Citizenm LND St Paul's Properties BV v Chil Lte & Ors

Interconnected agreements forming a joint venture must be read together and in sequence, giving effect to detailed provisions governing the parties’ rights and obligations. A general partner’s broad management powers remain subject to limitations in the limited partnership agreement and related shareholders’ agreement. A power enabling directors to implement a waiver does not create an independent power to bypass conditions which the limited partnership agreement requires the active parties to waive first. Commercial purpose cannot override the plain meaning of the final agreements. Earlier heads of terms cannot impose a materially different bargain where the parties later adopt a different structure and detailed contractual arrangements.

CitizenM LND St Paul’s Properties B.V. and Chil Limited formed a joint venture through a limited partnership to acquire and develop a property as a hotel. Under a conditional sale and purchase agreement, the Partnership, acting through its general partner, could waive conditions precedent. The limited partnership agreement required the parties to operate schedules concerning funding and transport-related conditions. A shareholders’ agreement gave CitizenM-appointed directors discretion concerning waivers. Those directors served a waiver notice without a prior waiver under the schedules.

The High Court, Chancery Division, held the notice valid. The appeal concerned whether the shareholders’ agreement created a separate power to bypass the limited partnership agreement, and whether earlier heads of terms assisted interpretation.

1. Disposition. The appeal was allowed unanimously. The respondent’s notice was dismissed. The waiver notice was invalid.
2. Construction of the agreements. The sale and purchase agreement, limited partnership agreement and shareholders’ agreement had to be read together and in sequence. The general partner’s power to manage the Partnership under clause 5.1 of the limited partnership agreement was expressly subject to that agreement and the shareholders’ agreement. The schedules formed part of the limited partnership agreement and therefore limited the general partner’s management authority.
3. Effect of the waiver provisions. The detailed procedures in schedules 2 and 3 gave CitizenM and Chil rights and obligations concerning the Funding and TfL Conditions. Those provisions could not coexist with an independent power allowing the general partner to bypass them. Clause 6.8 of the shareholders’ agreement was a ministerial power enabling the CitizenM-appointed directors to implement a waiver already made in accordance with the schedules. It did not create a separate substantive power of waiver.
4. Interpretative considerations. The construction adopted gave effect to the detailed schedules and avoided making them effectively otiose. It also avoided extending clause 6.8 beyond the commercial purpose of preventing a party from wrongly frustrating the joint venture. The limited partnership structure did not justify the contrary construction. The court noted the statutory risk under the Limited Partnerships Act 1907 if limited partners participated in management, but it did not decide whether operation of the schedules constituted management.
5. Heads of terms. Even assuming the earlier Heads were admissible as an aid to interpretation, they could not be used to give the final agreements a different meaning. The parties had materially changed the structure and terms of the joint venture, including by introducing the limited partnership and detailed contractual conditions.

• Court of Appeal (Civil Division) ([2016] EWCA Civ 771): allowed Chil’s appeal and dismissed CitizenM’s respondent’s notice.
• High Court of Justice, Chancery Division: Murray Rosen QC, sitting as a Deputy High Court Judge, held on 22 February 2016 that the waiver notice was valid in claim HC2016000078.