Organic Group Ltd v Charterhouse Macmillan Group Inc

A commercial agreement should be construed fairly and broadly so far as its language and factual context permit. Difficulty of interpretation does not itself create uncertainty. The court should give effect to an apparent contractual intention, including by implying machinery necessary to make the bargain work, but must not rewrite the agreement.

Where performance depends on cooperation by one party, that party cannot rely on the absence of performance resulting from its own failure to request or facilitate performance. A consultancy or retainer agreement may make payment conditional on the passage of time or another stated event, rather than on services actually being provided. An agreement is not merely an unenforceable agreement to agree where the parties have already undertaken binding obligations and only implementation details remain.

The claimant, an English company, sold hotel assets to the defendant, a Seychelles company. The defendant paid a deposit but obtained deferred completion and occupation of the hotel without rent.

The claimant obtained default judgment for sums said to be due under a deeded Consultancy Agreement. The Master set aside the judgment, holding that the defendant had a real prospect of defending the claim, although he rejected total failure of consideration. The claimant appealed, contending that the agreement required payment whether or not services were provided and was not void for uncertainty.

The central issues were the proper construction of the consultancy agreement, the effect of the defendant’s failure to request services, contractual uncertainty, and whether the arrangement was merely an agreement to agree.

1. Appeal allowed. The Master’s decision was reversed and the default judgment stood. The defendant had no real prospect of successfully defending the claim.
2. The Consultancy Agreement was a formal commercial document intended to create legal obligations. It was to be construed by reference to its words and relevant factual background. The court should seek to uphold the bargain where a fair meaning could be extracted, while stopping short of making a new contract for the parties. Difficulty in interpretation was not equivalent to uncertainty.
3. The agreement was properly characterised as having the features of a retainer. The claimant undertook to remain available to provide services, while the defendant could request services from time to time. The contractual sums were payable under the timetable in Schedule 3 whether or not services were ultimately provided.
4. Per the court’s application of Mackay v Dick and New Zealand Shipping v Société des Ateliers et Chantiers de France, where performance depends on an act by the other party, the contract may require that party to do what is necessary to enable performance. That obligation is not confined to cases where the cooperating party is itself in breach. The defendant could not rely on its failure to request services as a reason for non-payment.
5. The services clause was capable of operation through an implied term requiring reasonable professional services connected with the hotel transaction. Disputes about whether a request or response was reasonable could be resolved by the court. The agreement was therefore not void for uncertainty. It was also not an unenforceable agreement to agree: unlike Willis Management v Cable & Wireless, the parties had already reached a binding agreement and only the machinery for requesting and defining services remained.
6. There was no total failure of consideration. The sums claimed were due whether or not services had been provided.

• High Court (Queen’s Bench Division): The claimant appealed the Master’s order setting aside default judgment. The appeal was allowed, the Master’s decision was reversed, and the default judgment stood.