Quest Advisors Limited Sharriba Ltd v McFeely & Anor

A specific-performance order reinforces the contractual obligations; it does not dispense with or rewrite them. An honest but mistaken construction of the order will not ordinarily amount to repudiation where the party remains willing to perform if its construction proves wrong. A payment ordered “on account” of disputed contractual sums is an interim payment. It may be ordered only under the applicable conditions in the Civil Procedure Rules 1998, and should not be imposed summarily without notice and supporting evidence.

The dispute concerned a contract for the sale and development of a site. The purchaser was to receive long leases of commercial space and make building-cost contributions in three stages. A deputy judge declared that the leases had to be granted subject to payment of the contribution. The parties later disagreed whether that order replaced the staged-payment provisions.

Lewison J held that the staged payments remained due, but ordered payment of £600,000 plus VAT on account. He rejected the contention that non-payment repudiated the contract. The appeals concerned construction of the earlier order, repudiation, the jurisdiction to order payment on account, and a subsequent order made by the deputy judge.

1. Construction of the specific-performance order. The order of 22 October 2009 had to be construed objectively, having regard to the judgment it implemented and the subject matter to which it related. The repetition of the contractual wording requiring payment “on or before” completion did not remove the staged-payment obligations in clause 18.4. The deputy judge had power to reinforce the contract by ordering its performance, but no power on the specific-performance application to dispense with or alter Quest’s contractual obligations (paras [34]–[39]).
2. Repudiation. The principle in Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd [1980] 1 WLR 277 applied. A refusal to perform based on an honest but mistaken belief about the contract or the court order did not, without more, amount to repudiation where the party remained willing to perform if its position proved wrong. The evidence showed that Quest’s position was based on such an honest belief. The McFeelys’ appeals on repudiation were dismissed (paras [40]–[47], [57]–[58]).
3. Payment on account. The £600,000 order could not be an order for specific performance of clause 18.4 because the amount due remained disputed and required further inquiry. It was an interim-payment order under Part 25 of the Civil Procedure Rules 1998. The relevant conditions in rule 25.7(1) had not been properly established. The judge should have required an application supported by evidence and notice to the parties. Quest’s appeal was allowed on this point, and the sum was varied to £136,396.46 plus VAT, payable within 28 days (paras [48]–[55]).
4. The appeal against the order of 5 May 2010 became academic. No order was made on Quest’s appeal against that order. The parties were directed either to agree the sums payable under clause 18 or submit the dispute to an inquiry before a Technology and Construction Court judge (paras [56], [59]–[60]).

• Court of Appeal (Civil Division): Quest’s appeal against the £600,000 payment order was allowed in part and the sum was varied. The McFeelys’ appeals on repudiation and construction of the specific-performance order were dismissed. The three Lord Justices agreed.
• High Court of Justice, Chancery Division, Lewison J: on 1 March 2010, held that the staged-payment obligations remained in force, rejected repudiation, and ordered Quest to pay £600,000 plus VAT on account.
• High Court of Justice, Chancery Division, deputy judge: on 5 May 2010, refused to vary the £600,000 order and rejected the claim that non-payment repudiated the contract.
• High Court of Justice, Chancery Division, deputy judge: on 22 October 2009, declared that the leases were to be granted subject to payment of the contractual contribution. No appeal was brought against that decision.