Get Nominees Limited v Trinity Welsh Homes Limited

Where a contract gives either party a right to rescind by notice within a specified period, the right must ordinarily be exercised within that period. Time is of the essence where the clause operates like an option or break clause, even though the right is mutual rather than unilateral. The construction does not depend on terminology such as “unilateral” or “mutual”. The contractual allocation of a completion date and a rescission period may reinforce that conclusion. A party cannot retain a right to rescind after completion has become due while remaining subject to the accrued obligation to complete.

The claimant agreed to sell, and the defendant agreed to purchase, freehold property under an agreement containing detailed planning provisions. Failure to obtain satisfactory planning permission by 21 June 2013 constituted an event of default. Under clause 2.1 of the schedule, either party could rescind by written notice within 14 days of the event of default. Completion was also to take place 14 days after the earlier of the operative date and the termination date.

The defendant served notice of rescission on 11 July 2013, after the contractual period had expired and after the claimant had sought completion. The claimant challenged the effectiveness of that notice and sought specific performance. The issue was whether time was of the essence of the right to rescind under clause 2.1.

1. The claimant succeeded. The defendant’s notice of rescission was served too late and was ineffective.
2. Time was of the essence of clause 2.1. Although both parties possessed the right, either could exercise it independently and without the other’s cooperation. The clause therefore had the same essential character as a unilateral option or break clause, in which strict compliance with the specified period is required.
3. The court rejected an analysis based solely on whether the right was mutual or unilateral. The construction had to reflect the substance of the contractual mechanism. Clause 4.1 reinforced the conclusion because the completion date coincided with the expiry of the rescission period. Once that period ended, the obligation to complete persisted.
4. The reference to accrued rights and liabilities also supported strict compliance. By the time of the purported rescission, the seller’s right to payment had accrued and the buyer was subject to the correlative liability. It would be incoherent for the buyer to retain a right to rescind after the completion date while remaining liable to complete.
5. Alchemy Estates Limited v Astor & Astor [2008] EWHC 2675 (Ch) did not assist the defendant. That decision concerned a different Standard Condition, lacked an express maximum period for rescission, and rejected any substantial survival of the right after completion. Its reference to exercise “promptly” did not permit rescission a week after the contractual period had expired.

The right to rescind had to be exercised by 5 July 2013 or not at all. The court would hear submissions on consequential orders, including the claimant’s £100 notice-to-complete cost.