Law firm faces £5.1m breach of contract claim

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28 July 2015


RCJ

Judge Klein: “contrary agreement has to be a clear agreement”

London commercial property law firm Maples Teesdale is facing a claim for up to £5.1m for repudiatory breach of contract after losing a bid in the High Court to have the case thrown out.

Royal Mail Estates argued that the firm became a party to the deal to buy a property in West London for £20m after it emerged that the company on whose behalf it signed the contract was not incorporated.

Jonathan Klein, sitting as a deputy High Court judge, said his decision turned on two issues of construction – “a few words” in a contract and a “few words” in a sub-section of a statute.

Judge Klein said it was “purportedly agreed” that the properties, on Kensington High Street, would be sold to Kensington Gateway Holdings for £20m in December 2008. He said the contract was signed ‘for and on behalf of the buyer’ by “Maples Teesdale pp Buyer”.

The judge explained that the company was not incorporated until February 2009, but, at the time of the deal, neither side knew it. “Indeed, any other scenario would be highly improbable.”

The claimants argued that, under section 36C (1) of the Companies Act 1985, a contract made with a company which has not been formed has effect, “subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it”.

As a result, Royal Mail Estates claimed the deposit due under the contract from the defendants, Maples Teesdale and property developer Borzou Shirazi, and/or damages for repudiatory breach, which Judge Klein said amounted to a “total principal sum” of £5.1m.

Delivering judgment in Royal Mail Estates v Maples Teesdale [2015] EWHC 1890 (Ch), Judge Klein said the defendants applied for summary judgment, arguing that the claimant had “no real prospect” of succeeding on its claim.

The defendants relied on a clause in the contract, stating that “the benefit of this contract is personal to the buyer” as evidence of a “contrary agreement”.

Dismissing the application, the judge said a “contrary agreement has to be a clear agreement”.

He said he could not derive from the clause mentioned by the defendants an “intention on the part of the claimant and the defendants” to exclude section 36C.

“Bearing in mind that neither the claimant nor the defendants apparently knew that the company had not been incorporated, I cannot accept, on the evidence before me, that they had in mind section 36C when they agreed the words in question.

“The words are more apt to and were, in fact, in my view, intended to prevent (or restrict) a third party, say the defendants, becoming in effect third-party purchasers by way of assignment or sub-sale in circumstances where the original contracting party was the company.”

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