Lock-out agreement — Interlocutory relief for alleged breach — Whether injunction appropriate remedy
On June 2 1997 the plaintiff met with the
defendants to negotiate the purchase of a golf course the defendants were
selling; the plaintiff alleged that at that meeting it was agreed that there
would be an exclusivity agreement until July 2 during which the defendants
would not negotiate with another purchaser if once they accepted terms the
plaintiff might offer. The plaintiff did offer terms which the defendants found
acceptable. The defendants then received a higher offer from a further party
and informed the plaintiff they were minded to accept it. The plaintiff
obtained an ex parte injunction restraining the defendants from
exchanging or completing a contract of sale of the property. The order came to
be reviewed at an inter partes hearing.
Whether there was an exclusivity agreement was a question of fact which would
need to be tried. If there was such agreement it could be supported by
consideration. But the injunction would be discharged because damages would be
an appropriate and alternative remedy.
The following case is referred to in this
report.
Pitt v PHH Asset Management Ltd [1994]
1 WLR 327; [1993] 4 All ER 961; (1993) 68 P&CR 269; [1993] 2 EGLR 217;
[1993] 40 EG 149
This was the hearing of an application by
the plaintiff, David Edward Tye, to continue an injunction obtained ex parte
against the defendants, Colin House and Margaret Jennings.
Miss Lynne Counsell (instructed by Reynolds
Porter Chamberlain, London agents for Greenland & Houchen, of Attleborough)
appeared for the plaintiff; Stephen Shaw (instructed by Ellison & Co, of
Colchester) represented the defendants.
Giving judgment, EVANS-LOMBE J
said: This is a motion inter partes in respect of an order which I made ex
parte on June 11. By that order I restrained the defendants, Mr House and
Mrs Jennings, from exchanging or completing upon a contract of sale of
Costessey Park Golf Course near Norwich on or before July 2, shortly to arrive.
The circumstances in which I made that
judgment are these: It seems that the golf course, of which the defendants were
the joint owners, was on the market and that the plaintiff communicated through
his agents with the defendants for the purpose of offering to purchase it. A
meeting took place on June 2 of which terms were discussed. That meeting being
between the plaintiff and Mr House, the first defendant, and Mr Merrick of
Savills, the estate agents, who were Mr House’s and Mrs Jennings’s agents for
the purposes of the sale.
Terms were discussed. It is the
plaintiff’s case that in the course of those negotiations he informed Mr House
and Mr Merrick that he only operated on the basis of exclusivity; that means
that he would require them to undertake not to negotiate with another purchaser
if once they accepted the terms that he had to offer. And he asserts that in
the course of those oral negotiations that they agreed that there should be
such an exclusivity agreement which would last until July 2. In the event that
he offered terms which the vendors accepted.
In the course of the next few days the
plaintiff increased his offer price; the plaintiff offered terms which were
accepted by the defendants. Correspondence then proceeded between Mr Merrick
and those acting on behalf of the plaintiff, in the course of which heads of
terms were sent by Savills for the defendants to those advising the plaintiff,
which did not include any reference to an exclusivity agreement. There does not
appear to have been any objection to that absence by or on behalf of the
plaintiff.
Mr Tye, the plaintiff, asserts that in
the course of a further conversation with the first defendant, Mr House, he
referred to the exclusivity agreement and that that was confirmed by Mr House.
However, the defendants then received a
further offer for the purchase of the golf course at an increased sum which was
a more attractive offer than that being made by the plaintiff and they notified
the plaintiff that they were minded to accept it. And it was that notification
which triggered these proceedings and which triggered the application to me ex
parte on June 11, as a result of which I made the ex parte order
which today comes to be reviewed.
The defendants advance three arguments
for why I should decline to prolong the injunctive relief which I have granted.
The first argument is that on the evidence it is sufficiently plain that there
cannot have been any exclusivity agreement, and for me to dismiss the
proceedings on the basis, that the plaintiffs have not shown a case to be tried
on the central issue, namely the existence of such an agreement. I am unable to
accept this argument. There is here a simple issue of fact between three
people, the plaintiff, Mr House and Mr Merrick, as to whether there was such an
exclusivity agreement. It doesn’t seem to me that any of the documents before
the court establish beyond peradventure that no such agreement can have been
made. I certainly accept there are pointers in favour of the defendants’ position,
but I am not in a position as of today to come to any such conclusion.
The second point taken is that the
agreement lacks any consideration flowing from the plaintiff to support it.
Again, I am unable to accept that submission. It seems to me, the fact that the
plaintiff required such an exclusivity agreement, indicated that he had bound
himself to complete by a certain date and so to incur expense and cost in
getting himself ready to complete the agreement on or before that date. That
was capable of constituting consideration flowing from the plaintiff, and
indeed it is the sort of consideration which is spoken of in the judgment of
Peter Gibson LJ in Pitt v PHH Asset Management Ltd a case to
which I was referred when the application was made ex parte, which is
reported in [1994] 1 WLR 327*.
*Editor’s note: Also reported at [1993] 2
EGLR 217
The third, but much weightier argument
which the defendants advance, is that this is a case where damages are an
appropriate and
exclusivity agreement confers on the purchaser no right to require the
defendant to sell the land to him. Accordingly, the peculiar facet of a
contract for the sale of land is absent, namely that because land is individual
and cannot be substituted for. The purchaser may have particular uses for the land.
Damages in the usual case are not an alternative remedy and accordingly the
court will usually make interlocutory injunctions to restrain disposition of
land where there is a claim which is more than just evanescent that a contract
for its sale has been entered into. Those are not the circumstances of an
exclusivity agreement. Exclusivity agreements are, as I understand them,
designed to protect purchasers from having incurred substantial costs in
getting themselves ready to complete and at the last minute losing the property
because the vendor elects to sell to somebody else. The purchaser can recover,
as damages, his costs thrown away if the vendor dealt with another during the
period of exclusivity.
I accept the defendant submissions that
the injunction, in this case, should not be prolonged on the basis that damages
are a suitable alternative remedy to Mr Tye if he succeeds in establishing that
there was, contrary to what appears to be the evidence of Mr House and Mr
Merrick, an exclusivity agreement. For these reasons it seems to me that I
should not prolong the injunction that I made on June 11, but should permit the
case to proceed, if the parties elect to proceed with it, to trial. I merely
comment that the plaintiff by launching these proceedings took a considerable
risk; by so doing he may have, and might still, if this injunction were to be
prolonged, induce the second offeror for this golf course to withdraw his offer
and go and buy a golf course elsewhere. If such were to occur there would be a
plain claim available to the defendants against Mr Tye, on the crossundertaking
in damages for the sum of approximately a quarter of a million pounds, which
would be the difference between the offer that has been made by these further
would-be purchasers and that being made by Mr Tye. That seems to me to be a
risk which the removal of this injunction, assuming that offer has not already
disappeared, relieved Mr Tye of the risk of having to meet.
But the result of the case is that I will
not prolong the injunction and accordingly the motion for injunctive relief
falls to be dismissed.