Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd & Anor

A contractual communication may constitute an offer where, read objectively in its commercial and factual context, it seeks agreement on matters capable of contractual determination. The court must consider the agreement as a whole, the language used, the parties’ positions and knowledge, the relevant date, and commercial sense. A contract may bind principals where agents possess actual authority, and may also be effective through ostensible authority or ratification. The parties’ undisclosed subjective intentions do not displace the objective construction of their communications.

Crest Nicholson claimed declarations concerning the calculation of profit payments under a development agreement with Akaria Investments. The dispute concerned whether correspondence between representatives of Crest and Aberdeen, Akaria’s asset manager, agreed the open market rents for units remaining unlet at the relevant buy-out date. Akaria denied that the correspondence constituted an offer and acceptance, disputed contractual intention and challenged the representatives’ authority.

The court also had to determine whether Helen Smith’s communication bound Akaria and whether the resulting agreement was otherwise effective through authority or ratification.

1. Construction of the correspondence. Applying the objective approach to contractual interpretation stated in Chartbrook Ltd v Persimmon [2009] UKHL 38, and referring to the principles summarised in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, the court construed the correspondence in the context of the Development Agreement, clause 19.8.1, the parties’ positions and knowledge, the timing of the communication and commercial sense.
2. The letter of 21 June 2007 was an offer capable of acceptance. Properly construed, it sought agreement that the rents in the attached target-rent schedule would be treated as the market rents for calculating the payment due for unlet units under clause 19.8.1. The subsequent communications constituted acceptance and a minor variation.
3. The parties’ subjective lack of intention to create legal relations did not prevail over the objective meaning of the documents. The correspondence showed an intention to fix the market rents in advance and avoid a reference to the rental expert.
4. Mr Tindale had actual authority to send the letter on behalf of Crest, through the approval and delegated responsibility of Mr White. Ms Smith’s response had the actual authority of Aberdeen’s fund manager, Mr Sankey. The court also considered that she had ostensible authority and that Aberdeen’s subsequent conduct amounted to ratification.
5. Paragraph 6(1) of Master Bragge’s order was answered affirmatively in Crest’s favour. Paragraph 6(2) was answered negatively. It was unnecessary to determine paragraph 6(3).