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rescission of land contracts - even the professionals don't always get it right

1 May 2015
Hardy v Griffiths [2014] EWHC 3947 (Ch)

The case of Hardy concerns the agreed sale of Laughton Manor; a substantial country residence in Lewes which came with a helipad, 12 acres, a walled garden and, unfortunately, extensive damp and dry rot (which the buyers were unaware of at the time contracts were exchanged). Both parties sought to rescind the contract and recover damages from the other.

The case serves as a salutary reminder to lay people and professionals alike, of the importance of obtaining a survey before contracts are exchanged. It also provides a useful summary for those in the construction/development fields, of the law in this area; namely who is entitled to rescind a contract for the sale of property and, in the event of rescission, who is entitled to the deposit.

The facts

The case made headlines due to the profile of the individuals involved. The claimant, Alan Hardy, is a successful builder and brick tycoon (the seller). The defendants are both successful lawyers; William Griffiths, a property and planning barrister, and Angela Griffiths, a solicitor (the buyers).

In March 2011 the seller agreed to accept an offer of £3.6m for the property from the buyers. Contracts were exchanged the next day, incorporating the Standard Conditions of Sale (fourth edition) together with a non-reliance clause (special condition 10) whereby the buyers agreed that no representations had been made by or on behalf of the seller about the property.

A deposit of £150,000 was paid by the buyers. A side agreement extended the completion date to 30 April 2012 and provided compensation for late completion. On 3 May 2012, a survey was carried out on the property which concluded that it suffered from extensive rising dampness and local wet and dry rot. This was allegedly the first time that the buyers had been made aware of these significant problems.

The buyers failed to complete on the agreed completion date, prompting the seller to serve a notice to complete and request the balance of the 10 deposit due when the notice was served (a further £210,000).

The buyers failed to comply with the notice to complete and the seller issued a claim for a declaration that the contract had been rescinded and the £150,000 deposit forfeited, and for damages (including the £210,000 balance of the deposit). The buyers disputed the claim on the ground that, as a result of the sellers misrepresentation, it was the buyers who were entitled to rescind the contract. The buyers also claimed that they were entitled to the return of the deposit and damages for misrepresentation.

The judgment

The High Court awarded judgment on the claim, and dismissed the buyers counterclaim in its entirety. The seller was entitled to rescind the agreement, recover the full 10 deposit plus other sums due for maintenance under the side agreement.

There were no grounds on which the buyers were entitled to rescind the contract since no fraud was alleged against the sellers. As for the non-reliance clause, the judge found that this was fair and reasonable.

The judge held that the seller was entitled to forfeit and keep the deposit already paid (£150,000), and that his right to recover the balance of the deposit (the further £210,000) survived the rescission. The buyers had not claimed return of the deposit under section 49(2) of the Law of Property Act 1925 and the court held that, even if it had been pleaded, there was no evidence to justify the return of the deposit.

This is a relatively straightforward failure-to-complete case. However, what makes this case worth taking time to read is the useful summary of the case law on rescission of a land contract and discussion as to who is entitled to the deposit in such a situation.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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