Firstcity Insurance Group Ltd and another v Frizzell Group Ltd

Defendant refurbishing property – Plaintiffs to take lease on completion of refurbishment – Agreement between parties defining how works were to be agreed and put into progress – Plaintiff terminating agreement on ground that works had not been agreed – Whether terms in agreement amounted to conditions precedent An agreement was made between the plaintiffs and the defendant whereby the defendant was to refurbish a property and the plaintiffs were then to take an underlease of the property on completion of the works. Clause 5 of the agreement defined the process of how the works were to be agreed, put into progress and carried out. The defendant was to appoint consultants, on terms approved by the plaintiffs, and such approval was not to be unreasonable withheld. The defendant was to supply detailed plans of the works; amendments were then to be made by the parties to bring the cost of the works to within the agreed budgets. When the works were nearing completion the defendant was to allow the plaintiff’s surveyor access to the property and if there was any dispute between the parties as to whether the works were complete the matter was to be referred to a building surveyor. If the completion date had not occurred before December 24 1995 the plaintiffs were entitled to terminate the agreement. Near to completion the defendant gave the plaintiffs’ surveyor gave notice that he was not satisfied that the works was practically complete. The matter was referred to a building surveyor who found that they were practically complete on the December 11. In January 1996 the plaintiffs gave the defendant notice terminating the agreement. The plaintiffs then applied for a declaration that they had validly terminated the agreement. They contended that the defendant was in breach of clause 5 by, inter alia, appointing consultants on terms which had not been approved by the plaintiffs and also failing to agree the works. They further contended that the completion date had not been reached before the December 24 1995 because the works had still not been agreed and therefore they could not be completed under the agreement. Accordingly the plaintiffs were entitled to exercise their right of rescission. Held The plaintiffs’ application was dismissed. 1. It was not unreasonable for the plaintiffs to object to appointments of the consultants on the basis of the fees which they were to be paid. Therefore the appointment of the consultants had not been in accordance with the agreement. 2. The terms in clause 5 were not conditions precedent. If they had been the clause would have become unworkable. The plaintiffs were adequately protected by the right to treat any sufficiently serious default by the defendant plaintiffs as a repudiatory breach and by the right to seek damages if the default was of a less character. Since the failure to appoint the consultants in accordance with the agreement did not amount to a repudiatory breach and therefore the plaintiffs were not entitled to rescind the agreement. Steven Gee QC and Zoe O’Sullivan (instructed by Orchard) appeared for the plaintiffs; Nicholas Dowding (instructed by Freshfields) appeared for the defendant.