Marlbray Ltd v Laditi & Anor

The Court of Appeal allowed the vendor's appeal on the preliminary issue and concluded that the purchaser who signed the sale paperwork was contractually bound on his several obligation despite the fact that his wife (the other named purchaser) had not authorised him to sign on her behalf and had not ratified. The court held that the contract, insofar as it bound the signing purchaser, incorporated all terms required by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 and was therefore compliant with the statutory formalities.

The court also held, alternatively, that even if there had been no enforceable contract as against the signing purchaser, the vendor could retain the deposit on restitutionary grounds: applying the Court of Appeal's reasoning in Sharma v Simposh, the purchaser had obtained the benefit he paid for (the unit had been taken off the market and the developer had completed), so there was no total failure of consideration entitling repayment.

Subsidiary findings were that the second respondent did not ratify the purported signature, and that estoppel and constructive trust arguments did not prevent the vendor relying on those conclusions. The Court of Appeal also allowed the vendor permission to plead breach of warranty of authority by way of set-off and set aside the judge's costs condition imposed on that permission; costs of the preliminary issue were to remain reserved.

Background and procedural posture. The appeal arose from a High Court (Chancery Division) preliminary-issue judgment in proceedings concerning the off-plan sale of a hotel unit (Unit 687) at the Park Plaza Westminster Bridge Hotel. The vendor (Marlbray Limited) appealed against the deputy judge's declaration that there was "no valid or enforceable contract" between the vendor and the two purchasers, and against refusal to permit the vendor to re-amend a counterclaim to plead breach of warranty of authority. The deputy judge had found that the husband signed the contractual "Particulars" sheet on behalf of himself and his wife but that he had no authority to sign on her behalf and that she had not ratified.

Relief sought. The vendor sought declarations that the contract was valid and enforceable (subject to separate substantive defences such as unconscionable bargain or penalty), permission to amend to plead breach of warranty of authority or equitable set-off, and related costs relief. The purchasers sought to uphold the deputy judge's declaration and resist amendment.

Issues framed by the court.

• Whether the husband’s signature on the Particulars purported to sign on behalf of his wife as well as himself (the construction issue).
• Whether the wife ratified the husband’s signature (the ratification issue).
• Whether the seller could retain the deposit and/or plead breach of warranty of authority or rely on estoppel/constructive trust.
• Whether the contract satisfied s.2 of the 1989 Act in relation to the several obligation of the signing purchaser.
• Whether restitution/unjust enrichment principles prevented repayment of the deposit if no valid contract existed.

Court’s reasoning (concise account). The Court of Appeal accepted the deputy judge’s factual findings that the wife had not authorised the husband and did not ratify his signature. However, the court departed from the deputy judge’s (and the vendor's prior concession at trial) legal starting point that there was "no contract". The appellate court held that the Particulars evidenced separate several obligations: the husband had entered into a several contract with the vendor and had signed a document incorporating the agreed terms. That several contract satisfied the writing-and-signature requirement of section 2 of the 1989 Act because the document incorporated all expressly agreed terms and was signed by or on behalf of the relevant parties as to that several obligation. The court therefore concluded that the vendor could sue the signing purchaser on his several obligation and could insist on retention of deposits for non-completion, subject to any substantive defences the purchaser would raise at trial (for example unconscionability, penalty or s.49(2) LPA 1925).

Further, the court held in the alternative that, even if no enforceable contract existed as to the signing purchaser, the purchaser's restitutionary claim for repayment of the deposit failed because there had been no total failure of consideration: the purchaser had received the commercial benefit for which the deposit was paid (the unit was taken off the market and works were completed). The court relied on and applied the reasoning in Sharma v Simposh.

Disposition. Appeal allowed; the vendor was permitted to plead breach of warranty of authority as an equitable set-off (and permission to amend as a counterclaim should have been granted); the costs condition imposed below was set aside; costs of the preliminary issue were reserved for later determination.

Appeal allowed. The Court of Appeal held that, as a matter of legal analysis, the husband who signed the Particulars was contractually bound on his several obligation and the document satisfied section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Alternatively, applying unjust enrichment principles (Sharma v Simposh), even if there were no enforceable contract the purchaser could not recover the deposit because there had been no total failure of consideration. The court also allowed permission to plead breach of warranty of authority by way of set-off and set aside the lower court's costs condition; costs of the preliminary issue were reserved.

Appeal from the High Court, Chancery Division (Deputy Judge Nicholas Strauss QC) HC11C02783; preliminary-issue judgments dated 28 October 2013 and consequential orders of 10 December 2013 and 10 March 2014. Permission to appeal was granted and the Court of Appeal handed down judgment on 24 May 2016 ([2016] EWCA Civ 476).