Proposed shopping centre — Agreement between landowner and developer — Planning permission refused — Whether landowner having right to exercise put option — Landowner’s appeal allowed
In 1989 the trustee (later Barclays Bank) entered into an agreement with the defendant regarding a retail development of land at Staines, owned by the trustee. The developer was to endeavour to obtain planning permission for the development by the longstop date, December 31 1994. The agreement also created an option in favour of the trustee to sell its land to the developer. The trustee could exercise its option by serving a sale notice on the developer both prior to the longstop date and for one month thereafter. Thereby the developer was obliged to purchase the trustee’s land (the land subject to the planning application) plus any “further land”. The price was to be the higher of, the open market value or the amount produced by the valuation formulae — £20m plus “further land costs if any” plus “net holding costs if any”. Prior to the longstop date, it became clear that planning permission would not be obtained.
Accordingly, the trustee served a sale notice. Both parties agreed that the higher price would be achieved by applying the valuation formulae. However, there was a dispute as to whether certain interests owned by the trustee were “further land” creating any “further land costs”. The interests were: (1) a freehold purchased for £113,000; (2) the leasehold interest of the trustee as reversioner acquired for £3.2m. The agreement defined “further land” as any “Relevant Interest” subject to a proviso that “should any relevant interest by agreement between the developer and MIM no longer be required for … the development … it shall no longer be further land”. It was agreed that both interests were “relevant interest”. However, the developer contended that because the development was not going ahead, the proviso had been triggered. Accordingly, it was not obliged to purchase or pay “further land costs”. There was also a dispute as to whether the developer had to pay any “net holding costs” defined as the notional interest on “further land costs” calculated from the date of payment by the trustees to the “date of valuation” which was defined as being the same date as “the developer’s request notice”. The trustee contended that there should be implied term to ensure that “net holding costs” would still be paid in these circumstances. At first instance, it was held that the developer was under an obligation to purchase the properties for the amounts paid, but there was no obligation to pay “net holding costs”.
Held Trustee’s appeal allowed: developer’s cross-appeal dismissed.
1. The definition of “further land” had to be construed in the light of the intention of the parties shown by the agreement read as a whole. The proviso in the definition was, consistent with business sense, not concerned with the present circumstances where the development would not be going ahead.
2. The purchase price of £113,000 paid by the trustee for the freehold interest was a “further land cost” so long as the property remained within the definition of “further land”. Since the property fell within that definition, MEPC had to pay that sum.
3. Since the same submissions arose in respect of the leasehold interest, it followed that MEPC must pay the £3.2m paid by the trustee.
4. There were clear indications that the parties intended that “net holding costs” be paid whether or not the “sale notice” was proceeded by a “developer’s request notice”. Such a term should be implied to give business efficacy to the agreement.
David Neuberger QC (instructed by Clifford Chance) appeared for the trustee; Michael Barnes QC (instructed by Nabarro Nathanson) appeared for the developer.
