Leasehold interest in shopping centre — Option to purchase — Restriction on assigning benefit — Profit-sharing on resale — Whether breach of restrictions — Whether vendor under obligation to transfer direct to assignee — Specific performance decreed
The defendant company own a leasehold interest in the Tricorn Centre, Portsmouth. In an agreement of August 12 1988, they granted to the plaintiff company an option to purchase their interest in the centre for £6m. The agreement provided that on the exercise of the option, a contract for sale would arise and the plaintiffs would then pay £300,000, a sum to be taken into account at completion. Completion was to take place within seven days of the exercise of the option. Clause 3 of the option agreement restricted the assignment, subletting or transferring of the benefit of the agreement, and clause 17 provided that upon any sale of the centre within 45 months of completion the defendants were to be entitled to any profit made at a resale. Because the plaintiffs could not finance the redevelopment of the centre without assistance, they entered into an agreement with Taylor Woodrow Properties Ltd under which the latter company would purchase the centre for £7m if the plaintiffs exercised the option. The option was exercised on October 28 1988 and a contract arose between the parties as a consequence. The plaintiffs requested the transfer of the legal title directly to Taylor Woodrow. The defendants refused to complete for two reasons: first, they contended, the plaintiffs were in breach of the option agreement because they had agreed to share the benefit contrary to the restriction against such sharing; and, second, the defendants were under no duty to transfer the leasehold interest directly to Taylor Woodrow as required by the plaintiffs. The defendants argued that the agreement with Taylor Woodrow was a breach of clause 3 and was an attempt to avoid the profit-sharing requirement of clause 17.
Held The plaintiffs had transferred to Taylor Woodrow the fruits of the benefit of the option agreement, not the benefit of the agreement. Accordingly their agreement with Taylor Woodrow was not a breach of clause 3, and not an attempt to avoid the profit-sharing requirement of clause 17. However, the defendants were not obliged to transfer their interest directly to Taylor Woodrow as this could not be required under the terms of the agreement between the parties. The plaintiffs’ claim for specific performance of the agreement to complete therefore succeeded, and the defendants were obliged to transfer their interest in the centre to the plaintiffs.
Hazel Williamson QC and Christopher Pymont (instructed by McKenna & Co) appeared for the plaintiffs; and David Neuberger QC and Nicholas Dowding (instructed by Herbert Smith) appeared for the defendants.