Dooba Developments Ltd v McLagan Investments Ltd [2016] EWHC 2944 (Ch)
The High Court appeal decision of Dooba Developments Ltd v McLagan Investments Ltd [2016] EWHC 2944 (Ch) provides a useful example of unintended consequences of simple draftin errors. The offending clause in the case was a termination clause within a conditional land contract for sale that provided:
'if all of the conditions have not been discharged in accordance with this Schedule by the Longstop Date, then either ASDA or Dooba may rescind this Agreement'.
Does this clause mean a party can only rescind (a) if all of the conditions remain undischarged ("Meaning A") or (b) if any of the conditions remain undischarged ("Meaning B")?
The respondent had attempted to rescind on the grounds that some but not all of the conditions had been discharged. They accepted that a literal interpretation of the clause resulted in Meaning A. However, they argued that the clause was ambiguous and that a purposive interpretation within Meaning B, taking into account commercial common sense, (per Arnold v Britton [2015] UKSC 36) should be applied.
The judge found that the clause was not ambiguous in that Meaning B was not the primary meaning of the drafting form. Therefore, Meaning A (the strict interpretation) applied and the contract was wrongfully rescinded.
Lesson: Whilst versions of the offending clause are commonly found in land contracts for sale, the interpretation of triggers for condition precedents will have wider application. For planning and environmental issues, this could include the drafting of planning conditions and s106 planning obligations through to other environmental licencing, consents and agreements.
Where Meaning B is intended then clearer drafting may be:
- 'if not all…have…'
- 'if any of…have not been satisfied'
- 'if any of…remain unsatisfied'
