Sale of land – Construction of contract – Claimant agreeing to sell development land to defendant – Local planning authority requiring affordable housing contribution as condition of grant of planning permission for development – Claimant conceding in dispute resolution process that cost of affordable housing included in “development costs” deductible from sale price – Whether that correct as matter of construction – Whether claimant entitled to rectification of contract to place burden of affordable housing on defendant – Claim dismissed
The claimant acquired brownfield sites, carried out remediation works and sold the sites on to residential developers. In February 2006, it entered into an option agreement for the sale to the defendant of a 43-acre site comprising a former railway depot in Doncaster, for £925,000 per net developable acre, less the “development costs” as defined. The claimant was to apply for planning permission for a residential development and all necessary prior remediation works, with completion to take place only once planning permission was obtained for a development of at least 30 acres. The council required the claimant, as a condition of the grant of planning permission, to contribute towards the provision of affordable housing, by means of an agreement under section 106 of the Town and Country Planning Act 1990. The option agreement specifically provided for the parties’ respective responsibilities for costs incurred in that connection. In 2008, the claimant entered into a section 106 agreement for an affordable housing contribution of £4.587m.
A dispute arose as to which party was to bear the cost of the affordable housing. The defendant maintained that it was included in the “development costs” deductible from the purchase price for the site and therefore fell on the claimant. An expert appointed under the dispute resolution clause in the agreement determined, on the basis of a concession by the claimant, that that was the meaning of the relevant clause. Under the terms of the agreement, his decision was made in the capacity of an expert, not an arbitrator, and was to be final and binding save for any manifest error.
The claimant brought proceedings to rectify the agreement on the ground that the parties had intended, when entering into the agreement, that the defendant should bear the cost of the affordable housing provision.
Held: The claim was dismissed.
The option agreement contained various provisions in clear, coherent and consistent terms that indicated that the defendant should bear the liability for the cost of affordable housing. Although the definition of the “development costs” to be deducted from the purchase price was sufficiently wide to embrace the cost of affordable housing, it should not be read in that way given the apparent conflict with other provisions that dealt explicitly with affordable housing. The conflict should be resolved by reading the general provision regarding development costs as subject to the specific provision in other clauses regarding affordable housing. That was both a matter of common sense and the effect of the principle that general provisions did not derogate from specific ones. Since the parties had spelt out their specific agreement in respect of affordable housing requirements contained in a section 106 agreement, they could not be supposed to have intended that agreement to be contradicted and overridden by a general provision. The true construction of the agreement was clear: the burden of bearing the costs of the affordable housing fell on the defendant and could not be deducted from the purchase price.
That way of resolving the apparent conflict seemed so simple and obvious that it was difficult to understand how the claimant had made its concession in respect of the expert’s determination. It had been unwise for it to concede the issue of construction before the expert. Since the expert’s determination contained no manifest error, his decision on the construction issue was final and binding as a matter of contract between the parties, although it did not bind the court since it was not a judicial decision to which the doctrine of res judicata could apply. The court was free to and did find that the agreement, as it stood, cast the burden of affordable housing on the defendant. The rectification claim therefore failed because there was nothing to rectify. Since the claimant was bound by the expert’s determination on the construction issue, it was left without a remedy notwithstanding that the agreement meant what it wanted it to mean.
John McGhee QC (instructed by Clifford Chance LLP) appeared for the claimant; Christopher Pymont QC and Andrew Ayres (instructed by Walker Morris LLP, of Leeds) appeared for the defendant.
Sally Dobson, barrister
