Donnelly & Ors v Weybridge Construction Ltd

A claimed purchaser’s lien over registered land may be protected by a unilateral notice before the lien has been adjudicated. The court nevertheless retains power to vacate the notice. That discretion should be exercised by an approach akin to an interlocutory injunction, with the balance of convenience as the central consideration. The overriding question is which course creates the least risk of injustice if it proves to be wrong. Relevant matters include the practical value of the notice, its effect on the opposing party, the absence of an undertaking in damages, proportionality, and the timing and purpose of registration. A claimant has no general right to security for its claim, and alternative security should not be imposed without a proper application and evidence.

The claimants contracted to purchase 18 apartments from Weybridge Construction Ltd. They refused to complete, alleging repudiatory breaches concerning design, workmanship, planning permissions, building regulations and specifications. They claimed rescission, repayment of deposits and damages, while the defendant counterclaimed.

Pending trial, the claimants registered unilateral notices against the freehold title to protect alleged purchasers’ liens for their deposits. The defendant applied for the notices to be vacated because they prevented a proposed sale of the apartments. The application concerned the claimants’ prima facie entitlement to register the notices, the court’s power to vacate them, and the proper exercise of that discretion.

1. Power to register and vacate. The claimants had a prima facie entitlement to register unilateral notices. Under section 34(1) of the Land Registration Act 2002, a person claiming an interest affecting a registered estate may apply for a notice. Section 87(1) includes a pending land action within the relevant category of interest. The court also had power to vacate the notices.
2. Applicable approach. The power to vacate should be exercised in a manner akin to an interlocutory injunction. The decisive consideration was the balance of convenience, namely which course was likely to involve the least risk of injustice if it proved wrong.
3. Application. The balance overwhelmingly favoured discharge. The notices were unlikely to provide practical protection because the bank’s first charge appeared to absorb the sale proceeds. They nevertheless prevented a sale which would enable the defendant to mitigate its alleged losses. The claimants had offered no undertaking in damages. It would also be disproportionate for notices protecting deposits of £25,000 each to prevent a sale exceeding £5 million. The timing of registration supported the conclusion that the notices were intended, at least in part, to exert commercial pressure.
4. The court did not treat uncertainty concerning who had originally paid the deposits as relevant to the discretion and proceeded on the basis that the claimants had paid them.
5. The notices were ordered to be discharged without conditions. The claimants had no general right to security for their claims. Any application for security for costs under the CPR would be separate and required proper evidence.

First-instance decision. No prior appellate decision is stated in the judgment.