Cases on failure to complete sale and purchase contracts of land are not uncommon.  Much rarer are disputes over the consequences of failure to pay the required deposit when the contract is formed, because the mechanics of the Standard Commercial Property Conditions require payment by electronic means from the buyer’s conveyancer on the same day as exchange of contracts.  The involvement of conveyancers therefore minimises any possibility of default by the buyer. 

The case of IAA Vehicle Services Limited v HBC Limited [2024] EWHC 1 (Ch) is one of those rare cases and provides an opportunity to remind ourselves of the usefulness of the court’s equitable discretion in certain circumstances . 

The Facts

The claimant was the tenant under three separate leases of commercial premises.  The leases, granted in 2013, contained an option to acquire the freehold interest from the landlord through a mechanism set out in a schedule to the leases.  The tenant purported to exercise its right to acquire the freehold and it was accepted by both parties  that the options were validly exercised, and therefore that a contract for sale and purchase of the freehold interests in the three properties had arisen .  

The Standard Commercial Property Conditions, which were to govern the contract, state at condition 3.2.1, that a deposit of 10% of the purchase price is to be paid electronically, no later than the date of the contract. In other words, the notices of exercise for the option should have been accompanied by payment of the deposits.  This did not happen. 

The landlord claimed that there had been a repudiatory breach of contract by the tenant due to its failure to pay the deposits.  In fact, tenant’s solicitors had failed to obtain the details of the bank account into which the deposits should have been paid, and the landlord thereafter refused to provide them.  It should be noted that the landlord did not respond to the notices until a few weeks after service, at which point the options had expired.  

Whilst it was entitled, as a matter of law, to do this, the trial judge referred to ‘the elephant in the living room‘ that the landlord had made a bad bargain by setting a price in 2013 which was now well below the market value of the premises, and was trying to get around that? 

Some months later, the tenant issued a claim for a declaration that it had not committed a repudiatory breach of contract and for specific performance of the sale contract.  As the facts were not in dispute, the case proceeded on a Part 8 basis, that is decided on the papers without the need for live evidence. 

The Law

There are three main strands of English law.  First, there is statutory, or parliamentary-made, law which trumps the other two strands.  The common law which – amongst other things – regulates contracts people make is the second strand.  The third strand is known as equity, which in this context is what gives courts the discretion to mitigate the effect of a strict rule of common law.  For historical reasons, equity has a significant role in land law.

If the parties intend a strict time limit to apply in conveyancing, then it is better to make it clear that this is to be strictly adhered to, and if it is not then this will be a repudiatory breach (that is, a breach which terminates the contract, rather than the contract continuing to exist and damages being awarded to the innocent party).  Strict time limits may also be implied into a contract by the court. 

In situations where completion is delayed, the innocent party may serve a notice on the defaulting party making the time limit strict.  This is called ‘making time of the essence’.  If the defaulting party fails to complete after time has become of the essence, then on the expiry of the notice the contract will be treated as repudiated by the defaulting party, and the buyer will be entitled to keep the deposit and preserves its rights to damages for other losses. 

The situation where the deposit is not paid in accordance with the requirements of a contract is much rarer because, in the usual course of events, conveyancers will have been instructed from the start of the sale and purchase process.  The exchange of contracts and the payment of the deposit is therefore choreographed by the lawyers.  As a consequence, there are far fewer instances of deposits not accompanying exchange. 

Given that time is not automatically of the essence for completion of the sale and purchase contract, it would perhaps be surprising were it to be so with the payment of the deposit.  A deposit has long been held as a sort of guarantee for the buyer’s committed intention to purchase a property.  The seller may remove the property from the market with the consolation that it will at least be able to keep the deposit if the buyer does not complete when obliged to do so. 

What case law there is has shown the court taken a nuanced view of the strict deadline.  A fairly recent case (Alexey Samarenko v Dawn Hill House Limited: [2011] EWCA civ 1445) from a very distinguished panel of appellate judges had held that the time limit for the payment of the deposit was to be strictly adhered to, and failure to pay over the money was a repudiatory breach.  However the factual matrix in that case was entirely different.  The defaulting buyer had had many reminders and opportunities to pay the deposit and had failed to do so.  The judges therefore decided that equity should not be allowed to intervene on his behalf. 

Applying the law to the facts

This was a first instance decision by a high court judge, which meant that he was bound by the doctrine of precedent to follow the appellate court.  However, the judge was free to exercise his own principled discretion and find that the deadline was not so strict that a repudiatory breach had occurred.  In doing so, he was mindful of the substantial loss that the tenant would incur, and that the landlord would be allowed to wriggle out of a contract it had freely entered into.  He decided that time had not been of the essence in the payment of the deposit, and was influenced by the landlord’s failure to provide its bank details for the transmission of the deposit, and the fact that the deposit was held by the tenant’s solicitors ready to be transferred. 

The judge also attributed considerable significance to the fact that the landlord was bound to its tenant for the foreseeable future.  The leases were protected leases under the Landlord and Tenant Act 1954, so the landlord was not likely to be able to dispose of the properties free from incumbrances in the near future.  This was not analogous to an eager seller who wanted reassurance that its buyer was serious. 


The tenant’s solicitors had gone to elaborate lengths to ensure the validity of the exercise of the options by serving the notices on the landlord in four different ways.  It was a shame that they had overlooked the corresponding need to solicit bank details from the landlord in order to pay the deposit.  Had they done so, it is unlikely that this situation would have come before a court. 

Nevertheless, the tenant in this case was able to secure what it had bargained for through the judge’s equitable discretion to mitigate the harshness of the common law.  Equity is often regarded by litigators as the refuge of the desperate, and this case illustrates that it is better to pre-empt any necessary recourse to equity by including clear drafting in contracts. 

IAA Vehicle Services Limited v HBC Limited [2024] EWHC 1 (Ch)


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