Shaker v Vistajet Group Holdings SA
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE TEARE,Mr. Justice Teare |
| Judgment Date | 18 May 2012 |
| Neutral Citation | [2012] EWHC 1329 (Comm) |
| Docket Number | Case No: 2011 FOLIO 595 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 May 2012 |
[2012] EWHC 1329 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Teare
Case No: 2011 FOLIO 595
Michael McLaren QC and John Taylor (instructed by Byrne and Partners LLP) for the Claimant
Akhil Shah QC and James Duffy (instructed by Bird & Bird LLP) for the Defendant
Hearing dates: 11 May 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application for summary judgment on a claim for the return of a deposit of US$3.55m. paid by the Claimant to the Defendant pursuant to the terms of a Letter of Intent ("LOI") dated 11 August 2010 in respect of a potential transaction concerning the purchase, operation and repurchase of an aircraft.
Although a great many points were canvassed in the parties' witness statements and skeleton arguments the oral argument on this application was sensibly limited to just three points. Two were points of law relating to the meaning and effect of the LOI. The third was whether the Defendant had raised a triable issue on one limited issue of fact. There was also a counterclaim to be taken into account.
The material terms of the LOI were as follows:
| "Seller | Airchallenge SA, a VistaJet Group company |
| Guarantor | VistaJet Group Holding SA |
| Purchase Price | USD 23,700,000 |
| Deposit | USD 3,550,000 |
| Final Payment | USD 20,150,000 |
| Cut-Off Date | 23:59 CET on Thursday 26 August 2010 |
| Registration | Currently N749BA, to be changed to OE-INU |
| Payment | Buyer shall pay the Deposit to Guarantor by 17:30 CET on Friday 13 August 2010. |
|
| The Deposit will be applied towards the Purchase Price as anticipated by the Transaction Documents, subject to the expiry provisions below. |
| Closing | Buyer agrees to proceed in good faith and to use reasonable endeavours to agree, execute and deliver the following documents by no later than the Cut-Off Date: • Aircraft Purchase Agreement with Seller • Program Ownership Agreement with VistaJet Luftfahrtunternehmen GmbH • Guarantee Agreement with Guarantor • Repurchase Agreement with VistaJet Ownership Holding SA (together, the "Transaction Documents"). |
|
| Seller agrees to refrain from selling the Aircraft to another buyer until the Cut-Off Date, subject to any extension of such date by written agreement of the parties. |
| Governing law | This Letter of Intent (including any non-contractual obligations arising out of or in connection with the same) shall be governed by the laws of England and the parties hereto submit to the exclusive jurisdiction of the courts of England. |
| Expiry | In the event that the Buyer fails to transfer the Deposit to the Guarantor by 17:30 CET on Friday 13 August 2010, subject to any extension by written agreement of the parties, this Letter of Intent shall automatically terminate without penalty or claim by either party and shall be void and of no legal effect. In the event that the Guarantor, Seller and Buyer, despite the exercise of their good faith and reasonable endeavours, fail to reach agreement, execute and deliver the Transaction Documents on or before the Cut-Off Date (subject to any extension of such date by written agreement of the parties): (a) this Letter of Intent shall automatically terminate following the Cut-Off Date without penalty or claim by either party and shall be void and of no legal effect; and (b) the Guarantor shall within five (5) business days following the Cut-Off Date refund the Deposit to the Buyer's nominated account. |
| Non-binding | Other than the provisions relating to the application, payment and refund of the Deposit and the confidentiality provisions hereunder, it is specifically understood and agreed that this Letter of Intent does not constitute a binding agreement upon the Guarantor, Seller and Buyer to enter into the Transaction Documents. Accordingly, the Guarantor, Seller and Buyer shall not be bound to each other or to any third party by any legal or equitable commitment whatsoever, other than as specifically set forth herein." |
The Cut-Off Date was amended on five occasions. The first amendment was dated 26 August 2010 and, inter alia, acknowledged that the Claimant was seeking financing. It was submitted that on the true construction of the amendment the Claimant undertook to exercise good faith and reasonable endeavours to secure written confirmation from the financing party on or before the Cut-Off Date. This was disputed but I shall assume that that is the true construction of the amendment.
The last amendment was dated 10 December 2010 and provided, inter alia, as follows:
"We acknowledge that, notwithstanding the exercise of good faith and reasonable endeavours by all relevant parties, (a) a written confirmation from a financing party will not be obtained and (b) the agreement, execution and delivery of the Transaction Documents will not occur by the Cut-Off Date. We hereby agree that the Cut-Off date be extended to 23.59 CET on Monday 17 January 2011 and that any reference to the Cut-Off Date in the Letter of Intent be construed accordingly without prejudice to any of the parties' ongoing rights and obligations thereunder. "
Thereafter there was no further extension to the Cut-Off Date. The Claimant maintains that he is entitled to the return of his deposit. He says that he proceeded in good faith and used reasonable endeavours to agree the Transaction Documents and to seek written confirmation from the financing party. The Defendant says that the Claimant did not proceed in good faith or use reasonable endeavours and submits that the Claimant cannot therefore satisfy the condition on which depends his right to the return of his deposit. In response the Claimant says that the obligation to proceed in good faith and use reasonable endeavours to agree the Transaction Documents and obtain written confirmation from the financing party is unenforceable in law and accordingly the Defendant's contention is irrelevant. That is the first issue of law. If the Claimant is wrong on that first issue he says that in any event the Defendant is contractually estopped from denying that the Claimant has proceeded in good faith and used his reasonable endeavours by reason of the terms of the fifth amendment to the Cut-Off Date. That is the second issue. The estoppel does not apply to the period after 10 December 2010. In respect of that period the Claimant says that the Defendant has not raised a triable issue that between 10 December 2010 and 17 January 2011 the Claimant failed to proceed in good faith and use his reasonable endeavours. That is the third issue.
The first issue: Enforceability
There can be no doubt that the Claimant's agreement to proceed in good faith and to use reasonable endeavours to agree the Transaction Documents and obtain written confirmation from the financing party does not give rise to an enforceable obligation in law. First, the "Non-binding" clause expressly states that the LOI does not constitute a binding agreement to enter into the Transaction Documents. Second, an agreement to negotiate or agree further agreements is unenforceable in law; see Walford v Miles [1992] 2 AC 126. Thus agreements to use reasonable endeavours to agree or to negotiate in good faith are unenforceable; see Multiplex Constructions UK Limited v Cleveland Bridge UK Limited [2006] EWHC 1341 at paragraphs 633–639 and Barbudev v Eurocom Cable Management Bulgaria EOOD [2012] EWCA Civ 548 at paragraphs 43–46. The reason for such unenforceability is that there are no objective criteria by which the court can decide whether a party has acted unreasonably and that a duty to negotiate in good faith is unworkable because it is inherently inconsistent with the position of a negotiating party. Agreements to reach agreement with a third party (such as the financing party in the present case) are also unenforceable for the same reason; see Scottish Coal v Danish Forestry [2009] CSOH 171 at paragraph 62.
The LOI states that the provisions relating to the application, payment and refund of the deposit are intended to be binding on the parties. The provision relating to the refund of the deposit states that the Defendant shall within 5 days following the Cut-Off date refund the deposit "in the event that the Guarantor, Seller and Buyer, despite the exercise of their good faith and reasonable endeavours failed to reach agreement, execute and deliver the Transaction Documents on or before the Cut-Off date". Mr. Shah QC, counsel for the Defendant, submitted that that clause made the exercise of good faith and reasonable endeavours by the Claimant a condition precedent to the Defendant's obligation to return the Deposit. Mr. McLaren QC, counsel for the Claimant, submitted that just as the obligation to exercise good faith and reasonable endeavours to agree the Transaction Documents or obtain written confirmation from the financing party is unenforceable so the alleged condition precedent is unenforceable.
I am doubtful that the LOI makes the exercise of good faith and reasonable endeavours by the Claimant a condition precedent to the Defendant's obligation to return the Deposit. It may simply assume that all parties will have exercised their good faith and reasonable endeavours. However, I shall assume that it does create such a condition precedent.
Upon that...
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