Urban I (Blonk Street) Ltd v Ayres & Anor [2013] EWCA Civ 816

Case No A3/2012/2915[2013] EWCA Civ 816IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE CHANCERY DIVISION
Venue LEEDS DISTRICT REGISTRY
HIS HONOUR JUDGE KAYE QC
ILS30568
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 05/07/2013
Before
THE CHANCELLOR OF THE HIGH COURTLORD JUSTICE UNDERHILLLORD JUSTICE FLOYD
Between
URBAN I (BLONK STREET) LIMITEDAppellant(1) SIMON MARTIN AYRESRespondents(2) NICOLA JANE AYRESRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Stephen Howd (instructed by Chadwick Lawrence) for AppellantsMr Simon Ayres and Ms Nichola Lucas appeared in person for in personHearing Hearing dates : 27 June 2013
JudgmentThe Chancellor (Sir Terence Etherton):
[1]These proceedings concern a dispute about the rights of the appellant, as vendor, and the rights of the respondents, as purchasers, under a contract for the sale of a flat to be built as part of a development by the appellant which was considerably delayed beyond the original anticipated completion date. The respondents claim to have terminated the contract and to be entitled to repayment of their deposit. The appellant claims that the respondents were not entitled to treat the contract as at an end when they purported to do so and so the respondents themselves repudiated the contract. The appellant claims to be entitled to damages for the respondents’ refusal to complete the purchase. The appellant does not seek specific performance.[2]The case raises questions of principle about time being or being made of the essence in contracts for the sale of land and of the role of a notice to complete where there has been delay in complying with the terms of such a contract.[3]This appeal is from the order made on 19 October 2012 by His Honour Judge Kaye QC, sitting as a High Court Judge in Leeds District Registry, dismissing the claim of the appellant, Urban 1 (Blonk Street) Limited, and giving judgment on the counterclaim of the respondents, Simon Martin Ayres and Nicola Jane Ayres, for the return of their deposit and interest.

The Contract

[4]The appellant is the developer of a mixed commercial and residential development at Blonk Street, Sheffield (“the Development”). On 25 January 2007 it entered into a written contract with the respondents (“the Contract”) for the grant to the respondents of a 125 year lease (in the form of the draft attached to the Contract) at a premium of £172,950 of a two bedroom apartment in the Development (“the Apartment”). The respondents had already paid a reservation fee of £5,000. The Contract provided for them to pay in addition a further sum of £12,295 by way of deposit, a total of £17,295.[5]The Contract did not specify a fixed completion date. Condition 7.2 of the Special Conditions of Sale (“the Special Conditions”), which formed part of the Contract, provided that when the building of the Apartment was complete the appellant’s solicitors would send a written notice to the respondents’ solicitors and completion would then occur on or before 10 days of the date on that notice.[6]Condition 2.1 of the Special Conditions provided that the appellant would build the property (as defined in the Contract), of which the Apartment formed part (“the Property”), and the common parts (as defined in the draft lease of the Apartment) in accordance with the terms of the relevant planning permission, the relevant building regulation consent and the plans and specification of the Property.[7]Condition 2.5 of the Contract provided as follows:
“2.5 If the Seller is prevented from completing the building of the Apartment on the Property within a reasonable time after this Agreement because of: 2.5.1 strike or lockout of workmen; 2.5.2 inability (for whatever reason) to obtain building materials or labour; 2.5.3 accident or act of God; 2.5.4 bad weather; or 2.5.5 any other avoidable cause then the Buyer will have no claim against the Seller. This Agreement shall not be cancelled nor shall the Buyer be entitled to compensation or damages resulting from a delay. The Seller will take all reasonable steps to prevent any delay arising.”
[8]Condition 7.1 of the Special Conditions provided that the Property was to be regarded as physically completed when no major items affecting the habitability of the Property remained outstanding and when a satisfactory final inspection had been carried out by the inspector under a scheme for the protection of the Property as specified in the Contract (such as NHBC).[9]Condition9.1 of the Special Conditions provided that the Law Society’s Standard Conditions of Sale (Fourth Edition) (“the Standard Conditions”) applied so far as they were not varied or inconsistent with the terms of the Contract. Condition9.2 provided, among other things, that Standard Condition 6.1.1 did not apply. Special Condition 6.8.2 provided that Standard Condition 6.8.2 would apply as amended by altering “ten working days” to “five working days” for the period to complete.[10]Standard Condition 6.1.1 provided as follows:
“6.1.1 Completion date is twenty working days after the date of the contract but time is not of the essence of the contract unless a notice to complete is served.”
[11]Standard Condition 6.8 (so far as relevant to this appeal) provided as follows:
“6.8 Notice to Complete 6.8.1 At any time on after completion date a party who is ready, able and willing to complete may give the other a notice to complete. 6.8.2 The parties are to complete the contract within ten working days of giving a notice to complete, excluding the day on which the notice is given. For this purpose, time is of the essence of the contract.”

Events subsequent to the Contract

[12]The following facts and matters are taken from the Judge’s judgment.[13]At the date of the Contract the appellant envisaged that the Development would start on 26 February 2007 and the target date for completion was December 2008. The Development in fact started a month late on 26 March 2007. The first minutes of the progress meetings with the contractor and the project manager noted that the development programme envisaged a 96 week contract with completion to be on or before 26 January 2009.[14]The evidence of the appellant’s managing director was that the completion of the Development was delayed principally by the following five factors: fibre optic cables discovered on the development site; wholly unusual inclement weather; financial problems of contractors; the closure of a lane on Blonk Street; design revisions to foundations. All of those matters and some other delaying factors (such as late arrival of a piling rig, outstanding planning conditions and some problems with sub-contractors) all “stabilised” (to use the language of the Judge in [29] of his judgment) by September 2007. By November 2007 the contractors had requested and been granted an extra two weeks for contractual completion leading to a revised target date of 9 February 2009 despite being seven weeks behind schedule and with the lane closure along Blonk Road still to come.[15]In June 2008 the respondents were advised by their solicitors, Gordons, that completion would be in December 2008. The source of that information was said to be “the developers”. Gordons suggested that the respondents should arrange their mortgage and finances if they had not already done so. By this time the respondents’ marriage was breaking down.[16]The respondents set about arranging finance through a mortgage broker. In September 2008 they received a mortgage offer from Halifax of 90 per cent of the purchase price. The mortgage offer was subject to a number of conditions, including that there had to be a satisfactory assessment of the property to be mortgaged and a full mortgage application had to be made before 8 March 2009. The offer documentation indicated that the mortgage had to commence by 31 December 2008.[17]The anticipated February 2009 completion date was not communicated to the respondents by the appellant until October 2008.[18]The appellant wrote to the respondents in October 2008 informing them that the Development was progressing well and their block was due for completion in February 2009 and warning them that if they did not complete a default notice would be served.[19]In fact, according to the appellant’s evidence, little work took place over the period between October 2008 and January 2009 due to the contractor’s financial difficulties. That information was not passed on to the respondents at the time.[20]In November 2008 the respondents’ mortgage broker informed the respondents that the mortgage needed to be completed and the loan drawn down by 31 December 2008 because Bank of Scotland, which owned Halifax, was ceasing to offer 90 per cent. loan to value products. The respondents attempted to extend the date, but were unsuccessful. They needed a 90 per cent. mortgage but were unable to find any other such products. Furthermore, in November and December 2008 the respondents requested the appellant to allow access for their mortgage valuer, their solicitors pointing out that the respondents’ mortgage would expire on 31 December if the valuation was not carried out before that date. Those requests were not granted.[21]At the end of January 2009, by which time completion looked set for May 2009, Gordons asked the appellant’s solicitors, Chadwick Lawrence, for an explanation of the delay. Chadwick Lawrence replied by letter dated 10 February 2009. They said that the delay was due to problems with the contractor. They said that the contract handover date as between the claimant and the contractor “is and always has been 9th February 2009”. They further stated that the Development might be finished in April but that the appellant thought it might possibly be May. They said that access could now be given for valuations although most of the units were not in an ideal state to be valued. As the Judge observed (at [43] of his judgment), that was already too late for the respondents.[22]Despite a new site management team being put in place in January 2009, there were still delays with the Development during February. A third team was put on site in March when work recommenced. In mid-March the appellant was still hoping for completion at the end of April.[23]On 20 March 2009 Hackett Windle, who had replaced Gordons as the respondents’ solicitors, wrote direct to the appellant terminating the Contract due to unreasonable delay. They said that it was an implied term that completion would take place within a reasonable time. They noted that the anticipated date for completion had been December 2008 and on that basis the respondents had obtained a mortgage offer subject to satisfactory assessment. They pointed out the appellant had refused access for a valuation and the appellant had not completed in December 2008. They added as follows:
“A reasonable time for completing the property and taking the necessary steps to complete the sale expired by no later than the end of December 2008. You were aware at that time that property values were falling and as a consequence of the delay it will now be very difficult if not impossible for our clients to obtain a satisfactory mortgage offer. Our clients’ former solicitors wrote for an explanation of the delay on 30 January 2009 and received a reply from your solicitors, Chadwick Lawrence LLP, dated 10 February 2009 (copy attached). In that letter, you blamed the delay on [the contractor], stating that the handover date in the building contract ‘is and always has been 9 February 2009’. On that basis, if we are wrong in contending for a completion date of December 2008, then the deemed date for completion is a reasonable time after 9 February 2009 to allow for compliance with the legal formalities. In these circumstances, it is clear that completion has been unreasonably delayed, beyond the deemed completion date, and your clients are in repudiatory breach of the [Contract]. On behalf of our clients, we hereby give you notice that our cl ients accept your breach as discharging the [Contract]. Accordingly, we are instructed to require repayment of our clients’ deposit of £17,295, together with interest, within 14 days of the date of this letter.”
[24]The appellant continued to regard the Contract as still on foot.[25]The Development was finally completed on 31 July 2009. On 13 August 2009 the appellant’s solicitors served on the respondents the 10 day notice under Special Condition 7.2. On 1 September 2009 they served a notice to complete giving 10 days to complete.

The proceedings

[26]The claim form was issued by the appellant on 12 August 2011. It claimed specific performance of the Contract and/or damages for late completion, interest and costs. At that stage the appellant was still represented by Chadwick Lawrence.[27]The respondents served a joint Defence and Counterclaim dated 23 August 2011. These were handwritten and signed by the respondents as litigants in person. They alleged that the appellant had wrongfully refused to perform the Contract and repudiated it. They said that they had taken all reasonable steps to obtain a mortgage in principle but were not allowed to undertake a valuation and, as a consequence, the mortgage offer expired. They alleged that they had successfully terminated the Contract. They counterclaimed for return of their reservation fee and deposit, together amounting to £17,295.00, payment of their solicitors’ costs of £8,010.50 and any other costs they may have incurred.[28]The appellant, acting by Chadwick Lawrence, served an undated Reply, in which it denied that it had breached the Contract. The appellant denied, in particular, that the Contract required the appellant to allow access to a mortgage valuer on or before 31 December 2008, and, without prejudice to that plea, alleged that at that date a considerable amount of work remained to be done to the site, which remained under the control of the contractor and not under the control of the appellant. The appellant alleged, in the alternative, that the respondents subsequently affirmed the Contract, including by a letter of 6 January 2009 from their solicitors to the appellant’s solicitors. The appellant further alleged that the appellant could not practically have done anything more to ensure that the Development was completed sooner than it was, and that it was unavoidable that the Development was not completed sooner than it was. The appellant said that it relied on clause 2.5 of the Contract. Further or alternatively, the appellant denied that any such breach of contract as the respondents alleged was a breach entitling them to terminate the contract as at 20 March 2009 or at all. As regards the respondents’ assertions about their mortgage offer, the appellant said that by letter from their solicitors to the respondents’ solicitors dated 10 February 2009 the appellant offered to provide access to a mortgage valuer of the respondents, the appellant then being able to obtain access to the site. The appellant denied that the issue of the respondents’ mortgage offer was in any event relevant. The appellant denied that the respondents were entitled to the return of £17,295 or any sum or any solicitors’ costs.

The trial

[29]The trial took place before the Judge in the Leeds District Registry on 29 August 2012. Neither side was represented by solicitors or counsel. The Judge allowed the appellant to be represented by its managing director, Mr Darryl Baker. The respondents represented themselves.[30]There were witness statements, on behalf of the appellant, from Mr Barker and from Miss Charlotte Wright, the appellant’s head of sales. The respondents also made brief witness statements. All of them gave oral evidence from the witness box.[31]There was an expert’s report from Fowler Sandford on behalf of the respondents. There was also an expert’s report from a surveyor, Mr Matthew Jones of Savills (L&P) Ltd, and another from a project manager, a Mr John Fraser Scott, of Mascot Management Ltd, on behalf of the appellant. None of the experts was called to give oral evidence or to be cross-examined but neither side suggested that the Judge should not read their evidence.[32]There were bundles of documentary evidence.[33]Mr Barker made it clear that what the appellant was seeking was an award of damages and not specific performance.[34]The Judge handed down a full and careful judgment on 19 October 2012. He observed (at [13] of his judgment) that the parties were unable to give him any assistance on the law. He said that he had been given a written skeleton argument prepared by the appellant’s former solicitors and had the advantage of a written advice given to the respondents by counsel, which he had treated as a helpful skeleton or written argument for the respondents.[35]The Judge’s analysis and conclusions may be summarised as follows. He said that the case was not like Samarenko v Dawn Hill House Limited [2011] EWCA Civ 1445 where there was a specified date for fulfilment of the relevant contractual provision. He said that, in the case of the Contract, it was implied that the Development and the consequential completion of the Contract were to be within a reasonable time. He said that what was reasonable depends entirely on the context and the circumstances as well as the terms of the Contract.[36]The Judge observed (at [51] of his judgment) that Mr Barker had rightly not sought to persuade him that Special Condition 2.5 justified any unreasonable delay on the part of the appellant. He also said (in the same paragraph) that the factors which Mr Barker relied upon, such as bad weather, floods and financial difficulties, all occurred or started before the original handover date of December 2008 and any delay due to those factors had been built in to the revised programme re-set at February 2009.[37]He said (at [52] of his judgment) that the question, therefore, was whether a reasonable time had elapsed when the appellant served its notice to complete.[38]He then referred to and quoted from Megarry & Wade, The Law of Real Property, 8th ed. para. 15-098, Emmett & Farrand on Title para. 8.029, Sargant J in Farrant v Olver (1922) 91 LJCh 758, and Lord Templeman in Graham v Pitkin [1992] 1 WLR 403 (PC). He also quoted the following passage from paragraph [71] of the judgment of Neuberger J (as he then was) in Tennaro Ltd v Majorarch Ltd [2003] EWHC 2601 (Ch), with which he said he agreed:
“I am not convinced that there is, in fact, any dichotomy between the observations of Sargent LJ and Lord Templeman. It does not seem to me that Lord Templeman was going so far as to say that in no circumstances can delay be so unreasonable to give rise to an inference of repudiation. What he was saying, as I see it, is that, where time is not of the essence and there has been unreasonable delay, one cannot always infer that there has been a repudiation: one has to look at all the circumstances. However, that does not mean that delay alone cannot give rise to the inference of repudiation. There is nothing in Lord Templeman's reasoning or conclusion to negative the view that, in an appropriate case, delay can be so long that, because of the absence of any explanatory or mitigating circumstances, the right inference is that the delay amounts to a repudiation of the contract.”
[39]Having observed that no notice to complete had been served by the respondents, the Judge concluded that viewed objectively the overall delay by the date of the respondents’ solicitors’ letter of 20 March 2009 or by the time the appellant served its notice to complete on 1 September 2009 was such as to amount to a repudiation of the Contract entitling the respondents to refuse to complete. The Judge set out as follows (at [62] of his judgment) the matters he had taken into account in coming to that conclusion:
“I rely on the following overall factors in particular over and above the mere time lapse and the circumstances and evidence (including that of the experts) set out or referred to above (all of which I take into account): • The overall time frame of 21/2 years for completion of the development, 6 months or so beyond the revised anticipated programmed completion date must be considered, but, as said, in its context. • I accept that there was delay caused by the factors mentioned by Mr Barker. However, these were all built in to the reprogramming of the project and due allowance made. In any event they cannot solely explain the 124 day delay when the evidence of the contract and project meetings suggested no more than a 7 week delay due to flooding. Even if another 8 weeks is added to this (Mr Barker’s factor of 6-8 weeks as normal), a delay of 14 weeks is nowhere near 124 days (17-18 weeks). By March 2009 (and certainly by September) the developers were even behind their own projected programme allowing for all the delays. • I do not see why the contractors own financial circumstances (or lack of finance) or the delay caused (if any) by the failure to comply with planning conditions should be visited on the defendants. Clearly there was trouble but precisely what, and what was being done about it was not adduced in evidence in any detail. • The purchasers including the defendants were told long after it had become apparent to the claimant it could not be adhered to, that December 2008 was the projected completion date, yet having arranged to market their house on the letting market, and to obtain a 90% mortgage to valuation (interest free), when the time came to obtain access for a valuation (entirely consistent with the date of anticipated completion, December 2008) they were repeatedly refused. As a result they lost their mortgage which expired as I find and accept on 31 December 2008 notwithstanding the terms of the earlier offer. The defendants kept the claimant informed of their mortgage and valuation position but the claimant’s position was that other mortgage products were out there. However, they did not show me any evidence that the defendants could have obtained a satisfactory mortgage by these means. Moreover their evidence was that the defendants had tried and failed: they needed a 90% mortgage, values were falling, and interest only products were being taken off the market. • Even before March 2009 the defendants were being told various dates for completion: in June 2008 it was anticipated completion would be in December 2008, in October it changed to February 2009, in December they were told completion was due “shortly”, in the same month it became at least April, in January it was March/April, later the same month it was May 2009, in February it was “possibly … May”
. It would be enough in the circumstances to drive any reasonable person in the circumstances of the defendants to despair. I am not surprised they took the view the claimant was not fulfilling the Agreement. The letter they sent via their solicitors on [20] March 2009 reasonably and accurately, in my judgment, set out their position and with justification. • Even after March, there were further unexplained delays of four months (April to July inclusive) before the project was completed.”[40]He, accordingly, dismissed the appellant’s action, and ordered the appellant to return the respondents’ reservation fee and deposit amounting to £17,295 together with simple interest at 6 per cent. per annum to the date of judgment and to pay the respondents’ costs as appropriate to litigants in person.

The appeal: discussion

[41]The appellant has been represented on this appeal by Mr Stephen Howd, counsel. The respondents have again represented themselves. We also had the benefit of a skeleton argument dated 22 February 2013 of Mr Jonathan French, the respondents’ former counsel.[42]The Judge was in a most difficult situation. This field of law is complex. The case law has developed in significant respects over time and is not always consistent. Observations by Lewison LJ and Rix LJ in the recent case of Samarenko show how, even today, aspects of the law relating to time provisions in contracts for the sale of land and the relevance of notices to complete can be puzzling and that there is still room for clarification of the law.[43]As I have said, one of the reasons for the complexity and some obscurity in this area of the law is that it has steadily developed over the past 300 years. That development has not, however, always taken place in a clear and consistent way and has often been bedevilled by a lack of understanding of the different strands of equity and common law, particularly as they existed before the coming into force in 1875 of the Supreme Court of Judicature Act 1873 (“the 1873 Act”). The important cases are too numerous to set out here. It is sufficient to say that, aside from section 25 of the 1873 Act and section 41 of the Law of Property Act 1925, important milestones have included the decision or observations in Pordage v. Cole (1669) 1 Wms.Saund. 319; Boone v. Eyre (1789) 126 E.R 148; Seton v Slade (1802) 7 Ves.Jun.265; Davidson v. Gwynne (1810) 12 East 381; Martindale v. Smith (1841) 1 Q.B. 389; Parkin v Thorold (1852) 16 Beav 59; Stickney v Keeble [1915] AC 386; Hong Kong Fir Shipping Co Limited v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; United Scientific Holdings Limited v Burnley BC [1978] AC 904; Raineri v Miles [1981] AC 1050; Behzadi v Shaftesbury Hotels Ltd [1992] Ch. 1.[44]This is not the place to examine those cases and the developing jurisprudence in detail. I consider that the following principles under the current law, which are relevant to the present case, can be extracted from them.(1) It is necessary to distinguish between three types of contractual time provision. They are those which are conditions in the technical sense that any breach of them, however slight, is a repudiatory breach of contract which entitles the other party to terminate the contract immediately; those which are warranties in the technical sense that any breach of them, however serious, will only ever entitle the other party to damages and not to terminate the contract; and those which are so-called innominate terms, breach of which will only be a repudiation of the contract entitling the other party to terminate the contract if the breach deprives him or her of substantially the whole benefit which it was intended they should obtain from the contract or, in simpler language, which goes to the root of the contract: Hong Kong Fir Shipping Co. Ltd at 69 to 70. It is a matter to be determined on ordinary principles of contractual interpretation into which of those categories the term falls.(2) Where a contract for the sale of land does not contain any specified date for completion, and subject to any contractual indication to the contrary, it is implied that completion will be within a reasonable time. There is no breach of contract until that that time has arrived: Behzadi at 12G-13A and 23E.(3) The moment that the contractual date for completion has passed the contract-breaker who has delayed completing is liable in damages: Raineri.(4) Where the contractual date for completion has passed the contract-breaker is still entitled to specific performance of the contract unless it would be inequitable to grant that relief: Stickney at 416, Seton v Slade.(5) It would be inequitable for there to be a grant of specific performance to the contract-breaker if the parties have expressly stated in the contract that the contract can be terminated forthwith upon breach of the time provision or if it is to be implied from all the circumstances that they so intended: Parkin v Thorold at 66. Accordingly, if, on the proper interpretation of the contract, the time provision is a condition in the technical sense I have mentioned, it is difficult to imagine that the court would grant the contract breaker specific performance. I respectfully agree, in this regard, with the doubt expressed by Rix LJ in Samarenko at [64] as to whether equity, as a distinct species of legal principles, now has anything to add in the context of contractual terms of fundamental importance.(6) Service of a valid written notice to complete after the contractual completion date has passed has the effect of bringing to an end the possibility of equity’s intervention by the grant of specific performance to the contract-breaker. A valid notice is one which calls on the contract-breaker to perform within a reasonable period, specifying exactly what it is that party must do and what consequences will follow (that is to say, exercise of the right to terminate if he or she fails to do so): Re Olympia & York Canary Wharf Limited (No.2) [1993] BCC 159 at 169 C to F citing Behzadi at 12B to E. Statements in many of the cases and some textbooks that the service of a notice to complete makes time of the essence in equity are incorrect. Absent any relevant express provisions in the contract (as are to be found in the Standard Conditions, for example), it is contrary to all principle for one party to be able unilaterally to transform one type of contractual provision (namely, an innominate term or a warranty in the strict sense) into something different (a condition in the strict sense). Equity’s role, in this context, always has been to relieve a contract-breaker against the strict legal rights of the other party, not to enhance them: Parkin v Thorold at 71, Behzadi at 12 and 24.(7) Accordingly, absent any relevant express terms in the contract, where a completion notice has been served and expired following breach of a time provision which is an innominate term the question whether the other party can terminate the contract depends upon that party’s ordinary legal rights. This depends upon two matters which, again, have often been confused in the case law. Firstly, the contract-breaker will have repudiated the contract, entitling the other party to terminate it, if and when the delay has been such as in all the circumstances to deprive the other party of substantially the whole benefit it was intended he or she should obtain from the contract, that is to say it has gone to the root of the contract. The delay may or may not have reached that point at the time that the notice to complete has expired: comp. Peregrine Systems Ltd v Steria Ltd [2005] EWCA Civ 239 at [15]. Secondly, the contract-breaker will have repudiated the contract, or as it is sometimes put, renounced the contract, entitling the other party to terminate it, if the contract-breaker has demonstrated an intention never to carry out the contract or, at any event, only to do so in a manner substantially inconsistent with his or her contractual obligations such as to deprive the other party of substantially the whole benefit which it was intended they should receive under the contract: Federal Commerce & Navigation Co Ltd. v Molena Alpha Inc. (The Nanfri) [1979] AC 757 at 778-779 (Lord Wilberforce citing passages from several other cases). The failure to comply with the notice to complete may be some evidence of that, but an intention to renounce must be determined in the light of the evidence as a whole: Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168 at [61] to [64]. I agree with Lewison LJ’s further thoughts on this aspect when, in Samarenko at [42], he resiled from his earlier position in Multi-Veste 226 BV v NI Summer Row Unitholder BV [2011] EWHC 2026 (Ch) at 201.(8) Where, in the case of a time provision which is an innominate term, a completion notice has not been served on the contract-breaker, an award of specific performance will be available to the contract-breaker until such time as the grant of that remedy would be inequitable. It is difficult to see in principle why that would be any different to the time when the breach due to the delay is such as to go to the root of the contract.[45]I turn to consider the application of those principles to the present case in the light of the Judge’s judgment.[46]I agree with the Judge that, in the absence of any express stipulated date, it was an implied term of the Contract that completion of the Apartment, and hence the consequential completion of the Contract, was to be within a reasonable time. What is a reasonable time is a mixed question of fact and law.[47]The Judge did not expressly consider whether that implied term was, in all the circumstances and on the proper interpretation of the Contract, a condition in the strict sense, a warranty in the strict sense or an innominate term. It is clear, however, from his judgment as a whole that he regarded it as an innominate term. That was plainly correct since the combination of Special Conditions 7.2, 9.1 and 9.3 (incorporating with amendments the Standard Conditions) make it clear that, in the event of delay in completing on the contractual completion date, the Contract could thereafter be brought to an end upon service and expiry of a notice to complete.[48]It follows from the above, and the express provisions of Special Condition 7.2, that contractual completion was to take place at the latest 10 days after a reasonable time for building the Apartment had elapsed. The Judge, however, never identified that date. He plainly thought it had elapsed by the date of the respondents’ solicitors’ letter of 20 March 2009, by which the respondents purported to terminate the Contract. It is unclear from paragraph [51] of his judgment whether he thought it had elapsed in February 2009 in accordance with the revised programme target date set in November 2007. The reason why it was important to identify the contractual completion date was that, being an innominate term, and the respondents never having served a notice to complete on the appellant, the respondents only became entitled to terminate the contract thereafter(1) if and when it ceased to be equitable to grant the appellant specific performance, and(2) which is probably the same date, if and when the delay was such as to go to the root of the Contract, that is to say it deprived the respondents of substantially the whole benefit which it was intended they should have under the Contract; or alternatively,(3) the appellant showed that it had no intention of carrying out the Contract or, at any event, only to do so in a manner substantially inconsistent with the appellant’s contractual obligations such as to deprive the respondents of substantially the whole benefit which it was intended they should receive under the Contract.[49]I would be reluctant on this appeal to express my own view as to when the contractual date for completion occurred. What was a reasonable time for completion of the Apartment is highly fact sensitive. Mr Howd relied on Hick v Raymond & Reid [1893] AC 22, 32-33 (Lord Watson) as authority that, where it is a term of a contract that it be performed within a reasonable time, the party on whom that obligation rests fulfils the obligation, notwithstanding protracted delay, so long as the delay is attributable to causes beyond his control and he has neither acted negligently nor unreasonably. A fuller statement of the correct approach is to be found in the judgment of Maurice Kay LJ (with whom the other members of the Court of Appeal agreed) in Peregrine Systems at [15] as follows:
“The consideration of whether there has been a breach of an obligation to perform within a reasonable time is not limited to what the parties contemplated or ought to have foreseen at the time of the contract. In my judgment, the correct interpretation of authorities such as Hick v. Raymond & Reid [1893] AC 22 is that adopted by His Honour Judge Richard Seymour QC in Astea (UK) Ltd v. Time Group Ltd [2003] EWHC 725, [2003] All ER (D) 212, where he said that the question whether a reasonable time has been exceeded is "a broad consideration, with the benefit of hindsight, and viewed from the time at which one party contends that a reasonable time for performance has been exceeded, of what would, in all the circumstances which are by then known to have happened, have been a reasonable time for performance. That broad consideration is likely to include taking into account any estimate given by the performing party of how long it would take him to perform; whether that estimate has been exceeded and, if so, in what circumstances; whether the party for whose benefit the relevant obligation was to be performed needed to participate in the performance, actively, in the sense of collaborating in what was needed to be done, or passively, in the sense of being in a position to receive performance, or not at all; whether it was necessary for third parties to collaborate with the performing party in order to enable it to perform; and what exactly was the cause, or were the causes of the delay to performance. The list is not intended to be exhaustive. " I do not seek to improve upon that formulation. It shows that, even if the contract had required Peregrine to complete the installation within a reasonable time, the fact that the parties had contemplated at an earlier stage that completion would be effected by a certain date would not necessarily mean that a failure to complete by that time would involve a breach of the obligation to complete within a reasonable time.”
[50]Mr Howd confirmed on the hearing of the appeal, as Mr Barker had confirmed to the Judge at the trial, that the appellant does not rely on clause 2.5 of the Contract to prevent the court taking note of any unreasonable conduct of the appellant.[51]Mr Howd relied on all the matters mentioned by the Judge for the delay. He also relied heavily on a matter not expressly taken into account by the Judge, namely the fact that the building contract was a “design and build” contract, and so the appellant had limited control over the delays or defaults of the contractors or the subcontractors. There is no evidence, however, or at least none recorded in the Judge’s judgment, as to whether the respondents were aware of that fact. We did not have the benefit of any legal submissions from the respondents as to whether the absence of any such knowledge on their part is a relevant consideration.[52]Mr Howd observed that the Judge acknowledged in his judgment that there had been seven weeks’ delay (principally due to flooding) by the end of 2007, but said that the Judge appears only to have allowed two weeks’ delay beyond the revised building completion date of 26 January 2009 (which had replaced the original projected date of December 2008 due to the delay of one month in starting the Development). Mr Howd submitted that, if the seven weeks were taken into account, a reasonable time for completing the Apartment would have been 16 March 2008 and so completion of the Contract, which was to be at least 10 days later, would have been after the respondents’ solicitors’ letter of 20 March 2009.[53]Mr Howd also complains that, although the Judge referred in paragraph [12] of his judgment to the existence of the experts’ reports and that the parties were happy for him to read them, even though none of the experts was cross-examined, it is unclear what weight, if any, he attributed to what the experts said in their reports. Mr Howd has pointed out that the respondents’ own expert evidence was that a primary build period of 24 months would not be unreasonable, and, on that footing, a reasonable time for completion of the Apartment would not have expired before 26 March 2009. The Judge did say in paragraph [62] of his judgment that he took the expert evidence into account but he has not explained precisely how and in what respects. Mr Howd emphasised that it was for the respondents to prove that there was unreasonable delay in the construction of the Apartment and from what date.[54]Having regard to those arguments, the fact, as Mr Howd accepted in the course of his submissions, that the way the parties presented their evidence at the trial no doubt was affected by their being lay litigants in person and the Judge’s perception of what were the principles to be applied, I do not consider it safe or fair to attempt on the appeal to fix the contractual date for completion, that is to say the date when a 10 day notice under clause 7.2 should have expired. I do not consider it is necessary, however, to remit the matter to the Judge for further consideration. That is because I consider it is clear that on any footing the appellant was not in repudiatory breach of the Contract by 20 March 2009.[55]The burden was on the respondents to prove that there was a repudiatory breach by the appellant by 20 March 2009. On any footing, the appellant had not unreasonably delayed completion of the Apartment prior to 9 February 2009. That much appears to have been accepted by the Judge. Completion of the Contract was not, therefore, due until, at the earliest, the expiry of a 10 ten notice after that date. The Judge did not distinguish between repudiation of the Contract by the appellant for past delay amounting to a breach of the Contract and renunciation or anticipatory breach by the appellant by virtue of past conduct indicating that the appellant intended to abandon the Contract for the future. In either case, the breach could only have been repudiatory, entitling the respondents to terminate the Contract on 20 March 2009, if it went to the root of the Contract at that date: Telford Homes (Creekside) Limited v Ampurius Nu Homes Holdings Limited [2013] EWCA Civ 577 at [64] and [76].[56]That any breach did so is, in my respectful judgment, an impossible conclusion. In Ampurius Nu Homes Holdings Limited at [44] Lewison LJ said the following with regard to the authorities on what constitutes a repudiatory breach:
“There are three points which emerge from this. First, the task of the court is to look at the position as at the date of purported termination of the contract even in a case of actual rather than anticipatory breach. Second, in looking at the position at that date, the court must take into account any steps taken by the guilty party to remedy accrued breaches of contract. Third, the court must also take account of likely future events, judged by reference to objective facts as at the date of purported termination.”
[57]Lewison LJ also referred at [49] and [50] in the same case to an apparent tension between the test of deprivation of "substantially the whole benefit" (Diplock LJ in Hong Kong Fir at p. 66) and "a substantial part of the benefit" (Buckley LJ in Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361at p. 380). Lord Wilberforce observed in The Nanfri at page 779C, however, that the difference in expression does not reflect any divergence of principle but merely the application of the same principle to different facts. For that reason, and because the current common formulation is that of deprivation of “substantially the whole benefit”, I prefer to adhere to that formulation of the test. In any event, like Lewison LJ in Ampurius Nu Homes, it is not necessary for me on the facts of the present case to resolve that difference in expression of the test. As Lewison LJ said at [51], whatever test one adopts, the starting point must be to consider what benefit the injured party was intended to obtain from performance of the contract. In Ampurius Nu Homes the benefit was the grant of a leasehold interest of 999 years and the actual ultimate delay in completion of the relevant part of the development was just under a year. It was held that the delay at the date of the purported termination of the contract did not go to the root of the contract. In the present case, the respondents were to be granted a 125 year lease of residential premises. On the face of it, the delay of approximately one month, at most, between the earliest possible date for contractual completion and the respondents’ purported termination of the Contract on 20 March 2009 could not possibly be said to have deprived the respondents of a substantial part of the benefit of the Contract, let alone substantially the whole of the benefit.[58]What appears to have impressed the Judge greatly in terms of prejudice to the respondents from the delay and what was at the centre of the oral submissions of Ms Nicola Lucas (Mrs Ayres), on behalf of herself and Mr Ayres, is that the delay beyond the end of 2008 caused them to lose the ability to obtain a 90 per cent. mortgage, without which it was impossible for them to finance the completion. Mr Howd accepted that, in principle, if the respondents’ mortgage situation was known to the appellant, it could be taken into account in determining whether or not delay in breach of the Contract was a repudiatory breach. The Judge found (at paragraph [62] of his judgment) that the respondents kept the appellant informed of their mortgage and valuation position. Mr Howd challenged that finding if and insofar as it was intended to include notification to the appellant (at least before 18 December 2008) that the 90 per cent. mortgage offer from the Halifax would expire if the mortgage had not been drawn down by 31 December 2009 or that the Bank of Scotland would be withdrawing its 90 per cent. mortgage product from the market with effect from that date or that the respondents would not be able to obtain any similar product from any other mortgage provider after that date. Mr Howd also submitted that what really caused the respondents’ financial difficulty was not the delay in completing the construction of the Apartment but the collapse in the property market leading to the withdrawal in the market of 90 per cent. loan to value mortgages.[59]It is not necessary, however, to form a view about any of those aspects because it is clear that the loss of the opportunity to secure a 90 per cent. mortgage had, on any footing, occurred before the contractual completion date, that is to say at a time when the delay in completing the construction of the Apartment was not unreasonable. The respondents’ mortgage offer from Halifax expired when it was not drawn down and security given by the end of 2008. Completion of the Contract was, however, never due until after that date. Even at the very outset the Development was not projected to be completed until an unspecified time in December 2008, which (in the absence of any evidence to the contrary) must be assumed to be by the end of that month, and contractual completion was not due until the service and expiry of a 10 day notice after that date. As I have said, on the findings of the Judge, by the end of 2008 contractual completion was not due, at the very earliest, until the second half of February 2009.[60]There is no evidence of any other prejudice to the respondents. Such prejudice as there was in the delay of a month or so between the (earliest) date for contractual completion and the respondents’ purported termination of the Contract on 20 March 2009 could easily have been satisfied by damages, for example in so far as the respondents’ enjoyment of the term of years to be granted by the appellant under the lease (125 years from 2006) was adversely affected by the delay.[61]Nor can there be any question of the appellant being in anticipatory breach as at 20 March 2009 since it is clear that the appellant was throughout attempting to complete the Development, including the Apartment, and to hold the respondents to the Contract.[62]It follows that the respondents were not entitled to terminate the Contract by the letter from their solicitors dated 20 March 2009. The appellant continued to hold the respondents to the Contract, serving on them on 13 August 2009 the 10 days notice under Special Condition 7.2 and then on 1 September 2009 a 10 day notice to complete pursuant to Standard Condition 6.8 as amended by the Contract. The Judge considered that a reasonable time had elapsed by 1 September 2009, even if it had not elapsed by 20 March 2009, and that the appellant was in repudiatory breach by that date justifying the respondents’ refusal to complete in accordance with the notice to complete. There are two difficulties with that conclusion. In the first place, the Judge never considered whether the effect of the appellant’s delay by 1 September 2009, assuming it amounted to a breach of the Contract, was to deprive the respondents of substantially the entire benefit they were intended to take under the Contract. Secondly, after the respondents’ solicitors’ letter of 20 March 2009 the respondents never purported to accept any repudiatory breach by the appellant. Accordingly, if the respondents were not entitled to terminate in March 2009, the Contract always remained on foot until after expiry of the notice to complete served by the appellant. It follows that the respondents were themselves in breach of the Contract by failing to complete in September 2009.[63]The appellant is, for those reasons, entitled to damages for breach of the Contract by the respondents. As I have said, by the date of the trial the appellant was no longer seeking specific performance.

Conclusion

[64]For the reasons I have given, I would allow this appeal.[65]In stating that conclusion I would emphasise again the difficult position in which the Judge found himself, having to adjudicate in a difficult and technical area of the law when both parties were without legal representation and he did not have the benefit of any oral submissions from anyone versed in the law.[66]I must also acknowledge that this judgment will be a severe disappointment to the respondents and is likely to carry financial consequences for them. They waited a long time for the completion of the Apartment and, with the passage of time, lost their means of financing the purchase through a 90 per cent. mortgage offer. The unfortunate position in which they found themselves was not caused, however, by the appellant’s breach of contract. The reasons for their misfortune were that the Contract did not have a fixed long-stop date for construction of the Apartment; their mortgage offer from Bank of Scotland was conditional on the mortgage commencing by 31 December 2008 but that was before the earliest date when completion of the Contract was projected to take place; and the change in market conditions led to the Bank of Scotland and other mortgage providers withdrawing their products for 90 per cent. loan to value mortgages, without which the respondents were unable to finance the purchase. Lord Justice Underhill[67]I agree Lord Justice Floyd[68]The contract signed by Mr and Mrs Ayres, the respondent purchasers, was not an ordinary contract for the purchase of a lease of an existing house or flat. It required the appellant vendor to build the property of which their apartment would form part. The contract did not contain any express provision allowing the respondents to cancel the contract if the building was not completed by a given date. The only relevant obligation on the vendor was the implied obligation to complete the building within a reasonable time. The provisions of the Law Society’s Standard Conditions of Sale, which were incorporated into the contract in the way the Chancellor has explained, and which enable a party to force completion of a sale where the other party is not ready to complete on the sale completion date, are of no avail unless and until there is a sale completion date. In this contract the sale completion date was to be dependent on the building completion date. As the parties had not expressly provided for what was to happen in the event of a delay in completing the building, the question of whether the respondents were entitled to escape from the contract as a result of the delay which in fact occurred fell to be decided according to the general law of contract.[69]As the Chancellor has demonstrated, the delay in completing the building which had occurred by 20 March 2009 was minimal. Yet on that day the respondents’ new solicitors purported to be entitled to treat the appellants as in repudiatory breach of the contract. It is of course material to take into account any impact which the delay has on the innocent party, and that would in principle include the loss of the ability to fund the purchase. However, once it is understood that the respondents would have lost their mortgage funding even if the building had been completed on time, there is nothing to assist the respondents there.[70]Accordingly, all one is left with is the delay itself. Irritating as it must have been for the respondents, the delay was not, on any view, sufficient to cause them to lose substantially the whole benefit of the contract. I agree, therefore, that on this ground the appeal must be allowed.

Cited in 2 later judgments