Vismead Association Ltd v Lanni

This litigation involves some land in Field Road, Hatfield, Doncaster. The defendant, Mr Lanni, a builders’ merchant, was the owner of that land. He entered into two transactions in relation to that land. He entered into an option agreement in July 2003 with a Mr Grayson and a Mr Simon Harley. The option price was £10 and there was an option price of £55,000.

There have been purported transactions relating to the benefit of that option agreement, details of which we need not go into, but I shall refer to them in due course. In addition, and subsequently, Mr Lanni entered into a Condition of Sale agreement in relation to the same land for a different and indeed higher price of £85,000. The agreement was conditional on planning permission being granted for extraction of gravel from the land, and, although the agreement was a homemade agreement, it is accepted that the condition had to be satisfied or, if not satisfied, waived, 24 months after the date of the contract.

In due course the claimant, which had the benefit of the Condition of Sale agreement, purported to waive the condition and sought the transfer of the land pursuant to the, as it was asserted by then, unconditional sale agreement. There were a number of defences raised, of which the most important one and ultimately the only one which was determined at trial, was whether the condition was, on the true construction of the agreement, solely for the benefit of the purchaser (that is to say the claimant/appellant) and so could be waived, or whether it was not such a condition and was, on the true construction of the agreement, one inserted for the benefit of both parties which could not be waived unilaterally.

In due course, to anticipate somewhat, at the trial of the proceedings between the appellant and the respondent it was held that the agreement was indeed one which provided for a condition for the benefit of the purchaser only, that it had been validly waived and therefore the agreement was binding on Mr Lanni.

However, some time before the trial of these proceedings there had been a purported exercise of the option agreement, which in time was prior to the Conditional Sale agreement, by parties claiming to be entitled to the benefit of that option. In February 2009 the claimant discovered that some two months earlier Mr Lanni had transferred the land pursuant to the option agreement to those who claimed to be entitled to exercise the option and to have exercised it.

There had been registration of both the interests under the Conditional Sale agreement and under the option agreement. However, since both were equitable interests, that conferred first in time would have priority. It followed that, when this matter came for trial, if there had been a valid exercise of the option agreement, Mr Lanni had been bound to transfer the land to the beneficiaries of the option agreement but, if not, he would have been bound to transfer the land pursuant to the by then unconditional sale agreement to the appellant.

Mr Lanni, having transferred the land, did not inform the appellant of the transfer, notwithstanding that litigation was pending with a trial not very far away, nor were the documents relating to the transfer of the land to the beneficiaries of the option disclosed. The defence in the proceedings between the appellant and the respondent (that is to say Mr Lanni’s defence) should have been promptly amended as a result of that transfer because the transfer was relevant to the claim for specific performance. Moreover the documents in question should have been immediately disclosed in those proceedings. That did not happen and it was only, as I have already mentioned, in February of 2009 that the appellant discovered that there had been a transfer of the land which, if effective, deprived him of the right or at least the ability to claim specific performance.

On 11 February (that is to say a week after discovering that the land had been transferred) the appellant sought an adjournment of the trial of its specific performance proceedings against Mr Lanni. Had that application been granted, it would have been possible for the issues which have now arisen as between the appellant and the transferees of the land in purported pursuance of the option agreement, and the claims between them, to have been determined in the same proceedings as those between the appellants and the respondent. I have to say that had I been the judge discovering what had happened in relation to the land, I would have granted the adjournment with a view to all of the claims relating to this land being heard together. However, in fact the application was refused and the trial proceeded. As I have already mentioned, there was only one issue at the trial. The claimant’s case was upheld and the order made by the judge contained a declaration that the Condition of Sale agreement to which I have referred was effective and binding.

The events which had occurred created a predicament for the claimant/appellant. It wants the land, it does not want damages and indeed the damages that it would recover on the basis of such valuation evidence as is now available would indicate that the damages would be no more than nominal. But its claim was for specific performance, and the object of such a claim is to obtain in specie the land itself. Had this been simply a damages claim, at an earlier stage the claimant/appellant could have accepted the transfer of the land to the beneficiaries of the option as a repudiation of the Condition of Sale agreement and sought damages. It did not do so because it still seeks the land. In order to obtain the land it has to pursue its claims against the transferees under the option agreement, and its case as against them, which is due for trial in a window between April and May of next year, is that the transfer of the benefit of the option was invalid. Indeed if it took place at all, there is a suggestion that a document transferring at least part of the benefit of the option agreement was backdated so as to legitimate the exercise of the option. If the option was validly exercised, it would follow that the registered interest of the present appellant in relation to the land would take priority as against the transferees of the land and it would be able to complete its purchase of the land as against them. Whether its claims against the transferees are good or bad remains to be seen.

Following the trial the judge considered what directions to give in relation to damages and costs. So far as damages were concerned, she accepted that damages should not be immediately assessed but made an order under which they were to be assessed on the first open date after 1 June 2009 with a time estimate of half a day. Her order, I should add, was made when judgment was handed down on 8 April 2009.

If that order stands, the appellant will be put in a position in which it cannot establish any damages. It wishes to maintain its contract and not to claim damages. What its position is in relation to the land remains to be seen and will not be determined until the trial of the separate proceedings. If its claim against the recipients and present owners of the land fails, it may and probably will want to accept Mr Lanni’s conduct as a repudiation, and the question would arise as to what damages in the circumstances then prevailing are payable by Mr Lanni. It seems to me at the moment it does not at all follow that those damages would simply be nominal damages.

The judge also deferred the question of costs of the trial and the proceedings between the appellant and the respondent to the assessment of damages. It seems to me that costs should not be determined at the present stage. It would be appropriate to determine the costs of the trial after issues have been dealt with as between the appellant and the transferees of the land for a number of reasons. One is that the damages claim will then be able to be properly determined. The other is that there may be arguments notwithstanding the declaration contained in paragraph 1 of the order and the fact that the appellant succeeded at trial in circumstances in which, as is possible, the claim against the present owners of the land fails. No steps were taken to obtain any injunction or undertaking against Mr Lanni in the present proceedings. It may be said that, having learnt of the transfer of the land pursuant to an option having prior registration rights to the Condition of Sale agreement, the appellant should not have continued on to trial in circumstances in which the only valuation evidence indicated that the land was worth less than the amount payable under the Condition of Sale agreement. Whether or not any of those arguments on behalf of Mr Lanni have any force is not for me to address at this stage. I somewhat doubt it. It seems to me that Mr Lanni has put himself and the appellant into the present situation by failing to disclose immediately the transfer of the land pursuant or in purported pursuance of the option agreement. Had that been immediately disclosed, I have no doubt that the appropriate course would have been for all the issues to be determined together. Mr Lanni’s position would have been more than certain at the end of a single trial. He asserts that it is unfair for him to face the uncertainty of a deferred assessment of damages and a deferred issue as to his liability for costs. No doubt that may be of some concern for him, but it seems to me that it is a situation entirely of his own making, assuming that the transfer pursuant to the option agreement was on his part bona fide and genuine and not an attempt to avoid or evade his obligations under the Condition of Sale agreement. Leaving that aside, the reason that there is now a significant period of time between the conclusion of the trial of the issues as between the appellant and the respondent and as between the appellant and the transferees of the land in question is Mr Lanni’s failure immediately to disclose the transfer on its taking place.

It seems to me that the judge’s order was, so far as the assessment of damages and costs was concerned, wrong in principle. In my judgment it ignored the fact that the object of these proceedings so far as the appellant is concerned is not damages but the recovery of the land. It has always been so; it continues to be so. The only reason why all the issues have not been tried together is Mr Lanni’s own fault for failing to disclose what he had done in relation to the land.

In those circumstances, for my part I would feel free to interfere with the judge’s decision albeit that it would appear to be a case management decision. It seems to me its result is unfair to the appellant, that the detriment to Mr Lanni is a detriment which is brought upon himself. In any event it is not of great weight considering the fact that the trial as against the transferees of the land is due to take place in April or May of next year. Even if that date slips, it does not seem to me that the uncertainty would justify placing the appellants in the difficult situation which they faced pursuant to the judge’s order. I would therefore allow this appeal and in place of paragraph 3 of the judge’s order I would substitute an order staying the assessment of damages until after judgment in the proceedings between Vismead and the recipients of the land. The order will identify the proceedings in question and I would leave paragraph 5 of the judge’s order as it is on the basis that the consequence of that is that neither costs nor damages are to be determined until after judgment in the other proceedings. I would grant liberty to apply so far as the stay is concerned, but on the understanding that some development unknown at present would be required if there were to be a successful application for a stay.

I agree. The only matter which could possibly be proposed against the justice of the order suggested by my Lord is that we are interfering with a decision of the judge in respect of the conduct of the proceedings and particularly the timing of part of them. The judge’s decision was not a traditional case management decision in the sense of organising the case before it is heard. It is a decision as to what should happen once judgment had been given in favour of the claimants. It may be that the reason for the judge’s decision to proceed at once with the assessment of damages was that she thought it was a logical consequence of the decision made at an earlier date not to adjourn the trial. But if she thought that, it seems to me that she was wrong about that because the mere fact that an adjournment is refused does not mean that, if the justice of the case requires all matters to be sorted out together, that that should not happen as much after judgment as before.

For those short reasons I agree with all that my Lord has said.

Although we are interfering with effectively a case management decision of the judge there is nothing I can usefully add to the judgments my Lords have given, with which I agree, and therefore the appeal against paragraph 3 of the judge’s order of 8 April will be allowed but the appeal against paragraph 5 of that order is dismissed and, subject to anything counsel may say as to the form of order we should make, it should be, as my Lord has suggested, to stay the assessment until after judgment in the second proceedings which can be described and defined with liberty to apply.