Real property – Option agreement – Planning permission – Appellant giving notice to trigger option to purchase farm on basis that planning permission obtained as required by option agreement – High Court determining that permission for new roof was not planning permission within option agreement – Appellant appealing – Whether planning permission meaning permission to develop whole, or substantially whole, of property – Appeal dismissed
By an agreement dated 9 November 2002, the appellant had an option to acquire Bethwines Farm, a 117-acre farm in Fishbourne, near Chichester, West Sussex. The farm comprised open fields and farm buildings. Under the option, which was due to expire on 31 December 2020, the appellant was entitled to acquire the farm at a 30% discount from its open-market value.
The option was triggered by the obtaining of a “planning permission” which was defined in clause 1.9 of the option agreement as “a planning permission granted by the local planning authority permitting any development of the property”.
In 2016, the appellant obtained planning permission to erect a new pitched roof on one of the existing farm buildings. The appellant had no intention of implementing the permission and it expired. However, in 2018 it gave notice to trigger the option on the basis that it had obtained a planning permission.
The High Court decided that, on a proper interpretation of the words “any development of the property” in the definition in clause 1.9, a “planning permission” meant a planning permission for development of the whole, or substantially the whole, of the property by the erection of a new building involving a change of use from agricultural use; the roof permission was not such a planning permission and the notice was not valid: [2020] EWCA Civ 1704.
The appellant appealed, contending that the judge: (i) had failed to take the natural and ordinary meaning of the term “planning permission… for any development” as his starting point and undervalued the importance of the language used; (ii) had been wrong to hold that a planning permission had to relate to the whole or substantially the whole of the farm; and (iii) had been wrong to construe the option consistently with a series of earlier option agreements relating to the farm: [2020] EWCA Civ 1704.
Held: The appeal was dismissed.
(1) The court’s task when construing the 2002 option was to ascertain the objective meaning of the words used by the parties in the context of the 2002 option as a whole, taking into account the relevant factual background which would have been available to the parties, but excluding subjective evidence of the parties’ intentions. If there were rival meanings, the court could give weight to the implications of the rival constructions by reaching a view as to which was more consistent with business common sense: Arnold v Britton & Ors [2015] EGLR 53, Wood v Capita Insurance Services Ltd [2017] AC 1173, and Rainy Sky SA & Ors v Kookmin Bank [2011] UKSC 50 followed.
(2) The term “planning permission” was capable of more than one meaning. The reasonable reader of clause 1.9 of the option agreement with all the relevant background available to the parties at the time, having read the clause in the context of the 2002 option as a whole, would not conclude that the natural and ordinary meaning of word “development” in the context of that clause encompassed each and every one of the activities set out in section 55 of the Town and Country Planning Act 1990. He would have in mind that the land subject to the 2002 option was a farm and approach the meaning of “development” in that context. The fact that reference was made in clause 1.9 to the grant of planning permission by the local planning authority, which would be within section 55, did not mean that the natural and ordinary meaning of “development” included all or any of the activities outlined there. Therefore, the judge was right to reject the submission that “development” in clause 1.9 of the 2002 option had the meaning given to it in section 55 and to conclude that it had more than one meaning.
(3) The judge was then required to weigh up the implications of rival meanings and apply commercial common sense. If one considered clause 1.9 in the context of the 2002 option as a whole, it was clear that the appellant’s interpretation of “development” made little commercial sense in circumstances in which the option holder would be entitled to purchase the farm at a discount of 30% from its open-market value.
The planning permission which triggered the 2002 option could not be entirely inconsequential. If that were the case, there would be no reason to give a discount. There would be little point in granting an option at all and no reason to include all of the detailed provisions which appeared in the 2002 option. Such an interpretation was consistent with the fact that the 2002 option did not contain any “claw-back” or overage provisions enabling the owner/grantor to benefit if the land was subsequently sold or developed at a substantial profit, despite having been transferred at a low value under the option.
Therefore, if one interpreted the term “development of the property” in context, having taken account of the relevant factual matrix and business common sense, it meant a development which included new building and which involved a change of use from agricultural use. There was nothing before the court to suggest that part of the relevant factual matrix was that part of the property could not be developed.
(4) If clause 1.9 was construed in the context of the 2002 option as a whole, it was clear that “planning permission” in clause 1.9 had to relate to the whole or substantially the whole of the property. Despite the use of the phrase “or any part thereof” in the definition of “planning application” in clause 1.8, the term “property” was used in clause 1.9 without qualification. The draftsman was capable of distinguishing between the property as a whole and part of it and had done so.
It followed that the judge’s interpretation of clause 1.9 was to be preferred and it was not necessary to place any reliance upon the precise terms of earlier agreements in order to reach the proper interpretation of clause 1.9 and the 2002 option as a whole.
John Litton QC and James Neill (instructed by Fladgate LLP) appeared for the appellant; Julian Greenhill QC (instructed by Irwin Mitchell LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Fishbourne Developments Ltd v Stephens
