Swinton Reds 20 Ltd v McCrory & Anor

A contractual deadline may be extended under a unilateral contractual power only where the parties have objectively reached an effective determination to extend it. Where discussions are referred to solicitors for approval, the agreement may objectively be conditional upon that approval. If the original agreement has expired, the parties may nevertheless conclude a new contract on substantially the same terms. The validity of that contract does not depend on their correctly describing it as a new agreement rather than a variation. The court determines the legal effect of the agreement from its objective terms and circumstances.

Swinton Reds claimed rectification of Seebeck’s register so as to record its alleged acquisition of 99% of Seebeck’s shares, which indirectly owned 98.5% of Swindon Town Football Club. The parties had entered into a Share Subscription Agreement subject to conditions precedent to be satisfied within 14 days. Those conditions were not satisfied by 25 April 2013.

The issues were whether the contractual period had been extended before expiry and, if not, whether an exchange of emails on 1 May 2013 created a new agreement on the same terms with a three-year completion period. The claimant also advanced estoppel arguments in the alternative.

1. The claim succeeded. The period for satisfying the conditions precedent was not extended before 25 April 2013, and the Share Subscription Agreement therefore ceased to exist on that date.
2. The parties’ prior oral agreement was objectively subject to the approval of their respective solicitors. The agreement concerned a complex transaction, and extending the completion period from 14 days to three years could affect other obligations, including restrictions on Seebeck’s conduct of business. The solicitors’ approval had not been obtained before expiry.
3. Had it been necessary to decide the formal points, the power in clause 2.4 was a unilateral power which did not require notice under clause 16. Clause 19.4 did not prevent its exercise, and clause 19.5’s writing requirement would have been satisfied by the emails.
4. The exchange of emails on 1 May 2013 created a new agreement. The parties had reached clear and certain agreement as to their rights and obligations, including the three-year period. Their mistaken description of the transaction as a variation of the expired agreement did not prevent the court from giving effect to the agreement actually made.
5. The objective construction of an agreement determines its legal consequences. The principle in Street v Mountford [1985] A.C. 809 applied: parties cannot alter the legal effect of concluded terms merely by attaching a different legal label to them. The difficulty in distinguishing a new contract from a variation did not justify defeating the parties’ evident agreement.
6. In the alternative, the court would have found an estoppel by convention, or a representation giving rise to estoppel, because the parties acted on the basis that the agreement had been revived and Swinton Reds relied detrimentally on that position.
7. The claimant was entitled to the relief claimed. The form of the order was to be determined after hearing counsel.