George Wimpey Manchester Ltd v Valley & Vale Properties Ltd

An unpaid vendor’s lien ordinarily arises by operation of law on exchange of contracts. It is not excluded merely because the transaction contemplates a later merger of legal and equitable interests, where merger depends upon payment of the purchase price. Before completion, the lien operates as an equitable charge over the purchaser’s equitable interest.

The court may grant specific performance requiring delivery of contractual consideration, such as a deed of release, together with a declaration enforcing the lien. Appropriate safeguards may be required to prevent the claimant obtaining both the release and the benefit of terminating the contract. In an administration, permission to continue proceedings may be granted where priority issues remain unresolved and the respondent’s position is not thereby worsened.

The claimant had agreed to surrender its leasehold interest in land to the defendant for £5 million, together with the release of obligations under an earlier agreement for lease. Completion did not occur, and the defendant subsequently entered administration.

The claimant sought specific performance, including execution of the release deed, and relied on an unpaid vendor’s lien. The bank, which held security over the defendant’s property and agreements, contended that the claimant should not obtain priority. The court also considered whether the transaction was void as an agreement to surrender a business tenancy and whether summary judgment was appropriate.

1. Unpaid vendor’s lien. An unpaid vendor’s lien arose on exchange of contracts. It comprised a legal lien and an equitable lien operating as a charge over the purchaser’s equitable title before completion. The interest would bind later purchasers subject to registration requirements.
2. Merger. The contractual provisions contemplating merger did not exclude the lien. Merger was conditional upon actual completion, which required receipt of all completion monies as cleared funds. Until payment, the equitable interest and the charge continued.
3. Specific performance and enforcement. The claimant could seek specific performance of the agreement as a whole, coupled with a declaration permitting enforcement of the lien by sale. The deed of release formed part of the consideration and could be ordered as part of that relief. The court could require safeguards, such as making the release conditional upon payment or enforcement of the lien, so that the claimant could not obtain the release and then terminate the contract while retaining both benefits.
4. The principles stated in Barclays Bank Plc v Estates & Commercial Ltd [1997] 1 WLR 415 did not prevent the lien on the facts. The cases of Chattey & Anr v Farndale Holdings (1996) 75 P&CR 298 and International Finance Corporation v DSNL Off Shore Ltd [2005] EWHC 1844 (Comm) were distinguishable.
5. Administration and the bank. Applying the balancing approach referred to in Re Atlantic Computer Systems Plc [1992] Ch 505 and Innovate Logistics Ltd v Sunberry Properties Ltd [2009] BCC 164, permission to continue the specific-performance proceedings was extended. The bank’s priority could not be resolved on the evidence then available, and permission would not worsen its position. The bank should be joined before final relief was granted.
6. There was no sufficient evidence of business use to raise a triable issue concerning the alleged surrender of a business tenancy. Nevertheless, summary judgment was not granted immediately because the bank’s position and possible prejudice required proper investigation. Permission to amend to plead the lien and seek declarations was granted in principle, subject to narrowing one proposed declaration.

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