Sale of land – Terms of contract – Variation agreement – Claimant agreeing to sell property to defendants with vacant possession – Third party claiming interest in property – Claimant failing to obtain release of interest on or before longstop date – Defendants refusing to complete – Claimant seeking specific performance of contract – Whether claimant entitled to summary judgment – Application dismissed
The claimant property investment company acquired freehold land and premises (the property) for redevelopment. Following a winding-up petition, the claimant was wound up in August 2006. The property was the only significant asset available to the liquidator for the benefit of the creditors; it was valued at £1.5m.
In December 2007, contracts were exchanged with the defendants on their purchase of the property in the sum of £1.8m. The contractual completion date was 20 December 2007 and a deposit of £180,000 was paid on exchange of contracts. The contract provided for vacant possession on completion and incorporated the standard commercial property conditions (1rst ed). Before completion, a third party (B) produced a copy of a lease of the property that he claimed the claimant had granted to him in 2004. The defendants refused to complete on the ground that the claimant could not give vacant possession.
The liquidator issued an application in the winding-up, seeking declarations as to whether B had a valid interest in the property. The parties then entered into a variation agreement to afford the claimant an opportunity to clear B’s claim, either by a declaration from the court that B had no such interest or by obtaining a release from him of any interest that he might have had. By clause 2.6.1 of the agreement, the claimant was required to obtain a declaration and/or release on or before 2 November 2008 (the longstop date). The last day for the service of the buyer’s and seller’s notice was 20 October 2008.
B was unwilling to execute the release of his interest until he had received £90,000 from cleared funds. Further, it was not possible to execute the deed of release until 3 November, one day after the longstop date. The defendants took the view that they were released from any further obligation to complete under clause 2.6 of the variation agreement. The claimant sought specific performance of the contract and applied for summary judgment, contending that all the conditions specified in the variation agreement had been satisfied. The requirement for the claimant to obtain a release on or before the longstop date was not to be construed as requiring delivery of an unconditional release before completion. It was enough that B had committed himself to the release on completion.
Held: The application was dismissed.
The claimant had failed to establish that there was no real defence to the claim.
The modern approach to construction was to pay less attention to the language and grammar of a document if the admissible evidence supported an alternative meaning that the parties, using the terms in question, could reasonably be taken to have intended. However, the starting point was to assume that the parties to an agreement and their legal advisers did not ordinarily make linguistic mistakes and that either the language or the background to the agreement must therefore suggest that something had gone wrong: Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 considered.
Although it was possible to construct a symmetrical model of the agreement in which the fulfilment of all the preconditions to completion were fulfilled on the completion date, there was a danger in attributing too easily to the parties a different intention from that expressed in the language used in the interests of arriving at what, with hindsight, might appear to be a commercially fair solution.
In the instant case, there was little or no evidence as to the admissible background beyond the difficulties caused by B in respect of the completion of the original contract. The variation agreement was a compromise between the rights of the purchasers to demand an early completion date and the wish of the seller to have time to resolve its problems.
On an application for summary judgment, it was not safe to conclude that the express terms of the variation agreement should be ignored. The meaning of clause 2.6 was clear and required the release to be executed by 2 November 2008; there was nothing to suggest that the dates had not been chosen deliberately. The claimant also faced the difficulty that, even if the longstop date could be read as being 3 November, the deed of release had not been delivered unconditionally until 4 November as a result of the operation of the conditions of sale. Accordingly, the defendants had a seriously arguable defence.
James Ayliffe QC (instructed by Howes Percival LLP, of Norwich) appeared for the claimant; John Male QC (instructed by Nabarro LLP) appeared for the defendants.
Eileen O’Grady, barrister