In a decision many may view as surprising, the High Court found in TBAC Investments Ltd v Valmar Works Ltd [2015] EWHC Civ 1213 (Ch) that a reasonable recipient would be able to understand the purpose of a notice to complete despite the fact it was littered with errors. Consequently the notice was valid.

Facts

TBAC Investments Ltd (TBAC) was the freehold owner of a property. In July 2011 TBAC's bank appointed receivers as TBAC had failed to comply with the conditions of its mortgage. In July 2012, the receivers, exchanged contracts for the sale of the property to Valmar Works Ltd (Valmar).

It was agreed that Valmar would occupy the Property under a lease for a year, after which completion of the freehold sale would take place. Valmar defaulted on the rent which entitled TBAC to terminate the lease and to call for the completion of the sale. TBAC terminated the lease, but Valmar failed to complete the sale.

The receivers served a notice to complete on Valmar, requiring completion within ten days, failing which TBAC would be able to terminate the contract and keep the deposit. Valmar failed to comply with the notice and the receivers wrote to Valmar stating that the sale contract had been rescinded.

The property was instead sold at auction and Valmar sought to challenge the validity of the notice to complete and registered unilateral notices against the title to the property to prevent the auction sale.

TBAC sought a declaration that the sale contract had been rescinded, an order that the unilateral notices be removed and an injunction preventing Valmar registering further unilateral notices. Valmar counterclaimed for TBAC to be compelled to proceed with the sale and sought a declaration that, should TBAC be successful, it be prevented from retaining the deposit.

Decision

The Court considered all the arguments regarding the validity of the notice:

Although the notice was not signed, the Court found that a reasonable recipient would understand from the fact it had been sent to Valmar and its solicitors that it was not intended to be a draft.

The notice was not served by the original receivers as one had resigned and been replaced. Valmar asserted that a notice to complete could not be given by the new receivers as the contract did not provide for this. The Court rejected this argument as the receivers were simply acting as agents for TBAC. Secondly, it considered that the definition of 'Receivers' in the contract, should include their successors in office. Finally, either both or any one of the receivers could serve the notice, and at least one who was an original receiver had.

The Court found that despite the many errors, which it considered were relatively minor, a reasonable recipient would have understood the notice.

The notice gave the wrong date for when the contract would be rescinded. The Court held that a reasonable recipient would again understand that he was required to complete within ten working days of receipt and would calculate the correct date.

It followed that the notice to complete was held to be valid. The Court also refused to exercise its discretion to order the return of the deposit. The Court stated that the profit made by TBAC on the auction sale was in line with the market and TBAC had suffered the risk and cost of holding the property until the issue was resolved.

Comments

Given the numerous errors it is surprising that the notice was found to be valid. However, despite the many errors, none were so significant that the recipient would have failed to understand the notice. Although this decision may offer comfort to those who have issued a notice containing mistakes, errors will often lead to litigation and delay. In different circumstances a Court may not be so forgiving.

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