Weston Homes Plc v Henley Developments 211 Limited, Henley Property Investments (UK) LLP

Weston Homes Plc v Henley Developments 211 Limited, Henley Property Investments (UK) LLP

Background

The claimant (‘the Buyer’) agreed to buy freehold property in Ebbsfleet, Kent (‘the Property’) from the first defendant (‘the Seller’) under a conditional contract of sale dated 21 June 2022 (‘the Contract’), and paid a deposit of £870,000 (‘the Deposit’).

Clause 23.2 of the Contract entitled either party to serve written notice terminating the contract “if the Compliance Date had not occurred by the expiry of the Relevant Period”. In the event such a notice was served, the Seller was to repay the Deposit to the Buyer within 10 business days.

Clause 1.1 defined the Compliance Date and Relevant Period as follows:

• The Compliance Date was the date on which the various condition precedents were “wholly fulfilled”. One of the condition precedents was the grant of satisfactory planning permission (‘the Planning Condition Precedent’).
• The Relevant Period was the period running from the date on which the planning permission was made and expiring on either 6 months from the date of the application, or 31 December 2023 (whichever occurred first).

The Buyer was under an obligation to “use all reasonably and commercially prudent endeavours to procure the fulfilment of the Planning Condition Precedent at its own cost as soon as practicable” and to “diligently pursue the application” for planning permission (paragraphs 1.1 and 1.2 of Schedule 1 to the Contract) (‘the Planning Obligations’)

Here, it was common ground that when the Relevant Period expired, on 4 June 2023, the planning application had not yet been determined; the result was that the Compliance Date had not yet occurred because the Planning Condition Precedent had not been wholly fulfilled. The Buyer therefore served notice pursuant to clause 23.2.1 terminating the contract and seeking the return of the Deposit. The Seller refused.

Issue

The Seller’s position was that Buyer had failed to comply with the Planning Obligations, and that that failure was the cause of the circumstances which gave rise to the Buyer’s right to terminate under clause 23.2 (i.e., but for the Buyer’s default, the Planning Condition Precedent would have been met before the expiry of the Relevant Period). The Seller argued the clause 23.2 should be construed to preclude or prevent the Buyer from relying on its own default to terminate the Contract, either on its proper interpretation or pursuant to an implied term.

Although the Buyer disputed any breach of the Planning Obligations, it also argued that the right to terminate under clause 23.1 was available even if the circumstances giving rise to the right to terminate had arisen from its default, and sought summary judgment on that basis.

Decision

The starting point was the principle that, as a matter of construction, a contract should be construed subject to “the presumed intention of the parties to the contract that one of those parties should not be entitled to rely upon its own breach of contract in order to bring the contract to an end, or to otherwise secure a benefit” (‘the Breach of Contract Principle’). The Buyer argued that such a principle no longer existed, and if it did, it was merely a subset of the ‘prevention principle’ (whereby, in certain circumstances, the court will preclude one party from acting in such a way as to prevent, or put out of their own power, their ability to perform the contract).

Master Bowles rejected both of these arguments, ruling that the Breach of Contract Principle be applied to the question of construction in this case. However,  he considered that the principle was no more than a presumption of construction which, like the rules of construction (e.g. contra proferentem) were “no more than helpful tools designed to assist in the iterative process of determining the objective intention of the parties to a contract” and “fall to be displaced if and to the extent that the particular provisions of a particular contract point to a contrary conclusion as to the meaning and effect to be given to the contract in question”.

On his analysis of the Contract, the Breach of Contract Principle was displaced in light of the context and framework of the Contract. In particular:

• The Contract was substantial and professional prepared document, designed to give effect to a large-scale of complex transaction. As it had been carefully crafted, the meaning of the Contract is best found by the language used by the parties.
• The language used by the parties was clear and entirely unequivocal, providing straightforwardly that either party may terminate the contract in the circumstances that the Compliance Date had not occurred before the expiry of the Relevant Period.
• There was nothing in the Contract as a whole which that the parties did not mean what they said in clause 23.2 which, taken literally, would entitled a party to terminate notwithstanding the fact that the right to terminate arose due to that party’s breach.
• To the contrary, there were indications that the parties did intend that the right to terminate would be exercisable in these circumstances, including that:
  • clause 23.2 stated that the provision as without any right or remedy in respect of any antecedent breach of the contract, indicating that the parties contemplated the operation of this clause in the event of breach of contract but had not limited the availability of terminate in this regard;
  • other aspects of clause 23.2 limited the circumstances in which notice to terminate could be given, indicating that the parties had contemplated imposing limits on the right to terminate but had not included any limitation relating to breach;
  • the language used in clause 23.2, such as the use of the passive voice, suggests that the parties intended the right to terminate when the specified circumstances arose regardless of and without regard to the cause of those circumstances; and
  • the purpose of clause 23.2 appeared to be to enable the parties to make a clean break in the event that certain situations arose, given that it focused on the facts of those situations and not why they arose.

Thus, the Buyer had been entitled to terminate the Contract, regardless of whether its right to terminate had arisen due to its own breach, and to the return of its deposit.

Lesson Learnt

This decision is a reminder that the meaning and effect of any given contract will turn on its own terms; any rules, presumptions or canons of construction only play a  limited role in determining what the parties meant. Indeed, that fact that the Master Bowles distinguished and reached a different decision to that in Sainsbury’s Supermarkets Ltd v Bristol Rovers (1883) Ltd [2015] EWHC 2002 (Ch) (where the presumption was not displaced in circumstances where the right to terminate was said to be “without prejudice to the rights of any one party against the other for any antecedent breach of the terms”) shows that relying on past decisions on similar provisions is of limited assistance.

Further,  although it is sometimes said that there must be a “clear contractual intention” to displace these sorts of presumptions, this case illustrates that this need not be an express term to the contrary (e.g. that the right to terminate is available regardless of whether it arose from default of the party relying on it); such an intention can be properly inferred from the express terms of the contract, including the language and wording of the right to terminate itself.

Article by Joshua Griffin