Sale of land – Condition – Respondent agreeing to purchase stadium site from appellant for development as supermarket – Sale conditional on respondent obtaining acceptable planning permission free from onerous conditions – Respondent to use reasonable endeavours to obtain such permission – Planning permission granted – Request for removal of restrictions refused by local planning authority – Whether respondent lawfully terminating sale agreement for non-satisfaction of condition precedent – Whether complying with obligation to use reasonable endeavours and act in good faith – Appeal dismissed
The appellant was the owner of Bristol Rovers Football Club. In March 2011, it entered into a conditional contract for the sale of the club’s stadium to the respondent for £30m. The appellant proposed to move the club to a modern stadium while the respondent proposed to demolish the old stadium and construct a mixed-use development with residential units and a superstore.
The sale agreement required the respondent to use all reasonable endeavours to obtain an acceptable planning permission for the superstore development as soon as reasonably possible (the store planning condition). An acceptable permission was defined as one which did not contain “store onerous conditions”, including conditions that restricted the hours of delivery and despatch of goods between 5am and midnight on any day. In the event of a planning refusal, defined to include a grant of planning permission in terms that were not acceptable, the respondent would be obliged to pursue an “appeal”, as contractually defined, only if planning counsel confirmed that such an appeal had a 60% chance or greater of achieving an acceptable store planning permission on or before a contractual long-stop date in December 2014.
Both parties agreed to “act in good faith in relation to their respective obligations in this Agreement” and to assist the other in obtaining permissions for the store and the new stadium. However, either party was entitled to terminate the agreement by giving 20 days’ notice in the event that the conditions were not satisfied by a contractual cut-off date.
The respondent applied for planning permission for a new superstore with deliveries 24 hours a day, seven days a week, but the local planning authority granted permission subject to a restriction on delivery times. In return for the appellant’s acceptance that the restriction was a store onerous condition, the respondent agreed to make an application to vary the restriction, pursuant to section 73 of the Town and Country Planning Act 1990, without seeking the advice of planning counsel. That application was refused in January 2014.
A dispute ensued between the parties as to whether the respondent was obliged to appeal against the refusal of the section 73 application, make a further such application or assist the appellant in doing so. In October 2014, a jointly instructed planning counsel advised that the prospects of achieving an acceptable store planning permission were less than 60%.
The respondent thereafter purported to terminate the sale agreement for non-satisfaction of the store planning condition. The appellant argued that the respondent had terminated the agreement in breach of contract, having failed to use all reasonable endeavours to obtain an acceptable store planning permission.
In the court below, the judge found that the sale agreement had been validly terminated: see [2015] EWHC 2002 (Ch); [2015] PLSCS 218. In reaching that conclusion, she held that: (i) the contractual cut-off date had occurred sometime in the summer of 2014; (ii) the obligation to use all reasonable endeavours to procure the grant of an acceptable planning permission had continued after that date until the expiry of the termination notice; (iii) a section 73 application was not strictly an “appeal” as defined in the sale agreement; (iv) the parties had however agreed and acted on the assumption that it would count as one, so as to give rise to an estoppel by convention; and (iv) the respondent was not obliged to bring a further appeal unless, on the advice of planning counsel, it passed the 60% test. The appellant appealed.
Held: The appeal was dismissed.
(1) It was common ground that the store planning condition was never satisfied because there was no grant of an acceptable store permission before the long-stop date in December 2014. The right to serve a termination notice arose if the store planning condition was not satisfied by the cut-off date. Accordingly, subject to the doctrine that a party could not rely on its own breach of contract, the respondent had been entitled to terminate the sale agreement when it did.
(2) The respondent was under an obligation to use all reasonable endeavours to obtain an acceptable store planning permission as soon as reasonably possible. The process did not end with an initial planning application which was refused, or with an unsuccessful appeal, but continued until there were no more reasonable steps that the respondent could take to secure the grant of an acceptable store planning permission. The arrival of the cut-off date did not, without more, bring to an end the respondent’s obligation to pursue the store planning permission; otherwise, the service of termination notices would be unnecessary. Instead, the obligation continued until service of a termination notice.
(3) The respondent’s agreement to make a section 73 application without resorting to planning counsel, in return for the appellant’s agreement that the planning permission contained a store onerous condition, compromised the issue of whether a section 73 application was an “appeal” only for the purposes of that agreement. However, the compromise nonetheless continued to bind the parties once the section 73 application was refused, since it would have been unconscionable for the parties subsequently assert that a section 73 application was not an appeal. That was because the mistaken common assumption about the meaning of “appeal”, although occurring in the context of that agreement, was an assumption about how the main sale agreement worked. The question of whether a section 73 application was an appeal had important consequences for the operation of the sale agreement, impacting both on whether the agreement had become terminable and on whether the respondent was in breach of its reasonable endeavours obligation. For the appellant to resile from the common assumption, so as to place the respondent in breach, was unconscionable. In all the circumstances, it would be unjust to allow the appellant now to assert that the respondent’s failure to lodge a further section 73 application was a breach of its planning obligations. Since such an application was to be treated as an “appeal”, the respondent was not obliged to lodge such an application unless planning counsel advised that it passed the 60% test, and that had not occurred.
(4) The obligation to use all reasonable endeavours did not require the respondent to consent to the appellant filing its own section 73 application in circumstances where the respondent would not itself be obliged to file such an application. Once it was concluded that the respondent was not obliged file a section 73 application, it could not have been the intention of the parties that it would nonetheless be reasonable for it to consent to such an application by the appellant. The sale agreement required the parties to act in good faith in relation to their respective obligations and, if the respondent was not itself required to submit a further section 73 application, then its reliance on that contractual provision could not be said to lack good faith. The appellant did not itself have any obligation under the agreement to make an application for a store planning permission and, in failing to assist the appellant to do so, the respondent was not failing to act in good faith in relation to its respective obligations under the agreement. Likewise, the contractual obligations of each party to assist the other could only be interpreted as requiring assistance in relation to the opposite party’s obligations under the agreement. The appellant was to assist the respondent with its store planning application and the respondent was to assist the appellant with its stadium planning application. There was no obligation on the respondent to assist the appellant with an application for store planning permission which neither party was under an obligation to lodge.
(5) It followed that the respondent was not in breach of its contractual obligations and had been entitled to terminate the sale agreement when it did.
David Matthias QC and George Mackenzie (instructed by Burges Salmon LLP) appeared for the appellant; Mark Wonnacott QC and Philip Sissons (instructed by Dentons UKMEA LLP) appeared for the respondent.
Sally Dobson, barrister
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