Clarke Investments Ltd v Pacific Technologies

Serving a notice to complete makes time of the essence for both parties because completion requires their co-operation. The party serving the notice must remain ready, willing and able to complete on the notified date. Failure to do so is a breach of an essential term and may justify rescission; specific performance is unavailable to a claimant in that breach. An inaccurate or disputed completion statement does not suspend the obligation to complete. A purchaser must attend and tender the sum it considers due, accepting the risk of being wrong. An invitation to negotiate does not vary or waive the contractual deadline without the required legal basis.

Clarke contracted to purchase a shop and two flats from Pacific under the standard conditions of sale. A dispute arose over VAT. Clarke served a notice to complete, but Pacific later indicated that it would complete without VAT. Clarke did not provide funds by the expiry of the notice because the completion statement and compensation remained unresolved. Pacific purported to rescind. The Central London County Court dismissed Clarke’s claim for specific performance on the ground that it was not ready, willing and able to complete. Clarke appealed. The central issues concerned the effect of the notice to complete, the meaning of Pacific’s correspondence, and whether an inaccurate completion statement justified non-completion.

The appeal was dismissed unanimously. Lord Justice Floyd gave the leading judgment. Sir Stephen Sedley agreed, and Lord Justice Maurice Kay agreed with both judgments.

1. Service of a notice to complete makes time of the essence for both parties, not merely for the recipient. Completion is a consensual activity requiring co-operation. This was supported by Quadrangle Development and Construction Co Limited v Jenner [1974] 1 WLR 68. The party serving the notice must therefore be ready to complete by the notified date. A party in breach of that essential condition will not obtain specific performance.
2. The white flag letter was to be construed objectively against the contractual and correspondence background. It meant that Pacific had abandoned its VAT objection and offered to complete in accordance with the contract. Even if it had invited further negotiation, no legal principle discharged Clarke’s obligation to complete. There was no waiver or estoppel, and no variation. Any variation would also have had to comply with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. North Star Land Ltd v Brooks and another [2006] EWCA Civ 756 did not assist Clarke.
3. Reliance on Eminence Property Developments v Heaney [2010] EWCA Civ 1168 was misplaced because that case concerned a materially different and obvious mistake. Where time is of the essence, failure to complete on time is a repudiatory breach. Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 confirmed that late performance can be accepted only through waiver or estoppel.
4. A completion statement is customary conveyancing practice, not a contractual prerequisite. An inaccurate or excessive statement does not release the purchaser from the obligation to complete. Schindler v Pigault (1975) 30 P. & C.R. 328 and Carne and another v Debono [1988] 1 WLR 1107 supported that approach. Hanson v SWEB Property Developments Ltd (sued as South West Electricity Board) [2002] 1 P. & C.R. 35 459 established that a purchaser disputing the amount must tender what it believes correct, accepting the risk of error.
5. Clarke could make the necessary calculations but insisted on final agreement of compensation and was not in funds by the expiry of the notice. It was therefore not ready or able to complete. Pacific was entitled to treat this as breach of an essential condition and rescind. Specific performance was refused and the appeal dismissed.

Sedley LJ expressed concern that the result might encourage an unscrupulous vendor, but considered that creating an exception would undermine essential certainty in conveyancing.

1. Court of Appeal (Civil Division) — [2013] EWCA Civ 750, 21 June 2013: Clarke’s appeal dismissed.
2. Central London County Court — HHJ Edward Bailey, 18 April 2012: claim for specific performance dismissed because Clarke was not ready, willing and able to complete.