Analysis
The claimant was the freehold registered proprietor of 7 Parkside Parade, Dartford, Kent (7 Parkside Parade). The defendant was managing director of a construction company called Earlswood Interiors Ltd (Earlswood Interiors). Earlswood Interiors carried out some work on the claimant’s home, a different property. There was an issue with payment for additional works. In April 2018 Earlswood Interiors had been owed £15,000 and had demanded that sum from the claimant. It was found that no unwarranted or illegitimate pressure had been applied to the claimant but she had felt under pressure to make payment. It was in that context that the discussions about the potential sale of 7 Parkside Parade occurred. Earlswood Interiors later assigned the debt to the defendant. It was agreed the defendant would purchase 7 Parkside Parade from the claimant for the sum of £270,000. There was a handwritten note of the claimant. There were then three letters recording the agreement, the first being dated 28 April 2018. The letters were signed by both parties.
On 27 July 2018 the defendant’s solicitor had written to the claimant’s solicitor stating that he withdrew from the transaction and demanded the sum of £25,000. This sum reflected the outstanding amount for the building works, a deposit of £5,000 which had been paid, and the claimed wasted solicitor costs. Thereafter attempts were made to progress the transaction but without success.
The defendant claimed it was a binding contract. The claimant claimed it was an oral agreement, impliedly subject to contract, and that it failed to comply with s2 Law of Property (Miscellaneous Provisions) Act 1989. The signatures were said to have been procured by undue influence or duress.
The defendant registered a unilateral notice against the title of 7 Parkside Parade. The claimant issued proceedings to have the notice removed. The defendant issued a counterclaim for specific performance or damages. In the alternative there was a claim for restitution for costs and the difference between sale price and market value of 7 Parkside Parade.
Held:
- (1) The first of the letters had not been signed by the claimant under duress or undue influence or pressure. The claimant knew in general terms what she was signing on each occasion. None of the three letters reflected the entire agreement which had been reached: a deposit of 10% payable on exchange, along with a one-year long-stop date for completion, and the defendant would fund the legal costs. These terms were not referred to in the letters. The documents did not comply with s2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 and were unenforceable as contracts.
- (2) But for that unenforceability the court would have concluded that the letters were not subject to contract, but were intended to be immediately binding. The contract would also have been supported by consideration as it expressly agreed the benefits to be obtained by the claimant.
- (3) If a valid and binding contract had arisen specific performance would not have been ordered. It was a discretionary remedy and would not have been exercised in circumstances where the defendant had indicated as early as August 2018 that he did not want to proceed and discussions about continuing had not taken place over a long period of time before the defendant was seeking the return of his monies and payment of the debt. Expert evidence indicated that the agreed price may have been at a substantial undervalue when the claimant had received no independent advice on value.
- (4) In Thorner v Major [2009] and Howe v Gossop [2021] the courts had sought to distinguish the factual scenario and emphasise the defensive nature of the relief sought when considering intended, but ineffective, contracts. Those distinctions were not convincing:
- (i) Whether the doctrine operated defensively or offensively might simply depend on who issued first.
- (ii) There was no clear dividing line between commercial and informal family cases. Some cases would be commercial but also involve family. The current case could be said to be commercial but also had elements of informality.
- (iii) There was no reason why, simply because the parties intended a contract which then failed to comply with s2(1), that should preclude the party from inviting the court to grant equitable relief. The party relying on estoppel was not circumventing s2(1). They were simply put back into a non-contractual position and like any other claimant had to prove the elements of proprietary estoppel. They were in no stronger position, but there was no reason for them to be in a weaker position. If the elements of proprietary estoppel were satisfied then the court should be able to grant relief.
- (5) There could be greater problems in cases where the parties had intended a contract which then failed due to non-compliance where the remedy sought was the same as enforcing an invalid contract. It was difficult to conclude that an expectation performance remedy should be granted where a constructive trust cannot be found in light of Dudley Muslim Association v Dudley Metropolitan Borough Council [2015]. That authority did not preclude relief which was not enforcing the contract or similar relief, but instead some other relief in the form of relieving some detriment.
- (6) The promises relied on were in substance those relied on in the letters. The defendant did not suffer detriment by waiver of fees. Earlswood Interiors had assigned the debt to the defendant and he remained able to pursue the claimant for those fees. They had not been waived. The defendant did not suffer detriment for agreeing to carry out the snagging work as that was being carried out by a different legal personality, Earlswood Interiors, which was probably obliged to carry out the work anyway. The defendant did suffer detriment in the advance of £5,000 to the claimant and expenditure on legal fees, which was fairly modest. The £5,000 could have been recovered by the restitutionary claim so the equitable claim did not add anything.
- (7) While the claimant’s repudiation was unconscionable in light of the defendant’s reliance, there were reasons why something less than full performance would negate any unconscionability. It would confer an unwarranted benefit on the defendant to grant relief on the difference in value between the agreed undervalue price and the market value of 7 Parkside Parade.
- (8) In respect of the legal expenses the defendant had known fairly quickly that the claimant was not committed to the purchase. A large proportion of the legal expenses were incurred with the defendant’s eyes open to the risk that the claimant would not complete.
- (9) The restitutionary claim succeeded in respect of the £5,000. It was dismissed in respect of the other sums claimed. The claimant had not been unjustly enriched by maintaining her beneficial interest in 7 Parkside Parade.
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