Vista DEL MAR Development Ltd v Francis and Clarke
| Jurisdiction | Cayman Islands |
| Judge | (Mangatal, J.) |
| Judgment Date | 20 September 2016 |
| Court | Grand Court (Cayman Islands) |
| Date | 20 September 2016 |
(Mangatal, J.)
M. Imrie and G. Freeman for the plaintiff;
H. Robinson for the defendants.
Attorneys: Maples & Calder for the plaintiff; Mourant Ozannes for the defendants.
(1) Australian Blue Metal Ltd. v. Hughes, [1963] A.C. 74; [1962] 3 W.L.R. 802; [1962] 3 All E.R. 335, referred to.
(2) Cavendish Square Holding B.V. v. Makdessi, [2015] UKSC 67; [2016] A.C. 1172; [2015] 3 W.L.R. 1373; [2016] 2 All E.R. 519; [2016] 2 All E.R. (Comm) 1; [2016] 1 Lloyd's Rep. 55; [2016] B.L.R. 1, followed.
(3) Cayman Arms (1982) Ltd. v. English Shoppe Ltd., 1990-91 CILR 299, referred to.referred to.
(4) Coatsworth v. Johnson, [1886-90] All E.R. Rep. 547; (1886), 55 L.J.Q.B. 220, referred to.
(5) Duchess of Argyll v. Duke of Argyll, [1967] Ch. 302; [1965] 2 W.L.R. 790; [1965] 1 All E.R. 611, referred to.
(6) G. Scammell & Nephew Ltd. v. Ouston, [1941] A.C. 251; [1941] 1 All E.R. 14, referred to.
(7) Greater Sydney Dev. Assoc. v. Rivett (1929), 29 SR (NSW) 356, referred to.
(8) Grobbelaar v. News Group Newspapers Ltd., [2002] UKHL 40; [2002] 1 W.L.R. 3024; [2002] 4 All E.R. 732; [2003] E.M.L.R. 1, referred to.
(9) Hutton v. Watling, [1948] Ch. 26; [1947] 2 All E.R. 641; (1947), 63 T.L.R. 615, applied.
(10) Jamaica Mutual Life Assur. Socy. v. Hillsborough Ltd., [1989] 1 W.L.R. 1101; (1989), 133 S.J. 1032, referred to.
(11) Jefferys v. Jefferys (1841), Cr. & Ph. 138; 41 E.R. 443, distinguished.
(12) Jobson v. Johnson, [1989] 1 W.L.R. 1026; [1989] 1 All E.R. 621; (1988), 4 BCC 488, considered.
(13) Lindsay Petroleum Co. v. Hurd (1873-74), L.R. 5 P.C. 221, considered.
(14) London & S. Western Ry. Co. v. Gomm (1882), 20 Ch. D. 562, referred to.
(15) Mills v. Haywood (1877), 6 Ch. D. 196, referred to.
(16) Moody v. Cox, [1917] 2 Ch. 71, followed.
(17) Royal Bank of Scotland plc v. Highland Fin. Partners L.P., [2013] EWCA Civ 328; [2013] 1 C.L.C. 596, referred to.
(18) Smith v. Smith, 2004-05 CILR 225, referred to.referred to.
(19) United Scientific Holdings Ltd. v. Burnley B.C., [1978] A.C. 904; [1977] 2 W.L.R. 806; [1977] 2 All E.R. 62, considered.
Perpetuities Law (1999 Revision), s.3: The relevant terms of this section are set out at para. 65.
s.4: The relevant terms of this section are set out at para. 65.
s.5: The relevant terms of this section are set out at para. 65.
s.17: The relevant terms of this section are set out at para. 65.
Land Law — option to repurchase — vendor's option to repurchase lot (at sale price) if purchaser fails to construct property in accordance with contract enforceable even if purchaser could have sold lot to third party (subject to same conditions) — not unenforceable penalty — option not lapsed if enforcement delayed at purchaser's request
The plaintiff sought specific performance of an option to repurchase a property.
The plaintiff was a land development company. In 2009, it sold a parcel of land which formed part of a development to the defendants, who were experienced purchasers. The terms of the agreement for sale included the following:
Clause 5:
“The Purchaser acknowledges and agrees that it is under an obligation ... to commence and diligently proceed with the construction of a residence ... on the Property ...”
Clause 6.2:
“The Purchaser agrees, so that the same shall survive Completion, that if, save for reasons beyond its control ... it has failed either to commence construction of a residence on the Property within eighteen (18) calendar months of Completion or to complete such construction by the ... third anniversary of the Completion Date ... it will upon receipt of the written notice from the Vendor requiring it to do so sell the Property back to the Vendor at a price equal to the Purchase Price plus the value of the Construction Works (if any) on it as at the date of receipt by it of the Vendor's notice.”
Clause 6.3:
“The Purchaser will not transfer the Property to any third party without that third party having first entered into an agreement with the Vendor in similar terms ...”
Clause 19:
“In this Agreement time is of the essence.”
The plaintiff alleged that, in breach of these terms, the defendants had failed to commence construction of a residence on the property within 18 months of completion, or to complete such construction by the third anniversary of the completion date. In 2011, the parties entered into a deedof variation to the agreement, at the defendants' request, extending the time for construction. The new cl. 6.2 provided that-
“if [the defendants] failed either to commence construction of a residence on the Property by 9 January 2012 or to complete such construction by eighteen (18) months thereafter, then in either case it will upon receipt of a written notice by the Vendor requiring it to do so sell the Property back to the Vendor at a price equal to the Purchase Price plus the value of any Construction Works (if any) on it as at the date of receipt of the Vendor's notice.”
It was also provided that no exercise or lack of exercise of a right constituted a waiver by the plaintiff of any other right or remedy.
The plaintiff claimed that in breach of the deed of variation the defendants had failed to commence construction by the specified date or at all. It sought to exercise its option to repurchase the property in October 2013, stating that it wished to effect the transfer within 30 days and that it would provide a form of transfer. It served a second notice in July 2014 and a form of transfer in August 2014. Another notice was sent in November 2014. The plaintiff subsequently sought specific performance of the option.
The defendants refused to transfer the property. They admitted that they had not commenced construction but denied that they had breached the agreement or that the plaintiff had a right to repurchase the property. They submitted, inter alia, that (a) the agreement for sale, as amended by the deed of variation, created no valid or enforceable option in favour of the plaintiff to repurchase the property; (b) if there had been a valid option, the defendants would have been obliged to keep the option open and could not have sold the property; (c) the plaintiff had provided no consideration for the grant of the alleged option; (d) even if a valid and enforceable option had been created, it had lapsed by the date of its purported exercise because time was of the essence and the plaintiff had failed to exercise any right to repurchase promptly; (e) the enforcement of the alleged option, requiring them to sell the property to the plaintiff at much less than its current value, would constitute a penalty out of all proportion to any legitimate interest the plaintiff had in enforcement of the construction covenant and was therefore unenforceable; (f) the option to repurchase the property without consideration was a gratuitous bargain unenforceable by specific performance; (g) specific performance should also be refused on the grounds of laches and the plaintiff's lack of “clean hands,” in that it had failed to enforce similar construction covenants against other purchasers in the development; and (h) an option to purchase without a time limit for its exercise would breach the rule against perpetuities- to the extent that the alleged option did not state the period in which it was to be exercised, it was void.
The plaintiff submitted in reply inter alia that (a) the fact that the defendants could have sold the property to a third party did not render unmet the requirement that an option to sell be irrevocable; (b) the option formed part of the original agreement for sale and did not require separateconsideration but, in any event, the option had been amended by the deed of variation and no consideration was required; (c) nevertheless, the consideration for the deed of variation included its forbearance in enforcement of its rights and the mutual exchange of promises; (d) it had not failed to act in a timely manner, and any temporary forbearance in exercising its rights under the agreement had been solely the result of the defendants' repeated assurances that commencement of construction had been imminent; (e) the time of the essence clause did not apply to its exercise of the option and was not therefore a bar to enforcement; (f) options in property deals were not uncommon, cl. 6.2 imposed a primary obligation and was not therefore subject to the rules on penalties; (g) even if cl. 6.2 imposed a secondary obligation, it was not a penalty; and (h) it could not be said that it did not have “clean hands.”
Held, awarding specific performance:
(1) There had plainly been an obligation on the defendants to commence and complete construction as required first by the agreement for sale and subsequently by the deed of variation. Failure to do so was clearly capable of amounting to a breach of contract. The fact that the defendants could have transferred the property to a third party (with the same stipulations as to construction) did not mean that the defendants' failure to construct was not a breach of contract. Such a sale could only have taken place with the plaintiff's knowledge and agreement and on the basis of the new purchaser entering into an agreement with the plaintiff in similar terms to the present agreement (paras. 45-46).
(2) The terms of the agreement for sale, as varied by the deed of variation, created a valid and enforceable option in favour of the plaintiff to repurchase the property. An option to purchase was, in effect, an offer to sell which was irrevocable until a stated event- in the present case, the stated event was completion of construction or the transfer to a third party in accordance with cl. 6.3. The fact that the defendants could have sold the property to a third party did not render unmet the requirement that an offer to sell be irrevocable. The rule against perpetuities did not apply as the plaintiff sought equitable...
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Francis and Another v Vista Del Mar Development Ltd
...of clean hands and laches. The court made an order for specific performance in favour of the respondent (the judgment is reported at 2016 (2) CILR 84). On appeal to the Court of Appeal, the appellants submitted that (a) on the true construction of cl. 6.2 of the agreement for sale, there co......