Royal Courts of Justice
Strand, London, WC2A 2LL
Before:
Mr Justice Simon
Between :
HHR Pascal B.V. | Claimant |
and | |
W2005 Puppet II B.V.
| Defendant |
Mr Mark Howard QC and Mr Ben Valentin (instructed by White & Case LLP) for the Defendant
Mr Laurence Rabinowitz QC and Mr Daniel Toledano QC (instructed by Travers Smith LLP) for the Claimant
Hearing dates: 19 & 20 October 2009
Judgment
Mr Justice Simon:
Introduction
There are two applications for summary judgment before the Court:
the Defendant’s application issued on 16 June 2009; and
the Claimant’s application issued on 31 July 2009.
Both applications raise similar issues as to the proper construction of a Share Sale and Purchase Agreement dated 6 August 2008 (‘the SPA’). The SPA was an agreement for the sale by one Dutch company, the Defendant (‘Puppet’), of shares in another Dutch company, W2005/Thirty Four BV, to a third Dutch company HST GP Euro BV. W2005/Thirty Four BV was the ultimate beneficial owner of a portfolio of European hotels, two of which, the Renaissance Hotel in Amsterdam and La Defense in Paris, were undergoing major renovations at the time of the SPA. The Claimant (‘HHR’) subsequently became a party to the SPA as Buyer in succession to HST GP Euro BV.
Completion of the sale depended on certain conditions being satisfied by the fifth business day prior to 31 December 2008, which was described as the ‘Long Stop Date’. The day which was five business days before 31 December was 19 December 2008. It is common ground that completion of the sale did not take place; and the issue between the parties is whether this was because the SPA terminated in accordance with its terms because HHR failed to perform material obligations relating to completion (as Puppet contends) or because Puppet failed to satisfy the conditions necessary for completion (as HHR contends).
The amount immediately in issue is a deposit of €25 million which was paid by the Buyer. Under Clause 3.2 of the SPA this sum became forfeit if the Buyer failed to perform its completion obligations. Puppet maintained that HHR had failed to perform such obligations; and, on 31 December 2008, gave instructions that the deposit be released to it, together with accrued interest. HHR contends that the SPA was terminated automatically in accordance with its terms because Puppet failed to perform the conditions for completion by 19 December, and that the deposit should be released to HHR. It claims the deposit in the present action; and, in its Defence, Puppet maintains that it was entitled to receive the deposit.
The issues in outline
The issues, at least so far as they arise on these applications, are relatively confined and relate to the rebuilding of the Amsterdam Hotel in accordance with what was referred to as the Amsterdam Capex Plan.
Puppet contends that completion occurred on 18 December on one of two alternative bases: either Puppet had given a contractual notice of Substantial Completion on 18 December under paragraph 31.1.7 of Schedule 9 of the SPA and no dispute about this was raised by HHR under paragraph 31.1.8, or alternatively, there was completion by 19 December since the work carried out under the Amsterdam Capex Plan had been completed by that day.
In order to understand the issues it is necessary to refer to three provisions of the SPA: Clause 5, and Schedules 2 and 9.
Clause 5 was headed ‘Completion Conditions’:
5.1 Completion is conditional upon the satisfaction or waiver of the conditions set out in Schedule 2 ... (the ‘Conditions’)
5.2 The Parties undertake to use their reasonable endeavours to satisfy the Conditions in a timely and efficient manner and to use all reasonable endeavours to comply with applicable laws and to render to each other all reasonably necessary support and cooperation to ensure that Completion can occur as soon as possible after the date of the signing this Agreement ...
5.3 If the Conditions are not fulfilled or waived on or before the Long Stop Date, this Agreement shall terminate and the provisions of Clause 17 (Termination) will apply.
Schedule 2 to the SPA provided as follows:
Conditions
Completion is conditional upon the following:
…
5. the Amsterdam Capex Plan and the La Defense Capex Plan having been substantially completed (as defined and as set out in Schedule 9 (Capex Plans)).
Schedule 9 to the SPA set out the General Principles for Substantial Completion, and was numbered in paragraphs 31.1 to 31.15. In this judgment I have adopted the parties’ convention of referring to paragraphs 1.1 to 1.15; and have divided paragraph 1.6 into five sentences identified with a roman numeral:
1.1 For the purposes of this Agreement, ‘substantially completed’ shall mean the stage in the progress of the Amsterdam Capex Plan or the La Defense Capex Plan, as the case may be, when each of the works contemplated by such Capex Plan is sufficiently complete to enable the parts of the relevant Hotel to which the relevant Capex Plan relates to be occupied or used in the ordinary course in the manner in which they were occupied or used prior to the commencement of the relevant Capex Plan.
1.1.1 In the case of the Amsterdam Capex Plan, this shall be deemed to have been ‘substantially completed’ if each of the works shown in:
(a) rows 2 to 219 (inclusive) of the chart set out in Section 3 of Part B of this Schedule 9;
(b) rows 2 to 18 (inclusive) of the chart set out in Section 4 of Part B of this Schedule 9; and
(c) rows 20 to 36 (inclusive) of the chart set out in Section 4 of Part B of this Schedule 9,
have been completed.
1.2 The Seller shall be responsible for ensuring that each of the Amsterdam Capex Plan and the La Defense Capex Plan is substantially completed. The Buyer shall, by giving notice to the Seller in writing, have the option to conduct regular inspections of the progress of the Capex Plans from 29 July 2008 to the declaration of substantial completion.
…
1.6 (i) The Seller shall prepare and deliver to the Buyer a notice in respect of each of the Amsterdam Capex Plan and the La Defense Capex Plan stating the date on which it anticipates that such Capex Plan shall have been substantially completed (the ‘Projected Substantial Completion Date’). (ii) Such notice shall be sent at least 10 Business Days in advance of the Projected Substantial Completion Date. (iii) On or prior to the Projected Substantial Completion Date, the Seller shall prepare and deliver to the Buyer a list of those items with respect to the relevant Capex Plan (the ‘punch list items’) which have not been completed as of the Projected Substantial Completion Date, but which it reasonably believes do not prevent substantial completion of the relevant Capex Plan. (iv) The Buyer may, prior to the Projected Substantial Completion Date, give notice to the Seller in writing that it wishes to carry out a site visit at the relevant Hotel to review the works carried out in relation to such Capex Plan. (v) Any such site visit shall be a joint visit by the Seller and the Buyer (and/or their respective representatives) and shall in any event take place no later than two Business Days after the Projected Substantial Completion Date.
1.7 To the extent that, after delivery by it of a notice pursuant to paragraph 1.6, the Seller ascertains that substantial completion of the relevant Capex Plan will occur after the Projected Substantial Completion Date referred to in such notice, the Seller shall give notice in writing to the Buyer of the new Projected Substantial Completion Date with respect to such Capex Plan.
1.8 If the Buyer wishes to dispute that substantial completion of a Capex Plan has occurred as of the Projected Substantial Completion Date, the Buyer must provide a notice in writing to the Seller within five Business Days after the Projected Substantial Completion Date. Such notice shall specify those items which are in dispute. If the Buyer does not deliver such a notice to the Seller within such period, and no notice has been delivered by the Seller to the Buyer pursuant to paragraph 1.7, substantial completion of such Capex Plan shall be deemed to have occurred as of the Projected Substantial Completion Date. If the [Buyer] does serve a notice of dispute pursuant to this paragraph 1.8, all of the items which are not specified in such notice as being in dispute shall be deemed to have been agreed.
1.9 If the [Buyer] does serve a notice pursuant to paragraph 1.8 of this Part A of Schedule 9, the Parties shall use their reasonable endeavours to resolve the dispute within five Business Days of the date of such notice.
1.10 If the Buyer and Seller do not reach agreement pursuant to paragraph [1.9] of this Part A of Schedule 9, the dispute shall, at the request of either Party, be referred to an expert agreed by the Parties or, in the absence of agreement within two Business Days of the relevant Party's request that an expert be appointed, the person appointed (on the application of either Party) by the head of the office of the Royal Institute of Chartered Surveyors in France or the Netherlands, as the case may be; provided that, as a condition to being appointed, such expert shall execute a certificate of independence.
1.11 Any expert appointed pursuant to paragraph 1.10 shall act as an expert and not as an arbitrator and shall be directed to resolve any dispute by reference to the underlying contract documents provided under Part D of Annex 2 to the Disclosure Letter relating to the relevant works.
1.12 The determination of the expert shall, in the absence of fraud or manifest error, be binding on the Parties.
1.13 The Parties shall share the expert’s documented fees and expenses as to 50 per cent. for the Seller and 50 per cent. for the Buyer.
Summary of the facts
As already noted, the SPA was executed between Puppet (as Seller) and HST GP Euro BV (as Buyer) on 6 August 2008.
On 17 November 2008, Puppet served a notice (under paragraph 1.6 (i) of Schedule 9) notifying the date on which it anticipated that the Amsterdam Capex Plan would be substantially completed, as 3 December 2008.
On 20 November, HHR became a party to the SPA as Buyer; and, on 25 November, served a notice (under paragraph 1.6 (iv) of Schedule 9) that it wished to carry out a site visit.
On 28 November, Puppet served a notice (under paragraph 1.7) of a new Projected Substantial Completion date of 5 December; and on 1 December, HHR served a further notice (under paragraph 1.6 (iv) of Schedule 9) indicating that it wished to carry out a site visit on consecutive days from 3-5, and on 8-9 December.
It appears (from paragraph 29 of the first witness statement of Mr John Reynolds, a solicitor acting on behalf of Puppet,) that HHR held inspections at the Renaissance Amsterdam Hotel on each of these dates and had a representative on site on 10 December.
On 5 December, Puppet served a notice of ‘punch list items’ (i.e. the items described in paragraph 1.6 (iii) which had not been completed by the Projected Substantial Completion date, but which Puppet reasonably believed did not prevent substantial completion). On the same day HHR indicated by email that it was working towards 19 December ‘for the purposes of completion conditions and deliverables’.
On 11 December, HHR served a notice (under paragraph 1.8) disputing that Substantial Completion had occurred on 5 December; and invoked the dispute resolution mechanism in paragraphs 1.9 and 1.10.
On 13 December Mr Reilly of Puppet emailed Mr McPhail of HHR suggesting a further meeting at the site on 16 December ‘to work through any remaining issues’. Thereafter differences of view were expressed as to whether 5 December was the Projected Substantial Completion Date for determining substantial completion or whether Puppet had until the date which was 5 business days before the Long Stop Date (i.e. 19 December) in order to complete the work.
At about 4.30 pm on 18 December, Puppet served the notice with which Issue 1 is concerned, informing HHR that (1) the Schedule 2 conditions were satisfied and completion would take place on 31 December, (2) pursuant to paragraph 1.7, the new Projected Substantial Completion Date was Thursday 18 December, (3) the Hotel was now completed whatever the outcome of any dispute as to whether it had been completed on 5 December. Puppet also served a new punch list and encouraged HHR to conduct an inspection and provide details of any remaining issues as soon as possible.
HHR responded by sending a paragraph 1.10 notice requesting the appointment of an expert to determine whether substantial completion had occurred on 5 December.
Between 18 and 31 December, the parties exchanged emails about whether Puppet’s 18 December notice of a new Projected Substantial Completion Date was valid; and, on 31 December, Puppet gave notice that the SPA was terminated and that the deposit should be released to it.
The two issues
Although each party agreed that two issues arose on these applications, they were not able to agree a formulation of what they were. In setting out the two issues below I have endeavoured to express the issues in neutral terms.
Issue 1: whether Puppet’s notice given on 18 December 2008 was a contractual notice, or whether such notice was devoid of contractual effect?
Issue 2: on the assumption that substantial completion was in fact achieved by 19 December 2008, whether that state of affairs satisfied Puppet’s obligations as to completion condition under the terms of the SPA.
Summary of argument
This is a brief summary, rather than a complete record of the Parties’ close analysis of the contractual provisions and their detailed submissions.
Puppet’s argument on the first issue
Mr Howard QC (for Puppet) submitted that the structure of paragraph 1.6 (i) and (ii) was that a Seller’s notice of an estimated or (to adopt the word used in the paragraph) ‘anticipated’ Projected Substantial Completion Date would be served at least 10 Business days prior to the Projected Substantial Completion Date; and that, on or before the Projected Substantial Completion Date, the Seller was bound to deliver a ‘punch list’ of items which had not been (or would not be) completed at the Projected Completion Date, but which it reasonably believed would not prevent substantial completion.
If, having given the notice under paragraph 1.6 (i) and (ii), the Seller realised or (to adopt the word used in the paragraph) ‘ascertained’ that substantial completion would occur after the Projected Substantial Completion Date referred to in a previous notice, it was obliged to serve a notice under paragraph 1.7 giving a revised or new Projected Substantial Completion Date.
This is how the parties operated the contract. On 17 November Puppet gave notice of a Projected Substantial Completion Date of 3 December under paragraph 1.6 (i); and, on 28 November, it gave a revised Projected Substantial Completion Date of 3 December under paragraph 1.7. It was not uncontractual to serve a further notice under paragraph 1.7 on 18 December. On the contrary it was the way the scheme of notices under paragraphs 1.6 and 1.7 was intended to operate, with the possible (if not, likely) need to update the Projected Substantial Completion Date. There was Substantial Completion on 18 December and the notice under paragraph 1.7 simply reflected the actuality; alternatively, and if it were impermissible to serve a notice on the same day as the date notified, then the Projected Substantial Completion Date should be treated as the following day (19 December).
Once the Notice under paragraph 1.7 had been given, HHR had a choice. If it disputed that there had been substantial completion on the Projected Substantial Completion Date, it could issue a notice under paragraph 1.8 within 5 Business Day, and the provisions of paragraphs 1.9 to 1.13 were brought into operation. If it did not give a notice under paragraph 1.8 within the time allowed, then Substantial Completion was deemed to have taken place as at the Projected Substantial Completion Date. In either event it had two days in which to carry out an inspection after the Projected Substantial Completion Date.
Since HHR did not serve a notice under paragraph 1.8, substantial completion was deemed to have taken place by no later than 19 December. In circumstances in which substantial completion had taken place on 18 December, but HHR were refusing to complete, Puppet was entitled to direct the Notary that the deposit amount should be released to Puppet.
Alternatively, if Puppet’s notice was served late, there was no proper basis for treating this as the failure of a condition precedent, rather it should be treated as a breach of a term, which sounded in damages, if any damage was caused.
HHR’s argument on the first issue
For HHR, Mr Rabinowitz QC contended that the operation of paragraph 1.7 could not sensibly be construed in a way which deprived the Buyer of its rights under (iv) and (v) of paragraph 1.6. The Buyer had a right under (iv) to give notice to the Seller that it wished to carry out a site visit to review the works. The fact that the Buyer was entitled to give such notice ‘prior’ to a ‘Projected’ Substantial Completion Date plainly envisaged a time between the giving of the notice of the revised Projected Substantial Completion Date and the Date itself. Without such intervening period the Buyer would be deprived of the right (which Puppet acknowledges it had) to give notice of a wish to carry out a site visit.
The proper construction of paragraph 1.7 was that the Notice took effect as a notice under paragraph 1.6 (i); and it had to be sent 10 Business Days in advance of the revised Projected Substantial Completion Date. Puppet’s difficulties in not being able to give 10 Business Days’ notice of a Projected Substantial Completion Date of 18 December were of their own making. They had chosen to contend that the 5 December was a contractual Projected Substantial Completion Date until the last moment, when they purported to give the 18 December Notice.
Puppet’s argument on the second issue
Puppet’s argument on the second issue was refined by Mr Howard in the course of his argument. The submissions proceeded on the factual assumption that there was substantial completion within the meaning of paragraph 1.1 of Schedule 9 by the 19 December. He submitted that, if this were so, the Court should not regard Puppet’s failure to serve the requisite notices in time as leading ineluctably to the conclusion that there had been no substantial completion on 18 December. He referred to the parties’ obligation to cooperate so as to ensure completion under Clause 5 of the SPA, to the terms of paragraph 5 of Schedule 2 and to the statement by Lord Hoffmann in Chartbrook Limited v. Persimmon Homes Limited and others [2009] UKHL 38 at [20].
Mr Howard submitted that, applying the appropriate ‘rational businessman test’, it was neither reasonable nor commercially sensible that HHR should be entitled not to complete simply because a notice under paragraph 1.7 was (on this hypothesis) served late.
HHR’s argument on the second issue
Mr Rabinowitz submitted that neither the terms of the SPA nor legal authority supported Puppet’s argument. There was nothing in Schedule 9 which suggests that there was to be a free-standing right to satisfy the completion obligation outside paragraphs 1.6 and 1.7. The notice provisions in paragraph 1.6 were expressed in mandatory form; and there were no provisions which supported the argument based on an alternative optional mode of performance. In addition, he submitted, it was difficult to see how a dispute as to whether completion had actually taken place was to be resolved, if it were not a dispute that came within the clear terms for dispute resolution set out in paragraphs 1.8-1.13 of Schedule 9. There was nothing in Clause 5 of the SPA which justified finding an intention to bypass the clear and emphatic terms of Schedule 9.
Principles of Construction
Before considering the arguments it is convenient to summarise what the parties agreed were the applicable principles, although they disagreed as to their application.
In interpreting the meaning of words in a contract the court must ascertain,
... the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
See Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896, Lord Hoffmann at 912.
The principle that words should be given their natural and ordinary meaning reflects a common sense proposition that people do not usually make linguistic mistakes in formal documents. On the other hand,
if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business commonsense.
See Lord Hoffmann in the Investors Compensation Scheme case, quoting Lord Diplock’s speech in Antaios Compania Naviera SA v. Salen Rederierna AB [1985] AC 191 at 201.
In addition,
In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law ... generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on the niceties of language.
See Lord Steyn in Mannai Investment Co. Ltd v. Eagle Star Life Assurance Co. Ltd [1997] AC 749, at 771A-B.
A commercially sensible construction does not mean that the Court disregards express and clear terms in order to give effect to a conception of what might be fair or reasonable. This is particularly so in the case of notice provisions, which are generally (but not always) regarded as being stipulations which must be strictly complied with, see for example the following passage in Chitty on Contracts (30th Ed) §22-051.
The terms of the contract may further provide that notice can be given only after the occurrence of a specified event; or that a specified period of notice be given; or that the notice is to be in a certain form (e.g. in writing); or that it should contain certain specified information; or that it should be given within a certain period of time. Prima facie the validity of the notice depends upon the precise observance of the specified conditions. However, a consideration of the relationship of the notice requirements to the contract as a whole and regard to general considerations of law, may show that a stipulated requirement, for example, that notice be given ‘without delay’, was intended by the parties to be an intermediate term, the non-observance of which would not invalidate the notice (unless the other party was seriously prejudiced thereby), but would give rise to a claim for damages only.
In the Privy Council case of Valentines Properties Ltd v. Huntco Corp. Ltd [2001] 2 NZLR 305 [20], Lord Nicholls considered the effect of time limits in this context.
Inherent in a time limit is the notion that the parties are drawing a line. Once the line is crossed, a miss is as good as a mile. The rigour of this principle is softened when the parties are taken to have intended otherwise. Then, in the legal jargon, time is not regarded as ‘of the essence’. Failing a contrary indication, the law assumes that stipulations as to time are not of the essence in certain common form situations, such as the date for completion of a contract for the sale of land. But that is not this case. The law makes no such assumption regarding a date fixed by a conditional contract as the date by which the condition is to be fulfilled. In the absence of contrary indication, the date so fixed must be strictly adhered to, and the time allowed is not to be extended by reference to equitable principles: see, for instance, the decision of the Board in Aberfoyle Plantations Ltd v. Cheng [1960] AC 115. In the present case a contrary intention is not to be found in the language of the agreement, nor can it be inferred from the context.
Issue 1, discussion and conclusion
There are, in my judgment, considerable difficulties in treating Puppet’s notice of 18 December 2008 as a contractual notice under paragraph 1.7, such as to trigger the rights and obligations under paragraph 1.8.
First, the obligation under paragraph 1.7 was to give a notice of a new ‘Projected’ Substantial Completion Date. A ‘Projected’ Date very strongly suggests a date in the future, rather than the date on which the notice is given.
Secondly, this impression is reinforced by the terms of paragraph 1.6 (iv), which Mr Howard accepted (rightly in my view) should be given proper effect in the case of a revised notice under paragraph 1.7. If the Seller’s notice is given on the same day as the notified Projected Substantial Completion Date, it is difficult to see how the Buyer has any opportunity to give a notice of a wish to carry out a site visit ‘prior’ to the Projected Substantial Completion Date. Although Mr Howard’s submission, that under paragraph 1.6 (v) the site visit could take place up to 2 Business Days after the notified Projected Substantial Completion Date, may be an answer to the practical difficulties caused by notifying on the same day as the Projected Substantial Completion Date, it is not a sufficient answer to the difficulties posed by his argument as a matter of the construction of paragraph 1.6 (iv). Nor is his suggestion that the Buyer has already received the benefit of a 10 business day notice in which to organise a site visit: not least because the earlier site visit may have taken place at a very much earlier stage in the process.
Thirdly, it is inherently unlikely that, having agreed a 10 Business Day notice period under paragraph 1.6, the parties can have intended that no period of notice at all was to apply to a notice under paragraph 1.7.
Fourthly, once it is assumed that the notice under paragraph 1.7 is to take effect as if it were a notice under paragraph 1.6 (i), then there is no difficulty created by the need for the Seller to provide a Punch (or ‘Snagging’) List ‘on or prior to the Projected Substantial Completion Date’, under paragraph 1.6 (iii). It is to be noted that the parties specifically envisaged and were able to express the possibility that the Punch List might be delivered ‘on’ the Projected Substantial Completion Date. In contrast, there is nothing in the wording of paragraph 1.7 read with paragraph 1.6 to suggest that the parties had in mind that the notice of such Projected Substantial Completion Date could be given ‘on’ the date itself.
Fifthly, the contractual scheme works perfectly well and without these difficulties of construction, if the notice in paragraph 1.7 is to be regarded as simply replacing a prior notice under paragraph 1.6 (i), with the requirement that such notice be sent at least 10 Business Days in advance. Mr Howard sought to meet this point by arguing that this construction does not give proper weight to the Seller’s obligation to give a revised notice under paragraph 1.7 when the Seller ‘ascertains’ that substantial completion will occur after the Projected Substantial Completion Date. He posed the question: suppose the Seller discovers that his previous Projected Substantial Completion Date is inaccurate and that in fact the date is three days later, is the Seller still required to give a notice which must be sent at least 10 Business Days in advance of the revised date? Such an approach, he submitted, would require the Seller to give an untruthful notice or ‘tell a lie’, since what the Seller has ascertained is not a Projected Substantial Completion Date at least 10 Business Days ahead, but one very much sooner. Mr Rabinowitz’s responded by pointing out that the 10 Business Day notice requirement applied to a notice under paragraph 1.6 (i), whatever the underlying factual position; and, in any event, there would have been no difficulty in giving the 10 Business Days’ notice but for the requirement that completion conditions had to be satisfied by 19 December 2008 (5 Business Days before the 31 December Long Stop Day). If the Sellers had given a revised and precautionary 10 Business Days’ notice of Projected Substantial Completion on 5 December (in other words when they ‘ascertained’ that substantial completion would not take place on 5 December) there would have been no difficulty in giving the notice in sufficient time. Whether the latter point is right or not, it seems to me that the answer to Mr Howard’s point is that the parties had agreed on a 10 Business Day notice period, and that this was to apply even if the work would be completed within the 10 Business Day period.
Sixthly, the words ‘such notice’ in paragraph 1.6 (ii) are not limited to an initial notice sent under paragraph 1.6 (i). Once it is accepted that the triggering of the rights and obligations under paragraph 1.7 brings into effect all, and not simply parts of, paragraph 1.6, ‘such notice’ applies perfectly naturally to the new notice under paragraph 1.7. Each notice is a notice that falls within the description in paragraph 1.6 (i), namely, ‘a notice in respect of each of the Amsterdam Capex Plan and the La Defense Capex Plan stating the date on which it anticipates that such Capex Plan shall have been substantially completed’.
Seventhly, and viewing this issue as a matter of commercial good sense, Mr Rabinowitz had the better of the argument. HHR’s construction enables the Seller to carry out further works between the time of one notice and the time of another, while protecting the Buyer’s position by ensuring that the notices are given in accordance with the contractual requirements as to notice periods, thereby protecting HHR’s contractual rights, including its right to carry out a site inspection. In contrast a construction which enables the Seller to serve a notice of a revised Projected Substantial Completion Date at about 4.30pm on the day itself without advance warning and thereby prejudicing the Buyer’s rights under paragraph 1.6 (iv) and (v), strikes me as being contrary to commercial good sense.
Finally, it is necessary to deal with Puppet’s contention that, if the notice on 18 December were served too late, this was not a failure of a condition precedent but a failure of a contractual term whose breach gave rise to a claim for damages. In my judgment this contention is wrong. The timing provisions were very clearly of the type which had to be strictly complied with in order, to use the words of Lord Wilberforce in Bremer Handelsgesellschaft m.b.H v Vanden Avenne-Izegem P.V.B.A [1978] 2 Lloyds Rep 109 at 113, ‘to avoid commercial confusion’. The language is emphatic: ‘such notice shall be sent at least 10 Business Days in advance ... ’, and the terms are part of a scheme which provides for the exercise of rights by each party. On the face of it the validity of the notice depends on the precise observance of the specified conditions as to time; and there is nothing among the wider considerations, and no contrary indications, to displace that assumption.
For these reasons I have concluded that Puppet’s notice of 18 December was without contractual effect.
Issue 2, discussion and conclusion
As already noted, Puppet’s argument on this issue assumes that, as at 18 December, there was substantial completion of the building works. Mr Howard’s argument proceeds on the commercial sense of recognising such a fact and the commercial absurdity in ignoring it.
In my judgment this submission involves mischaracterising the nature of the obligations in the SPA. The parties proceeded on the basis that the completion of the building works was to be assessed by a carefully drafted code, which involved proper notice of Projected Substantial Completion by the Seller, a right to inspect by the Buyer and a clearly prescribed method of dispute resolution if the Buyer disputed that substantial completion had occurred. Puppet’s submission that there was an alternative means of demonstrating substantial completion which avoids this process is entirely uncommercial, in the overall context of this complex share purchase agreement. Furthermore, and despite Mr Howard’s submissions, it is very difficult to identify how such a right to prove substantial completion, outside the process set out in paragraph 1.6 and the following paragraphs, could arise.
The Completion Condition in Clause 5 of the SPA, is a conventional provision obliging the parties to cooperate, but it is expressed to be in relation to laws and regulations, and does not oblige a party to waive its substantive rights in order to ensure completion can occur.
The issue of whether there has been completion in condition 5 of Schedule 2 is specifically made subject to Schedule 9.
Paragraph 1.1 of Schedule 9 is a deeming provision which may bear on assessments made at later stages in the operation of the Schedule 9 proces; but it does not establish a separate means of establishing substantial completion.
At [15] in the Chartbrook case, Lord Hoffmann, after restating what are now well-established principles of construction, added:
It is, I am afraid, not unusual that an interpretation which does not strike one person as sufficiently irrational to justify a conclusion that there has been a linguistic mistake will seem commercially absurd to another ... the subtleties of language are such that no judicial guidelines or statements of principle can prevent it from sometimes happening. It is fortunately rare because most draftsmen of formal documents think about what they are saying and use language with care.
Although it contained a few minor typographical errors which even the most visually acute proof-reader might have missed, the SPA was a carefully drafted document in which both language and legal principles were deployed logically and with care. There is no proper basis for inviting the Court to impose one party’s conception of what is sensible and reasonable. In this agreement the mandatory completion provisions were less concerned with the fact of completion, than with the process by which completion was deemed to occur.
Summary
For these reasons I have concluded that HHR succeed on both issues.