Vendor and purchaser — Development of shopping centre — Option agreement — Restrictions on assignment of benefit of agreement and provisions for sharing profit on resale within a stated period — Joint venture agreement between the proposed purchaser and a third party providing finance — Whether on exercise of option a conveyance direct to the third party could be required — Whether breaches of option agreement had taken place — Appeals from decisions of Mr Michael Wheeler QC, sitting as a deputy judge of the Chancery Division, and of Morritt J — Both appeals dismissed
appeals arose out of the effect of two main documents, the interpretation of
which brought three companies interested in a development in Portsmouth into
dispute and eventual litigation — The development concerned the Tricorn Centre
at Portsmouth and the documents were the option agreement and the joint venture
agreement — The three companies will be referred to as Briargate (the
respondents to both appeals), Newprop and Taylor Woodrow (the appellants in
separate appeals)
of Slade LJ goes into the facts in great detail and the following is a very
brief summary — Newprop, the appellants in the first appeal, had an interest,
consisting of leasehold land and flats, in the Tricorn Centre and they wished
to dispose of this asset profitably — They granted to Briargate an option to
purchase this interest for £6m — The option agreement contained elaborate clauses
of which two require particular mention — Clause 3 provided that the agreement
should be personal to the parties and forbade Briargate to ‘assign sublet share
or part with the benefit of’ the agreement, subject, however, to a dispensation
to Briargate in connection with its financial arrangements for the purchase of
the property — Clause 17 made provision for Newprop to share in any profit made
on a future sale within a stated period by Briargate
needed assistance to finance the proposed development, it entered, at a time
when the option was still unexercised, into a joint venture agreement with
Taylor Woodrow, the appellant in the second appeal — This joint venture
agreement was to create some difficulties — It provided for Briargate to
exercise its option but with the intention that Taylor Woodrow would become the
purchaser and take directly an assignment of the property from Newprop — The
financial arrangements were that Taylor Woodrow should pay a price of £7m,
payable as to £5,700,000 to Newprop and £300,000 to Briargate on completion of
the purchase, together with a deferred payment of £1m to Briargate — This
deferment was arranged to avoid the impact of the profit-sharing provisions in
clause 17 above mentioned
hearing of an Ord 86 summons by Briargate, Mr Michael Wheeler QC, sitting as a
deputy judge of the Chancery Division, decided that the joint venture agreement
with Taylor Woodrow was not a breach of the option agreement, as what was being
transferred to the latter was not the benefit of the option agreement but the
fruits of that benefit — He made an order for specific performance in favour of
Briargate, holding that Newprop were under no duty to transfer the property
directly to Taylor Woodrow instead of to Briargate — The Court of Appeal
differed from the deputy judge in holding that the joint venture agreement was
in breach of clause 3 of the option agreement, as by it Briargate ‘shared the
benefit’ of the option agreement — The practical effect of this difference was,
however, removed by the court’s decision that the breach did not disentitle
Briargate from obtaining an order for specific performance — The court agreed
with the judge below that Briargate could not require Newprop to make a direct transfer
to Taylor Woodrow — Appeal accordingly dismissed
option had been duly exercised by Briargate, Taylor Woodrow became impatient
and served no less than three notices on Briargate to complete the joint
venture agreement — At the same time Briargate had issued a summons seeking an
order for specific performance under RSC Ord 14 and Ord 86 — The matter came
before Morritt J, who held that all three notices served by Taylor Woodrow were
invalid — He granted the relief sought by Briargate and declared that the joint
venture agreement should be carried into execution contemporaneously with the
completion of the option agreement — On appeal to the Court of Appeal the sole
issue raised by the appellants, Taylor Woodrow, was whether they were entitled
to serve on Briargate the first of the notices to complete the joint venture
agreement — The appellants contended that by virtue of the incorporation of the
National Conditions of Sale in the joint venture agreement the notice to
complete, served pursuant to condition 22 of the National Conditions, was valid
— The court found that the National Conditions had not been incorporated in the
joint venture agreement either expressly or by necessary implication, so that
this point failed — Appeal dismissed
noted that one point of some general interest was raised in the course of the
case — It was submitted that the requirement that Newprop was bound to assign
the property to Taylor Woodrow on the direction of Briargate was supported by
the ordinary rule, as set out in Halsbury and Emmet on Title, that, provided
the vendor is not prejudiced, the purchaser can direct that the conveyance be
made to a nominee — The Court of Appeal, however, while not questioning the
general rule in an ordinary contract of sale, found evidence in the option
agreement of an intention to
Briargate alone
of Slade LJ on the deputy judge’s decision to make no order as to costs may
also be noted
The following
case is referred to in this judgment
Haslemere
Estates plc v Hambros Bank Executor &
Trustee Co Ltd unreported October 29 1987
In these two
appeals Briargate Developments Ltd were the respondents in each case. The appellants
in the appeal from the decision of Mr Michael Wheeler QC (reported at [1989] 2
EGLR 189) were Newprop Co Ltd. The appellants in the appeal from Morritt J were
Taylor Woodrow Property Co Ltd.
David
Neuberger QC and Nicholas Dowding (instructed by Herbert Smith) appeared on
behalf of the appellants, Newprop Co Ltd; Dennis Levy QC and Miss Elizabeth
Weaver (instructed by Norton Rose) represented the appellants, Taylor Woodrow
Property Co Ltd; Miss Hazel Williamson QC and Christopher Pymont represented
the respondents, Briargate Developments Ltd, in both appeals (instructed by
McKenna & Co in the appeal by Newprop Co Ltd and by Lovell White Durrant in
the appeal by Taylor Woodrow Property Co Ltd).
Giving
judgment, SLADE LJ said: This is a judgment on two appeals which have
been heard consecutively. The first is an appeal by Newprop Co Ltd (‘Newprop’)
from an order of Mr Michael Wheeler QC, sitting as a deputy High Court judge,
made on March 6 1989. The second appeal is by Taylor Woodrow Property Co Ltd (‘TWPL’)
from an order of Morritt J made on May 19 1989. The respondent to each appeal
is Briargate Developments Ltd (‘Briargate’).
On August 12
1988, a written agreement (‘the option agreement’) was entered into between
Newprop and Briargate relating to a property in what is known as the Tricorn
Centre at Portsmouth. Clause 1 contained a number of definitions. ‘Contract’
was defined as meaning: ‘The contract for the sale and purchase of the property
which will arise on the exercise of the option in accordance with the
provisions of this Agreement’. ‘The property’ was defined as meaning a
specified piece of leasehold land and some specified leasehold flats on the
Tricorn Estate. I shall use the expression in the same sense in this judgment.
‘Option money’ was said to mean the sum of £300,000 paid on the date of the
option agreement by Briargate to Newprop. ‘Option period’ was said to mean a
period commencing with the date of the option agreement and ending on the
exercise of the option granted in accordance with Clause 4. ‘Purchase price’
was said to mean the sum of £6m. There was also a definition of ‘the
occupational leases’. Subject to two stated modifications which are immaterial,
clause 2 incorporated the National Conditions of Sale (20th ed) into the option
agreement and the contract ‘in so far as they are applicable and not
inconsistent with the express terms hereof’.
Clause 3
provided:
This
Agreement shall be personal to Briargate and Briargate shall not assign sublet
share or part with the benefit of this Agreement or any part thereof save that
Briargate shall be entitled to assign the benefit of this Agreement or hold it
in trust by way of charge in connection with its financial arrangements for the
purchase of the Property.
Clause 4
provided:
(1) In consideration of the Option Money paid by
Briargate to Newprop (the receipt whereof Newprop hereby acknowledges)
Briargate shall have the option of purchasing the Property at the Purchase
Price.
(2) In the event of the option hereby granted
being exercised in accordance with the provisions of Clause 5 hereof the Option
Money shall form part of the Purchase Price but in the event of its not being
so exercised Newprop shall be entitled to retain the same (without paying any
interest to Briargate) PROVIDED THAT if the option is exercised in accordance
with the provisions of Clause 5 hereof but completion of the Contract does not
take place owing to the default of Newprop without prejudice to all other
rights and remedies of Briargate the Option Money shall be returned to
Briargate within fourteen days of the Contract being terminated together with
interest at the prescribed rate from the date hereof until the date of payment.
Clause 5
provided:
The option
hereby granted shall be exercisable by notice in writing given to Newprop
before 1st November 1988 and if the same shall be exercised then Newprop shall
sell and Briargate shall purchase the Property at the Purchase Price upon the
terms hereinafter mentioned.
Clause 6
provided:
Newprop shall
use all reasonable endeavours to answer promptly and fully enquiries relating
to the Occupational Leases and the Property prior to the expiry of the Option
Period.
Clause 7 and
the following clauses contained provisions of which the great majority were
intended to regulate the relationship of the parties only after the option had
been exercised and indeed in the case of some of them only at or after
completion of the contract. I need refer to only a few of these provisions.
Clause 10(1)
provided:
The date for
completion of the Contract shall be the eighth day following the date upon
which the option is exercised provided that the same is a working day and if
not the next working day thereafter.
Clause 11
provided: ‘The Transfer to Briargate shall contain’ a covenant by Briargate by
way of indemnity and a declaration of the nature therein respectively
specified.
Clause 12
specified a number of incumbrances and rights subject to and with the benefit
of which the property was to be sold.
Clause 13
provided:
Title to the
Property having been deduced prior to the date hereof Briargate shall be
entitled to raise no enquiries or requisitions thereon nor make any objections
thereto . . .
with certain
limited exceptions.
Clause 14
dealt with overriding interests and provided (inter alia) that Briargate
would purchase the property subject to all overriding interests. Clause 15
headed ‘knowledge’ specified a number of matters relating to rights of
occupation of the property as to which Briargate would be deemed to have full
notice and raise no requisitions. Clause 16 authorised Briargate to inspect
certain registers of title at HM Land Registry and obliged Newprop to take
steps to have a specified entry made at HM Land Registry.
Clause 17
provided for the sharing between Briargate and Newprop of any profit which
might arise on a future ‘sale of the property’ by Briargate. Subclause (1)
stated:
(1) In this Clause a ‘sale’ includes (a) a
contract (whether or not conditional) for the sale of the Property by Briargate
(b) a contract (whether or not conditional) for the sale of shares in Briargate
the prime or major purpose of which is to effect a sale of the Property (c) a
sale of shares in Briargate the prime or major purpose of which is to effect a
sale of the Property (d) a sale or contract (whether or not conditional) for
the sale of the Property by any person other than Briargate where Briargate has
any interest in the proceeds of sale or is to receive any payment calculated by
reference to the proceeds of sale and (e) the grant of any lease at a premium
other than for occupational purposes or contract therefore (sic) whether
or not conditional either by Briargate or by any other person where Briargate
has any interest in the premium or is to receive any payment calculated by
reference to the premium and ‘the Effective Date of Sale’ shall be the date on
which any such event occurs.
Clause 17(2)
began as follows:
In the event
of a sale of the Property at any time during the period of 39 months following
the date hereof (‘the Effective Period’) and the receipt by Briargate of the
proceeds of sale within the Effective Period or within six months thereafter
Briargate shall within 7 days of the completion of such sale (if completion so
occurs) and receipt by Briargate of the proceeds of sale pay to Newprop a sum
(if any) representing:
(a) 50% of ‘X’ calculated in accordance with the
following formula if the Effective Date of Sale is within the period of 15
months immediately following the date of completion of the Contract or
(b) 40% of ‘X’ calculated in accordance with the
following formula if the Effective Date of Sale is within the period of 12
months immediately following the expiration of the period referred to in (a)
above or
(c) 30% of ‘X’ calculated in accordance with the
following formula if the Effective Date of Sale is within the period of 12
months immediately following the expiration of the period referred to in (b)
above.
Clause 17(2)
then defined the relevant ‘formula’. ’39 months following the date hereof’
would elapse on November 12 1991, and the further six months, which was the
extended period for the receipt of proceeds of sale, would elapse on May 12
1992.
Clause 17(3)
stated that the provisions of the clause should apply to any sale (as therein
defined) of a part of the property and specified the formula applicable in that
event for the purpose of assessing the sum payable by Briargate to Newprop.
Clause 20
contained provisions requiring Briargate at completion to offer new contracts
of employment to certain specified classes of person.
Clause 21
contained provisions requiring Briargate to pay to Newprop on completion sums
in respect of such arrears as might be owing by tenants or licensees of the
whole or part of the property.
Clause 22
contained corresponding provisions in relation to service charges.
Clause 23
contained provisions relating to such rent deposits as might be held by Newprop
at the time of completion and also dealt with the matter of insurance.
Clause 29
provided:
The parties
hereby agree that during the Option Period they shall not disclose to any third
party the Purchase Price save that Briargate may do so on a confidential basis
in connection with any discussions in respect of the financing of the purchase
of the Property.
Condition 22
of the National Conditions of Sale (20th ed), incorporated by clause 2 of the
option agreement with variations, so far as material provided:
Special
Notice to Complete
(i) At any time on or after the completion date,
either party, being ready and willing to fulfil his own outstanding obligations
under the contract may (without prejudice to any other right or remedy
available to him) give to the other party or his solicitor notice in writing
requiring completion of the contract in conformity with this condition.
(ii) Upon service of such notice as aforesaid it
shall become and be a term of the contract in respect of which time shall be of
the essence thereof that the party to whom the notice is given shall complete
the contract within 16 working days after service of the notice (exclusive of
the day of service), but this condition shall operate without prejudice to the
right of either party to rescind the contract in the meantime . . .
On October 19
1988, at a time when its option was still unexercised, Briargate entered into a
written agreement with TWPL (the joint venture agreement). This agreement
recited that
Briargate has
the benefit of the Option Agreement for the purchase of the Leases (each as
hereinafter defined) and has agreed with TWPL for sale thereof to TWPL as
hereinafter provided.
The leases in
question, defined by clause 1 of the joint venture agreement as ‘the Newprop
leases’, were the leases of the property to which the option agreement related.
The only
clause of the joint venture agreement dealing with the acquisition by TWPL of
the leases referred to above was clause 2, which provided as follows:
2(1)(a) Prior
to the 31st October 1988 Briargate shall exercise the Option and (subject as
hereinafter provided) direct Newprop to assign the Newprop Leases (together
with the benefit of the rent deposits (if any) referred to in Clause 23 of the
Option Agreement) to TWPL and if Newprop shall comply with such direction then
TWPL shall complete the purchase of the Newprop Leases at the price of
£7,000,000 (payable as to £5,700,000 to Newprop and £300,000 to Briargate on
completion of such purchase and £1,000,000 to Briargate as hereinafter
provided) pursuant to and subject to the provisions of the Option Agreement
PROVIDED that if Newprop shall refuse to assign the Newprop Leases to TWPL and
Briargate shall have used all reasonable endeavours to procure such assignment
direct to TWPL then Briargate itself shall complete the purchase of the Newprop
Leases pursuant to the Option Agreement and shall immediately as beneficial
owner assign the Newprop Leases to TWPL with the benefit of but subject only to
the matters with the benefit of which and subject to which the same are to be
transferred to Briargate pursuant to the Option Agreement and subject to the
provisions of the Option Agreement itself otherwise free from encumbrances at
the price of £7,000,000 AND if this proviso shall have effect then Clause 2(2)
shall also have effect.
(b) The sum of £1,000,000 hereinbefore referred to
shall be paid to Briargate on the 1st June 1992 and shall be paid together with
interest at the rate and in the manner referred to in the proviso to the
definition of ‘Payment Date’ above.
2(2) If the proviso to Clause 2(1) has effect (so
that the Newprop Leases are assigned to TWPL by Briargate rather than by
Newprop) then TWPL shall be liable to pay the stamp duty and HM Land Registry
fees due on the assignments of the Newprop Leases to Briargate and the amounts
of such stamp duty and HM Land Registry fees shall form part of the Development
Cost.
2(3) On the date of completion TWPL shall pay to
Briargate such sums as may be payable by Briargate to Newprop pursuant to
clauses 21 22 and 23 of the Option Agreement.
2(4) Briargate will at the request of TWPL
exercise for the benefit of TWPL Briargate’s rights under Clause 6 of the
Option Agreement to make enquiries in respect of the Occupational Leases as
therein defined.
2(5) Briargate shall pay and keep TWPL fully and
effectually indemnified against any sum which may become payable to Newprop
pursuant to Clause 17 of the Option Agreement as a result of the payment by
TWPL of the sum of £7,000,000 for the Newprop Leases but not further or
otherwise.
2(6) Briargate will comply with the provisions of
the Option Agreement and shall procure that the benefit of Clause 22(3) thereof
shall enure to TWPL and Briargate shall also at TWPL’s cost use all reasonable
endeavours to procure that Newprop complies with the obligations on its part
contained in the Option Agreement.
The joint
venture agreement contemplated the development of the Tricorn site and provided
for the payment by TWPL to Briargate of shares of what were defined in the
agreement as ‘the development profit’ and ‘the profit income’.
It is not in
dispute that provision was made by clause 2(1)(b) of the joint venture
agreement for deferment of the payment of the sum of £1,000,000 with the
intention of avoiding, if possible, the impact on Briargate of the
profit-sharing provisions of clause 17 of the option agreement. That this was
so is made additionally clear by a letter (‘the side letter’) written by TWPL
to Briargate and signed by one of its directors on October 19 1988, the same
date as that of the joint venture agreement. This letter stated:
THE TRICORN
CENTRE, PORTSMOUTH (‘THE PROPERTY’)
With regard to
the Agreement which has been exchanged today between us in relation to the
Property, we write to advise you that if it shall be found that there is any
Development Profit or any Profit Income (both as defined in the Agreement)
which has been calculated and which could be paid to you prior to the 1st June
1992 and you ask us for payment of such monies to be made to you prior to that
date then in our sole discretion (and without being under any legal obligation
so to do) we may make such payments to you.
We also agree
that of the sum of £1,000,000 referred to in clause 2(1)(b) of the Agreement we
shall pay to you today the sum of £90,000 in order for you to discharge
professional fees that you have already incurred. Should you ask us for payment
of the whole or any remaining portion of the sum of £1,000,000 before the 1st
June 1992 then in our sole discretion (and without being under any legal
obligation so to do) we may make such payment to you provided that you have
given to us not less than three months notice and the sum to be repaid is not
less than £250,000.
It is not
intended that this letter should give rise to any legally binding obligation on
either of us, save as expressly referred to above in relation to the payment of
£90,000.
On October 28
1988 Briargate duly exercised its option in accordance with clause 2(1)(a) of
the option agreement, and the price of £300,000 was paid. Thus completion under
the option agreement was due on November 7 1988 (see clause 10(1)). Between
October 28 and November 7 1988 correspondence took place between Newprop’s
solicitors and Briargate’s solicitors, from which it emerged that (1) certain
requisitions raised by Briargate were not fully answered; (2) a tenant had registered
a caution in respect of its statutory right to renew under the Landlord and
Tenant Act 1954, Part II; (3) Newprop considered that the joint venture
agreement was in breach of clause 3 of the option agreement and declined to
complete.
On November 7
1988, Briargate gave Newprop notice to complete under condition 22 of the
National Conditions of Sale, and notice of the deposit of the balance of the
purchase price in the name of TWPL.
On November 21
1988, Newprop having failed to complete, Briargate began proceedings against it
and issued a summons seeking summary judgment for specific performance under
RSC Ord 86.
On November 22
1988, Newprop obtained an order from the master that the summons for summary
judgment should be referred straight to the judge.
On March 1
1989, TWPL served on Briargate a notice to complete the joint venture agreement
within 16 days, purportedly in accordance with condition 22 of the National
Conditions of Sale.
On March 3
1989, TWPL served on Briargate a second notice to complete, which was a
duplicate of the other but served at a different address. It is common ground
that the two notices stand or fall together. On March 3 1989, the hearing of
Briargate’s Ord 86 summons began before Mr Michael Wheeler QC. On March 6 1989,
he gave judgment in favour of Briargate and made an order for specific
performance of the contract defined by clause 1(3) of the option agreement. He
gave certain ancillary directions, including an order for inquiry as to
damages, and granted a stay on the execution of his order pending appeal, and
leave to appeal from his order. Newprop and Briargate in due course agreed that
the time for Newprop to appeal should run from March 30 1989 and on April 26
1989 Newprop’s notice of appeal was lodged.
Meanwhile, on
March 22 1989, TWPL notified Briargate that they were withdrawing the balance
of the purchase money from the deposit of which Newprop had been notified on
November 7 1988.
On April 6
1989, Briargate issued a writ endorsed with a statement of claim against TWPL
claiming a declaration that the notice to complete dated March 1 1989 was
invalid and seeking specific performance of the joint venture agreement. On
April 10 1989 TWPL’s solicitors served a further (third) notice to complete on
Briargate. On May 2 1989 Briargate’s solicitors issued a summons seeking an
order for specific performance under RSC Ord 14 and Ord 86. The hearing of that
summons began on May 15 before Morritt J
venture agreement should be carried into execution contemporaneously with
completion of the option agreement. Morritt J gave leave so far as necessary to
appeal from his judgment, and on June 2 1989 TWPL lodged its notice of appeal.
The outcome of TWPL’s appeal must necessarily depend considerably on the
outcome of the appeal of Newprop, with which I will deal first in this
judgment.
The Appeal of
Newprop
Before the
deputy judge the main ground upon which Newprop sought to justify its failure
to complete on November 7 1988 and to resist an order for specific performance
was that Briargate, by entering into the joint venture agreement, had broken
clause 3 of the option agreement. We have been told that Newprop also sought to
resist the claim for specific performance in reliance on
(a) an alleged breach by Briargate of clause 29
of the option agreement on the grounds that its terms must have been revealed
to TWPL:
(b) Briargate’s request or requirement that the
property be transferred by Newprop direct to TWPL, which it asserted was in
contravention of clauses 3 and 5 of the option agreement.
Prior to the
hearing before the deputy judge, Briargate had made it plain that it would be
content that Newprop should transfer the property to Briargate itself if the
court were to hold (contrary to Briargate’s contention) that Newprop was not
obliged to transfer it direct to TWPL. Before this court point (b) was argued
only in the context of the form of order which should be made if it should
decide to uphold the order for specific performance made in Briargate’s favour
by the deputy judge.
The deputy
judge held that Newprop was not obliged to transfer the property direct to TWPL
but was entitled to insist on transferring it to Briargate. However, he
rejected Newprop’s main argument that Briargate, by entering into the joint
venture agreement, had broken clause 3 of the option agreement. Though he
referred to clause 29 of the option agreement in his judgment, he did not refer
to the argument which we have been told was advanced, albeit briefly, in
reliance on that clause.
Has there
been a breach of clause 3 of the option agreement?
The first
question for this court’s decision, as Mr David Neuberger QC has submitted on
behalf of Newprop, is whether Briargate, by entering into the joint venture
agreement, has purported to ‘assign, sublet, share or part with the benefit of
[the option agreement] or any part thereof’ within the meaning and in breach of
clause 3 of the option agreement.
The deputy
judge in the course of his judgment, on several occasions, drew a distinction
between the option agreement and ‘the contract’, as defined in clause 1, being
the contract for sale and purchase which would arise on the exercise of the
option. He considered that (1) clause 3(a) of the option agreement related only
to the option agreement itself and did not preclude any assignment etc of the
contract; (2) the conclusion of the joint venture agreement by Briargate did
not give rise to an ‘assignment, subletting, sharing or parting with the
benefit of ‘the option agreement’ or any part thereof’ within the meaning of
clause 3(a).
Mr Neuberger
submitted that the deputy judge erred on both points. As to the first, he drew
our attention to a number of the clauses in the option agreement (for example,
clauses 7 to 15) which set out the terms which were to govern ‘the contract’
which would arise if and when Briargate had exercised its option. These
clauses, in his submission, show that, in construing clause 3 of the option
agreement, it is not right to treat that agreement and the contract as separate
and distinct; the parties, he pointed out, would continue to be bound by the
option agreement, even after the option had been exercised and the contract had
come into existence.
In my
judgment, however, the deputy judge was plainly right as to the first of the
two points referred to above. The draftsman of the option agreement in both
clause 1 and clause 2 drew the clearest distinction between ‘this agreement’
and ‘the contract’, carefully defining or using those expressions in different
senses. In using the phrase ‘this agreement’ in clause 3, he must, in my
judgment, be taken to have used it in the same narrow sense as he used it in
clauses 1 and 2, namely the sense of the option agreement itself.
In my opinion,
however, the second of the deputy judge’s conclusions referred to above gives
rise to greater problems. The gist of his decision on this point is to be found
at pp 10F-11A of his judgment*:
Moreover I
cannot regard the contract as involving an assignment of the benefit of the
option agreement. The option agreement was not, and was not intended to be,
assigned at all and there is nothing in it which suggests the contrary. What
was transferred to Taylor Woodrow under the second agreement was the benefit of
the fruits of the option, that is to say the assignment to Taylor Woodrow of
the benefits which would arise from the exercise of the option.
*Editor’s
note: Also reported at [1989] 2 EGLR 189 at p 191 L.
Mr Neuberger
did not argue that the conclusion of the joint venture agreement involved an
‘assignment’ or ‘subletting’ within the meaning of clause 3 of the option
agreement, whatever the somewhat obscure reference to subletting may mean. However,
he submitted that the deputy judge attached inadequate weight to the crucially
important phrase ‘share or part with the benefit of this Agreement’. Briargate,
in his submission, by entering into the joint venture agreement, had ‘share
or part with the benefit of the option agreement‘ within the meaning and in
breach of clause 3.
Miss Hazel
Williamson QC, on behalf of Briargate, did not seek to argue that the saving
words at the end of clause 3 had any application. Her answer to Newprop’s
submission was in short that when the option agreement is read as a whole,
clause 3 will be seen to have a dual commercial purpose, namely (a) to save
Newprop from contractual involvement with a third party and (b) to ensure that
the next sale of the property would be a sale by Briargate, so that, if
effected within the relevant period of time, it would bring into operation the
profit-sharing provisions in clause 17 of the option agreement. As to (a), she
pointed out that in the absence of such a provision as clause 3 Briargate would
have been free to assign the benefit of the option and the assignee, on
exercising the option, would have brought himself into direct contractual
relationship with Newprop. In her submission, a crucial distinction falls to be
made between the ‘benefit of’ the option agreement and the interest in the
property which arises on the exercise of the option. The ‘benefit of’ the
option agreement means the right of Briargate by virtue of clauses 4 and 5 to
have the property conveyed to it on the exercise of the option. The interest in
the property which arises on the exercise of the option is more properly to be
regarded and described as the fruits of the option. In her submission, all that
Briargate did by the joint venture agreement was to deal with the fruits of the
option agreement.
In support of
these contentions Miss Williamson referred us to an unreported judgment of
Hoffmann J, delivered on October 29 1987, in Haslemere Estates plc v Hambros
Bank Executor and Trustee Co Ltd. In that case the judge had to consider
whether there had been a breach of a clause in a building agreement as follows:
Neither Haslemere
nor the Trust shall assign or part with their respective interests or
possession under this agreement or any part thereof or undertake to do so.
In the course
of his judgment, Hoffmann J said:
If I may take
an example which I put to counsel, if A has agreed to buy a unique chattel from
B and then agrees with C that upon receiving delivery he will sell and deliver
the chattel to him, A does not thereby assign or undertake to assign to C any
interest in his agreement with B. He undertakes to sell to C what he receives
as a result of the performance, by which the agreement is discharged.
I agree with
this general statement of the law and see no reason to doubt the correctness of
Hoffmann J’s decision in the case before him. However, he was considering a clause
in a form materially different from that of clause 3 of the option agreement in
this case. In particular, he was not considering the impact of a clause such as
clause 3 which forbade a party ‘to share . . . the benefit of this agreement’.
The first twelve
words of clause 3, ‘This Agreement shall be personal to Briargate and Briargate
shall not assign’, and probably even the first six alone, would manifestly have
sufficed to prevent Briargate from imposing on Newprop a contractual
relationship with a third party by virtue of an assignment of the option
agreement. The succeeding words ‘sub-let share or part with the benefit of this
Agreement’ cannot be rejected as otiose; if possible, some force must be given
to them. The meaning of the word ‘sub-let’ in this context is obscure and does
not fall for our decision. The crucial phrase on which Newprop relies is ‘share
. . . the benefit of this Agreement or any part thereof’. Miss Williamson
submitted that
execution of a declaration of trust or the entering into a partnership
agreement under which the benefit of the option was to be introduced as one of
the partnership assets. I agree that either of those two transactions would
amount to a ‘sharing’ of the benefit of the agreement. In my judgment, however,
the phrase cannot be read as applicable only to transactions of this nature.
In my
judgment, on the ordinary meaning of words and on the true construction of
clause 3, Briargate would ‘share . . . the benefit of this Agreement or any
part thereof’, within the meaning and in breach of clause 3 of the option
agreement, by entering into any transaction whereby it was no longer
exclusively entitled to the entire benefit of the option agreement. If this
be the right test, there can be no doubt that Briargate, by entering into the
joint venture agreement, shared (with TWPL) the benefit of the option
agreement. By so doing Briargate (a) contractually committed itself to
exercising the option and (b) precluded itself from agreeing with Newprop any
variation or release of the terms of the option agreement without TWPL’s
consent. If, for any reason, Briargate had refused to exercise the option, I
see no reason why TWPL should not have been able to obtain an order for
specific performance compelling it to do so for the benefit of TWPL. In these
circumstances I find it impossible to say that the execution of the joint
venture agreement did not involve a ‘sharing of the benefit of’ the option
agreement. The provisions of clauses 2(3), 2(4) and 2(6) of the joint venture
agreement quoted above make it additionally clear that it involved a sharing of
such benefit.
The commercial
purpose of the insertion of the added words ‘sub-let share or part with the
benefit of’ in clause 3 is less clear and is a matter for speculation. It is
possible that the draftsman, without any precise thought in this context,
included them ex abundanti cautela as an ‘anti-avoidance’ provision,
with a view to precluding some dealing by Briargate with the benefit of the
option agreement during the period before the option had been exercised (‘the
option period’) which might enable Briargate to realise a profit equivalent to
that which it would make on a ‘sale’ of the property falling within clause 17,
but without actually involving a ‘sale’ within that meaning and thus without
bringing into operation the profit-sharing provisions of that clause.
In further
support of his argument that clause 3 be given a wider ‘anti-avoidance’ meaning
than that attributed to it by the deputy judge, Mr Neuberger made two
submissions as to the effect of clause 17 which I should mention. First, he
submitted that a transaction, such as the joint venture agreement, entered into
before the option was exercised would not involve a ‘sale’ of the property,
within the meaning of clause 17, so as to bring into operation the
profit-sharing provisions of that clause. (I should add that Mr Neuberger
explained that both of his submissions as to the effect of clause 17 were made
solely for the purpose of this appeal. Since the rights of Newprop (if any) to
a share of profit by virtue of clause 17 of the option agreement have not yet
been determined, it might well wish to make quite contrary submissions in
another forum.)
On any
footing, in my judgment, there is no substance in the first of Mr Neuberger’s
submissions as to the effect of clause 17. If A, who has an option to purchase
Blackacre, agrees with B that he will exercise the option and, having exercised
it, will convey Blackacre to B for a monetary consideration, such agreement
plainly involves a contract for the sale of Blackacre by A to B. In my
judgment, the execution of the joint venture agreement plainly gave rise to a
contract for the sale of the property by Briargate and thus a ‘sale’ falling
within clause 17. Miss Williamson, on behalf of Briargate, accepted this
without equivocation.
The second
point concerning the construction of clause 17 of the option agreement drawn to
our attention by Mr Neuberger is more puzzling. Clause 17(2) in an important
respect appears to be ambiguous. The opening words of the subclause oblige
Briargate to make the specified payment
in the event
of a sale of the Property at any time during the period of 39 months following
the date hereof . . . and the receipt by Briargate of the proceeds of sale
within the Effective Period or within six months thereafter . . .
However, the
earliest period in which a sale may take place, as contemplated by the sliding
scale formula which specifies the sums payable to Newprop, is ‘the period of 15
months immediately following the date of completion of the Contract’ (as
defined by clause 1(3) of the option agreement).
In these
circumstances, Mr Neuberger submitted that: (a) notwithstanding the opening words
of clause 17(2)(a) of the option agreement, the profit-sharing provisions of
that clause are not intended to be operative and are not capable of operating
if a sale of the property takes place during the option period; and (b) this
point explains the need for clause 3 to preclude any sort of dealing with the
option agreement during the option period.
Having
mentioned it, I do not propose to express any concluded view in regard to Mr
Neuberger’s second submission as to the construction of clause 17. It is not
necessary to do so for the purpose of deciding whether the joint venture
agreement involved a breach of clause 3 because I have already decided this
point in Newprop’s favour. And, for the reasons appearing below, I do not think
that, in the event, it is relevant for the purpose of deciding what relief (if
any) should be given to Briargate as against Newprop.
Has there
been a breach of clause 29 of the option agreement?
The second
alleged breach relied on by Newprop is a breach of clause 29 of the option
agreement. I can deal with this point very shortly. It is common ground that
during the option period Briargate disclosed to TWPL the purchase price and,
indeed, as soon as Newprop became aware of the joint venture agreement, it must
have become aware that this had happened. However, under clause 29 Briargate
would have been at liberty to disclose the purchase price to TWPL provided that
it did so ‘on a confidential basis in connection with any discussions in
respect of the financing of the purchase of the Property’. Mr P R Hardcastle, a
director of Briargate, who swore an affidavit dated November 22 1988, described
(in para 5) the reason for the execution of the joint venture agreement as
being that ‘the plaintiff could not afford to finance the redevelopment
itself’. It may well be — there is no evidence to show the contrary — that the
disclosure of the purchase price to TWPL by Briargate was in fact on a
confidential basis in connection with discussions in respect of the financing
of the purchase of the property. In his affidavit sworn on March 2 1989, Mr H E
Severn, Newprop’s company secretary, while specifically asserting a breach of
clause 3 of the option agreement as a ground for resisting an order for
specific performance, did not suggest that there had been a breach of clause
29. If he had done so, Briargate might well have wished to answer this
suggestion by further evidence as to the commercial background against which
the purchase price had been revealed. As I understand the position, the submission
as to a breach of clause 29 was raised for the first time, briefly, before the
deputy judge and was then disposed of by him summarily without being referred
to in his judgment. If I may say so, I am not surprised. In my judgment, the
point is without substance. A breach of clause 29 had not and has not been
proved.
I thus
conclude that, while no other breach by Briargate has been established, a
breach of clause 3 of the option agreement has been established by virtue of
Briargate’s entering into the joint venture agreement. The question thus
arises: should this court treat this breach as disentitling Briargate to an
order for specific performance?
Does its
breach of clause 3 disentitle Briargate to an order for specific performance?
By an amended
respondent’s notice, Briargate has submitted that
the learned
judge failed to hold, as he should have held, that even if there were a breach
of Clause 3 or Clause 29 of the said contract, the breach was purely technical
or trivial and that a technical or trivial breach, as was conceded by the
defendant, would not debar the plaintiff from obtaining an order of specific
performance.
It is clear
that a breach by one party to a contract which amounts to a repudiation of the
contract will preclude him from thereafter obtaining an order for specific
performance (Halsbury’s Laws of England, 4th ed, vol 44, para 491).
However, it has not been submitted that the execution by Briargate of the joint
venture agreement amounted to a repudiation of the option agreement.
By way of
guidance as to the principles which should direct a court in deciding whether
or not to order specific performance against a contracting party who is in
default, in a case where there have also been previous breaches by the
plaintiff not amounting to a repudiation of the contract itself, we have been
referred to no decided cases but to Spry on Equitable Remedies, 3rd ed
at pp 104-106 and p 212 and also to Jones and Goodhart’s Specific
Performance (1986) at pp 49-50. From these works and from my further limited
researches no very clear principles emerge. However, I think it is clear that
the court has a wide discretion whether or not to order specific performance
and that, in exercising this discretion, it is entitled to take into account
such factors as the honesty or otherwise of the
may have caused, and the hardship (if any) to the defendant or plaintiff (as
the case may be) which might arise if it were to make or to decline to make the
order sought.
In considering
whether or not an order for specific performance should be made against
Newprop, I take into account the following factors:
(1) There is no evidence which established that
Briargate, in entering into the joint venture agreement, believed that it was
committing any breach of the option agreement. The inference which I draw from
the evidence before the court is the contrary. So far as appears, Briargate has
not sought to conceal from Newprop any information which might be relevant as
to the existence of a breach of clause 3 or to a right in Newprop to a share of
the profits under clause 17. The existence of the joint venture agreement was
disclosed to Newprop’s solicitors by a letter of November 3 1988 and, under cover
of a letter of November 18 1988, copies of that agreement and of the
supplemental side letter were sent to Newprop’s solicitors. All this occurred
before Briargate’s proceedings were instituted on November 21 1988. The deputy
judge quotes (with apparent agreement) Mr Neuberger as submitting that the
joint venture agreement was a ‘shabby’ transaction. This description, however,
was attached to Briargate’s conduct not because there was a premature dealing
with the benefit of the option agreement but because of the provisions for
deferment of payment contained in clause 2(1)(b) of the joint venture
agreement. It is common ground that those provisions were devised by Briargate
or its legal advisers with the intention of avoiding the impact of the
profit-sharing provisions of clause 17 of the option agreement. In my judgment,
however, Briargate was entitled to make this arrangement with this object in
view. Whether it succeeded in fulfilling its object is not for this court to
decide. Anyone who had paused carefully to consider the wording of clause 17,
before or after the option agreement was executed, would have realised that a
future sale of the property by Briargate would not, or at least might not,
bring the clause into operation provided only that Briargate arranged for
actual payment to be made after the expiration of six months following ‘the
effective period’. This was the provision to which the parties, no doubt after
careful negotiation and the receipt of legal advice, had agreed. In my
judgment, Briargate was fully entitled to take advantage of it according to its
terms.
(2) The breach of clause 3 of the option
agreement now complained of has by itself caused Newprop no prejudice at all.
Conceivably, the very fact that the ‘sale’ effected by the joint venture
agreement took place during the option period might be said to have caused
Newprop prejudice if this fact were one of the grounds relied on by Briargate
for denying the applicability of clause 17. However, Miss Williamson has made
it clear that Briargate does not rely on, and has no intention of relying on,
that ground. For this purpose, the ground upon which it relies is simply the
provision for deferred payment contained in clause 2 of the joint venture
agreement. It is thus the adoption of this provision by the parties to the
joint venture agreement, and not the fact that the joint venture agreement was
concluded during the option period, which has or may have caused Newprop loss
by depriving it, in the event, of the practical benefit of clause 17 of the
option agreement. In this context, the fact that the ‘sale’ by Briargate
happened to take place during the option period is irrelevant.
(3) For the reasons appearing from (2) above, I
think the making of an order for specific performance against Newprop could not
justifiably be said to cause it hardship. On the other hand the withholding of
such an order would, in my judgment, cause hardship to Briargate, which has
paid £300,000 for the option and can never exercise it again.
In all the
circumstances I, for my part, consider that the breach by Briargate of clause 3
of the option agreement could not justify the court in declining to make an
order for specific performance against Newprop and I would make such an order.
It follows that I would dismiss Newprop’s appeal.
Can
Briargate require the transfers to be made direct to TWPL?
It is open to
the parties to a contract of sale of land expressly to agree that the vendor
may refuse to convey to any person other than the purchaser. Thus, for example,
the Law Society’s General Conditions of Sale (1984 revision) provide by
condition 17(6) that the vendor may on reasonable grounds decline to convey to
any person other than the purchaser. However, those conditions were not
incorporated in the option agreement. Neither the National Conditions of Sale,
which were incorporated in the option agreement, nor any other provision of the
option agreement expressly say anything about the point.
The ordinary
rule is that ‘provided the vendor is not prejudiced, the purchaser can direct
[the conveyance] to be made to a nominee for such estate and interest, not
exceeding the interest purchased as he pleases’: Halsbury’s Laws of England,
4th ed, vol 42, para 289. The position is stated thus in Emmet on Title,
19th ed, para 10.003:
A purchaser
is entitled to insist upon the conveyance being to his nominee, for example, to
a sub-purchaser (in any number of lots, provided that the purchaser meets any
additional expenses), unless the purchaser’s personal qualifications are
material. If the conveyance is to be subject to obligations, the vendor can
insist on the purchaser joining as the party to guarantee observance of the
obligations (Curtis Moffat Ltd v Wheeler [1929] 2 Ch 224). As far
as the implied covenants for title are concerned a sub-purchaser does not need
to have the purchaser joined as a party provided the conveyance is expressed to
be by his direction as beneficial owner (see section 76(2) of the LPA 1925).
Mr Neuberger
has, in effect, submitted that clauses 3 and 11 of the option agreement read
together show an intention that, in the event of the exercise of the option,
the transfer of the property by Newprop shall be to Briargate and no one but
Briargate and that Newprop shall be entitled to decline to execute a transfer
in favour of any other party.
As to clause
3, the principal purpose of expressing the option to be personal to the grantee
was presumably to ensure that the grantor, Newprop, could look to Briargate,
and not some third party, for performance of the purchaser’s contractual
obligations, particularly as to the payment of the purchase price, which would
arise if and when the option was exercised and a contract for sale of the land
arose. The personal qualifications of Briargate in the sense of its financial
stability were thus very material in relation to the contract for sale. Miss
Williamson has accepted that in any event Newprop is entitled to insist on
Briargate’s being a party to any transfer executed by Newprop, for the purpose
of giving the covenant for indemnity provided for by clause 11(1) of the option
agreement. This concession was, in my judgment, plainly correct. The question
is whether the option agreement, on its true construction, by implication
displaces the ordinary rule as stated in Halsbury and Emmet.
In my
judgment, it does. Clause 3 of the option agreement makes it clear that
Briargate alone is to have the right to exercise the option. If that clause had
stood alone, it might not necessarily have followed that Briargate was
precluded from directing the transfer to be made in favour of a third party.
However, clause 11 specifically provides that ‘the transfer to Briargate’ shall
contain ‘a covenant by Briargate’ by way of indemnity and a mutually agreed
‘declaration’ of the nature there respectively specified. Briargate was
carefully defined by clause 1(1) as meaning ‘Briargate Developments Ltd’ (not
as including its successors in title). In my judgment, as Mr Neuberger has
submitted, these provisions, when read together, justify Newprop in asserting
that it has contracted, in the event of the exercise of the option, to transfer
the property to Briargate and to Briargate alone. This is not the case of the
ordinary contract of sale which by implication embodies an obligation not only
to convey to the purchaser but as the purchaser shall direct. On this point I
am in agreement with the deputy judge.
Costs
The deputy
judge, having reached the conclusion that Briargate was not in breach of the
option agreement, made the following observations:
For Newprop
Mr Neuberger, perfectly fairly, did not mince his words. He said that when you
look at the second agreement, and not least when you look at the side letter,
this was a shabby transaction on the part of Briargate and Taylor Woodrow. It
is no part of my function to act as schoolmistress to the parties, and once I
have arrived at the answer to the question of construction — namely, that in my
judgment the second agreement was not a breach of the option agreement — I
think it better that I should refrain from comment on the way in which the
parties have seen fit to operate.
He then proceeded
to express the view that the profit-sharing provisions of clause 17 did not
operate on the ground that the proceeds of sale were not recoverable by
Briargate within the period designated by clause 17(2) of the option agreement.
He then said:
I have not
reached this conclusion without a great deal of thought, because, without
seeking to make use of emotive adjectives, it does seem hard on
being so, it seems to me that Briargate are entitled to a decree of specific
performance of the contract as defined. I do not think, as at present advised,
that they are entitled to require an assignment direct to Taylor Woodrow, but I
do not consider that the second agreement was a breach of clause 3 of the
option agreement. On the other hand, looking at the picture as a whole, it
seems to me that this would be an appropriate case where, although granting a
decree of specific performance, I should make no order as to costs . . .
We have been
told that no argument had been addressed to the deputy judge on the matter of
costs before he delivered judgment. However, after he had done so, a colloquy
followed in which Briargate’s counsel attempted unsuccessfully to persuade him
to reconsider his order as to costs and to award them in favour of Briargate as
the successful party.
The question
of costs was, of course, one for the deputy judge’s discretion, but Miss
Williamson on behalf of Briargate has submitted that in this context he went
wrong as a matter of principle. With great respect to him, I think she is
right. On his view of the matter, Briargate had not even committed a breach of
clause 3 of the option agreement in entering into the joint venture agreement.
On his view of the matter, Briargate, in doing so at the time when it did, was
acting entirely within its legal rights. Although he referred to ‘hardship’ on
Newprop, he also pointed out that clause 17 probably originated from Newprop
itself and that ‘there is not a shadow of doubt that the words were carefully
and deliberately negotiated’. Provided that, as was the case, no concealment of
material matters from Newprop was involved, Briargate was, in my view, fully
justified in including in the joint venture agreement deferred provisions for
payment designed to avoid the impact of clause 17. Though the deputy judge
rightly disclaimed any intention to act as ‘schoolmistress’ to these two
commercial organisations, I think that his order as to costs can only be
explained as a mark of his disapproval of Briargate’s conduct. For reasons
which I hope will have adequately appeared, I do not think that such
disapproval was justified. The mere exercise of astuteness by the party to a
commercial agreement, unaccompanied by trickiness or bad faith, is no ground
for depriving it of an order for costs.
With great
respect to the deputy judge, I do not therefore consider that his refusal to
make an order for costs in favour of Briargate was justifiable in the face of
his decision that Briargate had committed no breach of the option agreement.
However, it will be a matter for argument hereafter whether this court, having
decided that there was such a breach, should in the event vary the order
for costs made in the court below.
The Appeal of
TWPL
In Briargate’s
action against TWPL the first issue which arose for the decision of Morritt J
was whether the notices to complete given by TWPL in March 1989 were valid. He
held that they were not. The reasons for which he did so are set out very
clearly at pp 7F to 10A of his judgment. In substance, they were that:
(a) this issue depended upon whether the National
Conditions of Sale (20th ed) were incorporated in the joint venture agreement;
(b) there was no express incorporation;
(c) the wording of clause 2(1)(a) of the joint
venture agreement, which was relied on by TWPL, was not apt to incorporate
them, the reference in clause 2(1)(a) to the option agreement being merely
intended to show that TWPL was ‘to get no more and no less than Briargate was
entitled to under the Option Agreement’;
(d) the correctness of this construction was
confirmed by the fact that the joint venture agreement specified no date for
completion;
(e) the reason why no date for completion was
specified was that the operation of the joint venture agreement was wholly
dependent on actual completion of the contract provided for by the option
agreement.
The judge
accepted that an effectual notice to complete could have been served on
Briargate by TWPL on April 10 1989 under the general law (not condition 22) if
there had been a failure to comply with the obligation imposed on Briargate by
clause 2(6) to use all reasonable endeavours to enforce the option agreement.
However, he expressed the view that ‘in addition the time allowed by the notice
must have been reasonable in all the circumstances . . .’. He concluded that
there had been no default by Briargate at the time that the notice was served.
The judge then
proceeded to consider, but reject, a number of points raised by TWPL in support
of a contention that its notice to complete of April 10 1989 was a valid
notice. He concluded that in respect of all three notices TWPL had no arguable
defence and that each of them was invalid. After dealing with Briargate’s
application for summary judgment, he concluded that the proper order to make
was an order that the joint venture agreement ought to be specifically enforced
and carried into effect contemporaneously with completion of the option
agreement.
On this
appeal, the sole issue raised by TWPL is whether on March 1 1989 TWPL was
entitled to serve on Briargate the first notice to complete the joint venture
agreement. No reliance is placed on the second precautionary notice of March 3
1989 or on the third notice of April 10 1989.
Mr Dennis Levy
QC, on behalf of TWPL, has submitted that:
(i) the National Conditions of Sale (20th ed) as
amended by the option agreement were incorporated into the joint venture
agreement by clause 2(1)(a) of the latter agreement;
(ii) the completion date, to which the parties had
committed themselves by the joint venture agreement, was the same as the
completion date for the completion of the option agreement (in the events which
happened on November 7 1988);
(iii) By virtue of such incorporation, TWPL on
March 1 1989 was entitled to serve a notice to complete on Briargate pursuant
to condition 22 of the National Conditions of Sale.
In support of
the first two of these submissions we have been taken through a succinct but
very careful analysis of the option agreement and the joint venture agreement
in the skeleton and oral arguments of counsel for TWPL. I intend no disrespect
if I do not deal with all the points drawn to our attention, since, ultimately,
the issues arising in this appeal are very narrow ones.
As Mr Levy
pointed out, the option agreement performs two functions. First, it grants to
Briargate the option and contains conditions governing the grant and exercise
of the option and the mutual obligations of the parties during the option
period (see, for example, clauses 1-6 and 16 and 29). Second, it contains
provisions which define the mutual obligations of the parties under the
contract which will arise if and when the option is exercised. Most of the remaining
clauses relate to these obligations. Clause 2 expressly provides for the
incorporation of the National Conditions of Sale not only in the option
agreement itself but also in the contract. Clause 13 is significant because it
very substantially limits the rights of Briargate to raise inquiries or
requisitions or to make objections in regard to title. The same observation
applies to clauses 14 and 15.
Mr Levy
submitted that the joint venture agreement similarly performs two functions,
namely to provide for the acquisition of the property, through Briargate
exercising its option, and to set out the provisions which were to govern the
contract for sale between Briargate and TWPL which would fall to be implemented
once the option had been exercised. He referred us to the recital to the joint
venture agreement which reads:
Whereas
Briargate has the benefit of the Option Agreement for the purchase of the
leases (each as is hereinafter defined) and has agreed with TWPL for the sale
thereof to TWPL as hereinafter provided.
In his
submission it is to be expected that Briargate and TWPL would have incorporated
the National Conditions in this latter contract, just as Newprop and Briargate
incorporated them in the option agreement.
Whether or not
this might have been expected, the question for this court is whether the
parties did actually incorporate the National Conditions in the joint venture
agreement, either expressly or by necessary implication. Mr Levy submitted that
they did so expressly. He referred us to the words in the first limb of clause
2(1)(a):
if Newprop
shall comply with such direction then TWPL shall complete the purchase of the
Newprop Leases at the price of £7,000,000 . . . pursuant to and subject to the
provisions of the Option Agreement.
Since the
provisions of the option agreement include clause 2 thereof, in his submission
the use of the phrase ‘subject to the provisions of the Option Agreement’
incorporated in the joint venture agreement clause 2 of the option agreement
(referring to the National Conditions of Sale) and, save as specifically
provided in the joint venture agreement, the other clauses of the option
agreement. Similarly, the proviso to clause 2(1)(a) provided that, if Newprop
should refuse to assign the leases to TWPL, Briargate should itself complete
the purchase pursuant to the option agreement and
shall
immediately as beneficial owner assign the Newprop leases to TWPL with the
benefit of but subject only to the matters with the benefit of which and
subject to which the same are to be transferred to Briargate pursuant to
the Option Agreement and subject to the provisions of the Option Agreement.
Thus, in Mr
Levy’s submission, as in the earlier limb of clause 2(1)(a), the appropriate
clauses of the option agreement were drawn into the joint venture agreement,
including the incorporation of the National Conditions of Sale and the
completion date.
The point of
construction is a short one but, in my judgment, the words in clause 2(1)(a) of
the joint venture agreement relied on by TWPL are not apt or sufficient to have
the effect submitted. TWPL invited the court to read them as providing, by way
of shorthand, that the respective rights of Briargate and TWPL under their
contract of sale and purchase would be governed by the conditions contained in
the option agreement governing the respective rights of Newprop and Briargate
under their contract for sale and purchase. For my part, I cannot read
them in this way. The words are, I think, clearly directed to the moment of
completion and to what TWPL is to receive on completion. As the judge thought,
they were intended to make it plain that TWPL was to receive on completion no
more and no less than the bundle of rights which Briargate would be entitled to
receive on completion of the option agreement after the exercise of its option.
This would, of course, necessitate reference to the many clauses of the option
agreement which define or limit the extent of that bundle of rights. The words,
however, are not apt to incorporate by reference an entire code, such as the
National Conditions of Sale, intended to govern the contractual relations of
Briargate and TWPL both before and on completion, merely because the option
agreement rendered this code applicable to the contractual relations of Newprop
and Briargate.
There might
have been a greater need for the incorporation of some such code in the joint
venture agreement if Newprop’s title to the property had not already been
deduced even before the option agreement had been signed and if a full investigation
of the title by TWPL was going to be necessary before completion. However, the
joint venture agreement itself made it clear that no such further investigation
was contemplated. TWPL was to have the right under clause 2(4) of the agreement
to require Briargate to exercise its rights under clause 6 of the option
agreement to make enquiries in respect of the occupational leases. Clause 2(6)
also obliged Briargate to use all reasonable endeavours to procure that Newprop
complied with its obligations under the option agreement (including its limited
obligations with regard to making title). If the contract to purchase entered
into by TWPL can properly be described as a largely ‘open’ contract, this is
because it largely knew what it was getting. In my judgment, it is impossible
to treat the National Conditions as incorporated in the joint venture agreement
by necessary implication and indeed I do not think that Mr Levy has so
contended.
He did,
however, rely strongly on clause 2(3) of the joint venture agreement as
indicating an intention in the parties that the completion date in respect of
the joint venture agreement was to be the same as the completion date provided
for by clause 10(1) of the option agreement (the eighth day following the date
upon which the option was exercised). This, he submitted, was an additional
factor pointing to the incorporation of the National Conditions of Sale in the
joint venture agreement.
In my
judgment, however, this reference to the completion date does not serve to
support TWPL’s contentions, since closer analysis of the position in regard to
completion dates shows that there is no room for the application of the
National Conditions of Sale to the joint venture agreement. Condition 5(1) of
the National Conditions provides:
The
completion date shall be the date specified for the purpose in the contract or
if none the 26th working day after the date of the contract or the date of
delivery of the abstract of title, whichever shall be the later.
The joint
venture agreement did not specify any date for the purpose of completion for
the very good reason, explained by the judge, that its operation was wholly
dependent on actual completion of the option agreement. I agree with him that
the only reasonable implication is that completion was intended to be
simultaneous with the completion of the option agreement, an implication which
is fully supported not only by clause 2(3) but also by the use of the phrase
‘shall immediately . . . assign’ in the proviso to clause 2(1)(a) of the joint
venture agreement. It cannot be supposed that Briargate was intending to commit
itself to a date for completion of the joint venture agreement on the 26th
working day after the date of that agreement, whether or not Newprop had
already completed, any more than it would have intended to commit itself to a
date for completion of that agreement on the eighth day following the exercise
of the option, whether or not Newprop had already completed. Sufficient
protection against default on the part of Briargate was afforded to Briargate
by clauses 2(1)(a) and 2(6) of the joint venture agreement, coupled with the
ability of TWPL, if necessary, to serve a notice requiring Briargate to comply
with its obligations under clause 2(6). The joint venture agreement, as I read
it, did not contemplate the delivery of any abstract of title by Briargate to
TWPL.
In these
circumstances, I conclude that the National Conditions of Sale are not
incorporated in the joint venture agreement
(a) because there is no provision in that agreement
which incorporates them expressly or by necessary implication and
(b) because condition 5 of those conditions
relating to completion date is manifestly inappropriate and inapplicable to the
joint venture agreement.
Conclusions
In my
judgment, therefore, the appeals of both Newprop and TWPL should be dismissed.
I would, however, invite further submissions as to the precise form of order
which should be made in each case in the light of the judgments of this court.
NEILL and RALPH GIBSON LJJ agreed and did not add anything.
Both appeals
were dismissed; counsel were asked to prepare and submit draft form of order;
applications by defendants for leave to appeal to House of Lords were refused.
For further cases
on this subject see p 211
