Francis and another v Vista Del Mar Development Ltd

An option must be exercised in strict conformity with its terms. Where it specifies no period for exercise, it must be exercised within a reasonable time, assessed as a question of fact in all the circumstances. Exercise of an option creates a new contract and changes the parties’ legal relationship to that of vendor and purchaser. Subsequent indulgence or forbearance does not, without an express agreement, abandon that contract, waive the right to enforce it, or release the other party from continuing obligations. A separate contractual right to enforce development obligations is not rendered inequitable merely because neighbouring owners may also enforce related restrictions.

The appellants purchased a building plot from the respondent subject to obligations to commence and complete construction within specified periods. Under the varied agreement, failure to comply gave the respondent an option to require the property’s sale back to it at a contractually defined price.

The respondent served a first notice in October 2013 and a second notice in July 2014 after giving the appellants further time in reliance on repeated assurances that construction would begin. The appellants resisted specific performance, arguing that the first notice was late or had lapsed, that the option could be exercised only once, and that the respondent’s delay and selective enforcement made specific performance inequitable. The Grand Court ordered specific performance. The Court of Appeal dismissed the appeal. The central issues before the Board were whether the first notice validly exercised the option and whether subsequent forbearance defeated enforcement.

The Board granted permission to amend the respondent’s pleading to allege that the first notice was effective. The issue was already part of the parties’ contentions and had been considered by the local courts. Further proposed amendments concerning convention estoppel, withdrawal and delay were refused.

1. Validity and timing of the option. An option must be exercised in strict conformity with its terms. Where no time is specified, exercise must occur within a reasonable time, which is a question of fact assessed in all the circumstances: United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904. The Court of Appeal’s finding that the first notice was served within a reasonable time, whether the relevant trigger was 9 January 2012 or 9 July 2013, was not challenged and provided a sufficient basis for treating it as valid.
2. Effect of exercise. Exercise of the option created a new contract. In relation to land, the purchaser became in equity the owner, while the vendor became a trustee with a continuing and substantial interest capable of protection: United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904; Shaw v Foster (1872) LR 5 HL 321.
3. Subsequent indulgence. There was no finding that the first contract for sale had been abandoned or that enforcement had been waived. The respondent’s further time and failure to implement the transfer timetable were induced by the appellants’ assurances. That conduct did not amount to an unconditional release or an agreement to an indefinite construction timetable. Such a result would have required an express agreement. Any convention estoppel analysis was therefore unnecessary.
4. Specific performance and other objections. The existence of enforcement rights in neighbouring owners did not make the respondent’s separate contractual rights inequitable. The allegation of discriminatory enforcement was rejected on the facts.
5. The Board did not need to resolve whether the option could be exercised only once or whether it conferred cumulative opportunities, because the first notice was effective.
6. The order for specific performance was upheld, and the Board advised that the appeal be dismissed.

1. Privy Council. Appeal dismissed; the Board advised Her Majesty accordingly: [2019] UKPC 14.
2. Court of Appeal of the Cayman Islands. Appeal from the Grand Court’s order for specific performance dismissed. The decision’s citation is not stated in the judgment.
3. Grand Court of the Cayman Islands. Mangatal J ordered specific performance on 20 September 2016.