THE LAW REFORM COMMISSION

AN COIMISIÚN UM ATHCHÓIRIÚ AN DLÍ

(LRC 40–1991)

REPORT

ON

LAND LAW AND CONVEYANCING LAW:

(4) SERVICE OF COMPLETION NOTICES

IRELAND

The Law Reform Commission

Ardilaun Centre, 111 St Stephen's Green, Dublin 2

©Copyright The Law Reform Commission 1991

First Published December 1991

THE LAW REFORM COMMISSION

The Law Reform Commission was established by section 3 of the Law Reform Commission Act, 1975 on 20th October, 1975. It is an independent body consisting of a President and four other members appointed by the Government.

The Commissioners at present are:

The Hon Mr. Justice Ronan Keane, Judge of the High Court, President;

John F. Buckley, Esq., B.A., LL.B., Solicitor;

William R. Duncan, Esq., M.A., F.T.C.D., Barrister-at-Law, Associate Professor of Law, University of Dublin;

Ms. Maureen Gaffney, B.A., M.A., (Univ. of Chicago), Senior Psychologist, Eastern Health Board; Research Associate, University of Dublin;

Simon P. O'Leary, Esq., B.A., Barrister-at-Law.

The Commission's programme of law reform, prepared in consultation with the Attorney General, was approved by the Government and copies were laid before both House of the Oireachtas on 4th January, 1977. The Commission has formulated and submitted to the Taoiseach or the Attorney General thirty-eight Reports containing proposals for the reform of the law. It has also published eleven Working Papers, five Consultation Papers and Annual Reports. Details will be found on pp 28–31.

William Binchy, Esq., B.A., B.C.L., LL.M., Barrister-at-law, is Research Counsellor to the Commission.

Ms. Suzanne Egan, B.C.L., LL.M., Barrister-at-Law, Ms. Clíona Kimber, LL.B., LL.M., Ms. Julianne O'Leary, B.A., LL.B., Barrister-at-Law and Mr. Oisín Quinn, B.C.L., LL.M., are Research Assistants.

Further information from:

The Secretary,

The Law Reform Commission,

Ardilaun Centre,

111 St. Stephen's Green,

Dublin 2.

Telephone: 715699.

Fax No: 715316.

This Report was submitted on 20th December 1991 to the Attorney General, Mr. Harold A. Whelehan, S.C., under section 4(2)(c) of the Law Reform Commission Act, 1975. It embodies the results of an examination of and research in relation to the law relating to The Service of Completion Notices which was carried out by the Commission at the request of the former Attorney General, Mr John Rogers, S.C., together with the proposals for reform which the Commission were requested to formulate.

While these proposals are being considered in the relevant Government Departments the Attorney General has requested the Commission to make them available to the public, in the form of this Report, at this stage so as to enable informed comments or suggestions to be made by persons or bodies with special knowledge of the subject.

CHAPTER 1

Introduction

1.

On the 6th March, 1987, the then Attorney General, in pursuance of section 4(2)(c) of the Law Reform Commission Act, 1975, requested the Commission to formulate proposals for the reform of the law in a number of areas. Among the topics was:

2.

The Commission recognised that a comprehensive review of land law and conveyancing law was not feasible within the limited resources available to them at the time, and accordingly established a Working Group which was asked to identify a number of areas in which reform of land law or conveyancing law could be brought about more easily. The Working Group was asked to concentrate on areas where it could recommend changes in the law which would remove anomalies or redundant provisions.

3.

The members of the Working Group appointed were Mr John F. Buckley, Commissioner (Convener), Miss Justice Mella Carroll, Professor J.C. Brady, Mr George Brady, SC, Ms Mary Laffoy, SC, Mr Ernest B. Farrell, Mr Rory McEntee, Solicitors. Miss Justice Carroll resigned from the Working Group in November 1988 following her appointment as a judge of the Court of the International Labour Organisation.

4.

The Commission has already published two reports in the areas of the land law and conveyancing law. The first contained General Proposals - LRC 30–1989, and second dealt with Enduring Powers of Attorney -LRC 31–1989.

5.

Ms Mary Laffoy, SC and Mr Rory McEntee resigned from the Working Group following the publication of the first two Reports and Ms Mary Geraldine Miller and Ms Deborah Wheeler, Barristers-at-Law, and Mr Patrick Pagan and Mr Tom O'Connor, Solicitors, joined the Working Group.

The Working Group has continued to concentrate on matters which occur in a significant number of conveyancing transactions which give rise to unreasonable delays in the completion of those transactions and

it has also identified a number of aspects of statute law which are in need of reform.

6.

The Commission would like to record its deep appreciation of the contribution which the members of the Working Group have made to the Commission's examination of this difficult and technical area of the law. Their knowledge and experience were invaluable in enabling the Commission to formulate practical proposals for alterations in the law. As usual, however, the Commission emphasises that it alone is responsible for the contents of this Report.

7.

The position of parties in the intermediate stage in the conveyancing process between contract and completion has given rise to considerable controversy in Ireland. This controversy not only manifests itself in the area of the passing of risk between contract and completion, on which topic the Commission is publishing a contemporaneous Report but also on the entitlement of a Vendor or Purchaser to serve a notice requiring the other party to complete the sale. This topic has recently been reviewed by the Supreme Court in the case of Viscount Securities Ltd v Kennedy.

8.

In view of the considerable complexities in this area, together with the comparative materials which need to be referred to, the Commission decided to publish a separate Report on the area of the Passing of Risk from Vendor to Purchaser.

9.

In view of the importance of the topic, and its complexities, the Commission decided to publish a separate Report on the Service of Completion Notices.

CHAPTER 2: THE PRESENT LAW

Vacant Possession

Parties to a contract for the sale of land frequently stipulate in their contract that the vendor shall give vacant possession of the property upon completion of the conveyance.¹ This is reflected in the Incorporated Law Society of Ireland's General Conditions of Sale, 1988 Edition, Condition 21 of which states:

In the absence of any such express provision, there is an implied condition that vacant possession will be given on completion.² At that time, the purchaser will be entitled to be put into actual, as opposed to constructive, possession.³ This implied condition must, however, be consistent with the express terms of the contract and the conditions of sale,⁴ and it may be rebutted by implication.⁵ The matter is essentially a determination of the intention of the parties as revealed by the contract itself.

As a term of the contract for the sale of land, the requirement that a vendor give vacant possession stands independently of any other duty resting on the vendor:

A condition that the vendor shall give vacant possession of the property is generally regarded as meaning, firstly, that the purchaser will acquire possession free from any form of occupation or from any claim to a right to possession by the vendor or by a third party. The vendor is accordingly obliged to terminate any subsisting leases or tenancies of the property.⁷ Furthermore, he must ensure that the premises are free from occupation by trespassers⁸ or squatters.⁹

Secondly, the term implies that the property will be given free from any physical impediment.¹⁰ In the English case of Cumberland Consolidated Holdings Ltd v Ireland¹¹ it was held that a vendor who had left a considerable quantity of rubbish in the cellars of the premises sold had failed to give vacant possession. Lord Greene stated:

This decision was approved and followed in Norwich Union Life Insurance Society v Preston¹³ where it was held that failure to remove a substantial amount of furniture from the premises prevented the giving of vacant possession. Similarly, in Ireland, it was decided in the case of Bank of Ireland v Waldron¹⁴ that vacant possession was not given when lands which were the subject of a contract of sale were damaged due to trespass by a large number of cattle and sheep and some horses, in the time between the signing of the contract and the taking up of possession by the purchaser. In Viscount Securities Ltd v Kennedy,¹⁵ the existence of large amounts of spoil on the lands defeated the requirement of vacant possession.

The English courts have in recent years displayed a willingness to extend the

meaning of “vacant possession” beyond mere occupation, third party right to occupy, and physical impediment. In Topfell Ltd v Galley Properties Ltd,¹⁶ Templeman J took the view that the meaning of the words “vacant possession” can vary from context to context.¹⁷ In that case a house was sold subject to a first floor tenancy, but with vacant possession of the ground floor. A notice under the Housing Act 1961 prevented occupation of the house by more than one household. It was held that the purchaser could not be put into vacant possession since he could not occupy and enjoy the property, even though it was physically usable.

The requirement that a vendor give vacant possession of the property on completion is supported by his general duty to take reasonable care of the property, for the benefit of the purchaser, in the period between contract and completion.¹⁸ It does not matter that the impediment which prevents the giving of vacant possession is not caused by the vendor, or that the vendor may be unaware of the presence of that impediment.¹⁹ Regarding physical damage to property, Overend J stated in Bank of Ireland v Waldron:

An express provision in a contract requiring vacant possession will be strictly construed. In England there is authority to suggest that there will be a breach of such a provision even if the impediment which prevents the giving of vacant possession is apparent or known before the contract.²¹ It has been suggested, however, that an implied condition as to vacant possession will not arise where the property is not in fact vacant when inspected by the purchaser.²²

Remedies

A number of options are available to the purchaser should the vendor fail to give vacant possession of the property on completion:

Time

As we have seen, the law demands that under contracts for the sale of land, the purchaser is entitled to vacant possession of the property on completion. A question therefore arises as to exactly when completion takes place, or in circumstances where completion does not take place, at what point one party may justifiedly conclude that completion should have occurred and accordingly seek remedies against the other party.

Where the contract is silent as to time, the law allows for a reasonable time within which completion of the sale may be secured. Roxburgh J stated in Johnson v Humphrey:

It is usual, however, for the parties to a contract for the sale of land to make provision in their contract for a specific date on or before which the sale is to be completed. Traditionally, law and equity had conflicting estimates of the merit of such time clauses. The common law took the view that time is an essential ingredient in an agreement for the sale of land. Accordingly, at common law, failure by one party to complete on or before the appointed day would amount to a fundamental breach, entitling the other party to treat it as a repudiation of the contract. Equity, on the other hand, did not regard time as being of the essence of the contract and was prepared to allow the parties a reasonable time, after the specified time period, within which to complete the sale.

The parties may, at the outset, expressly provide that time shall be of the essence of their contract.²⁷ Furthermore, even in the absence of an express provision to this effect, time may be deemed by implication to be crucial. For example, the nature of the subject property may be such that any delay in completion will affect business interests or the value of the property, so that a definite deadline for closing the sale is essential.²⁸ In such instances, where time is of the essence of the contract, the date specified for completion is final and failure to meet it will immediately expose the delaying party to liability for breach of contract. Furthermore, it is mutually binding: in United Yeast Company Ltd v Cameo Investments Ltd²⁹ Butler J, in the High Court, rejected the vendors' claim that a contractual stipulation that time was of the essence of the contract in respect of the closing date was

not binding on them since it had been inserted in the contract at their insistence.

It is possible for the parties either expressly or impliedly to waive a condition as to time, so that time effectively ceases to be of the essence.³⁰ However, there is authority for the view that where such waiver amounts to an extension of the closing date, for a definite period agreed by the parties, then time may become of the essence in respect of the further period specified for completion.³¹

The equitable approach to time has prevailed³² so that as a general rule, time is not of the essence of contracts for the sale of land. The completion date is normally regarded as a target date. In the absence of specific reference to the importance of that date, completion within a reasonable time, or within a short time after the completion date is sufficient.

It follows that delay will not in itself be regarded as amounting to a breach of contract. It remains at all times open to the party facing delay to seek specific performance of the contract since that remedy relates to the equitable duty to perform the contract and does not depend upon breach of contract.³³ However, the aggrieved party is precluded from taking any other form of action until the delay in completing the sale is such that it may be regarded as unreasonable. Provided that the delaying party completes the sale within a reasonable time after the closing date, the other party may not invoke remedies such as rescission of the contract. The question of reasonableness depends upon the circumstances of the individual case.³⁴

A stricter approach to the question of time appears to be favoured by the English courts. Caselaw indicates that failure to complete on the date specified constitutes a breach of contract and entitles the other party to sue for damages, provided that the delay is not due to difficulties of title.³⁵ As Lord Edmund-Davies explained in Raineri v Miles³⁶:

Pearce and Tomkin have taken the view that this should be the preferred

approach in Ireland:

The authors point to the decision of the Supreme Court in Hynes Ltd v Independent Newspapers Ltd³⁹ as evidencing support for the Raineri v Miles approach.

The practice of conveyances in Ireland does however seem to be to treat the completion date as a target date, unless time is of the essence of the contract.

Completion Notices

Where time is not of the essence of the contract and the closing date has passed without completion of the formalities of sale, one of the options available to the party facing delay is service of a completion notice. This mechanism enables the aggrieved party to establish a clear cut-off date beyond which a delay in closing the sale may be regarded as amounting to a breach of contract. Hence it is often said that upon service of a notice to complete, time becomes of the essence of the contract.

In the absence of any contractual stipulations regarding completion notices, a number of general requirements must be fulfilled in order to serve a valid notice to complete. The law leans against allowing one party unilaterally to renegotiate a contract with the result that safeguards exist to prevent the aggrieved party from imposing unjust stipulations as to time.

Completion Notices: The Duty to Give Vacant Possession

In the context of the vendor's duty to give vacant possession the position seems to be less clear. Does the requirement that a vendor be able, ready and willing to complete before giving notice imply that he must have given vacant possession? In other words, is it necessary that the premises be in actual vacant possession when notice to complete is served?

On a practical level, the answer would seem logically to be in the negative. Nevertheless, in light of the Supreme Court decision in Viscount Securities Ltd v Kennedy,⁴⁹ it seems that the giving of vacant possession is now a precondition to service.

Viscount Securities Ltd v Kennedy

The case centred on the sale of two premises, concerning which the validity of a completion notice served by the vendors on the purchaser was called into question. Clause 28 of the contract, which was in the Incorporated Law Society's General Conditions of Sale, 1978 Edition, provided in part:

Clause 29 of the contract stated that the purchaser's deposit should be absolutely forfeited should he fail in any material respect to comply with any of the conditions.

The purchaser failed to complete within the twenty-eight day period. He contended that the completion notice was not a valid notice, since at the time when the notice was served, the vendors were not then able, ready and willing to complete the sale. Firstly, they were not in a position to give vacant possession due to large amounts of spoil on the lands, and secondly, they were not able to make title to the lands.

Clause 7 of the contract expressly provided that the purchaser should be entitled to vacant possession on completion. On the date on which the completion notice was served and for some weeks previous to that date, there was a large quantity of spoil on the lands. It had been placed there, unknown to the vendor's solicitors, by Dublin County Council in the course of construction of a dual carriageway. The spoil had been removed in full, ten days after the completion notice was served, and some twenty four hours after the vendors' solicitor learned of its existence.

The Supreme Court held that the completion notice was not valid. On a strict construction of the relevant clauses of the contract, the vendors had to be able, ready and willing to complete as of the date of service of the completion notice. On the facts of the case the vendors were unable to do so since the existence of the spoil on the lands prevented them from giving vacant possession of the property on the date of service of the notice and for ten days thereafter.

Walsh J stated:

Similarly Griffin J concluded:

McCarthy J agreed that the vendors were unable to complete the sale since the existence of spoil on the lands at the date of service of the notice prevented the giving of vacant possession. He noted:

In light of their conclusions on the question of vacant possession, Griffin J and McCarthy J did not consider it necessary to respond to the second argument advanced by the purchasers, namely that the vendors were not able, ready and willing to complete the sale because they were not able to make title to the lands. Walsh J was of the opinion that on the evidence the vendors were at all times in a position to make title.⁵⁵

CHAPTER 3: THE PROBLEM – THE CASE FOR REFORM

The decision of the Supreme Court in Viscount Securities Ltd v Kennedy gives rise to difficulty at two levels. Firstly, the legal authority on which the judgment rests raises a number of questions. Secondly, the decision has far-reaching practical implications.

I LEGAL AUTHORITIES

(i) Irish Authority

The Supreme Court decision in Viscount Securities Ltd v Kennedy naturally embodies the current position of Irish law on the question of completion notices. Nevertheless, it breaks new ground in relation to the rule that a vendor must be able, ready and willing to complete the sale before he can serve a completion notice.

The Supreme Court did not actually define the meaning of “able, ready and willing”. Rather than discuss the nature of the requirement itself, the decision centred on the rigidity with which the requirement is to be applied. However, by including vacant possession within its ambit, the Supreme Court interpreted the “able, ready and willing” requirement in a uniquely broad fashion. The decision, therefore, indirectly extends the meaning of the phrase.

A further question arises, in the context of contractual completion notices, as to the precise point in time at which a vendor must be able, ready and willing to complete. The Incorporated Law Society's General Conditions, 1978 and 1988 Editions, state that a completion notice will be effective “only if the party giving it shall then either be able, ready and willing to complete the sale or is not so able, ready or willing by reason of the default or misconduct of the other party”. There is a need to consider the meaning of the word “then” in this context. The Supreme Court adopted a narrow and literal interpretation and concluded that a vendor must be able, ready and willing to complete at the date of service of the completion notice. But could the word “then”, on a broader interpretation, refer to some time after the date of service? For example, could it refer to the date at which the notice expires or alternatively could it refer to some time in the interim at which the parties agree to proceed to completion?

In this respect, the decision of Costello J in Dublin Laundry Co v Clarke⁵⁶ is instructive. The case concerned undertakings to discharge encumbrances on property which was the subject of a contract of sale, in the context of service by the vendor, a company in liquidation, of a notice to complete. The purchaser, in defending an action for specific performance, claimed that the notice was invalid since the vendor did not have good marketable title at the time of service. Costello J rejected this argument and accepted the evidence of the plaintiff that upon realisation of the company's assets, there would be sufficient funds to discharge the encumbrances. He took the view that the fact that releases of the encumbrances were not available on the date of its expiration, did not render the completion notice invalid. Referring to Viscount Securities Ltd v Kennedy,⁵⁷ Costello J stated:

As we have seen, a vacant possession requirement will generally be implied, if it is not expressly stipulated in the contract of sale. In the course of their decision in Viscount Securities Ltd v Kennedy, the Supreme Court appear to have proceeded on the assumption that the giving of vacant possession is vital to a vendor being able, ready and willing to complete a sale of land. It is implicit in the judgment that a vendor may not be considered able, ready and willing to complete until the subject property is vacant. The question of whether vacant possession should in fact be a prerequisite to the service of notice was not actually raised or discussed.

The plaintiff's argument that the vendors were not able, ready and willing to complete was in fact based on two grounds: firstly, that they could not give vacant possession of the subject property and secondly, that they had failed to show good title to the lands. Although the question of title is far more substantive than that of vacant possession, only Walsh J touched upon the argument concerning title. He took the view that on the evidence the vendors were at all times in a position to make title to the lands. However, he emphasised that in his opinion the inability to give possession of the area covered by the spoil was sufficient to invalidate the completion notice.

The individual judgments of the Supreme Court focus generally on the rules regarding completion notices and in particular on the principle that such notices are mutually binding. In determining the invalidity of this particular service of notice to complete, all three judges relied on Healy Ballsbridge Limited v Alliance Property Corporation Limited.⁵⁹ The contract for the sale of land in that case stipulated that time was of the essence of the contract. However, the parties were not ready to complete on the date set and the vendors agreed to postpone the completion date. They subsequently served a completion notice on the purchasers. When the sale was not completed

in the twenty one day period referred to in the notice, the vendors purported to rescind the contract.

The case came before Kenny J in the High Court. He took the view that as soon as the vendors had agreed to postpone the completion date, time ceased to be of the essence of the contract.⁶⁰ Furthermore, the completion notice was invalid, firstly, because the vendors had not shown good title when the notice was received by the purchasers, and secondly, because the purchasers had not been guilty of unreasonable delay.⁶¹

Griffin J also referred to the English case of Quadrangle Development and Construction Co Ltd v Jenner⁶² in which the Court of Appeal discussed the service of a notice to complete under a clause of the English National Conditions of Sale corresponding to Clause 28 of the contract in Viscount Securities v Kennedy. The purchasers who had served the notice, were themselves unable to complete within the twenty eight day period. They argued, however, that the notice was not binding on them since it only required the party on whom it was served to complete within the twenty eight days. It was held that the notice to complete bound both parties. Russell LJ stated:

Buckley LJ similarly said:

Healy Ballsbridge Ltd v Alliance Property Corporation Ltd establishes that failure to show good title on the part of the vendor is a bar to service of a completion notice. It is also authority for the view that the “able, ready and willing” requirement arises at the time of service of the notice to complete and subsists for the duration of the notice period. Quadrangle Development and Construction Co. Ltd v Jenner establishes that the completion notice itself binds both parties equally. In neither case, however, was the question of a failure to give vacant possession at issue; in Quadrangle Development, the completion notice was served by the purchasers, while in Healy Ballsbridge the vendors' failure to show good title prevented them from

being able, ready and willing to complete the sale. There does not appear to have been another case in this jurisdiction in which the question of vacant possession in the context of completion notices has been discussed. Indeed, there seems little authority generally addressing the question of what is required of a vendor that he may be able, ready and willing to complete a sale.

(ii) English Authority

There is, however, English authority on the issue of what constitutes “able, ready and willing”. For the most part, these cases deal with the showing of good title, a factor which the courts have consistently recognised is essential to a vendor being able, ready and willing to complete.

In Cole v Rose and Another,⁶⁵ the property in question was subject to three charges, only two of which were detailed by the vendor. Confirmation that the two charges would be discharged before completion was requested and received by the purchaser. The purchaser's solicitor later discovered the existence of the third charge and wrote to the vendors' solicitor for details. The purchaser was unable to raise the purchase money and the closing date passed without completion taking place. The vendors served a completion notice in which they stated that they were “ready and willing to complete the sale”. Meanwhile, correspondence continued concerning the third charge. The purchaser failed to complete within the notice period, so the vendors purported to rescind the contract and forfeit the deposit. The purchaser brought an action claiming a return of the deposit, arguing inter alia that the completion notice was invalid since the vendors were not in fact ready and willing to complete the sale.

In the High Court, Mervyn Davies QC held in favour of the purchaser. The completion notice was not valid because at the time of service the vendors, contrary to the notice, were not ready to complete the sale since they were not prepared to undertake that the third charge would be discharged on completion:

The fact that the vendors' solicitor was, at a later stage, able to confirm that the charge would be discharged on completion was immaterial.

In Clearbrook Property Holdings Ltd v Verrier,⁶⁷ it was recognised that failure on the part of the vendor to show good title is a ground on which to challenge the validity of a completion notice. On the facts of that particular case, however, Templeman J could see “nothing triable in the argument that the vendor was not ready, able and willing to complete”.⁶⁸

In Re Stone and Saville's Contract,⁶⁹ involving a contract for the sale of registered land, the existence of a covenant on the charges register restricting use of the property to use as a private dwelling-house and garden, was not known to the purchaser until after the contract was signed. The vendor failed to reply to a requisition on this point raised by the purchaser, and when the latter party failed to complete, the vendor served a completion notice. The Court of Appeal held that the notice was invalid since the vendor had not fulfilled his part of the bargain to date. In the words of Lord Denning, the vendor was “guilty of a breach going to the root of the contract because he was not, on the face of his documents, able to make a good title to this land”.⁷⁰

Pagebar Properties Ltd v Derby Investment Holdings Ltd⁷¹ concerned the sale of freehold property subject to and with the benefit of certain disclosed leases and tenancies. However, the vendor failed to make known the existence of one of the tenancies to which the property was subject. He subsequently sought to serve notice to complete the sale. It was held that the completion notice was invalid since the vendor was himself in breach of an obligation which ought to have been performed by that date, namely the obligation to disclose all existing tenancies. Furthermore, the Court considered it immaterial that the breach did not have the effect of annulling the sale or that it did not entitle the purchaser to compensation.

The decision in Pagebar was later discussed in Bechal and Another v Kitsford Holdings Ltd.⁷² There the purchaser argued that the vendor was not able, ready and willing to complete the sale and accordingly not entitled to serve a completion notice on account of a material misdescription of the area of the property in the conditions of sale. Sir Nicholas Browne-Wilkinson VC concluded that the notice was valid since the matter at issue was merely part of the description of the property and not, as was the case in Pagebar, a matter of title:

In Prosper Homes Ltd v Hambros Bank Executor,⁷⁴ the validity of a completion notice was challenged on the ground that the vendors were not ready, able and willing to complete the sale when the notice was served because they were in breach of their fiduciary obligation to look after the subject property. Without informing the purchasers, the vendors had permitted a change in the lessee and user of part of the property. Browne-Wilkinson J, in the High Court, rejected this argument, firstly, on the facts of the case, and secondly, as a principle of law:

...the fact that a vendor may have failed in some respect to carry out his duty between contract and completion in looking after the property does not mean that he is unable or unwilling or unready to complete... If any damage has occurred in the interim the vendor would have to make it good in damages. It does not prevent a completion of the contract.⁷⁵

In Naz v Raja,⁷⁶ the vendor who served a notice to complete in accordance with the standard contractual term had not fulfilled his statutory duty to furnish the purchaser with an authority to inspect the register.⁷⁷ The Court of Appeal considered that notwithstanding this fact, the vendor was ready and willing to fulfil this outstanding obligation under the contract for the sale of land. Therefore, his failure to furnish the authority to inspect before serving notice did not in itself render the notice invalid.

Horton v Kurzke⁷⁸ appears to be the only authority which touches upon the question of vacant possession in the context of a vendor being able, ready and willing to complete a sale so as to be in a position to serve a valid completion notice. The case involved a contract for the sale of land with vacant possession. Between contract and completion, the purchaser became aware that a third party was claiming an agricultural grazing right tenancy over the property and that this claim had been submitted to arbitration. The purchaser then raised a question as to whether vacant possession could in fact be given. She refused to complete the sale pending the outcome of the arbitration and the vendor served a notice to complete. When the purchaser failed to comply with the notice, the vendor sought to rescind the contract and forfeit the deposit. The purchaser brought an action for specific performance and claimed an abatement should the grazing tenancy be upheld. No such tenancy was found to exist, and the sale was eventually completed. The parties could not agree, however, on the question of costs and the matter came before Goff J in the High Court. He stated:

Having classified the issue as being one of title rather than vacant possession, he proceeded to deal with purely in those terms:

A number of approaches may be gleaned from the English experience revealed in these cases:

(a) The Distinction between Substantive and Administrative Matters

An approach involving the distinction between matters of substance and administration has been most frequently applied by the English courts. For example, in Cole v Rose, Mervyn Davies QC took the view that being ready to complete for the purposes of serving an effective completion notice means that the vendor must have fulfilled all matters of substance although he need not also have made the necessary administrative arrangements for completion.⁸¹ Similarly, in Re Stone and Saville's Contract,⁸² it was the substantive nature of the vendor's default which led the court to believe that he was not able, ready and willing to complete.

The merit of this approach may be more theoretical than practical, since its success depends to a large extent on the nature of the particular duty of the vendor which is under scrutiny. The distinction had been applied by the courts in cases where the duty falls somewhat obviously into one or other of the respective categories of substance and administrative formality. For example, in cases where the validity of a completion notice is challenged on the ground that the vendor has failed to deduce a good title, the courts have had no difficulty in classifying it clearly as a matter of substance. Arrangements regarding, the exact time and place for completion⁸³ and, furnishing the purchaser with authority to inspect the register⁸⁴ have been considered to be purely administrative matters.

There are a number of other matters, however, which are less obviously matters of either substance or administration and regarding which application of the distinction is problematic. Although Mervyn Davies QC described “arrangements made for the discharge of mortgages” as merely administrative,⁸⁵ Farrand has argued that mortgages are more a question of substance than administration in the context of a vendor being deemed ready to complete:

Vacant possession is another such grey area. Application of the distinction between matters of substance and administrative formality is not particularly helpful on two counts. Firstly, the definition of vacant possession is sufficiently broad that it may encompass both matters which are substantive and matters which may be viewed as purely administrative. For example, a third party claim may in essence be seen as a substantive question of title. In contrast, the removal of the vendor's possessions from the subject property may be regarded by the parties as a purely administrative issue. Both matters, however, relate to the vendor's duty to give vacant possession.

Secondly, the simple distinction between substantive and administrative factors fails to take the time-frame of the conveyancing process into account. It emphasises the value or significance of matters arising out of the contract but falls short of evaluating them in the context in which they have to be performed. The contract embodies a series of obligations to be discharged in the course of the conveyance; some of these duties are performed immediately after the signing of the contract, some will subsist for the duration of the period between contract and completion and others will be performed towards the end of that period. Unless excluded, it will be an express or implied term of the contract that the vendor give vacant possession on completion. In the normal course of a conveyance, certainly with regard to the removal of the vendor's possessions from the premises, it is a duty that perhaps will not be performed until immediately prior to completion.

(b) Performance of the Vendor's Duties to Date

A second approach, featuring in the caselaw, seeks to avoid problems concerning time by emphasising that the vendor must have performed all of his duties to date before serving a completion notice. The vendor must accordingly be in a position to move directly to completion, rather than being on the point of completion itself. In the words of Danckwerts J in Re Barr's Contract, the vendor must be able, ready and willing “to proceed to

completion”.⁸⁷ This reasoning is sensible in that it recognises that in practice vendors leave the performance of certain duties, such as physically vacating the premises, to the last minute.

Coupled with this approach is another theme, namely, that the vendor should have confirmed, at the time of the commencement of the period of notice, that he will perform any outstanding administrative matters. For example, should the purchaser become aware of a charge on the property, he may raise a requisition on this point and the vendor may agree to discharge it. Once he has made this commitment, the vendor will be entitled to serve notice to complete, even though the charge itself may not in fact have been removed at the time of service.⁸⁸ It is sufficient that the vendor is able, ready and willing to fulfil his outstanding obligations.⁸⁹ The vendor has an obligation, in the context of showing good title, to discharge any charges which affect the property. In the context of vacant possession, it is the contractual term itself which is testament to the fact that the vendor is prepared to fulfil this outstanding obligation.

(c) Definition of Vacant Possession

Much of the difficulty surrounding the issue of vacant possession and completion notices stems form the fact that the term “vacant possession” extends to a number of matters. It may refer to actual occupation, third party right to occupy, and physical impediment. Furthermore, the courts have been prepared to interpret each of these categories broadly.

In response to this, Goff J in Horton v Kurzke⁹⁰ distinguished matters of vacant possession which involve questions of title and those which do not. The case involved a third party grazing tenancy, which on the one hand affected the vendor's title and on the other was an impediment to the giving of vacant possession. Goff J regarded the issue of title as paramount and as a result, the discussion proceeded in terms of title rather than vacant possession. This is helpful since issues of title are clearly fundamental and must be settled before a vendor is either ready to complete or ready to proceed to completion.

(d) Matters which Entitle the Purchaser to Rescind

This approach is similar to the distinction between matters of substance and administration. However, it focuses on the impact of failure to perform the duty in question, rather than on the nature of the duty itself. A distinction is drawn between a fundamental breach of duty such as will entitle the purchaser to rescind and a breach which will not prevent completion of the contract.⁹¹ Failure to show good title will automatically entitle the purchaser to rescind the contract. The contract itself is contingent on the vendor showing title. While it may be said that the equitable interest in the property passes to the purchaser on contract, entitlement to specific performance only arises when title is deduced. In contrast, failure to give vacant possession merely entitles the purchaser to sue for damages. It does not empower him to rescind the contract, although he may resist efforts by the vendor to obtain specific performance.

These four approaches are really variations on a theme. As such they are not mutually exclusive and are often applied side by side. The English caselaw reveals that the process of determining whether a particular duty is essential to a vendor being able, ready and willing is by no means precise. Nevertheless, it is suggested that overall the English authorities lend support to the view that vacant possession is not generally a prerequisite to service of a completion notice. An exception to this would be cases involving a third party claim regarding rights over the property, which although a matter of vacant possession, would also be a matter of title and more appropriately considered under that heading.

II PRACTICAL APPLICATION OF VISCOUNT SECURITIES LTD V KENNEDY

Regarding its practical application, it is apparent that the ruling of the Supreme Court in Viscount Securities Ltd v Kennedy may lead to unsatisfactory results. The practical significance of the vacant possession requirement varies depending upon the nature of the subject property and the use to which it is put. Separate to the question of third party occupation or physical impediment, the extent to which premises are occupied or in use will greatly determine the steps which must be taken to secure vacant possession. Viscount Securities Ltd v Kennedy concerned the sale of land for the purposes of development. Generally, in sales of this nature, fulfilment of the duty to give vacant possession of the property will not greatly trouble the vendor since the property is not subject to any residential or business use immediately prior to completion of the sale.

Where the vendor is in occupation of the premises which are the subject matter of the sale, the giving of vacant possession is a more cumbersome task. The establishment of a definite date for completion is all the more crucial. The process is further complicated in cases involving chain transactions, namely where the vendor is selling his property in order to purchase another property and the two conveyances are running concurrently.

The conveyance of a residential property serves as a good example of the complexities to which the doctrine in Viscount Securities Ltd v Kennedy gives rise. A vendor has contracted to sell the residential property in which he normally resides. He has entered into a second contract in order to buy a larger residence and he intends to fund the purchase, for the most part, with the proceeds from the original sale. As vendor, he has performed all of his substantive duties under the contract, including deducing a good title. Aside from administrative formalities, all that remains for him to do is to vacate physically the premises upon completion. The purchaser, however, is dragging his feet. The closing date has passed and the delay can no longer be considered reasonable. The vendor wishes to serve a notice to complete the sale on the purchaser.

According to Viscount Securities Ltd v Kennedy, the vendor must have vacant possession of the property at the time of service of such notice. It follows that the vendor must have vacated the property, together with all of his goods and chattels by this time. Furthermore, the premises must remain vacant during the time-period set out in the notice. The vendor cannot complete the purchase of his new premises without the proceeds of the original sale. However, he is not entitled to such proceeds, or to take further action to recover them, until the expiry of the period of notice. Accordingly, he must secure independent accommodation for himself and any dependents, as well as storage facilities for his possessions, for the duration of that period. Nor is he entitled to recover the cost of such expense. Further difficulty may arise with regard to insuring property which is left vacant for such a period of time.

While the decision in Viscount Securities v Kennedy was based on the wording of the particular contract, a court might take a similar line in relation to a sale on an open contract.

Discharge of Money Charges

A vendor is required to convey the property freed and discharged from all

money charges unless there are special conditions in the contract which provides otherwise. The normal practice for these charges to be paid off on completion of the sale and for undertakings to be given for the subsequent furnishing of formal releases.

Following the Viscount Securities decision concern was expressed particularly having regard to the judgment of Griffin J that a vendor might be required to have discharged any money charges prior to giving a valid completion notice. This would have imposed hardship on the vendor since in many cases it would have required the vendor to raise funds probably by way of bridging finance, to enable the vendor to discharge the money charge. In a number of cases completion notices are served because there are grounds to suspect that the purchaser is not going to be complete. The discharge by a vendor of his money charges could have a particularly adverse affect on the vendor if the purchaser did not respond to the completion notice and the sale did not go ahead. A vendor might have considerable difficulty and would have inevitable expense in remortgaging the property and it is possible that the mortgage terms would not be as favourable as those of his original mortgage. We would propose that any amendment of the law in this area should extent to the release of charges as well as to the giving of vacant possession.

CHAPTER 4: PROPOSALS FOR REFORM

Service of a completion notice should not alter the rule regarding the giving of vacant possession, namely that it is incumbent on the vendor to give vacant possession of the property upon completion.

Summary

The Commission is concerned that any proposed solution to the issue must, on the one hand, prevent the vendor from being able automatically to extend the closing date for the full twenty-eight days and, on the other, prevent the purchaser from being able to surprise the vendor by demanding completion shortly after the vendor has served notice to complete.

We propose that the service of a completion notice should not alter the vendor's duty to give vacant possession on actual completion. The requirement that a vendor be able, ready and willing to complete before serving a completion notice should not be regarded as extending to vacant possession per se. Should the matter which is an impediment to the giving of vacant possession also prevent the vendor from showing a good title, then in this latter respect it will prevent him from being able, ready and willing to complete and render invalid any completion notice served.

We further propose that, after serving a completion notice, the vendor should be required to complete, giving vacant possession, within ten days of being requested to do so by the purchaser.

Recommendation

A statutory provision should be enacted to provide that: