CFI 013/2019 Hexagon Holdings (Cayman) Limited v (1) Dubai International Financial Centre Authority (2) Dubai International Financial Centre Investments LLC

Claim No: CFI 013/2019

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE
BEFORE H.E JUSTICE ALI AL MADHANI

BETWEEN

HEXAGON HOLDINGS (CAYMAN) LIMITED

Claimant/Respondent

and

(1) DUBAI INTERNATIONAL FINANCIAL CENTRE AUTHORITY
(2) DUBAI INTERNATIONAL FINANCIAL CENTRE INVESTMENTS LLC

Defendants/Applicants

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JUDGMENT

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UPON reviewing the Claimant’s claim form and Particulars of Claim dated 6 March 2019 (CFI-013-2019)

AND UPON reviewing the Defendants’ application dated 10 April 2019 for the Claimant’s claim (the “Claim”) and Particulars of Claim to be struck out and/or for immediate judgment in their favour (CFI-013-2019/1) (the “Application”)

AND UPON hearing counsel for the Claimant and counsel for the Defendants at the hearing of the Defendants’ application dated 10 April 2019 on 17 June 2019

AND UPON reviewing all the relevant documents on the Court’s file

IT IS HEREBY ORDERED THAT:

1. The Defendants’ Application is granted and the Claimant’s Claim and Particulars of Claim dated 6 March 2019 are struck out and immediate judgment is granted in the Defendants’ favour.

2. The Claimant is to bear the Defendants’ costs of these proceedings.

Issued by:
Nour Hineidi
Deputy Registrar
Date of Issue: 25 March 2020
At: 10am

JUDGMENT

Introduction

1. There is before the Court in the matter of Hexagon Holdings (Cayman) Limited v Dubai International Financial Centre Authority and Dubai International Financial Centre Investments LLC (CFI-013-2019) an application by the Defendants for the Claimant’s Claim and Particulars of Claim to be struck out on the basis that, they submit, neither discloses reasonable grounds for bringing the claim (the “Strike-Out Application”) or, in the alternative, for immediate judgment in their favour on the basis that, they contend, the Claim has no real prospect of success and there is no other compelling reason why it should be disposed of at trial (the “Immediate Judgment Application” and together with the Strike-Out Application the “Applications”).

2. The Claimant, Hexagon Holdings (Cayman) Limited (the “Claimant” or “Hexagon“), is a company incorporated in the Cayman Islands solely for the purpose of facilitating investment into a project which is the subject matter of this dispute (the “Project”). The shareholders of Hexagon are Ruby Limited as to 75% and the Gate Limited as to 25%.

3. The First Defendant, the Dubai International Financial Centre Authority (“DIFCA”), is the corporate body established by the Government of Dubai to oversee the strategic development, operational management and administration of the Dubai International Financial Centre (the “DIFC”).

4. The Second Defendant, Dubai International Financial Centre Investments LLC (“DIFCI” and together with DIFCA the “Defendants”), is a subsidiary of DlFCA established on 27 November 2005 which owns the real estate assets formerly overseen and managed by DIFCA, including the property at the heart of this dispute (the “Property”).

5. The value of the Claim is extremely large: the Claimant seeks AED 1,749,808,843.52 in damages in respect of alleged loss and damage which it alleges it suffered because of the Defendants. The relationship out of which the dispute has arisen is rather old: it dates back to the execution of an agreement on 5 May 2004 (the “Amended Agreement”). The Amended Agreement provided for an extremely important development: hundreds of millions of dollars of investment would see to the commercial development of a highly valuable piece of land within the DIFC. But despite all this, determination of the dispute will come down to a single, but no less important, question: did Hexagon, on 19 November 2018, validly terminate the Amended Agreement (the “Purported Termination”)?

If the answer to this question is yes, then Hexagon may be successful, wholly or partly, in its Claim against the Defendants. Hexagon says the Purported Termination was indeed valid, and on two separate grounds. These two grounds, to be discussed below, form the bases of Hexagon’s DIFC Courts Claim.

If the answer to this question is no, then Hexagon’s Claim is doomed. The Defendants say the Purported Termination was invalid, and on eight separate grounds. These eight grounds, to be discussed below, form the bases of the Defendants’ Strike-Out and Immediate Judgement Applications.

The Defendants’ Applications were argued before me at a hearing on 17 June 2019 and this is my reasoned decision.

Background

9. The Defendants have not yet pleaded a defence to the Claim. They submit that the grounds for the Court striking out the Claim and the Particulars of Claim or for granting immediate judgment are established in the Claimant’s own pleaded case; for the purpose of the Applications, the Defendants proceed on the basis that, firstly, they were in breach of the obligations in the Amended Agreement (the “Clause 3 Obligations”) which are the subject of the Claim (the “Clause 3 Breaches”) and that, secondly, they had renounced the Amended Agreement on 12 June 2012 (the “Renunciation”). Crucially, both the Clause 3 Breaches and the Renunciation – each being a ground upon which Hexagon purportedly terminated the Amended Agreement and upon which it now relies in these proceedings – occurred before the Purported Termination. It is necessary now, then, to turn to the Claimant’s case and the background of the dispute as it has outlined them.

10. On 14 December 2003, Nexus Capital SA (“Nexus”), a stock corporation company headquartered in Switzerland, entered into a joint venture agreement (the “Joint Venture Agreement”) with DIFCA in respect of a plan to develop the aforementioned Property into mixed-use real estate, with this plan being the Project.

11. The Joint Venture Agreement set out the way in which the parties would pursue the Project through a joint venture company (the “Joint Venture Company”) and provided, amongst other things, the following. Firstly, and pursuant to clause 2.1, the Joint Venture Agreement provided for certain operative provisions in the agreement to be triggered upon Nexus identifying and DIFCA approving an investor willing and able to invest the Total Project Capital (the “Investor”), as defined in the Joint Venture Agreement, by way of liquid finance into the Joint Venture Company (the “Condition Precedent”). In return for providing the Total Project Capital, the Investor was to receive paid up shares in the Joint Venture Company.

12. Secondly, and pursuant to clause 3.1, as soon as reasonably practicable after the satisfaction of the Condition Precedent (the “Effective Date”), the following steps were supposed to be actioned. Firstly, DIFCA and Nexus were to execute, and Nexus to procure, that the Investor executes a Deed of Adherence pursuant to which the Investor was to, amongst other things, agree to be bound by the Joint Venture Agreement. Secondly, DIFCA and Nexus were required to take all steps and sign all documents, and Nexus was required to procure, that the Investor signs all documents required on its part, as necessary to incorporate the Joint Venture Company. Thirdly, DIFCA, Nexus and the Investor were required to execute a shareholders’ agreement (the “Shareholders’ Agreement”) pursuant to which, amongst other things, the Investor and Nexus were to receive 85% and DIFCA 15% of the shares in the Joint Venture Company. Fourthly, DIFCA was required to execute, and DIFCA, Nexus and the Investor procure, that the Joint Venture Company execute a Sale and Purchase Agreement prepared by DIFCA in accordance with certain provisions of a schedule to the Joint Venture Agreement, and pursuant to which DIFCA would sell the Property to the Joint Venture Company. The purchase price of the Project Land was determined to be a minimum of AED 105,113,025 based upon a minimum total built up area of 1,051,130 square feet and was payable by the Joint Venture Company to DIFCA in the form of shares in the Joint Venture Company. Finally, and pursuant to clause 3.1.5 of the Joint Venture Agreement, DIFCA, Nexus and the Investor were to procure that as soon as possible after its incorporation, the Joint Venture Company would resolve to adopt the provisions of the Shareholders’ Agreement and the plans, proposals and computations attached as certain schedules to the Joint Venture Agreement, as may have been appropriately amended prior to such adoption.

13. On 5 May 2004, after Hexagon was identified and approved as the Investor, DIFCA, Nexus and Hexagon entered into an amendment of the Joint Venture Agreement, being the Amended Agreement. In summary, the Amended Agreement provided, amongst other things, that, pursuant to clause 2.3, the parties agreed that the Condition Precedent at clause 2 of the Joint Venture Agreement had been satisfied, with the Effective Date therefore being 5 May 2004. Pursuant to clause 2.4, the obligation in clause 3.1.2 of the Joint Venture Agreement was to be amended so that, amongst other things, the parties would be required to proceed immediately to incorporate a limited liability company in either Dubai Internet City or the DIFC to serve as the Joint Venture Company. Pursuant to clause 2.5.1, clause 3.2 of the Joint Venture Agreement, which included its termination provision, was to be replaced with an obligation upon the parties to use “their best endeavours in good faith” to complete the steps and procedures set out in clause 3.1 of the Joint Venture Agreement as soon as “reasonably practicable.” Pursuant to clause 2.5.2, paragraph 4 of Schedule C to the Joint Venture Agreement was replaced with an obligation on the Joint Venture Company to complete the Project within 4 years and 6 months following the execution of the Sale and Purchase Agreement.

14. Clause 3.1.3 of the Amended Agreement provided for the Shareholders’ Agreement to be executed between Nexus, Hexagon and the Defendants in a form prepared by Nexus and approved by Hexagon and the Defendants. During 2008, the parties sought to negotiate a draft of the Shareholders’ Agreement. However, at no time was the Shareholders’ Agreement executed.

15. Hexagon submits to this Court that it spent substantial time, effort and money in progressing the joint venture, including undertaking market and feasibility studies, developing a design concept and appointing designers, project managers and construction consultants. The Claimant says, furthermore, that it had engaged extensively with the Defendants with respect to the Project, including with respect to the preparation of the Shareholders’ Agreement, making presentations about the Project and pressing for the Project to progress.

16. Hexagon submits that over time the Defendants failed to comply with their obligations under the Joint Venture Agreement and the Amended Agreement, both of which required steps to be taken as soon as “reasonably practicable” and imposed a time limit on completion of the Project. In the circumstances, on 2 May 2012, the then project manager acting on behalf of Hexagon, Mr. Abdul Samie, requested on Hexagon’s behalf a status update of the Project and required further steps to be taken to progress the Project. But in its response dated 12 June 2012, DIFCl, on behalf of DIFCA, asserted as follows:

17. The Claimant’s legal representatives, King & Spalding, responded to this letter on 13 August 2012, expressing contrary views as to the status of the Amended Agreement and the Defendants’ obligations under it. The Defendants did not respond, however. The Claimant’s counsel wrote a further letter to DIFCI on 2 September 2012, reiterating the Claimant’s position while, Hexagon submits, reserving Hexagon’s rights. DIFCI, on behalf of DIFCA, responded on 27 September 2012, restating the position that one or other or both of the Defendants were not bound by the Amended Agreement.

18. The Claimant submits that these letters and the Defendants’ conduct prior to and following the exchange of the letters amounted to breaches of obligations under the Amended Agreement. As for the Defendants’ conduct, specifically, the Claimant submits that the Defendants committed the following breaches of the Amended Agreement. Firstly, in breach of clause 3.1.2, the Defendants did not proceed immediately to incorporate the Joint Venture Company and nor did they do so as soon as reasonably possible. Secondly, the Defendants did not execute the Shareholders’ Agreement, as required by the terms of the Amended Agreement. Thirdly, in breach of clause 3.1.4, the Defendants did not, as soon as reasonably possible or otherwise, execute the sale and purchase agreement in accordance with the Amended Agreement. Fourthly, and in breach of clause 3.2, the Defendants did not use their best endeavours in good faith to complete the aforesaid steps and procedures and nor did they do so as soon as reasonably possible after 5 May 2004. And lastly, the Defendants failed to promote the Project, in breach of clause 3.3. Collectively, these are the Clause 3 Breaches.

19. As for the letters, the Claimant takes the position that the these letters constituted a clear renunciation of the Amended Agreement, being the Renunciation, and that, moreover, it subsequently formally accepted this Renunciation by its letter dated 19 November 2018, being the Purported Termination.

20. The Amended Agreement, the Claimant submits, has accordingly been terminated and it should now be compensated for loss and damage incurred up until the Purported Termination. The Defendants disagree.

Discussion

21. According to Hexagon, not enough evidence has been furnished yet in these proceedings and the Court should accordingly restrain from making findings. In particular, Hexagon says the existence of highly contentious issues of fact which must be determined by reference to large volumes of communications, documentation and commercial activities over an extended period means the dispute is not amenable to summary disposal. However, as stated above, the Defendants have conceded to the Clause 3 Breaches and the Renunciation for the purposes of the Applications as each is outlined by Hexagon. Accordingly, the Defendants’ arguments are concerned with points of law as applied to the facts of the dispute as outlined by Hexagon itself. And I must not shy away from making a decision if the dispute boils down to points of law. As Lewison J said in Easy Air Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]:

If the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better.

It was open to Hexagon to deal with the questions of law raised by the Defendants and any deficiency in this regard has not been due to any lack of opportunity on the part of Hexagon to do so.

22. To proceed, Hexagon’s case is premised on the validity of their Purported Termination of the Amended Agreement. As mentioned above, the Purported Termination is expressed to be justified on two grounds – the Clause 3 Breaches and the Renunciation.

23. As also mentioned above, the Defendants say that the Purported Termination was in fact invalid. Even if the Clause 3 Breaches and the Renunciation did occur, they submit, the Purported Termination was invalid on eight separate grounds. In summary, the Defendants’ grounds are as follows. Firstly, the Defendants submit that the Clause 3 Breaches did not amount to fundamental non-performance under the contract law of the DIFC, being DIFC Law No. 6 of 2004 (the “Contract Law”) and that, therefore, Hexagon was not entitled to terminate on their bases. Secondly, they say, the Clause 3 Breaches were delay breaches and the requirements for termination based on non-fundamental delay breaches are set out in Article 81(3) of the Contract Law, while the Purported Termination failed to meet those requirements. Even if these first two propositions are incorrect and the Clause 3 Breaches amounted to fundamental non-performance, still, the Defendants submit, the Claimant had lost any right of termination by virtue of Article 87(2) of the Contract Law, as it failed to give notice within a reasonable time upon becoming aware of the Clause 3 Breaches; the Claimant had clearly and irrevocably elected to affirm the Amended Agreement, both expressly and by implication; the Clause 3 Breaches were cured prior to the Purported Termination by the Defendants evincing a clear intention to “get on” with the Amended Agreement and perform the Clause 3 Obligations; and the Clause 3 Breaches crystallised, that is, the cause of action in respect of those breaches accrued, within the meaning of Article 123 of the Contract Law, at the very latest and giving the Claimant the benefit of a large margin for error, within a few years of the date the Amended Agreement was entered into, rendering any cause of action arising from those breaches long since time barred under Article 123 of the Contract Law. Furthermore, the Defendants submit that the Claimant, again, clearly and irrevocably elected to affirm rather than terminate the Amended Agreement following the Renunciation, both expressly and as a matter of implication from conduct, thereby losing its termination right. And finally, even if the Claimant did not affirm the Amended Agreement, the Defendants maintain that the Renunciation was cured prior to the Purported Termination, by, again, the Defendants evincing a clear intention by them to “get on” with the Amended Agreement and perform their own obligations.

24. There is much overlap – in fact and in law – between the Defendants’ grounds which relate to affirmation and cure after the Clause 3 Breaches and the Renunciation had each occurred and so, to avoid repetition, I will depart from the order the Defendants have presented their Applications in and I will instead discuss arguments about affirmation together and arguments about cure, also, together.

The law

25. Before delving into discussion of the various submissions made by the parties, I will first set out the legal setting of the Applications. Pursuant to Rule 4.16 of the Rules of the DIFC Courts (“RDC”), the Court may strike out a claimant’s statement of case if it appears that the statement “discloses no reasonable grounds for bringing or defending the claim.” Similarly, RDC 24.1 provides that the Court may give immediate judgment in favour of a defendant if it is satisfied that that a claimant has no real prospect of succeeding on the claim (RDC 24.1(1)(a)) and there is no other compelling reason the case should be disposed of at a trial (RDC 24.1(2)). There is significant overlap between the proper approach to deciding applications for strike out under RDC 4.16 and immediate judgment under RDC 24.1. As Giles J explained in Nest Investment Holding Lebanon SAL & Ors v Deloille & Touche M.E. & Joseph El Fadl (CFI-027-2016) at [20]:

There is a degree of overlap between these two provisions. RDC 4.16 is apt for an application on the basis that, even if the pleaded grounds are accepted, the claim must fail. That can also be the basis for an application under RDC 24.1, but that rule is apt for an application on the basis of evidence showing that the claim must fail, or of absence of evidence to support it. The overlap suggests, however, a common approach under either rule, subject to questions of fact in an evidence-based application and to RDC 24.1(2).

After summarising the rules applicable to immediate judgment under RDC 24.1, at [23] Giles J cites the case of Francois Kryvenko v Renault Sport Racing Limited [2016] EWHC 2289 (Comm) as authority for the proposition that the “test for the RDC 4.16 avenue [i.e. strike out] has been regarded as materially the same.” For the sake of simplicity, then, I will proceed on the basis that no material difference exists between the two approaches and that the applicable legal principles may be applied interchangeably, with this judgment tending to adopt the language of the test for immediate judgment. I note for Hexagon’s benefit that to the extent that there is difference between the two standards, the English courts have held that the grounds for strike out are slightly narrower than for immediate judgment (see Swain v Hillman [2001] 1 All ER 91, 92) and I will have regard to this discrepancy. I further note that the DIFC authorities make clear that there is no difference between the approach to determining applications for strike out or immediate judgment taken by English law and DIFC law.

26. As set out in their Applications, the crux of the Defendants’ position is that, firstly, the Claimant has no reasonable grounds for bringing its claims and that it has no real prospect of success. To determine this position, the question that must be addressed is whether Hexagon’s Claim has a “realistic” as opposed from a “fanciful” prospect of success. Though speaking about the factual basis of a claim specifically, in Three Rivers District Council v Bank of England [2003] 2 AC 1, 26 Lord Hope provided guidance as to what will amount to “fanciful”:

…it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based.

By contrast to a claim which is “entirely without substance,” in order to have a “realistic” prospect of success a claim must carry some degree of conviction and be more than “merely arguable,” per Potter LJ in ED & F Man Liquid Products v. Patel [2003] EWCA Civ 472.

27. Furthermore, the Court should avoid conducting a mini trial. Any assessment of whether Hexagon’s Claim is “realistic” or “fanciful” will turn on the facts of the case and in the instance of real disagreements as to matters of fact, this Court should not seek to dispose of the case on an immediate basis. As Potter LJ explained in ED & F Man Liquid Products, “where there are significant differences between the parties so far as factual issues are concerned, the court is in no position to conduct a mini-trial.” However, the mere appearance of factual discrepancies does not, in and of itself, preclude the Court from giving judgment at an early stage. If a surface-level review reveals that a party’s case has been constructed on the basis of factual assertions which are likely to be false, for example, such a case may be amenable to summary judgment.

28. By way of a further corollary, the authorities dictate that complex cases are unlikely to be amenable to a summary process. As Lord Hope noted in Three Rivers at [26]:

The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.

29. Finally in respect of reaching a decision on whether a claim is “realistic” or “fanciful,” the Court must consider not only the evidence adduced by the parties in the context of the immediate judgment application, but also any evidence which could reasonably be expected to be available at the substantive trial. In Easy Air, Lewison J stated at [15(vii)]:

If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the Court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success.

Lewison J’s judgment in Easy Air goes on to note in the same paragraph that “it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction.” But such warnings against allowing the parties to mount “fishing expeditions” should be considered in light of Mummery J’s comments in Doncaster Pharmaceuticals Group Ltd v. Bolton Pharmaceutical Co 100 Ltd [2006] EWCA Civ 661:

The court should also hesitate about making a final decision without a trial where, even though there is no obvious conflict of fact at the time of the application, reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case.

30. In addition to the Defendants’ obligation to prove that the Claimant’s claim has no realistic prospect of success, pursuant to RDC 24.1(2) the Defendants must also prove that “there is no other compelling reason why the case or issue should be disposed of at a trial.” Per Megarry J in Miles v Bull [1969] 1 QB 258 at 266A, there will be a compelling reason for trial where “there are circumstances that ought to be investigated.” An example of a “circumstance that ought to be investigated” is one in which the parties’ actions in respect of a key transaction or event are difficult to discern or understand. For example, in Global Marine Drillships Limited v Landmark Solicitors LLP [2011] EWHC 2685 (Ch), Henderson J described how such a situation might arise:

In a similar way, I think it is at least arguable that, if Ms Jones was indeed authorised by Global Marine to pay £4.5 million to a Cheshire car dealer for the ostensible purpose of purchasing the insurance, the transaction assumes such a strange complexion, and so many obvious suspicions are raised, that the ability of the claimant to rely on the unvarnished terms of the Undertaking must be put in question, and the full facts of the matter need to be carefully scrutinised at trial. It would, in other words, be a classic example of the kind of case where there is an “other compelling reason” why it should go to trial, even if the court were not satisfied that the defendants had a real prospect of successfully defending the claim…

31. The preceding paragraphs, in my view, contain those rules and principles which are most relevant to the Defendants’ Applications and to which, therefore, I will have regard to as I determine them.

The Clause 3 Breaches: fundamental or non-fundamental non-performance?

32. The first of Hexagon’s grounds that I will discuss is the ground related to the Clause 3 Breaches. The first question that must be addressed so far as the Clause 3 Breaches are concerned is whether they amounted to fundamental or non-fundamental non-performance of the Amended Agreement. This is an important question as DIFC contract law makes a distinction between these two types of non-performance of contracts and provides distinct regimes for aggrieved-party termination for each. Where fundamental non-performance of a contract is established, under Article 86 of the Contract Law the aggrieved party is immediately afforded a right to terminate the said contract:

Where there is no fundamental non-performance, however, there is no such immediately-exercisable right. However, subject to certain conditions, an aggrieved party may later obtain a right to terminate. Article 81 of the Contract Law is the relevant provision in such circumstances, about which more will be said below. In either case, under Article 87 of the Contract Law, the right of a party to terminate a contract is exercised by notice on the other party. Before looking at these provisions more closely against the facts of the instant case, it is necessary to determine whether the Clause 3 Breaches constituted fundamental or instead non-fundamental non-performance of the Amended Agreement.

33. To recap, the Clause 3 Breaches relate to alleged breaches by the Defendants of clauses 3.1, 3.2 and 3.3 of the Amended Agreement. The timeframe for performance of the obligations under Clause 3.1 was specified as being “as soon as is reasonably possible after the Effective Date.” Clause 3.2 required the parties to use their best endeavours in good faith to complete the steps in Clause 3.1 “as soon as in [sic] reasonably practicable after the date of this Amendment Agreement” and the obligation to incorporate the Joint Venture Company was expressed as being required to be performed “immediately.” With the exception of Clause 3.3 which required DIFCA to “do all it can to promote the Project,” the obligations under Clause 3 were all prescribed to be performed within a timeframe specified in the Amended Agreement. And although the timeframe for performance of the obligation under clause 3.3 is silent in terms of an actual date, the consequence of Article 64(c) of the Contract Law is that this obligation was required to be performed within a reasonable time after conclusion of the Amended Agreement:

As such, it can be said that all Clause 3 Breaches were time-related breaches.

34. Hexagon proceeded with its response to the Applications on the basis that the Defendants had conceded, for the purposes of the Applications, to having committed fundamental breaches of the Amended Agreement. Accordingly, Hexagon did not itself outline why, as it saw it, the Clause 3 Breaches were of a fundamental as opposed to a non-fundamental nature. Unfortunately, however, this starting position of Hexagon’s appears to have been assumed as a result of a misreading or mischaracterisation of the Defendants’ submissions. In its “Application for Strike Out and/or Immediate Judgement,” being the submission Hexagon relied on in taking this starting position, the Defendants stated: “…therefore, this Application proceeds on the assumption that the Claimant is able to establish the Other Alleged Breaches…” Earlier in that submission, where the “Other Alleged Breaches” was defined – and this appears to be where the confusion has come from – the Defendants had stated: “the grounds upon which the Claimant purports to have been entitled to [terminate the Amended Agreement include]…that the Defendants’ alleged failure to perform its obligations under [clause 3 of the Amended Agreement] amounted to “fundamental non-performance” (the “Other Alleged Breaches”).” In my view, and while acknowledging that this passage could have been worded more clearly, the “Other Alleged Breaches” which the Defendants for the purposes of the Applications conceded to were the alleged breaches themselves and not to their status as fundamental or otherwise. This interpretation is supported – conclusively, I think – by another statement of the Defendants,’ several paragraphs later: “the Other Alleged Breaches, which relate to the failure to perform certain obligations within a timeframe, do not amount to “fundamental non-performance” justifying termination of the [Amended Agreement] as a matter of DIFC law.” (emphasis added) The Defendants had not, then, conceded to breaches which amounted to fundamental non-performance of the Amended Agreement, rather only to the occurrence of breaches without specifying a degree of seriousness. Accordingly, it was for the Claimant to demonstrate that the breaches amounted to fundamental non-performance of the Amended Agreement. Again, however, it did not.

35. The Defendants have elaborated on their stance. They take the position that the Clause 3 Breaches were simple breaches of the obligation to perform the Clause 3 Obligations within a particular timeframe. For a time requirement breach to constitute fundamental non-performance of a contract, they submit, and, in turn, for it to give rise to a right on the part of an aggrieved party to terminate, time must be “of the essence” under the contract. The Defendants argue that clause 3 neither expressly nor impliedly provides that the time for performance of the Clause 3 Obligations was intended to be of the essence of the Amended Agreement. “In these circumstances,” the Defendants stated in written submissions,

The Claimant cannot contend as a matter of DIFC law or common law that the Clause 3 Breaches, individually or collectively, constituted “fundamental non-performance” for the purposes of Article 86(1) of the DIFC Contract Law (interpreted by reference to Article 86(2)(b)).

36. In my view, the Defendants are correct. In Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2015] EWHC 718 at [96], Popplewell J summarised the condition for a time requirement in a contract to be “of the essence” of the contract:

37. To transpose Popplewell J’s exposition into the language of this jurisdiction, for a time requirement to be of the essence of a contract and, accordingly, for non-timely performance to amount to fundamental non-performance of that contract, the contract itself must expressly provide that such is the case. Returning to the instant matter, there is no such provision in the Amended Agreement stipulating that time is of the essence of that agreement; there is no term that might render timely performance of the Clause 3 Obligations a condition of the Amended Agreement and their breach as amounting to fundamental non-performance of it. It follows, I think, that the Clause 3 Breaches were non-fundamental breaches of the Amended Agreement. And it follows, in turn, that Article 86 of the Contract Law was not engaged by the Clause 3 Breaches and that Hexagon, therefore, did not qualify for the Article 86(1) right to terminate the Amended Agreement.

38. Being as they are non-fundamental breaches, the relevant provision in terms of termination is Article 81 of the Contract Law and in particular clause 3:

(3) Where in the case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate.

As a matter of uncontroversial fact, Hexagon has not taken the step required by Article 81(3) for termination under the Article to be valid: Hexagon did not give notice requiring performance of the Clause 3 Obligations within a reasonable period of time. Having failed to satisfy the requirements in Article 81(3), no termination right at DIFC law based on non-performance of the non-fundamental Clause 3 Obligations could have arisen. This is rather fatal to Hexagon’s case to the extent that the Claim relies on the Clause 3 Breaches as Article 81 provides the exclusive regime under DIFC law by which non-fundamental delay breaches can entitle an aggrieved party to terminate.

39. In my view, therefore, this ground of Hexagon’s Claim regarding the Clause 3 Breaches fails to disclose reasonable grounds for bringing the Claim and, moreover, it has no real prospect of success and nor is there a compelling reason why it should be disposed of at trial. The Clause 3 Breaches amounted to non-fundamental non-performance of the Amended Agreement and so any claim premised on their being fundamental breaches will unlikely have even a fanciful prospect of succeeding and much less a real prospect. And nor will Hexagon be able to amend its pleadings so that the Clause 3 Breaches are advanced as being non-fundamental delay breaches as, as shown above, it had not terminated the Amended Agreement in accordance with Article 81(3) of the Contract Law. For me, the Claim under the Clause 3 Breaches is of a simple nature and I think it can be struck out without any difficulty. And it is clear to me that further investigation will not assist Hexagon.

40. Before leaving this discussion, it should be noted that if given the opportunity, Hexagon will no doubt attempt to justify that the Clause 3 Breaches were in fact fundamental breaches. Indeed, in its grounding witness statement, Hexagon has made this relatively clear by means of emphasising Article 86(1) and (2)(c) and (d) of the Contract Law, which provide:

Hexagon, it can be inferred, takes the position – at least on a provisional basis – that the Defendants’ non-performance was intentional and that it gave Hexagon reason to believe that it could not rely on the Defendants’ future performance of the Amended Agreement. Allegations like these are not to be dismissed without due consideration at all and much less when determining strike-out and immediate judgment applications. As has been shown above, a court should not grant immediate judgment on the basis of the evidence before it at the time of the application and, instead, should have regard for additional evidence which can be expected to be available at trial. And it is not inconceivable that Hexagon will be able to adduce evidence which demonstrates intentional non-performance on the part of the Defendants. I will leave consideration of such potentialities for later in this decision. As will be noted, Article 86(2) is a non-exhaustive illustrative list which guides the Court in terms of its determination of a breach’s status as being fundamental or non-fundamental, but without binding the Court’s determination if any of the examples provided are or are not engaged. As such, it would be improper to give consideration to the possibility that the Clause 3 Breaches were or might be fundamental breaches on the basis of Article 86(2)(c) and (d) before consideration is given to the other grounds of the Defendants’ Applications which, needless to say, will provide further useful – and perhaps indispensable – guidance for the Court’s regard pursuant to Article 86(2).

41. I will now enter into the other issues that arise under the Clause 3 Breaches ground and in particular those issues that arise if the Clause 3 Breaches were in fact fundamental breaches. The Defendants submit that even if the Clause 3 Breaches amounted to fundamental non-performance under DIFC law, still, Hexagon’s Claim thereunder fails on multiple other grounds.

Notice within reasonable time?

42. The first of these other grounds, the Defendants submit, is that Hexagon failed to give notice of termination within reasonable time after it had or ought to have become aware of the Clause 3 Breaches, as required by Article 87 of the Contract Law:

In determining the “reasonable time” within which Hexagon was required to give notice to the Defendants of its termination, the point at, or range within which the Clause 3 Breaches had occurred must be determined. To approach this question, it is necessary to return to the Amended Agreement.

43. Clause 3.1 to the Amended Agreement provides that the obligations thereunder were to be performed “as soon as is reasonably possible after the Effective Date.” As said above, the Effective Date is the date upon which the Investor was identified and approved and that was deemed to have been fulfilled in the Amended Agreement such that the Effective Date was 5 May 2004. The clause 3.1 obligations, therefore, were required to be undertaken as soon as reasonably possible after 5 May 2004. The next question, then, is when did the “reasonably possible” timeframe extend to, after which performance of the said obligations would be late? This question, of course, is not easily answered due to the equivocal nature of the phrase “reasonably possible,” which requires the determination, further, of two equivocal terms: “possible” and “reasonably.” However, when putting this equivocal timeframe into its context, that is, into the context of the Amended Agreement and the Project it provided for, a maximum amount of time, at least, becomes relatively clear. Under paragraph 4 of Schedule C of the Amended Agreement there was an obligation to complete the Project within four years and six months of the execution of the Sale and Purchase Agreement. While the Sale and Purchase Agreement was never executed, for me, as a matter of ordinary commercial logic, the Clause 3 Breaches will have crystallised not long after the Amended Agreement was entered into and certainly within a period of years after that date.

44. As such, on any view, the Claimant was, or ought to have been, aware of the Clause 3 Breaches in the years following execution of the Amended Agreement. The Claimant nevertheless failed to give anything which could be considered notice of termination until the Purported Termination on 19 November 2018, that is, more than 14 years after the Amended Agreement was executed. This is patently beyond the “reasonable time” granted to an aggrieved party by Article 87 of the Contract Law for termination. As such, any right that Hexagon had to terminate the Amended Agreement on the basis of any fundamental breaches of that agreement was lost in the passage of what ended up being a rather lengthy period of time. Even if the Clause 3 Breaches were fundamental breaches of the Amended Agreement, then, Hexagon’s Purported Termination of it on their basis was nevertheless too late.

Claim on grounds of Clause 3 Breaches time barred?

45. Article 123 of the Contract Law provides:

The Defendants submit that this Article provides another fatal blow to Hexagon’s case: even if the Clause 3 Breaches crystallised within a few years of the date of the execution of the Amended Agreement, being, again, 5 May 2004, still, they submit, Hexagon’s Claim, which was issued on 6 May 2019 – some fifteen years after the Effective Date of the Amended Agreement – was well after the period of limitation in DIFC contract law had expired.

46. In reply, Hexagon submits that it has made repeated demands for performance of the Amended Agreement over the years, up to and including a memorandum dated 26 April 2012 and sent to the Defendants on 2 May 2012 (the “2012 Memorandum”).

47. This point can be dealt with swiftly. While Hexagon has brought the Court’s attention to these alleged attempts over the years for the Amended Agreement to be performed, it has failed to demonstrate to the Court what type of bearing this should have on the issue of whether the Claim is time barred. It is unclear whether Hexagon wants the Court to conclude something to the effect that the cause of action, that is, the Clause 3 Breaches, had not crystallised until after it had ceased demanding the Defendants to perform the Amended Agreement, with these demands having the effect of extending or continuing the timeframe for their performance until, crucially, within six years of the Claim being issued in May of 2019. To the extent that Hexagon would like the Court to arrive at a conclusion like this or something similar to it, it can be said at once that such would be at odds with the authorities: an obligation not performed within the time specified is breached once and for all upon the expiry of that time. In Larking v Great Western (Nepean) Gravel Ltd. (in Liquidation) (1940) 64 CLR 221, Dixon J stated on page 236:

If a covenantor undertakes that he will do a definite act and omits to do it within the time allowed for the purpose, he has broken his covenant finally and his continued failure to do the act is nothing but a failure to remedy his past breach and not the commission of any further breach of his covenant. His duty is not considered as persisting and, so to speak, being forever renewed until he actually does that which he promised.

And nor does it matter if the timeframe is specified in terms of a date or by a term like “reasonable.” In Farimani v Gates [1984] 2 EGLR 66, Griffiths LJ stated at [68]:

There is no difference between an obligation to perform an act by a given date and an obligation to perform an act within a reasonable time. If the tenant fails to perform the act within a reasonable time he has broken his obligation, which is a single and not a continuing obligation.

At [69], Slade LJ agreed:

I respectfully agree with Griffiths LJ that if in any given case the relevant obligation is to perform an act by a given date or (as the case may be) within a reasonable time, that is an obligation which can only be broken once; if the act has not been performed by that date or (as the case may be) within a reasonable time, there is a single breach of that covenant, but no continuing breach.

Whenever the Clause 3 Breaches occurred, they occurred once and finally; and nor did any attempts made by Hexagon for the Clause 3 Obligations to be performed have the effect of extending or continuing what were express provisions of the Amended Agreement. As stated above, in my view, the Clause 3 Breaches will have crystallised certainly within a period of years after Amended Agreement was entered into. And so, even if we are generous and say the Clause 3 Breaches had crystallised four-and-a-half years after the Amended Agreement was made, still, by Article 123 of the Contract Law, the instant Claim will have been grossly time barred.

48. Article 123 of the Contract Law seems to constitute a significant impediment to Hexagon’s Claim. To the extent that obligations agreed in May 2004 to be performed “as soon as is reasonably possible after the Effective Date…” and “as soon as in [sic] reasonably practicable…” had not yet been breached by May 2013 at the latest, it is arguable that they have not been breached until the present day either, and in which case they cannot be the basis of a cause of action. Because of Article 123, Hexagon is in the difficult position of having to demonstrate that the Clause 3 Breaches had in fact occurred as the Clause 3 Obligations had not been performed within a reasonable time on the one hand, while needing to simultaneously show that the Breaches had not occurred so early that the Claim would be time barred by the Article on the other. In other words, because of Article 123 of the Contract Law, Hexagon must establish that the Clause 3 Breaches had crystallised no earlier than nine years after the Amended Agreement – which, again, concerned a Project which was supposed to be completed in four-and-a-half years – was entered into; the “reasonable” timeframe given for performance of the Clause 3 Obligations – which it should be emphasised were preliminary obligations – would, therefore, need to be double the length of the time it was hoped the entire Project would be completed within. To me, this calculation seems to me to be unreasonable and by May 2013, six years before these proceedings were issued, the “reasonable” timeframe had long since expired. Accordingly, the Claim insofar as it is based on the Clause 3 Breaches is time barred.

Affirmation of the Amended Agreement after the Clause 3 Breaches and the Renunciation?

49. As stated above, there is overlap in the arguments pertaining to affirmation and cure in connection with the Clause 3 Breaches and the Renunciation and so, to avoid repetition, I will deal with the alleged affirmation of the Amended Agreement following both the Clause 3 Breaches and the Renunciation together and afterwards I will deal with the alleged cure of the Clause 3 Breaches and the Renunciation together also.

50. Before dealing with the question of the alleged affirmation of the Amended Agreement, the Renunciation should be brought back into the picture. To recap, in its letter dated 12 June 2012 to Tanmiyat Group in which Nexus and Hexagon were copied, DIFCI stated that it was “under no obligation to continue any negotiation with [Hexagon] (or any other party) of any Shareholders’ Agreement for the development of the Plot.” Hexagon submits that this statement constituted a renunciation of the Amended Agreement and a fundamental breach of contract, entitling Hexagon, at its election, to terminate the agreement. And, moreover, Hexagon submits that it exercised this entitlement by its letter dated 19 November 2018 in which it purported to terminate the Amended Agreement, being the Purported Termination. As with the Clause 3 Breaches, the Defendants proceed with the Applications on the basis that the Renunciation had taken place: “the Defendants are content to take the Claimant’s case at its highest.” However, the Defendants submit that the Purported Termination on the basis of the Renunciation was nevertheless invalid for two reasons, the first being, they allege, that previously Hexagon had affirmed the Amended Agreement following the Renunciation in June 2012.

51. To proceed, even if I am wrong in the foregoing paragraphs regarding the Clause 3 Breaches, and if the breaches in question did entitle Hexagon to terminate the Amended Agreement, and if, moreover, the Renunciation also gave Hexagon this entitlement, can it be said that the Claimant nevertheless went on to elect to affirm the Amended Agreement instead of terminating it, thereby waiving its entitlement? The Defendants say that Hexagon did indeed so affirm the Amended Agreement, both by express words and conduct, and that, therefore, it lost right to terminate the agreement based on those breaches.

52. In reply, and regarding the Clause 3 Breaches in particular, Hexagon has said regrettably little. For the same reason that Hexagon did not demonstrate the basis for its position that the Clause 3 Breaches were fundamental breaches, it overlooked the need to discharge the Defendants’ argument that it had affirmed those breaches:

…issues of affirmation and waiver have no relevance to fundamental non-performance. The Defendants, who only raised affirmation and waiver with regards to anticipatory breach, rightly do not dispute this principle.

With that said, Hexagon has made submissions relating to affirmation in the context of the Renunciation which sufficiently demonstrate its position about how the law regarding affirmation should be applied. I will now briefly discuss Hexagon’s position on affirmation, while acknowledging that it itself has not applied this position to the Clause 3 Breaches.

53. Hexagon relies on the case of Bournemouth University Higher Education Corpn v Buckland [2011] QB 323 and in particular Jacob LJ’s dicta at [52]:

Once [a contract breaker] has committed a breach of contract which is so serious that it entitles the innocent party to walk away from it, I see no reason for the law to take away the innocent party’s right to go. He should have a clear choice: affirm or go. Of course the wrongdoer can try to make amends to persuade the wronged party to affirm the contract. But the option ought to be entirely at the wronged party’s choice.

Hexagon appears to take the position that, if the Clause 3 Breaches and the Renunciation were fundamental, upon their coming about, Hexagon was afforded an inalienable right to terminate the contract; a right, ultimately, which it exercised by its Purported Termination.

54. In my view, this is incorrect. Buckland is indeed authority for the proposition that an aggrieved party may either “affirm” the breaches or “go.” But it is also authority, in my view, for the proposition that what an aggrieved party must do is take a step either way within an appropriate amount of time; an aggrieved party is not, as I understand it, afforded a right to affirm or go whenever it so likes. Just below in Jacob LJ’s judgment in Buckland, at [54] and [55], he states:

If these paragraphs appear to be not entirely relevant with respect to the instant matter, being as they are concerned with an employment contract, in my view they are relevant for this exact reason: all of the observations that Jacob LJ makes in respect of the employee that justify him being able to stay in employment for a time before terminating his employment contract without the initial inactivity being taken to be an affirmation of the contract, clearly do not apply to parties such as Hexagon and the Defendants. Hexagon has not submitted that the Clause 3 Breaches and the Renunciation placed enormous pressure on it and nor that termination of the Amended Agreement would result in its shareholders losing business equivalent to an employee losing his employment. And there is no obvious analogy either in the instant matter for the students in Buckland. In short, upon crystallisation of the Clause 3 Breaches and upon the Renunciation, in my view Hexagon will have had to “affirm or go” reasonably promptly, there being no reason why a delay would be justified; and to not “go” in a timely manner must, I think, be taken to be an affirmation of the Amended Agreement by Hexagon.

55. As Rix LJ said in Stocznia Gdanska SA v Latvian Shipping Co (No. 2) [2002] EWCA Civ 889 at [87]:

In my judgment, there is of course middle ground between acceptance of repudiation and affirmation of the contract, and that is the period when the innocent party is making up his mind what to do. If he does nothing for too long, there may come a time when the law will treat him as having affirmed.

In my view, it can be said without reservation that Hexagon far exceeded any period of time it needed to “make up its mind” about what it should do regarding the Clause 3 Breeches and the Renunciation before it finally attempted termination of the Amended Agreement by way of its Purported Termination. And, indeed, it seems clear to me that quite early on Hexagon had already made up its mind. By way of example, the following passages from a letter dated 13 August 2012 (the “Letter”) and a subsequent email dated 8 October 2015 (the “Email”) seem conclusive in this regard. In the Letter, which was from Hexagon’s lawyers to DIFCI, it was stated:

It is our client’s clear view (shared by this form on the basis of the detailed review we have undertaken of both the circumstances and documents relating to this matter), that there are clear contractual obligations upon you to complete the project process with our client.

In the Email, sent by representatives of Hexagon to those of the Defendants, the former stated:

I am now instructed by Mr. Al Romainzan that he and his partners have decided that they would like to implement the original agreement with the DIFCI and enter a joint venture to develop the plot.

Moreover, in a term sheet attached to the Email it stated in the background section:

The Parties hereby acknowledge and agree that the [Amended Agreement] is still valid and binding on the parties thereto…

It is also noteworthy that in a subsequent letter from Mr. Al Romaizan to H.E. Essan Kazim, Governor of the DIFC, Mr. Al Romaizan stated:

As per our first meeting in September 2015 and our agreement that the [JVA] is ongoing, binding and enforceable and must form the basis of Hexagon’s relationship with DIFC Investments LLC going forward, my legal advisers King & Spalding LLP circulated a draft term sheet to the DIFC legal department, on 8 October 2015…

56. As for the authorities, in Edge Tools & Equipment Ltd v Greatstar Europe Ltd [2018] EWHC 170, Martin Chamberlain QC stated at [55]:

Acceptance of repudiation requires a conscious intention to bring the contract to an end, or the doing of something that is inconsistent with its continuation. Affirmation may be express or implied. It will be implied if, with knowledge of the breach and of his right to choose, the innocent party does some unequivocal act from which it may be inferred that he will not exercise his right to treat the contract as repudiated.

57. As for the facts, there is no dispute that Hexagon knew of the Clause 3 Breaches at the time of the Letter, Email and Mr. Al Romaizan’s letter and of the Renunciation at the time of the Email and Mr. Al Romaizan’s letter. Nor has it been argued – and I do not think it could be argued – that Hexagon was unaware of its legal right to choose to “affirm or go”: Hexagon is a sophisticated commercial entity and it was at all material times advised by a reputable law firm. And in my view, the Letter, Email and Mr. Al Romaizan’s letter amount to an unequivocal acts from which it could have been inferred that Hexagon would not exercise any right to treat the Amended Agreement as repudiated. Under Edge Tools, Hexagon are, therefore, to be deemed to have affirmed the Amended Agreement. And with reference to Stocznia, it can be put another way: after the Clause 3 Breaches and the Renunciation and up until the Purported Termination, Hexagon did “nothing for too long” and it is, therefore, to be treated as having affirmed the Amended Agreement at law.

58. There is a final point to be addressed. Hexagon has said in submissions that it reserved its rights with regards to affirming or terminating the Amended Agreement on the basis of the breaches in question. In particular, it has brought the Court’s attention to a letter dated 2 September 2012 to DIFCI in which its counsel stated on its behalf:

In the event that we do not hear from you, our client will have no alternative but to take steps to progress matters and protect its position. All of our client’s rights are reserved in this regard.

As a matter of law, an innocent party may reserve his right to terminate a contract. In Stocznia at [87], it was stated: “if [the innocent party] maintains the contract in being for the moment, while reserving his right to treat it as repudiated if his partner persists in his repudiation, then he has not yet elected.” However, the reservation of a right to terminate is a step that can be taken instead of either affirming a contract or terminating it; I have not been shown an authority for the proposition that a contract can be affirmed while the innocent party simultaneously reserves his right. While discussing anticipatory repudiatory breaches, [87] of Stocznia supports, at least implicitly, the proposition that reservation cannot be combined with either affirmation or termination:

As long as the contract remains alive, the innocent party runs the risk that a merely anticipatory repudiatory breach, a thing ‘writ in water’ until acceptance, can be overtaken by another event which prejudices the innocent party’s rights under the contract – such as frustration or even his own breach. He also runs the risk, if that is the right word, that the party in repudiation will resume performance of the contract and thus end any continuing right in the innocent party to elect to accept the former repudiation as terminating the contract.

For me, and transposing the logic in the above passage, when Hexagon affirmed the Amended Agreement – and it should be noted that the Email was sent on 8 October 2015, that is, three years after the above reservation of Hexagon’s rights, as it should be noted that Mr. Al Romaizan’s letter was sent even later than this – those affirmations “overtook” any reservation of its right to terminate that it may have attempted to maintain: Hexagon’s affirmations precluded its ability to later elect to accept any former repudiation of the Amended Agreement.

59. In conclusion, I find that Hexagon had affirmed the Amended Agreement after the Clause 3 Breaches and Renunciation, thereby rendering any subsequent attempted termination based on them invalid.

Clause 3 Breaches and Renunciation cured?

60. The Defendants go further. They say in addition to Hexagon itself affirming the Amended Agreement after the Clause 3 Breaches and the Renunciation had occurred, the Defendants had themselves cured these breaches – crucially before the Purported Termination – by way of its Performance Letter which, they submit, evinced a clear intention by them to “get on” with the Amended Agreement and perform their own obligations under it. This, they say, constitutes another independent challenge to Hexagon’s Claim insofar as any subsequent termination based on the allegedly cured Clause 3 Breaches and Renunciation would be invalid.

61. For its part, Hexagon poses a question: is a contract breaker able to cure a past breach relating to a past obligation, as it may with regards to an anticipated breach of a future obligation? Hexagon submits the answer is “no.” While Hexagon acknowledges that an anticipatory breach may be cured if the defaulting party repents before the obligation crystallises and then performs the contract at the appointed time, it submits that the same is not true of fundamental breaches of obligations which have already arisen. Hexagon relies on the aforementioned case of Buckland and in particular [52] – partially cited above at [53] of this judgment – and [53]. The latter paragraph states:

That has been the common law rule for all kinds of contract for centuries. It works. It spells out clearly to parties to contracts that if they actually commit a repudiatory breach, then whether the contract continues is completely out of their hands. The rule itself discourages repudiatory breach.

On the basis of the Court of Appeal’s judgment in Buckland, the Claimant submits that the Defendants’ reliance on principles relating to “anticipatory” breach do not advance the Application in the face of fundamental breaches of past obligations.

62. The Defendants, however, have taken the Court to authority to the effect, they say, that certain actual, as opposed to anticipatory, breaches are now capable of cure. In Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] EWCA Civ 577 at [44], Lewison LJ stated:

First, the task of the court is to look at the position as at the date of purported termination of the contract even in a case of actual rather than anticipatory breach. Second, in looking at the position at that date, the court must take into account any steps taken by the guilty party to remedy accrued breaches of contract. Third, the court must also take account of likely future events, judged by reference to objective facts as at the date of purported termination.

And at [63]:

The judge [below] distinguished this case on the basis that Rix LJ was dealing with anticipatory repudiatory breaches. But as the Hong Kong Fir Shipping Co [Ltd v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474] case shows the same test applies to actual breaches. I do not consider that the judge was right to differentiate between the two in the way he did. A breach of contract, although serious, may be capable of remedy. If it is remedied before the injured party purports to exercise a right of termination, then the fact that the breach has been remedied is an important factor to be taken into account. Likewise if there is delay in performance of an ongoing obligation it may well be possible for the delay to be made up by faster performance.

The Defendants submit that the Performance Letter requested the Claimant to immediately incorporate of the Joint Venture Company and execute a Shareholders’ Agreement, and then inject liquid capital into the same within three months, following which the Sale and Purchase Agreement would be executed. This, the Defendants say, manifested a firm and unequivocal commitment to comply with the Clause 3 Obligations within a set period and had the effect of curing the Clause 3 Breaches and the Renunciation before the Purported Termination.

63. Hexagon says, however, that the Defendants have misunderstood Ampurius, and relies on the case of Super-Max Offshore Holdings v Malhotra & Anor [2017] EWHC 3246 (Comm) which discussed the above-cited ratio decidendi from that case. At [121] of Super-Max, the Hon. Mr. Justice Popplewell stated:

120. I am bound by Court of Appeal authority that English law does not permit a party in repudiatory breach unilaterally to cure the breach once it has been committed, so as to affect the innocent party’s right to rely upon it to put an end to the contract. The innocent party may terminate unless he has lost the right to do so because of an election to affirm or a deemed affirmation from the passage of time. This was confirmed by the Court of Appeal in Bournemouth…

121. Mr [Jonathan] Adkin [QC for the Defendant] relied on a dictum of Lewison LJ in Ampurius…, at paragraph [63], endorsing a passage in the judgement of Rix LJ in Stocznia… at paragraph [87]:

A breach of contract, although serious, may be capable of remedy. If it is remedied before the injured party purports to exercise a right of termination, then the fact that the breach has been remedied is an important factor to be taken into account. Likewise if there is delay in performance of an ongoing obligation it may well be possible for the delay to be made up by faster performance.

122. Ampurius was concerned with a breach by a developer which consisted of his suspending building works he was obliged to carry out. By the time of the purported termination he had resumed work. The breach in that case was a delay in performance, the extent, and therefore the seriousness, of which fell to be judged at the date of purported termination when the works had restarted. Whether the default was repudiatory, as a breach of an innominate term, depended upon the length of the delay in performance. The case was not concerned with cure of an existing breach as such, but with defining the extent of breach of an innominate term. It casts no doubt on the principle that a party who has committed a repudiatory breach cannot cure it, at least where the repudiatory character of the breach is not itself dependent on the passage of time. Mr Malhotra’s breaches were complete when committed. Accordingly as a matter of law Mr Malhotra’s breaches could not be cured.

64. I do not think it is necessary for me to try to resolve the apparent disharmony between Ampurius – as the Defendants understand it and as, I think, it is justifiably understood – and Super-Max – which appears to be a rather clear authority, too. For me, it is sufficient to look at the Performance Letter itself and ask, if past non-performance can be cured by a guilty party, whether the Performance Letter could actually constitute a cure of the breaches. In other words, and most fundamentally, and with reference to Ampurius, did the Performance Letter amount to a step taken by the Defendants to remedy the Clause 3 Breaches and the Renunciation or, if the obligations were ongoing, did the Performance Letter constitute a “faster performance”? In my view, the Performance Letter does not amount to such a step and nor is it a “faster performance” of the Obligations. The Defendants’ appeal in the Performance Letter to the parties to the Amended Agreement for them to “get on” with the Project was merely a reiteration of what was impliedly but no less pervasively present in the Amended Agreement itself. The request for the parties to “get on” with performing the Amended Agreement was merely a paraphrasing, so to speak, of the existence of the agreement. It follows, I find, that the Defendants fail on this ground of their Applications and that the Clause 3 Breaches and the Renunciation were not cured prior to the Purported Termination.

65. Of course, the above analysis is based on the Defendants’ concession in these Applications only that it had committed the Clause 3 Breaches and that the Renunciation was actually a renunciation of the Amended Agreement. If the matter proceeds to trial, the Defendants have said that their position will be that, bar the obligation to promote the Project, the Clause 3 Obligations were obligations shared by all the parties which could not be performed unilaterally by any single one of them and that the Renunciation was merely an expression of a view which the Defendants had at the time but which it subsequently abandoned upon external legal advice. According to these positions, in my view, it can indeed be argued that an appeal for the parties to the Amended Agreement to “get on” with performing it did amount to a cure: what else might a single party have done in order to mobilise the parties to collectively perform the obligations in question? I make these remarks further to the considerations made above.

Further discussion: Article 86 of the Contract Law

66. At [40] above, I noted that if the opportunity arises, Hexagon will likely next not only argue that the Clause 3 Breaches were fundamental breaches of the Amended Agreement but will also provide explanation for its coming to this conclusion. I noted, also, that Hexagon appears to have already hinted such an explanation in its grounding witness statement in which it emphasised Article 86(1) and (2)(c) and (d) of the Contract Law when citing the Article. I make the following final observations for completion, but while noting that the points have not been the subject of discussion in the parties’ submissions. I would usually have more restraint with respect to points not argued by the parties, but in this case the losing party has already failed in its case on multiple other and more fundamental grounds.

67. Article 86(1) of the Contract Law confers on innocent parties a right to terminate a breached contract in circumstances where the said breach amounts to fundamental non-performance of the contract. For its part, Article 86(2) provides guidance to parties, counsel and adjudicators when determining whether an instance of non-performance is fundamental or non-fundamental, and asks them to have regard in particular for, amongst other things, whether the non-performance was intentional (Article 86(2)(c)) or whether it gave the aggrieved party reason to believe that it could not rely on the guilty party’s future performance (Article 86(2)(d)). The list at Article 86(2) is illustrative and does not bind an adjudicator, except to the extent that regard must be had for the circumstances mentioned.

68. If Hexagon can furnish evidence that the Clause 3 Breaches were committed intentionally or that, upon the Renunciation, Hexagon believed it could not rely on the Defendants’ performance of the Amended Agreement, will either of these assist Hexagon in its Claim? This is an important question as, under Easy Air, the existence of evidence which could later assist a party might make it inappropriate for me to give immediate judgment and, under Doncaster Pharmaceuticals, I should be slow to make a final decision where fuller investigation might add to or alter the evidence which would be available to the trial judge. But despite the gravity of these considerations, I think it is possible to say that evidence suggesting or perhaps even proving that the Clause 3 Breaches were fundamental breaches on the basis that they were intentional or that Hexagon believed the Defendants would not perform the Amended Agreement at the time of the Renunciation will not help Hexagon in its Claim.

69. It should be borne in mind that Article 86 of the Contract Law will only be invoked before a court in circumstances where the parties to the proceedings disagree about the status of a breach or alleged breach as being fundamental or non-fundamental. Accordingly, in most cases, first there will be an alleged breach and secondly a purported termination on the basis that the alleged breach was fundamental. Next, either the innocent or guilty party will issue court proceedings, asking the court to find that the alleged breaches either were or were not fundamental. In determining whether the breaches were fundamental or otherwise, the illustrative examples at Article 86(2) will be vital to the Court, as might other important details of the dispute.

70. The instant dispute unfolded very differently, however. As has been shown above, the Clause 3 Breaches crystallised within a matter of years after 5 May 2004 and the Renunciation occurred on 12 June 2012. And any dispute between the parties after these key events and until the Performance Letter did not feature the innocent party purporting or threatening to terminate on the basis of fundamental non-performance of the contract, with the guilty arguing that no breach had occurred or that any breaches were not fundamental. Instead, the dispute between the parties featured the innocent party, Hexagon, maintaining that the Amended Agreement was still valid and binding, with the guilty parties, the Defendants, insisting the opposite. Hexagon then went on to not terminate the Amended Agreement within a reasonable time, as required by Article 87 of the Contract Law; fail to begin these proceedings within six years of the causes of action, as required by Article 123 of the same law; and, moreover, affirm the Amended Agreement, as has been demonstrated above. As such, Hexagon appears to now be asking the Court to come to a conclusion that it had not come to and to take certain steps that it itself should have taken – if Hexagon regarded the Defendants had intentionally breached the Amended Agreement and that it could not rely on the latter’s performance of it, it should have made an appropriate intervention, but it did not; and, in my view, the Court is now unable to.

Conclusion

71. The Defendants have demonstrated that the Claimant’s Claim and Particulars of Claim do not disclose reasonable grounds for bringing the Claim and that it has no real prospect of success and nor a compelling reason why the matter should be disposed of at trial, crucially on the Claimant’s own pleaded case. As such, I am unable to do anything but grant the Defendants’ Applications and, accordingly, I order that the Claimant’s Claim and Particulars of Claim be struck out, that immediate judgment is granted in favour of the Defendants and that the Claimant pay the Defendants’ costs of these proceedings.

Issued by:
Nour Hineidi
Deputy Registrar
Date of Issue: 25 March 2020
At: 10am