England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand. London, WC2A 2LL
		14/03/2008

Mr Justice Floyd :

1. Chief Ajibola Anthony Aribisala ("the Purchaser") is a Nigerian businessman. He is also a Senior Advocate of Nigeria, said to be the equivalent of Queen's Counsel in England and Wales and head of a law firm in Lagos. In 2006 he tried to purchase the leasehold of two properties from St James' Homes (Grosvenor Dock) Limited ("the Vendor") at Grosvenor Waterside, on the banks of the River Thames in London. One was a penthouse which he intended to use for himself and his family when in England. The other was a studio which he planned to let or, at some stage in the future allow his son to use.

2. The claims in the action arise from two contracts, each dated 14 July 2006, by which the two leasehold properties were agreed to be sold by the Vendor to the Purchaser for an aggregate purchase price of £2.16 million. The aggregate 10% deposit, which was payable in two instalments of 50 per cent each under the terms of the two contracts, was therefore £216,000. The contracts were in each case in identical terms. The completion date was 9 September 2006, later varied by supplemental agreements to 8^th September 2006, because the 9^th September 2006 was a Saturday. The contracts incorporated the Standard Conditions of Sale (4^th edition). However, by clause 1.2 of each contract, condition 7.5.2 of those Standard Conditions, which provides that the vendor is entitled to rescind the contract and forfeit any deposit if the purchaser fails to comply with a notice to complete, was amended so as to add the words "(c) section 49(2) of the Law of Property Act 1925 shall not apply".

2. Section 49(2) of the Law of Property Act 1925 provides:

"Where the court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit"

3. In a judgment dated 12^th June 2007 [2007] EWHC 1694 (Ch), given on the Defendant's application for summary judgment, Mr Alan Steinfeld QC sitting as a Deputy Judge of the High Court held that that contractual provision was not effective to oust the jurisdiction of the Court under that section. There was no appeal from his decision. So section 49(2) does apply.
4. The Purchaser did not complete the contracts by 8 September 2006. Accordingly the Vendor, by a letter dated 12 September 2006 gave to the Purchaser notice to complete the two contracts under Standard Condition 6.8. The effect of service of that notice was to require the Purchaser to complete each contract within ten working days of service of the notice, as to which time was to be of the essence. The Purchaser did not complete the contracts within that time, because he had not been able to obtain the finance to enable him to complete. The Vendor then elected to rescind the contracts and forfeit the deposits, as it was entitled to do under Standard Condition 7.5.2.
5. The claim form in the action originally sought specific performance of the two contracts, or, in the alternative, return of the deposits pursuant to the court's jurisdiction under section 49(2). The claim for specific performance was abandoned whilst the summary judgment application to which I have already referred was pending. That leaves the claim for return of the deposits under section 49(2), and a counterclaim in respect of certain expenditure on furnishings claimed by the vendor to have been incurred in the course of re-marketing the properties.

The Law

6. The discretion given to the court to order the repayment of a deposit in an action brought for that purpose is to order repayment "if it thinks fit". The nature of the discretion thus conferred has been examined in a number of cases.
7. In Universal Corporation v Five Ways Properties Limited [1979] All ER 552, Buckley LJ preferred the view that:

"the jurisdiction is one to be exercised where the justice of case requires. In this connection I take the word "justice" to be used in a wide sense, indicating that repayment must be ordered in any circumstances which make this the fairest course between the two parties."

8. In Omar v El Wakil [2001] EWCA Civ 1090; [2002] 2 P. & C. R. 3 (Lord Phillips MR, Pill and Arden LJJ) the Court of Appeal appear to have taken a rather more structured line. This was a case where the principal argument had been about whether there had been a deposit at all. When the court went on to consider section 49(2), it noted that the decision in Universal had been on an interlocutory appeal to a two-judge Court of Appeal in which the other member of the court did not express a view on the width of the court's jurisdiction. Arden LJ noted that the court had not been taken to any authorities on the width of the court's jurisdiction and concluded at [33] that

"however wide the jurisdiction, it should not in the circumstances of this case be exercised in favour of the appellant"

9. Arden LJ, did however make some observations on the exercise of the discretion at [35]:

"The starting point must be that although section 49(2) is expressed in open-textured terms leaving it to the courts to determine the organising principles, the court must bear in mind that the payment in question was a "deposit", that is an earnest for performance and that accordingly there should not be relief simply because the [purchase] contract never took place. The meaning of "fairness" (see per Buckley LJ above) in any given situation is context-specific, as Lord Hoffmann pointed out in O'Neill v Phillips [1999] 2 BCLC 1 (a very different type of case):

"Although fairness is a notion which can be applied to all kinds of activities, its content will depend upon the context in which it is being used. Conduct which is perfectly fair between competing businessmen may not be fair between members of a family. In some sports it may require, at best, observance of the rules, in others ('it's not cricket') it may be unfair in some circumstances to take advantage of them. All is said to be fair in love and war. So the context and background are very important."

The context here is of a conveyancing transaction. It is common knowledge that if a purchaser pays a deposit he is likely to forfeit it if he does not fulfil the contract. Moreover deposits are very usual features of conveyancing transactions and conveyancing transactions are common. It is important that there should be certainty attaching to the consequences of paying a deposit."

10. Arden LJ went on to say at [36] that she would "start from the position that the deposit should not normally be ordered to be repaid." She asked whether there were mitigating circumstances and concluded that there were none. In so doing she concluded that

"It is also irrelevant that Mr El-Wakil has not sought to establish that he has suffered any loss as a result of the abortive Corringham contract: the parties agreed that the £110,000 was a deposit."

11. She concluded that

"Furthermore in my judgment, in a situation where a purchaser could not himself perform, the circumstances which make it appropriate for the court to exercise its discretion under section 49(2) in his favour must be exceptional."

12. I think that last observation needs to be seen in context. The only real scope for the operation of section 49(2) is when the purchaser is the party unable to perform the contract: where it is the vendor who is unable to perform the contract, the purchaser will have a legal right to the return of the deposit. I think what needs to be looked at is how close the purchaser came to performing the contract, what alternatives he was able to propose to the vendor and how advantageous they would be compared with actual performance of the contractual terms. Where the purchaser simply could not perform the contract or offer any such alternative, then it would be exceptional, as Arden LJ held, for the deposit to be returned.
13. I was referred to some authority on the nature of deposits. It is clear that they are different in kind from liquidated damages clauses, and are not subject to the rule that they are void if they operate as a penalty. In Linggi Plantations v Jagatheesan [1972] 1 MLJ 80, Lord Hailsham, giving the opinion of the Privy Council said

"It needs to be pointed out that the law relating to the forfeiture of deposits has always been treated as entirely distinct and separate from the learning introduced into English law by the distinction between liquidated damages based on a genuine pre-estimate of the loss likely to be suffered in event of a breach and a penalty where equity came to the rescue of the obligee on a bond or other contractual provision imposing a penalty under a contract where the penalty exceeded the actual damage."

14. Nevertheless I do not read the Court of Appeal's judgment in Omar v El Wakil as saying that in all circumstances the question of whether the vendor has made a loss or a profit from the purchaser's breach is irrelevant. The fact that he has not proved any loss cannot, on its own, amount to a sufficient ground for ordering the return of a deposit where the purchaser is in breach. But the economic impact of the breach on the vendor is a factor which the Court may take into account in deciding whether the case is an exceptional one.
15. I am fortified in that view by the fact that in Tennaro v Majorarch Properties [2003] EWHC 2601 (Ch), Neuberger J, as he was then, to whom both Universal v Five Ways and Omar v El Wakil were cited, regarded the fact that the Vendor could have sold a flat at a price significantly higher than the market value at the contractual date as a factor influencing the exercise of the discretion, albeit that there were other factors there (see [87] to [88] of the judgment). In particular the purchaser had, before the completion date, found a new purchaser prepared to pay more than the contract price. Neuberger J drew assistance from the reasoning and decision of Mr Gerald Godfrey QC in the pre-Omar case of Dimsdale Developments v De Haan (1983) 47 P&C R at 12, where he considered the fact that the vendor had resold at a higher price as an important factor which justified the return of a deposit.
16. Mr Umezuruike, who appeared on behalf of the Purchaser, also referred me to Midill (97PL) Limited and Park Lane Estates Limited and Gomba International [2008] EWHC 18 (Ch). In that case, at [29], HHJ Mackie QC referred to the decision in Tennaro as deciding that "if ... special circumstances are needed to justify the return of a deposit where the purchaser is in breach of contract, the fact that the vendor has resold the property elsewhere for a profit constitutes such special circumstances". However, that passage in HHJ Mackie QC's judgment needs to be read together with [31], where he describes more fully the facts relied on by Neuberger J, including the fact that it was the purchaser who found the new buyer prepared to pay more than the contract price. The additional price was merely one factor weighed up by Neuberger J in Tennaro. As I read the judgment in Tennaro, it is not authority for the proposition that an increase in market price can, on its own, amount to a sufficiently exceptional circumstance to justify the return of the deposit.

The history of the failed transaction in more detail

17. On 13^th June 2006 the Purchaser paid reservation fees to the Vendor in respect of two plots, D 7.01 (the penthouse) and D7.09 (the studio) of £5,000.00 and £1,000.00 respectively. His purpose in buying the larger, penthouse apartment was to provide a personal residence for himself in London. The smaller, studio apartment was purchased with a view to sub-letting, although with a view to allowing his student son to live there in due course. The price agreed for the two apartments was lower than the price which the Vendor was seeking for each apartment if sold separately.
18. On 30^th June the Purchaser's solicitors wrote to inform the Vendor's solicitors that processing of his finance was "at the advance[d] level". Yet on 10^th July 2006 they wrote again to ask for a discount on the purchase price as the amount his lenders are now offering him was less than he had expected at the time of reserving the property. In fact, by this date, there had been no formal offer of any funding.
19. On 14^th July 2006 the parties exchanged contracts for the sale of the two plots. The 10% deposit (inclusive of the reservation fees) was to be paid in two instalments of 5% each. The first instalment of the deposit was to be paid on exchange and the second on 31^st August 2006. The balance of the purchase price was to be paid on completion. I am quite satisfied that the Purchaser was well aware throughout that what he was paying was a deposit.
20. On 24 August 2006 a representative of The Woolwich commissioned by Barclays inspected the properties and reported to the Purchaser.
21. On 25^th August OMBC Solicitors, solicitors then acting for the Purchaser, wrote to the Vendor's solicitors in the following terms:

"We write to inform you that our client has been advised by his lender to seek an extension of time of one week for completion, this is due to some procedural delays in processing our client's mortgage application which [are] though at the advanced stage now."

22. The effect of that extension would have been to move the completion date to 15 September 2006. On 29^th August 2006 the Vendor's solicitors responded:

"Whilst we will advise our clients of your predicament, we would point out that it is our standard instruction that should completion not take place on the completion date, special notice to complete will be served and interest and costs charged from the date which completion should have taken place."

23. The second instalment of the 10% deposit was duly paid on 31^st August 2006. Also at around this time the Purchaser had obtained an estimate for various furnishings for the apartment from a firm of interior designers called Honky.
24. In the meantime the Purchaser had been in contact with Barclays Bank in Knightsbridge on the subject of the loan. The indication he was given was that the maximum loan to purchase price or funding ratio was 84%, subject to evidence of earnings. However he was advised that there would be tax advantages for an overseas resident in applying for an offshore mortgage. Offshore mortgages were handled through Barclays Isle of Man Limited ("Barclays IOM"). On the 8^th September, the date set for completion, Barclays IOM advised the Purchaser that it would only be able to lend the Purchaser 50% of the purchase price. It will be observed that, far from having a firm offer of a mortgage at the date of exchange of contracts, the Purchaser had received no commitment to give him a mortgage by the date fixed for completion.
25. On the 8 September the Vendor was advised by the Purchaser's solicitors that the Purchaser was still in the process of obtaining mortgage finance and would not be able to complete on that day, and was unable to indicate at that stage when completion would be likely to occur.
26. The Purchaser returned to Lagos on the 8^th September. On 9^th September he wrote a letter of complaint to Barclays Knightsbridge. It is clear that the Purchaser had made an offer to Barclays to provide from his own funds the shortfall in the necessary funding caused by the lower percentage that the Bank were now prepared to fund. He was proposing that he do this over a period of 6 months in equal instalments. The letter asserted that the acquisition had been extended to terminate on 22^nd September, i.e. that a two week extension for completion had been obtained from the Vendor, through their respective solicitors. There is no record of such an extension being asked for, let alone granted. The Purchaser was making this suggestion in order to put pressure on Barclays to accept his proposal of deferred payments. The letter finished by imploring the bank to reverse its decision.
27. On 12^th September the Vendor served special notice to complete in relation to each of the contracts by 26^th September, making time of the essence.
28. On 21^st September 2006, Mr Richard Kides from Barclays' customer relations department sent an e-mail to the Purchaser saying that he was passing the file with a summary note of the position to the Managing Director. Chetan Shah, the Purchaser's Relationship Manager, was exerting as much influence as he could on the mortgage department to process the application.
29. On 27 September the Vendor's solicitors wrote rescinding the contracts and saying that they were treating the deposits as forfeited, and reserving their right to claim damages. Finally they stated that, the contract having come to an end, they would be re-marketing the properties.
30. On 28 September 2006 the Purchaser's solicitors wrote to the Vendors' solicitors explaining that the reason for the Purchaser not meeting the deadline for completion was the shortfall in funding from his mortgagee. The letter went on to state:

"..our client has however managed to raise the required funds to complete this matter and arrangement is currently being made to credit our client's account with the same"

31. On the same day the Purchaser himself called the Vendor and asked for an extension of time to complete. The Vendor had however resolved not to take the matter any further as the units were on the market for resale. It was not however correct to say that at this date the Purchaser had raised the required funds, or that arrangements were in place to transfer the money to his solicitors.
32. On 29 September the Purchaser wrote a letter to Mr Hopkins of the Vendor. The letter purported to enclose the e-mail from Barclays dated 21^st September and indicated that the Purchaser was still trying to persuade Barclays IOM to reverse their decision, a reversal decision being expected "today". The letter also stated that the Purchaser had obtained an offer of 150 million Naira from his bank in Nigeria, and that a copy of the offer letter from the local bank was attached. I accept Mr Hopkins' evidence that no such email or letter were attached to the Purchaser's letter.
33. The only written evidence of an offer from a bank in Nigeria of a loan for this sum was from Oceanic Bank International and dated November 1^st 2006 and therefore postdates by some weeks the letter to which the offer was supposedly attached. The Oceanic offer is not made to the Purchaser, but to a company of which he is the owner and a director, Princely Court Limited. The offer letter refers back to an application having been made on 28^th September 2006, the day before the letter to the Vendor. Accordingly if this was the loan that was being referred to in the letter to the Vendor, it had only been applied for the day before. It certainly was not an offer in the terms described in the letter.
34. When faced with these difficulties in cross examination, and contradicting some earlier evidence that he gave, the Purchaser said that the offer letter was in fact an offer from Eco Bank. No letter from Eco Bank has been produced. I hold that there was in fact no offer of finance from any bank at the time of the letter of 29 September to the Purchaser.
35. The letter of 29^th September to the Purchaser asks for a final extension to Friday 13^th October to conclude the transaction. The final paragraph reads as follows:

"The request is predicated on the fact that, as conveyed by your solicitors in their letter to the effect that you intend to resell the properties upon termination of the present transaction, since your intention remain to sell the properties, we strongly believe that it will be equitable to keep faith with the undersigned and allow the property to be sold to him. He has demonstrated an unflinching determination to see the transaction through as evident in the foregoing steps he has taken to secure local funding to meet the shortfall. It would be inequitable to terminate the transaction on account of the delay caused by Barclays Bank's unfortunate decision to change the rules of the game midstream, a development entirely outside the control of the undersigned and which he has worked assiduously to remedy."

36. The Vendor's solicitors responded by fax the same day to say their instructions remained the same and the rescission and forfeiture notice remained valid.
37. On 2^nd October 2006 new solicitors instructed by the Purchaser, Osibanjo and Co., wrote to the Vendor's solicitors saying that the Purchaser was now able to "complete" on 13 days notice. The letter threatened to commence proceedings unless the matter was resolved. It is clear from this letter and a further letter of 5^th October that the solicitors' instructions were to seek an order of the court requiring the sale to go through. These proceedings were issued on 12^th October 2006.
38. On 13^th October 2006 a meeting was held between the Purchaser, Mr Shah of Barclays and representatives of the Vendor, namely Mr Hopkins and Mr Rixon. At the meeting the Vendor's approach initially remained unchanged. It was explained that the market value of the properties was some £250-300,000 greater than the sale price. Prompted by this disclosure, Mr Shah asked on behalf of the purchaser whether it would make a difference if the Purchaser offered more money, for example by £100,000. Mr Hopkins said this would have to be taken back to the main board for review, and that the Purchaser should set out his proposals in writing by 16^th October. The meeting concluded with the Purchaser agreeing to set out his proposals for a time frame to complete. The legal action would be on hold pending further negotiations.
39. On 17^th October the Purchaser wrote saying that his solicitors would be writing with his payment proposals. He then said this:

"In order to save time and to ensure we are not faced with any other disappointment from our would be lenders, we have taken additional steps to ensure that we secure further funding at a more acceptable term from another lender, to which we now request that you graciously allow the undersigned's new lender have an inspection and conduct a new survey in line with the offer in principle made available to him for a facility up to 70% of the purchase price of the property in contention".

"We will appreciate you full co-operation in this regard as the undersigned is poised to ensuring that this long standing transaction is swiftly dealt with so that an earlier completion time is achieved than the time suggested in the said proposal lately sent by his solicitors"

40. The Purchaser's evidence about this further lender was that it had nothing to do with the original purchase - this new lender was being approached by him in order to take over from the local funding he had secured in Nigeria. I reject that evidence. The letter is a clear indication that even at 16^th October 2006 the Purchaser did not have firm offers of funding in place. Furthermore, whatever the true position, it must have appeared to the Vendor from the terms of this letter that the Purchaser was still casting around for lenders.
41. On 18^th October the Purchaser's solicitors wrote with the new payment proposals. Time for completion was now sought to be extended to 20^th December 2006 to enable the Purchaser to transfer the funds from Nigeria and the lenders (for the balance of the money) to carry out the survey. This cannot have been encouraging given that the funds were supposed to have been raised and on their way on 28^th September 2006. This reference to the lenders must have been to new lenders: Barclays had already carried out their survey and the Nigerian loan was to be secured on property of Princely Court Limited.
42. Funds would be transferred in instalments from Nigeria and transferred directly to the Vendor's solicitors as follows:

i) 10% of the combined price of the two properties no later than 3 ^rd November 2006;

ii) A further 10% no later than 24^th November 2006

iii) The remainder on 20^th December 2006.

43. The letter also offered to pay the contractual penalty as set out in the contract and allowed the Vendor to keep the interest on the deposit.
44. New solicitors instructed by the Vendor responded on the same day saying that the proposals were rejected. On the same day the Purchaser's solicitors wrote again offering to increase the purchase price by £100,000. There was no statement about the contractual penalty. The final paragraph said that "Your client will return the deposit already paid together with interest" (my emphasis). I think that is a misprint for "retain". It would make no sense for money to pass in that direction. These terms were rejected as well.

The balancing process

45. Mr Umezuruike relies on a number of factors to support the exercise of the court's discretion to order the return of the deposit in the present case.
46. Firstly he relies on the size of the deposit and the fact that it amounts to a significant proportion of the Purchaser's assets. The deposit is undoubtedly a significant sum: but it is only 10% of the value of the property, which is a very common amount for a deposit. I do not accept that the deposit is a large proportion of the Purchaser's assets. On the evidence, he is enormously wealthy, a fact which certainly does not assist him in the exercise of the discretion.
47. Secondly he relies on the Purchaser's unfamiliarity with English conveyancing practice. I am afraid that I cannot accept that, in the relevant respects, the Purchaser was unaware of the practice. He knew of the need to raise finance for the transaction by the completion date or risk losing his deposit.
48. Thirdly he relies on the suggestion that the fault lies with Barclays for reneging on the transaction. I think this is putting the matter far too high: Barclays had done no more than indicate what their policy would be. Moreover it was the Purchaser's choice to opt for an offshore mortgage, because of its tax advantages which was in part responsible for the lower mortgage offer.
49. Fourthly he relies on the request for an extension of time prior to the date set for completion. I think this is immaterial. It bore no relation to the length of time he actually needed, and if granted would have made no difference. Moreover that request has to be seen in the context of the whole timetable of the transaction. For example there was no written communication between the Purchaser and the Vendor or their solicitors between the service of special notice and rescission, the Purchaser preferring merely to direct his guns at the Bank.
50. Fifthly he relies on the Purchaser's attempt to persuade Barclays to reverse their decision to lend only 50%. I cannot imagine that such a step is in any way unusual. In the end it was not successful. And any effect this might have is rather tainted by the fact that he falsely raised the Vendor's hopes by saying that the Bank were going to reverse their decision to fund at the original level on 29^th September, when he had received no such indication.
51. Sixthly he relies on the application for the 150 million Naira loan from a Nigerian bank. It is correct that he applied for such a loan. But he did not do so until 28^th September, well beyond the completion date, and the offer did not come until November. Even then, it was an offer to Princely Court: the evidence was not clear as to how that would be converted into funding for the purchase of properties for its Chairman's own use. I should say that, in this connection, I do not take any account of the Nigerian companies legislation that was put to the Purchaser in cross examination. The fact remains that a loan to a company in Nigeria is one thing: ready money to complete a purchase in the UK is another. In any case, all this was much too late.
52. Seventhly he relies on the fact that he was "willing to complete". It is correct that the evidence does show efforts by the Purchaser to come up with money. But this is not a case like Tennaro where the purchaser found a substitute within the special notice period who, it seems, was both willing and able to complete the transaction. All this is going on long after the deposit is forfeited under the terms of the contract. Moreover the Vendor was never put on the spot, as was the vendor in Tennaro, and faced with terms as good as those which he could expect elsewhere. What is more, on the evidence before me, there would still have been a significant shortfall in the remaining purchase prices even if the Nigerian bank had produced the 150 million Naira.
53. Eighthly he relies on the fact that one of the properties was for his family and the other might have been. Even if it were material that this is not a purely commercial matter, I regard this as a factor of little weight.
54. Ninthly he relies on the fact that the Vendor made a profit from the Purchaser's breach of some £366,000 on the resale of the properties. This, for the reasons I have given, is a factor I can weigh in the balance: on its own it is in my view inadequate to make the case a special one.
55. Finally he relied on the relative financial sizes of the parties. I cannot regard this as an unusual factor: it is commonplace.
56. In his final speech on behalf of the Purchaser, Mr Umezuruike relied on the Vendor's conduct in refusing to negotiate and allow the Purchaser to complete. It is correct that the Vendor played hardball once the Purchaser had failed to meet the original completion date. But in my view it was entitled to do so unless faced within a short timescale with a proposal as to how the purchase is to be funded at least as advantageously as the deal to which the parties were committed. This the Purchaser could not do.
57. Mr Umezuruike also relied on the Vendor's conduct of the Counterclaim. It seems to me that, whatever view I take of the counterclaim, it cannot have the effect of making the case an exceptional one. The counterclaim was not commenced until July 2007. It cannot affect my discretion to order the return of the deposit.

Conclusion on return of the deposit

58. I have come to the conclusion that I should not order the return of the deposit in this case. Individually or cumulatively the factors relied on by the Purchaser do not take this case out of the ordinary run of cases where the Purchaser could not come up with the money. I have to weigh the factors relied on by the Purchaser against the need for certainty and the fact that, in the ordinary case, the deposit is not refundable. It is true that the Vendor made a significant profit out of the breach of contract: in a rising market that will often be the case. That factor, alone or with all the other matters relied upon by the Purchaser, do not persuade me that it would be just in all the circumstances to return the deposit.

Counterclaim

59. The Vendor's counterclaim, as finally reduced by amendment, is under two heads. Under the first head the Vendor claims by reference to two invoices from a company called Preferpress Limited, which trades as JE Freeman Showhomes, for the costs of hiring certain furniture and purchasing soft furnishings and paint in order to encourage the re-sale when the contract with the Purchaser fell through. The invoices are raised against the Vendor's parent company, but I am satisfied that they were ultimately paid by the Vendor. Under the second head they claim interest on the proportion of the purchase price which was unpaid.
60. The facts relating to the counterclaim can be shortly stated. In order to improve the chances of a resale, the Vendor hired and purchased the furniture and materials identified in the invoices. The purpose was to make the flats more attractive. Although the evidence about precisely when the apartment was "dressed" was a little unclear, I find that these particular items of expenditure were incurred after and because the original sale to the Purchaser fell through.
61. The two invoices were:

i) Dated 8^th December 2007 for quarterly rental of furniture from 1/12/06 to 28/2/07 for £11,750, and

ii) Dated 11^th December 2007 for paint/wallcovering, soft furnishings (including blinds), granite worksurface and carpet for £33,474.90.

62. The re-sale of D 7.01 was completed on 15^th March 2007 and that of D 7.09 on 23^rd July 2007. The sale price of D 7.01 of £2,050,00.00 was expressed in the Vendor's documents as being made up of a net price of £2,026,000.00 and £24,000.00 as incentives. The incentives were made up of two car parking spaces, carpets, curtains and selected furniture.

The claim for furniture and furnishings

63. It seems to me that this is a case where it is appropriate and just to look at the transactions in relation to these properties as a whole. On this basis, the Vendor has not in fact suffered any loss as a result of the Purchaser's breach of contract. In October 2006 the Vendor was already aware that the market value of the properties was some £250-300,000 greater than the sale price. That was confirmed when the sales ultimately went through. It seems to me that the Purchaser is correct when he says that the Vendor has not suffered any loss.
64. The way in which this aspect of the counterclaim is put is that the cost is recoverable as loss or expense incurred in reasonably attempting to mitigate the loss flowing from the Purchaser's breach. There is no doubt that such a principle exists, and operates in appropriate cases to allow a claimant to obtain damages for steps taken, even if the steps are unsuccessful or lead to greater loss: Chitty on Contracts 29^th Edition at 26-105. However I do not think that there is room for the application of that principle in the present case when, viewing the matter as a whole, there never was a time when the Vendor could say that he reasonably anticipated making a loss. It seems to me that the present case is one where the loss has been avoided through steps sufficiently connected with the original breach for it to be right to take their effect into account. I would dismiss this aspect of the counterclaim.

The claim for interest

65. Clause 7.3.1 of the Standard Conditions of Sale which was incorporated into the contract provides, under the heading "Late Completion":

"If there is default by either or both of the parties in performing their obligations under the contract and completion is delayed, the party whose total period of default is the greater is to pay compensation to the other party."

66. Clause 7.3.2 of the Standard Conditions was excluded from the contract but instead the conditions of sale agreed between the parties included at clause 1.3 the following:

"Where the Buyer is the paying party compensation is calculated at the contract rate on the Purchase Price (less any deposit paid upon which the Seller is entitled to interest) for the period by which the Buyer's default exceeds that (if any) of the Seller's default or (if shorter) the period between the completion date and actual completion. Where the Seller is the paying party compensation is calculated as the actual loss (if any) to the Buyer."

67. Clause 7.3.3 of the Standard Conditions of Sale which was incorporated into the contract between the parties provides

"any claim for loss resulting from delayed completion is to be reduced by any compensation paid under this contract."

68. By clause 1.1.1(e) of the Standard Conditions, the contract rate is defined as Law Society's interest rate from time to time in force, but clause 1.1 of the contract which takes priority provided that the contract rate should be 4% above the Base Lending Rate of Barclays Bank plc from day to day.
69. Mr Umezuruike submits that what is provided for here is a regime for late completion, not a regime for non-completion. It provides a contractual scheme for calculating loss to one of the parties where completion is delayed. That is emphasised by the way in which clause 1.3 refers to actual completion (in contrast to the date for completion), assuming that it will have occurred. There is no hardship to the Vendor here as his right to claim compensation at common law for loss resulting from delayed completion is clearly preserved: see 7.3.3.
70. Mr Hanham, for the Vendor, draws attention to clause 7.5 which reads as follows:

"Buyer's failure to comply with notice to complete

7.5.1 If the buyer fails to complete in accordance with a notice to complete, the following terms apply.

7.5.2 The seller may rescind the contract, and if he does so: (a) he may

(i) forfeit and keep any deposit and accrued interest

(ii) resell the property and any chattels included in the contract

(iii) claim damages....

7.5.3 The seller retains his other rights and remedies"

71. Mr Hanham submits that the Vendor's rights survive the termination of the contract, and that therefore the right to claim compensation under the contract is not affected by the rescission.
72. I accept Mr Umezuruike's submission. In my judgment it is not correct to read the combined effect of clause 7.5.3 and clause 7.3 and the Standard Conditions (and 1.3 of the contract) as allowing a claim for contractual compensation once the contract is at an end. Once the purchaser has failed to comply with the Notice to Complete and the contract has been rescinded, the purchaser has the specific rights provided by clause 7.5.2, and all other rights that the law provides for breach of contract, but not the specific rights provided under the contract for late, as opposed to nonperformance. Those specific rights are brought to an end by the rescission of the contract.
73. Mr Hanham did not seriously press his alternative submission that the interest could be awarded under section 35(A) of the Supreme Court Act 1981. I therefore do not consider it further here. The counterclaim for interest fails.

The result

74. The claim for return of the deposit fails, and the counterclaim fails as well.