UKPC 42
Privy Council Appeal No 0088 of 2011
Lancashire Insurance Company Ltd (Appellant) v MS Frontier Reinsurance Ltd (Respondent)
From the Court of Appeal of Bermuda
Sir John Chadwick
JUDGMENT DELIVERED BY
SIR JOHN CHADWICK
20 December 2012
Heard on 8 November 2012
Jonathan Small QC
(Instructed by Harcus Sinclair)
Jonathan Gaunt QC
(Instructed by Charles Russell LLP)
SIR JOHN CHADWICK:
The underlying facts
The questions for determination
The construction issue
"6.6 If for any reason the Condition Date has not occurred by the 31 December 2009 then the Tenant or the Assignee may serve written notice on the other to determine this Agreement and upon service of such this Agreement shall determine and cease to have effect and no party shall be under any further liability to any other party under this agreement without prejudice to any pre-existing right of action of any party in respect of any breach by any party of its obligations under this Agreement."
It can be seen that clause 6.6 does not, by its express terms, impose any temporal restriction on the right to serve a termination notice. It is submitted on behalf of the Tenant that it is necessary, in order to give business efficacy to the agreement between the parties, to imply a restriction to the effect that a termination notice under clause 6.6 must be given (if at all) before the Condition Date. It is submitted on behalf of the Assignee that it is unnecessary to imply any temporal restriction on the right to serve a termination notice; or, in the alternative, that, if such a restriction is to be implied, there is no reason why the restriction should take effect earlier than the end of the day which is the Condition Date.
"1.1. . . . the date falling no more than fifteen (15) Working Days following the latter of:
1.1.1 completion of the Lease
1.1.2 receipt by the Assignee of the tenant's written notice confirming completion of their fit out works in relation to their occupation of the 5th & 6th Floors of 7 Par-la-Ville Road, Hamilton and such written notice shall be given by the Tenant immediately following the completion of its said fit out works."
In that context "Working Day" means ". . . a day when banks in Bermuda are open for business other than a Saturday or a Sunday or a public holiday": clause 1.7. Clause 2.1 (read with clauses 1.3 and 1.6) provides that the Landlord will grant to the Tenant and the Tenant will accept from the landlord a lease ("the Lease"), substantially in the form of the draft lease in the first schedule to the Agreement, of the 5th and 6th floors of Mintflower Place. Clause 2.2 is in these terms:
"2.2 In consideration of the agreement by the Tenant contained in clause 2.1 above the Landlord consents to an assignment of the Lease to the Assignee on the Condition Date and the Tenant will assign to the Assignee on the Condition Date and the Assignee will accept from the Tenant an assignment of the Lease on the terms set out in this Agreement."
Counsel for the Tenant points to that clause as imposing on the Assignee the obligation to accept an assignment of the Lease on the Condition Date.
"6.1 The Deed of Assignment and two counterparts shall be prepared by the Tenant's attorneys and engrossments shall be sent to the Assignee's attorneys at least five Working Days [before] the Condition Date."
The word "before" has been substituted for the word "after" which appears in the text of the Agreement as executed. It has been common ground throughout this litigation that that substitution is necessary in order to give effect to the parties' common intention.
"6.2 Completion of the Deed of Assignment shall take place on the Condition Date."
"Deed of Assignment" is defined, at clause 1.4, to mean a deed in the form of the draft assignment in the second Schedule to the Agreement.
"6.3 On the Condition Date :
6.3.1 the Tenant shall assign the benefit of the Lease to the Assignee;
6.3.2 the Assignee shall accept an assignment of the Lease and the Assignee shall execute the Deed of Assignment; and
6.3.3 the Landlord will consent to the assignment and shall execute the Deed of Assignment."
6.4 At any time on or after the Condition Date [if] either the Tenant or the Assignee are ready able and willing to complete the Deed of Assignment and perform their other obligations under this Agreement they may invoke the provisions of clause 6.5 by serving a Notice to Complete to the other or on the Landlord but without prejudice to any other available right or remedy.
6.5 The Deed of Assignment shall be completed within 20 Working Days after service of the Notice to Complete (excluding the day of service) and time shall be of the essence of this provision."
The election issue
(1) In advance of the service by the Tenant of written notice confirming completion of its fit-out works in relation to the premises at Powerhouse Place to which it intended to move, its attorneys had prepared engrossments of the Deed of Assignment and counterparts for the purpose of complying with the obligation imposed by clause 6.1 of the Agreement. Those documents were sent to the attorneys for the Assignee on 30 November 2009. On 21 December 2009, following service on 18 December 2009 of the notice confirming completion of the fit-out works, Ms Fox, acting for the Tenant in the absence of her colleague, Mr Robinson, who was then on holiday, sent an e-mail to Mr Harry Kessaram, acting for the Assignee, enquiring when she could expect to receive the executed assignments from his client. Mr Kessaram's response, by an
e-mail of the same date was in these terms (so far as material):
"I met with the client this morning and gave him the documents.
I think my client will want to view the state of the premises before completion.
I presume the premises are vacant but perhaps you can confirm."
(2) Later that day, 21 December 2009, Mr Devery, then Controller of the Assignee company, with responsibility for administrative functions, sent an e-mail to Ms Landy, the Tenant's Office Manager, asking for a time when representatives of the Assignee could "come over to Mintflower to inspect the fixtures and fittings for sale".
(3) Also on 21 December 2009, but after the matters just mentioned, in the course of a telephone conversation between Ms Fox and Mr Kessaram, an "agreement in principle" was reached for completion of the assignment to take place on 31 December 2009.
(4) That inspection of fixtures and fittings took place on the following day, 22 December 2009. It was attended by Ms Landy and Mr Soares, the Tenant's Group Chief Operating Officer, and, on behalf of the Assignee, by Mr Devery and Ms Yoshimoto. Ms Landy and Mr Soares gave evidence at the trial, which was not contradicted, that Mr Devery and Ms Yoshimoto ". . . gave every indication that the assignment would proceed and they would be moving into the premises in short order."
(5) On the same day, 22 December 2009, Mr Soares sent an e-mail to Mr Devery asking whether the Assignee would be interested in taking over the UPS unit and the additional AC unit on the 5th floor at Mintflower Place. He explained in that e-mail that he would like an answer as soon as possible, so that, if the Assignee did not want to take over those units, he could "arrange for the trades to do the removal and replacement work". Mr Devery's response, by return
e-mail, was that the Assignee was not interested in either unit.
(6) Also on 22 December 2009, Ms Fox sent an e-mail to Mr Kessaram, referring to the "walk through" of the premises which had taken place earlier that day and informing him that "the final cleaning is scheduled for 27th December following which the parties have agreed to a further walk through". The e-mail continued:
"On this basis I believe that a 31st December completion is feasible. I am aware however that you are away from close of business tomorrow. Please would you let me know who will be handling this in your absence or otherwise what arrangements can be made for completion in your absence."
Mr Kessaram's response, by e-mail on 23 December 2009, was to identify the colleague (David Cooper) who would "have conduct of the file in my absence" and to confirm that Ms Fox could deal with him "on agreeing the condition/completion date as well as any other matters."
(7) Christmas intervened. On 30 December 2009 Mr Robinson, the associate in the property department of the Tenant's attorneys with responsibility for the transaction, having returned from holiday, sent an e-mail to Mr Cooper, in which he referred to his understanding that it had been agreed between Ms Fox and Mr Kessaram that completion of the Deed of Assignment and a Bill of Sale (in respect of fixtures and fittings) would take place "tomorrow [31 December 2009] so avoiding the parties having to apportion the rental and other outgoings under the lease". He asked for confirmation that "you are in a position to complete". There was no response to that e-mail.
(8) Also on 30 December 2009, Ms Landy sent an e-mail to Mr Devery, informing him that everything was out of Mintflower Place; and that he was welcome "to go by anytime to inspect." She enquired:
"Did you hear back from your lawyer because our lawyer has been chasing your lawyer but has not received a response yet? Can you contact me when you get back as we are looking to close the deal tomorrow as agreed."
Mr Devery's response, by return e-mail, was that:
"We are still awaiting advice from our lawyers and expect them to get back to CDP [Conyers Dill & Pearman Limited, the attorneys for the Tenant] when ready."
(9) On 5 January 2010 Mr Robinson sent an e-mail to Mr Kessaram, pointing out that he was still awaiting confirmation as to when the Assignee would be in a position to complete. Mr Kessaram replied that he was "stuck here in Denver". He suggested that Mr Robinson contact Mr Cooper.
(10) On the following day, 6 January 2010, Ms Landy sent an e-mail to Mr Devery, enquiring whether he had had a chance to go through the furniture list. His response, by e-mail of the same day, was in these terms:
"Sorry for not getting back to you earlier but we are a bit swamped as have been badly effected (sic) by personnel delays with people stuck in the UK and US.
Can we do this next week"
Ms Landy replied:
"That would be fine although I understand from our lawyer that we need to complete the assignment by January 12th being next Tuesday according to the terms of the assignment agreement. If you want to go over everything before the 12th, I will make myself available to you."
"51. The scheme of the Agreement was as follows. Completion could not take place until the [Tenant] served its clause 1.1.2 Notice. Either party could exercise termination rights under clause 6.6 if the Condition Date did not for any reason occur before year end 2009. The Condition Date could validly occur after that date; however either party could elect to terminate should this eventuality occur. In the absence of completion taking place on December 31, 2009, the right to terminate crystallized at the beginning of the New Year at the earliest and on January 13, 2010, when the Condition Date actually occurred at the latest. What is the evidence said to amount to an unequivocal representation that the [Assignee] intended to waive its right to terminate?
52. Before the right to terminate even crystallized, cogent evidence would be required to support the [Tenant's] waiver claim. Such cogent evidence is simply lacking. . . ."
And, after, reviewing the communications passing between the parties and their attorneys between the service of the "fit-out" notice and 31 December 2009, he went on:
"55. If it is right that clause 6.6 was not engaged prior to January 1, 2010 at all, it is impossible to infer from the [Assignee's] leaving open the possibility of completing by December 31, 2009 as unequivocally waiving its right to terminate after that date had passed. The construction the [Tenant] places upon the written communications and the [Assignee's] conduct during this period reflects a view of the relevant facts looked at through the lens of wishful thinking rather than any objective analysis.
56 Evidential support for the [Tenant's] case on waiver is even weaker after December 31, 2009 when the [Assignee] was first obliged to formally consider whether or not to waive its termination rights. During this period, from January 1, 2010 until the coup de grace was eventually delivered on January 13, 2010 when the Condition Date actually occurred, the most that the [Tenant] can point to are holding communications. . . .
57. It is impossible to conclude, based on these neutral communications entirely consistent with a reservation of rights over the comparatively short time which elapsed between the earliest date when the Termination Notice could have been served and the date when it was served, that the [Assignee] must be deemed by its conduct to have waived its termination rights. . ."
"44. We do not think that this principle of law imposed upon MS Frontier an obligation to warn Lancashire that if the delay continued in fitting out Floors 5 and 6 of Power House it would have to consider invoking the provision provided in Clause 6.6 of the Agreement. The language of Clause 6.6 spoke for itself. There could have been no mistake as to its meaning.
45. We agree with the learned judge that MS Frontier did not unambiguously represent by its conduct that it intended to complete the transaction. There was no clear and unambiguous representation such as is required in the doctrine of estoppel. . . .
. . .
47 In the instant case, judged by an objective standard, although MS Frontier had not served its Notice of termination by 31st December 2009, it cannot be said that by continuing to treat the contract as subsisting, it had therefore waived its right to serve Notice of termination on of before any future date for termination."
"It is a commonplace that the expression 'waiver' is one which may, in law, bear different meanings. In particular, it may refer to a forbearance from exercising a right or to an abandonment of a right. Here we are concerned with waiver in the sense of abandonment of a right which arises by virtue of a party making an election. Election itself is a concept which may be relevant in more than one context. In the present case, we are concerned with an election which may arise in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election. . . ."
Lord Goff went on to explain (ibid) that:
" . . . where with knowledge of the relevant facts a party has acted in a manner which is consistent only with his having chosen one of the two alternative and inconsistent courses of action then open to him – for example, to determine a contract or alternatively to affirm it – he is held to have made his election accordingly, . . . But of course an election need not be made in this way. It can be communicated to the other party by words or conduct; though, perhaps because a party who elects not to exercise a right which has become available to him is abandoning that right, he will only be held to have done so if he has so communicated his election to the other party in clear and unequivocal terms (see Scarf v Jardine, (1882) 7 App CAs 345 at p 361, per Lord Blackburn and China National Foreign Trade Transportation Corporation v Evlogia Shipping Co SA of Panama (The Mihalios Xilas)  2 Lloyd's Rep 303 at p 307;  1 WLR 1018 at p 1024, per Lord Diplock)."