“Re: Hotel Unit No 687 Westminster Bridge, London SE 1 I/We hereby instruct you to act on our behalf in connection with our purchase of the above mentioned property at the price of£315,000 plus VAT. I/We further instruct you to proceed to an immediate exchange of contracts in connection with the purchase of the above at the aforementioned price. I/We confirm that you advised me/us fully of the consequences of entering into this contract before I/we did so and would confirm that I/we have read and understood the context of your report (dated 18. 10. 05) that you had it to me/us before giving you these instructions and instruct you on the basis of that report.” ii) After the 1st respondent’s signature, the 1st respondent set out his contact details. iii) The 1st respondent also signed what purported to be a contract between the appellant, the respondents and Galliard Homes Ltd (“Galliard”) for the grant of a long lease of unit 687. This contract consisted of a first page headed “Precedent Form of Contract for UK Launch” and then, on the next line the statement “Particulars” (“the Particulars)”
“121. On the other question, relating to C2’s authority to sign for C3, it is unnecessary to rehearse the evidence in great detail. I accept C2’s and C3’s evidence that C3 was, throughout the day, looking after their two children, aged 1 and 2, was outside the hotel for most of the time, was paying little attention to what was going on even when inside, and was anxious to get away, having other plans for the day and no intention of staying so long. 122. I also accept C2’s and C3’s evidence that, whilst any purchase of a property would normally be made by them jointly, C3 never authorised C2 to enter into a contract on her behalf without her consent, and that she did not on this occasion know that he was entering into a contract, or consent to his doing so on her behalf. All she knew was that C2 had paid£1,000 to reserve the unit, and she was quite annoyed about that. It is not entirely clear when she was told this, but it seems probable that it was either when she was outside, by telephone, or during one of her sporadic visits inside. It may well have been before C2 had signed the Particulars page. In any event, I accept her evidence that she was unaware that C2 had entered into a contract, let alone that he had purported to do so on her behalf, on that day. I also accept C2’s evidence that Mr. Bloom did not ask him whether he had authority to sign for his wife. 123. It is clear from both C2’s and C3’s evidence that she was angry about the whole thing from the start, and increasingly so when she learned (as she did) that further and more substantial deposits had to be paid, for which she had to make some contribution. She did not think that the family could afford it, and the tension over this resulted in C2 telling her as little as possible. He was away working during the week, and she had a fulltime job as well as two small children to look after. Dealing with a contentious matter was the last thing that either of them needed. Obviously, he ought to have told her that he had signed the Particulars page on her behalf, but he did not do so; he was anxious to minimise trouble, and hoped that she would eventually be reconciled to what he expected to be a good investment. So she probably would have been but for the wider events of 2008, resulting eventually in the failure in 2010 to get a mortgage. 124. C3 was a patently honest witness, and I accept her evidence as what happened later, which can be summarised as follows:- She did not see, and was not aware of, the letter of26th October 2005 in which Mr. Mughal referred to a contract having been entered into by C2 and herself. She knew about the more substantial deposits which had to be paid, and realized that they must denote “some kind of commitment”, but did not appreciate that there must be a binding contract, let alone one to which she was a party. She knew of and participated in the attempts to raise the finance during 2010 and intended, if they resulted in the successful purchase of the property, that she and C2 would own it jointly. 125. Clearly, C3 must have become aware, at some time before the proceedings were brought, of the Particulars page and of the letter of26th October 2005 , since they were referred to in the Particulars Claim. But there is no evidence that she was aware at any earlier stage of the fact that C2 had signed a document showing her as Purchaser 2, and it has of course always been both C2’s and her own case that the Particulars page did not incorporate any other contractual terms. 126. Therefore, the defendant’s difficulty in establishing its case on ratification (discussed below) is that it has not been established that C3 knew, at the time she participated in the mortgage application, or at any other relevant time, that C2 had purported to enter into a contract on her behalf. The closest one gets to such knowledge is the following exchange in cross-examination. “MR. RAINEY: Let us take it from there. You now know sitting here today that there was a contract exchanged on the day? Yes. Q. And you knew when the claim was issued a couple of years ago, so you knew then. I am just trying to go back in time. There comes a point in time between the sales fair and now which you realised there was a contract. Can you tell us at what point you say you realised there was a contract. I think for sure some time early in about 2010 when we moved to Inverness. Q. Is there anything which sticks in your mind as to how you can place the moment in time roughly when you found out? Yes, what happened then was we had just, I think we just purchased a house in Inverness I think my husband was saying something about employing him to source for a mortgage for this project. MR. RAINEY: Fill in the gap then. So how does that lead you to discover that there was is a contract for the room at the Park Plaza Hotel? Well, I remember him saying the he has to get a mortgage, another mortgage and that is what (inaudible) all right, so now it is a contract I think. I mean I didn’t, there was not any need for me to think about it really, it was just okay. I had the feeling that okay. DEPUTY JUDGE STRAUSS: You had what feeling? That it had become our property, kind of; if you see what I mean. MR. RAINEY: I think you have already told us this; you considered your property as in yours and his? Yes. Q. We have seen at least one, during the search for mortgages there is one email on the bundle which is copied to you to a personal email address? Yes. ... MR. RAINEY: When you were searching for a mortgage your husband told us this morning that there was one point when he I think referred to a feeling of elation that an offer had been obtained which was quite a good one, which he then told us had later been reduced in value because the valuation report came in and the bank dropped the amount of money it was going to lend. Do you remember that? All I remember is he was saying he needs to get a mortgage and looking for a mortgage and the person helping us saying you might be able to, it is hopeful. Some days he would say oh looks promising and then suddenly it was like oh no, it is not going to happen and that was it. DEPUTY JUDGE STRAUSS: Dr. Laditi, you knew that your husband was using these mortgage brokers to try and get a mortgage for the project? Yes. DEPUTY JUDGE STRAUSS: And you went along with that? I didn’t feel at that stage there was much I could do or there was any way I could influence anything so I didn’t know that I had a choice really. DEPUTY JUDGE STRAUSS: Presumably if a mortgage had been obtained, then purchase of the property would have been completed? Most likely. DEPUTY JUDGE STRAUSS: Looking back to that time, was it your expectation that if a mortgage was obtained and if the purchase was completed, the property would be transferred into both your names. Yes, probably yes.” 127. However, I do not think that this establishes any more than that she knew in 2010 that C2 had entered into a contractual obligation binding on him at some time (not necessarily in 2005, possibly at the time of the further deposits). It does not establish that she knew that he had purported to enter into a contract on her behalf at any time, as opposed to having the intention to ensure that the property which he was buying was transferred into her name.”
“Ratification 128. I have found that C2 had no actual authority to contract on behalf of C3. It is not suggested that he had any ostensible authority. Mr. Rainey accepts that, if that is the finding, there was no contract, unless and until there was ratification: see Suleman v. Shahsavari [1989] 1 E.G.L.R. 203. However, he submits, if C3 subsequently ratified (a) the contract would become valid with retrospective effect and (b) section 2 would be satisfied as C2’s signature on behalf of C3 would also be retrospectively validated. The first of these propositions is uncontroversial, but the second is not. 129. Mr. Rainey’s argument starts with the proposition that, on the proper construction of the Particulars page, C2 purported to sign the contract for and on behalf of himself and C3. The term “Purchaser” is defined in the agreement as “as set out in clause 5 of the Particulars”, and the Particulars clearly name C2 and C3 as Purchaser 1 and Purchaser 2. The obvious meaning of “Signed for and on Behalf of the Purchaser” immediately below C2’s signature is that he was signing for and on behalf of both the persons encompassed by that term as shown on that page. I agree with this submission, and I think that it is also supported by a background fact known to both parties (and therefore to a hypothetical objective observer), namely that no effort had been made to obtain a separate signature from C3. 130. Mr. Rainey’s next proposition is that ratification would validate with retrospective effect a contract which complied with section 2. This is because there would then be a contract, signed by C2 on behalf of himself, and on behalf of C3 with her authority, containing all the terms agreed between them and the defendant, which is all that section 2 requires. Nothing in section 2 alters the law of agency and the retrospectively validated signature by an agent, acting within the scope of his actual or ostensible authority, is sufficient. 131. Miss Stevens-Hoare submits that this is wrong. She submits that there is no authority on the relationship between section 2 and ratification, but that in principle the effect of section 2 is to render the contract void, in which case it cannot be revived by ratification. One cannot bring to life a void contract, and section 2 had rendered this contract void at the time of exchange. 132. I agree with Mr Rainey’s submissions on this point. I can see no flaw in their logic, and the underlying basis of Miss Stevens-Hoare’s submission, namely that it was section 2 that made the contract void on23rd October 2005 , is in my view incorrect. Section 2 is not engaged unless there is first an agreement which would, subject to compliance with it, be a binding contract: see Commission for New Jersey v. Cooper (Great Britain) Ltd [1995] 2 E.G.L.R. 113 at 123 J-L. In this case, there was no such contract on23rd October 2005 , because one of the parties to the intended contract did not enter into it. Therefore, no question of compliance with section 2 arose, and noncompliance with section 2 was not the reason why the intended contract was void or ineffective.”
“133. However, for reasons indicated earlier, I cannot see how it can be said that there has been any ratification by C3 once I believe, as I do, her evidence that she did not see or know of Mr. Mughal’s letter of26th October 2005 , which would have told her that C2 had entered into a contract on her behalf. Mr. Rainey submits that C3’s evidence that she participated in the efforts to obtain a mortgage with the intention of becoming a joint owner of the property is conclusive on the question of ratification, and it certainly would have been if she had known that a contract had purportedly been entered into on her behalf. But, as Miss Stevens-Hoare submits, it is trite law that there can be no ratification unless the party concerned knows the circumstances relating to that which he is said to have ratified: see Bowstead on Agency para. 2-067. The extent of the knowledge of the circumstances required may in some cases be debatable, but in the absence of any evidence that C3 knew even that C2 had entered into a contract purportedly on her behalf at the sales fair, or at any other time, it cannot be said that she had knowledge of the act which it is claimed she ratified. For this reason, she never became bound by the contract. 134. Mr. Rainey also submits that C3’s counterclaim for the return of the deposits (or such part of them as she provided) was an act of ratification, but this cannot be right. The suggested act of ratification, i.e. the counterclaim, is a document which denies the existence of the contract which requires ratification in order to be effective.”
“135. Mr. Rainey submits in the alternative that there is a constructive trust in favour of the defendant, alternatively that the claimants are estopped from asserting any rights to repayment of the deposits, essentially on the ground that it would be unconscionable or inequitable for them to do so having regard to the fact that they maintained the contract in being until it proved difficult or impossible to obtain a mortgage in 2010. These submissions cannot apply to C3, for the reasons discussed earlier, and there would have to be an enquiry as to how much of the deposits she provided. But in any event, I reject both submissions for the following reasons:- (a) The defendant has chosen not to pursue its obvious remedy, namely an action for breach of warranty of authority against C2, which would have enabled it to recover its exact loss, whether greater or smaller than the amount of the deposit attributable to C2, and to set off any amount recovered against C2’s claim. The natural assumption is that the reason for the absence of such a claim is that the defendant cannot prove loss. (b) Although the defendant has argued that the unit could have been put up for sale at any time, the units have not all been sold and there is no evidence that there would have been a purchaser for this unit who did not buy another unit. Nor is there any evidence of the current price of units. Therefore, the defendant has not established either (i) that there is any actual loss or (ii) that it would suffer a loss if it now resold the unit. (c)In these circumstances, even assuming that the principles of constructive trust and estoppel are of potential application:- (i) as to constructive trust, I can see nothing unconscionable in leaving the defendant to pursue a claim for damages against C2, which would enable it to recover its actual loss if any; (ii) as to estoppel, no detriment has been established; and (iii) the application of either principle would enable the defendant, in effect, to enforce the contract and to recover a sum which might well be greater than any loss or detriment it has suffered. (d) The normal case in which constructive trust arises is one in which the claimant has acted to his detriment (e.g. carried out work) in reliance on an informal promise of an interest in land: see for example Yaxley v. Gotts[2000] Ch. 162 . (e) Whether or not a constructive trust of this kind could ever exist in relation to a sum of money, it is clear that it does not in this case for at least the following reasons:- (i) the circumstances in which the defendant was to be entitled to the deposits are prescribed by the said agreement i.e. if and only if the claimant, in breach of contract, failed to complete; to permit the claimant to take the deposits in the present circumstances would be to enforce the agreement outside the circumstances for which it provided; and (ii) what makes the retention of the property unconscionable in cases of this kind is that the claimant has provided the consideration for the informal and therefore void contract, which is now irretrievable; the defendant in this case seeks to have the deposit and keep the property, providing nothing. No doctrine based on unconscionability could support this. (f) As regards estoppel, this might be established if the defendant relied to his detriment on a promise by the claimant not to rely on the statute, but to seek to establish it on the basis only of a continuing promise to perform the void contract would in effect override section 2 and reintroduce, and expand, the abolished doctrine of part performance: cf. Actionstrength Ltd. v. International Glass Engineering IN.GL.EN SpA [2003] 2 A.C. 541. Conclusion 136. For these reasons, whilst a binding contract was purportedly entered into by C2 on behalf of himself and C3, it fails because he had no authority to enter into it and C3 never ratified it. C2’s and C3’s claim therefore succeeds.”
“IT IS ORDERED that 1. There is no valid or enforceable contract for the purchase of a lease of Apartment 687 in the Park Plaza Hotel…. between the Defendant for the 1st part and the 2nd and 3rd Claimants for the 2nd part. …… 3. The Claimants have permission to amend the Amended Particulars of Claim pursuant to their oral application and in the form attached hereto and to make such consequential amendments to their Reply to Requests for Further Information and Reply and Defence to Counterclaim as are necessary to ensure the same are consistent with the Re-amended Particulars of Claim. The Claimants shall file and serve the Re-amended Particulars of Claim and amended Replies to Requests for Further Information by 4pm on10 January 2014 and the Amended Reply by 4 pm on7 February 2014 . 4. Save for the declaration set out in paragraph 1 herein, the Release Issue and the defence of equitable set off for breach of warranty as against the Second Claimant the claims and counterclaims by and against the Second and Third Claimants be dismissed. 5. On condition that the Defendant pays at least 80% of the Second Claimant’s costs in these proceedings of and occasioned by the defence of equitable set off based on breach of warranty, and that it does not seek and is not entitled to an order for its own costs of this issue, whatever the outcome, the Defendant has permission to amend the Amended Defence and Counterclaim pursuant toCPR 17.1 (2)(b) and/orCPR 17.4 in the form attached to the Defendant’s application dated6 November 2013 save that the amendments be revised to plead breach of warranty as an equitable set off but not a counterclaim. The Defendant shall file and serve the Re-Amended Defence and Counterclaim by 4pm on17 January 2014 . …… 8. The Defendant be granted permission to appeal against paragraph 1 and 4 of this Order on the basis of its claim that the Third Defendant ratified the contract signed by the Second Defendant and/or estoppel. There be a stay of paragraphs 1 and 4 of this order (and any further order made in respect of the return of the Second Claimant’s deposit) pending the disposal of the appeal. ……”
“IT IS ORDERED that 1. Subject to the outcome of any appeal the entitlement to the return of the Deposits paid by the Second Claimant in the sum of£78,750 together with such interests as has accrued on the same from the stakeholder Howard Kennedy FSI LLP arises only after the issue of equitable set-off of the breach of warranty claim is determined. 2. The defendant is refused permission to appeal against (1) the costs conditions imposed on the grant of permission to amend the Defence to plead breach of warranty by way of equitable set-off and (2) the refusal of permission to amend the Counterclaim. 3. The costs of the Preliminary Issue as between the Defendant and the 1st, 2nd, 4th, 5th and Claimants are reserved for determination of the remaining issues in these proceedings. 4. The costs of the claim as between the Defendant and the 3rd Claimant are adjourned to be decided at the determination of the remaining issues between the Defendant and the other Claimants proceedings.”
“53. As to the first proposition, I see no reason why, in circumstances where, as here, the contract expressly provided that, where there were two or more persons constituting “the Purchaser", the obligations of each of them should be joint and several, the several obligations of the one “Purchaser”, who clearly did sign the contract and authorise the solicitors to exchange, should not be contractually binding on him to purchase the property and to pay the deposits, and the balance of the purchase price on completion. 54. As stated in Chitty on Contracts, 32nd edition, Volume 1, paragraph 17 – 003: “Joint and several liability gives rise to one joint obligation and to as many several obligations as there are joint and several promisors.” 55. In a joint and several contract, the obligation is said to be either joint or several at the election of the promisee, and he may, if he chooses, sue all the promisors in one action or bring separate actions against any one or more of the promisors in respect of their several obligations; see Glanville Williams, Joint Obligations (1949), at §20 and cases there cited. That being so, the appellant could have sued the 1st respondent alone on the several contract between himself and the appellant without joining the 2nd respondent or relying upon the joint contract as between the appellant, the 1st respondent all the 2nd respondent. 56. As to the second proposition, again subject to further argument from counsel, my brief researches suggest that the old case law onsection 40 of the Law of Property Act 1925 (although not precisely on point) supports the proposition that a memorandum in writing which adequately documented the essential terms of the several contract between the appellant and the 1st respondent would be sufficient for the purposes of section 2, notwithstanding that the appellant knew from what was written on the Particulars that the 1st respondent was also purporting to sign the joint contract on behalf of himself and his wife, and indeed her several contract on her behalf. If, as a matter of analysis, there is no obligation on the appellant to sue both respondents together or under the joint contract, it follows in my view that section 2 is not infringed in relation to the several contract entered into between the appellant and the 1st respondent. The Particulars contain all of the terms which the parties have agreed in relation to that several contract. See, by way of analogy, cases such as Basma v Weekes[1950] AC 441 and Davies v Sweet[1962] 2 QB 300 , where the Court of Appeal held that a memorandum will be sufficient even though one of the parties to the contract is not identified, provided it does identify someone will be bound by the contract, such as an agent who has incurred personal liability. 57. I have considered the case of Suleman v. Shahsavari, upon which the judge apparently relied. It is necessary to read the case as reported at (1989) 57 P. & C.R. 465, where the reasons of Mr Andrew Park QC, sitting as a deputy judge, in relation to his refusal of the purchaser’s claim for specific performance, are fully set out. In my judgment Suleman v. Shahsavari provides no basis for the judge’s conclusion that, in the absence of the 1st respondent having any authority to sign the Particulars on his wife's behalf, there was no contract at all as between the appellant and the 1st respondent. 58. Suleman v. Shahsavari was a case where the defendant vendors, Mr and Mrs Shahsavari, were joint owners of the property in question. No question of compliance with section 40 of the Law of Property 1925 (the predecessor to section 2) arose; see page 472. The judge found that Mrs Shahsavari had purportedly given authority to the solicitor to sign and exchange contracts, but since she had in fact no actual, ostensible or implied authority from her husband to authorise the solicitor to exchange contracts, she had only effectively given authority on her own behalf. In those circumstances counsel for Mr and Mrs Shahsavari contended that, since authority to exchange from both vendors was required, there was no contract which bound them. In the relevant passage for present purposes at page 473, the judge said: “Mr. Hurst (counsel for Mr. and Mrs. Shahsavari) says in the alternative: (i) he [Mr Martinez, the vendors’ solicitor] had no authority at all, and indeed was expressly instructed by Mrs. Shahsavari not to sign and exchange the contract; or (ii) if he had authority from Mrs. Shahsavari, he did not have any form of authority from Mr. Shahsavari, and, since authority from both vendors was required, there was no contract which bound them. I will first deal with Mr. Hurst's first argument. I reject it because, as I have said earlier, I accept Mr. Martinez's evidence about the telephone call on July 8. I therefore take the view that Mr. Martinez had express authority from Mrs. Shahsavari to sign and exchange the contract. Mr. Hurst's second argument, however, based on the absence of authority from Mr. Shahsavari, is a different matter, and I have concluded that I must accept it. Before saying why I consider that there was no sufficient authority from Mr. Shahsavari I should say this. Neither Mr. Geldart nor Mr. Hamlin has disputed the proposition that, if Mr. Martinez was authorised by Mrs. Shahsavari but not by Mr Shahsavari, there is no contract. It has not been suggested to me that there could be a contract which bound Mrs. Shahsavari, and on which she is liable in damages. I think this must be right. Suppose that, instead of an exchange of part and counterpart, a single contractual document was drawn up, to be signed by all three; Mr. Suleman and Mrs. Shahsavari signed it, but Mr. Shahsavari refused to sign. There would have been no contract. The position is the same if Mr. Martinez had no authority from Mr. Shahsavari.” [My emphasis.] 59. Having decided on the evidence that the solicitor had not been authorised by Mr Shahsavari to exchange, the judge concluded that the purchaser’s claim for specific performance against Mr. and Mrs. Shahsavari failed. However apart from the fact that the relevant point for present purposes was conceded and not argued in Suleman v. Shahsavari (see highlighted passage above), the facts of that case are, in my judgment, wholly distinguishable from those of the present case. In the former case, unlike the present case, there was, not surprisingly, no question of either of the joint vendors being in a position to convey the property individually; there does not appear to have been any provision, such as that in the present case, imposing several (as well as joint) liability on each of the purchasers. In contrast, in the present case, there was no reason why the 1st respondent, as one of the proposed two “Purchasers” of a unit, and given the express provisions of the contract, should not be contractually liable on his separate and several obligation to purchase the unit, given that he had certainly signed the Particulars and authorised exchange on his own behalf. 60. Moreover, there is nothing in the authorities relating to agency which would preclude a person, who contracts on his own behalf as principal, and who also purports to sign the relevant contract as agent for another party, from being contractually bound in his capacity as principal under a contract imposing joint and several liability, notwithstanding that, in the particular circumstances, he had no authority from his principal to sign the relevant contract on the latter’s behalf. It all depends on the terms of the relevant contract: see for example Bowstead on Agency, 20th Edition, paragraph 9-006. 61. Accordingly, as a matter of first principle, and subject to such further reference to relevant authority as counsel would wish to present to the court, I would have concluded, contrary to the judge’s conclusion based on Mr Rainey’s concession, that there was indeed a binding contract, between the 1st respondent on the one hand and the appellant on the other, imposing several obligations on the former. 62. That would give rise to the second issue, namely whether there was a sufficient document in writing “incorporating all the terms which the parties have expressly agreed” “signed by or on behalf of each party to the contract” for the purposes of section 2 of the 1989 Act. 63. Section 2 of the 1989 Act provides as follows: “2 Contracts for sale etc. of land to be made by signed writing. (1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each. (2) The terms may be incorporated in a document either by being set out in it or by reference to some other document. (3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract. … (5) This section does not apply in relation to— … and nothing in this section affects the creation or operation of resulting, implied or constructive trusts.” 64. As I have already said, it appears to have been implicitly accepted by the judge that, in the absence of 2nd respondent’s authorisation or ratification, there was no sufficient document in writing to satisfy the requirements of section 2(3). Again, if that is what the judge decided, for the reasons given above, I would disagree as a matter of analysis. 65. Unfortunately, because of counsel’s acceptance of the judge’s starting point (i.e. that there was no binding contract), we were not referred to any authority in relation to a situation such as the present, where as a matter of analysis it must be arguable that there was a separate contract as between the 1st respondent and the appellant, reflecting his several obligations, which was adequately documented in writing so as to satisfy the requirements of section 2 of the 1989 Act. In the absence of any such authority, in my judgment, the terms of the contract adequately documented in writing the provisions of the several contract as between the appellant and the 1st respondent. 66. Accordingly, in my judgment the 1st respondent was contractually bound under his several contract with the appellant to purchase the property, notwithstanding that paragraph 13 (iv) of the amended particulars of claim pleaded that “at no point was it intended that [the 1st respondent] would proceed with any proposed purchase without the [the 2nd respondent]”
“I agree with the judge that this cannot be the policy of section 2.”
“56. The defendant's case is that the reference to “the parties” in section 2(3) is to the parties to the proposed conveyance or transfer. Two strands of authority are put forward as supporting that contention. First, that the purpose of section 2 was to introduce a new and strict regime in relation to contracts for the creation or transfer of interests in land, can be seen from observations of the Court of Appeal in First Post Home Ltd v. Johnson[1995] 1 WLR 1567 at 1571B to H, and McCausland v. Duncan Laurie & Partners[1997] 1 WLR 38 at 44G. Secondly, the result for which the defendant contends is compelled by the reasoning and decision at first instance in this division of Mr David Mackie QC in Jolson Ltd v. Derby County Council[1999] 3 EGLR 1991 . Despite these authorities, I reject the defendant's case on section 2. 57. The purpose and effect of section 2 is to be assessed by reference to the words used by the legislature, and nothing said by the Court of Appeal suggests otherwise. Those words are to be given their natural meaning unless there is some very good reason to the contrary. The closing words of section 2(3) require the contract, or the parts of the contract to be signed by “each party to the contract”, not by “each party to the prospective conveyance or transfer”
"Although the transaction between the plaintiff and the defendant was illegal, nevertheless it was fully executed and carried out: and on that account it was effective to pass the property in the lorry to the plaintiff." 44. In the present case the agreement was not illegal in the same sense as in the Singh case, but it was void for failure to comply with the formal requirements of section 2 of the 1989 Act. As in the case of a contract void for illegality, so in the case of a contract void for lack of formal validity, it did not follow that property in the deposit could not pass to the defendant. That depended on the intention with which the payment was made. Was the payment intended to be conditional on the claimants completing the transaction or was it intended to be unconditional? If the former, the defendant would have obtained only a conditional title to the money and would have been bound to return it on the transaction falling through. If the property passed unconditionally, the defendant was prima facie entitled to retain it. In Chillingworth v Esche[1924] 1 Ch 97 it was necessary to construe the document of10 July 1922 for the purpose of determining the second issue, that is, in order to decide whether as a matter of fact the payment of the deposit was intended to be conditional or unconditional. In many cases where a deposit is paid under a contract for the purchase of land which is void under section 2 of the 1989 Act, and the transaction does not materialise, the purchaser will be entitled to the return of the deposit (as the Law Commission said) because the expectation which provided the reason for the payment would have failed, but that is a question of fact in each case. 45. Professor Birks gave contrasting illustrations in his Introduction to the Law of Restitution, pages 223-4, in a passage cited by Robert Walker LJ in Gribbon v Lutton at para 61: "
"No direct authority is cited for the last proposition (the reader is invited to compare R v Smith(1884) 27 Ch D 89 and Mayson v Clout[1924] AC 980 , both cases in which there was a concluded contract). But in principle the proposition must be right, if the sanction of forfeiture has been clearly stipulated." 47. Referring to the facts in Gribbon v Lutton, he said at para 64: "
“42 None the less, it does not seem to me that anything in the differences between section 2(1) of the 1989 Act and its ancestor in the Bill proposed by the Law Commission comes anywhere near to making it inappropriate to conclude, as I do, that it was no part of Parliament's intention by enacting section 2 of the 1989 Act to make it easier for people who have genuinely contracted to escape their contractual obligations. 43 Even more unfortunately, the reported cases in which the courts have sought to interpret and apply section 2(1) of the 1989 Act demonstrate that, because of the rigorous discipline which it imposes upon parties to land contracts, it does indeed enable persons who have genuinely contracted to do just that. It enables parties to land contracts who have changed their minds to look around for expressly agreed terms which have not found their way into the final form of land contract which they signed, for the precise purpose of avoiding their obligations, on the ground that the lack of discipline of their counterparty, or even their own lack of discipline, has rendered the contract void. As Judge Behrens noted in the present case, the exclusion of the 2% finder's fee from each of the 11 contracts occurred at the express request, and to serve the commercial purposes of, the defendant purchasers. Mr Holland did not on their behalf attempt to suggest that a successful outcome for his clients on the section 2 issue would do otherwise than to provide a wholly unmerited escape from genuine obligations deliberately entered into. 44 It is not uncommon to find a statutory provision which, in seeking to remedy one mischief, unexpectedly creates another, which cannot be undone by any purposive approach to construction. In the present case, the undeserved escape route which, on Mr Holland's submissions, would be afforded to his clients by succeeding on the section 2 issue would give rise to an injustice of a type which it was an express purpose of the 1989 Act to mitigate or prevent. 45 Although I am mindful of the need to avoid treating an apparent parliamentary purpose as the basis simply for disapplying a statutory provision in a case in which its application would otherwise give rise to injustice, I consider it legitimate to approach the interpretation and application to the unusual facts of this case of section 2(1) of the 1989 Act upon the basis that if it can be construed so as to prevent or mitigate the injustice of enabling genuine contracting parties to escape from their obligations, it ought to be.”
“11 The starting point in answering this question is a determination of the nature of the relationship between the stakeholder and the parties who have an interest in the deposit. Since this case relates to the proposed purchase of land, it is convenient to refer to the parties as the vendor, the purchaser and the stakeholder. It is important to bear in mind that in a normal case there exist two distinct contracts. The first is the contract between the vendor and purchaser which determines when and to whom the deposit will be paid. The second is the contract between the vendor and purchaser on the one hand and the stakeholder on the other. Since in the type of situation being considered here there are three parties, this latter contract has been referred to in the authorities as tripartite. The scope and purpose of the tripartite contract is very limited. It provides that the stakeholder shall keep the deposit pending a triggering event and then shall pay in response to that event. It is no part of the function of the tripartite agreement to create the triggering event. The matter can be put another way: the vendor/purchaser contract determines who is entitled to the deposit after the triggering event, the tripartite agreement provides that the stakeholder must deal with the deposit in accordance with the entitlement to it defined by the vendor/purchaser contract and, until the triggering event, he must retain it in accordance with the joint instructions of the vendor and purchaser. Therefore the tripartite contract does not create either the vendor's or purchaser's entitlement to the stake, but gives effect to the entitlement as between them which is determined by the vendor/purchaser contract. Although the two contracts may be entered into at the same time, that need not be so. 12 Since the tripartite contract does not define entitlement between vendor and purchaser but responds to an entitlement determined elsewhere, what happens in a case where the deposit is paid by the purchaser to the stakeholder in advance of there being any enforceable contract between him and the vendor? Prima facie, since it is the purchaser's money and the vendor has no legal entitlement to it, the purchaser can demand its return to him at any time in advance of an enforceable vendor/purchaser contract being put in place. Thus, if there is an unenforceable promise by the purchaser to pay a sum of money to the vendor, the vendor acquires no legal entitlement to it and the fact that the sum may have been paid to a stakeholder does not create an entitlement to it. The stakeholder can and must respond to a demand for repayment by the purchaser. The tripartite agreement does not alter who is and who is not entitled to the deposit.”