Ridgewood Properties Group Ltd & Ors v Valero Energy Ltd

A contractual term will not be implied merely because one party’s disposal of property may make performance more difficult. The court must construe the agreement and apply the requirements of necessity and obviousness. A transfer may nevertheless place the transferor outside its power to perform personal contractual obligations where the transferee has not assumed enforceable obligations to perform them. A repudiatory breach must be accepted clearly and unequivocally. Continued performance with knowledge of the breach, without reservation, may amount to affirmation. The limitation period runs from accrual of the breach, which may be the later completion of a transfer rather than the earlier sale agreement where the transferor retains the relevant power to perform until completion.

The claimants brought consolidated proceedings against Valero Energy Ltd, formerly Texaco Ltd, concerning ten contractual “airspace agreements” relating to the proposed redevelopment of filling-station sites. Valero had sold the properties to Azure Properties Ltd and Somerfield Stores Ltd under an agreement dated 28 April 2005, completed by transfers dated 21 June 2005.

The claimants alleged that the sales breached an implied term prohibiting disposal, or alternatively put Valero outside its power to perform its obligations, amounting to repudiatory breach. They said they had accepted the repudiation. Valero denied breach, relied on arrangements with the purchasers, alleged affirmation, and pleaded limitation. The trial concerned a preliminary issue on liability for repudiatory breach only.

1. Implied term. No term prohibiting Valero from selling the sites was implied. The agreements contained restrictions on assignment by the developer but no equivalent restriction on Valero. The express terms and commercial context did not make the proposed term necessary or obvious.

2. Power to perform. Valero nevertheless put itself outside its power to perform its personal obligations by transferring the sites. The sale documents did not impose on Azure and Somerfield enforceable obligations, in favour of Valero, to perform the airspace agreements. The transfer covenants were construed as indemnities, following Harris v Boots, Cash Chemists (Southern), Ltd [1904] 2 Ch 376, rather than as clear covenants requiring specific performance. The Landlord and Tenant (Covenants) Act 1995 did not apply to the unexercised option agreements or the conditional agreements.

3. Affirmation. The claimants knew of the sales and the purchasers’ position, yet deliberately continued to pursue planning applications, appeals and other contractual steps. They did so either to preserve the agreements while seeking performance through Valero, or to improve their position in a damages claim. This conduct affirmed the agreements. They therefore could not rely on repudiatory breach.

4. Communication. There was no clear and unequivocal communication accepting repudiation. Dropping planning appeals and allowing agreements to expire did not, in the circumstances, communicate acceptance to Valero.

5. Limitation and further claim. The claim was not statute-barred because the relevant loss of power occurred on completion of the transfers, not necessarily on entry into the sale agreement. The alternative damages claim for non-repudiatory breach was adjourned for further argument on pleading, amendment, limitation and related matters.