UK Supreme Court Eschews Mackay v Dick ‘Prevention’ Principle

In King Crude Carriers SA & Ors v Ridgebury November LLC & Ors [2025] UKSC 39 (12 November 2025), the Supreme Court of the United Kingdom rejected the continued operation in the law of England and Wales (cf Scotland) of the longstanding principle in Mackay v Dick (1881) 6 App Cas 251.  The gravamen of that principle operates such that where a party to a contract wrongfully prevents the fulfilment of a precondition to an obligation thereunder – in the case at hand, an obligation to set up an account for the payment by it of a contract deposit – such condition is treated as having been fulfilled.  In rejecting the ongoing authority of the decision of the House of Lords in Dick – expressing itself in graphic language – the court wrote at [66]:

…[T]he various formulations or explanations of the Mackay v Dick principle of law are all fictional….The language of there being a deemed performance, or a deemed waiver, or a quasi-estoppel immediately makes that clear. In reality, there has been no performance, and the ingredients of a true waiver or of a true estoppel (eg a representation plus reliance) have not been satisfied. Fictions tend to obscure transparent reasoning and, wherever possible, should be removed. Jeremy Bentham famously despised fictions. In his words (see J Bowring (ed), The Works of Jeremy Bentham, (1962), vol 5, p 92): “in English law, fiction is a syphilis, which runs in every vein, and carries into every part of the system, the principle of rottenness.” Lord Nicholls, in his dissenting speech in the economic tort case of OBG v Allen; Douglas v Hello! Ltd (No 3) [2007] UKHL 21; [2008] AC 1, paras 228–229, said: “fictions, of their nature, conceal what is going on. They are a pretence … I would like to think that, as a mature legal system, English law had outgrown the need for legal fictions.” And in Forsyth-Grant v Allen [2008] EWCA Civ 505; [2008] 2 EGLR 16, at para 45, looking at “waiver of tort” in the context of damages for the tort of nuisance, Toulson LJ remarked that the “modern tendency has been to eschew resort to legal fictions”. At the very least, a fiction has to be properly explained. But there is no convincing explanation for Mackay v Dick as a principle of law.  (emphasis added)

Importantly, in King Crude, there was no express provision – as, for example, exists in the standard REIQ contract – for recovery of the unpaid deposit.  Nor was it in dispute– on account of the breach of the defendant for failure to set up the account to hold the deposit –  that the defendant was liable to the plaintiff for damages for breach of the contract, which lead to contract termination, albeit the defendant contended that in the circumstances the plaintiff had suffered no loss.

It will be of interest to see what the High Court makes of this alteration of UK common law contract principle.

Lord Hamblen and Lord Burrows – Lord Reed P, Lord Hodge DP and Lord Stephens agreeing – wrote:

1. Introduction

1. The focus of this appeal is on the decision of the House of Lords in the Scottish case of Mackay v Dick (1881) 6 App Cas 251. Sitting as a panel of three, there were two leading speeches in the House of Lords in that case. The speech of Lord Blackburn stands as uncontroversial authority for there being an implied duty to co-operate whereby contracting parties are obliged to co-operate to ensure the performance of their bargain. In contrast, the speech of Lord Watson is controversial. That speech indicates that there is a principle (or rule or doctrine) of law that, where a party wrongfully prevents the fulfilment of a condition precedent (ie a pre-condition) to that party’s debt obligation (eg, as in that case, the duty to pay for goods being bought), that condition is treated as being fulfilled. The status of that “deemed fulfilment” principle, or alternative formulations of the same idea such as the condition being “dispensed with” or “deemed waiver” or “quasiestoppel”, has long been a matter of debate. We shall refer to that principle, or alternative formulations of it, as the “Mackay v Dick principle of law”. This appeal raises the issue of whether there is such a principle in English law (without prejudice to the position in Scotland). Very closely related to that is the question whether, even if there is no such principle of law, contractual interpretation or an implied term achieves much the same outcome. 

2. This issue arises in the context of contracts for the sale of three vessels on the Norwegian Saleform 2012, with amendments and additions. The sellers, who are the respondents, are (under each contract respectively) Ridgebury November LLC, Ridgebury Sierra LLC, and Makronissos Special Maritime Enterprise (the “Sellers”). The buyers, who are the appellants, are King Crude Carriers SA, Prince Crude Carriers SA, and Zenon Crude Carriers SA (the “Buyers”). Under the contracts, the Buyers were obliged to lodge a deposit of 10% of the purchase price with a deposit holder. The deposit was required to be paid within three banking days of the deposit holder confirming in writing that the deposit account had been opened. The parties were obliged to provide all necessary documentation for the opening of the account. In breach of contract, the Buyers never did so. The Sellers terminated the three contracts and claimed the deposits in debt, relying on Mackay v Dick. The Buyers contended that the Sellers’ sole remedy was in damages and that no loss had been suffered. The Sellers’ claim succeeded in arbitration, failed on appeal to the Commercial Court, but succeeded before the Court of Appeal. The Buyers now appeal to the Supreme Court arguing, primarily, that there is no Mackay v Dick principle of law in England and Wales and that contractual interpretation or an implied term cannot assist the Sellers in their debt claim in this case.   

3. Both parties also seek to raise secondary cases. The Buyers contend that, even if the right to the deposits had accrued, on the true interpretation of the contracts the deposits were not to be forfeited on termination by the Sellers. This requires them to contend that the Court of Appeal’s decision to the contrary in Griffon Shipping LLC v Firodi Shipping Ltd (“The Griffon”) [2013] EWCA Civ 1567; [2014] 1 Lloyd’s Rep 471 was wrong. 

4. The Sellers, in their secondary case, contend that the deposits accrued due as a debt when the contracts were made and that the stipulated conditions precedent went only to the time for payment of an already accrued debt. Put another way, it is said that the Buyers’ breach was a failure in the machinery of payment and did not prevent the accrual of the debt. This arguably requires the Sellers to contend that the Court of Appeal’s decision in Damon Compania Naviera SA v Hapag-Lloyd International SA (“The Blankenstein”) [1985] 1 WLR 435 was wrong. It was there held, unanimously on this point, that the right to the deposit did not accrue until after the signing of a Saleform contract.

2. Factual background

5. Between 28 and 30 April 2020, the Sellers and the Buyers concluded three Memoranda of Agreement (the “MOAs”) for the sale and purchase of three vessels, the Makronissos, the Ridgebury Astari, and the Ridgebury Alina L. Except for price, the three MOAs were on materially identical terms. 

6. The lodging of the deposit was governed by clause 2 of the MOAs which provided (with amendments to the Saleform marked in strikethrough or italicised):

“2. Deposit

As security for the correct fulfilment of this Agreement the Buyers shall lodge a deposit of 10% (ten per cent) or if left blank, 10% (ten per cent) of the Purchase Price (the “Deposit”) in an interest-bearing account for the Parties with the Deposit Holder within three (3) Banking Days after the date that:

(i) this Agreement has been signed by the Parties and exchanged in original or by email or telefax; and

(ii) the Deposit Holder has confirmed in writing to the Parties that the account has been fully opened and ready to receive funds.

The Deposit shall be released in accordance with joint written instructions of the Parties. Interest, if any, shall be credited to the Buyers. Any fee charged for holding and releasing the Deposit shall be borne equally by the Parties. The Parties shall provide to the Deposit Holder all necessary documentation to open and maintain the account without delay.” The Deposit Holder was defined as being Holman, Fenwick, Willan Greece (“the Deposit Holder”).

7. The consequences of failing to lodge the deposit were addressed in clause 13 which provided:

“13. Buyers’ default

Should the Deposit not be lodged in accordance with Clause 2 (Deposit), the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.

Should the Purchase Price not be paid in accordance with Clause 3 (Payment), the Sellers have the right to cancel this Agreement, in which case the Deposit together with interest earned, if any, shall be released to the Sellers. If the Deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest.”

8. Clause 14 addressed “Sellers’ default” and provided the Buyers with an option to cancel in the event of such default. If the Buyers elected to cancel, “the Deposit together with interest earned, if any, shall be released to them immediately”. Clause 16 was an English law and London arbitration clause.

9. Following the signature of the three MOAs at the end of April 2020, in breach of clause 2 of each MOA, the Buyers failed to provide the Deposit Holder with the necessary documentation to enable the accounts to be opened without delay. For that reason, the Deposit Holder never confirmed that the accounts had been opened and were ready to receive funds, and the Buyers (by reason of their own conduct) could not, and did not, lodge the deposits.

10. In late May and early June 2020, the Sellers purported to cancel (ie to terminate) the MOAs under clause 13 of the Saleform on the grounds that the deposits had fallen due and that the Buyers, having failed to provide the necessary documentation, had not paid those deposits. 

…

5. Issue 1 – Where a party (i) has an obligation to make a payment when a precondition is fulfilled, (ii) has an obligation to fulfil the pre-condition but (iii) in breach of contract, fails to do so, is the pre-condition deemed to be fulfilled—or Page 7 otherwise treated as inapplicable or dispensed with—so that the other party can claim the payment as a debt? Or must the other party’s claim be for damages only? 

(1) Is there a Mackay v Dick principle of law (in English law)?

(i) Mackay v Dick

22. In Mackay v Dick (1881) 6 App Cas 251 the defender buyer, who was involved in the construction of a railway, entered into a contract (by exchange of letters) with the pursuer seller for the manufacture and purchase of a steam-operated digging machine. The buyer wanted the machine for the purpose of excavating a long railway cutting and thereby saving the cost of manual labour. One of the terms of the contract was that the machine should be capable of digging out at least 350 cubic yards of clay in a day and that that capability should be tested at a trial at a specified railway cutting belonging to the buyer. It was agreed that, if the trial was successful, the buyer would keep the machine and pay the agreed price. If the trial failed, the seller would remove the machine. Although the machine was delivered as agreed, the buyer failed to provide a “properly opened-up” face at the railway cutting so that the trial of the machine could not go ahead. It was held by the House of Lords (as a panel of three) that the seller was entitled to the agreed price. 

23. Lord Watson’s reasoning was that payment of the price for the machine was conditional on the machine satisfying the buyer’s specified requirements at the trial. But as the trial did not go ahead because of the buyer’s default, that condition should be treated as if it had been fulfilled. He said at p 270:

“The [sellers] were only entitled to receive payment of the price of the machine on the condition that it should be tried at a proper working face provided by the [buyer], and that on trial it should excavate a certain amount of clay or other soft substance within a given time. They have been thwarted in the attempt to fulfil that condition by the neglect or refusal of the [buyer] to furnish the means of applying the stipulated test; and their failure being due to his fault, I am of opinion that, as in a question with him, they must be taken to have fulfilled the condition. The passage cited by Lord Shand [in the Inner House] from Bell’s Principles (para 50) to the effect that, ‘If the debtor bound under a certain condition have impeded or prevented the event, it is held as accomplished. If the creditor had done all that he can to fulfil a condition which is incumbent on himself, it is held sufficient implement,’ expresses a doctrine, borrowed from the civil law, which has long been recognised in the law of Scotland, and I think it ought to be applied to the present case.”

24. Lord Blackburn’s reasoning was different. In his view, even though not expressly stated, a contract should generally be construed as including a duty on each party to do what is necessary on its part in order for the contract to be carried out. In modern parlance, there is an implied duty of co-operation. Under the terms of the contract in question, the buyer was bound to keep and pay for the machine that had been delivered unless it subsequently failed the trial; and that subsequent condition (failure of the trial) did not, and could not, occur because of the buyer’s own default (in breach of its duty of cooperation) in not allowing the trial to go ahead. Lord Blackburn said, at pp 263–264:  

“I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. … the Defender, having had the machine delivered to him, was by his contract to keep it, unless on a fair test according to the contract it failed to do the stipulated quantity of work, in which case he would be entitled to call on the Pursuers to remove it. And by his own default he can now never be in a position to call upon the Pursuers to take back the machine, on the ground that the test had not been satisfied, he must, as far as regards that, keep, and consequently pay for it.”  Lord Selborne LC, at p 272, agreed with both speeches. 

25. It will be apparent that there are two significant differences between the two main speeches. First, Lord Watson regarded success at the trial as a condition precedent to payment, whereas Lord Blackburn reasoned that there was a condition subsequent that the buyer did not need to pay if the machine failed the trial. Secondly, and most importantly, Lord Watson’s reasoning was that, by reason of the buyer’s default, there was a deemed fulfilment of the condition precedent that the machine must be successful at the trial. In contrast, Lord Blackburn did not rely on any such deemed fulfilment. Rather the condition subsequent (failure of the trial) simply did not occur so that the buyer was bound to pay for the machine. 

26. It follows that, because he did not rely on any deemed fulfilment of a condition, there is nothing controversial about Lord Blackburn’s reasoning in Mackay v Dick.  Instead, his judgment is well known for its path-breaking recognition of an implied duty of co-operation. In contrast, it was Lord Watson’s reliance on there being a deemed fulfilment of a condition, by reason of the buyer’s default, that is being focused on when one refers to the Mackay v Dick principle of law. 

…

(vii) The main reasons why, in our view, Mackay v Dick is not a principle of law in English law

61. Having surveyed the most relevant case law and academic commentary, it is our view that Mackay v Dick is not a principle of law in English law. This is for the following six main reasons.

62. First, Lord Watson in Mackay v Dick did not cite or rely upon any English law authorities in support of the principle stated by him. Rather he relied upon what he understood to be “a doctrine borrowed from the civil law” (see para 23 above). Lord Blackburn’s reasoning was different and Lord Selborne LC’s speech is ambiguous since he agreed with both speeches.

63. Secondly, the English law authorities do not speak with one voice. While the four main cases relied on by Mr Kenny (Hotham, Panamena, Cory and Abacha) support such a principle of law, Scott J in Thompson v ASDA-MFI Group plc and Millett LJ in Little v Courage have voiced persuasive views to the contrary. Moreover, it is possible that, in those four main cases relied on by Mr Kenny, the same result could have been reached through the application of the law on damages for breach of contract rather than the law on debt.

64. Thirdly, such a principle of law is contradicted by Colley. As McCardie J recognised, it would fundamentally undermine the law on contracts for the sale of goods (and it would appear also for the sale of land) if Mackay v Dick were to be applied in respect of a failure to fulfil a condition precedent to the passing of property. At the very least, therefore, and in order to avoid what McCardie J referred to as “extraordinary” and “far reaching” consequences, one would have to cut back the ambit of the Mackay v Dick principle of law. Indeed, as Mr Eaton submitted, one can think of many other types of contract (eg the payment of freight in a voyage charter) where the application of the Mackay v Dick principle of law would undermine the established law as to when a debt accrues. But it is unclear how one could achieve such a cut back in a principled manner and without resorting, for example, to the particular intentions of the parties. In a similar vein, it should be noted that the formulations of the principle in cases such as Hotham and Panamena are very wide ranging and give no indication that any such principle of law must have some limits.

65. Popplewell LJ in the Court of Appeal recognised that there must be limits and formulated the principle in terms which recognised four broad exceptions (see para 16 above). But the application and rationale of those exceptions are uncertain. As Mr Eaton submitted, a supposed general rule which has to be stated in terms which significantly but uncertainly qualify and curtail it does not make for a robust principle of law.

66. Fourthly, the various formulations or explanations of the Mackay v Dick principle of law are all fictional. Rix LJ explicitly recognised this in Abacha. The language of there being a deemed performance, or a deemed waiver, or a quasi-estoppel immediately makes that clear. In reality, there has been no performance, and the ingredients of a true waiver or of a true estoppel (eg a representation plus reliance) have not been satisfied. Fictions tend to obscure transparent reasoning and, wherever possible, should be removed. Jeremy Bentham famously despised fictions. In his words (see J Bowring (ed), The Works of Jeremy Bentham, (1962), vol 5, p 92): “in English law, fiction is a syphilis, which runs in every vein, and carries into every part of the system, the principle of rottenness.” Lord Nicholls, in his dissenting speech in the economic tort case of OBG v Allen; Douglas v Hello! Ltd (No 3) [2007] UKHL 21; [2008] AC 1, paras 228–229, said: “fictions, of their nature, conceal what is going on. They are a pretence … I would like to think that, as a mature legal system, English law had outgrown the need for legal fictions.” And in Forsyth-Grant v Allen [2008] EWCA Civ 505; [2008] 2 EGLR 16, at para 45, looking at “waiver of tort” in the context of damages for the tort of nuisance, Toulson LJ remarked that the “modern tendency has been to eschew resort to legal fictions”. At the very least, a fiction has to be properly explained. But there is no convincing explanation for Mackay v Dick as a principle of law.

67. Fifthly, we regard Scott J as being correct when he observed in Thompson v ASDA-MFI Group plc that the English law of contract in this area proceeds on the basis of the terms of the contract, express and implied, and their proper interpretation rather than by way of fictional fulfilment of a condition precedent. This is consistent with the importance which English law attaches to freedom of contract, and to the application and enforcement of the terms of the bargain which the parties have made. This promotes certainty and predictability, which are important considerations, especially in the commercial law context.

68. Sixthly, the consequence of rejecting Mackay v Dick as a principle of law does not lead to injustice. Subject to terms to the contrary, where a condition precedent has not been fulfilled because of the debtor’s breach of contract, that breach is appropriately and adequately dealt with in English law through the claimant’s remedy in damages. Those damages aim to compensate the claimant by putting it into as good a position as if the contract had been performed, subject to limitations such as mitigation and remoteness. There is no good reason to strain to uphold a claim for debt where, as illustrated by this case, this involves disregarding the terms of the contract and where, in contrast to damages, allowing the debt claim may exceed the claimant’s net loss.

69. In the light of our rejection of Mackay v Dick as a principle of law, we move on to consider whether the Sellers can here succeed by relying on Mackay v Dick not as a principle of law but as an aid to contractual interpretation or as based on an implied term. Both interpretation and the implication of terms (by fact) may be said to rest on the objective intention of the parties, but it was made clear in Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742 (“Marks and Spencer”) that they are different (and, it would appear, sequential) techniques. In simple terms, interpretation is concerned with what is there in the express terms of the contract whereas the implication of terms inserts into the contract what is not already there.

(2) Contractual interpretation?

70. Popplewell LJ’s reasoning in the Court of Appeal was that the juridical basis of Lord Watson’s reasoning in Mackay v Dick was presumed contractual intention and the maxim that a party should not be entitled to take advantage of its own wrong.

71. In support of this approach Mr Kenny relied on Lewison, The Interpretation of Contracts, 8th ed (2023), at para 7.108 in which it is stated:

“A contract will be interpreted so far as possible in such a manner as not to permit one party to it to take advantage of his own wrong.This principle is not a rule of law; rather it is an aspect of the principle of interpretation that leans against interpretations that produce unreasonable or absurd consequences that could not have been intended. The contractual intention is still to be decided by reference to the ordinary principles applicable to the interpretation of contracts.” (Original emphasis.)

72. Mr Kenny also relied on a number of cases cited by Lewison and, in particular, Rede v Farr (1817) 6 M & S 121, New Zealand Shipping v Société des Ateliers et Chantiers de France [1919] AC 1 (“New Zealand Shipping”), Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 (“Cheall v Apex”) and Alghussein Establishment v Eton College [1988] 1 WLR 587. Lest there be any confusion, it should be noted at the outset that, in the first two cases, where the language used includes that the contract is “void”, it is clear from the context that what is meant by “void” is that the contract is brought to an end (in modern terminology is terminated) and not that the contract never existed.

73. In Rede v Farr it was a term of a lease that if the rent was not paid for 40 days, the lease “shall cease, determine and be utterly void”. The lessee failed to pay the rent for more than 40 days and sought to rely on this provision to claim that the lease was thereby determined. It was held that he was not entitled to do so. Lord Ellenborough CJ stated, at p 124:

“In this case, as to this proviso, it would be contrary to an universal principle of law, that a party shall never take advantage of his own wrong, if we were to hold that a lease, which in terms is a lease for twelve years, should be a lease determinable at the will and pleasure of the lessee; and that a lessee by not paying his rent should be at liberty to say that the lease is void.”

74. In New Zealand Shipping it was a term of a shipbuilding contract that, in the event of France becoming engaged in a European war, if the French shipbuilder were unable to deliver the vessel within 18 months of the completion date then “this contract shall become void”. It was held by the House of Lords that the contract became “void” and was thereby brought to an end in circumstances where this had not been caused by any wrongful act or default on the part of the shipbuilder. Lord Ellenborough’s judgment in Rede v Farr was cited with approval and Lord Atkinson stated, at p 9:

“if the stipulation be that the contract shall be void on the happening of an event which one or either of them can by his own act or omission bring about, then the party, who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself or to compel the other party, who is blameless, to insist upon it, because to permit the blameable party to do either would be to permit him to take advantage of his own wrong …”

75. In Cheall v Apex Lord Diplock referred to New Zealand Shipping and summarised the applicable principle as follows, at pp 188–189:

“In the course of the speeches, which are not entirely consistent with one another, reference was made by all their Lordships to the well known rule of construction that, except in the unlikely case that the contract contains clear express provisions to the contrary, it is to be presumed that it was not the intention of the parties that either party should be entitled to rely upon his own breaches of his primary obligations as bringing the contract to an end, i e as terminating any further primary obligations on his part then remaining unperformed. This rule of construction, which is paralleled by the rule of law that a contracting party cannot rely upon an event brought about by his own breach of contract as having terminated a contract by frustration, is often expressed in broad language as: ‘A man cannot be permitted to take advantage of his own wrong.’”

76. Both Rede v Farr and New Zealand Shipping concerned reliance on a contractual provision bringing the contract to an end by rendering it void. Alghussein Establishment v Eton College concerned reliance on a provision conferring a contractual benefit. An agreement between a landowner and a developer provided that a 99-year lease would be granted to the developer “if for any reason due to the wilful default of the tenant [ie the developer] the development shall remain uncompleted” on a certain date. It seems clear that the word “not” had been inadvertently omitted, but the trial judge felt that he could not proceed on that basis in the absence of a claim for rectification. The developer claimed to be entitled to the lease under this provision in circumstances where the failure to complete the development was due to its wilful default. The House of Lords held that it was not so entitled. In so concluding, Lord Jauncey referred to and relied upon Rede v Farr, New Zealand Shipping and Cheall v Apex. He held that the principle stated in those cases equally applied to a provision under which a party claimed the right to enjoy a contractual benefit because of his wrong. He said, at p 594:

“Although the authorities to which I have already referred involve cases of avoidance, the clear theme running through them all was that no man can take advantage of his own wrong. There was nothing in any of them to suggest that the foregoing proposition was limited to cases where the parties in breach were seeking to avoid the contract and I can see no reason for so limiting it. A party who seeks to obtain a benefit under a continuing contract on account of his breach is just as much taking advantage of his own wrong as is a party who relies on his breach to avoid a contract and thereby escape his obligations.”

77. In Chitty on Contracts, 35th ed (2024), at para 16-115, these cases (and others) are cited in support of the following proposition:

“It has been said that, as a matter of construction, unless the contract clearly provides to the contrary it will be presumed that it was not the intention of the parties that either should be entitled to rely on their own breach of duty to avoid the contract or bring it to an end or to obtain a benefit under it.”

78. In the light of the modern developments in the approach to contractual interpretation (see, eg, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Arnold v Britton [2015] UKSC 36; [2015] AC 1619, and Wood v Capita Insurance Services Ltd [2017] UKSC 24; [2017] AC 1173) it would appear that the above cases supporting the presumption that the parties did not intend a party to profit from its own breach, are best rationalised as ones where that presumption reflects the objective intention of the parties in the relevant context. But in any event, we agree with Chitty that, as a matter of authority, the cases on the presumption are all concerned with a claimed entitlement to treat the contract as being at an end or to obtain a benefit under it. They do not support any wider presumption that a party may not take advantage of its own wrong. There are many contractual circumstances in which a party may do so. This is most obviously illustrated by the principle that damages for breach of contract are to compensate the claimant and not to punish the defendant and, subject to rare exceptions, damages or an account of profits are not awarded to strip profits made by the defendant’s breach. Contract law permits efficient breach and the defendant may therefore profit from its wrong.

79. In the present case the Buyers are not relying on their own breach of contract to treat the contract as being at an end or to claim a benefit under it. They are not using it in order to found or to invoke any right under the contract. As Dias J said at first instance at para 99: “Far from deriving any benefit, Buyers’ breach exposed them to a liability in damages. Nor would they be rid of the contract, since that depended on whether or not Sellers elected to cancel.” Put another way, the Buyers’ reliance on the terms of clause 2 is purely defensive. They acknowledge that they are liable to pay damages but contend that to claim in debt the Sellers must show, and they cannot, that the pre-conditions set out in clause 2 have been satisfied. That is not comparable to any of the cases on interpretation principally relied upon by the Sellers (see paras 72–76 above) which are clearly distinguishable. In these circumstances the maxim that a party cannot take advantage of its own wrong is of no assistance in interpreting the contracts in this case. It is not a principle of interpretation of universal application, as the Court of Appeal acknowledged (para 79). More generally, applying the modern objective and contextual approach to contractual interpretation, we do not consider that the correct interpretation of the express pre-conditions in this case is that they do not need to be satisfied where the Buyers have defaulted.

80. Mr Kenny advanced a further and related argument that, unless the MOA is interpreted as not requiring the pre-conditions to be satisfied, unreasonable and absurd consequences follow. He submitted that the Buyers’ reading of clause 2 requires one to accept that the MOA: (i) requires the Buyers to pay the deposit upon the Deposit Holder’s confirmation; and (ii) requires the Buyers to provide documents to enable the Deposit Holder to give such confirmation; but (iii) allows the Buyers to avoid (i) by breaching (ii). That, he submits, is not a realistic interpretation. It permits the Buyers to adopt a “cunning plan” to avoid its agreed obligations. He relies on the concurring judgment of Nugee LJ in the Court of Appeal in this case and, in particular, his statement at para 101:

“It cannot have been the parties’ intention that the buyer could avoid his obligation to pay the deposit by the simple expedient of deliberately failing to comply with what is on any view a subsidiary obligation to sign the necessary forms to open the account.”

81. The difficulty with this argument is that it means that the parties cannot have intended what they have stated and agreed. Leaving aside the Sellers’ case on Issue 3, clause 2 makes the Buyers’ obligation to lodge the deposit within three Banking Days conditional on: (i) the parties signing and exchanging the MOA; (ii) the parties providing the Deposit Holder with all necessary documentation to open the account; and (iii) the Deposit Holder confirming that the account is fully open and ready to receive funds. This is what clause 2 states. The Sellers’ case is that there are, however, unstated circumstances in which those pre-conditions do not apply. If so, that would seem to require some term to be implied. It does not follow from the wording of clause 2.

82. As Mr Eaton submitted, there is nothing extravagant about the proposition that a conditional obligation applies according to its terms. The parties should be understood to mean what they say. The Sellers’ case on interpretation means that a payment obligation subject to a promissory condition requires payment to be made regardless of whether the condition is performed. But if the parties intended it to be paid regardless, they would not have made it conditional. The Sellers’ case effectively strikes out the condition and rewrites the terms of the contract. It should also be stressed that it is always open to the parties to include a term in the contract making clear that a condition precedent to a debt obligation does not apply where the failure of the condition precedent is caused by the debtor’s breach.

83. A similar point arose in The Blankenstein in which it was held that signing the MOA was a pre-condition to the deposit being payable. As Robert Goff LJ observed (at p 456):

“I realise that the effect is that the seller does not get the protection of the deposit until signature; and that the buyer, by repudiating the contract before signature of the memorandum of agreement, can escape from the consequence of forfeiture of the deposit. That may not be very satisfactory from the seller’s point of view; but it is, in my judgment, what he has agreed. The security of the deposit is not due until after signature of the memorandum of agreement; and so, if the buyer repudiates the contract before signature, the seller is without the benefit of the deposit.”

84. Subject to the Sellers’ case on Issue 3, the same applies to the pre-conditions in the present case. Until they are satisfied the Sellers do not have the security of the deposit. That is what they have agreed.

85. In many contracts for the sale of land a deposit is paid at the time that the contract is made, often on exchange of contracts. In such cases the seller has the security of the deposit from the outset and from that moment the right to the deposit accrues. Subject to the Sellers’ case on Issue 3, the parties have agreed to defer that moment until certain pre-conditions have been satisfied, as in The Blankenstein.

…

(4) Conclusion on Issue 1

100. The appeal on Issue 1 therefore succeeds. There is no Mackay v Dick principle of law in English law. Moreover, in this case, the proper interpretation of the contract does not entail, and there is no implied term, that the conditions precedent to the Buyers’ debt obligation are to be ignored because of the Buyers’ breach of contract in respect of those conditions precedent. The Sellers have their remedy in damages for the Buyers’ breach but they do not have a valid debt claim.

101. It follows that, on this issue, we agree with the decision and the essential reasoning of Dias J and disagree with the Court of Appeal. Popplewell LJ recognised the difficulties with accepting a Mackay v Dick principle of law and that no doubt explains why, first, he recognised significant exceptions to its operation and, secondly, he recast the principle as one resting on the parties’ presumed intentions (see para 16 above). But, with respect, and as has already been touched on in para 65 above, the two exceptions he formulated apart from contrary intention and the circumstances of the case (“the condition is not the performance of a principal obligation by the obligee, nor one which it is necessary for the obligee to plead and prove as an ingredient of its cause of action”) are not only very difficult, and probably impossible, to rationalise but would be highly complex to apply in practice. And, as we have made clear, a focus on the parties’ intentions, whether through interpretation or an implied term, would not assist the Sellers in this case.

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