Parties enter into written contracts to ensure that transactions proceed as planned and to protect themselves if something goes wrong. The litigation in TC Development (South East) Ltd v Investin Quay House Ltd [2019] EWHC 3727 (TCC) concerned a contract requiring a firm of architects to provide services to a landowner in connection with an application for planning permission to develop a property in London.
The architects devoted a considerable number of hours to the project (which would, on a time-charge basis, have generated a fee in the region of £738,000). Indeed, the application for planning permission was well advanced and pre-application meetings with the local planning authority suggested that its response to a planning application was likely to be favourable. But the landowner decided to sell the property instead – and made a considerable profit from so doing – without notifying the architects that it had done so, or paying the professional fees that were due to them.
The parties’ contract covered a number of eventualities. It provided for the payment of a basic fee, in the sum of £750,000, on the grant of planning permission. The sum was payable in two instalments: £250,000 was payable immediately and the balance was payable on the sale of the property or in six months, whichever was the sooner (because the landowner anticipated selling the property with the benefit of planning permission, instead of developing the land itself).
It was also an express term of the contract that the architects would be paid if the landowner were to terminate the contract, which it was entitled to do on 10 days’ notice. In those circumstances, the agreement provided for a payment if the contract was terminated before 1 January 2018; for the payment of £295,000 if it was terminated after that date, but before making a full planning application; and for the payment of £500,000 if the contract was terminated after a planning application was made.
The property was sold in July 2018. So the architects invoiced the landowner for £295,000, even though the agreement had not been formally terminated, and, after issuing proceedings to recover the amount claimed, secured a judgment in their favour, which has just been published.
The judge ruled that the architects had a claim in either debt or damages. The requirement for written notice operated for the benefit of architects, as the party on whom the notice was to be served. So it was up to them to waive the notice requirement, if appropriate, and that, in effect, was what they had done when they issued their invoice. Consequently, they had a claim in debt for the amount due.
Alternatively, for reasons of business efficacy or necessity, it was an implied term of the parties’ agreement that the landowner would formally terminate the contract, if it were to decide not to pursue a planning application and to sell the property instead. Without such a term, the clear commercial basis for the agreement could be avoided for no good reason. So the implied term was absolutely necessary, as opposed to being a term that would be nice or reasonable to have, and the architects were entitled to damages for breach of contract.
Allyson Colby, property law consultant
