More cases are coming to trial as a result of the property collapse, with developers suing bulk buyers who then, in turn, sue their sub-buyers. One leading case involved a contract for the sale of 100 flats to a bulk buyer, who then entered into contracts to sell to different sub-buyers. The bulk buyer never had any intention of retaining the flats, but was simply looking to make a profit (about £20,000 per flat). Because of the property collapse, the sub-buyers could not complete, and that meant that the bulk buyer was also unable to complete its contract with the developer. Accordingly, the developer rescinded the contract with the bulk buyer, and the bulk buyer then sued the individual sub-buyers for its losses (arising from the sub-buyers’ failure to complete). 


The bulk buyer’s main problem was that it had failed to complete its own purchases from the developer. As a result it could not sue for the difference between the market value of the property and the contract price in the conventional way (ie it did not own the property). Instead, it had to sue for ‘loss of profit’. Its claim failed, with the judge holding that it could not recover the loss of profit since that loss was not reasonably foreseeable. In his view, the normal damages rules would apply (ie based on the difference between the contract price and the market value), but that was not applicable here because the bulk buyer had not owned the property. 


The structure of the transaction used in this case, with a developer and bulk buyer, was common a few years ago. It will be interesting to see whether this decision changes that model when the market recovers. See commentary on Strategic Property v O’Se and anor [2009] EWHC 3512 (Ch) (access free at www.practicalconveyancing.co.uk).