Summary

A written agreement for the sale of commercial property was no longer valid where related agreements between the parties had been terminated and it was clear from the express language of the commercial agreement that the terminations of the other agreements had rendered the commercial agreement unworkable, and where the parties clearly saw all the separate agreements as part of one overall transaction.

Facts

The claimant group of companies (M) claimed that a written agreement for the sale of commercial property to the first defendant (V) had been discharged by the termination of other related agreements between themselves and the defendants. The second claimant owned the relevant property, and had planning permission to redevelop it into commercial and residential units. M had agreed heads of terms to sell the property to V and the second defendant (L), who were both subsidiaries of the same common parent. The heads of terms provided that the second claimant was the vendor, and that L would purchase the residential units and V would purchase the commercial units. The purchase was for a single figure. The heads of terms also provided that a stamp duty saving would be effected by the transfer of shares in the second claimant to V, so that effective title to both the residential and commercial units passed along with it. Shortly afterwards M entered into an agreement with L for the residential units, an agreement with V for the commercial units and an agreement with V for the sale and purchase of the shares in the second claimant. All the agreements were executed together. The commercial agreement granted to V the option to buy any or all of the commercial units at the agreed price at any time during the "option period". The option period was defined as commencing at the start of the commercial agreement and expiring on the completion date of the transfer of shares under the sale and purchase agreement. The sale and purchase agreement provided that its completion date was 15 days following the end of the calendar month in which the "last completion date" fell due. Both the residential and commercial agreements provided that the last completion date was the later of the dates on which the development of the final residential or commercial units were legally completed. L defaulted on its payments, and the residential agreement was validly terminated. It was later accepted by reason of the residential termination the sale and purchase agreement was no longer effective. M submitted that as a result of the termination of the residential and sale and purchase agreements, the option to acquire a commercial unit - which was a central part of the commercial agreement - had been rendered unworkable. They argued that the option period ended on the expiry of the sale and purchase agreement, but the sale and purchase agreement no longer existed and therefore would never be completed. They contended that the entire option was unworkable and there was no longer any purpose to the commercial agreement.

Held

The termination of both the residential and sale and purchase agreements did entail the termination of the commercial agreement. As drafted, the commercial agreement provided for a definite end to the option period, and the parties clearly intended that the sale and purchase agreement would complete shortly. It was clear from the express language of the commercial agreement that the termination of the sale and purchase agreement rendered the commercial agreement unworkable, and no implied term need be invoked. In any event, were it necessary to imply such a term in light of the absence of an express provision for what was to happen to the commercial agreement following the termination of the sale and purchase, the implication of such a term would be inevitable to give the agreement its natural meaning, Attorney General of Belize v Belize Telecom Ltd (2009) UKPC 10, (2009) 2 All ER 1127 considered. Viewed objectively and against the relevant background, the commercial agreement could only reasonably be understood to mean that it would be treated as cancelled following a termination of the other two agreements. The parties clearly saw the three separate agreements as one overall commercial transaction involving the intended transfer of the entire development. That was evidenced by the fact that the heads of terms was a single document contemplating the transfer of both the residential and commercial units for a single purchase price, that all three agreements were executed together and that the main reason for the sale and purchase agreement was to reduce stamp duty on the other transactions.

Judgment for claimant