Apvodedo NV v Terry Collins (2008)
It was not within the purview of the court, hearing a case on an application for summary judgment, to determine complex questions of law and fact arising out of the construction of a contractual clause contained in an exclusivity agreement; the case necessitated a trial whereby all the evidence and all the arguments could be aired and judicially considered.
The applicant (P) applied for summary judgment against the defendant businessman (C) as representative of a property investment and development company (L) for money owing to it under a contract. In his capacity as representative of L, C had been led to believe that the Ritz hotel was about to come up for sale. C had entered into negotiations with men (X) claiming to represent the hotel's owners. In order to facilitate the release of relevant documentation pertaining to the sale, X required a down-payment of £1 million from L. For the purposes of funding that down-payment C entered into an exclusivity agreement with P on L's behalf. Under the terms of that agreement P would provide L with the required £1 million with which to pay X, and L would, upon completion of the transaction between L and X, resell the hotel to P. A clause of the agreement provided that if L had not received the necessary documentation by a specified date, then C would be liable to repay the £1 million to P. It later emerged that X had contrived to defraud L, C and P. X were in no position to act on behalf of the hotel's owners and had spent the £1 million. The fraud came to light and L realised that it would never receive the relevant documents from X. P issued an application for summary judgment against C for liability under the relevant clause of the agreement. C submitted that the agreement was void by reason of the common mistake of the parties in that, contrary to the understanding and assumption of the parties at the time of the signing of the agreement the relevant documentation pertaining to the sale of the hotel did not exist; and that the agreement was subject to an unsatisfied condition precedent that the documentation existed and that X was entitled to negotiate the sale of the hotel. P submitted that since L had never received the documentation promised to it by X, the agreement operated so as to make C personally liable to P for the repayment of the £1 million; and that there was no reason to imply a contractual term to the effect that the existence of the documentation referred to in the agreement was a condition precedent to the performance of C's obligation to pay P the £1 million, nor could the presence of an express term to that effect be conjured up by a legitimate process of contractual construction.
There was a real question whether the allocation of the risk of non-receipt of the documentation in the relevant clause of the agreement and the corresponding obligation to pay the £1 million was absolute and unqualified or whether it was dependent on the truth of the underlying common assumption that X were acting on behalf of the hotel's owners. It would not be possible for the court, at this stage of the proceedings, to determine the issue either way. The answer to that question depended on the court being able to conduct a proper trial of the issues having regard to all the evidence and was, necessarily, outside the ambit of a judge sitting on an application for summary judgment. (2) The defence of common mistake was one which, having considered the extensive jurisprudence, had a real prospect of success and in any event would turn on a detailed analysis of the factual matrix: that task was wholly beyond the ambit of a judge sitting on an application for summary assessment, Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (2002) EWCA Civ 1407, (2003) QB 679, Associated Japanese Bank (International) Ltd v Credit du Nord SA (1989) 1 WLR 255 QBD, Bell v Lever Brothers Ltd (1932) AC 161 HL, Krell v Henry (1903) 2 KB 740 CA considered. C was entitled to a proper hearing, indeed the complexity of the case required one.
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