The decision in AMA v Law and Glenmorison reaffirms there is an extra right for an innocent seller to implement a contract against 'can pay, won't pay' purchasers but some sellers may say: "so what?" Is it a remedy worth pursuing? What the decision brings to the fore are the frustrations, overall cost implications and lack of certainty in pursuing any form of implementing missives (and those of the alternatives of rescission, resale and damages for any shortfall, resale costs, etc.).
The three properties in question have now been off the market since 2009 (4 years); in a period when 'cash is king'. The Pursuers cannot now comfortably rescind the Missives because they hold decree demanding that the Defenders pay the purchase price. Whilst they hold the decree for payment, and are effectively calling on the defaulting purchaser to pay, the seller cannot remarket the property or even rent it out (lest the Defender suddenly pay and demand vacant possession in terms of the missives). Since before 2009 AMA have likely been repaying development funding covering these properties along with paying council tax, utilities and insurance without any prospect in the near future of selling those properties to anyone or obtaining any income from them until Law et al pay up. By seeking this remedy, have they potentially played themselves into a legal cul-de-sac pursuing the hope that the Defenders will eventually pay up whilst the payment decree hangs over their heads! (The Court commented that, although granting decree for payment was competent, it may yet be an inconvenient decree that did not help the Pursuers to resolve matters. The Court allowed AMA to make such a tactical error in selecting their remedy.)
In AMA v Law seeking implement by way of payment of the purchase price was potentially the most inconvenient of the available remedies. At least an action for specific implement has a clear route plan. The action often contains an alternative conclusion for damages if the defaulting purchasers fail to implement and so the sellers know where they stand as regard reselling and returning to court to pursue damages. A specific implement action also arguably deals, at the earliest stage, with any challenge by the defaulting purchasers to their liability. (a notable line of defence by the defaulting is that the seller was in earlier repudiatory breach due to some alleged breach of the missives. As it happens, Law et al advanced such further line of defence against AMA, claiming that AMA had breached the missives by allowing too many properties to become serviced apartments at the development. The court rejected the argument on construction of the missives.)
Alternatively, an action for damages requires initial rescission and resale. Though one may find, if pursuing that route, there is merely a delayed challenge to the terms of the original missives and one is taking the risk on whether the original purchasers will be good for the damages claim once the subjects are finally resold, at least some income from the property will have been obtained from the resale.
Further, there is a question as to what remedy AMA now have as regards further damages they may suffer. At the moment, they will keep maintaining and paying Council Tax for the properties. If Law was suddenly to pay the price then what of the last three years of these costs? Will another action require to be raised? It would seem that such costs would have to be absorbed by AMA, hopefully compensated by any late payment interest due in terms of the missives (and the decree for payment) as if Law was to pay and thus perform late, it would seem difficult to see grounds for a subsequent "damages" claim for a "breach" that has potentially been fully cured by the late payment.
Finally, once locked into the action, and even once decree has been granted in lines of AMA v Law, is the seller required to pursue the purchasers to the very end of the road? What, indeed, is the end of the road? At what point are the innocent sellers entitled to draw a line on the decree and simply resell? What happens if they do? What if they do not resell but manage to obtain some partial payment against the decree by the defaulting purchasers? How long are they to sit, with the property unsold, awaiting the rest of the payment?
What forms of debt recovery ("diligence") are sensible to advance? Most - such as bank arrestment or attachment of goods - will result in little dent against a £212,000 decree. Bankruptcy ("sequestration") of the original purchasers would seem the ultimate threat, but what happens then? Even against a wealthy Defender, whose assets - once realised - are sufficient to pay the decree in full, the Trustee is unlikely to be in a position to pay the sum in full and take ownership of the property (which the Trustee will then have to sell once again to continue to realise assets). More likely, the Trustee will indicate that he does not intend to pay for the subjects. It would seem that the innocent purchasers will then have to claim for the full decree sum, wait some years for the Trustee to realise all the assets and obtain their dividend. If the dividend is 100%, they will then have to pass title to the Trustee, who will have to keep the sequestration open to resell the property. If it is less than 100%, and is therefore a part-payment, what happens to the property then?
The Court suggested that in the event of part-payment, and subsequent resale by AMA, there may be a claim by Law in unjust enrichment for any double recovery. Such a claim would fall to any Trustee in the event of a dividend payment less than the full decree sum. Clearly there is a possibility of a route map being devised as to 'what happens next' if such an "AMA decree" is not paid in full by the defaulting purchaser. This may include further actions by the defaulting purchaser for a balance of damages on resale and/or claims or counter-claims in unjust enrichment by the defaulting purchaser. All very lucrative for lawyers but not perhaps in the best interests of the innocent seller.
Lady Dorian pointed out in AMA v Law that "in the vase majority of cases the reason for default on the part of the purchaser will be impecuniosity. In the vast majority of such cases there would be little to be gained for a seller in obtaining decree for payment…" Lady Dorian's opinion provides a shrewd insight into the state of missives litigation today, in this recession, in this property market. The likely benefit of pursuing any action for implement (rather than reselling and suing belatedly for damages) is striking whilst the iron is hot. In the meantime, the unsold property is just sitting costing the seller money. In deciding between the two options for implement - the 'standard' action for specific implement with an alternative for damages or a claim for payment price as sought by AMA - there is a question as to the circumstances of the property, seller and purchaser. One may see the sense of proceeding to sue for the purchase price in a case where (a) the property had already been on the market for some time and has failed to complete after several aborted sales before the defaulting purchasers agreed to buy, and/or (b) the property is so unusual or is now blighted by some post-missives issue (which does not result in the sellers being in breach) that resale seems very unlikely. One might think of an unusual property of value only to these purchasers (e.g. a small plot adjacent to their garden) or the neighbouring properties being occupied by some social undesirables respectively. The seller must be able to sit and wait with the property completely unsold and the defaulting purchaser must be thought able to raise the purchase price easily (hopefully without external funding). Absent such circumstances, does the current economic climate suggests that the most prudent way of most sellers dealing with "can pay, won't pay" purchasers is still to seek either a 'normal' action of specific implement with an alternative for damages or simply to bite the bullet, rescind, resell (and obtain some money in) and then consider pursuing damages?
The Laws have been reported as having intimated their intention to appeal to the UK Supreme Court. On the basis that the remedy remains upheld in London, will many innocent sellers - especially developers - really wish to utilise an action for payment, with matters as they currently stand?