Mill Reef Properties

• Jurisdiction: Antigua and Barbuda
• Judge: Lewis, C.J.,Lewis, J. A.,Davis, J.A.
• Judgment Date: 24 June 1971
• Neutral Citation: AG 1971 CA 11
• Docket Number: Civil Appeal No. 2 of 1971
• Date: 24 June 1971
• Court: Court of Appeal (Antigua and Barbuda)

Court of Appeal

Lewis, C.J.; Lewis, J.A.; Davis, J.A. (Acting)

Civil Appeal No. 2 of 1971

Mill Reef Properties

and

Clarence Johnson Construction Ltd.

Appearances:

J. Dear Q.C. (B/dos) and S. Christian for appellant

C. O. R. Phillips Q. C. and McC. George for the respondent

Contract - Breach — Damages — Whether damages awarded were excessive

Contract - Breach — Whether there was a breach of contract.

Contract - Certainty of Contract — Agreement to agree.

Facts: Evidence revealed that the respondent/tenants constructed buildings on lands leased from the appellants. The respondents were awarded damages for breach of contract when the appellants refused to pay a “reasonable sum” for the buildings.

Facts: Evidence revealed that there was a clause in the lease that at the end of the tenancy the buildings constructed by the tenant should either be removed or both parties agree on a “reasonable” sum to be paid to the tenant by the landlord.

Facts: The issue was whether a clause in a document was merely an agreement to agree. Evidence revealed that the appellant leased land to the respondent who constructed buildings on them. The lease stated that where buildings were constructed at the end of a tenancy they should be removed or the parties “shall agree upon a reasonable sum to be paid by the tenant to the landlord”.

Held: “Reasonable” requires that the interest of both parties be taken into account. Further, although the appellants must pay for the building, they did not require them. A reasonable sum was the mean of the highest and lowest values given by valuers. Appeal dismissed but damages varied downward.

Held: The appellants' failure to agree to a reasonable sum and their repudiation of the agreement was a breach of contract.

Held: The parties had a valid agreement and the court would not make it void since it was intended. The duty of the court is to construe the clause broadly and fairly without making a contract for the parties or going outside the words they have used seeking to give, if possible, legal effect to what the parties intended. Further, the present agreement provided a formula to settle the matter by agreeing that the sum must be reasonable. The agreement was therefore valid and enforceable. Appeal dismissed.

Lewis, C.J.

1 This is an appeal from the judgment of Louisy, J., awarding the respondents $51,700 damages for breach of contract and costs and dismissing the appellants' counterclaim.

2 The action was in respect of an alleged breach of Clause 3 (d) of a lease entered into between the parties by which the appellants demised to the respondents a portion of land at the Valley at Mill Reef, where the respondents had for some time been carrying on their business as building contractors. Part of the respondents' business both before and after the date of the lease, was the construction and maintenance of buildings at Mill Reef for the appellants and others. Indeed, the appellant company had been incorporated to acquire the business of Clarence Johnson and his wife, Helen who had been similarly engaged at Mill Reef since 1949. The lease was drawn up by the appellants' solicitors and executed on the 29 ^th April, 1965 and was on a yearly basis, to be determined by either party giving six months notice to the other. Rental was $12 yearly, if demanded.

3 On 7 ^th May, 1969 the appellants gave the respondents notice to terminate the lease on the 31 ^st December, 1969 and the learned judge found that the respondents gave up possession on that date. The respondents then had on the demised premises eleven small buildings used in connection with their business, and this case raises the question whether the appellants were bound, on the respondents electing not to remove the buildings from the land, to pay compensation for them.

4 It is necessary to set out the relevant clauses of the lease. By clause 2 the respondents covenated:

“(d) Not to erect any additional structure without the written consent of the landlord.”

5 By clause 3 (d) it was agreed as follows;

“(d) Any buildings, structures and/or other erections which the Tenant has built and paid for or shall at any time build and pay for upon the land shall remain the property of the tenant and the landlord hereby waives any rights of ownership that should otherwise accrue to it, and upon determination of the tenancy and tenant shall be at liberty to remove such buildings and/or other erections.”

6 The respondents duly notified the appellants that they did not propose to remove the buildings and called upon them “to come to a settlement for the buildings in the Valley as per the lease”. A difference of opinion immediately arose between the parties as to the proper construction to be put upon the words “or shall agree with the landlord upon a reasonable sum to be paid to the tenant by the landlord”. The appellants maintained and still maintain that they were not bound to pay for the buildings if they did not want them. They intimated that the respondents might either remove the buildings or abandon them. Correspondence was exchanged and discussions took place between the parties' solicitors as a result of which the buildings were assessed by Messrs. Wescott and Delisle, directors of another company controlled by the respondents. Their assessment of eight buildings, totaling $61,920, was forwarded to the appellants by letter dated 17 ^th January, 1970. This valuation was not accepted. Further discussions, including an interview with the appellants' general manager Colonel O'Neal, proved fruitless, as the appellants continued to maintain their position that they did not require the buildings and would not pay compensation for them.

7 The respondents' claim is set out in paragraph 8 of their Indorsement of Claim delivered on 30 ^th April 1970:

“8. Both before and after the determination of the said lease the plaintiff invited the defendant orally and in writing to come to an agreement in good faith “in accordance with clause 3(d) of the said lease” to arrive at a reasonable sum to be paid by the defendant to the plaintiff for the said buildings, structures and/or erections, but the defendant has neglected to do so and, in any event, denies being obligated to pay anything to the plaintiff in respect thereof”.

8 By paragraph 6 they alleged tat the eleven buildings were of the value of $68,985.

9 By paragraph 6 of the defence the appellants pleaded that clause 3(d) of the leases imposed to obligation on them to arrive at a reasonable sum to be paid by them to the respondents, or any obligation to pay anything as they did not require the buildings.

10 The learned judge found that the relevant portion of clause 3(d) meant that:

• “(a) When the tenancy comes to an end, the tenant may remove all the structures, buildings and erections he built on the land, OR

• (b) If the tenant does not remove them the tenant will agree with the landlord on a reasonable sum to be paid by the landlord to the tenant.”

11 He held that once the tenant elected to leave the buildings on the land it was for him to enter into negotiations with the landlord on the question of the payment of a reasonable sum for them: the question whether the appellants required the buildings or not did not arise: as no agreement on a reasonable sum had been reached and the appellants had taken the stand that they were not bound to acquire at a reasonable sum or at all, the court had to decide what was a reasonable sum to be paid for the buildings. Upon consideration of the evidence as to value, including three valuations, he came to the conclusion that $51,700 was a reasonable sum and awarded same as damages.

12 By their counterclaim the appellants asked, inter alia, for declaration that the respondents' statement of claim discloses no cause of action in that there had been no breach by the appellants of clause 3(d) or any other clause of the lease; and that clause 3(d) imposes no obligation on the appellants to purchase buildings which they do not require. This counterclaim was dismissed, the learned judge holding that there was a cause of action.

13 The first ground of appeal alleged error in the judge in holding:

• (a) that the respondents had a cause of action;

• (b) that on the pleadings the respondents were entitled to an award of damages; and

• (c) that the appellants had committed a breach of contract.

14 Alternatively ground 2 challenged the sum awarded as being unreasonable and against the weight of evidence.

15 At the hearing of this appeal, counsel at the Bar were agreed that the action is not one for the price of goods sold and delivered but for damages for breach of contract. Counsel for the respondents stated that two breaches were alleged, namely, neglect to enter into negotiations to agree upon a reasonable sum to be paid as compensation, and for repudiation of the agreement to pay a reasonable sum.

16 Under ground 1, learned counsel for the appellants submitted that the agreement contained in clause 3 (d) that:–

“The tenant…shall agree with the landlord upon a reasonable sum to be paid to the tenant by the landlord for such buildings and/or other erections”

17 was merely an agreement to agree in the future and did not constitute a legally binding contract. Although this point was not argued at the trial or specifically put forward as a ground of appeal, the Court held, overruling an objection by learned counsel for the respondent, that it could properly be argued under ground 1.

18 Counsel for the appellants submitted that this case fell within the ratio decidendi of the decision in May and Butcher Ltd. v. R. [1934] 2 Q.B. 17n in which it was held that an argument for the sale of goods which left the price to be agreed between the parties was not a concluded contract and was therefore not enforceable when the parties failed to agree on the price. By clause 3(d) the parties had...