The buyer had paid deposits under an unconditional contract for the purchase of land induced by the misrepresentations of the seller. On discovering the falsity of the representations the buyer rescinded the contract and successfully resisted a claim for specific performance made against him. He now claimed against the vendor’s successors in title to the land contracted to be sold the purchasers asserting a lien over that land to secure the repayment to them of the deposits paid under the contract.
Held: The purchasers’ claim succeeded. He was entitled, so far as the payments extended, to claim a lien on the estate for their amount, and to enforce that claim against the assignees of the vendor.
Lord Westbury said: ‘I think that your Lordships will agree with me that the case is determinable by principles which are very simple and very clear, and which have long been established in the Courts.
When the owner of an estate contracts with a purchaser for the immediate sale of it, the ownership of the estate, is in equity, transferred by that contract. Where the contract undoubtedly is an executory contract, in this sense, namely, that the ownership of the estate is transferred, subject to the payment of the purchase-money, every portion of the purchase-money paid in pursuance of that contract is a part performance and execution of the contract, and, to the extent of the purchase-money so paid, does, in equity, finally transfer to the purchaser of the ownership of a corresponding portion of the estate.
My Lords, that being so, we have only to inquire under the terms of the present contract whether the sums of money paid by the Respondent were, or were not, paid in pursuance of that contract. About that, my Lords, there is no controversy whatsoever. They were bona fide payments made by the Respondent, in conformity with the contract which required such payments to be made in part of the purchase-money; and they were accepted by the vendor as portions of that purchase-money. In conformity, therefore, with every principle, the purchaser paying the money acquired an interest in the estate by force of the contract and of that part performance of the contract, namely, the payment of that portion of the purchase-money.
Then, my Lords, if that contract fails, and the failure is not to be attributed to any misconduct or default on the part of the purchaser, the obvious question arises, is the purchaser to be deprived of the interest in the estate which he has acquired by that bona fide payment? And yet, my Lords that he ought to be so deprived is the whole controversy of the Appellants at your Bar. ‘
Lord Cranworth said: ‘There can be no doubt, I apprehend, that when a purchaser has paid his purchase-money, though he has got no conveyance, the vendor becomes a trustee for him of the legal estate, and he is, in equity, considered as the owner of the estate. When, instead of paying the whole of his purchase-money, he pays a part of it, it would seem to follow, as a necessary corollary, that, to the extent which he has paid his purchase-money, to that extent the vendor is a trustee for him; in other words, that he acquires a lien, exactly in the same way as if upon the payment of part of the purchase-money the vendor had executed a mortgage to him of the estate to that extent.
It seems to me that this is founded upon such solid and substantial justice, that if it is true that there is no decision affirming that principle, I rejoice that now, in your Lordships’ House, we are able to lay down a rule that may conclusively guide such questions for the future.’
Judges:
Lord Westbury, Lord Cranworth
Citations:
(1864) 10 HLC 671, (1864) 33 LJCh 385, [1864] EngR 300, (1864) 10 HLC 672, (1864) 11 ER 1187
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – Chattey and Another v Farndale Holdings Inc and others CA 11-Oct-1996
The plaintiffs had paid deposits for apartments which were to be built. After the developer became insolvent the plaintiffs sought recovery of the deposits, saying they had a lien which preceded the claims of chargees.
Held: The one appeal . .
Cited – Scribes West Ltd v Relsa Anstalt and others CA 20-Dec-2004
The claimant challenged the forfeiture of its lease by a freeholder which had acquired the registered freehold title but had not yet registered its ownership. The second defendant had forfeited the lease by peacable re-entry for arrears of rent, and . .
Lists of cited by and citing cases may be incomplete.
Contract, Land
Updated: 01 May 2022; Ref: scu.259714