Introduction
[1] The Claimant commenced proceedings against the Defendant for an alleged breach of an agreement dated the 12th day of August 2016 between the Claimant and the Defendant for the lease of the Claimant’s property situate at 41B Lower Estate in the parish of St. Michael. The Claimant alleged that the Defendant signed and agreed to the terms of the said agreement but has failed to fulfil its obligations by terminating the agreement prior to completion. The Claimant insisted that it acted to its detriment in reliance on the Defendant’s promise to complete. The Defendant has however denied the existence of any valid subsisting agreement and alleged that the parties were merely at a negotiating stage. The Defendant also alleged that it incurred some level of loss and was placed in a compromising position.
[2] The issues arising out of this claim for determination are as follows:
Background
[3] Davco Inc. (“the Claimant”) is a company incorporated pursuant to the provisions of the Companies Act Cap. 308 having its registered office at 41B Lower Estate in the parish of St. Michael, and was at all material times the owner of the property situated at 41B Lower Estate (“the property”).
[4] Caribbean LED Lighting Inc. (“the Defendant”) is a company incorporated by way of the provisions of the Companies Act Cap. 308 and having its registered office situated at Building # 3, Square Foot Complex, Lower Estate, St. Michael.
[5] In July of 2016, a representative of the Defendant visited the property of the Claimant exploring the possibility of leasing the premises for its business but because of inadequate spacing combined with the need for at least 10,000-12,000 square feet for the operation of its factory, the Defendant expressed disinterest.
[6] Subsequently, to secure a lease agreement, the Claimant was willing to expand the property with the construction of two (2) storage bays (40 ft x 80 ft.) and communicated this proposal to the Defendant, which agreed to take possession by September 1, 2016. In the interim, the Defendant engaged the service of an interior decorator to prepare plans and drawings for its intended LED manufacturing plant and factory at the premises, at a cost of $20,000.00.
[7] The parties then commenced negotiations on the terms of the lease agreement and a draft agreement was prepared and dated August 12, 2016, by which the Claimant agreed to lease the property to the Defendant for a term of three (3) years commencing September 1, 2016 at rent totaling $168,000.00 per annum. One of the terms of the agreement provided for the construction of two storage bays which were estimated to cost between BDS$400,000.00 to BDS$600,000.00, that would serve as the extension of the warehouse facility.
[8] By August of 2016, it was discovered that the Claimant’s mortgagee had taken possession of and placed chains, security guards and guard dogs at the property pending the satisfaction of its outstanding mortgage on the said property. To mitigate this situation, the Defendant was asked to submit a letter of comfort to the Claimant’s Mortgagee, which it did, stating that it agreed with the second draft of the Lease Agreement which was signed and stamped: “For Discussion Purposes Only”.
[9] However, due to the delay of the construction of the extension of the two storage bays coupled with the pending negotiations, the Claimant was unable to deliver possession of the said property to the Defendant on both stipulated dates: September 1, 2016 and October 1, 2016. As a result, the Defendant extended its then current lease for an additional three (3) months.
[10] On November 23, 2016, the Defendant sent correspondence via email requesting to take possession of the property no later than mid-December 2016 for its factory to be fully functional by December 31, 2016. The parties then arranged for a site meeting.
[11] On November 28, 2016, at the site meeting of the parties’ representatives, it was noted that none of the works had been completed and the Defendant insisted that the property had to be ready by mid-December so that its factory could be functional by December 31, 2016.
[12] Following this, by correspondence dated November 28, 2016, Counsel for the Claimant memorialized the said undertaking to deliver possession of the premises on or before December 31, 2016, stating that an agreement had been reached with the storage bays to be completed by December 31, 2016 and the lease to commence on January 1, 2017.
[13] However, the Defendant refuted the terms stated in the email and by way of email dated November 28, 2016, the Defendant informed the Claimant ‘that the deal was off’ due to lack of confidence in the commitments given and that possession of the property would not be taken on the postponed date of December 31, 2016, or at all.
[14] As a result, the Claimant alleges that it has suffered loss and damage and commenced proceedings against the Defendant seeking, inter alia, the following:
[15] The Defendant filed a Defence and Counterclaim and which it claimed damages, inter alia, for
[16] The Claimant filed a Reply and Defence to the Counterclaim denying the Defendant’s claim under the counter claim and stated that it did not renege on the delivery of the property but rather, it was the result of the inclusion of terms and/or revised terms requested by the Defendant relating to the extension and renovation of the property that caused the delays.
[17] The draft lease agreement which was marked at the beginning of each page “FOR DISCUSSION PURPOSES ONLY” contains a few key clauses which are relevant to these proceedings. They are as follows:
interest in the property for $1,800,000.00 subject to the following conditions:
i & ii- construction of 2 storage bays
estimated to cost between $400,000.00 and $600,000.00;
iii.- if option to purchase is exercised, the additional cost for the extension of the storage bays shall be recoverable and will be added to the gross sale price;
to be deducted at signing of sale agreement.
any time prior to six months from the expiration of the term of the agreement;
Law & Discussion
The classical formation of a contract: Offer & Acceptance
[18] The basic constituent elements of a classical agreement are offer and acceptance, consideration, and an intention to create legal relations. Without these there can be no valid and subsisting contract. Professor Gilbert Kodilinye and Maria Kodilinye in the text entitled Commonwealth Caribbean Contract Law, provide compendious discussions on the formation of a contract, and delve deeply into the offer and acceptance scenario. The authors expressly state at page 7:
“The first requirement of a binding contract is that the parties should have reached agreement (consensus ad idem). Normally, an agreement is made when one party (the offeror) makes an offer to another (the offeree) which the offeree accepts…but where the alleged agreement is preceded by protracted negotiations conducted in lengthy correspondence, it may be difficult to discover a precise offer and acceptance. In such a case, it would be necessary for the Court to scrutinize the correspondence carefully in order to decide whether or not there was a concluded agreement”.
[19] The learned authors state at page 12 that:
“Once the existence of an offer has been proved, the Court must be satisfied that the offeree has accepted the offer in the above sense, and, if such acceptance is established, there will be a contract”.
[20] Moreover, Treitel in the text entitled Law of Contract, 12th edn., para 2-002 qualifies this definition by aptly describing an offer as:
“An expression of willingness to contract on certain terms made with the intention (actual or apparent) that it shall become binding as soon as it is accepted by the person to whom it is addressed”.
[21] Counsel for the Claimant submitted that there existed an agreement for a lease between the parties as encompassed in the draft agreement and upon which the Claimant had begun performance in good faith, and which was terminated by the Defendant. Furthermore, Counsel stated that as a result, the Claimant suffered loss and damage.
[22] However, Counsel for the Defendant denied that there was any agreement with the Claimant or that the document dated the August 12, 2016, constituted an agreement between them or that the said document was valid or binding on the Defendant. Counsel asserts that there were merely discussions and negotiations, and no agreement was ever in place.
[23] In the decision of Buder and Pfenning v Cox BB 2017 HC 23, Beckles J. was required to determine, inter alia, whether there was a valid binding contract between the parties and in so doing provided a comprehensive analysis on the formation of a contract. At paras.15-16 the Court said:
“A clear and undisputed contract can only exist where certain elements are present, namely, offer, acceptance, consideration, intention to create legal relations, completeness and certainty — see Chitty on Contracts, 32rd Edn, Sweet & Maxwell 2015 Vol. 1 at 2–001”.
“Therefore, in order to be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing further to be settled by negotiation between the parties. For it is well settled that an agreement to negotiate in good faith is not enforceable and an agreement which requires further negotiation and agreement on essential matters is not enforceable as such contracts are too uncertain to have binding force”.
[24] The Court then acknowledged at para. 17 that the first requirement for the formation of a contract is that the parties should have reached agreement. Beckles J then pointed out that:
“Generally speaking, agreement is reached when an offer made by one of the parties is accepted by the other. However, an agreement may lack contractual force on the ground of want of consideration. Also, when parties carry on negotiations, it may be hard to say exactly when an offer has been made and accepted because as the negotiations progress, each party may make concessions or new demands and the parties may in the end disagree as to whether they had ever agreed at all”.
[25] At para. 18, the Court stated that in deciding whether the parties have reached agreement the Court must look at all the correspondence exchanged between the parties and decide whether, on its true construction, the parties had agreed to the same terms and this is normally done by applying the objective test. The learned judge maintained at para. 19 that:
“In some cases after parties have reached agreement, it may be that the offer and acceptance are set out in formal documents the purpose of which may be merely to record the agreed terms or where it is stipulated that an agreement is to be embodied in a formal contract it may be that the agreement is regarded by the parties as incomplete, or as not intended to be legally binding, until the terms of the formal document are agreed and the document is duly executed in accordance with the terms of the preliminary agreement. This is generally the position where “solicitors are involved on both sides; formal written agreements are to be produced and arrangements are made for their execution”. The normal inference will then be that “the parties are not bound unless and until both of them sign the agreement”. Cheveny Consulting Ltd. v. Whitehead Mann Ltd. [2006] EWCA Civ 1303; [2007] 1 All E.R. (Comm.) 124 at [45] per Sir Andrew Morritt C.”
[26] Pursuant to para. 20 of the judgment, the Court succinctly pointed out the impact on an agreement which was labelled “subject to contract”. However, it should be noted that in the current matter, the purported agreement was stamped with the words: “For Discussion Purposes Only”. In that regard, Beckles J said:
“Usually, agreements for the sale of land by private treaty are made “subject to contract”. In those cases such agreements are normally regarded as incomplete until the terms of a formal contract have been settled and approved by the parties. In Winn v. Bull (1877) 7 Ch. D. 29 at 32, the defendant agreed to take a lease of a house for a specified time at a stated rent “subject to the preparation and approval of a formal contract.” It was held that there was no enforceable contract and Jessel, M.R. said, “It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared”.
[27] The principles and cases referred to above highlight and discuss what is referred to as domestic agreements, that is, agreements that are usually between individuals that outline their rights and responsibilities under the agreement. However, other considerations arise in relation to commercial agreements that vary in some material particulars from purely domestic agreements.
Commercial Agreements
[28] Commercial agreements are typically contracts between business entities or agreements regulating the business relationship between persons engaged or involved in business with each other and may be oral, written or partly oral and partly written. In the text Cheshire, Fifoot and Furmston’s Law of Contract, Eleventh Edition, the learned authors state that in commercial agreements, there is a presumption that the parties, through their negotiations and subsequent actions, intend to create legal relations and make a contract, but that presumption may be rebutted. In Davies on Contract, Ninth Edition, by Robert Upex & Geoffrey Bennett, the learned authors confirmed the rebuttable presumption principle in commercial agreements. They contend that in the normal scheme of commercial transactions, it is not necessary for the claimant to give affirmative evidence that there was such an intention, but that the presumption may be rebutted by reference to words and conduct of the parties.
[29] In Commonwealth Caribbean Business Law, Third Edition at page 85-86, the learned authors noted the following:
“In commercial agreements there is a rebuttable presumption that parties intend to create legal relations and conclude a contract. The establishment of the intention to create legal relations will be determined by the court on the basis of facts and may be established by evidence. The burden of rebutting the presumption of legal relations in commercial agreements lies on the party seeking to deny the contract (my emphasis).
“It is common practice in commercial transactions that businesses engaging in negotiations will often exchange detailed drafts of the proposed agreement. They may be marked ‘subject to contract’ or ‘Letter of Intent’. Where parties exchange letters of intent or agreements subject to contract and act before the preparation of the formal contract, the court will be required to examine all documentation and oral evidence very carefully to determine whether there existed an intention between the parties to create legal relations…”
Nevertheless, where, on examination of all evidence, it appears to the court that the parties came to a consensus on all the essential aspects of the bargain, it will be inclined to conclude that the was an intention to create legal relations and will hold that a contract was formed and is binding on the parties.” [my emphasis].
“Halsbury Volume 9(1) paragraph 674 puts it this way
“Although the courts will not make a contract for the parties where none exists, they will seek to uphold bargains made between businessmen wherever possible, recognizing that they often record the most important agreements in crude and summary fashion, and will seek to construe any documents fairly and broadly, without being astute or subtle in finding defects. If satisfied that there was an ascertainable and determinate intention to contract, the courts will strive to give effect to an agreement which lays down criteria for determining those matters left open; or machinery for achieving sufficient certainty, even where that machinery fails…Indeed businessmen involved in complicated negotiations do not always find it easy to say when a contract has been concluded: this issue is to be determined by looking at the entire negotiations between them; and a contract once made prime facie will not be destroyed by further negotiations between the parties”[emphasis mine].
[30] One of the leading authorities for this principle is Edwards v Skyways (1964) 1 All ER 494 which concerned an agreement between the defendant company and an airline pilot who was to be made redundant. The informal agreement stipulated that if the pilot withdrew his funds from the company’s pension fund, he would receive an ex gratia payment equivalent to his contribution. The pilot followed the terms, but the company subsequently faced financial difficulty and did not make the payment. The Court of Appeal upheld the agreement as legally binding because it had been made in a commercial context and the company’s use of the term ‘ex gratia’ raised a strong presumption that they intended to create legal relations.
[31] The House of Lords also considered the principle in Esso Petroleum Co. Ltd. v. Commissioners of Custom and Excise [1976] 1 All ER 117. In that case, the company organized a promotion along with the 1970 World Cup and the terms were that a person buying four gallons of petrol was also entitled to a free “World Cup Coin”. The coins had no value but were intended for promotional effect. Customs and Excise tried to recover tax on the coins on the grounds that they had been produced for general use. The question of whether there was an intention to create legal relations was considered and the majority concluded that there was such an intention.
[32] The question must be asked and answered about determining the intention of the parties in agreements. Lord Denning stated in Storer v. Manchester City Council [1974] 1 WLR 1403 (“Storer v. Manchester City Council”) that the courts should employ an objective test when determining whether there is an intention to create legal relations. In that case, a Conservative party-controlled company decided to sell council houses to their tenants for favourable rates. To help tenants purchase without the need for full legal formalities, they created a standard application form for tenants to use. The claimant applied using the form, asking to purchase the house with a mortgage. The city treasurer wrote back to the claimant, stating that the company would lend the claimant the full amount and enclosed a sale agreement. The letter instructed the claimant to sign the agreement and send it back, whereupon the company would send the claimant the version of the agreement they signed. The claimant duly did so. However, he failed to fill in a blank space in the agreement which specified the date on which the sale would be complete. Before the company could write back to the claimant, the Conservatives lost the local elections to the Labour party. This placed the company under Labour control. The Labour party opposed the sale of council houses, so the city wrote to the claimant stating that they would not be proceeding with the sale. The claimant argued that there was already a completed contract. Accordingly, they sued for specific performance of the sale. The company argued that there was no completed contract until the agreements had been signed and exchanged (this being the usual practice in land sale). They also argued that any contract was void for uncertainty, because the claimant left the date clause blank. The Court of Appeal held in favour of the claimant. The company’s scheme was objectively designed to dispense with the usual formalities associated with land sale. In light of this, the city treasurer accepted the claimant’s offer to buy the house. This was not a case in which the parties had implicitly or explicitly agreed that their arrangement would be ‘subject to contract’. There was therefore no need for an exchange of contracts. The date clause was merely of administrative concern, so its absence did not affect the contract’s validity.
[33] This approach was recently clarified by Lord Clarke in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] UKSC 14, para 45 as
‘…a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations’). The advantages of an objective test are that it allows for legal certainty as well as relying upon concrete evidence”.
[34] An example of the application and utility of the objective test was seen in Blue v Ashley (2017) EWHC 1928. The case concerned an agreement between Mr. Michael Ashley, the owner of the Sports Direct Group, and Mr. Jeffrey Blue, a business consultant which stipulated that if Mr. Blue could secure the share price of Mr. Ashley’s company to be above £8 per share, Mr. Ashley would pay him a £15 million bonus for his services. The agreement was made in a pub alongside other representatives of Sports Direct. The company’s share value did rise to above £8 but Mr. Ashley alleged that the agreement was mere ‘banter’ and refused to pay Mr. Blue the bonus. Subsequently, Mr. Blue brought an action in the High Court and Mr. Justice Leggatt focused on whether there was an intention to create legal relations. The case turned on the factual setting in which the alleged contract was formed and ultimately the claim was dismissed on the grounds that the social setting did not suggest, on the objective test, that a formal contract had been made therefore Mr. Blue could not rely on the agreement to elicit legal consequences.
[35] In the Matter of the Estate of Raphael Williams, Deceased, Cliff Williams and Aggie Williams v The Moorings Limited (2010) BVICV209/0083, the claimants as administrators for the deceased, claimed damages for work done for the deceased at the defendant’s facility. The parties met and agreed on a sum to be paid in full and final settlement of debts due to the estate. A week later, the claimants refused to accept the cheques, stating that the sum agreed on was initially greater than originally thought. They sought a further meeting to review additional documents and receipts which had come to their attention, but the defendant refused to enter further negotiations claiming that there was already a concluded contract. It was held that there was a binding concluded contract that claimants could not unilaterally change. Hariprashad-Charles reviewed the authorities and referred to Chitty on Contracts, 25th ed., para 104, as follows:
“The question whether the parties have reached a complete agreement frequently arises where there has been an agreement in general terms but the parties have stipulated for the execution of some further formal document. The problem then is whether the agreement is too general to be valid in itself and is dependent on the making of a formal contract, or whether the parties have in fact completed their agreement so that the execution of a further formal contract is intended only as a solemn record of the already completed agreement (my emphasis). This is a question of construction for the court. In the words of Parker J in Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, 288-89: “It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored”.
[36] It is without doubt that the transaction between the Claimant and the Defendant is of a commercial nature and in keeping with the dicta of the authorities referred to earlier, there is a rebuttable presumption that there is a concluded agreement. It should be noted that the facts of this transaction are not in dispute up to and including ‘the agreement’ to construct the additional bays, painting both interior and exterior, procurement of interior decorating designs and plans and the provision of electrical works. It does appear that the hand over date which shifted from as early as September to end of December 2016 was the main bone of contention that resulted in the Defendant walking away from the deal.
[37] There are a few things that stand out which, ineluctably will assist in determining this matter. Firstly, there is the letter of comfort provided by the Defendant to prospective financiers, and secondly, the email from Mr. Jim Reid, Founder and Chairman of the Defendant to Mr. Philip Davis of the Claimant, dated November 23, 2016. Finally, there is the procurement of services and payment of $20, 000.00 to interior designers for plans and drawings for the property. In relation to the letter of comfort, it is beyond doubt that the Claimant was experiencing financial difficulties. Indeed, it has been revealed that Claimant’s Mortgagee took possession of the property, and secured it in response to the Claimant’s failure to meet its obligations.
[38] Why did the Defendant provide the letter of comfort and said that it agreed with the attached terms of the draft agreement? The Defendant said in its written submissions that the letter was sent to assist the Claimant in procuring finances from its financiers but under cross examination, Mr. Reid said he ‘felt’ for the Claimant. Respectfully, these are businessmen schooled in the art of conducting business whether formally or not, and not simply lay individuals who do not always understand the implications of things said and done in business transactions. It seems to me that the letter of comfort was sent in good faith based on the understanding that there was a concluded agreement with the Claimant that would be enforced notwithstanding the label, ‘For Discussion purposes only’. That, in my opinion is the only reasonable conclusion that can be reached based on the circumstances of this case. Put slightly differently, the sending of the latter of comfort and the accompanying note, evinced an intention to be bound by the terms of the draft Agreement.
[39] The email from Mr. Reid to Mr. Davis dated November 23, 2016, in response to a letter written by the Claimant’s counsel indicating that the two (2) storage bays will be ready for occupation by December 31, 2016, with the lease to commence on January 1, 2017, is instructive. It said in part:
“I have already signed a lease in good faith which I understand was used to help you with the refinancing…The middle of December puts us in a bad situation with our current landlords as we signed a three month extension (of our current lease)…
We are getting decidedly fed up. Middle of December or the deal is off”.
[40] What is the deal referred to by Mr. Reid? Is it as alleged, continuing negotiations for the proposed lease or something more? I am hard-pressed to accept that it simply meant ongoing negotiations. Rather, it seems to be a concluded agreement for a lease for which the date of occupation of the property was shifting. On that note, there are competing arguments for the shifting dates. The Defendant on the one hand argued that the Claimant was unable to have the works completed on time while the Claimant placed the blame on the Defendant for constantly requiring changes to the construction plans. Whatever is the reason, in my opinion, it does not have any significant bearing on whether there was a lease agreement. At the time of the termination of ‘the deal’ there was a month remaining on the timeframe stipulated by the Claimant and two (2) weeks before the ‘drop dead’ date stipulated by the Defendant.
[41] The Defendant spent $20,000.00 in plans and drawings for the property which it is seeking to recover in its counterclaim. What troubles me is why would the Defendant spend $20,000.00 be spent on plans and drawings that if there were no concluded agreement? I am inclined to the view that is something that would be put in place when negotiations have borne fruit and there is an understanding that there is an agreement. What complimented that agreement was the Defendant insisting on choosing the colours for the interior painting as well as undertaking to do the electrical installations, while the Claimant was responsible for the exterior painting, the interior painting and the construction of the storage bays. There was earlier correspondence from the Defendant indicating that the lease agreement, which was signed by the Defendant, with its Common Seal affixed, was not legally binding, however, the Defendant’s conduct and course of dealings suggested otherwise.
[42] It should be noted that the letter from the Claimant’s counsel Elliott D. Mottley & Co. dated November 28, 2016, appears to be the notification that led to the Defendant ‘withdrawing from negotiations’. It is instructive and so far as is relevant states:
“We act on behalf of Davco Inc.
We refer to the lease between Davco Inc. and Caribbean LED Lighting Incorporated (“LED”) which is scheduled to commence on 1 January 2017.
Under the lease Davco Inc. has undertaken to construct two storage bays (40 feet by 80 feet).
Pursuant to instructions from our client, Davco undertakes to have the two storage bays completed by 31 December 2016”.
[43] The same day that letter was sent, Jim Reid sent an email to Diana Marshall at Massy Realty, the agent who introduced them to the property. It was copied to Gerard Borely. He wrote:
“I received copy’s (sic) of the lease and a letter from Elliott Mottley & co. this afternoon. I was expecting as promised at this morning’s site meeting, a one-page letter confirming that the factory will be ready for occupation on December 3st 2016.
Instead I received a rather terse statement that “Pursuant to instructions from our client, Davco undertakes to have the two storage bays completed by 31 December 2016.” This is not what we agreed this morning which was that the factory would be ready for occupation by December 31, 2016.
We formally withdraw from negotiations as we no longer have any confidence in commitments given”.
[44] There were no more discussions, and the Defendant did not occupy the property on December 31, 2016 or at all. The Elliott Mottley & Co. letter seemed to suggest that the terms of the lease would be satisfied by the finalization of the two (2) storage bays. On the other hand, the Defendant was of the view that there was more to be done than just the completed storage bays. What is critical was the timeframe between the expected handover and the proposed handover of the bays. It appears to be a period of two (2) weeks, from when the time was given by Mr. Reid as the middle of December compared with the Mottley letter stating December 31, 2016.
[45] Evidence was given by Mr. Davis for the Claimant and Mr. Reid and Mr. Borely for the Defendant, and it consisted of admissions and denials in support of each case. The Defendant’s witnesses were adamant that there was no agreement as they were ‘preconditions’ to be met and critical issues remained undecided. Mr. Davis on the other hand indicated that there was agreement in the main with the sole issue being a late payment penalty of 5% which he was advised that Mr. Borely rejected.
[46] At the November 28, 2016 site visit, it does appear that work had commenced on the storage bays, however, the witnesses disagreed on the progress. Mr. Reid said that it was minimal while Mr. Davis indicated that it was much more than that and further, that the contractor carrying out the works was present and gave Mr. Reid the assurance that the work would be finished by the agreed timeframe.
[47] I have analyzed the pleadings, reviewed the correspondence and the evidence based on the objective criteria outlined in the authorities referenced earlier. I have also examined the course of dealings by the parties and particularly the draft lease and conclude that there was a commercial agreement even though not fully executed on paper by the parties, but an agreement, nonetheless. There was an intention to be bound by its terms, notwithstanding the words “For Discussion Purposes Only”. In those circumstances, any further written requirement would be considered, according to Chitty on Contracts “…a solemn record of the already completed agreement”.
[48] However, as indicated by the authorities earlier cited, this is a presumption of a commercial agreement which is rebuttable, with the onus on the Defendant to rebut that presumption. I reviewed the pleadings, the witness statements and the evidence before the court and found nothing to rebut that presumption. To do so, the Defendant must establish to the court’s satisfaction that the presumed facts are not true. Expressed differently, it must establish that this was not a commercial transaction and there was no agreement. At best, the evidence reveals a series of denials of the existence of an agreement by the Defendant and an acknowledgment of an agreement by the Claimant but there was nothing before me to persuade me that the presumption was rebutted. In the circumstances, I hold that there was an agreement for a lease.
Agreement for Lease as good as Lease
[49] Counsel for the Claimant argued that the effect that an agreement for a lease is as good as a lease and that which was created between the parties is enforceable where the essential terms of the lease were expressed by the parties. Counsel referred to FBO 2000 (Antigua) Ltd. v. Bird [2008] UKPC 51 (“FBO 2000 (Antigua) Ltd. v. Bird”) in which the court held, at paragraph 17:
“Of the two issues argued before the Board their Lordships propose to focus on the appellant’s claim that there was a sufficiently complete agreement to warrant a decree of specific performance. To be enforceable an agreement for a lease must contain the essential terms of the transaction, the parties, the land to be leased, the term and the rent”.
[50] There is evidence that these four (4) criteria were satisfied in the case at bar. The parties are the Claimant and Defendant, the land to be leased is Unit 41 Lower Estate, St. George and the agreed term was three (3) years from September 1, 2016, and thereafter from year to year at the annual rate of $168,000.00 payable in advance in equal monthly instalments of $14,000.00. However, the Defendant in its written submissions contend that there is no consensus ad idem on several things, including:
[51] The Defendant further contended that the agreement must contain the essential terms “as well as any particular terms which are part of the bargain”. The authorities discussed in paragraphs [22] to [35] above all point to the existence of a commercial agreement in this case and highlight the fact that such an agreement is established once there is consensus on the essential terms of the agreement. The criteria set out by the House of Lords in FBO 2000 (Antigua) Ltd. v. Bird (para. 49] has been satisfied here.
[52] Of the items listed above in which it is claimed that the parties were not ad idem, the commencement date is the one that was previously discussed and some rationale for the shifting dates was provided. In any event, the commencement date is not one of the identifiable essential terms of an agreement. Items ii, iii and iv were the subject of discussions and seemingly, agreement was reached in relation to each. Items vi, viii, ix and x were covered in the draft agreement, with there being some ongoing discussions about the late payment penalties in viii. The amount of rent was fixed and the date of payment set, consequently any outstanding discussions about penalties for late payment could continue and would not derogate from the commitment to pay. In any event, the Defendant as at November 23, 2016, and discussed earlier (paras. [39] to [42]), was prepared to accept delivery of the property by mid-December, ‘or the deal is off’. That statement does not in my opinion, refer to ongoing discussions leading to an agreement, but rather concluded discussion and the consequent expected deliverables.
[53] That well known legal maxim, ‘an agreement for a lease is as good as a lease’ has its genesis in the locus classicus case of Walsh v Lonsdale (1882) 21 Ch.D 9 which was decided soon after the Judicature Acts of 1873-75 that fused common law and equity into one legal system where equity prevailed in cases of conflict between the two (2). In that case, the defendant, Lonsdale, agreed to grant the claimant, Walsh, the lease of a mill for seven years, the rent to be paid quarterly in arrears with a year’s rent payable in advance if demanded. The parties did not execute a deed for the grant of the tenancy, but the claimant moved in and paid rent quarterly in arrears. The defendant then demanded a year’s rent in advance. The claimant refused to pay. The claimant argued that under common law rules a lease had to be created by deed to be legal. This had not been done, therefore the lease was not legal. Referencing the equitable maxim ‘Equity looks on as done that which ought to be done’ the parties were treated as having a lease enforceable in equity from the date of the agreement to grant the lease. Such a lease was held under the same terms and the court could order specific performance of it. Lord Jessel stated [at 14-15]:
“The tenant holds… under the same terms in equity as though the lease had been granted… He cannot complain of the exercise by the landlord of the same rights as the landlord would have had if a lease had been granted”.
[54] That principle has formed part of the legal landscape in Commonwealth and other jurisdictions as reaffirmed by the Privy Council in FBO 2000 (Antigua) Ltd. v. Bird. It is part of the law of Barbados, as expressed in section 89 of the Property Act Cap. 236 which states that “lease” includes an agreement for a lease. I therefore hold that there was an agreement for a lease which was as a good as the lease itself.
Discharge by Breach: Repudiation
[55] Counsel for the Claimant has contended that the Defendant breached the agreement for a lease on or about November 28, 2016 when the Defendant notified the Claimant of its intention to terminate the agreement and of its refusal to enter into possession of the property at the postponed date or at all.
[56] Conversely, Counsel for the Defendant has denied the breach and counterclaimed the sum of $23,000.00 representing loss and damage for payment for the drawings and plans for the premises and payment for the additional three (3) month’s rent incurred. They contended that if there was indeed any legally binding and enforceable agreement then the Claimant negligently breached the same occasioning the Defendant’s loss and damage. Counsel further maintained that there was no breach by his client, the innocent party in the transaction.
[57] The learned authors of Commonwealth Caribbean Contract Law provide a description of the notion of breach of contract by repudiation at page 252 and posit that:
“Breach of contract always entitles the innocent party to sue for damages for the breach; but he will not be entitled to treat the contract as terminated and be discharged from his obligations unless the guilty party has either: (a) repudiated the contract; or (b) been guilty of a fundamental breach. In either of these two instances, the innocent party is entitled to regard himself as discharged from further liability to perform his obligations towards the guilty party, in which case the guilty party will also be discharged, though remaining liable to pay damages”.
[58] The authors at pages 252 to 253 later go on to delve deeper into the concept of repudiation and assert the following:
“Where one of the parties to a contract shows, by words or conduct, that he has no intention of carrying out his side of the bargain, he is said to ‘repudiate’ the agreement. Repudiation may be express, for example, where D wrote a letter to C stating that he did not intend to fulfill his obligations, or where a vendor of land orally refused to proceed with the conveyance following a dispute over the payment of legal fees...”
[59] Chitty on Contracts, 28th Edition, Volume 2, at paragraph 37–208 define a repudiatory breach as:
“where one party so acts or expresses himself as to show that he does not mean to accept the obligations of the contract any further, then this may, depending on the circumstances, amount to a repudiatory breach of contract. Generally, a breach of contract will only give rise to a claim for damages, and the innocent party will be obliged to continue its outstanding performance of the contract notwithstanding the breach. However, where there is a breach of a condition which amounts to a refusal to perform going to the root of the contract, then there will be a repudiatory breach entitling the innocent party on acceptance of the repudiation, to treat the contract as at an end”.
[60] In the current matter, there was an express repudiation of the contract on the part of the Defendant through electronic correspondence dated November 28, 2016 that was sent to the real estate agent. The Defendant made clear its intention not to continue with the agreement on the postponed date or at all, due to a lack of confidence in the Claimants’ promises. The Defendant acted on that notification and there was no more interaction between the parties. According to Chitty, that written declaration by the Defendant and its subsequent action in not fulfilling its part of the bargain went to the root of the agreement, that entitled the Claimant to treat the agreement as at an end.
[61] There is no evidence of formal acceptance of that communication by the Claimant, but it is inferred from its commencement of proceedings seeking damages for breach of contract. This indubitably points to an acceptance of the repudiation thereby resulting in the contract being at an end and incapable of being specifically performed by either party.
[62] I therefore hold that the Defendant repudiated the agreement between itself and the Claimant and is therefore liable to pay damages to the Claimant.
Damages
[63] In the matter of Nylotex Ltd v Barbados Industrial Development Corporation BB 2012 HC 10, Chandler J. scrutinized the measure of damages in circumstances where there had been a breach of contract and at para. 105 of his judgment it was implored that:
“The burden was on the plaintiff to establish its loss to the satisfaction of the court on a balance of probabilities. The measure of damages was to be ascertained by applying the principles established in Hadley v. Baxendale where Alderson B noted:
“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them”.
[64] The Court in Nylotex, supra, referred to the Plaintiffs’ submissions which read that the standard of proof only demanded evidence from which the existence of damage could be reasonably inferred and that there was adequate data for calculating it. (Biggin & Co. Ltd. v. Permanent Ltd. [1951] 1 KB 422 at 438, Ratcliffe v. Evans [1892] QB 524 at 532).
[65] In applying Nylotex, supra, to the case at bar, the Claimant must establish its loss to the satisfaction of the Court by the production of receipts, invoices, etc. However, with respect to the natural losses flowing from the breach, the Claimant must satisfy the court that it did in fact suffer the losses for which it seeks compensation. The court will therefore make that determination on receipt of submissions by both parties.
Disposal
[66] The court makes the following Orders:
BARRY L. CARRINGTON
Judge of the High Court
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