Energycare Homes Ltd v Pluess & Anor

This is an appeal against the order of Recorder Edmunds, sitting in the Bodmin County Court, dated 31 October 2007 dismissing the appellant’s claim in this action.

The appellant’s claim is that on the true interpretation of an agreement (referred to below as “the agreement”) between it and the respondents, made on 15 March 2003, for the sale and purchase of 6 Bowood Park, to which I will refer as the property, a further sum of £39,000 had become due to it, the appellant.

Going straight to the heart of the issue, clause 21 of the agreement stipulates for the retention of the sum of £39,000 out of the purchase price pending either proof that a strip of disputed land which I will call the “disputed land” was part of the property or the acquisition by the appellant of the strip of land and its transfer to the respondents, either of which was to occur within one year of the purchase of the property. The exact terms of clause 21 are as follows:

“The Purchasers’ Solicitors shall be entitled to retain the further sum of £39,000 out of the purchase price pending completion of registration at HM Land Registry showing that the line of the northern boundary as currently defined on site by the existing garden fence and identified with the relevant measurements on the attached extract from the satellite survey is correct and falls within registered title number CL172130. If prior to the 15^th day of March 2005 the Vendor is unable to provide such proof to the reasonable satisfaction of the Purchaser’s Solicitors or to acquire at the Vendor’s expense and transfer to the Purchaser such additional land currently forming part of title number CL144132 as is necessary to ensure that the registered title conforms with the measurements shown on the said satellite survey plan the Purchaser shall be entitled to retain the said sum of £39,000 with all accrued interest. Provided that the Vendor complies with this condition on or before the said 15^th day of March 2005 the Purchaser’s Solicitors shall forthwith account to the Vendor’s Solicitors for the whole of the said retention plus accrued interest.”

That clause refers to two title numbers. The first, CL1722130, was the existing registered title number of 6 Bowood Park, which was then registered in the name of the appellant, the second title number, CL144132?? was the title number of the adjoining golf course.

The problem that had arisen was that when making title a difference arose as to whether the vendor had within its title the full extent of the property as shown in the satellite survey plan; if not, it belonged to the golf course at the north of the property.

Recorder Edmunds held that Clause  21 of the agreement required title to the disputed land to be registered by 15 March 2005. There had been a prior alteration to the clause to delete the words “production of proof by the vendor that” and to inset the words “completion of registration at HM Land Registry showing”. Argument was addressed as to that change of wording in the court below but, strictly, any change of wording would not be relevant to the interpretation of the agreement as signed. That said, the Recorder, as will be shown, placed particular weight on the words substituted, meaning “completion of registration at HM Land Registry”, though he placed weight on them for themselves not on the fact of substitution.

The sole ground of appeal is, therefore, that the Recorder erred in holding that the material part of clause 21 required the legal estate in the disputed land to be transferred to the respondents within the time set by the clause, instead of requiring only that the appellant transfer to the respondents only an equitable title to the land, which the Recorder held was done within the time allowed by clause 21.

Initially the appellant’s solicitor, Ms Silverthorne, believed that the Land Registry could be persuaded that the disputed land did indeed form part of the property but subsequently, following the signing of the agreement, this did not prove to be possible and therefore the appellant entered into negotiations to purchase the disputed land from the owner of the golf course. That was done, but the transfer for that transaction was only delivered to the appellant on 14 March. The appellant then in turn executed a form of transfer of the disputed land attributable to the property. It had in fact purchased a rather larger amount of property from the owners of the golf course, but the form of transfer executed by the appellants did not arrive with the solicitors for the respondents until 4:30 pm on 14 March.

The Recorder was satisfied that the clause represented an option and that the appellants had to show that they complied with the terms of clause 39 before they were entitled to the £39,000.

The Recorder considered various problems with the appellant’s compliance with clause 21 but he held that the land conveyed by the form of transfer delivered on 14 March had the same physical extent as that which was required to be offered and accordingly there was no question that the appellant had not produced a transfer for the requisite land. The Recorder heard argument as to the date on which the document was to be taken to be delivered to the respondent’s solicitors. He held that as the transfer would occur upon actual delivery and that the transfer of an equitable interest resulting would not by the effect of the National Conditions of Sale be postponed by the deeming provision therein and that, in short, actual delivery would effect an actual transfer of the equitable interest and that that had occurred at 4:30 pm on 14 March. He held that there was no issue as to the timing of compliance with clause 21 provided that all that was required to be delivered was an equitable interest.

But he then went on to consider this last final potential requirement of clause 21. He held that section 27 of the Land Registration Act 2002 provided that a transfer must be completed by registration and consequently all that was transferred to the respondent was equitable title. He held that the alteration made to the clause which I have explained was not significant and he held that the first sentences of the clause stating “pending completion of registration at HM Land Registry” was significant in construing the clause and that nothing in the sentences following this contradicted his interpretation. He concluded further that the conclusion to the clause stating that the transfer was “to ensure that the registered title conforms with the measurements” was significant. He further held that if clause 21 did not intend that an equitable title would be sufficient then the respondents would be unable to check what was needed to be transferred and what they were obtaining was the equivalent of a legal interest and that this was not the intention of the parties when agreeing clause 21. Accordingly he held that an equitable interest was insufficient. It would have been insufficient for the first sentence of clause 21 and for the purposes of their intent, and the usual practice of executing and delivering a form of transfer was not relevant to that analysis given those further points.

He considered an authority, namely Re Rose (deceased); Midland Bank Executor and Trustee Co Ltd v Rose and Others [1948] 2 All ER 971. He held that that case illustrated how the word transfer was interpreted in the circumstances of that case. But he held that in the present case he had to construe the words in the clause in question and so he ultimately returned to the wording of the clause before him. On the hearing of this appeal we have not been taken to that authority, in my view rightly, because the question was one of interpretation of this particular clause. In sum the Recorder held that the claimant’s submission that the proffering of an equitable interest was sufficient to meet the conditions in clause 21 failed to address the clear intent of the clause; what was required was that the disputed land should be placed safely in the purchaser’s hands. He held that it was usual for money to be paid over on delivery of the form TP1 (that is the form of transfer for registered land) prior to subsequent completion by registration but that was in the circumstances where the purchaser had full opportunity to confirm the title by prior investigation. If necessary he the purchaser could invoke section 110 of the Land Registration Act. He held that the clause could not be construed as requiring the purchasers to accept a purely equitable interest, which was both practically and legally much less than they would accept through the registered title route. The clause required a completed transfer, namely one that was registered. Consequently the Recorder found that clause 21 had not been complied with.

The judgment of the learned Recorder is a lengthy judgment and I need to set out passages from four paragraphs to provide his verbatim reasons on the crucial issues. At paragraph 57 he said this:

“For the purposes of this Clause, I note that it concludes with an important phrase, ‘…as is necessary to ensure that the registered title conforms with the measurements…’. Interpreting it, I have regard to that ‘Specific reference to the registered title conforms’. I find that that reference to echo the concept of ‘completion of registration’ to be found in the first sentence.”

So he is finding there a link between the two methods of providing the disputed land which were open to the vendor.

The point about the echo is picked up in paragraph 65 of the Recorder’s judgment where, having set out the argument for the claimant that an equitable title would fulfil the requirements of the clause, the Recorder said this:

“That is an ingenious interpretation of that Clause but one which I find so wholly failing to meet the clear intention of the parties, not least expressed in the first sentence, that I reject it. It follows that I am satisfied that for the purposes of this Clause an actual transfer is necessary and that critically must depend upon whether a transfer of an equitable interest is sufficient.”

Then he expresses his concern about the purchasers having an adequate opportunity to consider the title being offered. At paragraph 70 he says:

“It is perfectly right that in conveyancing it is usual for the money to be paid over at the TP1 stage prior to subsequent completion by registration but that is in circumstances where the purchaser has the full opportunity to confirm the title by prior investigation and if he feels it necessary, to invoke Section 110 of the Land Registration Act to require that the would-be vendor receives a transfer to himself before proceeding.”

That point was relevant because in this case the transfer from the owners of the golf course to the appellant had not been completed by registration at the point in time when the vendor executed a transfer in favour of the purchasers, respondents to this appeal.

Then, at paragraph 71, he concluded that clause 21 provided a tool which was

“…practically and legally much less than they would accept through the proof of registered title route.”

On this appeal Mr Ball appears for the appellants. He explained that clause 21 contains two parts. The first part is set out in the first sentence. The second part is the remainder of the clause. The two parts contain two separate routes whereby title to the disputed land might be made good. The first part, in his submission, was to enable the appellant to try to persuade the Land Registry to accept that the appellant’s title included the disputed land. We know that that is what the parties intended because the Recorder found that Ms Silverthorne was of the view that the Land Registry could be persuaded to make good what was perceived by the appellant to be a mere deficiency in the drafting.

The Recorder does not in terms suggest that that was not known to the purchasers. It is no doubt a proper inference that Mr and Mrs Pluess would have known, or their solicitors would have known, that that was the opinion of the vendor.

The second part of the clause provided for an alternative course if the first course failed. Mr Ball submits that for the purposes of this alternative course it was sufficient to transfer equitable title and that that is the proper interpretation of the words “to acquire and transfer”. He submits that, if anything further to that was required, that is, if a legal transfer was required, there would have to be an implied term to that effect and he submits that no implied term to that effect could properly be implied. It was not necessary for the parties’ agreement that a term to the effect should be implied because the purchasers would receive the transfer and they could attend to registration. If registration for some reason was not obtained, or was irregular, then the transfer would not meet the description in the alternative part of the clause, namely that it conformed with the measurements shown in the satellite survey plan, and on that basis the purchaser would be fully protected. If there was any other defect in title then the purchasers would be protected by the covenants as to title.

Mr Ball further submits that in accordance with the usual practice the vendor would produce a form of transfer to the purchasers and that it would be the purchasers’ responsibility to deliver that form of transfer to the Land Registry. That means that the purchasers would be responsible for ensuring registration but Mr Charles Auld, who appears for the respondents, properly accepts that there would be some implied term to ensure that they took reasonable steps to ensure that the title was registered.

The essence of Mr Auld’s argument is as follows. He submits in the first place that clause 21 is an option which should be strictly construed. He makes this submission to emphasise the need for strict adherence to the terms of the clause. He does not suggest that anything in particular turns on the fact of its being an option and so it is not necessary, in my judgment, for this court to decide that question. He emphasises that the terms were to be strictly complied with and that a full year was given for that purpose. I should say that Mr Ball does not contest that the clause was an option; indeed the appellant asserts that in its reply in the proceedings.

Mr Auld emphasises the difficulty for the purchaser if he has not had an opportunity to check the title, and he submits that if the appellants are right, and the vendor produced a form of transfer, it would follow that the purchasers would have to pay the retained sum even before they knew whether registration would take place in a manner that would fulfil the requirements of the alternative part of the clause, or route 2 as it has been called. Those words again are necessary to ensure that the registered title conforms with the measurements in the satellite survey plan. He submits that those words are there to make it clear that the appellants had to achieve registration within the period limited by the clause -- that is to say before 15 March 2005.

In addition, Mr Auld seeks permission to appeal and an extension of time, insofar as that is necessary, to challenge the judge’s finding that the delivery of the form of transfer was in time. He submits that the Recorder was wrong in making his finding in paragraph 23. At paragraph 43 the Recorder found:

“It follows on this third issue, I find that if, and this I shall find to be the critical question, the tendering of an equitable interest was sufficient to trigger the condition, then it was delivered in time.”

Mr Auld submits that the Recorder was in error in this point; that the National Conditions of Sale apply to the agreement by virtue of their specific incorporation by Clause 6 of the agreement, and that under Clause 1.3.5 of the National Conditions of Sale a notice or document delivered after 4 pm on any day was deemed to be delivered on the day following. He submits that the delivery of the transfer had to be prior to 15 March and so, in the circumstances of this case and in the events which happened, the delivery of the TP1 at 4.30 on 14 March was out of time because it was deemed to take place on 15 March, and the condition had to be satisfied prior to that day.

I will now turn to my conclusions. It is well established that a contract has to be interpreted in the light of its factual matrix -- that is, the background factors known to both parties or reasonably available to them at or before the making of the agreement. In this instance those background facts would be the background facts relevant to Clause 21.

The parties obviously originally thought that the disputed land was within the title to which the appellant had; and the appellant, for its part, continued to believe that. Even when the doubts were discovered, revealed no doubt by the actions of the purchasers solicitors in trying to check title before the contract was made for its purchase, the solicitors for the appellant continued to believe that they could persuade the Land Registry to recognise the boundary which the appellant thought it to be, i.e. so as to include the disputed land in the property. That was the reason, as I have explained, for the first part of the clause. Accordingly, they anticipated that they would be able to persuade the Land Registry to amend the registration of their existing title, CL172130, so that the line of the northern boundary would conform to the relevant measurements on the satellite survey. If that happened, then the £39,000 retained by agreement by the purchasers’ solicitors was to be paid out to the appellant. But it was anticipated clearly that that might not be the case and it was for that reason that the alternative, or the route 2, was also included in the agreement.

Now it is clear that both parties will have known and anticipated that the ordinary conveyancing practice would apply, so that when the vendor produced a form TP1 and delivered it to the purchaser it would be the responsibility of the defendants’ solicitors to produce that to the Land Registry and to take whatever steps where necessary to ensure registration. That would be the ordinary practice and, as we have been informed, it was the practice that was in fact carried out, but after the course of the signing of the agreement for the bulk of the property.

It is also part of the background that both parties ought to have known then, that there was a common root of title for the disputed land and for the golf course. The same vendor had sold land to the developer who constructed the house on the property as had sold the land for the golf course. Accordingly, the parties would have known that there was no other party involved and it is reasonably to be anticipated that there would not be any difficulty in the title for the disputed land unless, of course, the owner of the golf course had done something in the meantime but, apart from that, the investigation of title for the disputed land would be similar to the investigation of the title for the property itself.

As against that, it is a factor to be taken into account that the parties had allowed a time limit of one year for this clause to be satisfied. After that the purchasers became entitled to the £39,000. That year may properly be described in my judgment as a generous time limit and, as Mr Auld has forcibly submitted, it was for the vendor to fulfil that clause strictly in accordance with the time limits if it was to obtain the right to the £39,000.

With those background facts in mind, I will now turn to consider the interpretation of the clause. The material ground is the one dealing with the alternative route, and in that clause the critical word is undoubtedly “transfer”. But the word “transfer” bears more than one meaning. It can mean transfer so as to confer legal title or, alternatively, it can simply refer to production of a form of transfer. In my judgment, in the circumstances of this case, unless there is any other indication in the clause, the parties by using the word transfer would have meant transfer in the latter sense, since that accorded with the usual practice. But the wording of the clause does contain significant additional material -- that is, the words:

“…as is necessary to ensure that the registered title conforms with the measurements shown on the satellite survey plan…”

Significantly, those words are in the present tense, and those are the words particularly relied upon by Mr Auld to convert the word “transfer” from delivery of a form of transfer to an obligation to ensure that title is properly registered. All that would have to have been completed by 15 March 2005.

Inevitably, in that process the Land Registry would be involved, and indeed under ordinary practice the respondent’s solicitors would also be involved. And the process of registration would not, in the ordinary course, involve the vendor. I have already concluded that the parties contemplated the usual practice on registration. In my judgment, the words that I have quoted, as is necessary, do not mean that the vendor must achieve that registration. If that had been intended it would more ordinarily have said “to procure the transfer of such land is necessary to ensure that the registration of title conforms with the measurements shown in the survey plan”, but it merely says “transfer”. If the vendor were required to achieve registration, the vendor would be required to ascertain and consider by when he had to produce a form of transfer to the purchasers’ solicitors, so that the transfer procedures could be completed by 15 March 2005. That would present a considerable practical problem because it could not be known whether the Land Registry would take six weeks or three months and the difference in time might in practice be critical.

Mr Auld submits that, in this situation, if there was something unusual, like a strike at the Land Registry, then it would be possible for the vendor to rely on the principle in Re: Rose. Although he did not take us to the authority, the principle is, I think, well-known, and it is that in the case of an incompletely constituted gift it is enough for the donor to have done all that was necessary on his part in the case of a transfer of a share or a transfer of land or a property requiring registration in order for the gift to be properly constituted. But in my judgment that does not assist on the interpretation of this clause because, even without an unusual event like a strike at the Land Registry, there would be considerable uncertainty as to when the vendor would have to produce a document to the respondents’ solicitors to enable the processes for registration to be put in train, and that would involve uncertainty. In my judgment, it is improbable that the parties could have agreed that that should be the obligation of the vendor or that the vendor could be expected to undertake that degree of uncertainty and financial risk. It might well have had to buy the property in, as indeed it did, and then not know whether it would be able to fulfil the route 2. Accordingly, I reject the interpretation of that transfer involves registration of a legal transfer as not being the natural requirement.

The insertion of a specific time limit prior to 15 March 2005 most naturally qualifies something that the vendor itself will do and that the vendor alone was to do, and in my judgment that was to produce the form of transfer.

The Recorder was understandably concerned that this would leave the purchaser unprotected if title was defective, or was concerned that they should have the risk that title might turn out to be defective, but, as Mr Ball submits, the purchasers would have the benefit of the covenants as to title and would be able to rescind the transaction or rescind the payment if it had been made. The only issue, therefore, is whether they should pay before registration processes were complete. For my part, I do not consider that it is any insuperable reason why they should not pay before registration took place, considering that they would have already (and had already) acquired the property by the main transfer and there was a common root of title in this case, a factor known to both parties.

The Recorder was also properly concerned that the purchasers would not have an opportunity to check the title but, as I have said, that risk was bluntly mitigated on the facts of this case by the existence of the common root of title. The Recorder also considered that the first route in Clause 21 confirmed his interpretation. He referred to the “echo” of the requirement for registration in route 2 as he interpreted, but, as I have explained, route 1 did not involve the registration of any title in the purchasers. What would happen was that the vendor’s title would be amended and that this would have what Mr Ball called “a cascading effect” on the purchaser. The completion of registration referred to in the opening part of Clause 21 would be that of the purchaser. Accordingly, on this aspect of the case I hold in favour of the appellant.

As I mentioned above, there is an application for permission to appeal against the Recorder’s finding in paragraph 43 (see [23] of his judgment) and for an extension of time. The position is that this point was raised in the respondent’s notice, but permission to appeal on this point was not sought. The point sought to be raised in the respondent’s notice was a matter which required permission as it involves overruling the Recorder’s holding in paragraph 43. That is not a matter that this court can in any way overlook since it goes to the jurisdiction of the court.

The respondents’ notice was drawn up at a time when the Recorder’s judgment was available. Alternatively, it could have been amended when the Recorder’s judgment was available. Nonetheless, for the purposes of this application, the important point is that the point which the respondents wish to raise was identified in the respondents’ notice.

Now the reason why Mr Auld wants to put forward this argument is to pursue a submission made to the Recorder that, whatever the interpretation of route 2, there was no strict compliance with Clause 21 because the TP1 was delivered at 4.30 on 14 March and therefore was deemed to be delivered on 15 March, and thus was not delivered “prior to the 15th day of March 2005” as clearly required by Clause 21.

It will be noted that in Clause 21 there is another reference to that date in the proviso. That states:

“Provided that the Vendor complies with this condition on or before the said 15^th day of March 2005 the Purchaser’s Solicitors shall forthwith account to the Vendor’s Solicitors for the whole of the said retention plus accrued interest”.

There is a discrepancy between those two references because in the first reference it is clearly prior to 15 March; in the second, the reference is to on or before 15 March 2005. The clause is, on the face of it, therefore internally inconsistent. Mr Auld submits that that, however, was not the proper interpretation of the proviso. He submits that the time expression “on or before the 15th day of March 2005” qualifies the obligation in the subsequent meaning of the proviso for the purchasers’ solicitors to account for the retention money. Now, the application for permission, in my judgment, depends upon this for showing a real prospect of success on this point, because if the position is that there is a conflict between the two dates. If the position is that the route 2 could be satisfied on or before 15 March 2005, then it does not matter whether or not he is right in saying that the National Conditions of Sale meant that the form TP1 was not delivered before 15 March 2005. Accordingly, in my judgment it is necessary to examine this submission as to interpretation with some care.

In my judgment there is no real prospect of success in arguing that the words “on or before 15th March 2005” in the proviso qualify the succeeding words as opposed to the previous words. There is, I should say, no punctuation in the proviso, but there is an adverb already qualifying the obligation to account. The obligation to account is “forthwith”. It does not say on any particular date or within any particular time frame. No doubt that might well depend on the circumstances. The word “forthwith” has within it some flexibility. So there is already an indication in the proviso as to the time within which the accounting must take place, and it would therefore duplicate that element of the obligation if the words “on or before” 15 March 2005 also qualify the obligation to account and, conceivably, could lead to some conflict.

Moreover, the more natural meaning of the words “Provided that the vendor complies with this condition on or before the said 15 March 2005”, is that they qualify the need for compliance. The date picks up the date in route 2. Accordingly, in my judgment there is no prospect of success in arguing that the proviso does not contain a reference to that date. The question then is whether that date -- on or before the said 15 March 2005 -- is a different date from that in route 2. They do not have to be the same date. On the other hand, it would be odd if they were not the same date because the proviso is a statement of the obligation of the solicitors. It crystallises what is to happen to the £39,000 if there is compliance with route 2 and therefore, as it seems to me, the two time conditions have to be read consistently.

In order to do that, in my judgment, it is the first reference to 15 March which must give way to the second, because the second is more specific, it says “on or before the said 15th day of March 2005” and it is not open to the court to strike out the words “on or” in that phrase. The expression “prior to the 15th day of March 2005”, however open to the interpretation that it is prior to the conclusion of 15 March 2005. This, in my judgment, is a way of ensuring that the clause is consistent and that the clause is interpreted and read as a whole.

For those reasons, therefore, I would dismiss the application for permission to appeal. For the reasons given I would extend time, but that of itself would not give Mr Auld the permission that he needs. In the circumstances I would allow the appeal and refuse permission.

I agree.

I also agree