The court has considered the performance of contractual obligations concerning a property development where parties had fallen out in Quay House Admirals Way Land Ltd and another v Rockwell Properties Ltd [2022] EWHC 545 (Ch). The first claimant owned Quay House, near Canary Wharf and the second claimant was its parent company. The building was to be developed by the defendant as a hotel and serviced apartment building.
In 2018, the parties concluded a planning and development management agreement (PDMA) which appointed the defendant as developer performing agreed services – formulating strategy, ensuring a plan for meeting critical dates and assisting with funding arrangements – for fees of £1.5m. There was a separate profit-share agreement (PSA) between the defendant’s parent company and the second claimant. By the date of the hearing, permissions for the development had been obtained, a prelet of the hotel to Premier Inn had been agreed and forward funding was being sought.
The PDMA contained obligations on the parties to act in good faith, to co-operate and to use reasonable endeavours to procure a funding arrangement. It also provided for there to be a restriction on the land register of the property so that there could be no disposition of the property without a certificate signed by the defendant’s conveyancer that the provisions of the PDMA had been complied with.
The parties had fallen out and were in dispute as to whether or not the contract had been terminated by the claimants. The claimants sought the removal of the restriction, which they claimed was an obstacle to raising finance of £100m for the development: funders would not negotiate unless satisfied they would secure the registered title. The defendant denied that the restriction prevented negotiations, as opposed to completion, or that there was any urgency.
The judge was satisfied that continuation of the restriction would be an absolute bar to the completion of a financing transaction and that interim relief was appropriate because significant delay could jeopardise the arrangement with Premier Inn, which would make the development unfundable. There was no understanding that the restriction would be removed prior to the approach to financiers and such removal would not be necessary but for the fact that the parties had fallen out. However, now that they had done so, there were no grounds for an implied term for removal of the restriction.
The broad obligations in relation to funding meant that the specific obligations of the parties remained inchoate and must be deduced from the circumstances. The intention of the restriction was to ensure that even though the first claimant owned the property it could not use it other than to pursue the agreed business plan. It was not to protect any entitlement to profit, since the defendant had none. Had the parties not fallen out, the defendant would have been required to consent to remove the restriction and this remained the position. The defendant’s entitlement to fees under the PDMA could be protected by a payment into court. The court also considered that it had inherent jurisdiction to remove the restriction and made an order accordingly.
Louise Clark is a property law consultant and mediator
