MBI Dive Corporation Inc. v Condoco Grand Cayman Resort Ltd

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Taylor and Forte, JJ.A.)
• Judgment Date: 26 January 2005
• Date: 26 January 2005
• Court: Court of Appeal (Cayman Islands)

Court of Appeal

(Zacca, P., Taylor and Forte, JJ.A.)

MBI DIVE CORPORATION INCORPORATED

and

CONDOCO GRAND CAYMAN RESORT LIMITED

E. George, Q.C. and Ms. L. Hatfield for the appellant;

J.P. Walton for the respondent.

Cases cited:

(1) Afovos Shipping Co. S.A. v. Pagnan, [1983] 1 W.L.R. 195; [1983] 1 All E.R. 449, distinguished.

(2) Universal Cargo Carriers Corp. v. Citati, [1957] 2 Q.B. 401; [1957] 2 All E.R. 70, applied.

Contract-repudiation-anticipatory breach-repudiation in advance if work sufficiently delayed that no reasonable prospect of completion of construction contract before final completion date and time of essence

Construction Industry-completion-anticipatory breach-no exercise of contractual right to rescind in advance of specified event-common law right to rescind for anticipatory breach not precluded by contractual right-such provision merely states what must necessarily follow in law if latest date for completion specified in contract where time of essence

Contract-rescission-exercise of right-rescission valid even if for wrong reason no special form of words required-justifiable ex post facto by facts demonstrating inability of other party to perform obligations

The respondent applied to the Grand Court for a declaration that a contractual down-payment made by the appellant purchaser was forfeit.

In March 2000, the parties entered into a contract for the construction and sale of a strata lot in a condominium apartment project with a ‘projected date for completion’ of on or before December 31st, 2001, though construction did not commence until April 2002. The contract required the appellant inter alia to make an immediate down-payment of $362,500 and further progress payments at specified times. A ‘completion date’ was specified, based on the completion of various stages of the work and time was stated to be of the essence of the whole agreement. The contract then provided that ‘. . . in the event all of the items set out . . . have not been achieved or are not available by December 31st, 2003, then the purchaser (by notice in writing to the vendor given on or before January 31st, 2004) may rescind this agreement and may demand the return of all moneys theretofore paid by the purchaser to the vendor hereunder together with interest thereon at the rate of 5% per annum . . .’

Substantial delays in construction then occurred, the height of the building was changed and by August 2002 six more floors still needed to be built in the remaining 16 months, the ground floor having taken four months to complete. Before the next progress payment was due, however,

the appellant, by letter dated August 27th, 2002, gave notice purporting to rescind the contract, on the ground, inter alia, that it was very sceptical that the structure would be completed by December 31st, 2003. Its position was vindicated by events, as the project was not completed by December 31st, 2003, nor by the time of the Grand Court hearing in March 2004. It claimed the return of payments already made with interest at 5%.

The Grand Court (Henderson, J.) found that the contract did not contain a promise to complete by any given date, and that the appellant accordingly had no reasonable prospect of success on its plea that it had already accepted an anticipatory repudiation based on the respondent”s no longer having any reasonable prospect of achieving timely completion. The proceedings in the Grand Court are noted at 2004–05 CILR N [12].

On appeal, the appellant submitted that (a) December 31st, 2003, as stipulated in the contract, was the latest date for completion, either expressly or by implication, or else a ‘reasonable date’ for completion which should be adopted by the court in the absence of any express or implied date. The notion of a contract for the improvement and sale of real property under which the purchaser was required to make a substantial down-payment and subsequent interim payments but the vendor had no obligation to complete by any particular date would be so lacking in commercial sense, particularly in a contract in which time was of the essence, that the court should look for a more reasonable construction; (b) construction was sufficiently delayed that the respondent had no reasonable prospect of meeting that date; (c) its failure to progress the work to such an extent was an anticipatory breach of the contract justifying the appellant”s treating it as rescinded; and (d) the letter of August 27th, 2002 validly rescinded the contract under the express contractual right of rescission and/or at common law on the basis of the respondent”s anticipatory breach.

The respondent submitted in reply that (a) the Grand Court was correct in holding that the contract imposed no obligation to complete by any particular date; (b) the December 31st, 2003 date had relevance solely for the purpose of the contractual right to rescind, of which the purchaser could take advantage only during the time stated for its exercise; (c) this was solely a contractual right to rescind, and as such could not be exercised in anticipation; (d) in any event, the letter by which the appellant claimed to have accepted anticipatory repudiation, and to have invoked a common law right of rescission, did not have that effect; and (e) the circumstances prevailing in August 2002 had not been shown to be such as would, in any event, justify the conclusion that the vendor had effected an anticipatory repudiation.

Held, setting aside the summary judgment:

(1) The evidence advanced by the appellant was sufficient to show that it had a reasonable chance of establishing at trial (the issue not being suitable for final determination on the application for summary judgment),

that the respondent had disabled itself from completing the project by the latest date for completion, thereby entitling the appellant to rescind the contract for anticipatory repudiation (paras. 33–35).

(2) The right to rescind at common law for anticipatory repudiation, where the breach anticipated was fundamental, was not lost even though the contract expressly provided for rescission in that event and the con-tractual right to rescind could not itself be exercised in anticipation. In providing that the appellant could rescind if the latest date for completion were not met, the contract merely stated what necessarily had to follow in law given that timely completion was a fundamental term of the agreement (para. 26).

(3) The phrasing of the letter of August 27th, 2003 was sufficient to amount to a claim by the appellant for rescission based on anticipatory repudiation by reason of the inability of the vendor to complete by December 31st, 2003 as no special words were needed to accept a repudiation. Even if the appellant rescinded for the...