Home Information Cases Englewood Properties Ltd v (1) Shailesh Patel (2) Cornberry Ltd (2005)

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Englewood Properties Ltd v (1) Shailesh Patel (2) Cornberry Ltd (2005)

Summary

A seller of land had a duty as trustee to continue to perform lease covenants between the contract of sale and completion. However, where there was a lessor's covenant, and the actions of the seller could not lead to forfeiture of the interest that was the subject matter of the sale, if the benefit of an agreement vested in the seller was not part of the property being sold then it did not survive the sale.

Facts

The first defendant property consultant (P) and second defendant company (C) appealed against an order for summary judgment in favour of the claimant property developer (E). E had sold some shops at auction in several lots. A lessor's covenant restricted sale or letting for certain uses and required E to insert a corresponding covenant in any sale or letting agreement. C, via P as agent, bought Lot 11 with the covenant inserted, but it was not inserted for the other lots. Before completion, C and P were refused finance on the ground that the buyer of Lot 11 would become landlord of a tenant who had power to litigate against it if the primary business of one of the other properties sold was in breach of the user covenant. The market value of Lot 11 fell accordingly. C and P alleged that E had acted in breach of its duties as trustee for not inserting an appropriate covenant and so could not enforce the contract of sale. E sought specific performance and obtained summary judgment. P submitted that (1) P was only acting as agent for C and that E was estopped by convention from asserting that P was the buyer or joint buyer; (2) there was no limitation on the duty of the trustee for sale of the property sold. E argued that (1) by virtue of the terms of the auction conditions P was jointly and severally liable with C under the auction contract, and was personally liable to buy at the bid price and indemnify E for any loss. There was no evidence of a common underlying assumption that only C was the buyer; (2) that it was not obliged to impose the covenant on the other lots sold, its duty did not extend to properties other than those that were the subject of the sale.

Held

(1) The auctioneer's notices clearly emphasised both the personal liability of an agent, and the joint and several liability of the agent and principal under the contract of sale. There was nothing in the communications between P, C and the auctioneers following the sale that was inconsistent with the auction conditions, and no conduct by E amounting to their waiver or variation. (2) It was not arguable that, in the absence of agreement to the contrary, E had a duty to require the purchasers of the lots sold after Lot 11 to comply with the user covenant. Case law had established that, where the existence of the trust or the identity of the property was not in question, the seller's trust was to preserve the property in its state as at the time of the contract, since equity imposed duties on the seller to protect, pending completion, the buyer's interest acquired under the contract. The seller had to give good title and, subject to the terms of the contract of sale, to avoid any steps that might result in forfeiture, Dowson v Solomon (1859) 1 Drew & Sm 1 considered. However, the covenant in the instant case was a lessor's covenant, and the actions of the seller could not have led to forfeiture of the interest that was the subject matter of the sale. If the benefit of an agreement, vested in the seller, was not part of the property being sold then it did not survive the sale, and if the buyer could not compel the seller to assign the benefit, then he could not complain if the seller chose not to do so, Heronsgate Enterprises Ltd v Harman (Chesham) Ltd January 21, 1993 (CA) applied.

Appeal dismissed.

Chancery Division
Lawrence Collins J
Judgment date
16 February 2005
References

​[2005] EWHC 128 (Ch), The Times 9.3.2005, LTL 28/2/05

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