Thorney Park Golf Ltd (t/a Laleham Golf Club) v Myers Catering Ltd

In construing a contract, the court must identify objectively what the parties intended from the agreement read as a whole. A general notice clause must not be read in isolation where another clause makes an initial term necessary to make the arrangement reasonable and to support development and investment. Where the contract makes obligations conditional on agreeing that initial term, the notice clause will not ordinarily permit termination during it. A material change from an earlier notice-only agreement is relevant background and should be given substantive significance. Commercial sense may therefore prevail over a syntactic reading that deprives the initial-term provision of practical effect.

Thorney Park engaged Myers to provide catering services at Laleham Golf Club under an unsigned draft agreement whose terms were accepted as contractual. Clause 4 provided for an initial three-year term, while clause 6 provided for termination on four months’ notice. Thorney Park gave notice after approximately one year.

In proceedings concerning sums allegedly due under the agreement, Myers counterclaimed damages for repudiatory breach. District Judge Trigg construed the agreement as allowing either party to terminate during the initial three years and dismissed the counterclaim. The appeal concerned whether the notice provision operated during the initial term.

1. The appeal was allowed unanimously. Lord Justice McCombe delivered the judgment, with Lord Justice Ryder and Lord Justice Longmore agreeing.
2. The competing constructions were both commercially possible: the agreement could provide for a fixed initial term followed by termination on notice, or for a three-year term subject to termination on four months’ notice at any time. The question was what the parties must objectively have intended from this particular agreement, construed as a whole.
3. Clause 4 was significant because it stated that the initial three-year term was required to make the contract reasonable and to enable both parties to develop and invest in a viable business plan. Thorney Park’s obligations were expressed as arising upon agreement to those terms. Permitting either party to terminate on four months’ notice immediately after the agreement was made would undermine that structure and was inconsistent with the evident purpose of the clause.
4. The earlier agreement had allowed termination on three months’ notice without an initial term. The express insertion of the three-year initial term was therefore a material contractual change which required substantive effect. Although the syntax of clause 6 supported Thorney Park’s construction, reading that clause as permitting termination during the initial term gave it excessive weight and deprived clause 4 of its commercial significance. The agreement was accordingly construed as providing for a fixed initial term, subject to the specific immediate-termination provisions, with the ordinary notice right operating thereafter.

1. Court of Appeal (Civil Division): On 27 January 2015, allowed Myers Catering Ltd’s appeal.
2. Staines County Court: On 3 December 2013, District Judge Trigg determined the preliminary contractual-construction issue against Myers, dismissed its counterclaim and gave directions for the claim.