed with Arden LJ on this issue at [85]. Indeed the present case is stronger than Braymist because the party held liable in that case only signed as an agent, whereas in the present case the 1^st respondent did not solely sign in his capacity as agent, but for himself as principal.
79. Another case relied upon by Miss Stevens-Hoare, RG Kensington Management Co Limited v. Hutchinson IDH Limited [2002] EWHC 1180 (Ch), also supports the appellant's argument. That was a case where the defendant contended that an agreement to sell the freehold of a leasehold block of flats was unenforceable under section 2 of the 1989 Act because, although it was signed by the two parties to the contract, namely the defendant freehold owner, and a Mr Caan, a leaseholder of one flat, it was a contract by the defendant to transfer the freehold to a third party, Kensington, which had not signed it. Neuberger J (as he then was) rejected this argument and said as follows at[56]-[58]:

"56. The defendant's case is that the reference to "the parties" in section 2(3) is to the parties to the proposed conveyance or transfer. Two strands of authority are put forward as supporting that contention. First, that the purpose of section 2 was to introduce a new and strict regime in relation to contracts for the creation or transfer of interests in land, can be seen from observations of the Court of Appeal in First Post Home Ltd v. Johnson [1995] 1 WLR 1567 at 1571B to H, and McCausland v. Duncan Laurie & Partners [1997] 1 WLR 38 at 44G. Secondly, the result for which the defendant contends is compelled by the reasoning and decision at first instance in this division of Mr David Mackie QC in Jolson Ltd v. Derby County Council [1999] 3 EGLR 1991 . Despite these authorities, I reject the defendant's case on section 2.

57. The purpose and effect of section 2 is to be assessed by reference to the words used by the legislature, and nothing said by the Court of Appeal suggests otherwise. Those words are to be given their natural meaning unless there is some very good reason to the contrary. The closing words of section 2(3) require the contract, or the parts of the contract to be signed by "each party to the contract", not by "each party to the prospective conveyance or transfer". In this case that means that the freehold agreement must be signed by the parties to it, the defendant and Mr Caan. Kensington is not a party to the freehold agreement and, as it is not a party to that contract, it seems there is no reason to require it to sign it. I see no reason to give an artificial meaning to section 2(3) as the defendant's argument involves, nor do I consider it permissible to do so. Mr Dowding, in his concise submissions on this issue, said that it would be consistent with the spirit of section 2 if a contract such as the freehold agreement could only be enforced in Kensington's favour if it could be enforced against Kensington. I accept, that the freehold agreement could not be enforced against Kensington unless Kensington had signed it. Accordingly, I see the force of the point, but there is nothing to suggest that the legislature had that sort of consideration in mind when enacting section 2 . To give section 2 the meaning and effect that the defendant contends for, would involve an impermissible re-writing and extension or extension of section 2(3) . It would also involve giving section 2 a greater degree of interference with Common Law rights and freedom to contract than it naturally bears.

58. I am not obliged to follow Jolson , but I should only depart from it if I am satisfied that it was wrongly decided, I am clear in my mind that it cannot be supported. It is fair to say that, at least judging from the report, it appears that the simple argument as to why section 2 does not preclude the enforcement of a contract such as the freehold agreement, which causes me to reject the defendant's case, does not seem to have been raised in terms in Jolson — see the summary of the losing argument at [1999] 3 EGLR 96 B to E."

80. In the present case Miss Stevens-Hoare sought to rely on the fact that, under the terms of the contract, on completion the lease of the unit was to be granted to the 1^st respondent and the 2^nd respondent jointly, and that accordingly section 2 required her to sign the contract. But the mere fact that she was to be granted the lease jointly with her husband, as RG Kensington Management Co Limited v. Hutchinson IDH Limited shows, is not determinative. Under the terms of the 1^st respondent's several contract, he was entitled on completion to call for the grant of the lease to himself and his wife jointly. In relation to that several contract it was not necessary for the 2^nd respondent as the proposed co-tenant to be a party to that several contract for the purpose of s.2 of the 1989 Act.
81. Nor did the fact that "the Purchaser" was defined in the particulars as comprising both the 1st respondent and the 2nd respondent persuade me that the contract was somehow non-compliant with section 2 on the grounds that the document did not accurately set out the terms of the contract. That definition was an apt description given the provisions of clause 24 and the fact that the contract actually consisted of three separate contracts, viz. the several contracts made by each of the respondents respectively with the appellant, and the joint contract made by both of them with the latter. As Mr Tager pointed out, section 2(3) of the 1989 Act distinguishes between "the document" and "the contract". All there needed to be, therefore, was a document (or two documents given the requirement for exchange) incorporating all the terms of the several contract, signed by the 1^st respondent on the one hand and by the appellant and Galliard on the other.
82. For the above reasons, in my judgment, the requirements of section 2 were satisfied in this case. It would make a mockery of the policy of the section if the 1^st respondent could rely on technical arguments, such as those presented to the court on this appeal, to escape from his several contractual obligations, in circumstances where the failure to obtain his wife's authority to sign the contract was entirely his.

The unjust enrichment issue

83. Even if I were wrong in my above analysis : (a) that there was a binding contract between the appellant and the 1^st respondent in relation to his several obligations; and/or (b) that that contract satisfied the requirements of section 2 of the 1989 Act; with the consequence that there was in fact no contract between the appellant and the 1^st respondent at all, or alternatively any such contract was invalid for non-compliance with section 2, I do not consider that any issue of estoppel arises. On a proper analysis the first issue to be considered is not whether an estoppel arises precluding the 1st respondent from recovering his deposit by advancing a restitutionary claim, but, rather, whether there has been a total failure of consideration entitling the 1^st respondent to restitution on the facts as found by the judge.
84. Again, the fact that this issue was not identified or addressed by counsel on the hearing of the appeal cannot, in my view, preclude this court from approaching the matter on the correct legal basis. Indeed it would be a travesty of justice if the court were unable to do so. The court has now afforded counsel the opportunity of addressing further argument on the issue and this judgment is based on consideration of those further submissions.
85. If there was no contract as between the appellant and the 1^st respondent, or such contract was invalid for non-compliance with section 2, then the situation in the present case is analogous with that in Sharma and another v. Simposh Ltd [2011] EWCA Civ 1383; [2013] Ch 23, another obviously relevant case which was not cited to us by either counsel at the oral hearing of the appeal.
86. Sharma v. Simposh concerned a defendant property developer which acquired a site in Leicester for the proposed development of residential flats. The defendant acquired the land and staggered the development in stages. Stage one was intended to involve the development of an existing hotel building into eight flats. In September 2007, the second claimant expressed an interest in buying all eight flats. The defendant indicated that it was prepared to accept £1.1m for them, a discount on the asking price. The second claimant needed time to consider how to raise the requisite finance and paid £1600 in a non-refundable deposit to secure a two week period to organise her finances.
87. The second claimant then agreed with the first claimant to become joint purchasers. They approached the defendant and agreed the following bargain orally: that if the claimants paid a total of £55,000 (including the initial payment of £1,600) by 26 September 2007, the defendant would complete phase one, would refrain in the meantime from offering it for sale to anyone else and secure the offer to sell the completed development to the claimants for £1.1m. In the event, a balance of only £27,500 was paid, but the defendant agreed to accept it in lieu of the full £55,000. The defendant carried out its part of their bargain.
88. In the wake of the financial crisis of 2007, the claimants decided not to continue with the purchase. They sought recovery of their deposit (less the £1,600 which they conceded was non-recoverable) on the basis the contract was void because of the requirements of section 2(1) of the 1989 Act. The judge at first instance agreed with this contention on the grounds that there was no document in writing. He also considered and rejected the argument by the defendant that the claimants were estopped from recovering the deposit monies which they had paid.
89. The matter came before a Court of Appeal composed of Laws LJ, Toulson LJ (as he then was) and Black LJ. The appellant defendant principally argued estoppel by representation as a bar to repayment. The respondent claimants replied "that this was an impermissible way of attempting to circumvent the effect of section 2 of the 1989 Act; the defendant was trying to convert a void promise to regard the payment as non-refundable into an obligation to do so by characterising it as a representation."
90. However, Toulson LJ, with whom Laws and Black LJ agreed, considered that the essential question was not whether the claimants were estopped, but the more basic question of whether there had been a failure of consideration entitling the claimants to restitution on the facts found by the judge.
91. Toulson LJ reviewed the authorities on restitution to determine whether such a failure of consideration had occurred, finding that since the claimants had had the benefit for which the payment was made their claim to the return of the deposit had no merit. There was no injustice in the defendant retaining the money. The justice of the matter was entirely on the defendant's side.
92. It is worth quoting parts of his judgment in extenso since they are directly relevant to the present case:

"12 Section 2 of the 1989 Act replaced section 40 of the Law of Property Act 1925, under which an oral contract for the sale or other disposition of land was unenforceable by action but was not void. Under section 40, as the Law Commission noted in para 1.3, if a purchaser paid a cash deposit to the vendor under an oral contract but did not proceed with the purchase, the vendor was entitled to keep the deposit.

13 Under the new section, as the Law Commission explained in its report at para 5.2:

"where an anticipated contract is void because not made in accordance with statutory formalities, it does not follow that the parties will simply be left remediless by the law. Apart altogether from any possibilities there may be of suing for damages in tort (e.g. deceit or negligence), either of the parties would where appropriate be able to seek restitution. Thus if money has been paid as a deposit or part of the price by a prospective purchaser, recovery would generally be permitted because there would be a total failure of consideration."

14 The words "where appropriate" and "generally" are significant. The Law Commission did not suggest that restitution would automatically or always be available to a purchaser who had paid a deposit. It would depend on the proper application of the principles of restitution.

……

Judgment

18 The judge found the facts with admirable clarity. On the law, the ratio of his judgment was that the claimants were entitled to the return of their deposit (less the £1,600 which was not disputed) as money paid under a void contract. In reaching that conclusion he considered and rejected the defence of estoppel and other arguments advanced by the defendant.

Arguments on appeal

19 The defendants written submissions advanced a number of points. In particular, it was submitted that the agreement, although void as a contract, amounted to a representation by the claimants that the payment of £55,000 was to be non-refundable, that the defendant changed its position and acted to its detriment in reliance on that representation by taking the property off the market and keeping it available for the claimants to purchase, and that in those circumstances the claimants were estopped from claiming repayment. The claimants responded that this was an impermissible way of attempting to circumvent the effect of section 2 of the 1989 Act; the defendant was trying to convert a void promise to regard the payment as non-refundable into an obligation to do so by characterising it as a representation. Mr Small submitted that on the authorities a vendor could not advance a non-contractual right to retain a pre-contract deposit.

20 It appeared to this court that the essential question was not whether the claimants were estopped from advancing a restitutionary claim. It was a more basic question whether there had been a failure of consideration entitling the claimants to restitution on the facts found by the judge.

Discussion and conclusion

21 The agreement between the parties lacked formal validity and so had no contractual effect. It was no more than a mutual declaration of intent. An important part of the law of restitution is concerned with money paid or benefits conferred in respect of legally ineffective transactions. Goff & Jones, The Law of Restitution, 7^th ed (2007) begins its treatment of the subject with this important statement of general principle, at para 19-001:

"Transactions may be or become ineffective for a variety of reasons. But the reason why the courts will award restitution is in each case fundamentally the same, namely, that the plaintiffs' expectations have not been fulfilled."

22 In relation to money paid, the authors continue, at para 19-002:

"If money has been paid under a contract which is or becomes ineffective, the recipient is evidently enriched. It is a distinct question whether that enrichment is an unjust enrichment . . . In most of the situations, however, the ground of recovery is that the expected return for the payment, or consideration, as it is confusingly called, has failed."

23 The confusion is caused by the fact that the term "consideration", when used in the phrase "total failure of consideration" as a reason for restitution, does not mean quite the same thing as it does when considering whether there is sufficient consideration to support the formation of a valid contract. Viscount Simon LC explained this in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 48:

"In English law, an enforceable contract may be formed by an exchange of a promise for a promise, or by the exchange of a promise for an act . . . but when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise."

24 A succinct summary of the meaning of failure of consideration was given by Professor Birks in his revised edition of An Introduction to the Law of Restitution (1989), p 223:

"Failure of the consideration for a payment . . . means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself."

25 It is easy to see why the Law Commission suggested that a purchaser who pays a deposit under an oral agreement for the purchase of land will generally be entitled to recover his deposit if the sale does not go ahead, for the state of affairs contemplated as the reason for the payment will have failed to materialise, but that is a generalisation and, like all generalisations, it is subject to the facts of the particular case.

26 In the present case the judge found that the claimants got what they paid for; as agreed, the defendant took the property off the market pending its completion and kept open its offer to sell it to the claimants at a fixed price. The claimants' expectations were therefore fulfilled and there is no injustice in the defendant retaining the sums paid to it. The agreement did not amount to a legally binding contract, but is nevertheless highly relevant as a matter of fact to the question whether there was a failure in the fulfilment of the parties' expectations such that denial of repayment would leave the defendant unjustly enriched. There is no suggestion in this case of any inequality of bargaining power or overbearing behaviour which might be relevant when considering the justice of the defendant's position. It was a commercial transaction between people able to look after themselves.

27 Mr Small submitted that it was unjust for the defendant to retain the money because it had no contractual right to it. He submitted that a vendor cannot lawfully retain a deposit paid by a prospective purchaser in respect of an intended purchase of land under a non-contractual agreement (i.e. an agreement made subject to contract or an agreement rendered void by the operation of section 2 of the 1989 Act) in the event of the purchase not proceeding. He relied in support of that submission on the combined effect of the decisions of the Court of Appeal in Chillingworth v Esche [1924] 1 Ch 97 and Gribbon v Lutton [2002] QB 902." (My emphasis throughout.)

93. Toulson LJ then went on to analyse the various authorities in detail and concluded that there was an intention in the case before the court that property in the deposit should pass to the defendant. He continued

"43. Underlying the discussion about what the Court of Appeal meant in Chillingworth v Esche there is an important point of principle. Property may pass between parties who are involved in a purchase transaction which is contractually ineffective. Property may pass by delivery with the necessary intention, and that may occur even in the context of a contract which is void for illegality. In Singh v Ali [1960] AC 167, the plaintiff contracted to buy a lorry from the defendant. The contract of sale was unlawful, but the plaintiff paid for the lorry and it was delivered to him. Later the defendant removed the lorry from the plaintiff's possession and refused to return it. The plaintiff sued the defendant in detinue. In order to succeed he had to show that he had a right to immediate possession of the lorry. The defendant argued that because the contract was illegal and void, it could have no consequences in law and no property could pass to the plaintiff. The Privy Council rejected this argument. Giving the judgment of the Board, Lord Denning said at 176:

"Although the transaction between the plaintiff and the defendant was illegal, nevertheless it was fully executed and carried out: and on that account it was effective to pass the property in the lorry to the plaintiff."

44. In the present case the agreement was not illegal in the same sense as in the Singh case, but it was void for failure to comply with the formal requirements of section 2 of the 1989 Act. As in the case of a contract void for illegality, so in the case of a contract void for lack of formal validity, it did not follow that property in the deposit could not pass to the defendant. That depended on the intention with which the payment was made. Was the payment intended to be conditional on the claimants completing the transaction or was it intended to be unconditional? If the former, the defendant would have obtained only a conditional title to the money and would have been bound to return it on the transaction falling through. If the property passed unconditionally, the defendant was prima facie entitled to retain it. In Chillingworth v Esche [1924] 1 Ch 97 it was necessary to construe the document of 10 July 1922 for the purpose of determining the second issue, that is, in order to decide whether as a matter of fact the payment of the deposit was intended to be conditional or unconditional. In many cases where a deposit is paid under a contract for the purchase of land which is void under section 2 of the 1989 Act, and the transaction does not materialise, the purchaser will be entitled to the return of the deposit (as the Law Commission said) because the expectation which provided the reason for the payment would have failed, but that is a question of fact in each case.

45. Professor Birks gave contrasting illustrations in his Introduction to the Law of Restitution, pages 223-4, in a passage cited by Robert Walker LJ in Gribbon v Lutton at para 61:

"But the basis of a payment is not always specified in a contract or as a contractual reciprocation. Take the case in which I see a house which I want to buy. I immediately pay a small deposit, say £200. My intention is merely to show bona fides and establish good will. The payment is made 'subject to contract'. A month later I call the whole thing off; no contract materialises. I can recover the £200. There is no need to twist the facts into an implied contract under which you promise to repay in the event of the negotiations being aborted. That is one way to conclude for repayment, but the temptation to adopt that approach is a reflection of the old insecurity about all non-contractual analyses. It is quite sufficient to say that when my purchase goes off the consideration for the payment fails. There can be a consideration in this sense without there being a contract about the payment. The phrase 'subject to contract' means, as matter of construction, that my payment was conditional on the successful conclusion of the contract. That is, the only consideration for the payment was the making of that contract. Without that contract, the consideration failed. It would have been different if the exercise of construction had shown that the payment was intended to operate as a sanction against my withdrawal. If that had been the basis of payment, there would have been no failure of consideration when I did withdraw."

46. The examples taken were both cases in which there was no contract; they differed in whether there was a failure of consideration in the sense relevant for the purposes of restitution. Commenting on that passage Robert Walker LJ said at para 62:

"No direct authority is cited for the last proposition (the reader is invited to compare R v Smith (1884) 27 Ch D 89 and Mayson v Clout [1924] AC 980, both cases in which there was a concluded contract). But in principle the proposition must be right, if the sanction of forfeiture has been clearly stipulated."

47. Referring to the facts in Gribbon v Lutton, he said at para 64:

"If a prospective vendor has been as sorely tried as Mr Gribbon was by a prevaricating purchaser, and if he stipulates for the payment of a non-returnable deposit linked to a clearly-defined condition, the purchaser should lose any claim to the return of the deposit if he fails to meet the condition. I agree with the judge that Sir Ernest Pollock MR was right in his dictum in Chillingworth v Esche [1924] 1 Ch 97, 108" [which he then set out]. ……

55 The fact that property was intended to pass and did pass does not, of course, exclude the possibility of a claim for restitution, but such a claim depends on the claimant being able to establish a recognised ground of restitution. In this case the only suggested ground is failure of consideration. Since the claimants obtained the benefit for which the payment was made, there is no merit in their claim and no injustice in the defendant retaining the money. The justice of the matter is entirely on the defendant's side.

56 The question whether and in what circumstances the doctrine of estoppel may operate to modify or counteract the effect of section 2 of the 1989 Act is a difficult topic: see the discussion in Yaxley v Gotts [2000] Ch 162. Although it was the subject of argument in the court below and in the parties' written submissions, it does not call for a decision in this case.

57 I would allow the appeal and set aside the judgment in favour of the claimants." (Again my emphasis throughout.)

94. While the contract in Sharma v. Simposh was void for being oral and therefore non-compliant with section 2, rather than, as in the present case (on the judge's analysis), on the basis that there was no contract at all, because the 1^st respondent had not been authorised to sign it on behalf his wife, I can see no reason (subject to two points not within the ambit of the preliminary issue) to distinguish Sharma v. Simposh. As an authority of this court it is binding on us. The first point is that, if at the main trial it were to be found that the contract as between the appellant and the 1st respondent were an unconscionable bargain, or there had been overbearing behaviour on the part of the appellant, that might affect the question as to whether the appellant had been unjustly enriched; see paragraph 26 of the judgment in Sharma v. Simposh and therefore entitle the 1^st respondent to the return of the deposit. The second point is that there has to date been no consideration of the issue as to whether the deposit was a penalty, or was otherwise recoverable pursuant to section 49 (2) of the LPA, which again might be material to the question of unjust enrichment.
95. Paragraph 20 of the re-amended particulars of claim in the present case pleads that the 1^st respondent is "entitled to and have demanded repayment of the sums paid to the stakeholder, Howard Kennedy there having been no valid or enforceable contract and a total failure of consideration for the said payments;" (see Chapters 12 and 14 of Goff and Jones on Unjust Enrichment, 8th ed.). Accordingly the 1^st respondent (who alone now makes a claim for repayment of the deposit) is putting forward the same basis for his claim for restitution, as that put forward by the respondent claimants in Sharma v. Simposh. In my judgment the 1^st respondent faces the same difficulties as the latter did.
96. In the present case, as in Sharma, there has not been a total failure of consideration in the sense required under the law of unjust enrichment (see paragraph 12-16 of Goff and Jones). The 1^st respondent has had part of the benefit which underpinned the payment of the deposit: namely the specific unit which he chose to buy has been taken off the market; it has been secured for his purchase at a specific price; the developer, no doubt (although I speculate) with the use of the 1^st respondent's deposit as collateral, has completed the works; and, upon payment of 10% of the deposit, the 1^st respondent became entitled to 10 free days stay at the Riverbank Park Plaza Hotel; see the Rider to the particulars.
97. Accordingly, in my judgment, even if I were to be wrong in my analysis (a) that there was in the present case a valid contract as between the appellant and the 1^st respondent in respect of his several obligations under the contract, and (b) that such contract was section 2 compliant, the decision in Sharma disposes of this appeal. Indeed paragraph 56 of the judgment of Toulson LJ in that case makes it clear that, in circumstances such as the present, the issue of estoppel, and whether it conflicts with section 2 of the 1989 Act, simply does not arise.
98. I am supported in my conclusion by the realistic approach of Briggs J (as he then was) in North Eastern Properties Ltd v. Coleman & Quinn [2010] EWCA Civ 277; [2010] 1 WLR 2715 to the construction of the policy of section 2 of the 1989 Act. He said:

"42 None the less, it does not seem to me that anything in the differences between section 2(1) of the 1989 Act and its ancestor in the Bill proposed by the Law Commission comes anywhere near to making it inappropriate to conclude, as I do, that it was no part of Parliament's intention by enacting section 2 of the 1989 Act to make it easier for people who have genuinely contracted to escape their contractual obligations.

43 Even more unfortunately, the reported cases in which the courts have sought to interpret and apply section 2(1) of the 1989 Act demonstrate that, because of the rigorous discipline which it imposes upon parties to land contracts, it does indeed enable persons who have genuinely contracted to do just that. It enables parties to land contracts who have changed their minds to look around for expressly agreed terms which have not found their way into the final form of land contract which they signed, for the precise purpose of avoiding their obligations, on the ground that the lack of discipline of their counterparty, or even their own lack of discipline, has rendered the contract void. As Judge Behrens noted in the present case, the exclusion of the 2% finder's fee from each of the 11 contracts occurred at the express request, and to serve the commercial purposes of, the defendant purchasers. Mr Holland did not on their behalf attempt to suggest that a successful outcome for his clients on the section 2 issue would do otherwise than to provide a wholly unmerited escape from genuine obligations deliberately entered into.

44 It is not uncommon to find a statutory provision which, in seeking to remedy one mischief, unexpectedly creates another, which cannot be undone by any purposive approach to construction. In the present case, the undeserved escape route which, on Mr Holland's submissions, would be afforded to his clients by succeeding on the section 2 issue would give rise to an injustice of a type which it was an express purpose of the 1989 Act to mitigate or prevent.

45 Although I am mindful of the need to avoid treating an apparent parliamentary purpose as the basis simply for disapplying a statutory provision in a case in which its application would otherwise give rise to injustice, I consider it legitimate to approach the interpretation and application to the unusual facts of this case of section 2(1) of the 1989 Act upon the basis that if it can be construed so as to prevent or mitigate the injustice of enabling genuine contracting parties to escape from their obligations, it ought to be."

99. To similar effect Longmore LJ, in the same case, said:

"81 I agree and add a few words on the construction of section 2 of the 1989 Act. This section is not intended to be a charter for those wishing to disown apparent contracts for the sale of property to go behind the document and search for statements made in pre-contract negotiations, then to claim that they were intended to be terms of the contract and thus bring the whole contractual edifice crashing to the ground. If parties want to have a separate arrangement recorded in a side exchange of letters or e-mails, the court should not be too astute to say that it is an unincorporated part of the contract for the sale or other disposition of land with the result that no contract comes into existence at all." (My emphasis.)

100. In her supplemental submissions on this point, Miss Stevens-Hoare sought to distinguish Sharma v. Simposh on a number of grounds. First, she submitted that in the present case the deposits were not paid over to the appellant, but were held by the appellant solicitors, HK as a stakeholder. That meant, she argued, that the 1^st respondent's claim was not a restitutionary claim at all, but merely a claim pursuant to the tripartite stakeholder agreement, because in the absence of an enforceable bipartite agreement between the vendor and purchaser, there could be no claim in restitution. Second, she submitted that the first respondent paid all the monies conditionally upon the sale taking place and that accordingly title in the money never passed to the appellant. Third, she submitted that, in a stakeholder situation, monies paid under a void or unenforceable contract were always repayable and the purchaser was entitled to call for the return of his deposit from the stakeholder at any time, as it is the vendor/ purchaser contract which determines entitlement to the money. Fourth, she submitted, that on the wording of the contract there was no provision that the appellant would be entitled to retain the deposit in circumstances where the contract turned out to be invalid or void, as opposed to where the contract was rescinded or repudiated on account of the first respondent's breach.
101. In support of these submissions she sought inter alia to rely on certain observations of Laddie J, sitting as a judge of the Court of Appeal, in Gribbon v Lutton and Another [2001] EWCA Civ 1956 [2002] QB 902 as well as on Chillingworth v Esche [1924] 1 Ch 97 and this court's decision in Robinson v Lane [2010] EWCA Civ 384. Gribbon v Lutton was a case where a deposit was paid by a prospective purchaser to a stakeholder in advance of the making of an enforceable contract which in the event did not materialise. At paragraphs 11-12 Laddie J said:

"11 The starting point in answering this question is a determination of the nature of the relationship between the stakeholder and the parties who have an interest in the deposit. Since this case relates to the proposed purchase of land, it is convenient to refer to the parties as the vendor, the purchaser and the stakeholder. It is important to bear in mind that in a normal case there exist two distinct contracts. The first is the contract between the vendor and purchaser which determines when and to whom the deposit will be paid. The second is the contract between the vendor and purchaser on the one hand and the stakeholder on the other. Since in the type of situation being considered here there are three parties, this latter contract has been referred to in the authorities as tripartite. The scope and purpose of the tripartite contract is very limited. It provides that the stakeholder shall keep the deposit pending a triggering event and then shall pay in response to that event. It is no part of the function of the tripartite agreement to create the triggering event. The matter can be put another way: the vendor/purchaser contract determines who is entitled to the deposit after the triggering event, the tripartite agreement provides that the stakeholder must deal with the deposit in accordance with the entitlement to it defined by the vendor/purchaser contract and, until the triggering event, he must retain it in accordance with the joint instructions of the vendor and purchaser. Therefore the tripartite contract does not create either the vendor's or purchaser's entitlement to the stake, but gives effect to the entitlement as between them which is determined by the vendor/purchaser contract. Although the two contracts may be entered into at the same time, that need not be so.

12 Since the tripartite contract does not define entitlement between vendor and purchaser but responds to an entitlement determined elsewhere, what happens in a case where the deposit is paid by the purchaser to the stakeholder in advance of there being any enforceable contract between him and the vendor? Prima facie, since it is the purchaser's money and the vendor has no legal entitlement to it, the purchaser can demand its return to him at any time in advance of an enforceable vendor/purchaser contract being put in place. Thus, if there is an unenforceable promise by the purchaser to pay a sum of money to the vendor, the vendor acquires no legal entitlement to it and the fact that the sum may have been paid to a stakeholder does not create an entitlement to it. The stakeholder can and must respond to a demand for repayment by the purchaser. The tripartite agreement does not alter who is and who is not entitled to the deposit."

102. However, Toulson LJ in Sharma v. Simposh comprehensively analysed the reasoning of Laddie J and Pill LJ in Gribbon v Lutton in this respect, and clearly did not agree with it, preferring the view of Jacob J, as the trial judge, and that of Robert Walker LJ in the Court of Appeal, based on his analysis of the decision in Chillingworth v Esche, that, even if there was no contract, a prospective vendor might take a deposit from a prospective purchaser on terms such that the prospective purchaser's subsequent withdrawal did not entitle him to recover the deposit, provided that those terms were sufficiently clearly defined. The Court of Appeal also expressly considered Robinson v Lane, pointing out that Sir Richard Buxton's dicta at paragraph 15 was obiter. The decision of this court in Simposh is binding on us. Accordingly I cannot accept Miss Stevens-Hoare's third submission that, in the absence of an enforceable bipartite agreement between the vendor and purchaser, there can be no claim in restitution.
103. Nor do I accept her other submissions. The fact that a stakeholder was involved in the present case can make no difference to the principle as to whether the vendor has been unjustly enriched. The 1^st respondent's entitlement, if any, to the return of the deposit depends on the relationship between himself as, on this hypothesis, prospective purchaser and the appellant as prospective vendor, not on that as between himself and HK . That is clear from the analysis of Laddie J in Gribbon v Lutton. Indeed the claim in this case was pleaded as a claim against the appellant and not as against HK. In a situation such as the present, the stakeholder has no independent entitlement to the monies held by him. The appropriate relief in this case - irrespective of whether HK was also a party to the proceedings - would simply be a declaration by the court as to which of the appellant and the 1^st respondent the monies were to be paid. The involvement of a stakeholder in a case such as the present can make no difference to the correct outcome.
104. I also disagree with Miss Stevens-Hoare's submission that the 1^st respondent paid all the monies "conditionally upon the sale taking place and that accordingly title in the money never passed to the appellant". Title in the deposit monies clearly did, and was intended to, pass to HK; there was no question of HK holding such monies on trust for, or to the order of, the 1^st respondent, whether under the terms of the contract or otherwise. In those circumstances, as Toulson LJ pointed out in Sharma v. Simposh, although passing of title does not exclude the possibility of a claim for restitution, such a claim depends on the claimant being able to establish a recognised ground of restitution, such as, in the present case, failure of consideration. That would require him to demonstrate that, as between himself and the appellant, the latter would be unjustly enriched if it were to retain the deposit.
105. Whilst, on the express wording of the contract in the present case, there was no provision that the appellant would be entitled to retain the deposit in circumstances where the contract turned out to be invalid or void, as opposed to where the contract was rescinded or repudiated on account of the 1^st respondent's breach, nonetheless the clear contractual intention was that, in circumstances where the sole reason for non-completion after payment of the full deposit was the 1^st respondent's fault, then the appellant should be entitled to retain the monies paid. Notwithstanding that, on this hypothesis, the situation is a non-contractual one, in my judgment the factual matrix of the intended contractual result serves as a clear guide as to on whose side "the justice of the matter" lies (as Toulson LJ put it). In circumstances where the fault for non-validity of the contract lay entirely with the 1^st respondent, on the grounds of his breach of warranty of authority, I conclude that there is no merit in the 1^st respondent's claim and no injustice in the appellant retaining the money.
106. Accordingly, I would allow the appellant's appeal in relation to paragraphs 1 and 4 of the December order on the grounds which I have articulated above, notwithstanding that the appellant did not raise these points at the trial of the preliminary issue or, initially, as arguments on its appeal. The points are essentially points of law, which require no further evidential elaboration. In general terms, the question of the existence or validity of the contract were raised in the grounds of appeal, which expressly challenged the judge's declaration to the effect that there was no valid or enforceable contract and that the judge was wrong to dismiss the appellant's counterclaim for a declaration that the 1^st respondent's deposit had been forfeit and that accordingly the appellant was entitled to give a good discharge for the same to the stakeholder, HK. It is also worthy of note that in Sharma the point had not been taken at first instance; see paragraphs 18 and 19 of the judgment.
107. Accordingly the order which I would make would be to declare:

i) that there was a valid and enforceable contract as between the appellant and the 1^st respondent which was compliant with section 2 of the 1989 Act; and

ii) that, irrespective of the conclusion at i) above, but subject to argument at trial in relation to the allegations of unconscionable bargain, penalty and section 49 (2) of the LPA, the appellant was entitled to retain the 1^st respondent's deposit and give directions to HK to such effect.

The estoppel issue

108. Despite Mr Tager's request that the court should nonetheless decide the estoppel issue, I decline to do so for the reasons which I have already given.

The amendment issue

109. In the light of my judgment above, which basically concludes that the appellant wins on the preliminary issue, the amendment issue is of lesser importance. However I take the view that the judge was wrong in refusing the appellant permission to re-amend the amended defence and counterclaim to plead a new counterclaim for breach of warranty of authority on the ground that the claim did not arise out of the same or substantially the same facts as those already in issue in the proceedings. In my judgment the counterclaim for breach of warranty of authority clearly did arise out of the same or substantially the same facts as those already in issue in the proceedings and I would have allowed permission to amend. That such was the case was emphasised by the fact that the matter was going to be litigated as a set off in any event.

The set-off issue

110. In my judgment the judge's decision to grant the appellant permission to plead a claim for damages for breach of warranty of authority as a set-off to the 1st respondent's claim in respect of the deposit cannot be faulted. In signing the Particulars purportedly on his wife's behalf, as I have held as a matter of construction of the document he did, the 1^st respondent clearly warranted that he had authority to do so and likewise, in authorising LMJ to exchange contracts in that form, it is more than arguable that he warranted to the appellant that he had his wife's authority to permit exchange of that piece of paper. Nothing in the case of Suleman v. Shahsavari persuades me that such an argument is not arguable. Nor am I impressed by the argument that the deposit monies were held by HK as stakeholder. That fact cannot preclude a defence by way of declaratory set-off to the 1^st respondent's claim for the return of his deposit.

The costs condition issue

111. It must logically follow from my decision in relation to the main grounds of appeal that the judge's order imposing conditions (i) that the appellant was required to pay at least 80% of the 1^st respondent's costs of the set-off issue based on breach of warranty and (ii) was not entitled to seek an order for its own costs of such issue, was flawed and must be set aside.

The costs issue

112. Consistent with my approach to this appeal, I consider that in all the circumstances the judge was right to reserve the costs of the preliminary issue as between the appellant and the 1^st respondent for determination after trial of the remaining issues in these proceedings.

Disposition

113. For the above reasons I would allow the appeal and dismiss the cross-appeal.

Lord Justice Mcfarlane:

114. I agree.

Lord Justice Jackson:

115. I also agree.