Sale of land – Contract – Conditional sale agreement – Defendant agreeing to purchase property from claimant subject to four conditions – Clause in agreement entitling either party to rescind “if all of the conditions have not been discharged” by the longstop date – Defendant purporting to rescind agreement on day after longstop date – Claimant seeking declaration that purported rescission invalid – Master summarily dismissing claim – Claimant appealing – Whether power to rescind arising only if none of conditions discharged by longstop date – Appeal allowed
The claimant owned land known as Vesuvius Works, Worksop. In 2010, it entered into a conditional agreement with the defendant, under which the defendant was to purchase the property, upon which the claimant would build a retail superstore together with cafeterias, restaurants and a petrol filling station. The claimant also agreed to construct an estate road linking the superstore to the highway. The agreement was subject to the satisfaction of four conditions, including the grant of satisfactory planning permission and the grant of permission and consent for the highway works.
By paragraph 2.2 of Schedule 4 of the agreement, either party was entitled to rescind the agreement if “any of the Conditions have not been discharged” by the date stipulated for each particular condition in paragraph 3 of the schedule. Paragraph 2.3 entitled either party to rescind the agreement “if all of the Conditions have not been discharged in accordance with this Schedule by the Longstop Date”, which was 23 July 2014. Planning permission was granted in March 2014.
On the day after the longstop date, the defendant served notice purporting to rescind the agreement on the basis that the highway condition had not been fulfilled. The claimant sought a declaration that the rescission notice was invalid as being premature. The defendant applied for summary judgment. The master found that, as the highway condition had not been discharged before the date of the rescission notice, the agreement had been validly rescinded under paragraph 2.3 since at least one of the conditions had not been satisfied by the longstop date.
The claimant appealed. The question arose whether, on the true construction of the agreement, the power to rescind arose if any of the conditions had not been discharged by the longstop date or only if none of the conditions had been discharged by that date.
Held: The appeal was allowed.
(1) The subject of the relevant clause of para 2.3 was “all of the Conditions”; the characteristic which the subject was required to have was “have not been discharged”. As a matter of Boolean logic, the relevant characteristic was a negative one, which had to affect all of the conditions in order to fall within the clause. The literal meaning of the clause “if all the Conditions have not been discharged” was that the power to rescind under para 2.3 arose only if none of the conditions had been discharged by the longstop date. That was supported by the contrast with the formula “if any of the Conditions have not been discharged” in para 2.2. One would expect any well-drafted conditional agreement to provide either a date by which the conditions had to be satisfied or a date after which either party was entitled to rescind. However, Schedule 4 had two separate provisions to that effect. In theory, there was no reason why an agreement should not confer two separate powers, even if they covered much the same ground. The consequence was that the person who had the benefit of those powers might choose which one to rely on. If there were two ways of construing clause, the court would lean in favour of the construction which resulted in there being no duplication.
(2) In a straightforward case, one would expect a planning agreement to be signed on the same day as planning permission was granted but it was clear that the planning and highway issues in relation to the property were very complex and it was impossible to conclude at this stage that the agreement was predicated on the conditions being satisfied in any particular order. The overall purpose of the agreement was to provide for the defendant to acquire the property containing the superstore. That was clearly dependent upon satisfaction of the four conditions. If the conditions were not satisfied, there had to come a time at which the agreement came to an end, either automatically or pursuant to the exercise of one or more powers to rescind. The purpose of paragraphs 2 and 3 of Schedule 4 was to say when those powers arose and how they were to be exercised.
(3) Given that overall purpose, the property would be useless to the defendant unless all the conditions had been fulfilled. The power to rescind arose only of none of the conditions had been discharged by the longstop date. Accordingly, the defendant was not been entitled to rescind on 24 July 2014 unless all of the conditions remained undischarged on that date. It had been established that the highway condition remained undischarged then but there was a triable issue as to the remaining conditions. In the circumstances, this was not an appropriate case for summary judgment dismissing the claim.
Nicholas Dowding QC and Adam Rosenthal (instructed by Reed Smith LLP) appeared for the claimant; Timothy Dutton QC (instructed by Eversheds LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Dooba Developments Ltd v McLagan Investments Ltd
