Hardy & Anor v Griffiths & Anor

Under a contract for the sale of land, a seller’s unconditional right to a further deposit arising after service of a notice to complete is an accrued contractual right. It survives the seller’s contractual rescission unless the contract clearly provides otherwise. The seller may recover the amount as a debt or claim it as damages, even if the amount exceeds loss on resale.

A contractual right to rescind for the buyer’s failure to complete ends the contract prospectively; it is not rescission ab initio. Caveat emptor remains applicable to physical defects, and a non-reliance clause may be effective where it is fair and reasonable.

The claimants agreed to sell Laughton Manor to the defendants. The defendants paid a deposit of £150,000, failed to complete by the extended completion date, and did not comply with a notice to complete. The claimants rescinded the contract and claimed forfeiture of the deposit, a further deposit, and sums due under a collateral agreement.

The defendants alleged misrepresentation concerning damp, rot, the condition of the property and land sold from its boundary. They counterclaimed for rescission, repayment and damages. The issues included the effect of the contractual non-reliance clause, whether the defendants could rescind, whether the further deposit survived contractual rescission, and the amount due under the collateral agreement.

1. Misrepresentation and rescission. The defendants were not entitled to rescind under standard condition 7.1.3(a). Recklessness in that provision was another way of putting fraud, as explained in Derry v Peek (1889) 14 App. Cas. 337. No fraud or recklessness was proved. Standard condition 7.1.3(b) was irrelevant because completion had not occurred.
2. Caveat emptor. Standard condition 3.2.1 placed the risk of physical defects on the buyers. The defendants had entered into the contract without obtaining a professional survey and could not complain that the property suffered from defects which they had accepted at the contract date.
3. Non-reliance clause. Special condition 10 was fair and reasonable. The parties had equal bargaining power, were professionally advised, and the clause was negotiable and preserved reliance on written replies from the claimants’ conveyancers. No actionable representation was established. The replies were truthful, were not a warranty as to condition, and did not remove the need for a survey.
4. Further deposit. Standard condition 6.8.3(b) created an unconditional obligation to pay the balance of the 10 per cent deposit upon receipt of the notice to complete. The further deposit was an earnest for performance. The claimants therefore acquired an accrued right to recover it before rescission. Applying The Blankenstein [1985] 1 W.L.R. 435, Samarenko v Dawn Hill House Ltd [2013] Ch. 36 and The mv Griffon [2014] 1 C.L.C. 1, that right survived the contractual rescission. The claimants were awarded £210,000.
5. Other sums and orders. The claimants were entitled to forfeit the £150,000 deposit. They were also entitled to £25,000 under the collateral agreement, but not the further £10,000 claimed for May 2012. The counterclaim was dismissed.