Excluded by the nature of the agreement
 EWCA Civ 233
No unpaid vendor’s lien can arise where it is excluded by the nature of the transaction.
L agreed to grant T a lease of a property. The agreement contained potentially onerous covenants by T. L subsequently granted T the lease. Three years later, T agreed to sell its leasehold interest in the property back to L. The sale agreement provided for merger of the leasehold interest in the property into the freehold interest on completion. The sale agreement also provided that on completion the parties would enter into a deed releasing T from the potentially onerous covenants.
T issued proceedings seeking specific performance of the sale agreement. L subsequently went into administration. T was permitted to continue its claim against L notwithstanding the administration. T applied for summary judgment on the basis that it was entitled to partial specific performance of the sale agreement, i.e. specific performance of that part of the sale agreement which obliged L to enter into the deed releasing T from the potentially onerous covenants.
The Judge indicated that he had difficulty with making an order for partial specific performance but allowed T to amend its claim so as to adopt his suggestion that it may be entitled to obtain its desired release by arguing that it had the benefit of an unpaid vendor’s lien over the property. At a later hearing the Judge declared that T had the benefit of such a lien and permitted T to amend its claim to seek directions for the sale of the property free from any claims by L. L appealed against that decision.
Court of Appeal
Appeal allowed. It was held that an unpaid vendor’s lien was excluded by the nature of the agreement, and in particular the parties’ common intention of achieving a merger of the freehold and leasehold interests on completion. Arden LJ at para.39:
- “In this case, the exclusion of the lien, in my judgment, stems from the fact that the intention which the parties have expressed is that merger should follow swiftly upon completion. The idea of enforcing a lien for the unpaid purchase price after completion is inconsistent with that agreement. The lien would give the vendor a beneficial interest in the property which, unless discharged, would prevent the merger taking place. Merger is an essential feature of the transaction”.