John Thompson and Janet Thompson v Goblin Hill Hotels Limited (Jamaica)

Contractual and constitutional documents should ordinarily be given their plain and ordinary meaning. That meaning may yield only where it produces a commercial absurdity, assessed with business common sense. A court should not infer absurdity from an assumption that a party will breach its obligations. Parties are presumed to intend performance, and contractual debts may be recovered by proceedings. Where a party seeks to displace literal wording by reference to background facts, it bears the burden of demonstrating the alleged absurdity. An implied term cannot rewrite clear language: it must spell out what the instrument, read against its relevant background, would reasonably be understood to mean. Accordingly, liability expressed as being borne by each member in proportion to shareholding extended to all issued shareholders and the whole issued share capital.

The appellants purchased shares in Goblin Hill Hotels Limited and took an assignment of a 99-year lease of a villa. The company later made maintenance assessments and special assessments. The dispute concerned whether those assessments were to be calculated by reference to the whole of the issued share capital or only the shares held by shareholders who were also leaseholders.

Sykes J accepted the appellants’ construction, set aside the assessments and declared the forfeiture of the lease and sale of the shares unlawful. On 19 December 2008, the Court of Appeal of Jamaica allowed the company’s appeal and rejected that construction. The central issue before the Privy Council was the proper construction of article 91(1) of the articles of association and clause 5(b) of the lease.

1. Disposition. The Board allowed the appeal and advised Her Majesty accordingly. The cross-appeal did not arise. The parties were given 28 days to make written submissions on costs.
2. Construction. Article 91(1) provided that the assessment was to be borne by each member in proportion to his shareholding in the company. In ordinary language, each member meant every shareholder of each class, including the Class C shareholders. Proportionality referred to the member’s shareholding relative to the entire issued share capital. Clause 5(b) was intended to reflect article 91(1) and had the same plain meaning.
3. Commercial absurdity. The plain meaning could be displaced only if it produced a commercial absurdity, applying the approach in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191 at 201. The Court of Appeal’s reasons did not establish absurdity. Article 4(3) showed that Class C shareholders did have rights to participate in the company’s earnings. It was also wrong to assume that shareholders would breach their obligations when construing the instruments. The company could recover unpaid assessments as a debt. Where the alleged absurdity was not patent, the party seeking to displace the literal meaning had to demonstrate it by evidence of the relevant background. That burden was not discharged.
4. Implied term. The proposed implied restriction failed under the approach stated in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 at paragraph 21. Read against the relevant background, article 91(1) and clause 5(b) could only reasonably be understood according to their literal meaning. No contrary term could therefore be implied.

• Privy Council. In [2011] UKPC 8, the Board allowed the appeal from the Court of Appeal of Jamaica.
• Court of Appeal of Jamaica. On 19 December 2008, Morrison JA, with Smith and Dukharan JJA agreeing, allowed Goblin Hill Hotels Limited’s appeal and rejected the trial judge’s construction.
• Supreme Court of Jamaica. On 6 November 2006, Sykes J accepted the appellants’ construction, set aside the assessments and declared the forfeiture and sale unlawful.