Land – Valuation – Independent expert – Consortium developing land in two phases – Land developed and sold to defendant – Dispute arising concerning consortium entitlement to overage payment – Payment deed requiring all members of consortium to join in appointment of expert – Rights of consortium member vesting in trustee in bankruptcy – Trustee refusing to join in application to instruct independent expert – Claimants seeking declaratory relief as to parties’ rights – Whether expert validly appointed – Declaration granted
The claimants formed a consortium which purchased land at Dalton Park in County Durham for development through a company of which they were directors. In May 2000, a payment deed was entered into between the claimants and the company which identified two separate areas of land within Dalton Park (phase 1 and phase 2).
The deed was valid for 15 years and entitled the consortium to payment of the open market value of “phase 2” land subject to a minimum threshold of £2 million, once the land had been developed. The deed included a dispute resolution procedure including the process for instructing an expert.
In 2002, the development started. The majority of the development works, involving the building of a cinema and roads and the construction of a car park, took place on the phase 1 land. Some work to construct car parking took place on the phase 2 land but the principal development works only commenced in May 2015, outside the 15-year period.
In August 2006, one of the consortium (D) was made bankrupt. His trustee in bankruptcy became the fourth claimant. All D’s contractual rights and benefits under the payment deed, at the date of his bankruptcy, vested in the fourth claimant. D was discharged from bankruptcy in March 2007.
In 2011, the company agreed to sell the property to the first defendant. In May 2014, an application was made for the appointment of an independent expert in connection with the “determination of average uplift agreement valuation as per legal agreement dated May 2000”. The claimants sought declaratory relief as to parties’ rights.
Held: The declaration was granted.
(1) In construing the payment deed, the court’s task was to ascertain the objective meaning of the language which the parties had chosen to express their agreement. The interpretative exercise was unitary, involving an iterative process by which each suggested interpretation was checked against the provisions of the contract and its commercial consequences investigated.
A term might be implied into a particular contract, in the light of the express terms, commercial common sense and the facts known to both parties at the time the contract was made. In this case, only implication in fact was relied upon. For a term to be implied, it had to be reasonable and equitable; necessary to give business efficacy to the contract; so obvious that it went without saying; capable of clear expression; and not contradict any express term of the contract: Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] EGLR 8, Wells v Devani [2019] UKSC 4; [2019] EGLR 16, Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18; [2020] EGLR 17, ABC Electrification Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 1645 and Barton and others v Morris and another [2023] UKSC 3; [2023] PLSCS 17 considered.
(2) In the present case, no expert had been validly appointed under the payment deed which required all members of the consortium to join in an appointment. After the bankruptcy of D, his right to join in such an appointment vested in his trustee in bankruptcy and did not re-vest in D after his discharge from bankruptcy. On the facts, the fourth claimant, as D’s trustee in bankruptcy did not agree to be joined into the application for the appointment of an expert, nor did the request for such an appointment purport to be made on behalf of (among others) the trustee in bankruptcy:
The main “development” of the phase 2 land had taken place after expiry of the 15-year period provided for by the payment deed, such that it could not trigger any payment under the payment deed.
(3) The only other development of the phase 2 land which could in principle have triggered a right to payment (and the right to appoint an expert) was the development by way of construction of car parking spaces on part of the phase 2 land in 2002. However, the value of the relevant part of the phase 2 land would not at that stage have been such as to trigger any payment to the “seller” under the payment deed because of the “collar” that provided no payment would be made until the application of the formula providing for payments to the seller resulted in a payment of at least £2 million. It was conceded that the relevant part of the phase 2 land on which the car park was constructed was not worth more than £4 million (which was the minimum open market value required to give rise to a payment of £2 million under the formula. In fact, the formula would probably have required the open market value of the relevant parcel of land to be worth more because the formula provided for the subtraction of “credits”).
(4) It was now too late to apply for an expert to make a determination of the open market value of the part of the phase 2 land on which the car park was constructed in 2002 and academic to do so because of the value of the land on which it was constructed in 2002. As the court had found that the reference to expert determination was invalid, there was no issue as to the court’s jurisdiction to make relevant determinations in the light of the appointment of an expert. There was no expert and one could not now be appointed. In any event, the agreement to the list of issues to put before the court meant that those issues at least could be decided by the court. Further, the reference made to the expert was the question of valuation of the open market value. Questions such as whether there had been relevant “development” and when would be matters going to the jurisdiction to appoint the expert rather than matters for his determination: Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826; [2012] 1 All ER (Comm) 912 considered.
Jason Jamil (of Arndale Solicitors LLP) appeared for the claimant; Jonathan Gavaghan (instructed by Flint Bishop LLP) appeared for the first defendant; The second and third defendants did not appear and were not represented.
Eileen O’Grady, barrister
Click here to read a transcript of Bastholm and others v Peveril Securities (Dalton Park Retail) Ltd and others
