Khashoggi Holding Company & Ors v Maurizio Molinari

A party may treat a contract as repudiated for self-induced impossibility only where non-performance has become inevitable in fact. Mere uncertainty, or dependence on the consent or discretion of an independent third party, is insufficient. Where completion is contractually contemplated for a future date, title and encumbrance obligations are ordinarily assessed by reference to completion, rather than signature. Warranties do not become conditions merely because the transaction is commercially important, particularly where the contract provides a remedy period. A claim for substantial damages requires focused evidence of the counterfactual, valuation, mitigation and loss. Fraudulent misrepresentation requires proof of a materially false representation, knowledge or recklessness, intention, reliance and loss.

The claimant agreed to acquire 75% of Metaenergia UK Limited under a share purchase agreement. The agreement required an initial payment and contemplated release of OakHill security and delivery of full title at completion. The claimant purported to terminate the agreement after learning that OakHill’s prior consent to certain transfers had not been obtained. The sellers rejected that termination and terminated the agreement for the claimant’s renunciation and failure to pay.

The claimant sought declarations arising from alleged repudiatory breach and frustration. The defendants counterclaimed for breach of contract, deceit and breaches of warranties, relying in part on a later transaction with IKOPUS. The central questions were whether the sellers had disabled themselves from performing, whether the claimant’s termination was effective, and whether any counterclaim had been proved.

1. Claim dismissed. The defendants’ counterclaims also failed.
2. The SPA required the sellers to transfer the Sale Shares with full title guarantee with effect from Completion. The parties’ communications showed that completion was intended to occur after signature. The absence of OakHill consent before completion therefore did not itself breach a condition or make performance impossible.
3. The warranties concerning authority and encumbrances were warranties, not conditions. The contract’s structure and commercial context did not show an intention to discharge the buyer for non-compliance at signature. Any breach was capable of remedy before completion by obtaining consent and, if necessary, re-transferring shares. The contractual 90-day remedy provision also applied to a claim founded on breach of warranty.
4. The defendants had not disabled themselves from performance. OakHill’s position created uncertainty, but not inevitable non-performance. OakHill wished the transaction to proceed and consent could still have been obtained. The reasoning in Geden Operations Ltd v Dry Bulk Handy Holdings Inc (The M/V “Bulk Uruguay”) was applicable.
5. Frustration would have failed in any event. No supervening event made performance radically different from that undertaken, and the alleged difficulty was not a qualifying change of circumstances without fault.
6. The claimant’s termination letter plainly renounced the SPA. It purported to terminate without establishing breach or frustration and proposed a different commercial arrangement. The defendants were therefore entitled in principle to damages, but failed to prove any quantifiable loss. The SPA and IKOPUS transactions were not shown to be sufficiently comparable, and there was no adequate valuation, trading or mitigation evidence.
7. The deceit claims failed because the alleged representations were not sufficiently established as representations, falsity and dishonesty were not proved, and there was no adequate evidence of reliance. The Batt claim also concerned loss allegedly suffered by Meta, which was not a party to the SPA.