Shaker v Vistajet Group Holding SA

Factual and Procedural Background

This opinion concerns an application for summary judgment relating to the return of a deposit of US$3.55 million paid by the Plaintiff to the Defendant pursuant to a Letter of Intent ("LOI") dated 11 August 2010. The LOI concerned a potential transaction involving the purchase, operation, and repurchase of an aircraft. The parties had amended the Cut-Off Date for agreement and execution of the Transaction Documents multiple times, with the last amendment dated 10 December 2010 extending the Cut-Off Date to 17 January 2011. The Plaintiff claims entitlement to the return of the deposit, asserting good faith and reasonable endeavours to conclude the transaction, while the Defendant disputes this, alleging failure by the Plaintiff to satisfy these conditions. A counterclaim by the Defendant is also noted.

Legal Issues Presented

1. Whether the obligation to proceed in good faith and use reasonable endeavours to agree the Transaction Documents and obtain written confirmation from the financing party is enforceable in law.
2. Whether the Defendant is contractually estopped from denying the Plaintiff’s good faith and reasonable endeavours up to the date of the last amendment to the Cut-Off Date.
3. Whether the Defendant has raised a triable issue that the Plaintiff failed to exercise good faith and reasonable endeavours between 10 December 2010 and 17 January 2011.

Arguments of the Parties

Plaintiff's Arguments

• The obligation to proceed in good faith and use reasonable endeavours to agree the Transaction Documents and obtain financing confirmation is unenforceable in law.
• Even if enforceable, the Defendant is contractually estopped from denying that the Plaintiff acted in good faith and used reasonable endeavours up to the last amendment date.
• The Defendant has not raised a triable issue regarding the Plaintiff’s conduct between 10 December 2010 and 17 January 2011.

Defendant's Arguments

• The obligation of good faith and reasonable endeavours is a condition precedent to the return of the deposit and is enforceable.
• The Plaintiff did not act in good faith or use reasonable endeavours, thus failing the condition precedent.
• The amendment to the Cut-Off Date does not estop the Defendant from denying the Plaintiff’s good faith and reasonable endeavours.
• There is a triable issue regarding the Plaintiff’s conduct after 10 December 2010, including failure to respond to document review requests and engage with financing terms.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Walford v Miles [1992] 2 AC 126	Agreements to negotiate or agree further agreements are unenforceable in law.	Supported the court’s conclusion that the obligation to negotiate in good faith and use reasonable endeavours was unenforceable.
Multiplex Constructions UK Limited v Cleveland Bridge UK Limited [2006] EWHC 1341	Agreements to use reasonable endeavours to agree are unenforceable due to lack of objective criteria.	Reinforced the court’s reasoning on unenforceability of the good faith and reasonable endeavours obligation.
Barbudev v Eurocom Cable Management Bulgaria EOOD [2012] EWCA Civ 548	Obligations to negotiate in good faith are unenforceable as they lack objective standards.	Supported the court’s view on unenforceability of the relevant obligations in the LOI.
Scottish Coal v Danish Forestry [2009] CSOH 171	Agreements to reach agreement with a third party are unenforceable.	Applied to the unenforceability of the obligation to obtain written confirmation from the financing party.
Phillips Petroleum v Enron Europe [1997] CLC 329	Difficulties in policing obligations to use reasonable endeavours justify their unenforceability.	Key authority for the court’s conclusion that the condition precedent was unenforceable.
Raiffeisen Zentralbank Ostereich AG v Royal Bank of Scotland PLC [2011] 1 Lloyd's Rep 123	Parties can agree on a factual basis for their dealings, giving rise to contractual estoppel.	Supported the court’s finding that the Defendant was estopped from denying the Plaintiff’s good faith before 10 December 2010.
Peekay Intermark v Australia and New Zealand Banking Group [2006] 2 Lloyd's Rep 511	Contractual estoppel can arise from acknowledgment of a state of affairs.	Referenced in support of contractual estoppel principles applied by the court.
JP Morgan Chase Bank v Springwell [2008] Lloyd's Rep. 63	Contractual estoppel can arise from agreed factual acknowledgments.	Referenced in support of contractual estoppel principles applied by the court.
Three Rivers District Council v Bank of England (No.3) [2001] 2 AER 153	“Absence of reality” test for triable issues.	Applied to reject the Defendant’s claim of failure to exercise good faith after 10 December 2010.
Petromec v Petroleo Brasileiro [2006] 1 Lloyd's Rep.	Obligation to negotiate in good faith can be enforceable when objective criteria exist.	Distinguished by the court as inapplicable due to lack of objective criteria in the present case.
Dhanani v Crasnianski [2011] EWHC 926 (Comm)	Agreements to agree are unenforceable without objective criteria.	Supported the court’s reasoning on unenforceability of the LOI obligations.

Court's Reasoning and Analysis

The court began by examining the enforceability of the Plaintiff’s obligation to proceed in good faith and use reasonable endeavours to agree the Transaction Documents and obtain financing confirmation. It found that such obligations are unenforceable because they lack objective criteria for judicial enforcement, consistent with established authority such as Walford v Miles and Phillips Petroleum v Enron Europe. The court doubted but assumed, for argument’s sake, that the LOI made the exercise of good faith and reasonable endeavours a condition precedent to the Defendant’s refund obligation. Even on that assumption, the court held the condition precedent unenforceable for the same reasons.

Regarding the Defendant’s argument that the Plaintiff had given up the right to act capriciously, the court was unpersuaded, noting that such a surrender does not render an otherwise unenforceable obligation enforceable.

On the issue of contractual estoppel, the court found that the parties’ last amendment to the Cut-Off Date contained a clear and unambiguous acknowledgment that both parties had exercised good faith and reasonable endeavours. This acknowledgment formed the agreed factual basis for the extension, thus estopping the Defendant from denying the Plaintiff’s good faith and reasonable endeavours up to that amendment date.

Concerning the period after the last amendment, the court considered the Defendant’s allegations of failure to engage with document drafts and financing terms. The court found these allegations lacked substance, noting the parties were awaiting financing confirmation and that the Plaintiff had insufficient time to respond meaningfully. The court applied the “absence of reality” test and concluded no triable issue was raised.

Finally, the court considered whether there was any compelling reason to refuse summary judgment in light of the Defendant’s counterclaim. It concluded that the counterclaim raised distinct issues and did not justify withholding summary judgment on the deposit claim.

Holding and Implications

The court’s final decision was to grant summary judgment in favour of the Plaintiff for the return of the deposit of US$3.55 million. The judgment was IN FAVOUR OF THE PLAINTIFF, with a stay of execution limited to the amount of the Defendant’s counterclaim. The direct effect is that the Defendant must refund the deposit to the Plaintiff. The court did not establish any new precedent but reinforced established principles regarding the unenforceability of obligations to negotiate in good faith and use reasonable endeavours where objective criteria are absent, and confirmed the applicability of contractual estoppel to agreed factual acknowledgments within commercial amendments.