Purchaser of $4.1 million penthouse flat in Bahamas unable to rescind purchase contract due to size discrepancy in title

About this case:

• Citation:
  [2024] UKPC 38
• Judgment:
  External link
• Court:
  Judicial Committee of the Privy Council
• Judge:
  Lord Sales

Appellant Belitza Silva contended that the mistake in respect of the square footage meant that Replay Destinations (Bahamas) Ltd was unable to give good title to the apartment and as a result she was entitled to rescind the contract. The Court of Appeal of the Bahamas concluded that the respondent had been at all times ready and able to convey title.

The appeal was heard by Lord Sales, Lord Leggatt, Lord Stephens, Lady Rose, and Lady Simler. Michael Scott KC, Linda Hudson, and Marnique Knowles appeared for the appellant, and Raynard Rigby KC and Asha Lewis for the respondent.

Substantially redesigned

The title to the apartment at One Ocean Place Condominium on Paradise Island was of a kind governed by the commonwealth’s Law of Property and Conveyancing (Condomimium) Act 1965. Under the 1965 Act, title was defined by registration of a declaration comprising detailed plans of the relevant property from which it could be determined with precision which apartment in a building was covered by the statutory title so registered. These plans were created before the construction of the building to be used by the developer in the building process.

During the construction of the building, the original developer ran into financial problems and sold the land to the respondent. The respondent substantially redesigned the building, with the consequence that the intended sloping roof was changed into a flat roof, increasing the space available in the penthouse to allow an additional room. This increased the square footage of the apartment from 4,801 square feet to 6,165 square feet. The declaration establishing title to the apartment was not amended to reflect the new design and construction, although it was anticipated that amendments would be made to the penthouse titles in due course.

The respondent advertised the apartment for sale as having living space of 6,165 square feet in the redesigned configuration with a flat roof, at a price of US$4.1 million. The appellant inspected the property while it was still under construction according to the new design and decided she wished to buy it, with a contract of sale concluded on 19 July 2018. However, she purported to rescind the contract by email dated 1 March 2019 after paying a 10 per cent deposit because by that stage she had become convinced that she would not receive good title to the apartment on completion.

It was submitted for the appellant that the declaration under the 1965 Act was invalid because it reflected a markedly smaller living space than the one that had actually been constructed. The judge at first instance had been wrong in his interpretation of the contract. Properly interpreted the respondent contracted to convey an expanded title to the apartment but was not in a position to do so.

Natural objective reading

In the sole opinion given by the Board, Lord Sales began: “In the Board’s view, in agreement with the judge and the majority in the Court of Appeal, on a proper objective construction of clause 1(a) the obligation of the vendor to convey title to the Apartment is defined by reference to the plans attached to the Declaration, not those [attached to the contract] in Exhibit A.”

He explained further: “The high point of the purchaser’s case is that clause 1(a) includes reference to the plans in Exhibit A. But, as noted, clause 1(a) refers to two different sets of plans, only one of which can be authoritative to define the extent of the vendor’s obligation assumed under the Contract. In the Board’s view, since that choice has to be made, it is clear that the plans attached to the Declaration are those which fulfil that definitional purpose.”

Noting that the parties were aware of the mismatch at the time of making the contract, Lord Sales said: “The purchaser could have insisted upon incorporating terms in the Contract which imposed obligations on the vendor to procure amendment of the Declaration in advance of completion and then to convey the amended title upon completion. But there was nothing to that effect. The natural objective reading of clause 1(a) against this background is that the vendor agreed that at completion it would convey the title it had as set out in the Declaration, as explicitly referred to in the clause.”

He concluded: “This natural reading of clause 1(a) is supported by other features of the Contract, whereas the contrary interpretation proposed by the purchaser is not supported by any other significant matters. Against these points, Mr Scott sought to rely on matters which had occurred after the making of the Contract, including what had been done pursuant to clause 4(b). The Board is by no means persuaded that such matters would, if relevant, support the purchaser’s case on construction of the Contract.”

For these reasons, the Board advised that the appeal should be dismissed.