Alghussein Establishment v Eton College

JurisdictionUK Non-devolved
CourtHouse of Lords
JudgeLord Bridge of Harwich,Lord Elwyn-Jones,Lord Ackner,Lord Goff of Chieveley,Lord Jauncey of Tullichettle
Judgment Date05 May 1988
Judgment citation (vLex)[1988] UKHL J0505-1
Date05 May 1988

[1988] UKHL J0505-1

House of Lords

Lord Bridge of Harwich

Lord Elwyn-Jones

Lord Ackner

Lord Goff of Chieveley

Lord Jauncey of Tullichettle

Alghussein Establishment (Anstalt Mit Rechtspersonkeit Registered in Liechtenstein)
(Appellants)
and
King's College of Our Blessed Lady of Eton Beside Windsor (Otherwise known as Eton College)
(Respondents)
Lord Bridge of Harwich

My Lords,

1

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Jauncey of Tullichettle. I agree with it and for the reasons he gives I would dismiss the appeal.

Lord Elwyn-Jones

My Lords,

2

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Jauncey of Tullichettle. I agree with it and for the reasons he gives I would dismiss the appeal.

Lord Ackner

My Lords,

3

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Jauncey of Tullichettle. I agree with it and for the reasons he gives I would dismiss the appeal.

Lord Goff of Chieveley

My Lords,

4

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Jauncey of Tullichettle. I agree with it and for the reasons he gives I would dismiss the appeal.

Lord Jauncey of Tullichettle

My Lords,

5

This appeal relates to the construction of a clause in an agreement relating to development of land between the respondents and a company Suregrand Ltd. who later assigned their rights and obligations to the appellants. It may be said at the outset that the relevant part of the clause is of a most unusual nature the like of which will seldom be encountered in practice.

6

The respondents own a valuable site in Elsworthy Road in the London Borough of Camden. On 30 June 1978 they entered into an agreement with Suregrand whereby in consideration of payment to them of the sum of £150,000 they undertook to grant to Suregrand (1) a lease of the site and the development to be erected thereon, and (2) a licence to enter upon the site for the purpose of undertaking the development. In the agreement the respondents are described as the landlord and Suregrand as the tenant. Clause 3(a) provides that the tenant shall use its best endeavours to obtain all necessary licences permissions approvals and consents in respect of the development and clause 3(b) provides, inter alia, that the tenant undertakes:

"as soon as is reasonably practicable following all necessary licences permissions consents and approvals having been obtained as aforesaid to use its best endeavours to commence and proceed diligently with the development in accordance with such licences permissions consents and approvals and complete the development to the reasonable satisfaction of the surveyors …".

7

Clause 4, with which this appeal is primarily concerned, is in the following terms:-

"Upon the proper issue of the certificate of practical completion referred to in clause 3(a) hereof the landlords will forthwith grant and the tenant shall forthwith accept and execute a counterpart of the lease provided that if for any reason due to the wilful default of the tenant the development shall remain uncompleted on the 29th day of September 1983 the lease shall forthwith be granted and completed as aforesaid but without prejudice to the provisions of clause 3 hereof"

8

The lease referred to in the agreement and of which a draft is appended thereto is for 99 years and contains no convenant to build. Indeed its provisions assume that the site will have been developed before the commencement of the 99 year term.

9

On 12 March 1979 Suregrand, with the consent of the respondents, assigned to the appellants their rights under the agreement for the sum of £310,000. The respondents aver that during the summer and autumn of 1979, in 1980 and in 1982 they, through their solicitors, pressed the appellants to commence work on the site but to no avail. They further aver that on 8 August 1984 they wrote to the appellants stating that unless active steps were commenced immediately to pursue the development they would seek to rescind the agreement. The appellants' solicitors replied to that letter stating inter alia that the "target was a start of works in the very near future". No such start was made and by letter of 23 October 1984 the respondents' solicitors informed the appellants that the Agreement was terminated because of the appellants' repudiation thereof which they accepted.

10

On 6 November 1984 the appellants commenced the present action claiming first that they had never repudiated the agreement, second that because of economic factors it had not been reasonably practicable to start the development and alternatively that if they were in wilful default the respondents were bound to grant to them a lease in terms of clause 4. When the case came for trial before Sir Nicolas Browne-Wilkinson V.-C. it became apparent that the evidence was likely to range over a wide field and that its ambit might be restricted if certain questions of law could be answered in advance. The Vice-Chancellor identified two such questions namely …. - (first) whether it was open to the appellants to say that it was not reasonably practicable to commence and proceed with the development simply on the grounds that such development, if entered into, would not have been profitable to them or could only have been carried out at a loss to them, and (second) whether, if it were to be established that the development remained uncompleted on 29 September 1983 due to the wilful default of the appellants, they, as opposed to the respondents, were entitled to insist on a grant of a lease under the proviso to clause 4 of the agreement. The Vice-Chancellor answered both these questions in the negative and the Court of Appeal unanimously reached the same conclusion. The appeal to this House is concerned solely with the second question.

11

Before considering the judgments in the courts below it is important to emphasise that the preliminary question now before this House is not capable, whichever way your Lordships decide it, of finally disposing of this litigation. The crucial issue will remain to be resolved as to whether or not there was a repudiation of the Agreement by the appellants. Neither that issue nor any of the subsidiary issues which may arise in consequence of the resolution of that issue are before your Lordships. I well understand the Vice-Chancellor's concern to narrow the ambit of the trial and the first question he decided certainly has done so, but in relation to the second question with hindsight one can see that, as sometimes happens with preliminary questions which the parties bring up to your Lordships' House, the intended shortcut may prove in the end only to have prolonged the proceedings.

12

In answering the second question the Vice-Chancellor expressed a strong suspicion that the word "Not" in the proviso to Clause 4 had been omitted so that it should have read "provided that if for any reason not due to wilful default of the appellant …." Nevertheless, reluctantly and in the absence of any claim for rectification, he concluded that his suspicion did not go far enough to entitle him as a matter of construction to insert the word in the proviso. However relying upon New Zealand Shipping Company v. Societe des Ateliers et Chantiers de France [1919] A.C. 1he concluded that the appellants, if in wilful default, could not rely on their own wrong to found a legal right. That, said the Vice-Chancellor, appeared to be a principle which could not be tolerated whatever the clear words of the contract might say. In the Court of Appeal, Dillon L.J., with whom Woolf and Fox L.JJ. agreed, concluded, in the light of the authority cited, that as a matter of construction the proviso to clause 4 had to be read subject to the implied condition that the party seeking to found on the proviso was not himself in default.

13

My Lords it is well established by a long line of authority that a contracting party will not in normal circumstances be entitled to take advantage of his own breach as against the other party. In Rede v. Farr (1817) 6 M. & S. 121, Lord Ellenborough C.J. said, at pp. 124-125:

"In this case, as to this proviso, it would be contrary to an universal principle of law, that a party shall never take advantage of his own wrong, if we were to hold that a lease, which in terms is a lease for twelve years, should be a lease determinable at the will and pleasure of the lessee; and that a lessee by not paying his rent should be at liberty to say that the lease is void. On this principle, even if it were not borne out so...

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