New High Court decision on operating machinery under option agreement
In Helix 3D v Dunedin a landlord and tenant entered into a side option agreement for the purchase of the freehold for a sum of at least £1.5m. In the first two years of the 5 year option period the purchase price was defined as £1.5m but the price in years 3-5 was to be the greater of £1.5m and the Open Market Value (as determined after the service of an option notice). A 5% deposit was required to be paid as at the date of service of the option notice. The tenant served the notice and paid a deposit of 5% of the £1.5m purchase price stipulated therein. The landlord maintained that the notice was invalid (or could not be known to be valid) as the purchase price may be determined in a sum greater than £1.5m.
In the High Court the Deputy Judge held that the option agreement's machinery could be made to work in a commercially sensible way so as to ensure that the option was capable of certain exercise in the last three years of a five year option period. Given that the document was infelicitously drafted, the clause concerning the payment of a deposit could be read so that the deposit payable was to be calculated by reference to the purchase price stipulated in the Option Notice as opposed to that which would be determined at a later date. The judge rejected the landlord's contention that the true construction of the agreement was that the tenant was to bid its highest offer, paying a deposit accordingly, as uncommercial as it gave rise to far too great uncertainty. Accordingly, the judge granted the declaratory relief sought.
Kester Lees acted for the Claimant and Charles Harpum acted for the Defendant.
Back to news listing
