Locke Jr. v Bellingdon Ltd et Al

JurisdictionBarbados
JudgeSimmons C.J.
Judgment Date06 December 2002
Neutral CitationBB 2002 CA 42
Docket NumberCivil Appeal No. 19 of 2001
CourtCourt of Appeal (Barbados)
Date06 December 2002

Court of Appeal

Simmons, C.J.; Chase, J.A.; Williams, J.A.

Civil Appeal No. 19 of 2001

Locke Jr.
and
Bellingdon Limited et al
Appearances:

Dr. R.L. Cheltenham Q.C., Mr. G.C. Turney Q.C. of R.G. Mandeville and Co., and Mr. Alrick Scott for the appellant.

Mr. R. Mahfood Q.C. and Mr. Ramon Alleyne of Clarke, Gittens & Farmer for the First and Second respondents.

Sir Henry Forde Q.C. and Mr. Brian Clarke of Clarke, Gittens & Farmer for the Third and Fourth respondents.

Contract - Agreement for the sale of commercial property — Letter of Intent forwarded by appellant to the fourth respondent — Trial judge found that a binding agreement had existed between the appellant and the first respondent but that agreement had been repudiated by the appellant — Whether the trial judge had erred in law in holding that the appellant had repudiated the agreement when he had failed to pay the deposit — Finding that the letter of Intent did not constitute a binding and valid contract between the parties because the intention of the parties as disclosed by their language was not sufficiently certain — Finding that the appellant's conduct evinced an intention not to perform the contract and the failure to pay the deposit amounted to a breach of a fundamental term which entitled the respondents to treat the “agreement” as at an end.

Simmons C.J.
1

This appeal may be referred to as “ William E. Locke Jr. v. Bellingdon Limited No.2”. Twice in this year the Court of Appeal has heard and determined appeals involving these parties. The first appeal was against certain interlocutory orders relating to security for costs pending appeal and the quantum of a cross-undertaking as to damages.

2

In this appeal, interesting and important aspects of the law of contract fall for consideration. These include construction of an agreement, the legal nature and effect of a Letter of Intent in commercial transactions, the doctrine of “subject to contract”, communication of acceptance, the concepts of “fundamental breach” and “breach of a fundamental term” and repudiatory breach of contract. These several matters arise because the appellant (Locke) appeals the decision of Payne, J. who, at the trial, refused his claims for specific performance and various injunctions in respect of an alleged agreement for the sale and purchase of shares in two companies together with a promissory note which evidenced and acknowledged an inter-company debt.

THE PARTIES
3

Locke is an American businessman. Bellingdon Limited (Bellingdon), the first respondent, is a company registered and incorporated in the Isle of Man. The other parties are: Eastern Resorts Limited (Eastern), the second respondent, a U.K. company; the third respondent, Paradise Beach Limited (Paradise), a Barbados registered company and the owner of a very desirable piece of beach land on which stands the former Paradise Beach Hotel on the West Coast of Barbados, and Sandals Resorts International Limited (Sandals) is the fourth respondent. It is not registered as a company in Barbados but is alleged to be the ultimate beneficial owner of the shares in Paradise. Two directors of Sandals, namely, Gordon “Butch” Stewart and Patrick Lynch, were original defendants in the action but were struck out of the action by Payne, J. on October 4, 1999. There was an inter-company debt of $11 million owed by Paradise to Bellingdon and this was acknowledged by a promissory note from Paradise to Bellingdon.

THE FACTS
4

For some time prior to March 16, 1999, Locke had been interested in purchasing the Paradise Beach Hotel site located adjacent to the junction of three important highways with a beach frontage of approximately 900 metres. The legal vehicle by which Locke intended to purchase the site was not by purchase of the land but, rather, by purchase of the shares in Paradise and the inter-company debt acknowledged by the promissory note. On March 16, 1999, Locke therefore sent a Letter of Intent (the Letter) to Patrick Lynch of Sandals.

5

In that Letter provision was made for Locke to conduct a due diligence exercise and, with the co-operation of the respondents, he commenced that exercise. Lynch signed the Letter on April 16, 1999 but did not return it to Locke. Locke had not paid an initial deposit of US$100,000 and, according to Lynch, that was the reason why he did not return the Letter to Locke. On the other hand, Locke's evidence was that he did not pay the deposit because, in a telephone conversation with Lynch on March 25, 1999, Lynch had waived the requirement for payment of the deposit if he (Locke) undertook to complete the due diligence exercise within 2 to 3 weeks. The terms of that telephone conversation were disputed by Lynch and Locke, each of whom gave a different version of the conversation in evidence. The trial judge was therefore called upon to make a finding as to which version of the conversation he accepted and, suffice it to say at this stage, the trial judge accepted Lynch's version.

THE PLEADED CASES
6

The substantive pleadings on which the trial was contested were a re-amended Statement of Claim and an amended defence. It was the appellant's case that Paradise and Sandals had offered to sell him all of the shares in Paradise together with the promissory note for a total sum of US$19 million.

According to the re-amended Statement of Claim, sale and purchase were to be effected by a “two-stage process”. Stage 1 was for the parties to negotiate and agree the terms of the Letter and, in accordance with the Letter, three events were to take place. First, the property was to be taken off the market in consideration of a deposit of US$100, 000 paid to an agreed escrow agent; secondly, Locke was to carry out a due diligence exercise against the respondent companies within 60 days “to enable a stock purchase agreement to be concluded within a further 30 days” after the initial period of 60 days. Thirdly, the appellant alleged that “upon conclusion of the stock purchase agreement the purchaser was to pay a further sum of US$900, 000 making a combined deposit of US$1, 000, 000.”

Stage 2 was not pleaded but, in the course of argument, Locke's counsel told us that the second stage was “a mere formality concerned with the date of the deposit and the date of closure.”

7

In view of their centrality to this appeal we think it useful to refer to other parts of the pleadings. Thus, Locke alleged that he had discharged or was in the course of discharging “the condition of expeditiously carrying out his due diligence when the defendants ceased to perform their obligation to provide materials and information requested by the plaintiff. The plaintiff was ready and willing to deposit the sum of $100,000 but was prevented from so doing by Patrick Lynch in an oral conversation between the plaintiff and Lynch on or about March 25, 1999.” It was pleaded that the Letter, oral negotiations and correspondence passing between the lawyers for both sides “resulted in an agreement which the defendants were bound to perform…”

8

The agreement was particularized and alleged to have been made in writing through the Letter itself and correspondence between the lawyers; in so far as the agreement was oral, the agreement was said to have been made on March 25, 1999; in so far as the agreement could be inferred from conduct, Locke pleaded that the conduct was his expeditiously carrying out his due diligence and the defendants assisting with it. One important particular pleaded was that the defendants had expressly waived any requirement for payment of a deposit of US$100,000 “based on the defendants' assurance that the plaintiff's offer of US$19,000,000 was accepted by the defendants and would be honoured by them provided that the due diligence was expeditiously carried out.”

9

In addition, Locke purported to plead, quite imperfectly, a series of legal doctrines, for example, an implied term, waiver, estoppel, part performance and a collateral contract. Finally, it was alleged that on or about April 29, 1999, the respondents unlawfully repudiated the Letter and the alleged agreement “which had subsisted until then” while Locke was carrying out the due diligence exercise.

10

As Locke saw it, all of the elements of a binding contract had been agreed except for the “date of performance” which could not be negotiated because of repudiation by the respondents. He therefore sought from the trial judge a Declaration that there was a valid and subsisting agreement between himself and Bellingdon for the sale of the shares in Paradise as well as specific performance of the alleged agreement for the sale and purchase of the shares in Eastern and/or Paradise and consequential injunctions restraining the directors of the respondents from dealing with the shares.

11

In response to Locke's allegations, Bellingdon, Eastern and Paradise in their Amended Defence pleaded the Letter of Intent in its entirety and contended that, upon its true construction, it did not constitute a binding or concluded agreement between the parties for the sale and purchase of the shares. Moreover, they alleged that, even if there was an agreement, it was not enforceable in law and that Locke had failed to comply with a fundamental term of the agreement, that is to say, to make the deposit of US$100,000 and this deposit was a prerequisite to any further negotiations. In so far as the deposit had not been paid, these respondents claimed that they were entitled to treat the agreement as at an end for breach of a fundamental term. They denied the purported pleas of collateral contract, waiver, implied term, part performance and estoppel.

12

Locke in his amended reply contended that, if the deposit of US$100,000 was a fundamental term, it was waived by the conduct of the respondents who encouraged, participated in and co-operated with him in carrying out the due diligence exercise.

THE...

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