Wild Duck Ltd v Smith & Ors

A party alleging prevention of contractual performance must prove prevention in fact. Where a landlord has a contractual right to step in and perform an obligation after the responsible party’s failure, exercising that right is not wrongful and does not breach an implied term not to prevent performance. The fact that the intervening party seeks payment or negotiates practical arrangements does not necessarily remove the contractual character of the step-in. In a tripartite agreement, the conduct of the party said to have been prevented is relevant to the overall evaluation, although it is not decisive.

Wild Duck held five 999-year leases of holiday units at a development. The leases imposed obligations on a Management Company to maintain and complete works on the common parts. After the developer entered liquidation, substantial works remained outstanding.

The lessors invoked a proviso in the leases permitting them to undertake the works where the Management Company failed to perform, and began works before later reaching an agreement for completion. Wild Duck claimed that the lessors had breached an implied term not to prevent the Management Company’s performance. The High Court dismissed the claim. The appeal concerned whether there had been a failure to perform, whether the lessors had acted under the proviso, and whether the Management Company’s conduct was relevant.

The appeal was dismissed and the High Court’s dismissal of the claim was upheld.

1. Failure to perform. By 1 September 2011 the Management Company was failing to perform its obligation to undertake and complete the outstanding works. It had commissioned a schedule and sought bids, but no contractor had been appointed, no building contract or detailed specification had been agreed, and the necessary funding had not been collected. Preparing to perform was not performance. The lapse of more than two years since the developer’s liquidation was also relevant.
2. Exercise of the contractual proviso. The implied term that the lessors would not prevent performance operated subject to the lessors’ contractual rights. Consistently with Luxor v Cooper [1941] A.C. 108 and Mona Oil Equipment v Rhodesia Railways [1949] 2 All E.R. 1014, conduct by a party entitled to step in and perform was not wrongful and did not constitute prevention. The lessors’ requests for early payment, their position on connection to the new sewage system, and their negotiation of payment terms did not mean that they had ceased to act under the proviso. The other parties were not obliged to accept non-contractual demands, but could not treat those demands as depriving the lessors of their contractual right.
3. Prevention in fact. Prevention was not a pure question of fact but required a multifactorial evaluation of the case as a whole. In a tripartite contract, the conduct of the party said to have been prevented was relevant, though not decisive. The Management Company’s lack of serious objection to the lessors taking over the works was significant. The principal reason for the conclusion was that the lessors were entitled to invoke, and did invoke, the proviso. Their conduct was therefore not wrongful and did not prevent performance.

• Court of Appeal (Civil Division) — dismissed the appeal and upheld the dismissal of Wild Duck’s claim.
• High Court, Chancery Division — Edward Murray sitting as a Deputy High Court Judge held that the lessors had not prevented the Management Company from performing its obligations and dismissed the claim.