Rarity Holdings Ltd v David Samuel Parkhill

For restitution based on failure of basis, the failure must be total. Where a property transaction is ineffective, the failure to confer enforceable legal rights does not automatically justify recovery of the deposit. The court must objectively identify the agreed basis of the payment and ask whether it wholly failed. Withdrawal of property from an auction is not an independent benefit where it merely follows from an agreement already made to sell the property. A separate exclusivity or option benefit may produce a different result.

Rarity Holdings Ltd agreed to sell a property to David Samuel Parkhill before a public auction. Parkhill paid a deposit and authorised exchange, but later sought to withdraw. The County Court held that the contract was void for non-compliance with Law of Property (Miscellaneous Provisions) Act 1989, s.2(1), and ordered repayment of the deposit because the consideration had wholly failed.

Rarity Holdings sought permission to appeal only on the restitution issue. It argued that withdrawing the property from the live auction was a separate benefit and that the Recorder’s factual findings were inconsistent. The central issues were whether the agreed basis of the deposit had wholly failed and whether the factual conclusion was open on the evidence.

1. Permission refused. The proposed appeal had no real prospect of success.
2. For a restitutionary claim based on failure of basis, the failure must be total. The relevant question is the objectively ascertained agreed basis of the transfer. An ineffective transaction does not, without more, establish total failure of consideration: Whinchup v Hughes (1871) LR 6 CP 78 and Goff & Jones were relied upon for that principle.
3. The benefits relied upon by Rarity Holdings were not independent benefits additional to the transfer of legal rights in the property. Removing the property from the live auction, avoiding competitive bidding and preventing a sale elsewhere were consequences of the agreement to sell, rather than separate consideration for the deposit.
4. Sharma v Simposh Ltd [2011] EWCA Civ 1383 and Rabiu v Marlbray [2016] 1 WLR 5147 were distinguishable. In those cases the purchasers obtained additional benefits, including an option or exclusivity arrangement and, in Rabiu, hotel accommodation. Parkhill acquired no comparable period of exclusivity in which to decide whether to proceed.
5. The Recorder’s finding that Parkhill wanted to secure the property at the agreed price was not inconsistent with his acceptance that withdrawal from the auction was a condition of payment. Read in context, withdrawal was not an independent benefit; it benefited him only if the sale was completed.
6. The threshold for permission to appeal was not met. Although an appeal on fact faces a high hurdle, the Recorder’s conclusion was supported by the evidence and was not one which no reasonable judge could have reached, applying Haringey LBC v Ahmed [2017] EWCA Civ 1861.

• County Court at Gloucester and Cheltenham: Mr Recorder Edwards held that the contract was void for non-compliance with s.2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 and that the deposit was recoverable for total failure of consideration.
• High Court, Chancery Appeals: Permission to appeal was refused by Mr Justice Zacaroli.