Failure To Complete? The Financial Consequences Can Be Dire

The recent case of Conway and another v Eze [2018] EWHC 29 (Ch) highlights the potential financial impact on any purchaser considering withdrawing from a purchase following exchange of contracts.

The facts

In April 2015, Mr and Mrs Conway ("the Vendors"), agreed to the sale of 86 Uphill Road, London, NW7 4QE ("the Property") at a price of GBP 5 million ("the Purchase Price"). Mr Richard Obahor ("Mr Obahor"), a UK-based Nigerian property developer and property manager, negotiated the price on behalf of Prince Eze ("the Purchaser"). Mr Obahor told the Vendors that he required payment for his assistance in locating a purchaser so a finder's fee of GBP 75,000, 1.5% of the Purchase Price, was reluctantly agreed to and promised by the Vendors.

Having found a suitable purchaser for their Property, the Vendors also reached an agreement to purchase a property in Cambridge ("the New Property") for GBP 2.9 million.

Following a series of delays, on 25 June 2015 the Purchaser signed his part of the contract for the purchase of the Property and the transfer form TR1. A delayed completion date of 30 November was agreed. Intending to use the proceeds from the sale of the Property to pay the purchase price of their New Property, the Vendors simultaneously exchanged both contracts on 7 August 2015.

However, the Purchaser's willingness to purchase grew cold and on 23 September 2015 he informed the Vendors, via Mr Obahor, that he no longer wished to purchase the Property. In response, the Vendors served a Notice to Complete on 9 October 2015 and a further Notice to Complete on the contractual completion date. The Purchaser never completed.

The Vendors, not wishing to default on their contract for the New Property, sought bridging finance, secured on the Property with a view to discharging existing charges on it and paying the purchase price of the New Property. The purchase of the New Property was completed in December 2015.

An alternative purchaser was sought for the Property, who negotiated a reduced purchase price of GBP 4.2 million, with completion taking place in July 2017.

Quantum of damages

The issue for the court was what was the quantum of damages to which the Vendors were entitled for Prince Eze's breach of contract. The losses for which the Vendors were seeking damages fell under three broad heads:

Losses in respect of the loss of the sale of the Property and the need to market it and sell it again. This included the difference between the original...