Hawridge Strategic Land Limited v Millen Homes Limited

A covenant not to terminate an agreement by action or omission does not ordinarily require a party to renew an option before its contractual expiry. Expiry by effluxion of time is not termination by omission, particularly where the agreement remains in force after the option period ends. A duty to extend the option, involving continuing obligations, time and expenditure, requires clear contractual language. An express contractual arrangement disapplying a no-assignment condition may make the benefit freely assignable. A short construction issue may be decided summarily where the evidence and argument are sufficient, but the pleaded duty-of-care claim was not struck out at this stage.

The claimant, a strategic land promoter, claimed damages from the defendant property developer. The defendant had entered an option agreement for land and a conditional assignment agreement with Inland Limited. Inland later assigned its rights under the assignment agreement to the claimant. The first option period expired without the defendant serving an extension notice.

The claimant alleged that the defendant breached clause 5.2.2 of the assignment agreement by failing to extend the option, and also owed it a duty of care. The defendant sought summary judgment or strike-out, arguing that the assignment was ineffective, that clause 5.2.2 imposed no duty to extend the option, and that no duty of care was pleaded. The claimant sought summary determination of related contractual issues.

Disposition. Summary judgment was granted against the claimant on its claim based on clause 5.2.2. The claim alleging a duty of care was not struck out.

1. Summary determination. Under the Civil Procedure Rules 1998, the court may decide a short point of law or construction summarily where it has the necessary evidence and the parties have had an adequate opportunity to address it. The parties agreed that those conditions were met. The construction issue could therefore be determined without a trial.
2. Meaning of termination. The word terminate refers to bringing the agreement to an end. An omission falls within a prohibition on termination by omission only where it is the operative cause of the agreement ending. The failure to extend the option did not end the Option Agreement. The Option Period expired by effluxion of time. Clause 9.1 did not alter that analysis. The agreement remained in force, although rights and obligations exercisable only during the Option Period could no longer be exercised. The express termination provisions reinforced that distinction.
3. Clause 5.2.2. The obligation to take steps so as to ensure that the Option Agreement remained in force did not require the defendant to extend the agreement beyond its existing term. The commercial context was important. Extension would preserve significant planning and development obligations involving substantial time and expenditure. If the parties had intended to impose that onerous obligation, clearer words could have been used. On the objective construction principles stated in Marley v Rawlings [2015] AC 129 and Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The “Ocean Neptune”) [2018] EWHC 163 (Comm), no contractual duty to extend arose and there was no breach.
4. Assignment. Clause 2.8 restricted assignment of the benefit of the Option Agreement to Inland. The claimant relied instead on the Deed of Assignment of Inland’s rights under the separate Assignment Agreement, so clause 2.8 did not apply. The Assignment Agreement contained no prohibition on assignment. The disapplication of the standard no-transfer condition showed that its benefit was freely assignable.
5. Unresolved issue and duty of care. The court did not decide whether the words making the defendant’s obligations subject to Inland’s compliance created a condition precedent, because the issue was unnecessary and had not been argued orally. The defendant accepted that, if the Assignment Agreement was freely assignable, the duty-of-care allegation was not strikable. The court therefore declined to strike it out.