Alchemy Estates Ltd v Astor & Anor

This is an application under CPR Part 24 for summary judgment, alternatively for determination of certain preliminary issues. The application is made by the Defendants to the claim. By it they seek resolution of points of construction on a contract of sale dated 15 January 2008 between the Claimant and the Defendants of a long-term leasehold (“the Contract”) and specific performance of the Contract. The Contract relates to leasehold property at 27 Walton Street, London SW3 3AQ (“the Property”). The Defendants, Judith Astor and Polly Astor (“the Astors”), are the personal representatives of Joan Antoinette Valerie Shorter. At her death Ms Shorter was the registered proprietor of the Property. She held the Property under a lease dated 30 June 1977 between Viscount Chelsea as lessor, the Chelsea Land and Investment Company Limited (“the Company”) and Guy Shearer as lessee, (“the Lease”). The background to the present proceedings is the falling property market in the current economic climate.

The Claimant, Alchemy Estates Limited (“Alchemy”), is a small property development company. Alchemy had been interested in acquiring the Property for a period before the Contract was eventually entered into in January 2008. On 28 November 2007, the solicitors for Alchemy, Vizards Tweedie LLP (“Vizards”), wrote to Iliffes Booth Bennett (“IBB”), the solicitors for the Astors, to confirm that they were instructed in relation to the proposed purchase of the Property at a price of £1,311,525. On 30 November 2007 IBB sent to Vizards a pack of relevant documentation relating to the Property, including a draft contract. There were then exchanges concerned with enquiries before contract. The terms of the contract were essentially agreed in the course of these exchanges in late 2007. It was agreed that the main framework for the Contract would be based on the Standard Conditions of Sale (4^th edition). IBB provided in addition a set of special conditions. These appear to have been based upon a general precedent rather than being directly formulated by reference to the particular circumstances of this transaction. Vizards for their part proposed the addition of what became special condition 22.

The terms of the proposed agreement were all agreed subject to contract by 10 January 2008, but on that date Vizards wrote to IBB to say that, although their client was prepared to enter into the agreement on the terms which had been negotiated, it would only do so if a significant reduction in the price was accepted. They referred to the economic storm clouds which were gathering, and offered a revised sum of £1,265,525 as “a more realistic price”. Vizards asked IBB to take their clients’ instructions on this new proposed contract. Meanwhile IBB continued to seek information from Olswang, the solicitors for the landlord, in order to deal with certain outstanding matters which needed to be resolved apart from agreement on the price. On 14 January 2008 IBB wrote to Vizards to say that the Astors would accept the reduced price. IBB sent a slightly amended version of the contract to Vizards for signature by Alchemy. The Contract in its final form was exchanged on 15 January 2008. Upon exchange, Alchemy paid the deposit of £126,152.50.

The Lease contained lessee’s covenants in the following terms at clause XVIII:-

“a)

Not to assign, transfer, underlet or part with possession of part only of the demised premises

b)

Not to assign, transfer, underlet or part with possession of the demised premises as a whole (except by way of mortgage or charge) without the previous consent in writing of the Company, such consent not to be unreasonably withheld

PROVIDED, however, that should the Lessee desire to assign the demised premises to a limited company, the Lessee shall, before such assignment (if required to do so by the Company), procure that two directors thereof (or two other persons first approved by the Company) as sureties for the limited company enter into a joint and several covenant with the Lessor and the Company that so long as the term hereby granted is vested in the limited company they will pay and make good to the Lessor and the Company all losses costs and expenses sustained by the Lessor or the Company through the default of the limited company to pay the rent hereby reserved or the failure of the limited company to observe and perform the Lessee’s covenants and conditions herein contained.”

Clause XIX provided:

“That every assignment of the demised premises as well as every Grant of Probate or Administration Mortgage or Charge Transfer Assent Underlease assignment of Underlease (where underletting is permitted under the terms of this Lease), Order of the High Court of Justice or other document affecting the demised premises or part thereof or the term hereby granted or (where underletting is permitted under the terms of this Lease) the term granted by any Underlease shall, within 21 days after the execution or date thereof respectively, be left for registration at the Registered Office of the Company together with notice thereof in writing and that the Lessee will pay a fee of £2 for every such registration, such fee to be increased to £3 if such document be not left at the said office within the said period of 21 days.”

The Contract provided for a completion date of 13March 2008 or earlier by agreement. It incorporated the Standard Conditions of Sale (4^th edition). The Contract also contained the agreed special conditions. Part of the difficulty of construing the terms of the Contract relates to the interaction between the special conditions overlaid as they were upon the Standard Conditions.

The Standard Conditions included the following provisions:

“4.1.1

Without cost to the buyer, the seller is to provide the buyer with proof of the title to the property and to his ability to transfer it, or to procure its transfer. …

6.1.1

Completion date is 20 working days after the date of the contract but time is not of the essence of the contract unless a notice to complete has been served.”

The specific contractual stipulation that the completion date was to be 13 March 2008 overrode the provision as to the timing of the completion date in condition 6.1.1, but the provision that time should not be of the essence of the Contract remained part of the agreement between the parties. Other standard conditions included the following:

“6.8.1

At any time on or after completion date, a party who is ready, able and willing to complete may give the other a notice to complete.

6.8.2

The parties are to complete the contract within 10 working days of giving a notice to complete, excluding the day on which the notice is given. For this purpose, time is of the essence of the contract.”

Condition 7.5 made provision in relation to the buyer’s failure to comply with a notice to complete, providing that the seller could then rescind the contract, forfeit and keep any deposit with accrued interest, resell the property and claim damages. Condition 7.6 dealt with the seller’s failure to comply with a notice to complete, providing that, in that case, the buyer may rescind the contract and require the deposit to be repaid with interest.

Section 8 of the Standard Conditions is headed “Leasehold Property”. Condition 8.3, headed “Consent”, is central to the present case. It provides:

“8.3.1

(a) The following provisions apply if a consent to let, assign or sub-let is required to complete the contract.

(b)

In this condition “consent” means consent in the form which satisfies the requirement to obtain it.

8.3.2

(a) The seller is to apply for the consent at his expense, and use all reasonable efforts to obtain it.

(b)

The buyer is to provide all information and references reasonably required.

8.3.3

Unless he is in breach of his obligation under condition 8.3.2, either party may rescind the contract by notice to the other party if three working days before completion date (or before a later date on which the parties have agreed to complete the contract):

(a)

the consent has not been given, or

(b)

the consent has been given subject to a condition to which a party reasonably objects. In that case neither party is to be treated as in breach of contract, and condition 7.2 applies.”

Condition 7.2 provides that if either party rescinds the contract then, in the absence of breach of contract by the buyer, the deposit is to be repaid to the buyer with accrued interest and the buyer is to return any documents he received from the seller and is to cancel any registration of the contract.

The special conditions attached to the Contract reiterated at condition 1(a) that “this contract incorporates the Standard Conditions of Sale (4^th edition)”; and provided at condition 1(b) that “the terms used in this Contract have the same meaning when used in the [Standard] Conditions.” Clauses 5 and 11 of the special conditions made specific provision to amend or disapply terms stipulated in the Standard Conditions. There was no specific provision disapplying or amending clause 8 of the Standard Conditions. However, clause 16 of the special conditions provided:

“The Buyer will comply with all requirements of the Lease in relation to its assignment to him and shall where necessary enter into all documents required by the Landlord but at the Buyer’s own expense and the Seller shall not be required to take any actions in respect thereof (other than where a Licence to Assign is required), the responsibility of compliance resting with the Buyer. Completion shall not be delayed on account of any documentation (other than where a Licence to Assign is required) not being completed.”

Clause 22 of the special conditions made provision in relation to enfranchisement of the long leasehold under the terms of the Leasehold Reform Act 1967. It provided in material part as follows:-

“(a)

The Seller shall, within 20 working days of exchange of this contract sign and send to the Buyer’s Solicitors a notice of claim on the competent landlord (“the Notice”) for the acquisition of the freehold of the Property under Part 1 of the Leasehold Reform Act 1967 (“the Act”)

(b)

The Notice will be prepared and served on the competent landlord of the Property by solicitors to be nominated by the Buyer and will provide that the nominated solicitors will act as the Seller’s agents within the enfranchisement process. The Notice is to be approved by the Seller’s solicitors who are to be kept informed of all material developments in the enfranchisement process and the Notice is to be personally signed by the Seller in order to comply with the provisions of the Act

(c)

The Buyer will nominate the surveyors to prepare the valuation as to the figure to be inserted into the Notice

(d)

The Buyer is to indemnify the Seller against all legal and surveyors’ fees and disbursements claimed by the landlord under the Act arising out of the same

(e)

On the Completion Date the Seller shall assign the benefit of the Notice to the Buyer and there will be inserted in the Transfer the following words:

“The Transferor hereby transfers to the Transferee the benefit of the notice of claim to acquire the freehold served pursuant to Part 1 of the Leasehold Reform Act 1967 on the competent landlord on the ……day of ………… and the assignment of the benefit of the claim will only take effect when this transfer of the Property is completed by registration”

(f)

The Seller shall assist the Buyer in pursuing the claim set out in the Notice and shall provide any information to support such claim as may reasonably be required provided that any costs and disbursements incurred by the Seller shall be paid by the Buyer.”

Once the Contract was entered into, since the landlord’s consent was required for the assignment of the Lease, one would have expected action to be taken in order to ensure that the landlord’s consent was sought and obtained in good time before the completion date of 13 March 2008. Unfortunately there was a hiatus because the solicitors on both sides of the transaction each assumed that the other had responsibility for communicating with the landlord. In light of special condition 16, IBB assumed that Vizards, for Alchemy, would assume that responsibility. In light of standard condition 8.3.2, Vizards assumed that it would be IBB and their clients, the Astors, who would approach the landlord in order to secure the necessary consent. This misunderstanding on each side only became apparent on 6 March 2008.

Meanwhile on 25 January 2008, Vizards sent IBB a draft Notice of Tenant’s Claim to Acquire the Freehold for approval and signature by the Astors. This was the document that was necessary for the operation of the enfranchisement procedure under the Leasehold Reform Act 1967 in accordance with special condition 22 of the Contract. Once they received the signed Notice of Claim, Vizards proposed to submit it as agents for the Astors in accordance with the terms of special condition 22.

The 1967 Act creates a right for tenants under long leaseholds to acquire the freehold in relation to the property concerned by operation of the procedure under the Act. Section 5 of the 1967 Act provides:-

“…the rights and obligations of the landlord and the tenant arising from the notice shall inure for the benefit of and be enforceable against them, their executives, administrators and assigns to the like extent (but no further) as rights and obligations arising under a contract for a sale or lease freely entered into between the landlord and tenant; …”

Section 5(2) provides that:-

“…the rights and obligations [referred to in subsection 1] of a tenant shall be assignable with, but not capable of subsisting apart from, the tenancy of the entire house and premises; …”

Section 5(3) provides:-

“(3)

In the event of any default by the landlord or the tenant in carrying out the obligations arising from any such notice, the other of them shall have the like rights and remedies as in the case of a contract freely entered into.”

Section 8(1) provides:-

“Where a tenant of a house has under this Part of this Act a right to acquire the freehold, and gives to the landlord written notice of his desire to have the freehold, then except as provided by this Part of this Act the landlord shall be bound to make to the tenant, and the tenant to accept, (at the price and on the conditions so provided) a grant of the house and premises for an estate in fee simple absolute, subject to the tenancy and to tenant’s incumbrances, but otherwise free of incumbrances.”

Section 9 includes the following provisions:

“(1)

Subject to subsection (2) below, the price payable for a house and premises on a conveyance under section 8 above shall be the amount which at the relevant time the house and premises, if sold in the open market by a willing seller …might be expected to realise on the following assumptions [the relevant assumptions are then set out]. …

(3)

On ascertaining the amount payable, or likely to be payable, as the price for a house and premises in accordance with this section (but not more than one month after the amount payable has been determined by agreement or otherwise), the tenant may give written notice to the landlord that he is unable or unwilling to acquire the house and premises at the price he must pay; and thereupon –

(a)

the notice under section 8 above of his desire to have the freehold shall cease to have effect, and he shall be liable to make such compensation as may be just to the landlord in respect of the interference (if any) by the notice with the exercise by the landlord of his power to dispose of or deal with the house and premises or any neighbouring property; and

(b)

any further notice given under that section with respect to the house or any part of it (with or without other property) shall be void if given within the following twelve months.

(4)

Where a person gives notice of his desire to have the freehold of a house and premises under this Part of this Act, then unless the notice lapses under any provision of this Act excluding his liability, there shall be borne by him (so far as they are incurred in pursuance of the notice) the reasonable costs of or incidental to any of the following matters:-

(a)

any investigation by the landlord of that person’s right to acquire the freehold;

(b)

any conveyance or assurance of the house and premises or any part thereof or of any outstanding estate or interest therein;

(c)

deducing, evidencing and verifying the title to the house and premises or any estate or interest therein;

(d)

making out and furnishing such abstracts and copies as the person giving the notice may require;

(e)

any valuation of the house and premises;

but so that this subsection shall not apply to any costs if on a sale made voluntarily a stipulation that they were to be borne by the purchaser would be void.”

It is clear from these provisions that the operation of the enfranchisement procedure under the 1967 Act by the Astors pursuant to special condition 22, through the agency of Vizards, would have significant legal effects upon the Astors themselves should it transpire that the Notice of Claim under the 1967 Act should be withdrawn by them if the sale to Alchemy did not proceed.

The Notice of Claim provided by Vizards was on a standard form which had been completed by Vizards. In the Schedule to the form headed “Particulars supporting tenant’s claim”, section 5(a) and (b) relating to particulars of the tenancy to be completed in certain circumstances had both been filled in “n/a” as not relevant to the circumstances of this particular lease. By letter dated 14 February 2008, IBB returned the signed claim notices to Vizards and informed them that the managing agents in relation to the Property had informed IBB that the freeholder was represented by Olswang. In the event, the signed Notice of Claim was couriered to Vizards on 19 February 2008. Vizards served the Notice of Claim on Olswang, who acknowledged that they acted for the landlord.

By an e-mail of 6 March 2008, Mr Barber of Vizards informed Ms McKay of IBB that he had just telephoned Mr Nicholson of Olswang, who had indicated that his client’s requirements in respect of a Licence to Assign were as follows:-

“1.

An undertaking for costs limited to £1,250 together with VAT and disbursement. He said the disbursements were mainly things such as photocopying.

2.

Where the Assignee is a UK Company they want copies of the last three years’ accounts. If the last account was filed more than 12 months ago they require up-to-date management accounts.

3.

They require a Landlord’s or trade reference.”

Mr Barber continued:-

“I will obtain the required accounts and reference from my clients and forward them to you. In the meantime no doubt you will give the undertaking for costs and hopefully they will produce a draft Licence to Assign which must surely be in standard form.”

It was thus at this point that it became clear to the solicitors on both sides that neither party had yet approached the landlord for the required consent or licence to assign the leasehold. Mr Barber in his e-mail did not express surprise or any complaint about the fact that IBB had not already approached the landlord and its solicitors to obtain the landlord’s consent to the assignment of the lease. Ms McKay’s e-mail response of the same date to Mr Barber likewise did not express surprise or any complaint about the fact that Vizards had not previously approached the landlord to secure the necessary consent to assignment.

The same day, 6 March 2008, Ms McKay wrote to Olswang stating:-

“We are instructed to act in the sale of the [Property] and understand that you are instructed to act on behalf of the Landlord Property Investment (Chelsea) Limited.

Please confirm your client’s requirements in respect of a Licence to Assign of the above property.”

This letter appears implicitly to accept that it was for the sellers, the Astors, to seek the formal consent for the assignment of the lease from the landlord. It was recognised that the landlord required a formal Licence to Assign to be executed, which would contain terms whereby the assignee of the lease (Alchemy) would assume obligations direct to the landlord. Olswang replied by e-mail to IBB that they had spoken to Vizards and informed them of the landlord’s requirements for the application for consent. IBB checked on the conditions required by the landlord and e-mailed Olswang to confirm that those were the landlord’s requirements. IBB questioned whether under the terms of the lease the landlord was entitled to charge their client, the tenant, for the Licence to Assign. Mr Nicholson for Olswang responded by e-mail later the same day. He said:-

“We did not tell Vizards Tweedie that our client would require your undertaking as to costs. They were told that our client would require their undertaking. They after all are acting for the tenant who will be making the application for consent in due course.

Vizards Tweedie were also told that if the last set of accounts for the proposed assignee were more than 6 months old our client would also need to see copies of their up-to-date management accounts.”

It appears from that e-mail that Olswang had been confused by the fact that Vizards were, in relation to the enfranchisement application, acting as agents for the Astors (the tenant). Olswang appear to have assumed that Vizards were the solicitors for the tenant for all purposes, which, of course, was not in fact the case.

In the light of that e-mail, however, Ms McKay for IBB e-mailed Mr Barber for Vizards to ask whether they would be providing the undertaking as to costs requested by Olswang. That elicited a letter dated 10 March 2008 from Vizards to IBB in which they said:-

“… our reading of Special Condition 16 of the Contract is that where a Licence to Assign is required it is for the Seller to meet the Landlord’s costs.”

With that letter Vizards also said that they enclosed “our client’s last three years’ accounts”. Unfortunately, however, by what appears to have been an oversight, two of the sets of accounts enclosed were not those of Alchemy Estates Limited, but accounts of Alchemy Properties Limited. Therefore, the materials supplied by Vizards at that point were not capable of satisfying the requirements of the landlord.

By an e-mail of 11 March 2008 from Ms McKay to Mr Barber, Ms McKay asked Mr Barber to contact Olswang to request them to deal with IBB in relation to the application for the Licence to Assign. It appears from this e-mail that IBB at this stage recognised that they were the appropriate party to deal with the landlord in relation to securing the landlord’s consent to assignment of the Lease and organising the execution of the Licence to Assign. This was happening just two days before the completion date set out in the Contract. The same day IBB wrote to Olswang indicating that Olswang should deal with IBB in relation to the application for the Licence to Assign in respect of the Property. In that letter IBB also said that although the Lease did not appear to them to contain a provision entitling the landlord to charge for the Licence to Assign, nonetheless IBB undertook to pay their costs for preparing and completing the Licence to Assign limited to £1,250 plus VAT and disbursements properly incurred on completion. IBB also enclosed for Olswang the sets of accounts which Vizards had provided to them. IBB, like Vizards, had not appreciated that two of the sets of accounts were for a different company. IBB also sought confirmation from Olswang that the accounts supplied would be sufficient and that no up-to-date management accounts would be required.

On 12 March 2008, Ms McKay sent Mr Barber an e-mail attaching a copy of her letter to Olswang and pointing out that Vizards had not yet forwarded their client’s landlord or trade reference, which was an item required by the landlord. That same day there were telephone conversations between IBB and Vizards. Vizards reported that Olswang were complaining that they had not yet got a trade or landlord reference and had stated that the landlord did require management accounts. Since there were no up-to-date management accounts available, Vizards were proposing that the principal of Alchemy, Mark Stoneham, would instead offer himself as a guarantor under the Licence to Assign of Alchemy’s obligations.

On 13 March 2008, IBB pressed Vizards for information whether they could complete the agreement that day and for an explanation of what was happening by way of provision of information or a guarantee by Alchemy to the landlord.

Also on 13 March 2008, the contractual completion date, Mr Nicholson of Olswang sent Ms McKay an e-mail in which he said:-

“What I had endeavoured to explain to Vizards Tweedie was if the last filed accounts were for a twelve month trading period that had ended more than six months ago then up to date management accounts for your client would be required so that my client can see that their finances had not deteriorated since the end of that trading period.

I await the above together with the requested references whereupon my client will then be able to consider and come to a view on, the subject application.”

Ms McKay responded by e-mail later the same day. She said:

“Messrs. Vizards Tweedie advises me that as their client company is a family run business … there are no Management Accounts as such. However a director of the company, Mark Russell Stoneham, has offered to be a guarantor for the Lessee’s covenants in lieu of the Management Accounts. Please advise whether your client is prepared to accept Mr Stoneham’s proposal.

I am informed that the trade reference should be available tomorrow.”

This e-mail reflected the position as it had been explained to her on the afternoon of 13 March by Mr Barber.

In fact, a trade reference was not made available on 14 March. One was obtained from a company called Refurbishment for London Limited dated 19 March 2008. It was faxed through by Vizards to IBB the same day, and IBB forwarded it to Olswang. Thereafter, IBB chased Olswang for a draft Licence to Assign for execution. The landlord took time for consideration and sought some additional information from IBB about the sale agreement, which was provided to them. By an e-mail of 2 April 2008 IBB chased Olswang once again for confirmation that the landlord’s consent for the assignment of the lease would be forthcoming. Olswang responded by an e-mail of 4 April 2008, stating that the landlord was in principle prepared to grant its consent for assignment of the Lease to Alchemy Properties Ltd (Olswang evidently having been misled as to the identity of the proposed assignee by the provision to them by mistake of the accounts of Alchemy Properties Ltd). Attached to the e-mail was a draft Licence to Assign. That was forwarded by IBB to Vizards the same day. On 9 April 2008, IBB chased Vizards for confirmation whether they were in a position to approve the draft Licence to Assign, and Vizards responded that they hoped to be able to revert later the same day.

On 10 April 2008 Vizards returned the draft Licence to Assign approved as slightly amended in manuscript, for IBB’s consideration. Vizards stated, “we await the engrossments for execution”. IBB indicated another small amendment to the Licence which Vizards were happy to accept. The amended draft Licence was forwarded to Olswang for their approval. Olswang responded on 10 April in these terms:-

“In our email of 4 April 2008 we stated that our client in principle is prepared to grant its consent to enable the Lease of 30 June 1977 to be assigned to Alchemy Properties Limited, with Mr Mark Stoneham acting as their Guarantor.

It appears that an error in the identity of the proposed Assignee has crept into the subject application and we will need to resolve this error before matters proceed.

The error appears to have arisen in consequence of incorrect filed Accounts being provided.

With your letter of 11 March 2008 three sets of filed Accounts were provided, one for Alchemy Estates Limited and two for Alchemy Properties Limited.

To correct and address the error please arrange to let us have copies of the filed Accounts for Alchemy Estates Limited for the years ending 31 March 2006 and 31 March 2007.”

IBB passed that request to Vizards, asking for the proper accounts to be forwarded as a matter of urgency. Vizards responded with copies of the relevant accounts, and on 11 April IBB forwarded them to Olswang. IBB asked that Olswang provide the engrossment copy Licence to Assign as a matter of urgency.

The landlord again took time to consider its position. In the following days IBB continued to press for an executed form of the Licence to Assign to be issued by the landlord. On 25 April 2008, Olswang sent IBB an e-mail in these terms:-

“Our client in principle is prepared to grant its consent to enable the Lease of 30 June 1977 to be assigned to Alchemy Estates Limited with Mr Mark Stoneham acting as their Guarantor.

The conditions attaching to the grant of such Licence are (a) the payment of our client’s reasonable costs incurred in connection therewith and (b) such Licence is documented within the form of the attached draft Licence to Assign, which is sent for your completion and approval.

When returning the draft Licence to us, please let us have details of the attestation clauses required for your clients, Alchemy Estates Limited and Mr Mark Stoneham.

Please note that this correspondence does not constitute the provision of consent by our client. Such consent will only be provided on the completion and delivery of a formal Licence executed as a Deed.

Please also note that our client reserves the right to change the form of the draft Licence submitted herewith and to impose new conditions to the grant of their licence in light of any further information received in relation to this matter. …”

The draft Licence attached was substantially in the form that had already been approved by IBB and Vizards for their clients, as was clarified in e-mail exchanges later the same day. On 28 April 2008 Vizards confirmed that the draft Licence was approved subject to correction of an omission of the guarantor’s middle names in the description of the parties. Olswang made the necessary correction and on 7 May 2008 sent out an engrossed counterpart version of the agreed form of Licence to Assign for signing by Alchemy and Mr Stoneham. Olswang indicated that the original Licence would need to be sent to their client overseas for signing, so that it might take a week or two before it was returned to them in completed form.

On 16 May 2008 Vizards wrote to IBB with reference to the enfranchisement proceedings in these terms:-

“The original Notice of Claim signed by your clients was served on the 21^st February 2008 on Messrs Olswang (the Solicitors who we were advised could be acting for Property Investments (Chelsea) Limited, Messrs Stevensons of Dereham in Norfolk who are still registered at the Land Registry as the address for the freeholder and Chancery St James Plc.

More than two months having elapsed, no counter notice has been served. There do not appear to be any penalties under the 1967 Act for failure by a landlord to serve a counter notice. However, the freeholder’s agents are claiming that the Notice of Claim was defective but the solicitors have taken no point upon it. Nevertheless, we have taken the benefit of Counsel’s instructions, who has suggested an amended reply to paragraph 5(b) of the schedule of the Notice. Enclosed please find a copy of the Notice of Claim to which has been added a new reply to 5(b).

Counsel also suggested that a second Notice should be served without prejudice to our contention that the earlier Notice served on the 21^st February was valid.

Two consequences arise.

Your clients did of course sign three copies of the original Notice of which we still retain one copy. Therefore we would be grateful if you could confirm whether we may insert the new reply to 5(b) in the existing Notice which we hold so that we can re-serve it on Messrs Olswang and their agents.

Secondly, it would mean you making a manuscript amendment to the TR1.”

The letter then set out the manuscript change that was to be made to the TR1 form.

It is significant to note that by this letter Alchemy was in substance calling on the Astors to fulfil the obligation they had assumed under special condition 22 in the sale agreement, which at sub-clause (f) provided that the seller should assist the buyer in pursuing the claim set out in the Notice. Attached to the letter was a new form of Notice of Tenant’s Claim under the 1967 Act with an answer completed in relation to section 5(b) of the form. On 19 May 2008 IBB responded to confirm that the new form Notice could be re-served on Olswang and that the suggested manuscript amendment to the Transfer Deed had been made.

The same day, however, Vizards wrote to IBB in these terms:-

“We enclose herewith Notice of Rescission served by hand at the addresses set out in the Contract dated the 15^th January 2008 and made between your clients, Judith Caroline Traill Astor and Polly Astor as personal representatives of Joan Antoinette Valerie Shorter of the one part and our clients, Alchemy Estates Limited, of the other part.”

This came as a complete surprise to the Astors and IBB. IBB asked Vizards to clarify the basis on which they were purporting to rescind the Contract. Vizards replied by letter of 20 May 2008 indicating reliance upon clause 8.3 in the Standard Conditions of Sale. They said:-

“At the contractual completion date and as well as at the 19^th May 2008, your clients were not in a position to comply with the requirements for [landlord’s] consent giving our clients the right to rescind.”

The Notice of Rescission served on 19 May 2008 was accompanied by a letter from Vizards to IBB of the same date marked “Without Prejudice”, which is in evidence before the court. The letter contained an offer from Alchemy to progress almost immediately to completion (subject to a completed and executed Licence to Assign being produced) at a significantly reduced price of £1,072,296. The letter sought to explain the position now being adopted by Alchemy. It said, inter alia:-

“Our clients have reluctantly come to the view that they had no alternative other than to serve the Notice.

Our clients are hoping that your clients will understand the action which they have taken. This has been caused by the collapse of market conditions over the months since the Contract was entered into on the 15^th January 2008. Also by the fact that the Freeholder, Property Investments (Chelsea) Limited (an overseas company) have shown by their actions the difficulties that our clients will be faced with in terms of enfranchising and subsequently completing the project. It is now over four months since the Contract was entered into and yet still the Landlord’s Solicitors have been unable to produce a duly executed licence to assign by their clients.

Government figures already concede a potential drop of 5% - 10% in the market but it is apparent in the Central London market that the prices are heading well beyond those figures fuelled by a shortage of mortgages and the nervousness of lenders.

Our clients’ funding arrangements have now been called in for review by our clients’ bank and it is inevitable that the lending on this property will be subject to much tougher conditions than if the Contract had been performed by the 13^th March, being the completion date.”

Vizards stated their client’s hope “that on reflection the Personal Representatives will understand the need for this adjustment in the purchase price to reflect the gloomy prospects for the property market coupled with the difficulties of dealing with this particular Landlord.”

Mr Stoneham in his witness statement in these proceedings for Alchemy explained his position in these terms:-

“18.

By the second week in May 2008 I was becoming troubled by the deteriorating economic climate and was also concerned about the financing of the project, as I would be in breach of the bank repayment date due to the delay. Also, as I would require a licence for alterations in order to carry out work at the property or have concluded purchase of the freehold, I had justifiable concerns these applications would be dealt with in the same slow and frustrating manner as the licence to assign. Also if I had to obtain a licence for alterations under the terms of the underlease the experience which the Defendant’s solicitors appeared to have had with the freeholder’s solicitors as described to me by my solicitors were scarcely encouraging. A licence to assign had still not been completed over 2 months from when my solicitors had advised that the Defendant’s solicitors had approached the freeholders. There was no indication as to when the licence was likely to be finally produced.

19.

The success of the Claimant’s business depended on a swift timetable for carrying out the renovations and the remarketing of the property at the earliest opportunity. My experience of the freeholders to date offered no encouragement that any matters involving them would be dealt with swiftly. …

20.

It therefore seemed to me that by the time we were into the second week of May 2008 (nearly six months after my offer to acquire the Property had been accepted) the deteriorating economic outlook was rendering the renovation project for the Property increasingly less viable. …”

On 21 May 2008 IBB sent Vizards the Licence to Assign as executed by the Astors. IBB invited Alchemy and Mr Stoneham to execute the Licence without prejudice to either party’s rights in relation to the dispute that had arisen between them. On 27 May, however, Vizards returned the engrossed Licence to Assign unsigned, since in light of their client’s rescission of the Contract they maintained that the matter would not be proceeding.

By letter of 6 June 2008 Vizards requested return of the deposit. The Astors maintained that the purported rescission of the Contract by Alchemy was invalid and declined to return the deposit. Accordingly, Alchemy issued the present proceedings claiming repayment of the deposit. The Astors counter-claimed, maintaining that there had been no effective rescission of the Contract and claiming specific performance.

The Licence to Assign as executed by the landlord and the Astors was ultimately sent to Vizards on 11 June 2008.

Mr Hutchings, for the Astors, submits that this is a case in which there is no significant dispute as to the relevant facts, and that summary judgment should be given for the sellers and specific performance of the Contract ordered. Mr Francis, for Alchemy, disputes that this is a case in which it would be appropriate to give judgment on a summary basis and submits that in any event the Astors’ claim for specific performance is ill-founded. I do not think that there is any significant dispute of fact between the parties which calls for a trial. This is one of those cases which gives rise to a short point of law or construction on which the court “has before it all the evidence necessary for the proper determination of the question” and where “the parties have had an adequate opportunity to address it in argument”, so that it is appropriate for the court to proceed to determine the case on the merits at this stage: see ICI Chemicals & Polymers Ltd v TT Training Ltd [2007] EWCA Civ 725, at [12] per Moore-Bick LJ.

The first submission for the Astors is that special condition 16 completely displaces standard conditions 8.3.2 and 8.3.3, with the effect that standard condition 8.3.3 has no application. I do not accept this. It is true that special terms take precedence over standard conditions if there is a clear conflict between them: see Homburg BV v Agrostin Private Ltd [2004] 1 AC 715, at [11]. However, where the parties have adopted both standard conditions and special conditions, and have not indicated that the standard conditions they have adopted are to be displaced in some respect by a special condition and there is no necessary inconsistency between them, then it appears that the parties’ intention is that the standard conditions and the special conditions should be interpreted together as parts of one coherent contractual scheme. That is the position which applies here so far as the relationship between special condition 16 and standard conditions 8.3.2 and 8.3.3 is concerned. In my view, special condition 16 does not wholly displace the standard conditions in the manner contended for by the Astors. Rather, special condition 16 qualifies the balance of obligations between buyer and seller set out in standard condition 8.3.2, to impose a greater set of obligations on the buyer in relation to the efforts required to obtain the necessary landlord’s consent. But it remained a basic obligation upon the seller to set events in train by making the original application to the landlord asking for the required consent.

This interpretation of the Contract is supported by the following reasoning. First, as Mr Francis points out, the legal background is that there would be no obligation upon the landlord to entertain at all an approach by a prospective buyer and assignee of the lease for consent for assignment to him. The landlord and prospective buyer are not in any contractual relationship. The landlord and the seller are in a contractual relationship, and it is in respect of that relationship that the landlord has an obligation not unreasonably to withhold consent for an assignment of the Lease. Against that background, it is natural to suppose that the parties intended that the obligation in standard condition 8.3.2(a) for the seller to apply for the required consent should form a part of the Contract. Further, in the special conditions the parties have in clause 1 expressly reiterated that the contract incorporates the Standard Conditions and have then been careful to specify precisely when those Standard Conditions should have no application (clause 11) or only modified application (clause 5). There is no express indication in special condition 16 that the parties intended to disapply standard conditions 8.3.2 and 8.3.3, nor is there any necessary implication that that is what they intended: the special condition only sets out that a greater onus should be placed upon the buyer in terms of complying with any requirements which might be imposed.

The Lease itself imposes no obligations on the buyer, so where special condition 16 speaks of the buyer having to “comply” with “all requirements of the Lease in relation to its assignment to him” I consider that the natural meaning of the clause is that it is concerned with any reasonable conditions which the landlord might properly insist upon under the Lease in respect of the consent to assignment which is sought from him. This interpretation is reinforced by two features of the latter part of the first sentence in the special condition, namely its particular focus upon the buyer entering into “all documents required by the Landlord” and the words in parenthesis, “(other than where a Licence to Assign is required)”, which preserve a limited obligation upon the seller to take action, if necessary, to seek to procure the landlord’s consent for the assignment to the buyer. Since the lease does not itself impose any requirement for a Licence to Assign, the reference to any requirement for a Licence to Assign in the special condition must be to a requirement imposed, in practice, by the landlord making the provision of such a Licence (i.e. a document executed by the seller, as well as the buyer and the landlord) a condition of his giving consent to assignment of the Lease to the buyer. In my view, the use of the word “required” in both places to refer to requirements of the landlord supports the construction of the phrase “requirements of the Lease” as referring to requirements imposed by the landlord under his right under the Lease to lay down reasonable conditions to be satisfied if he is to consent to assignment of the Lease. I consider that this construction makes commercial sense, best reflects the natural meaning of the language used in special condition 16, and produces the best and most coherent overall interpretation of the Standard Conditions and the special conditions operating together as the parties intended.

This is a construction which leaves standard condition 8.3.3 in place, although with the opening words modified to mean “Unless he is in breach of his obligation under condition 8.3.2 (as modified by special condition 16)”.

A distinct submission made for the Astors is that standard condition 8.3.3 does not apply, because the precondition for its application set out in standard condition 8.3.1(a) was not satisfied. It is said that no “consent to … assign” was “required to complete the contract”, since the Contract did not state that it was to be conditional upon the obtaining of consent from the landlord, and Alchemy could have chosen to waive the requirement for landlord’s consent and insisted that completion occur without it. I do not accept this submission either. Assuming for present purposes that Alchemy did have the option to waive the requirement for landlord’s consent (which I doubt), it is my view that, on a natural reading of standard condition 8.3.1, the landlord’s consent was required in order for the sale agreement to be completed in the manner contemplated by the parties, since it would be necessary for such consent to be given in order to provide Alchemy with good title to the leasehold interest which it was purchasing (see Barnsley’s Conveyancing Law and Practice, 4^th ed., pp. 298 and 300, citing Property & Bloodstock Ltd v Emerton [1969] Ch 94, 122 per Sachs LJ). The word “required” in standard condition 8.3.1(a) is used in this practical sense. It is not intended to operate having regard to technical legal options which might or might not be available to either party in terms of waiver of contractual rights.

Next, the Astors submit that Alchemy is not entitled to rescind the Contract in reliance on standard condition 8.3.3, on the grounds that Alchemy breached its obligations under standard condition 8.3.2(b) read with special condition 16. Since, as I have held, the obligation to ask the landlord for its consent to the assignment of the Lease rested on the Astors under standard condition 8.3.2(a), the fact that no steps were taken by either party to the Contract to seek such consent until rather late in the day did not constitute any breach of obligation on the part of Alchemy.

The delay meant that the landlord did not identify its requirements in respect of giving consent for assignment of the Lease, in terms of accounts for Alchemy and a trade reference, until 6 March 2008. That did not leave Alchemy with much time before the scheduled completion date of 13 March 2008 to comply with those requirements. The Astors, however, submit that Alchemy was in breach of its obligations in that it failed to comply promptly with the landlord’s request for Alchemy’s accounts for three years, and instead under cover of Vizards’ letter of 10 March 2008 supplied the wrong accounts for two out of the three years requested, which IBB then forwarded to Olswang. This occasioned some delay until the mistake was recognised and pointed out by Olswang on 10 April.

Meanwhile, Olswang also indicated, on 13 March 2008, that the landlord required provision of management accounts. Such accounts were not available, and that requirement was addressed by Alchemy offering on 13 March (i.e. on the contractual completion date) to procure the execution of a personal guarantee from Mr Stoneham in place of such accounts. The proposal that the landlord should have the benefit of such a guarantee in substitution for management accounts was accepted in principle by the landlord by Olswang’s e-mail to IBB of 4 April 2008, and was confirmed again in Olswang’s e-mail to IBB of 25 April.

The missing sets of accounts for Alchemy were eventually supplied by Alchemy to IBB and were forwarded to Olswang on 11 April 2008. The trade reference required by the landlord was eventually provided under cover of the letter from Vizards dated 19 March 2008.

In my view, the proper analysis of the situation here is as follows. Under the Contract, Alchemy was entitled to a reasonable time within which to provide the materials necessary to satisfy the reasonable requirements of the landlord in considering whether to give consent for the assignment. It has not been suggested that any of the requirements put forward on behalf of the landlord were in fact unreasonable. I deal first with the question of provision of a trade reference. Since Alchemy, without any fault on its part, was only informed of the landlord’s requirement for a trade reference to be provided on 6 March 2008, it was not in breach of its obligations under the sale agreement in failing to provide such a reference by the date referred to in standard condition 8.3.3 three days before the contractual completion date (i.e. by the beginning of Monday 10 March), or before the contractual completion date (13 March) or at any time until the reference was actually supplied on 19 March. The reference had to be obtained from a third party, and the reasonable period to be allowed should take account of that. I can also put to one side the requirement for provision of management accounts, since in due course and within a reasonable time Alchemy offered to provide a guarantee from Mr Stoneham in substitution for such management accounts, which offer proved to be acceptable to the landlord, and no complaint of breach of obligation is made in respect of this.

I turn, then, to the question of the provision of the annual accounts for which the landlord called. So far as these were concerned, Alchemy had not provided any accounts by the beginning of 10 March (i.e. three working days before the completion date, as identified in standard condition 8.3.3). In my view, there was no breach of obligation by Alchemy in that regard, since even though the annual accounts were within its possession and it was subject to the obligation in special condition 16 to ensure that they were provided, it had only been informed of the requirement one clear working day beforehand. Even though by that stage the contractual completion date was only a short time ahead, I do not think that Alchemy could reasonably be criticised for not providing copies of its accounts by 10 March. However, on 11 March Alchemy did purport to provide copies of the three years’ annual accounts which had been requested by the landlord. Only one of the sets of accounts was for Alchemy itself, however, while two sets were for another company, Alchemy Properties Ltd.

In my view, Alchemy by its own action in purporting to provide the requested accounts on that date showed that, using its reasonable endeavours as required under special condition 16 and having regard to the imminence of the contractual completion date, it was possible to provide annual accounts for Alchemy on that date. It had available to it accounts for the years 2006 and 2007, but they were not provided in accordance with the landlord’s request on that date. It is clear that this was by an error on the part of Alchemy or those acting for it. No good justification or excuse is put forward in relation to this. The effect of it was, in my judgment, that on that date Alchemy was in breach of its obligations under standard condition 8.3.2(b) as modified by special condition 16. The legal consequence was that, as at 11 March and as at 13 March (the contractual completion date), Alchemy was in breach of its obligations in such a way as to disable it at that stage from being able to rely upon standard condition 8.3.3, by reason of the opening words of that provision. It is this breach of obligation on which the Astors particularly rely.

After the contractual completion date had gone by, Alchemy continued to take steps to provide the accounts which were required. Once the error in the provision of the accounts was pointed out by Olswang on 10 April 2008, Alchemy promptly supplied the missing two sets of accounts and they were provided to Olswang on 11 April. At that stage, therefore, Alchemy did comply with its ongoing duty under standard condition 8.3.2(b) read with special condition 16 in respect of the provision of accounts, as it applied as at that date. The same is true of the position as at 19 May 2008 when Alchemy served its rescission notice: Alchemy was not at that stage currently in breach of that duty. However, it is clear from the history of events that the earlier mis-provision of accounts by Alchemy in breach of that duty had had a significant disruptive effect upon the dealings with the landlord and those acting for it. The question therefore arises whether, on proper construction of the opening words of standard condition 8.3.3 (“Unless he is in breach of his obligation …” [emphasis added]), the earlier breach of obligation by Alchemy was such as to disentitle Alchemy from relying on that provision to give notice to rescind the Contract on 19 May 2008.

In my judgment, the phrase, “Unless he is in breach of his obligation …”, requires attention to be focused on the current position as at the time notice to rescind is given under standard condition 8.3.3, but also having regard to any previous breach of such obligation which has any significant continuing effects as at that time. Thus, if at the time notice to rescind is given a party is then currently in breach of his relevant obligations, he is disabled from relying on standard condition 8.3.3. Similarly, the phrase would cover a situation in which, at the time notice to rescind is given, a party is not currently in breach of his relevant obligations but has in the past been in breach of those obligations, where that breach has significant continuing effects tending to impede the obtaining of the landlord’s consent as at the date of the notice. This interpretation seems to me properly to reflect the use of the present tense in the phrase and the overall commercial purpose of this limitation upon the operation of standard condition 8.3.3 (namely, that a party should not have the benefit of an option to rescind under that provision where he may himself bear some responsibility for the fact that the landlord’s consent has not been forthcoming).

For these purposes, I do not think it is right to focus upon the position applicable only on the third working day before the contractual completion date, as I understood Mr Francis to contend. Circumstances regarding a landlord’s requirements and what is done or not done by the parties to the sale agreement to satisfy them may change significantly over time, in ways which bear upon the detailed content of each party’s obligations under standard condition 8.3.2. That provision is intended to be flexible in its operation, depending upon the potentially changing situation in each particular case. The natural point of reference for the words in standard condition 8.3.3 (“is in breach of his obligation”) is the time when the relevant party purports to serve a notice to rescind. Moreover, that interpretation is supported by the fact that it provides a clear point in time specified in the contract by reference to which the specific entitlements of the parties may be determined with reasonable certainty. By contrast, if one were to take the reference point for those words as the third working day before the contractual completion date, it is clear that events may change in relevant ways affecting the obligations of the parties under standard condition 8.3.2 even in the course of that day. A focus on that day, rather than on the time a rescission notice is served, would not necessarily give the determinative guidance as to the time for testing the entitlement of a party to serve such a notice which I think the Standard Conditions are intended to provide. I should add that I do not read the decision of the Court of Appeal in Aubergine Enterprises Ltd v Lakewood International Ltd [2002] 1 WLR 2149, which concerned a predecessor of standard condition 8.3.3 in practically identical terms, as preventing the adoption of this interpretation of the current provision. In that case, the preconditions for the exercise of the right to rescind under the equivalent of standard condition 8.3.3 were all satisfied throughout the relevant period, up to and including the contractual completion date, on which day the notice to rescind was served. This particular question of construction was not in issue in that case.

Applying this interpretation of the opening part of standard condition 8.3.3 to the facts of the present case, I conclude that Alchemy was not disabled by operation of the opening words from serving a notice to rescind on the Astors on 19 May 2008 (if it otherwise had the right to serve such a notice on that date). As at that date, Alchemy had provided all three sets of its own annual accounts that the landlord had required to be provided and so was not currently in breach of its obligations under standard condition 8.3.2(b) read with special condition 16. Further, any difficulties with the landlord which had arisen earlier through the mistaken provision of the wrong accounts had been sorted out and smoothed over by 19 May 2008, so Alchemy’s earlier breach of obligation had no significant continuing effects affecting relations with the landlord as at 19 May 2008.

The next limb of the Astors’ submissions involves consideration whether Alchemy had a right to rescind the Contract in reliance on standard condition 8.3.3 as at 19 May 2008, in light of the way it had conducted itself over the period from 10 March (at the beginning of which day the right to rescind under that provision arose). In my judgment, there are two reasons why Alchemy had no such right.

First, since Alchemy did not, in the three day period up to the contractual completion date or within a reasonable time thereafter, purport to exercise such right of rescission under standard condition 8.3.3 as it enjoyed, but allowed the sale agreement to remain on foot and encouraged the Astors to continue working towards its completion, Alchemy lost the right to rescind under this provision. I expand upon this analysis below.

The interpretation and effect of standard condition 8.3.3 are informed both by the background rules of equity governing the operation of contracts for the sale of land (see Re Hewitt’s Contract [1963] 1 WLR 1298, at 1301 per Wilberforce J) and by the general scheme of the Standard Conditions of which that provision forms part. So far as concerns the scheme of the Standard Conditions, they have been drafted in the light of experience over many years to provide a fair balance between the interests of buyer and seller. It is provided that time is not of the essence (standard condition 6.1.1). Standard condition 6.8 governs the service of a notice to complete after the contractual completion date has arrived so as to make time of the essence, including in relation to matters of title such as obtaining landlord’s consent for assignment of a lease. The purpose of serving such a notice is to give the recipient a fair opportunity to put right any problem which stands in the way of completion. If it were possible for the right of rescission under standard condition 8.3.3 to have extended application in the period after the contractual completion date has arrived, allowing a notice of rescission to be served without warning at any stage, it would undermine the general scheme of the Standard Conditions, under which reasonable notice is ordinarily required before rescission is possible. This cannot have been the intention of the drafters of the Standard Conditions.

In my view, standard condition 8.3.3 has a very specific object, which is to allow the parties to a sale agreement to assess their respective positions where landlord’s consent has not been obtained at a specific point in time a short period before the contractual completion date in order to decide whether they wish to go on with the agreement in circumstances where it has become clear that there may be a difficulty in obtaining such consent. It is a provision which allows an area of uncertainty as to how a stranger to the contract (the landlord) might act which remains unresolved in the immediate lead up to the contractual completion date to be brought to a head by either party opting to treat the contract as rescinded on that basis. The provision allows the parties to anticipate the possible non-fulfilment by the contractual completion date of a condition upon which they contemplate their agreement depends. It enables them to achieve certainty at a particular defined juncture in the life of the contract, given by reference to the third working day before the contractual completion date (see Aubergine Enterprises Ltd v Lakewood International Ltd [2002] 1 WLR 2149, [46]-[51]). It is significant that the provision creates an option for either party to rescind at that stage, which is to say that it allows for each of them to re-assess in the light of the up-to-date information available at that point the extent of the risks which he will assume if he proceeds with the agreement, and to choose to unwind it if he then decides he does not wish to accept the obligations which the agreement will impose upon him moving forward into the future. I consider that it is clear that neither the drafters of the Standard Conditions nor the parties intended that the effect of a right to rescind arising under standard condition 8.3.3 shortly before the contractual completion date should continue indefinitely thereafter, so as to afford each party the potential ability to bring the agreement to an end without any warning at all (no matter how much time, effort and expense the other may have put into working for the proper completion of the agreement after the contractual completion date has passed, and no matter how close they may be to being able to achieve completion). If the right of rescission under standard condition 8.3.3 is not exercised promptly - by which I mean by the contractual completion date (which was found to be acceptable in Aubergine Enterprises) or perhaps a matter of a day or two thereafter - both parties must be taken to have decided that they wish to proceed with the original allocation of risk set out in their agreement.

This interpretation is reinforced by the words in parenthesis in standard condition 8.3.3, which define a different relevant point in time at which the right of rescission may arise by reference to any “later date on which the parties have agreed to complete the contract”. This part of the provision will typically apply where the contractual completion date has been missed, but the parties then agree that there should be a new completion date. It, therefore, suggests that the earlier right of rescission which arose by reference to the third working day before the original contractual completion date is not intended to create a right of rescission which continues to be available for use at any time before actual completion of the contract, since in the typical case it would then have been unnecessary to make further provision for such a right of rescission to arise.

The main objects of standard condition 8.3.3 seem to me to be to create a fair allocation of risk between the parties in respect of the behaviour of the third party landlord who is not subject to the contract, and to create a mechanism whereby the parties are able to introduce a reasonable degree of certainty into their relationship in the light of potential uncertainties created by the action or inaction of the landlord. In my judgment, both these objects point in the direction of the construction of the provision referred to above. So far as concerns the fair allocation of risk between the parties, once the contractual completion date has passed with neither party giving notice to rescind under the provision, the fair position will be that each of them should have reasonable assurance that they may expend time, effort and resources in continuing to work towards obtaining the necessary consent without being at risk of the other party simply turning round at any stage when it calculates that the contract is no longer in his commercial interests and rescinding it without warning. This is also a position which creates reasonable certainty in the parties’ relationship, since each side is afforded a degree of assurance that he can continue seeking to secure consent from the landlord, on the basis that each is relieved from being exposed to the whim of the other and the possibility of rescission of the contract without any warning. I do not consider that the parties intended, by the incorporation of standard condition 8.3.3 into the Contract, to create a right arising in the immediate period before the contractual completion date but not used then, which either of them could simply keep in their pocket and then use later at any time after the contractual completion date without any prior warning to the other, if the contract was no longer thought to be commercially attractive (as Alchemy sought to do here). In my view, the contractual right of rescission under the standard condition must be exercised promptly, which means by the contractual completion date or, possibly, within a day or two thereafter.

This approach to the operation of the standard condition is also supported by the particular reasons given by Auld LJ in his judgment in Aubergine Enterprises at [51] for the construction of the provision adopted in that case. He said:

“… The purpose of the provision is to provide a contractual and readily identifiable time limit within which the seller must, with the co-operation of the buyer, procure the landlord’s consent in order to enable each to comply with its obligation to complete on the contractual completion date. Both parties know exactly where they stand if, as they approach that date, consent has yet to be given and if, for one reason or another, either party no longer considers it in its commercial or other interest to proceed with the matter. It is in the interest of both parties that they should have an incentive to facilitate the grant of consent in good time within the contractual timetable and, failing it, to notify the other promptly if it intends to rescind. …”

On no view did Alchemy in the present case exercise its right of rescission under standard condition 8.3.3 “promptly” or within a reasonable time after that right had arisen. Therefore, if it wished to rescind the Contract in May 2008, it had to use the notice to complete procedure under standard condition 6.8, requiring the Astors to provide good title for the leasehold interest (but also, of course, giving them the opportunity to try to ensure that they achieved that).

The background rules of law governing the operation of contracts for the sale of land support the same conclusion, that Alchemy was not entitled to rescind the Contract without warning on 19 May 2008. An equitable approach to the exercise of rights between the parties contained in contracts for the sale of land has been established for a very long time. That approach will apply unless excluded by clear contractual language used by the parties in defining their obligations. No such language was used here in relation to the operation of standard condition 8.3.3 in the period after the contractual completion date.

Mr Hutchings relied upon an analogy with the operation of standard terms in contracts for the sale of unregistered land regarding the raising of requisitions by the buyer in relation to the vendor’s title, and the entitlement of the vendor to object to answer such requisitions and, if the requisitions are insisted upon, then to rescind the contract (in the sense of unwinding it in a manner similar to that applicable under standard condition 8.3.3, with the deposit being repaid, but neither party being liable in damages). In my view, this provides a close analogy with the operation of standard condition 8.3.3. Checking title in relation to unregistered land has always been capable of throwing up unforeseen supervening difficulties in the giving of title through no fault of either party, akin to the sort of supervening difficulty which might arise if a landlord refuses to give consent for the assignment of a lease which is being sold. To deal with such cases, it was usual to agree that the vendor could object to a requisition, if he did not wish to assume the risk in relation to that matter in completing the contract; the buyer could then decide whether he wished to insist upon the requisition (if he did not, he would be taken to have accepted the risk in relation to the matter which had arisen); and if he did insist upon the requisition, the vendor was then afforded an opportunity to assess whether he wished to continue to assume the risks provided for in the contract, and if not he had the option to repay the deposit and rescind the contract. The standard form provisions to deal with such cases were intended to provide the vendor with the right to re-consider the risks and withdraw at a particular juncture in the life of a sale agreement, just as standard condition 8.3.3 does for both buyer and seller under the current Standard Conditions.

It is established in the requisition cases that the vendor’s right to elect to unwind the contract must not be exercised unreasonably (Quinion v Horne ([1906] 1 Ch 596), but only bona fide for the purpose for which it was made part of the contract (Bowman v Hyland (1878) 8 Ch D 588); and see Selkirk v Romar Investments Ltd [1963] 1 WLR 1415, PC, 1422 per Viscount Radcliffe. Precisely because the vendor’s power to rescind is “a formidable weapon in the vendor’s hands”, he is bound to exercise the right of rescission given him by the relevant contract term “fairly, and to determine promptly whether he [will] exercise the power or not. He [is] not entitled to take advantage of his position, and to leave the purchaser in ignorance whether the contract [is] to be treated as rescinded or not”: Smith v Wallace [1895] 1 Ch 385, 390 per Romer J.

Likewise, in the present case, the right of either party to rescind under standard condition 8.3.3 is a formidable weapon, which should be exercised promptly after the right arises three days before the contractual completion date, and cannot be left at large to be used without warning at any time thereafter. Indeed, the extraordinary force of the right of rescission under this standard condition is emphasised by the interpretation given its predecessor by the Court of Appeal in Aubergine Enterprises at [46]-[51], to the effect that once the right of rescission arises on the third day before the contractual completion date, it will not be lost thereafter even though the requisite landlord’s consent is thereafter obtained. This seems to me to emphasise the equitable requirement that any exercise of this right of rescission (whether by seller or by buyer) must be especially prompt, to let the other party know where they stand, where that other party is likely otherwise to continue to make efforts and incur expense in seeking to obtain the landlord’s consent which is required. I also think that the background of the ongoing enfranchisement claim by the Astors under the 1967 Act which had been commenced by them in February 2008 pursuant to the Contract and for the benefit of Alchemy reinforced the obligation of Alchemy to give prompt notice if it intended to rely upon the right of rescission under standard condition 8.3.3. If, in reliance upon rights under that provision, the Contract was not to proceed because of want of consent from the landlord, the Astors needed to know that quickly, so as to minimise any expenses if they did not wish to proceed with the enfranchisement claim and to maximise their opportunity to seek to negotiate with the landlord for a withdrawal from that claim.

It is a feature of the equitable approach which is applicable to the interpretation and operation of terms relating to requisitions that the general position is that the vendor is only allowed a reasonable time within which to make his decision whether to rescind or not in reliance on this contractual term: St. Leonard’s Shoreditch Vestry v Hughes (1864) 17 CB (NS) 137. Mr Hutchings submitted that the same is true of the right of rescission under standard condition 8.3.3, and relied upon passages in the judgment of Megarry J in Brickwoods Ltd v Butler and Walters (1969) 21 P & CR 256, at 263-264. He submitted that Alchemy had not exercised its right to rescind under that provision within a reasonable time, and hence that it had lost that right by the time it purported to rescind the agreement on 19 May 2008. Whilst I think there is some obscurity in the reasoning of Megarry J at p. 264 in that report, I have no doubt that the general equitable approach referred to above leads to the conclusion that such rights of rescission as are referred to in these cases must be exercised promptly and within a reasonable time of the right arising. The reason is that the parties need to know clearly where they stand and whether the contract is to proceed or not. The requirement that such rights must be exercised within a reasonable time is confirmed by commentators: see Dart’s Treatise on the Law and Practice Relating to Vendors and Purchasers of Real Estate, 8^th ed. (1929), p. 160; Farrand, Contract and Conveyance, 4^th ed., p. 124. Since the object of standard condition 8.3.3 is to enable the parties to establish with reasonable certainty where they stand in the period immediately leading up to the contractual completion date, I consider that a particular obligation of promptness in the exercise of the right of rescission applies, and the reasonable time to be allowed for decision is short (up to the contractual completion date and perhaps a day or two thereafter: beyond that, the provision would not achieve its object and would clash to an excessive degree with the notice to complete regime in the Standard Conditions).

The legal analysis above proceeds as an exercise in interpretation of standard condition 8.3.3 in the light of the general scheme of the Standard Conditions and against the background of the general law, without it being necessary to refer to the general tests in the law of contract for implication of terms. However, if it had been necessary to do so, I would also have held that in the context of the particular agreement in this case and the Standard Conditions, the officious bystander test would have led to the same interpretation, namely that any exercise of the right to rescind under standard condition 8.3.3 is required to be prompt.

As at 19 May 2008, Alchemy had given no notice (let alone any prompt notice or notice within a reasonable time) to the Astors that it intended to invoke any right to rescind under standard condition 8.3.3. Its rescission of the Contract came as a complete surprise. In my judgment, Alchemy was not entitled to rescind the agreement without warning on that date.

It is for observation, but is not critical to the analysis above, that by 19 May 2008 the landlord had, by Olswang’s e-mail of 25 April 2008, already provided the relevant consent referred to in standard condition 8.3. Although the consent was expressed to be in principle and to be conditional upon payment of reasonable costs and execution and delivery of a formal Licence to Assign in the form of a deed, it is clear from the terms of standard condition 8.3.3(b) that a consent given subject to certain conditions may be sufficient to prevent the right to rescission under the standard condition from arising or continuing. This was the basis for the decision of the Court of Appeal on a similar issue which arose in Aubergine Enterprises: see [34]-[45], especially at [36] and [43]-[44]. In my view, the expression in Olswang’s e-mail of the landlord’s consent in principle, subject to certain conditions, satisfied the relevant test for landlord’s consent laid down by the Court of Appeal in that case, which applies to what is now standard condition 8.3. It was consent which was expressed to be subject only to reasonable conditions, and was unequivocal.

Finally, I turn to the second reason why, in my judgment, Alchemy was not entitled to give immediate notice to rescind the Contract on 19 May 2008. This is because, even if I am wrong in my analysis above in rejecting the submission that Alchemy had an established and continuing right to rescind the Contract in reliance on standard condition 8.3.3, I consider that Alchemy by its actions gave a clear and unequivocal indication after the contractual completion date that it regarded the Contract as on foot, was itself seeking to rely upon it and thereby affirmed it. Mr Francis submitted that all that was done by Alchemy was consistent with it reserving its right of rescission at any time under standard condition 8.3.3, and he relied on Aubergine Enterprises at [71] to show that the fact that a purchaser’s and vendor’s solicitors continue to work towards completion may not be sufficient to amount to a representation by the purchaser that it would not have recourse to its right to rescind under the standard condition if, for one reason or another, it suited its commercial interests to do so. In response, Mr Hutchings submitted that after the contractual completion date Alchemy and its solicitors did a range of things indicating that it treated the Contract as subsisting (see paragraphs [22] to [26] above): cf Aquis Estates Ltd v Minton [1975] 1 WLR 1452. In particular, he relied upon the letter from Vizards of 16 May 2008, on behalf of Alchemy, in which Alchemy requested the Astors to present an amended Notice of Claim under the enfranchisement procedure.

In my view, Mr Hutchings was correct in characterising this last letter as a step by which Alchemy sought to require the Astors to act in accordance with their obligations under special condition 22 in respect of the enfranchisement procedure. The letter amounted to an unequivocal representation by Alchemy that it regarded the Contract as on foot, and wished the Astors to comply with their obligations under it. Accordingly, it constituted an affirmation by Alchemy of the Contract notwithstanding any then established right Alchemy might have had to bring it to an end by immediate notice under standard condition 8.3.3.

For the reasons given above, I dismiss Alchemy’s claim and give judgment for the Astors on their claim for specific performance of the sale agreement.