Sale and purchase agreement – Contractual term – Commercial sense – Parties entering into agreement for sale of commercial property subject conditional upon defendant sellers obtaining emergency lighting certificates prior to completion date – Delay in obtaining certificates resulting in delay in completion — Whether claimant buyers entitled to damages – Whether defendants breaching contractual obligations – Claim allowed
The claimant buyers brought an action seeking damages for the delay of the defendant sellers in completing a contract made on 13 December 2013 for the sale and purchase of the King Edward Court shopping centre in Windsor. Clause 37 of the agreement provided that, as a pre-condition to completion the defendants should obtain, and supply true copies to the claimants of, emergency lighting certificates as soon as practicable and in any event prior to the date of actual completion, the defendants carrying out any remedial work necessary at their own cost in order to ensure that they were able to comply with their obligations.
The claimants advanced two alternative claims: (i) that, on the true construction of the agreement, the defendants were obliged to provide emergency lighting certificates and to complete the agreement on the contractual completion date of 17 December 2013 and in breach of such obligations failed to supply the certificates until 14 January 2014 and failed to complete the agreement until 17 January 2014, a month late; (ii) in the alternative, if the defendants were not required to provide the certificates and complete by the contractual completion date, they were required by clause 37 to provide the certificates as soon as practicable and had failed to do so.
The defendants denied that there had been any breach of the agreement. They submitted that clause 37 had three functions: (a) to impose an obligation on the defendants to obtain the certificates as soon as practicable, and in any event before actual completion; (b) to impose an obligation on the defendants to carry out the requisite remedial works at their own expense to enable that obligation to be complied with; and (c) to delay the obligation to complete until the certificates had been provided. The defendants submitted that the provision of the certificates was a condition precedent to both the claimants’ and the defendants’ obligation to complete. Consequently neither party was required to complete until the conditions in clause 37 had been satisfied.
Held: The claim was allowed.
(1) The construction or interpretation of a written agreement involved ascertaining what a reasonable person in the position of the parties would have understood the words to mean. The starting point was that the parties have intended what they have in fact said, so that their words had to be construed as they stood. The meaning of the document or of a part of it was to be sought in the document itself, by reference to the ordinary meaning of the words used. However, the process of construction was not a detached and literal exercise in semantics. The words of the contract had to be read and construed in the context of the matrix of surrounding fact insofar as known to the parties. Although the factual matrix in principle included anything which would have affected the way in which the language of the document would have been understood by a reasonable man, it was subject to the controlling requirement that it should have been reasonably available to the parties and to the exclusion of an examination of the parties’ previous negotiations. Even if the immediate object of inquiry was the meaning of an isolated word or clause, the court had to read the document as a whole with a view to ensuring the consistency of that word or clause with all other relevant provisions of that document. Where there were two possible constructions of the relevant agreement, the court might prefer that which was more consistent with business common sense. However, the court would depart from the ordinary meaning of the words in an appropriate case where it was clear that there has been some linguistic mistake. The court could only ignore the plain meaning of the words on the basis of the principle that something had gone wrong with the language if it was clear not only that a mistake had been made but also what correction ought to be made to cure the mistake: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 applied. East v Pantiles (Plant Hire) Ltd (1981) 263 EG 61, Chartbrook Ltd v Persimmon Homes [2009] UKHL 38; [2009] 1 AC 1101 and Re Financing No 3 Ltd v Excalibur Funding No 1 Plc [2011] EWHC 2111 considered.
(2) In the present case, it was clear that clause 37 had been introduced for the claimants’ protection. It placed an obligation on the defendants, not the claimants, to obtain and provide the certificates, which could only be waived by the claimants. Whilst those matters provided strong support for the claimants’ case, they were not necessarily determinative. The defendants’ proposed construction of clause 37 gave no effect to the phrase “and in any event by actual completion”. As a matter of language, that phrase was clearly intended to have some effect and content. If the defendants had simply been under an obligation to obtain and provide the certificates as soon as practicable that additional phrase would not have needed to be included. The defendants were under an obligation to obtain and provide the certificates as soon as practicable, but in any event by the date of completion, the latter operating in effect as a long stop date for the defendants’ obligation to be complied with. The only “fault-free” circumstance in which the agreement clearly provided for postponement of the completion date appeared from its definition in clause 20 which provided for the obtaining of landlords’ consents. It would have been relatively straightforward as a matter of drafting to amend the definition of completion date by referring also to clause 37 had it been intended to enable completion to be postponed until the certificates had been obtained and provided. In all the circumstances, the construction contended for by the claimants did not produce an uncommercial result, or such an uncommercial result as would require the court to reconsider its interpretation of the words used in the agreement: Schuler (L) AG v Wickman Machine Tools Ltd [1974] AC 235 and Wood v Berkeley Homes Ltd (1992) 64 P & CR 311 considered.
Rupert Reed (instructed by CMS Cameron McKenna LLP) appeared for the claimants; Timothy Fancourt QC (instructed by Olswang LLP) appeared for the defendants.
Eileen O’Grady, barrister
British Overseas Bank Nominees Ltd and another v Analytical Properties Ltd
Sale and purchase agreement – Contractual term – Commercial sense – Parties entering into agreement for sale of commercial property subject conditional upon defendant sellers obtaining emergency lighting certificates prior to completion date – Delay in obtaining certificates resulting in delay in completion — Whether claimant buyers entitled to damages – Whether defendants breaching contractual obligations – Claim allowedThe claimant buyers brought an action seeking damages for the delay of the defendant sellers in completing a contract made on 13 December 2013 for the sale and purchase of the King Edward Court shopping centre in Windsor. Clause 37 of the agreement provided that, as a pre-condition to completion the defendants should obtain, and supply true copies to the claimants of, emergency lighting certificates as soon as practicable and in any event prior to the date of actual completion, the defendants carrying out any remedial work necessary at their own cost in order to ensure that they were able to comply with their obligations.The claimants advanced two alternative claims: (i) that, on the true construction of the agreement, the defendants were obliged to provide emergency lighting certificates and to complete the agreement on the contractual completion date of 17 December 2013 and in breach of such obligations failed to supply the certificates until 14 January 2014 and failed to complete the agreement until 17 January 2014, a month late; (ii) in the alternative, if the defendants were not required to provide the certificates and complete by the contractual completion date, they were required by clause 37 to provide the certificates as soon as practicable and had failed to do so.The defendants denied that there had been any breach of the agreement. They submitted that clause 37 had three functions: (a) to impose an obligation on the defendants to obtain the certificates as soon as practicable, and in any event before actual completion; (b) to impose an obligation on the defendants to carry out the requisite remedial works at their own expense to enable that obligation to be complied with; and (c) to delay the obligation to complete until the certificates had been provided. The defendants submitted that the provision of the certificates was a condition precedent to both the claimants’ and the defendants’ obligation to complete. Consequently neither party was required to complete until the conditions in clause 37 had been satisfied.Held: The claim was allowed.(1) The construction or interpretation of a written agreement involved ascertaining what a reasonable person in the position of the parties would have understood the words to mean. The starting point was that the parties have intended what they have in fact said, so that their words had to be construed as they stood. The meaning of the document or of a part of it was to be sought in the document itself, by reference to the ordinary meaning of the words used. However, the process of construction was not a detached and literal exercise in semantics. The words of the contract had to be read and construed in the context of the matrix of surrounding fact insofar as known to the parties. Although the factual matrix in principle included anything which would have affected the way in which the language of the document would have been understood by a reasonable man, it was subject to the controlling requirement that it should have been reasonably available to the parties and to the exclusion of an examination of the parties’ previous negotiations. Even if the immediate object of inquiry was the meaning of an isolated word or clause, the court had to read the document as a whole with a view to ensuring the consistency of that word or clause with all other relevant provisions of that document. Where there were two possible constructions of the relevant agreement, the court might prefer that which was more consistent with business common sense. However, the court would depart from the ordinary meaning of the words in an appropriate case where it was clear that there has been some linguistic mistake. The court could only ignore the plain meaning of the words on the basis of the principle that something had gone wrong with the language if it was clear not only that a mistake had been made but also what correction ought to be made to cure the mistake: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 applied. East v Pantiles (Plant Hire) Ltd (1981) 263 EG 61, Chartbrook Ltd v Persimmon Homes [2009] UKHL 38; [2009] 1 AC 1101 and Re Financing No 3 Ltd v Excalibur Funding No 1 Plc [2011] EWHC 2111 considered.(2) In the present case, it was clear that clause 37 had been introduced for the claimants’ protection. It placed an obligation on the defendants, not the claimants, to obtain and provide the certificates, which could only be waived by the claimants. Whilst those matters provided strong support for the claimants’ case, they were not necessarily determinative. The defendants’ proposed construction of clause 37 gave no effect to the phrase “and in any event by actual completion”. As a matter of language, that phrase was clearly intended to have some effect and content. If the defendants had simply been under an obligation to obtain and provide the certificates as soon as practicable that additional phrase would not have needed to be included. The defendants were under an obligation to obtain and provide the certificates as soon as practicable, but in any event by the date of completion, the latter operating in effect as a long stop date for the defendants’ obligation to be complied with. The only “fault-free” circumstance in which the agreement clearly provided for postponement of the completion date appeared from its definition in clause 20 which provided for the obtaining of landlords’ consents. It would have been relatively straightforward as a matter of drafting to amend the definition of completion date by referring also to clause 37 had it been intended to enable completion to be postponed until the certificates had been obtained and provided. In all the circumstances, the construction contended for by the claimants did not produce an uncommercial result, or such an uncommercial result as would require the court to reconsider its interpretation of the words used in the agreement: Schuler (L) AG v Wickman Machine Tools Ltd [1974] AC 235 and Wood v Berkeley Homes Ltd (1992) 64 P & CR 311 considered.Rupert Reed (instructed by CMS Cameron McKenna LLP) appeared for the claimants; Timothy Fancourt QC (instructed by Olswang LLP) appeared for the defendants.Eileen O’Grady, barrister
