In Dooba Developments Ltd v McLagan Investments Ltd [2016] EWHC 151 (CH) the High Court applied a literal interpretation of contract wording, based on grammatical correctness, in determining that McLagan was not entitled to terminate a conditional sale agreement.

Summary of the facts

McLagen, a subsidiary of Asda, entered into a conditional agreement with Dooba for the sale of land associated with a development of a new supermarket and ancillary retail units. The agreement was conditional on the satisfaction of four conditions related to planning permissions and highways consents.

The agreement provided that either party was entitled to rescind the agreement if “all of the Conditions have not been discharged” by the long stop date.

Four years after the agreement was entered into three of the four conditions had been satisfied.

The day after the long stop date McLagen sought to terminate the agreement on the basis that Dooba had not satisfied all of the conditions.

Dooba claimed that the fourth condition had been satisfied prior to the long stop date but, in any event, the agreement only allowed a party to terminate the agreement if all of the conditions had not been satisfied i.e. because Dooba had satisfied at least three out of four of the conditions McLagen had no right to terminate.

The court had to look at the wording of the agreement and the ambiguity created by using the word ‘all’rather than ‘any’.

McLagen referred to case law where ‘if all are not’ was used to mean ‘if not all were’ in contending the intention was that the parties could terminate the agreement if any of the four conditions had not been satisfied by the long stop date.

Dooba’s position was that the word “all” should be given its ordinary meaning in that the parties could only terminate the agreement if all of the conditions had not been discharged and that, since they had discharged at least three, no right to terminate arose.

Decision

The judge favoured Dooba’s interpretation of the agreement in finding that McLagen did not have the right to rescind the agreement, even though this meant that the agreement would continue after the long stop date with no certainty as to when / how the agreement could be brought to an end.

Conclusion

Hindsight is a wonderful thing. Had McLagen used the word ‘any’ instead of ‘all’ it would have probably removed the ambiguity and prevented the dispute from occurring.

The decision seems to lack commercial sense, locking the parties into a seemingly never-ending agreement to try to fulfil all of the conditions, but should serve as a warning to carefully review the wording of a contract to ensure it properly reflects the intentions of the parties.