The Court of Appeal has overturned a ruling that delays to a £100m commercial and residential development on the south bank of the Thames constituted a repudiatory breach of contract that entitled a would-be tenant to a return of its deposit.
In July last year, Roth J found that freehold owner and developer Telford Homes (Creekside) Ltd did repudiate its contract with Ampurius Nu Homes Holdings Ltd, which had agreed to take four leases of the commercial premises for £8.4m. The judge, however, ruled that Ampurius was only entitled to recover the £421,309 deposit it paid, plus interest. He rejected Ampurius’ claims for additional damages, ruling that it would not have made a profit had the development proceeded as planned.
Today, Lewison LJ allowed Telford’s appeal and ruled that, when set against 999 year leases, an overall projected delay of around one year was not sufficient to be repudiatory.
The case centred on the Creekside Village West development of commercial space and 371 flats on land close to the south bank of the Thames at the border of Greenwich and Deptford, comprising four blocks of varying height, three of which enclose a raised piazza. The high court judge said that the development was expected to involve an overall investment of £102m, and Telford entered into a joint venture with the Royal Bank of Scotland to achieve it.
In October 2007, Ampurius agreed to take long leases of the ground and first floor commercial premises in each block for £8,426,181 and paid the 5% deposit.
However, the first two blocks were completed almost six and nine months late and works the other two were halted as a result of funding difficulties in June 2009.
In October 2010 – just after works on the blocks recommenced – Ampurius launched proceedings seeking to terminate the contract on the basis of repudiatory breach by Telford Homes.
Ruling that Telford Homes had repudiated the contract, Roth J said that the layout of the site, with three blocks framing a piazza was an important feature for the purpose of marketing the commercial units.
He said: “It would frustrate the commercial purpose if, for a substantial period, the claimant received only two blocks, while the rest of the development remained a building site.”
This breach, he added, was “sufficiently substantial to be repudiatory”.
However, overturning that decision today, Lewison LJ said that the judge failed to adequately analyse what benefit the investor was intended to receive under the contract before deciding whether the investor had been deprived of a substantial part of that benefit, and did not concentrate on the correct date, the date when the investor purported to terminate the contract.
He said that, by the time Ampurius purported to terminate the contract on 22 October 2010, work had restarted and it could no longer be said that the cessation of work was “indeterminate and prolonged”.
In fact, he said that on the judge’s findings, the overall delay to the handing over of all four blocks would only have been 13 months.
He said: “In my judgment it is simply not possible to say, as at 22 October 2010, that the actual and reasonably foreseeable effects of Telford’s breaches of contract were such as to deprive Ampurius of a substantial part, let alone substantially the whole, benefit of the contract.
“Nor is it possible to say that the delay had had the effect of frustrating the contract, whose overall objective was the grant of 999 year leases of the commercial units in each of the four blocks.
“I accept that uncertainty caused by delay is a commercial problem. But it seems to me that delay, even with its attendant uncertainties, will only become a repudiatory breach if and when the delay is so prolonged as to frustrate the contract. In the context of an agreement to grant a series of 999 year leases, we are a long way from that in this case.
He said that, even if the delay had an impact on marketing the flats, the cost to Ampurius would have been of the order of £100,000, and added: “Set against a purchase price exceeding £8m, and in the context of an overall development cost exceeding £100m, this was not a loss of a scale of magnitude sufficient to warrant characterising it as repudiatory.”
Ampurius’ sister company, Ampurius Nu Homes (UK) Ltd, acquired the adjoining development site, Creekside East, in 2005.
Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd Court of Appeal (Longmore, Tomlinson and Lewison LJJ) 23 May 2013
David Mayall (instructed by WGS Solicitors) for the Claimant/Respondent
Jonathan Gaunt QC and Adam Rosenthal (instructed by Dentons UKMEA LLP) for the Defendant/Appellant
The Court of Appeal has overturned a ruling that delays to a £100m commercial and residential development on the south bank of the Thames constituted a repudiatory breach of contract that entitled a would-be tenant to a return of its deposit. In July last year, Roth J found that freehold owner and developer Telford Homes (Creekside) Ltd did repudiate its contract with Ampurius Nu Homes Holdings Ltd, which had agreed to take four leases of the commercial premises for £8.4m. The judge, however, ruled that Ampurius was only entitled to recover the £421,309 deposit it paid, plus interest. He rejected Ampurius’ claims for additional damages, ruling that it would not have made a profit had the development proceeded as planned. Today, Lewison LJ allowed Telford’s appeal and ruled that, when set against 999 year leases, an overall projected delay of around one year was not sufficient to be repudiatory. The case centred on the Creekside Village West development of commercial space and 371 flats on land close to the south bank of the Thames at the border of Greenwich and Deptford, comprising four blocks of varying height, three of which enclose a raised piazza. The high court judge said that the development was expected to involve an overall investment of £102m, and Telford entered into a joint venture with the Royal Bank of Scotland to achieve it. In October 2007, Ampurius agreed to take long leases of the ground and first floor commercial premises in each block for £8,426,181 and paid the 5% deposit. However, the first two blocks were completed almost six and nine months late and works the other two were halted as a result of funding difficulties in June 2009. In October 2010 – just after works on the blocks recommenced – Ampurius launched proceedings seeking to terminate the contract on the basis of repudiatory breach by Telford Homes. Ruling that Telford Homes had repudiated the contract, Roth J said that the layout of the site, with three blocks framing a piazza was an important feature for the purpose of marketing the commercial units. He said: “It would frustrate the commercial purpose if, for a substantial period, the claimant received only two blocks, while the rest of the development remained a building site.” This breach, he added, was “sufficiently substantial to be repudiatory”. However, overturning that decision today, Lewison LJ said that the judge failed to adequately analyse what benefit the investor was intended to receive under the contract before deciding whether the investor had been deprived of a substantial part of that benefit, and did not concentrate on the correct date, the date when the investor purported to terminate the contract. He said that, by the time Ampurius purported to terminate the contract on 22 October 2010, work had restarted and it could no longer be said that the cessation of work was “indeterminate and prolonged”. In fact, he said that on the judge’s findings, the overall delay to the handing over of all four blocks would only have been 13 months. He said: “In my judgment it is simply not possible to say, as at 22 October 2010, that the actual and reasonably foreseeable effects of Telford’s breaches of contract were such as to deprive Ampurius of a substantial part, let alone substantially the whole, benefit of the contract. “Nor is it possible to say that the delay had had the effect of frustrating the contract, whose overall objective was the grant of 999 year leases of the commercial units in each of the four blocks. “I accept that uncertainty caused by delay is a commercial problem. But it seems to me that delay, even with its attendant uncertainties, will only become a repudiatory breach if and when the delay is so prolonged as to frustrate the contract. In the context of an agreement to grant a series of 999 year leases, we are a long way from that in this case. He said that, even if the delay had an impact on marketing the flats, the cost to Ampurius would have been of the order of £100,000, and added: “Set against a purchase price exceeding £8m, and in the context of an overall development cost exceeding £100m, this was not a loss of a scale of magnitude sufficient to warrant characterising it as repudiatory.” Ampurius’ sister company, Ampurius Nu Homes (UK) Ltd, acquired the adjoining development site, Creekside East, in 2005. Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd Court of Appeal (Longmore, Tomlinson and Lewison LJJ) 23 May 2013David Mayall (instructed by WGS Solicitors) for the Claimant/RespondentJonathan Gaunt QC and Adam Rosenthal (instructed by Dentons UKMEA LLP) for the Defendant/Appellant
