A contractual notice requiring the building of infrastructure for a gas-fired power station was invalid because when the notice was given, the claimant did not believe there was a demand for the services, the High Court has declared in Langage Energy Park Ltd v EP Langage Ltd [2022] EWHC 432 (Ch).
Planning permission was granted for the development of the Langage Energy Park and the Langage Energy Centre on land originally in common ownership, in June 2008. It was envisaged that the Energy Park could make beneficial use of steam, heat, gas and electricity from the Energy Centre which was built and commissioned in 2010. The Energy Park did not proceed due to the 2008 financial crisis. In early 2008 the parties came under separate ownership and signed a contract intended to establish a framework to facilitate their respective developments.
The contract contained obligations on the defendant to build specified infrastructure for services to be supplied to the claimant’s Energy Park: these included the laying, in phases, of service media for the transmission of services to the Energy Park. The first phase was preliminary works. The second phase was significantly more substantial and was contingent on written notice from the claimant to the defendant “that there is or will be a demand… from the occupier of the …buildings for any of the services”.
The claimant served notice on the defendant in June 2018 requiring it to instal the relevant service media, stating “we expect to have occupiers in place and consequently a demand for hot water, un-odorised gas and electricity supplied by the power station by mid-2019”. The defendant was sceptical about the demand and failed to carry out the works.
Was the claimant’s notice valid? The court decided that it was necessary to determine the meaning of the express words of the contract within its factual context in January 2008 before deciding whether any term as to honest belief or rational decision-making was implicit: Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742.
The differentiation between the phases of the works meant that the claimant did not have an absolute right to serve notice and nor could it do so in order to market the site. The criterion was whether there is or will be occupier demand for the services. The parties understood that development might proceed speculatively and so it was within their contemplation that the notice would be given at an early stage before there were any identified occupiers. However, in asserting in a notice that there is or will be a demand from occupiers for the services the claimant must have reached a decision on each service by a reasonable process which is neither capricious nor irrational.
The claimant’s evidence revealed that while negotiations with an occupier in mid-2018 led at least one of the directors to think that they might proceed in a speculative way, the decision to proceed was not taken before 2020. When the notice was served, none of the directors believed that there would be a demand for the services. The notice was invalid.
Louise Clark is a property law consultant and mediator
