Aribisala v St James Homes (Grosvenor Dock) Ltd.

A contractual term cannot exclude the court’s discretionary jurisdiction under section 49(2) of the Law of Property Act 1925 to order repayment of a deposit in an action concerning the return of a deposit. The jurisdiction is conferred on the court, rather than constituting a private contractual benefit which the purchaser may waive. An attempted exclusion therefore amounts to an impermissible ouster of the court’s jurisdiction and is void on public-policy grounds. The provision’s scope is wider than the limited equitable circumstances formerly assumed, extending to cases where justice requires repayment. The court accordingly held that an application for relief under section 49(2) could not be summarily dismissed merely because the contract purported to exclude that provision.

The Purchaser agreed to buy two leasehold properties from the Vendor under contracts incorporating the Standard Conditions of Sale. The contracts amended the forfeiture provision by stating that section 49(2) of the Law of Property Act 1925 would not apply. The Purchaser failed to complete after service of notices to complete, and the Vendor rescinded the contracts and retained the deposits.

The Purchaser claimed specific performance or repayment of the deposits. The specific-performance claim was abandoned. The Master referred to a judge the issue whether the contractual exclusion of section 49(2) was effective. A separate issue concerning whether relief would be available on the pleaded facts was left for further consideration.

1. Application for summary dismissal. The issue before the court was confined to whether clause 1.2 validly excluded section 49(2) of the Law of Property Act 1925. The Vendor’s separate argument that the Purchaser had no realistic prospect of obtaining relief was not determined because the required notice under CPR rule 24.4(3) had not been given.
2. Nature and scope of section 49(2). Section 49(2) confers jurisdiction on the court, exercisable in its discretion, to order repayment of a deposit in an action for its return. It does not merely confer a private contractual benefit upon the purchaser. The jurisdiction has a broad scope and may be exercised where justice requires, having regard to matters including the conduct of the parties, the gravity of the circumstances and the sums involved.
3. Contracting out. The jurisdiction is analogous to equitable relief against forfeiture. The reasoning in Schindler v Pigault and Universal Corporation v Five Ways Properties Ltd showed that section 49(2) had a wider operation than previously assumed. A contractual term that purports to exclude it seeks to prevent the court exercising a statutory jurisdiction in every case within the section. That is an impermissible ouster of jurisdiction and is void for public policy.
4. Authorities and statutory comparisons. The observations in Country and Metropolitan Homes Surrey Ltd v Topclaim Ltd did not decide whether section 49(2) could be excluded where the purchaser was in default. The comparison with section 146 of the Law of Property Act 1925 and section 110 of the Land Registration Act 1925 did not justify an inference that section 49(2) was contractually excludable. The principle in Hyman v Hyman, applied in Re Wynn (deceased), supported the conclusion that a party cannot by covenant prevent the court exercising a statutory jurisdiction.
5. Clause 1.2 was ineffective to exclude the Purchaser’s right to apply under section 49(2). The Vendor’s application for summary dismissal on that ground was dismissed. The remaining issue was adjourned for further directions or determination.