Ezekiel & Anor v Kohali & Anor

In an open contract for the sale of land, the law ordinarily implies an obligation on the vendor to show good title. That implication is rebutted where the purchaser actually knew, before contracting, that the vendor’s title was defective and nevertheless agreed to proceed. Actual knowledge may be inferred from the whole evidential picture; a direct admission is unnecessary. The rule differs where the written contract expressly requires good title, because pre-contract knowledge cannot vary that term by oral evidence. Where actual knowledge is established, the purchaser cannot obtain an abatement or resist specific performance on the basis of the known defect.

The purchasers agreed in 1999 to buy two plots of undeveloped land for £300,000. The vendors’ registered title did not cover all the land contracted to be sold, and the agreement was silent on title and service easements. The purchasers later sought specific performance with an abatement and damages for alleged misrepresentations. The vendors counterclaimed for specific performance at the contract price and sought interest.

After an eight-day trial, the Deputy High Court Judge found that the purchasers knew the extent of the vendors’ title before contracting. She ordered specific performance without an abatement, rejected the misrepresentation claims and refused equitable interest. The appeal challenged the finding of actual knowledge and the resulting order. The cross-appeal raised constructive knowledge and interest.

1. Disposition. The Court of Appeal unanimously dismissed both the purchasers’ appeal and the first respondent’s cross-appeal. Lord Justice Wall and Lord Justice Stanley Burnton agreed with the judgment of Lord Justice Mummery.
2. Implied obligation as to title. For an open contract which is silent about title, the law ordinarily implies an obligation on the vendor to show good title. As explained in Mc Grory v Alderdale Estate Co [1918] AC 503, the implication may be rebutted by proof that the purchaser entered into the contract knowing of defects in the vendor’s title. The inference is that the purchaser accepted a less complete title.
3. Express title term. Where the written contract expressly requires the vendor to make a good title, the vendor cannot rely on the purchaser’s prior knowledge of defective title to avoid that obligation. Oral evidence to that effect would conflict with the parol evidence rule.
4. Actual knowledge and appellate review. Actual knowledge may be inferred from all the relevant circumstances, without a direct admission. The Deputy Judge was entitled to consider the purchasers’ experience, credibility, the Land Registry documents, correspondence, conduct and evidence from the professional advisers. Her inference that the purchasers knew the vendors’ registered title did not cover the whole of the plots was reasonably open on the evidence and had not been shown to be wrong.
5. Consequence. That actual knowledge rebutted the implied obligation to show good title. The purchasers therefore had no basis for an abatement or for resisting specific performance at the agreed price. The common knowledge of the vendors’ lack of title was inconsistent with implying an obligation to convey land which the parties knew they did not own.
6. Other issues. The court did not need to decide constructive or imputed knowledge, clean hands or delay. It would in any event have upheld the refusal to imply service easements over the access strip, since the available materials were insufficient. The claim for interest was pleaded under section 35A of the Supreme Act, not as a claim for equitable interest. Such a claim should have been pleaded under CPR 16.4(2). The refusal of equitable interest disclosed no error of principle, particularly as the vendors remained in possession and had delayed seeking enforcement.

• Court of Appeal (Civil Division) ([2009] EWCA Civ 35): dismissed the purchasers’ appeal and the first respondent’s cross-appeal.
• High Court (Chancery Division): after trial, the Deputy High Court Judge ordered specific performance in favour of the vendors on their counterclaim at the contract price, without an abatement, dismissed the purchasers’ misrepresentation claims and refused equitable interest.