I refer to the unfortunate question raised in Calvert Solicitors’ letter, asking if the current recession is an ‘exceptional circumstance’ that would allow the return of a deposit under section 49(2) of the Law of Property Act 1925 (see [2008] Gazette, 13 November, 13).

I use the word ‘unfortunate’ because I think the answer must be ‘no’, following the clear guidance of the Court of Appeal in Midill (97PL) Ltd v Park Lane Estates Limited and another [2008] EWCA Civ 1227. This was handed down on 11 November, after Calvert wrote to the Gazette but before the letter was published.

Lord Justice Carnwath delivered the only judgment of the court and carried out a thorough review of the authorities in this area. He concluded that the jurisdiction is an extremely narrow one to reflect the fact that a deposit is an ‘earnest for performance’. In essence, the jurisdiction is unlikely to be exercised, save where the vendor has acted unconscionably, or at least somewhat shadily.

It is apparent therefore that the jurisdiction is simply not there to rescue Calvert’s clients from bearing the risk of the property market. Indeed, assuming their clients do not proceed, not only will they forfeit the deposit but they will also be liable in damages for the difference between the agreed price and the current market price – less the deposit – and any other consequential costs.

Owen Williams, Clarke Willmott, Bristol