Contractual interpretation Dooba Developments Ltd v McLagan Investments Ltd [2016] EWHC 2944 (Ch)

What was meant by a clause entitling either party to rescind where “all of the Conditions have not been discharged”?

The facts

The claimant (Dooba) was the owner of land in Worksop. In July 2010 it entered into a conditional agreement for the sale of the property to the defendant (Asda). The conditions included the grant of satisfactory planning permission and obtaining consents for highway works.

The dispute centred on the interpretation of Schedule 4 of the agreement, in particular paragraph 2.3 which provided that “if all the Conditions have not been discharged in accordance with this Schedule by the Longstop Date, then either Asda or Dooba may rescind…”. The Longstop Date was defined as 23 July 2014. There were also similar provisions for the satisfaction of individual conditions which provided for rescission if “any” of those conditions had not been satisfied.

On 24 July 2014 (the day after the Longstop Date), Asda served a notice of rescission pursuant to paragraph 2.3 on the basis that the highway consents condition had not been satisfied.

At first instance, the Master decided that paragraph 2.3 should be read as entitling either party to rescind if any of the Conditions remained unsatisfied at the relevant date. Asda was granted summary judgment on the basis that it had validly rescinded under paragraph 2.3.

The decision

The High Court upheld Dooba’s appeal applying the principles set out in Arnold v Britton. It found that either meaning of paragraph 2.3 was possible, but the one which Dooba had argued was the one that was grammatically correct – ie that the right to rescind did not arise unless all of the Conditions had not been satisfied by the Longstop Date.

The judge accepted that, had paragraph 2.3 stood alone, there would have been a strong ground for accepting the meaning which Asda had argued for. However, other provisions had referred to “any” conditions and these, together with paragraph 2.3, provided for a workable alternative regime, even if paragraph 2.3 did not sit happily within that regime.

Why is this important?

This case highlights the need to ensure that drafting is unambiguous and accurate. Confusion can arise from overlapping provisions, using different phrases and not crossreferencing.

Any practical tips?
Draft clearly! To avoid ambiguity, consider amending the phrase “if all conditions have not” to one of the following: (i) “if any of the conditions have not been satisfied”; (ii) “if any of the conditions remain unsatisfied”; or (iii) “if not all conditions have been satisfied”.