When Deals Fall Through: Lessons from Regal BA Ltd v Zhang

The law does not require parties to achieve the best possible commercial outcome – only that they act reasonably. That principle was reaffirmed in the case of Regal BA Ltd v Zhang [2026] EWHC 1446, a case arising from the collapse of a multimillion-pound property transaction. Decided by HHJ Hacon in the High Court (Chancery Division) on 23 June 2026, the judgment examined whether the seller had failed to mitigate its losses by selling a property at an alleged undervalue. In doing so, this case has provided an important reminder of where the burden of proof lies and how courts assess resale prices following a buyer’s default in high-value property disputes.

The judgment contains lessons not only for property developers and investors, but for anyone involved in commercial transactions where a deal has fallen through.

The Background

The dispute concerned a luxury seven-bedroom property in London, known as High Trees. In March 2022, Zhang agreed to purchase the property from Regal BA Ltd (‘Regal’) for approximately £16.9 million, including its contents.

However, the matter quickly evolved into something considerably more complex than a straightforward property purchase.

Completion was delayed on multiple occasions, and the deal was restructured several times. Despite these arrangements, Zhang failed to complete the purchase on two separate occasions, resulting in the forfeiture of deposits totalling more than £4.2 million.

Following the final failure to complete, Regal returned the property to the market. Specialist agents marketed the property for around eight months before it was eventually sold in September 2024 for approximately £10.16 million, significantly below the original contract price.

Regal subsequently brought a claim against Zhang for damages, seeking to recover the difference between the agreed purchase price and the amount achieved on resale.

The Key Question: Did the Seller Mitigate Its Loss?

Zhang accepted that she had breached the contract, but argued that Regal had failed to mitigate its loss by selling the property below market value. Zhang contended that the property was worth £14.75 million at the time of the resale and that Regal’s marketing efforts had been inadequate.

The court rejected this argument. HHJ Hacon reaffirmed that, whilst an innocent party must take reasonable steps to reduce its losses, it is not required to achieve the best possible outcome. Importantly, the burden of proving a failure to mitigate rests on the defaulting party.

The court found that Regal had instructed specialist agents, marketed the property for a substantial period, and conducted a genuine arm’s-length sale. As Zhang failed to show that Regal had acted unreasonably or sold at an undervalue, the court accepted the resale price as the appropriate base measure for Regal’s loss.

Why this Matters for Property Developers and Investors

When a transaction collapses, parties frequently find themselves arguing about what should have happened afterwards. Regal BA Ltd v Zhang demonstrates that courts are reluctant to second-guess sensible commercial decisions made in difficult market conditions.

A disappointed buyer cannot simply point to a lower resale price and argue that the seller should have achieved more. They must produce compelling evidence showing both that the seller acted unreasonably and that a materially better result would likely have been achieved.

Key Lessons for Sellers

1. Documentation Matters

One of the strongest themes running through the judgment is the importance of evidence. Where a defaulting purchaser seeks to argue that losses have been overstated, they will need persuasive evidence, mere disagreement of the eventual sale price is unlikely to be enough. 

A seller in this situation should ensure they keep comprehensive records of:

• Marketing activity.
• Agent recommendations.
• Property valuations.
• Offers received.
• Reasons for accepting or declining offers.

2. Act Promptly

A seller should take reasonable steps to re-market a property after a buyer defaults.

Unnecessary delay can create opportunities for a defaulting buyer to argue that losses were increased by the seller’s inaction.

3. Obtain Meaningful Deposits

The case also highlights the significant protection that deposits can provide. Although the seller ultimately suffered a substantial loss, the forfeited deposits played a vital role in reducing its overall exposure.

Importance for Buyers

A forfeited deposit is not the end of the story. One of the key takeaways from this case is the extent of a buyer’s potential liability following their failure to complete.

Zhang forfeited deposits exceeding £4.2 million, yet remained exposed to a substantial damages claim when the property was later sold for less than the agreed purchase price. This highlights the point that forfeiture of a deposit does not necessarily cap a buyer’s liability to the seller.

Before exchanging contracts, buyers should ensure that funding arrangements are secure, completion requirements are fully understood, and any potential risks have been carefully considered.

The judgment also demonstrates the difficulty of relying on a “failure to mitigate” defence. A party seeking to argue that the other side failed to reduce its losses, must provide cogent evidence that the other side acted unreasonably, not merely that a better outcome might have been achieved.

Key Takeaways

Regal BA Ltd v Zhang confirms five important principles:

1. A properly marketed resale is powerful evidence of market value.
2. The burden of proving a failure to mitigate rests on the defaulting party.
3. Sellers must act reasonably, not perfectly.
4. Forfeited deposits do not cap a buyer’s liability to the seller.
5. Detailed records and independent expert evidence can be decisive in litigation.

Above all, the case is a reminder that commercial disputes are often won or lost on preparation, documentation, and the ability to demonstrate reasonableness when circumstances become challenging.

How KN Can Help

The issues raised by Regal BA Ltd v Zhang sit squarely within the work our team handles on a regular basis. We advise property developers, investors and businesses on the full range of disputes that can arise when high-value transactions go wrong — including claims for breach of contract, the quantification and recovery of damages, mitigation arguments, and the strategic management of litigation involving expert valuation evidence.

We also advise clients at the transactional stage, on how to structure contracts, deposits and completion provisions in a way that can protect their position if a deal later falls through. The contractual framework put in place at the outset can have a material impact on the outcome of any subsequent dispute.

Whether you are a seller seeking to recover losses following a buyer’s default, a buyer facing a substantial damages claim, or a party in the early stages of a transaction, who wants to ensure that the documentation properly reflects their interests, we can help you understand your position and the options available to you.

Get in Touch

If this judgment raises questions relevant to your situation, whether you are dealing with a failed transaction, facing a damages claim, or you simply want to understand how your contracts would stand up if a deal were to collapse, we would welcome the opportunity to speak with you.

Our team can provide clear advice on the issues raised in this case and would be happy to discuss how they may affect your business or transaction.