Urban I (Blonk Street) Ltd v Ayres & Anor

Where a land-sale contract fixes no completion date, completion is required within a reasonable time, assessed in light of all circumstances known when the issue arises. If the time obligation is an innominate term, termination requires delay which deprives the innocent party of substantially the whole contractual benefit, or a clear renunciation. A notice to complete does not itself convert an innominate term into a condition unless the contract so provides. Loss of mortgage finance will not justify termination where it occurred before contractual completion was due and the remaining delay could be compensated by damages.

A developer agreed to grant purchasers a 125-year lease of a flat to be constructed. The contract contained no fixed completion date. Construction was substantially delayed, and the purchasers’ mortgage offer expired before contractual completion was due. They purported to terminate the contract on 20 March 2009. The developer treated the contract as continuing and later served completion notices.

The High Court dismissed the developer’s claim and ordered repayment of the purchasers’ deposit and interest. The appeal concerned the implied reasonable-time obligation, whether the delay was repudiatory or anticipatory breach, and the effect of the contractual notice-to-complete provisions.

Disposition. The Chancellor, with Lord Justice Underhill and Lord Justice Floyd agreeing, allowed the appeal. The purchasers had not validly terminated the contract and were themselves in breach when they failed to complete.

1. Contractual time provisions must be classified as conditions, warranties or innominate terms by ordinary contractual interpretation. Breach of an innominate term is repudiatory only where it deprives the innocent party of substantially the whole benefit of the contract or goes to its root, applying Hong Kong Fir Shipping Co. Ltd [1962] 2 QB 26.
2. Where a land-sale contract specifies no completion date, completion is implied to be due within a reasonable time. The question is a mixed question of fact and law and requires a broad assessment, with the benefit of hindsight, of the circumstances known when performance is said to be late. Relevant matters include estimates, the causes of delay, required participation by the parties and any necessary third-party cooperation.
3. Once the contractual completion date has passed, the delayed party is liable in damages but may retain a right to specific performance unless it would be inequitable. A valid notice to complete ends the possibility of that equitable intervention. It must specify what is required, allow a reasonable period and state the consequences of non-compliance. Unless the contract provides otherwise, the notice does not change an innominate term into a condition.
4. In this contract, the reasonable-time obligation was an innominate term. The contractual completion date could arise only after the reasonable building period and the further period specified by the contract. It was unnecessary and unsafe to fix the precise date on the appeal.
5. On any view, the developer was not in repudiatory breach on 20 March 2009. Completion was not unreasonably delayed before 9 February 2009, and contractual completion was due at the earliest after expiry of the contractual notice period. The remaining delay was approximately one month and could not deprive the purchasers of substantially the whole benefit of a 125-year lease. Their loss of mortgage finance had occurred before contractual completion was due. Nor had the developer renounced the contract: it continued attempting to complete and to hold the purchasers to the agreement. The approach to repudiatory breach was applied from Telford Homes (Creekside) Limited v Ampurius Nu Homes Holdings Limited [2013] EWCA Civ 577.
6. The March termination was ineffective. The contract remained on foot, so the purchasers were in breach when they failed to complete after the developer’s September 2009 notice. The developer was entitled to damages, although it no longer sought specific performance.

• Court of Appeal (Civil Division): Appeal allowed. [2013] EWCA Civ 816
• High Court of Justice, Chancery Division, Leeds District Registry: On 19 October 2012, His Honour Judge Kaye QC dismissed the developer’s claim and ordered repayment of the purchasers’ deposit with interest.