McLean-Sawney v McGaw-Carter

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 03 February 2015
• Court: Grand Court (Cayman Islands)
• Date: 03 February 2015

Grand Court, Civil Division

(Henderson, J.)

McLEAN-SAWNEY

and

McGAW-CARTER

H.G. Robinson for the plaintiff;

Ms. L. Clemens and Ms. P. Golaub-Symons for the defendant.

Cases cited:

(1) Allen v. Robles, [1969] 1 W.L.R. 1193; [1969] 3 All E.R. 154; [1969] 2 Lloyd”s Rep. 61, referred to.

(2) Bass Holdings Ltd. v. Morton Music Ltd., [1988] Ch. 493; [1987] 3 W.L.R. 543; [1987] 2 All E.R. 1001, distinguished.

(3) Beach Club Enterprises v. Horizon Management, 1980–83 CILR 223, referred to.

(4) Brooke Tool Mfg. Co. Ltd. v. Hydraulic Gears Co. Ltd.UNK(1920), 89 L.J.K.B. 263, referred to.

(5) Chillingworth v. Esche, [1924] 1 Ch. 97; [1923] All E.R. Rep. 97, referred to.

(6) China Natl. Foreign Trade Transport Corp. v. Evoglia Shipping Co. S.A. of Panama, [1979] 1 W.L.R. 1018; [1979] 2 All E.R. 1044; [1979] 2 Lloyd”s Rep. 303, referred to.

(7) Howe v. Smith, [1884] 27 Ch. D. 89, referred to.

(8) Vitol S.A. v. Norelf, [1996] A.C. 800; [1996] 3 W.L.R. 105; [1996] 3 All E.R. 193; [1996] 2 Lloyd”s Rep. 225, referred to.

Landlord and Tenant-option to purchase-termination-if option explicitly requires repayment of deposit on termination of contract, failure to repay waives right to terminate

Landlord and Tenant-option to purchase-termination-landlord has right to terminate option to purchase if breached whether or not tenant able to rectify breach, whereas no right to terminate option to renew lease if tenant rectifies breach

The plaintiff sought specific performance of an option to purchase property or, alternatively, damages in lieu.

The plaintiff was the lessee of the defendant”s property. The agreement contained an option for the plaintiff to purchase the property, subject to a number of conditions being satisfied, including the payment of a deposit by three scheduled instalments. It was expressly required that the deposit be repaid if the contract were terminated. The plaintiff was late in paying the second instalment, and by the time she had paid it the third was already due. The second payment was accepted by the defendant”s agent. When notified, the defendant claimed that the plaintiff was in breach of contract and said that the payments would be reimbursed, though she also said that ‘nothing was settled,’ and for a year no attempt was made to repay the first and second instalments of the deposit. The plaintiff then attempted to pay the third instalment of the deposit, which was over two

years late, and exercise the option to purchase. The defendant refused to accept the third instalment, sought to return the payment, and declared the option to purchase terminated by late payment of the third instalment of the deposit.

In seeking specific performance, the plaintiff submitted that (a) the defendant”s failure to repay the instalments of the deposit amounted to a waiver of the right to terminate the option to purchase; or (b) in the alternative, an option to purchase was not terminated if a tenant corrected any subsisting breach, and the attempted payment of the third instalment of the deposit had rectified the earlier late payments.

The defendant submitted that the deposit was forfeited by the plaintiff”s repudiatory breach of contract, and there was therefore no obligation on her to repay the two deposit instalments paid by the plaintiff.

Held, dismissing the claims:

(1) The option to purchase was terminated when the defendant rejected the plaintiff”s late payment of the third instalment of the deposit. Prior to this, the defendant”s right to terminate had been waived by her failure to repay the first and second instalments of the deposit, which, given the express requirement that the deposit be repaid on termination, indicated a lack of clear acceptance on her part that the contract had been terminated. The rejection of the third instalment of the deposit, on the other hand, was unequivocal. The defendant sought to return the payment, and this was sufficient evidence of an election to terminate. The right to terminate which arose on the rejection of the third instalment of the deposit was not waived by the defendant”s previous failure to repay the instalments or by the long delay between the breach and the election to terminate (paras. 28–29; paras. 31–32).

(2) A tenant”s option to purchase could be terminated on breach whether or not he or she was able to rectify the breach. The rule that breach of an option to renew or terminate a lease could be corrected by a tenant did not apply to an option to purchase. This was particularly so in the present case, given that the breach was not minor or inadvertent, but was a substantial and ongoing failure to adhere to a schedule of payments (para. 37; paras. 40–42).

1 HENDERSON, J.: In this action for specific performance of an option to purchase (and, in the alternative, damages), I disposed of some, but not all, of the issues in my judgment rendered on December 10th, 2013. The parties, who have no legal training, entered into a written agreement, drafted by themselves, containing a lease and an option to purchase. When Ms. McLean-Sawney (the tenant) gave notice that she was electing to exercise the option, the landlord, Ms. McGaw-Carter, refused because the deposit required by the agreement had not been paid on time.

2 I have already found that-

(i) clause 32 of the written agreement contains an enforceable option to purchase;

(ii) Ms. McLean-Sawney”s failure to make the second instalment payment on time, although an act of default, was waived by Ms. McGaw-Carter;

(iii) Ms. McGaw-Carter did not give any ‘general extension of time’ to Ms. McLean-Sawney;

(iv) Ms. McLean-Sawney”s failure to make the third and final deposit payment on time (i.e., on January 31st, 2006) was a potential act of default under the agreement;

(v) Ms. McLean-Sawney waived the requirement in the agreement for delivery of a written notice of the breach; and

(vi) Ms. McGaw-Carter was entitled to treat the agreement as terminated on March 6th, 2006.

Issues

3 I advised counsel that I required argument on two further issues:

(i) Was there, in fact and in law, a termination of the option to purchase or was it still extant in June 2008? and

(ii) What is the impact of the principle laid down in the line of cases summarized in Bass Holdings Ltd. v. Morton Music Ltd. (2)?

4 In this judgment I relate only those findings of fact which are relevant to these two issues.

Facts

5 On February 8th, 2006, Ms. McGaw-Carter wrote by email to Ms. McLean-Sawney to ask ‘What”s going on with’ the unpaid second and third instalments on the option to purchase. The response, on the following day, was:

‘Honestly, since you and I spoke and I advised I simply didn”t have the money-you mentioned if I didn”t have it not to worry, I hadn”t been pressuring myself about it-instead using my extra money to fix up the house (since I was able to make arrangements to pay things in instalments). My mom”s land is still up for sale in George Town-once it sells, I will have no problem paying you the entire CI$8,000 . . .’

6 On February 10th, 2006, Ms. McLean-Sawney wrote...