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Cite as: [2016] EWHC 548 (Ch)

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Neutral Citation Number: [2016] EWHC 548 (Ch)
Case No: HC-2015-000842

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Rolls Building, Fetter Lane,EC4A 1NL
16/03/2016

B e f o r e :

MASTER BOWLES
____________________

Between:
Anuj Shah
Dishit Shah
Claimants
- and -

(1)Susanah Eforma Greening
(2) The Estate of George Harry Greening
Defendants

____________________

Pierre Janusz (instructed by Vymans Solicitors) for the Claimants
Charles Irvine (instructed by Fisher & Myftari) for the Defendants
Hearing dates: 28th and 29th October 2015

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Master Bowles :

  1. By this Claim, issued on 5th March 2015, the Claimants, Anuj Shah and Dishit Shah (Anuj and Dishit), seek specific performance of a contract of sale, dated 23rd May 2014, entered into between themselves, on the one part, and the First Defendant, Susanah Greening (Mrs Greening) and her late husband, George Greening (Mr Greening), on the other part. The property the subject of the contract is a freehold house at and known as 15 Tenby Avenue, in Kenton, Middlesex (the Property). The Claimants, who are male cousins, were the purchasers under the contract and Mr and Mrs Greening were the vendors. The Claimants are, additionally, seeking damages which are said to arise from the Defendants' failure to complete the sale of the Property pursuant to the contract.
  2. In the event that the court, in the exercise of its discretion, elects not to order specific performance, damages are further sought in lieu of specific performance. The parties have agreed that, in that event, the matter should go over for an inquiry as to damages.
  3. Under the contract, completion should have taken place on 22nd August 2014. The purchase price, as stated in the contract, was 500,000, together with 3,000, in respect of chattels. 50,000 was paid by way of deposit, to be held, pursuant to the Standard Conditions of Sale (5th Edition), by the vendors' conveyancer as stakeholder.
  4. In addition to the deposit, two cash sums were paid to Mr and Mrs Greening, pursuant to written agreements, dated, respectively, 31st January 2014 and 16th May 2014. Under the first agreement a sum of 4,000 was paid. Under the second agreement that figure was to be 'topped up' to 7,000, by the further payment of a sum which should have been 3,000, although, in fact, only 2,990 was paid.
  5. Under each agreement the cash payment was said to be paid 'on condition that' the Property would 'be sold to them'; the 'them', being stated as being 'Mr and Mrs A Shah'. The Claimants' case is that each of these agreements was, as it was put, a 'lock out' agreement, providing the Claimants with an assurance, or promise, that the Property would not be sold elsewhere.
  6. These agreements, together with the circumstances in which a price was eventually agreed to be paid in respect of chattels, have been central to the debate before this court; it being, in essence, the Defendants' case that the price to be paid for the chattels, coupled with the 7,000 paid under the January and May additional agreements, were, in reality, additional payment for the Property, reflecting a true price of 510,000, and that the contract and the agreements took the form they did in order to disguise that fact and to, thereby, evade the stamp duty arising on a transaction at a price in excess of 500,000.
  7. The Defendants' position, as identified in counsel's skeleton argument, was that this was not merely to avoid payment of the additional stamp duty arising on the top 10,000 of the alleged price, but, by keeping the price at 500,000, to avoid stamp duty being exacted at the higher rate then payable for transactions in excess of 500,000.
  8. The corollary of the foregoing, if true, was, so it was submitted, that the contract, itself, containing an incorrect purchase price, and the two additional agreements in January and May of 2014 were each and all agreements entered into for an illegal purpose and were, in consequence, unenforceable by the Claimants. On that footing, it was submitted, that, not merely was the contract of sale unenforceable, either by way of a decree of specific performance, or by way of damages, but that the monies which had been paid under the illegal agreements were irrecoverable.
  9. The defence of illegality did not emerge until an application for summary judgment was issued by the Claimants in March 2015 and until, in response to that Claim, Mrs Greening lodged and served her witness statement dated 27th May 2015, together with a draft defence. That draft defence, raised both the issue of illegality and, also, the additional defence, that, in respect of the claim for specific performance, the court should, in its equitable discretion, refuse relief on the grounds of the exceptional hardship which would be occasioned to Mrs Greening, in the event that specific performance were to be ordered.
  10. In light of that draft defence, being the defence now before the court, the claim for summary judgment was not pursued and directions were given leading to this trial. Those directions included a direction that Mrs Greening be appointed to represent the estate of Mr Greening, who had, sadly, died on 14th June 2014, at a date, therefore, between exchange of contracts and the agreed date for completion.
  11. It is his death and the consequences said to flow from his death that underwrite the Defendants' plea that exceptional hardship would arise if the contract of sale was ordered to be specifically performed.
  12. The core position, in respect, of the original failure to complete is not in any issue between the parties. As already stated, Mr Greening died on 14th June 2014. On 11th August 2014, Mrs Greening wrote to her conveyancers, copied in due course to the Claimants, stating that, in view of her bereavement, she could not complete the sale and requesting that the sale should be terminated on the grounds of hardship. At that stage, Mrs Greening was offering the return to the Claimants of their deposit.
  13. The Claimants, while expressing sympathy, were not prepared to terminate the contract and, therefore, on 22nd August and upon the failure of Mrs Greening to complete on that day, notice to complete was served upon Mrs Greening requiring completion to take place in ten working days. No point is taken on the notice to complete, save the overarching point of the illegality of the contract. The notice to complete was not complied with.
  14. Since that time, Mrs Greening, together with Alice Greening, her school age daughter, has remained in occupation and possession of the Property. Somewhat surprisingly, given this dispute, she has elected to carry out works to the Property, which is a six bedroom semi-detached house, to the value of some 7/8,000, in order to separate off a part of the first floor into a self contained unit. That unit has been let out upon an assured shorthold tenancy, for the purpose, as Mrs Greening told me, of paying for her daughter's university education. The court was not informed of the rent which is being achieved from this letting.
  15. Mrs Greening is also the owner of another property; a two bedroomed flat at 104 London Road, in Wembley. At the time when contracts were exchanged in respect of the Property, the then existing tenancy of that property was coming to an end and it had been Mr and Mrs Greening's plan, as part of a process of downsizing, to move into that property, putting, as Mrs Greening told me, a large part of the contents of the Property into store until they found a four bedroomed property outside London. Mr Greening was already in considerable ill health.
  16. Since then, Mrs Greening has re-let the London Road property, under a tenancy commencing in March 2015 and at, what appears to be, a much increased rent to that previously payable. Under the existing tenancy the passing rent is 1,400 per month. Under the prior tenancy, the rent was said by Mrs Greening to be in the order of 600 per month. She has, also, as she told me, re-mortgaged the London Road property, so that it is now charged, on an interest only 'buy to let' basis, to the extent of 203,000 and, by so doing, has been able to pay off the mortgage on the Property, which is now, therefore, free of mortgage. The value of the London Road property, for purposes of the re-mortgage was put at 270,000, as at June 2015.
  17. Reverting to the sale to the Claimants, the Property was, I am told, first placed on the market in 2012. The Defendants' agents, in respect of the sale, were Blacklers Estate Agents (Blacklers) and the employee of Blacklers, instructed in respect of the sale was a Mr Tony Stanbrook. Mr Stanbrook gave evidence at the trial in respect of the circumstances in which the first of the additional agreements came to be executed and the purposes for which it was executed. I found him to be an honest and reliable witness.
  18. It was not, however, until the Autumn of 2013 that the Claimants first became interested in its purchase.
  19. Although the purchase was to be in the name of and by the Claimants, who are, as I have said, male cousins and although, as I was told by Dishit, had matters gone as first planned, the Property would, on purchase, have been rented out, it is now common ground that much of the negotiation in respect of the purchase was carried out by Dishit's wife, Dimple Shah (Dimple).
  20. Dishit, Dimple and the First Claimant, Anuj, all gave evidence, albeit that Anuj had left all matters pertaining to the purchase to Dishit and Dimple and gave his evidence simply to confirm that fact. I found Dishit and Dimple (and, so far as relevant, Anuj) to be honest witnesses, who tried to tell me the truth. They were not always secure in their recollection of every detail and timing, but, on important matters, such as the circumstances giving rise to the two additional agreements, in respect of which they were, properly, but firmly, pressed by Mrs Greening's counsel in cross-examination, they gave evidence which I have felt fully able to accept.
  21. The Claimants' first offer, of 490,000 was made in October 2013 and rejected. Further offers were made of 495,000 and, then, of 500,000. Although Mrs Greening, in her evidence, appeared to deny the acceptance of this offer, Blacklers, her agents, undoubtedly wrote to the solicitors to be instructed by Mr and Mrs Greening on the sale, on 8th November 2013, confirming a sale, expressed to be to Mr Anuj Shah at a price of 500,000, on the usual 'subject to contract' basis, and I accept that that offer, in fact emanating from both Claimants, was accepted, on that basis, at that time.
  22. What is not in any dispute, however, is that, in late December, or early January 2014, a higher offer was put forward for the Property, by a Mr and Mrs St Marthe. Dishit and Dimple's evidence is that they, initially, became aware of the higher offer, but not of its amount, and, in an attempt to beat the offer, made a new offer of 500,000, together with 5,000 for 'chattels', by which they meant the full contents of the Property. Their evidence was that this higher offer was rejected. That evidence is not completely consistent with the documentary record, because, by letter dated 9th January 2014, Blacklers wrote to Anuj stating that the vendor (Mr and Mrs Greening) had 'decided to withdraw' from a sale at 'your increased figure of 505,000'. The likelihood, as it seems to me, is that their increased offer was accepted, but very soon after rejected, such that, in their minds and in their recollection, they recall that offer as being refused at the outset.
  23. Be that as it may, there is no doubt but that, by 9th January and as recorded in Blacklers' letter of that date to Mr and Mrs Greening's solicitors, an offer, at 506,000 had been accepted from Mr and Mrs St Marthe. The letter refers to the sale being 're-agreed' and to a 'revised' figure, with the suggestion, therefore, that there had been an earlier agreement with Mr and Mrs St Marthe at a different figure.
  24. The next part of the chronology is in some dispute.
  25. The Claimants contend and it is Dimple's evidence that, at a date in January, Dimple met Mr and Mrs Greening in the street in Kenton and that it was on that occasion that she was told that the then accepted offer was for 506,000. Dimple's evidence is that she offered to match the offer, by raising the amount payable for chattels to 6,000 and that it was Mr Greening who posed the question as to why he and his wife should, simply, take a matched offer and made it clear that they wanted more.
  26. Dimple's further evidence is that, following this discussion, she telephoned the Greenings and that, after some negotiation, it was agreed that a further 4,000 would be paid in cash. Dimple was clear in her evidence that the Greenings had wanted, or hoped for, more, but that, it was, eventually a figure of 4,000 that was agreed. She was also clear that her offer was not pitched at 4,000 because the Greenings had made it clear that, overall, they wanted 510,000 for the Property and, importantly, that her offer, on behalf of the Claimants, was made on the basis that the price for the 4,000 was Mr and Mrs Greening's promise that they would not sell elsewhere. Dimple explained this requirement upon the footing that the Claimants, who had already been gazumped once, did not want to find themselves in a bidding war.
  27. Her evidence, further, supported by Dishit, is that, given that a cash payment was to be made and given that, to use Dishit's word, the money was to be paid for 'exclusivity', it was important that the payment was evidenced in some way. Their idea, as they told me, was to bring a witness, that the suggestion of a written agreement emanated from Mrs Greening and that it was at her behest that the agreement eventually executed on 31st January had been drawn up by Mr Greening.
  28. Mrs Greening gives a different account of the evolution of the agreement. Her evidence at trial was that there had never been a meeting in the street, but that Dimple had come to the Property and had offered to increase the price for the Property to 510,000 in order to 'get the Property'. She had wanted, however, to 'level' the price at 500,000, by placing a price of 6,000 on the chattels and making a 4,000 cash payment. The reason given, apparently, was that this would assist in the obtaining of a mortgage offer.
  29. In regard to the agreement, Mrs Greening told me that the agreement had emanated from Dimple, that Dimple had given her a draft written out on a piece of paper and that she had given the draft to her husband who had copied it on his computer. According to her, the draft agreement had been given to her in the morning, presumably of the 31st January, and that it was the same evening that Dimple, Dishit and Mr Stanbrook had come to the Property and the agreement had been executed.
  30. I find myself unable to accept Mrs Greening's version of these events and prefer the version put forward by the Claimants. There are a number of reasons for this.
  31. Firstly, the account she gave me at trial is materially and significantly inconsistent with the account that appears in her written evidence.
  32. In particular, Mrs Greening's witness statement does not, in any serious way, replicate her oral evidence. According to her written evidence the offer of 510,000 was made by Dishit and, thereafter, on a separate occasion and after that offer had been accepted, there was a further approach by Dishit in respect of the purchase of the chattels and a further discussion with Dishit on the footing that it would be helpful to Dishit if the price, or value, of the chattels was put at 6,000. In this scenario, Dimple only became involved, at a later date, by telephoning to suggest that a sum of money should be held pending the sale and, in this scenario, it was only at the meeting on 31st of January, when the first additional agreement was executed, that Dimple indicated that she wanted to provide 4,000 in cash to make up the overall purchase price and only at the meeting, itself, that the draft agreement was provided. None of this squares at all with Mrs Greening's evidence to me that the whole transaction (the increased price of 510,000, structured so as to include 6,000 for chattels and the additional 4,000 in cash and so as to 'level down' the apparent price of the Property itself to 500,000) was agreed and arranged by Dimple, when she had called at the Property, nor does it square, at all, with Mrs Greening's evidence that a manuscript note of the agreement had been given to her by Dimple on the day of the execution of the agreement and typed up by her husband prior to the meeting at which the agreement was executed. Nor did Mrs Greening have any sensible explanation for these divergent accounts. She said on a number of occasions that the references to Dishit, rather than Dimple, in her written evidence, was down to 'some mistake'. The other divergences between her written and oral accounts remain wholly unexplained.
  33. Secondly, it is manifest that her evidence as to the provenance of the agreement executed on 31st January is untrue. It is inconceivable that the agreement which was entered into on that date was prepared by Dimple or by Dishit and simply copied by Mr Greening. As already indicated, the agreement did not state the correct purchasers (Dishit and Anuj), but referred, incorrectly to the purchasers being Mr and Mrs A Shah (that is to say, apparently, Anuj and Dimple). An agreement prepared by Dishit and Dimple could not and would not have contained this error; not merely that Dimple was a party to the purchase when she was not, but also that she was married to Anuj, when she was not. By contrast an agreement prepared by Mr and Mrs Greening could well, given Dimple's involvement in the negotiations, have been drawn up in the false assumption that she was a purchaser and with a simple misnaming of her husband.
  34. Thirdly, I found the evidence of Dishit and Dimple as to the circumstances in which and their rationale for both the January and the May additional agreements credible and convincing. There is no doubt, as I find, but that Mr and Mrs Greening had already reneged at least once upon an agreement to sell to the Claimants. The Claimants offer of 500,000, which had been accepted on or about 8th November 2014, was undoubtedly displaced by the increased offer made by Mr and Mrs St Marthe in late December 2013, or early January 2014. In that context, it is more than understandable that, Dimple, in making an offer of additional payment in order to obtain the Property, should require, in return, a promise that the Property should not be sold elsewhere.
  35. In this regard, I was particularly impressed with both Dishit and Dimple's evidence. They were, quite rightly, pressed hard by counsel for the Defendants, Mr Irvine, as to their reasons for entering into the additional agreements and their explanation that they did so to 'secure' the Property and for 'peace of mind' had the clear ring of truth.
  36. In this regard, also, Dishit, in particular, was cross examined by Mr Irvine as to his knowledge and understanding of the stamp duty position. He told me that he was aware that additional stamp duty would have been payable upon any increase in the Property price over 500,000, that he had been told that, at a price of 500,000, 3% stamp duty would be payable, but that he had been unaware that a purchase at a price in excess of 500,000 would place the Property in a different and increased stamp duty bracket. In short, his understanding was, or would have been, that the effect of an uplift in price to 510,000 was that additional stamp duty would have been paid at 3% on the additional 10,000.
  37. Having seen and heard Dishit cross examined on this point, I am satisfied that he was telling me the truth and that the stamp duty implications of an increase in the price to a figure above 500,000, other than a requirement to pay additional duty at 3% on the additional amount, were implications of which he was unaware. From his perspective, therefore, the stamp duty effect of an increase in price from 500,000 to 510,000 would have been an increase in stamp duty liability of some 300.
  38. In that context, the idea that he and Dimple should have orchestrated the two additional agreements to achieve a tax saving of 300 is wholly implausible.
  39. In the result, I am satisfied that the sequence of events leading up to the first additional agreement executed on 31st January 2014 and the reasons underlying that agreement were as explained by Dimple and Dishit and, in particular, that that agreement, as well as the second agreement, to which I shall later turn, were not, in any sense, 'sham' agreements, designed to disguise an increased price for the Property and evade stamp duty.
  40. In so saying, I do not overlook the point, well made by Mr Irvine, that the two agreements in question do not operate as effective 'lock out' agreements, precluding Mr and Mrs Greening from selling elsewhere. All they achieve is that, in the event of a sale elsewhere the monies lodged pursuant to each agreement would be returned to the Claimants. The point was put to both Dishit and Dimple and the answer of each of them was that, at the time they did not understand the document, which had been drafted, as I find, by Mr and/or Mrs Greening, had that limited effect and that they and each of them understood the agreement as amounting to and giving a promise that, in return for the monies paid, the Property would be sold to them. Given the language of the opening part of each agreement, namely that 'Mr and Mrs Greening' had 'received 4,000 (in respect of the first agreement) 3,000 (in respect of the second agreement) .. on condition that' the Property would 'be sold to them', I am satisfied that that was their understanding, albeit incorrect, and that it was in that belief and to achieve that end that the agreements and each of them was entered into.
  41. The first additional agreement, dated 31st January 2014, was executed at the Property. Dishit and Dimple were present along with Mr and Mrs Greening and Mr Stanbrook. Dimple explained that the reason for inviting Mr Stanbrook to the Property was to ensure that there was a witness to the agreement. It is not in dispute that the agreement was executed by Dimple and Dishit and witnessed by Mr Stanbrook. I have already commented upon the errors contained in the agreement and the conclusions that I derive therefrom.
  42. In regard to that occasion, Mrs Greening's written evidence, was that she seemed to recall that Mr Stanbrook said something along the lines that 'this' (meaning the agreement and cash payment) would reduce stamp duty. Her oral evidence, however, put the matter very much more strongly, namely that Mr Stanbrook had said, at this meeting at the Property that this arrangement was the only way of getting away from stamp duty. Mr Stanbrook was clear in his evidence that he did not mention stamp duty at all.
  43. I far prefer Mr Stanbrook's evidence. He was very clear, when cross examined, that he had made no reference at all to stamp duty and that, in his understanding, the agreement he had been asked to witness was a lock out agreement and no more. By contrast, I felt that Mrs Greening's evidence on this point gilded the lily. A possible mention of stamp duty in her written evidence became an assertion, in her oral evidence, that Mr Stanbrook had asserted that the arrangement was the only way of getting away from stamp duty. My very clear impression is that Mrs Greening, having been told, as she explains in her written evidence, that 'the likely purpose of the cash payment .. was for' Dishit 'to wrongly state .. that the purchase price was 500,000 and .. to pay less stamp duty on the transaction' has convinced herself to this effect and that that conviction has coloured her recollection and her evidence in such a way as to render those aspects of her evidence which relate to stamp duty unreliable.
  44. My same concern as to the quality and reliability of her evidence applies to the evidence that Mrs Greening gave in relation to the eventual reduction in the price agreed to be paid for chattels from 6,000 to 3,000 and to the increase in the cash sum agreed to be paid under the second additional agreement.
  45. Mrs Greening's written evidence in this regard was that she was contacted by Dimple in late April or early May 2014 with a request, said to emanate from the Claimants' solicitor, that the price of chattels be reduced to 3,000 and an additional cash sum be paid in lieu and that, on that footing, Dimple, Dishit and a Neel Shah came to the Property on 16th May 2014, handed over a sum of what was, in fact, 2,990 in cash and provided a draft of the second additional agreement, which was duly signed. She explained that, 'as she now recognised', the likely purpose of this was to reduce the possibility of the Revenue carrying out an investigation of the value of the chattels, by reason of the overstatement of their value in the contract of sale. It was her evidence that the chattels had not been worth anything near the 6,000 first agreed and, indeed, that upon an open sale they would have been valueless. At trial, Ms Greening reiterated that the impetus to reduce the chattel price to 6,000 (and, therefore, for the corresponding uplift in the cash sum provided) had come from Dimple, that Dimple had told her that the suggestion to reduce the price payable for the chattels had come from the Claimants' solicitors and that to her and her husband the chattels were of no value.
  46. The evidence given by Dishit and Dimple is very different. Dishit, in particular, explained, as already stated, that in his understanding the 'chattels' meant the full contents of the Property, including such items as beds and sofas and that it was, on that basis, that the Claimants had been prepared to offer 6,000 for the chattels. It was when he came to understand that Mrs Greening did not intend to sell the contents with the Property that, at his and Dimple's instigation, it was requested that the chattel price be reduced to 3,000. It was at that point, according to both Dishit and Dimple, that Mrs Greening indicated, by now in May 2014 and close to the time when it was expected that contracts would be exchanged, that she was not prepared to agree a reduced price for the chattels unless a cash 'top up' was received and that without such a 'top up' there would be 'issues' as to the purchase. In short, their understanding was that without a cash 'top up' the sale would go off. Dimple, in particular, who was trying to negotiate the reduction in price in respect of the chattels, was both specific and convincing that the question of a 'top up' emanated from Mrs Greening, as the price for the continuation of the transaction, and that, as she put it, they (herself and her husband) 'figured it out' that what was required to keep the transaction alive was a further cash payment, such that the overall payment to be received by the Greenings remained 510,000. At the time that this was requested, she told me, her husband was with his ill mother at a hospital. She, Dimple, spoke to Dishit on the phone and they agreed to offer the extra money to make the matter 'go smoothly'. Accordingly and on that footing, the extra payment was agreed and the extra money, less 10, was paid to the Greenings at the Property. As before, the agreement, reflecting the increased cash payment emanated from the Greenings. On this occasion, however, it was Neel Shah, who was their mortgage broker, who came with them as a witness.
  47. In respect of this sequence of the chronology, I, again, prefer the evidence advanced by the Claimants.
  48. The Claimants' explanation as to their desire to reduce the chattel price is not, as it seems to me, in its inception, significantly at odds with the position presented by Mrs Greening. She was clear in her evidence that her understanding of what was meant by chattels did not accord with Dishit's and, in particular, that she had not seen herself and her husband as selling the contents of the Property. In that context, one can readily see how, once that misunderstanding became clear, the Claimants' might seek to reduce the chattel price. I am satisfied, given the weight I give to the honesty and reliability of Dishit and Dimple's evidence, that that is what occurred.
  49. I am equally satisfied that Mrs Greening's account as to how the reduction in chattel price came to be negotiated is, on the balance of probabilities, one which is untrue and which, therefore, should be rejected. I am not prepared to accept, as at all likely, that the reduction in chattel price arose at the instigation of the Claimants' solicitors with a view to reducing the risk of a Revenue investigation. It is, for a start, implausible that there should be seen any significant risk of any such investigation arising out of a chattel price of 6,000, not least where the Greenings themselves had identified chattels included in the sale, as shown in their Law Society Fittings and Contents Form, dated 3rd February 2014, at a figure in excess of 6,000.
  50. Even more materially, the allegation made by Mrs Greening contemplates that the Claimants' solicitors were advising the Claimants as to how to commit a fraud on the Revenue, in circumstances where, as I have accepted, Dishit was unaware of the stamp duty uplift arising on sales over 500,000 and where, therefore, the solicitors' dishonest advice would have been given, as seen from Dishit's perspective, to secure a saving of 300.
  51. Further, putting to one side the potential 'value' of the fraud and while, of course, recognising that solicitors, like other professionals, are not immune from dishonesty, it seems to me very much less likely that solicitors should have behaved in the way suggested than that, as explained by Dishit, the rationale for the chattel price reduction lay in the crystallisation of the misunderstanding between the Claimant and Mr and Mrs Greening as to what each contemplated as being included in the chattels.
  52. The further likelihood, as I see it, is that this suggestion of the solicitors' dishonest involvement reflects and is another example of the gilding of the lily by Mrs Greening, arising out of the belief that she has engendered in herself, in consequence of what she has, seemingly, been told, presumably by her lawyers, that the likely explanation of the conduct of the Claimants, in respect of the chattel price and the uplifted cash payment is that of a stamp duty fraud.
  53. The true explanation as to the provenance of the 'top up' payment is, as I find, that given by Dishit and Dimple. Dimple was, I think, right when she 'figured out' that the additional sum required to secure the sale was that which restored the overall payment to be made to Mr and Mrs Greening to 510,000. For wholly understandable reasons, Mr and Mrs Greening wanted the best financial outcome they could achieve and, having had in place arrangements which would achieve an overall payment of 510,000, they were not going, lightly, to let that position go.
  54. From Dishit and Dimple's perspective, having gone so far with the transaction, they, too, were not, lightly, going to let their position go. I find it wholly credible and I completely accept, that, in the circumstances in which they found themselves, they would have been and were prepared to offer an additional 3,000 in order for the matter to go smoothly and in order to finalise the purchase.
  55. As I find, it was upon that basis that the second additional agreement was entered into. As with the first, I am clear that the document itself was drafted by the Greenings and, given that, barring the increased figure as to payment and a sentence added to the effect that it operated to cancel the January agreement, it replicates, at least as a draft, the earlier agreement, that it came off Mr Greening's computer. As a draft, it contained the same errors as the earlier agreement and which would not have emanated from Dishit and Dimple. I am afraid I disbelieve Mrs Greening, therefore, when she says that the second, as the first, agreement emanated from Dishit and Dimple. It did not. On this occasion, however, as is clear from his unchallenged evidence of Neel Shah and from the executed document itself, some part of the mistaken language of the agreement was noticed and rectified, such that the agreement, as executed, referred, at least, to Dishit and Dimple as providing the agreed cash payment (as was true) and not, as previously, to Mr and Mrs A Shah.
  56. The result and the consequence of all of the foregoing is that I am satisfied that neither the contract of sale for the purchase of the Property, nor the additional agreements were entered into for any illegal purpose and, specifically, the avoidance of stamp duty, or, therefore, that they, or any of them, are unenforceable for illegality.
  57. The further consequence of this finding is that the argument advanced by the Claimants, by counsel, Mr Janusz, to the effect that, in the circumstances of this case and where, in making their case, the Claimants do not have to plead, or rely upon, their illegality, any illegal purpose underlying their contracts does not preclude them from the relief that they seek, does not fall for determination.
  58. Out of deference to counsel, however, and to the arguments that have been advanced, I will deal, albeit in relatively short order, with those arguments, with the inescapable caveat that, as is now well recognised, the law of illegality is in a state of some disarray, that I have only heard limited argument and that, in any event, all I say is obiter to the result.
  59. The Claimants advance their argument that the contract of sale can be enforced by way of specific performance and/or damages in reliance upon the decision of the House of Lords, in Tinsley .v. Milligan [1994] 1 AC 340, and, in particular, upon passages, in the speeches of Lord Lowry and Lord Browne- Wilkinson, in that case.
  60. The decision of the majority in that case establishes, as I read it, that where an interest in property, whether legal or equitable, has vested in a claimant, in the course of the carrying through of an illegal transaction, but where that claimant can assert title to that interest without relying upon the transaction, pursuant to which title was acquired, then the illegality of the transaction does not preclude the claimant in question from making good his title and recovering pursuant to his title.
  61. Put shortly, Tinsley .v. Milligan is about title and the circumstances where title can be established notwithstanding that title is acquired in the course of an illegal transaction. It is not about the enforcement of illegal contracts. Nor does it endorse, as I read it, a claim to title, where that title is dependent upon the enforceability of the illegal transaction. That is made clear by Lord Lowry (at page 368 below F), where he explains that the reason why, on the facts of that case, the defendant, in that case, could make good her equitable title was because her right to that title 'did not arise out of her illegal or immoral act'. Where, however, title does rely upon an illegal act, for example, where an equitable title is said to arise out of the exchange of contracts entered into for the sale of land, but where that contract is itself unenforceable for illegality, then that title will not be made out, because the existence of the equitable title is dependent upon the prior existence of an enforceable contract.
  62. In regard to enforcement, as is made clear by Lord Browne-Wilkinson, in the opening part of his speech (at page 369 at C), there is nothing in Tinsley .v. Milligan which was intended to, or did, modify the fundamental principle that neither 'in law or equity will the court enforce an illegal contract which has been partially, but not fully performed'. Nor, as explained by Lord Jauncey, the third of their lordships, making up the majority, were the majority intending to go behind what Lord Jauncey (at page 366 below C) described as trite law, namely 'that the court will not give its assistance to the enforcement of executory provisions of an unlawful contract whether the illegality is apparent ex facie the document or whether the illegality of purpose of what would otherwise be a lawful contract emerges during the course of the trial'.
  63. This case, being a case of specific performance of a contract, or, in the alternative, the enforcement of the contract, by way of the remedy of damages, seems to me to fall squarely within the fundamental, or trite, principles acknowledged by the majority in Tinsley .v. Milligan, such that, if the contract of sale and the additional agreements had been entered into for the illegal purpose of avoiding enhanced, or uplifted stamp duty, they would have been unenforceable.
  64. That view is consistent with dicta of the Court of Appeal, in Saunders .v. Edwards [1987] 1 WLR 1116.
  65. In that case, the parties to a contract of sale had allocated the value of the chattels sold with the property in question so as to evade stamp duty. The claim, however, did not directly concern the contract of sale, but fraudulent misrepresentations made by the vendor leading to the contract of sale. The claim, therefore, was not a claim arising out of the contract, or to enforce the contract, but a claim, in fraud, as to the circumstances giving rise to the contract.
  66. On appeal, it was argued that, notwithstanding that the claim was not a claim on the contract, nonetheless principles of illegality meant that the fraud claim could not stand. That argument failed, primarily, upon the ground that the claim was not brought upon the contract and did not, therefore, rely upon the undoubted illegality relating to the contract. In so far as, as a matter of public policy, illegality fell to be taken into account, the fact, that the claim was not on the contract and that reliance was not placed upon the contract, meant that, on the view of the law, as then understood, the public conscience would not have been affronted by allowing the fraud claim to succeed and, therefore, that illegality, on those facts, was not a bar to recovery.
  67. The public conscience test has not, I think, survived the robust criticism, which is to be found in the speech of Lord Goff in Tinsley .v. Milligan and which might be taken as watering down the statements of fundamental, or trite, principle set out above. Even with whatever mitigation of the strict principle as might have arisen from the public conscience test, however, both Kerr LJ and Nicholls LJ (respectively, at 1125 at B and at 1133 below D), were plainly of the view that, where a contract of sale is tainted with the kind of illegality alleged in this case and where the claim was, as here, brought on and in reliance upon the illegal contract, that contract could well be unenforceable.
  68. Bingham LJ, as he then was, the third Lord Justice in the case, also contrasted (at 1134 D to F) those cases where reliance was directly to be placed upon an illegality and those where the unlawful conduct was incidental. In the former case a claimant was likely to fail. In the latter, he was likely to succeed.
  69. Had the facts been alleged by the Defendants, this would have been, in Bingham LJ's terms, a direct case. It would have fallen squarely within the principles approved in Tinsley .v. Milligan and, as foreshadowed by Kerr LJ and Nicholls LJ, I would have held the contract of sale to be unenforceable.
  70. To that conclusion, I add two caveats.
  71. Firstly, although this was not fully explored in argument, it is possible, no more, that the Claimants might have been able to rely upon the locus poenitentiae, which applies where an illegal purpose has not been put into effect, to secure an order for specific performance on the condition that their return to the Revenue in respect of stamp duty reflected, if I had so found, a true purchase price of 510,000.
  72. Secondly, although monies paid under an illegal contract are, ordinarily, irrecoverable, it is, again, possible that, where, as here, the deposit of 50,000 was paid to a stakeholder so that title to the monies did not pass to the Defendants, an argument could be advanced by the Claimants for the recovery of those monies from the stakeholder, on the footing that they had retained title to those monies and that that title could be asserted without reliance upon and independently of the contract of sale.
  73. In the circumstances, as they arise, however, neither of the foregoing matters fall for determination and I say no more about them.
  74. The only further question raised as to the enforceability of the contract of sale, albeit not a matter pleaded by the Defendants, is as to the Claimants' ability to complete and their ability to demonstrate that they have been, at all material times, and are now ready willing and able to complete. As to this, the only issue raised has been as to their financial ability to complete.
  75. I can deal very shortly with this.
  76. In respect of the original completion date, I have been shown the Claimants' solicitors' ledger sheet, as it obtained, at 21st August 2014 and the funds shown in that ledger at that date. Those funds were more than sufficient to secure completion.
  77. Additionally, the Claimants, conscious of their obligation of readiness, but faced, following the Defendants' failure to complete, with the loss of their mortgage offer, procured bridging finance, which was in place at the time when their application for summary judgment came before the court in June. At that date, in so far as relevant, therefore, the Claimants were, again ready willing and able to complete.
  78. The current position is that there are funds in the hands of the Claimants of some 263,000 and there is unchallenged evidence from Neel Shah, their mortgage broker, that a mortgage offer will be available if and when the court orders specific performance to take place. The previous mortgage offer, in August 2014, had been 320,000. The mortgage sum now required to complete, given the deposit paid and the monies that the Claimants have in hand, will be significantly less than that and the value of the Property, the security for the mortgage loan, has, on the evidence of Mr Stanbrook, risen considerably since August last year. In these circumstances and given, also, the proven 'track record' of these Claimants in ensuring their readiness to complete, I am wholly satisfied that they will be able to complete the purchase if directed to do so.
  79. It remains to consider, in respect of the claim for specific performance, whether, notwithstanding the existence, as I find, of an enforceable contract of sale in respect of the Property, there is any discretionary reason why specific performance should not be granted. As earlier stated, the Defendants, in this regard, raise a plea of exceptional hardship.
  80. That plea is founded upon the decision of Goulding J in Patel .v. Ali [1984] 1 Ch 283. In that case, Goulding J reviewed the jurisprudence underlying the jurisdiction to deny specific performance upon hardship grounds. He determined that there could be relevant hardship even where the hardship did not emanate from the applicant for specific performance and did not arise until after contract. He accepted that the hardship could be personal and not related to the subject matter of the contract. He acknowledged, however, (at page 288 below A) that 'pecuniary difficulties' did not, in themselves, afford good reason for non-performance. He determined (at page 288 at C) that specific performance could only be refused in 'extraordinary and persuasive circumstances', but that, in the ordinary case of a person of full capacity, such a person 'takes the risk of hardship .. whether arising from existing facts or unexpectedly supervening in the interval before completion'. He attached very considerable importance to there being an effective remedy in damages in lieu of specific performance.
  81. On the particular facts, he attached very great weight to the fact that there had been a delay of some four years in bringing on the application for specific performance, that delay not being of the defendant's making, and to the fact that in the interim the defendant had suffered bone cancer, the amputation of her leg, the imprisonment of her husband and the birth of two further children In the evaluation of the judge, the effect, of an order for specific performance and the consequent removal of the defendant and her three young children into local authority accommodation, would be to lose very much of the daily assistance, upon which she relied, to cause, in consequence, very much more disturbance to her children than would ordinarily be the case and to create the possibility, given her disability, that she might no longer be able to keep her children with her. In that context, the judge was able to find that the defendant was being asked to do what she never bargained for, namely to complete a contract after four years and after all the changes that that four year period had entailed, and that to order her to complete in such circumstances would be to inflict a 'hardship amounting to an injustice'.
  82. I do not think that one can possibly say, in this case, that to compel the Defendants to complete their contract would be to inflict a hardship amounting to an injustice.
  83. In so saying and while undoubtedly demonstrative of the level of hardship which will bring into play the court's exercise of its discretion to refuse specific performance on grounds of hardship, I recognise that the particular hardship identified in Patel .v. Ali and the particular findings of the court in respect of that hardship should not be used as a yardstick for the level of hardship which must be established before a court can refuse discretionary relief upon the grounds of that hardship. The court is exercising an equitable discretion and must do so on a case by case basis, albeit having regard, as I see it, to the principles helpfully formulated by Goulding J.
  84. Accordingly, there must be extraordinary and persuasive circumstances such as to take the case away from the normal situation, in which the contracting parties undertake the risk of such hardship as may arise in the supervening period between exchange and completion.
  85. I do not think that this is such a case.
  86. As already set out, the hardship relied upon by Mrs Greening is the hardship arising from the sad death of her husband in June 2014.
  87. I do not wish, in any way, to undervalue the impact of that death upon Mrs Greening, or the anxiety and depression flowing from that bereavement and which has led to Mrs Greening seeking bereavement support. Nor do I wish to undervalue the fact that, by reason of her husband's death and the impact of that death upon her, Mrs Greening has been unable to work since his death, or the stress that, as I am told, this case has occasioned her. Likewise, at a practical and financial level I fully accept that the effect of his death and of Mrs Greening's current inability to work has been to reduce her income, other than the income she has derived from renting out the flat at London Road and the renting out of part of the Property. Mrs Greening told me that, if she had to move on, life would be difficult.
  88. The fact of the matter, however, is that Mrs Greening retains the ownership of the London Road flat, with a value, with vacant possession, said, in June 2015, to be 270,000 . On the figures that she has provided, she receives an income, after mortgage, from that property of some 800 per month. She receives, as I understand it, statutory sick pay of some 88 per week. She received an insurance payment of some 149,000 upon the death of her husband, of which, it would appear that some 50,000 remains available. On completion of the sale of the Property, which is now without mortgage, she would have the largest part of a further 500,000 available.
  89. Mrs Greening is, therefore, in a position to move on. In so saying, I do not undervalue the psychological impact arising from her removal from a long standing home. I do, however, have in mind that it had been her and her husband's intention to move. I also attach a degree of weight to the way in which Mrs Greening has, since the death of her husband, acted to rehabilitate her finances, in re-letting London Road, in re-mortgaging and in adapting the Property to secure a rental income. While she has done so in a way that, as I see it, has operated, particularly in the arrangements that she has entered into at the Property and particularly in putting London Road out of the way as alternative accommodation, in some denial of the consequences of the contractual arrangements she had entered into, she has shown, throughout and notwithstanding the effects of her bereavement, a quality of organisation and determination which I have no reason to believe will not be applied to her domestic and working circumstances if and when the sale of the Property is concluded.
  90. In this regard, Mr Irvine sought to make something of the undoubted rise in the property market since 2014. He adduced no evidence, however, that Mrs Greening would not be able to secure suitable accommodation for herself and her daughter, either within, or outside, London (as had been Mr and Mrs Greening's original intention), with the benefit of the monies that would become available at completion, or, indeed, that such accommodation would exhaust those monies. I am, in any event, dubious as to the weight that I should attach to any possible consequences arising from the delay in bringing this matter to completion, given that that delay derives exclusively from the conduct of the Defendants in refusing to complete and given that Mrs Greening could, at any stage since August 2014, have offered to complete.
  91. In all the circumstances and while inevitably sympathetic to Mrs Greening in her bereavement, this case does not exhibit the extraordinary and persuasive circumstances which are required if the court is to refuse to order specific performance on account of hardship.
  92. Accordingly, I will order that the contract of sale in this case be performed.
  93. The residual issue, therefore, is that of the damages, if any, to be paid by the Defendants arising out of their breach of contract in refusing to complete. In determining that question, the court must, of course, be careful, not to ascribe to the Defendants a responsibility for expenditure which would have taken place had the contract been performed as it should have been and, also, not, with the benefit of hindsight, to bring into play expenditure which would not have been in the contemplation of the Defendants as arising, in the ordinary course of things, from a failure to complete.
  94. The major head of damage said to arise from the Defendants failure to complete is the rent that Dishit has, he says, had to pay for rented accommodation in the period since completion should have taken place. As to that the evidence is that Dishit and Dimple have moved into rented accommodation at 29 Beaufort Avenue, in Harrow at a monthly rent of 1,450 from 26th September 2014. Although pleaded, initially and for the purposes of the Part 24 application, as the rent payable for an eight month period, it was not disputed by Mr Irvine that, if recoverable, the damages payable should reflect the continuing rental payments until completion.
  95. The issue as to this head of claim was as to whether, had completion taken place as contracted, Dishit and his family would have moved into the Property, or whether they would, in any event, have lived elsewhere. The foundation for the Defendants' argument, that the latter would have been the case, was that the mortgage offer in place at the date agreed for completion was a 'buy to let' mortgage.
  96. Dishit's evidence was that application had been made, at the outset, for both a residential mortgage and a 'buy to let' mortgage, with the original intention that, if the 'buy to let' mortgage came through first, then the Property would have been rented out. What transpired was that the 'buy to let' mortgage offer came through first, but, at or about the same time and unexpectedly, Dishit was given notice in respect of his then existing tenancy, such that, thereafter, there was a change of plan and his intention, with the consent, seemingly, of his cousin was that he and his family would move in. In respect of the status of the mortgage, Dishit would, he told me, have sought to re-negotiate with the lender so that it would continue upon a conventional residential basis. The further alternative, raised in his written evidence, was that he and Dimple would take an assured shorthold tenancy from himself and his cousin, or simply re-mortgage, upon a residential basis, with a new lender.
  97. Dishit was cross examined by Mr Irvine on these matters, it being put to him that his proposed conduct constituted a mortgage fraud. That was inaccurate. There was no suggestion that any untrue statement had been made in the mortgage application; albeit that, had Dishit moved in, at completion, in the way that he says he intended, there can be little doubt but that that occupation would have been in breach of the terms of the mortgage.
  98. Be that as it may, despite the pressure imposed by the allegation of fraud, Dishit stood by his evidence in a way that I found credible. I have no doubt but that, in the circumstances that they found themselves Dimple and Dishit would have moved in and I see no reason to believe that they would not have re-negotiated with their lender, nor that any negotiation would have been other than successful. From the point of view of possible remoteness, it was not suggested in evidence, or argument, that Mr and Mrs Greening would have had any contemplation at the date of contract other than that Dishit and his family would be moving in to the Property at completion and, therefore, that, if completion was refused, they might have to move elsewhere.
  99. That, however, is not quite the end of the matter, since there can be no doubt and as is accepted by Dishit, in his written evidence, that if he had moved into the Property he would have had to pay the mortgage.
  100. As to that, the figures before the court are that the mortgage cost would, until February 2016, have been 936.35 per month. That figure must, as I see it, be set against the monthly rental payment of 1,450, giving a net loss to Dishit of 513.65 per month. That monthly figure, from 26th September 2014 to date and continuing until completion, is recoverable from the Defendants as damages.
  101. I can deal rather more shortly with the other heads of damage, as follows:
  102. (1) Mortgage brokerage fees were payable to Neel Shah, under invoices issued by his company, Cogent Financial Services Ltd, in the sum of 600, in respect of the original mortgage offer and an extension to that offer. Although the mortgage offer indicated that some 400 of those fees were refundable in the event that the mortgage did not complete, Mr Shah told me (and it was not challenged) that, under his own terms of trading the fees were payable and had been paid. Those wasted fees are recoverable from the Defendants.

    (2) Likewise, post exchange insurance taken out by the Claimants and now wasted are recoverable, as are the expenses incurred in arranging the abortive mortgage, in the overall sum of 815.00 (23 being excluded because it related to the CHAPS fee for the deposit payment and which has not been, therefore, wasted expenditure).

    (3) Removal fees of 1,800 are sought by the Claimants (described as removal fees to and from interim accommodation). What seems to have occurred is that, on the initial failure to complete, Dishit and his family moved, temporarily, to a property at 58 Christchurch Avenue and, subsequently, in September, to the Beaufort Avenue address. When completion, eventually, takes place, they will have to pay again to move to the Property. Although the detail of these removal costs would not have been contemplated by the Defendants at the contract date, as possible damages arising from non-completion, the prospect of such fees arising, in the event of breach and in the event that Dishit, because of the breach, had to move his effects into temporary accommodation, was plainly in contemplation. Accordingly, as I find, those fees are recoverable in their totality.

    (4) A claim is also made for legal fees, apparently incurred up to exchange of contracts. I do not regard those fees as recoverable. They were incurred to achieve the exchange that has taken place and which will lead to completion. They are not wasted.

    (5) The two outstanding heads of claim are the fees incurred by the Claimants in arranging bridging finance at the time of the Part 24 application and loss of earnings said to have been caused by the failure to complete.

    (6) The unchallenged evidence of Neel Shah is that a fee of 4,800 has been incurred in respect of the acquisition of bridging finance, which, of course, would not have been required had completion taken place when it should. The acquisition of loan finance and the fees associated with such finance, including the brokerage and arrangement fees, discussed above, and these bridging loan fees, are, in this day and age, the everyday commonplaces of any purchase of land and the risk of such fees being wasted and lost in the event of a non-completion are, accordingly, losses of a type that the Defendants should have had in mind, as arising in the ordinary course of events, should they wrongly fail to complete and, as such, recoverable as damages.

    (7) I do not think, however, that Dishit should have his claimed loss of earnings. I was given very little explanation as to why, or how, the failure to complete caused Dishit to be unable to work. Nor do I readily see how this absence from work would, or should, have fallen within the Defendants' contemplation, at the date of contract, as a potential consequence of their breach of contract. I was, also, somewhat unimpressed with his evidence that he could go to some building site, pretty well at whim, and secure such work as he chose. In comparison to his other evidence, I found this very unconvincing. Taking it all together, I do not think, therefore, that the allegation of recoverable lost earnings is made out.

  103. There will be an order for specific performance and an award of damages as set out in this judgment. The parties should seek to agree the mechanics and the time scale for completion. In the event that agreement cannot be reached the court will, on the handing down of this judgment, give directions so as to give effect to the order for specific performance.


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