Quest Advisors Ltd v McFeely & Anor

A mistaken assertion that contractual obligations have been transferred does not amount to repudiation unless, viewed objectively, it clearly indicates an intention to abandon the contract or refuse performance. Repudiation is a drastic conclusion requiring a clear refusal going to the root of the contract. An honest but erroneous reliance on a contractual or related transaction will generally not suffice where the party would perform if the legal position were decided against it.

A contract to grant leases may have a proprietary dimension for the purposes of the Land Registration Act 2002. Declaratory relief may therefore confirm an obligation to grant leases while making performance conditional on payment of the agreed contribution.

Quest Advisors Limited agreed to sell a development site to Thomas McFeely and, subject to payment of construction contributions, to receive long leases of ground-floor commercial space. Quest later executed a deed purporting to assign the benefit of the agreement and all related obligations to Sharriba Limited.

The defendants argued that the assignment of obligations was ineffective and that the deed and notice constituted repudiation, which they had accepted. They also argued that the obligation to grant leases was not enforceable against Conal McFeely after the freehold was transferred into the defendants' joint names, and that relief was premature because payment had not been tendered.

The central issues were the effect of the contractual assignment restriction, whether the defendants had established repudiation, the application of the Land Registration Act 2002, and whether conditional declaratory relief should be granted.

1. Assignment. The restriction in the Standard Conditions of Sale applied to the contract to grant new leases, not to the whole agreement. Quest could not assign to Sharriba the right to require the leases to be granted to a nominee, although Quest retained that right and could assign the benefit of the contract for sale of the site (paras [13]-[15]).
2. Transfer of obligations. Contractual obligations cannot be transferred unilaterally by the party owing them. The consent of the counterparty and the proposed transferee is required for novation. The deed and notice therefore did not release Quest from its obligations (para [17]).
3. Repudiation. Applying the principles stated in Freeth v Burr LR 9 CP 208 and Woodar Investment Development Limited v Wimpey Construction (UK) Limited [1980] 1 WLR 277, the question was whether Quest's conduct objectively communicated an intention to abandon and refuse performance. Repudiation required a clear refusal going to the root of the contract. Quest's mistaken belief that the obligations had passed to Sharriba did not show an intention to refuse performance if the transfer was ineffective. The repudiation argument therefore failed (paras [22]-[29]).
4. Relief and successors in title. The contract to grant leases had a proprietary dimension capable of engaging the registered-land regime under the Land Registration Act 2002. The transfer into the defendants' joint names was not for valuable consideration, and both defendants knew of the agreement. The agreement was construed as binding the successor in title where the development was undertaken by a successor. Both defendants were therefore bound to the extent of the relief sought (paras [38]-[46]).
5. Final order. Quest was entitled to a declaration that, on or before completion of the development, the defendants must grant the ground-floor commercial leases to Quest or as it directed, provided that the required building-cost contribution was paid on or before each grant. The precise terms of the declaration and any further relief were reserved for argument (paras [47]-[48]).