Multi Veste 226 BV v Ni Summer Row Unitholder BV & Ors

A contractual time stipulation is construed in the context of the contract as a whole. A short period for simultaneous performance of several obligations will not ordinarily make time of the essence merely because one obligation is commercially important.

Time may be made of the essence by a reasonable notice which clearly warns that failure to perform by the specified date will be treated as repudiation. Even then, the failure must deprive the innocent party of substantially the whole benefit of the contract before termination is justified.

An innocent party does not affirm a contract merely by calling on the repudiating party to perform while reserving its position. In a loss claim involving hypothetical conduct by third parties, the claimant must prove the relevant conduct on the applicable standard and must establish causation of actual loss.

Multi Veste 226 BV agreed to sell a 50 per cent interest in a proposed Wolverhampton shopping and residential development to NI Summer Row Unitholder BV, backed by guarantees from the other defendants. The transaction required the NI Unitholder to provide bank guarantees and complete associated obligations within five business days after satisfaction of a council-related pre-condition.

The guarantees were not provided. Multi purported to terminate the Unit Sale Agreement on 3 February 2009. The defendants contended that Multi’s termination was itself repudiatory and accepted it.

The central issues were whether the defendants’ breach entitled Multi to terminate, whether Multi had affirmed the agreement, and whether the development would probably have proceeded and produced recoverable loss if the guarantees had been supplied.

1. Termination. The obligation to provide the bank guarantees was part of a group of obligations to be performed simultaneously under the same contractual time stipulation. Construed against the contract as a whole, time was not originally of the essence. The commercial importance of the guarantees did not justify isolating them from the other obligations.
2. By the letter of 25 November 2008, however, Multi gave sufficiently clear notice that completion on 3 December was required and that failure would amount to repudiatory breach. The notice was reasonable and made time of the essence for completion.
3. The effect of the notice was not that any late performance automatically entitled termination. The relevant question was whether the failure to perform the obligations under clause 2.5 deprived Multi of substantially the whole benefit of the Unit Sale Agreement. The defendants’ refusal to complete, including their failure to provide the guarantees and enter into the associated commitments, amounted to repudiation.
4. Multi did not affirm the agreement by repeatedly requesting performance. An innocent party may call upon the other party to recognise and perform its obligations while deciding whether to accept the repudiation. There was no unequivocal election to continue the contract.
5. Multi therefore lawfully terminated the agreement. Nevertheless, it failed to prove that the development would have proceeded if the guarantees had been provided. The banks’ hypothetical lending decision had to be proved on the balance of probabilities. The evidence showed a substantial funding shortfall, an objectively loss-making scheme, no demonstrated full funding, and no substantial chance of sufficient mezzanine finance or council waiver.
6. The breach consequently caused no proved loss. Multi was entitled only to £2 nominal damages. The alternative quantum calculations were academic, although the court found that completion would have produced an estimated loss rather than a profit.