Williams and another (as joint administrators of Signature Living Residential Ltd) v Alter Domus Trustees (UK) Ltd (formerly Cortland Trustees Ltd) and others

Real property – Agreement for lease – Equitable lien – Company purchasing property for development and selling apartments off-plan – Company in administration before development complete – Joint administrators applying for orders permitting sale of property free from security interests – Whether binding agreements for sale between company and purchasers – Whether agreements for lease excluding equitable lien in favour of purchasers – Application determined accordingly In 2015, the company bought a property known as Ralli House, 60 Old Hall Street, Liverpool, with a plan to develop it into a mixed-use building with 123 apartments and some commercial space. Some of the apartments were to be in new upper floors. A number of the apartments were sold off-plan to purchasers under agreements for lease which specified a relevant apartment by number and description. The AFLs were described as “contracts for sale” but what was being sold was a lease. After the development of some parts of the property was completed, work ceased and the project remained incomplete. The company went into administration in April 2020. The applicant joint administrators marketed the property and ultimately agreed to sell it to a buyer, on the basis that it would be unencumbered by security interests. They applied under paragraph 71 of Schedule B1 to the Insolvency Act 1986 seeking orders: permitting the applicants to sell the property free from various security interests; allocating the net sale proceeds; and providing for the applicants to be paid their fees and expenses. The first respondent was a secured lender with a mortgage over the property. The second respondents contracted to purchase apartments in the property under the AFLs. Some of the purchasers protected their interests at the Land Registry by mainly unilateral notices against the registered title before the first respondent registered its security (the category A purchasers). Held: The application was determined accordingly. (1) A contract for the sale of land was not binding unless it was signed by or on behalf of each party: section 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989. The first respondent had submitted that as three of the AFLs were not signed, they were not binding. However, the words “Signed for and on behalf of the Buyer” had clearly been added by the buyer’s solicitor on one of the agreements. It was an unusual way to authenticate a document, but the insertion of the words on the signature page amounted to his signing on behalf of the buyer for the purposes of section 2 of the 1989 Act. As regards the other two AFLs, on balance and on the evidence, those two agreements had been signed but the signature pages had been lost: Re Cook [1960] All ER 698, Firstpost Homes Ltd v Johnson [1996] 1 EGLR 175, Bassano v Toft [2014] EWHC 377 (QB), Neocleous and another v Rees [2019] EWHC 2462; [2019] EGLR 49 and Hudson v Hathway [2022] EWCA Civ 1648; [2022] EGLR 10 considered. (2) A purchaser’s lien, which was in the nature of an equitable charge, arose in equity to give the purchaser protection for any part-payments made under a contract to acquire an estate in land but did not depend on the contract being specifically enforceable. It would arise where the purchaser had a present, future or conditional right to call for a legal estate, including under an option. It extended to part payments, interest and costs thrown away, arose by operation of law and depended on there being an enforceable contract. But it did not arise from the express terms of the contract and was not an implied term. The lien came to an end when the legal estate contracted for was conveyed or granted to the purchaser. Its protection persisted where the contract went off for reasons other than the default of the purchaser; the position was otherwise where the contract went off because of the default of the purchaser. The lien continued to apply where the contract went off as a result of the exercise by the purchaser of a right to rescind and did not depend on showing that the vendor was in default. Where the relevant contract was protected by a notice on the Land Registry, the purchaser’s lien (which arose by operation of law) would also be protected even if not separately mentioned in the notice: (3) A lien would only be postponed to another lender where something in the terms of the transaction led to the necessary, irresistible, inference that the parties had to be taken to have agreed to postpone it to another lender’s rights. That was an objective exercise and did not turn on the subjective intentions or expectations of the parties. There was nothing in the AFLs or their surrounding circumstances that led inevitably to the inference that the parties had to be taken to have agreed that any lien that would otherwise arise would be excluded or postponed to new development funding. It was always possible that any new funder would be prepared to take security ranking after the category A purchaser’s liens. In fact, that had happened as the notices for those liens appeared on the land register at the time of registration of the first respondent’s charge. Looked at objectively, it was possible that the company would be able to undertake the development from its own resources and without the need for fresh funding. Accordingly, the contracts of sale did not impliedly exclude or postpone any equitable lien: Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415 considered. (4) It was logical and accorded with principle that the protection given by the lien should be co-extensive with the subject matter of the contract. If the contract was performed, the purchaser got that subject matter (ie the relevant estate); pending performance, the purchaser would be able to seek the protection of an injunction to protect that subject matter (and no more); and where the contract went off, the purchaser was entitled to a lien in respect of the subject matter: Whitbread & Co Ltd v Watt [1902] 1 Ch 835, Chattey v Farndale Holdings Inc [1997] 1 EGLR 153, Eason v Wong [2017] EWHC 209 (Ch); [2017] PLSCS 89, Williams and another v Broadoak Private Finance Ltd and others [2018] EWHC 1107 (Ch) and Campbell and another v Purchasers of flats at 47 Clarence Street and 44 Conduit Street, Leicester [2021] EWHC 2807 (Ch); [2021] PLSCS 178 considered. In the circumstances of this case, each of the equitable liens held by the category A purchasers attached only to the company’s interest in the area of land which formed the subject matter of each individual purchaser’s contract with the company. Ian Tucker (instructed by Gateley Legal) appeared for the claimants; Matthew Smith (instructed by TLT LLP) appeared for the first respondent; Andrew Twigger KC and Oliver Hyams (instructed by Gordons Partnership of Guildford) appeared for the third respondent Eileen O’Grady, barrister Click here to read a transcript of Williams and another (as joint administrators of Signature Living Residential Ltd) v Alter Domus Trustees (UK) Ltd (formerly Cortland Trustees Ltd) and others