Summary

On the proper interpretation of a termination clause in an agreement for a lease of a hotel to be constructed at a motorway service station, the developer could not give notice to terminate the agreement by relying on its own failure to perform obligations to obtain required consents in respect of the development.

Facts

The applicant commercial developers (L) applied for a declaration as to the meaning of a termination clause in an agreement for a lease with the respondent hotel group (T). The agreement was for a 15-year lease to T of a hotel to be constructed by L at a motorway service station. The agreement contained a condition that L obtain, before a certain date, various consents regarding the detailed siting and development of the service station, a rent charge deed and traffic sign agreement, in order for further terms of the agreement to come into effect. Clause 3.6 provided that L had to use all reasonable endeavours to satisfy the condition. Under cl.4.2 either party could serve a notice to terminate the agreement if the condition was not satisfied by the specified date. L served a notice to terminate under cl.4.2. T disputed the effectiveness of that notice on the basis that L had not complied with its obligations under the agreement. L sought a declaration that the right to terminate under cl.4.2 was not conditional on the proper performance by L of its obligations.

Held

A contract would not be construed so as to permit a party to take advantage of his own wrongdoing, Cheall v Association of Professional, Executive, Clerical and Computer Staff (APEX) (1983) 2 AC 180 HL applied,Petroplus Marketing AG v Shell Trading International Ltd (2009) EWHC 1024 (Comm), (2009) 2 All ER (Comm) 1186 and Gyllenhammar & Partners International Ltd v Sour Brodogradevna Industrija (1989) 2 Lloyd's Rep 403 QBD (Comm) considered. When considering whether a term ought to be implied the question was what the document, read as a whole against the relevant background, would reasonably be intended to mean, Attorney General of Belize v Belize Telecom Ltd (2009) UKPC 10, (2009) 1 WLR 1988followed. In the instant case, there was limited evidence of the factual matrix, but it was clearly an agreement for a lease at a very early stage in the development and many of the provisions did not apply until the condition had been satisfied. The purpose of cl.4.2, which was crucial to its interpretation, was to allow either party to exit from the agreement if it proved impossible to obtain the required consents, deed and agreement, for whatever reason. However, it would be wrong to suppose that one reason could be that a party had ignored its obligations and had not attempted to obtain the consent, deed or agreement. From a commercial point of view the parties would not have considered when entering the agreement that they would be permitted to rely on their own default. There was no express provision permitting a party to rely on its own breach, and the parties could not be taken to have reasonably intended cl.4.2 to permit that. By a process of construction and implication, cl.4.2 had to be construed as not permitting L to rely on its own breaches in order to serve a notice of termination.

Application refused