Ezekiel and another v Kohali and another

Land – Agreement for sale – Title – Respondents failing to sell with good title – Parties seeking specific performance – Appellants seeking abatement of purchase price – Whether appellants knowing extent of title – Appeal and cross-appeal dismissedThe respondents owned two plots of land (the site) that the appellant property developers wanted to purchase. In September 1999, the parties entered into a written agreement for the sale of the site, but an express reference to title or to the status of any representations was not made. The agreement did not contain a precise definition of the land being sold, so that it was necessary to rely upon the annexed plan and specification. The appellants carried out searches, which showed that the registered titles did not include the entire site; in particular, an access strip to the plots. Theys argued that: (i) the respondents had contracted to sell the entirety of the two plots; (ii) the first plot included the access strip; and (iii) the second plot was to have vehicular access over the strip. However, they contended that the respondents were unable to show good title to all the land that they had contracted to sell, particularly to the access strip, and that they could not grant the appropriate easements. They argued that throughout the negotiations, which culminated in the September agreement, the respondents had orally represented their ownership of the entire site, including the strip, and that the appellants had relied upon those representations when executing the agreement. They sought specific performance, but with an abatement of the £300,000 purchase price. The respondents counterclaimed for specific performance at the contract price. The main issue at trial was whether, before entering into the September agreement, the appellants had known the extent of the respondents’ title to the site. The deputy judge found that the appellants had had actual knowledge of the extent of the respondents’ title that rebutted an implied legal obligation to make good title on the sale of the plots: see [2008] EWHC 734 (Ch); [2008] PLSCS 96. The appellants had had no defence to the respondents’ claim for specific performance at the agreed price. They appealed against that decision. The respondents cross-appealed on other matters. Held: The appeal and cross-appeal were dismissed.The appellants had failed to demonstrate that the judge’s conclusion on their actual knowledge as to the extent of the respondents title was wrong. The judge could have reasonably and properly inferred from ample evidence that, on the balance of probabilities; (i) they had been aware of the extent of the respondents’ registered title to the plots; (ii) the titles did not cover the entirety of the plots; and (iii) there was no other documentary evidence to prove their title. If a purchaser had actual knowledge of the vendor’s title before entering into an open contract, the obligation that the law imported into the contract to make a good title in every respect might be rebutted by proving that the purchaser had entered into the contract with the knowledge of certain defects in the title. The inference was that it had been content to take a title that was less complete than that which the law would otherwise have given it by implication. Where the bargain for title was implied and not expressed, evidence could be admitted to show that, in view of the parties’ knowledge prior to the contract, the usual implication to show full title ought not to be made: McGrory v Alderdale Estate Co Ltd [1918] AC 503 applied.Although, in general, much could be said for the proposition that it was inherently improbable that the appellants had knowingly agreed to buy land to which the respondents were unable to make good title, the deputy judge had tested that proposition against the oral and documentary evidence and had been satisfied that they had been aware of the extent of the respondents’ title to the plots and proceeded to enter into the September agreement. It had to be borne in mind that the respondents could make good registered title to the majority of the plots and that there was no documentary or oral evidence that anyone else was claiming, or disputing title to, those parts of the plots that were not included in the registered titles. The judge had had to reach a conclusion on the appellants’ probable state of knowledge in the light of the conflicting oral and documentary evidence. Although the appellants had made no relevant admission of actual knowledge, it had been open to the judge to infer actual knowledge. Michael Michell (instructed by Kenneth Elliott & Rowe, of Romford) appeared for the appellants; Gary Blaker (instructed by Lawrence Sternberg & Co) appeared for the first respondent; Michael Lee (instructed by Davidson & Co) appeared for the second respondent.Eileen O’Grady, barrister