Redwell Investments Ltd v 1-3 Cuba Street Ltd

In a land sale, the meaning of “actual completion” depends on construction of the particular agreement in the light of facts known to the parties when they contracted. No absolute rule requires completion to occur either on transfer of title or only after payment of the full price.

A clause fixing an interest rate does not itself impose an obligation to pay interest. Where parties knowingly transfer title while leaving part of the price outstanding on an agreed interest-free basis, late-completion provisions do not support post-completion interest and equity should not award it. Inter-company accounting entries representing payments do not remain separate liabilities capable of being released as claims under the underlying agreement.

Redwell purchased the Westferry site and contemporaneously agreed to sell 1-3 Cuba Street to Cuba. Title was transferred on 30 March 1999, while £162,500 of the purchase price remained outstanding. Redwell later claimed that sum, interest, and related amounts.

After a five-day trial, HH Judge Weeks QC dismissed the claim. The issues on appeal were whether rent entries in the parties’ inter-company accounts had to be restored following a 2004 release agreement, and whether the sale contract or equity entitled Redwell to interest on the deferred purchase monies.

Appeal dismissed unanimously. Chadwick LJ gave the judgment, with Wall LJ and Moses LJ agreeing.

1. On the rent issue, the entries in the inter-company account represented payments made through the accounting arrangement adopted by the parties. When the accounts were balanced, separate items of indebtedness ceased to exist and were replaced by a single net balance owed by Cuba. The rent entries therefore did not constitute a claim, demand or liability arising against Redwell under the 26 March 1999 agreement. The 2004 release agreement did not require the relevant sum to be added back.
2. Clause 16 of the sale agreement merely specified the contract rate. It did not itself create an obligation to pay interest or identify when, to whom, or in what circumstances interest became payable. Standard condition 7.3 did create an obligation to pay compensation for delayed completion, calculated for the period between the contractual completion date and actual completion.
3. Whether actual completion had occurred depended on construction of the agreement in the light of the facts known to the parties. There was no absolute rule that completion occurred on transfer of title or only when the full price had been paid. Although simultaneous transfer and payment was the normal expectation, the parties here knew that £162,500 would remain outstanding. Clause 17 therefore prevailed over the inconsistent effect of condition 6.4, and actual completion occurred when title was transferred on 30 March 1999. Condition 7.3 did not provide for interest after that date.
4. The court assumed that equity could in principle award interest secured by an unpaid vendor’s lien. However, the trial judge’s finding that the deferred monies were agreed to be interest-free made an equitable award inequitable. The appellant accepted that, if that finding stood, statutory interest under the Supreme Court Act 1981 and reliance on section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 could not assist.
5. The trial judge was entitled to prefer the evidence supporting the interest-free agreement. The documentary evidence, including the companies’ statutory accounts, supported his conclusion. The failure to cross-examine one witness on the issue caused no disadvantage because he knew the opposing evidence. The finding was therefore not open to appellate challenge, and the order dismissing the claim stood.

Obiter: Chadwick LJ stated that permission to appeal had been wrongly granted because the appeal had no realistic prospect of success, and cautioned against any future misuse of the court’s process.

• Court of Appeal (Civil Division): On 14 December 2005, dismissed Redwell’s appeal.
• Chancery Division of the High Court: On 20 April 2005, HH Judge Weeks QC, sitting as a Deputy Judge, dismissed Redwell’s claim after determining the rent and interest issues against it.