The Court of Appeal recently found that a claimant’s failure to provide correct pre-contract documentation constituted a breach of a settlement agreement.
Gateway Plaza Ltd (the “Claimant”) and Mr White (the “Defendant”) were involved in a litigation following the non-completion of a contract for the purchase of a plot of land in a development carried out by the Claimant. By a settlement agreement dated 17 February 2012, the Defendant was afforded the opportunity to buy an alternative plot in the same development, provided he exchanged contracts by 28 March 2012. The terms of the settlement agreement prescribed that the litigation against the Defendant would be discontinued provided he committed himself to exchange contracts by the stipulated deadline.
Not until 12 March 2012 did the Claimant’s solicitors send to the Defendant’s solicitors a draft contract and other related documents. The covering letter, enclosed lease and CML “disclosure of incentives” form incorrectly stipulated the purchaser as a “Mr White and Mr Pearce”. On 20 March 2012, the Defendant’s solicitors replied, seeking amendments to the exchange documentation. The Claimant’s solicitors responded on 2 April 2012, refusing to make any amendments but saying that the contract and lease could be amended in manuscript. The Claimant’s solicitors further advised that they had requested a new CML form from their client. By this time, the stipulated exchange deadline had expired, though neither party treated this as fatal. The Defendant’s solicitors chased the Claimant’s solicitors for a revised CML form, but this was never provided. No explanation was ever advanced by the Claimant as to why it was unable to supply an amended form to the Defendant.
In view of the above, it followed that the Defendant failed to exchange contracts by 28 March 2012 or indeed at all. The Claimant contended that the litigation against the Defendant therefore remained. The Defendant, in response, argued that the reason he did not exchange contracts was because the Claimant was in breach of contract itself, by failing to supply him with the correct pre-contract documentation.
The case therefore turned on whether the Claimant was obliged to provide the correct CML form before the exchange deadline of 28 March 2012.
At First Instance
At first instance, Mr Recorder Philips considered the Claimant to have failed to provide the correct CML form in accordance with the normal practice of conveyancers. He noted that a vendor in such circumstances cannot, in his view, “turn round and say that the purchaser is at fault for failing to exchange contracts on the relevant date, or even on any later date”. The settlement agreement between the parties was considered by the Recorder to be a contract which required “mutual action by both parties”, noting that it was “simple enough to say that the cause of the fact that did not materialise was entirely the inaction of [the Claimant]”.
The Claimant appealed.
Sir Timothy Lloyd, sitting in the Court of Appeal, construed the wording of the settlement agreement between parties as requiring “at least some collaboration from [the Claimant]”. He recognised that whilst the contract and lease could be corrected by manuscript, this was not true of the CML form which had to be initiated by the Claimant itself. Sir Timothy Lloyd therefore agreed with the Recorder that the Claimant was under an obligation to supply the appropriate pre-contract documentation. The Claimant was found to be in breach of contract when it supplied the wrong CML form and when it failed and refused to supply a correct version of that form. The Claimant’s appeal was therefore dismissed.
Though the wording of the settlement agreement was recognised by the Court of Appeal to be ambiguous, Sir Timothy Lloyd adopted a common sense approach in assessing how a reasonable man, having all the background knowledge reasonably available, would have acted. This case serves as a reminder to litigants that the action is not always concluded at settlement and that both parties may be required to comply with further duties under a settlement agreement.
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