The question arising in this appeal, brought pursuant to section 69 Arbitration Act 1996, was: where buyers under a MOA on the Norwegian Saleform 1993 fail to pay the deposit by the due date, is the seller entitled to recover the amount of the deposit in debt or as damages or is the seller restricted to his loss of bargain damages. On the facts, the amount of the deposit was USD2.156m and the alleged loss of bargain was, at most, USD275,000. The LMAA Tribunal held that Sellers were restricted to their alleged loss of bargain damages. In particular, the Tribunal relied on clause 13 of the NSF 1993 form which specifically provided that the deposit was recoverable in the event that the purchase price was not paid but was silent as to the recoverability of the deposit in the event that the deposit itself was not paid as excluding any intention that the deposit should be recoverable in the latter circumstance.
Upholding the Sellers’ appeal, Teare J held that Sellers were entitled to recover the amount of the deposit by way of damages or in debt. The judge considered the principles applicable to deposits and part payments generally and concluded that the recoverability of the deposit depended on the true construction of the MOA having regard to the established principles of the substantive law of contract. On a true construction of all the terms of the contract, the right to payment of the deposit accrued unconditionally. Pursuant to clause 2 of the MOA, the deposit was intended to provide security to Sellers “for the correct fulfilment” of the MOA and it was not appropriate to infer from the absence of a reference to the deposit in clause 13 that the parties intended to exclude the right to recover the deposit otherwise provided by clause 2.
Upon Buyers’ application, permission to appeal to the Court of Appeal was granted.
Member of Chambers: Charlotte Tan for the Defendant instructed by Holman Fenwick Willan LLP