Eyestorm Ltd v Hoptonacre Homes Ltd

A buyer cannot invalidate a notice to complete merely by alleging a breach by the seller. The buyer must identify a legally operative contractual obligation and show that the breach caused the failure to complete. A new, unpleaded implied-term case will not ordinarily be entertained. An informal variation of a land contract is ineffective where it fails the formalities in Law of Property (Miscellaneous Provisions) Act 1989. Following a buyer’s repudiation, the seller may rescind and forfeit the deposit, subject to the discretionary jurisdiction under Law of Property Act 1925.

Eyestorm agreed to acquire leases of 14 flats from Hoptonacre, intending to sub-sell them before the contractual completion date. After the sub-sales failed, Hoptonacre served notices to complete, rescinded the agreement and forfeited the deposit. Eyestorm claimed that Hoptonacre had breached the agreement by marketing the flats and sought damages and repayment of the deposit.

The Central London County Court held that Hoptonacre had validly rescinded, was entitled to forfeit the deposit and was entitled to damages. Eyestorm appealed on the marketing issue and the refusal to exercise the statutory jurisdiction to return the deposit. It did not challenge the trial judge’s findings concerning access for mortgage valuations.

Appeal dismissed. Lord Justice Rimer gave the judgment, with Lord Justice Lawrence Collins and Lord Justice Tuckey agreeing.

1. The June agreement gave Eyestorm no express or implied right of access to the flats for valuation purposes. The trial judge’s factual findings on access were not challenged.
2. Eyestorm could not rely on a new implied term preventing Hoptonacre from marketing the flats. That case was not pleaded, and Hoptonacre had not come to trial prepared to meet it. The court also found no demonstrated legal basis on which the September agreement could be relied upon. The September terms purported to amend the June land contract, including the completion date, but were void for non-compliance with section 2 of Law of Property (Miscellaneous Provisions) Act 1989, following McCausland and Another v Duncan Lawrie Ltd [1997] 1 WLR 38.
3. Although the trial judge had found that Spicer McColl continued marketing the flats after the September agreement, Eyestorm’s evidence was that its inability to complete was caused exclusively by lack of access for mortgage valuations. That case had been rejected on the facts. Any marketing breach therefore did not make Hoptonacre other than ready, able and willing to complete, and did not invalidate the notice to complete or the subsequent rescission. The court left open whether an established and causative breach by a seller would necessarily have that effect. It expressed reservations about treating Prosper Homes Ltd v Hambros Bank Executor and Trustee Co Ltd (1980) 39 P & CR 395, at p 400, as conclusive on the point.
4. Eyestorm’s failure to comply with the notice to complete entitled Hoptonacre to rescind and forfeit the deposit under Standard Condition 7.5.2(a)(i). The refusal to return the deposit under section 49(2) of Law of Property Act 1925 was a proper exercise of discretion. The alleged increase in the flats’ value had not been evidenced before the trial judge and could not support appellate intervention.

1. Court of Appeal (Civil Division) — In [2007] EWCA Civ 1366, the appeal against the county court’s order was dismissed.
2. Central London County Court — On 23 January 2007, His Honour Judge Brian Knight QC dismissed Eyestorm’s claim, upheld Hoptonacre’s rescission and forfeiture of the deposit, ordered cancellation of the land-register notice, and awarded Hoptonacre damages, interest and costs.