Mr Justice Morgan
Approved Judgment
Mr Justice Morgan: Introduction
1. This litigation concerns a contract dated 29th June 2009 made between the Defendant as the Seller and the Claimant as the Buyer, in relation to a freehold property known as
2. The dispute as to the principal question and other related questions has given rise to some ten issues between the parties. I set out those issues at paragraph 74 below. To answer some of the issues, it is necessary to consider the facts in detail. In particular, I will set out the detailed planning history in relation to the property.
3. Mr Rodger QC appeared on behalf of the Buyer and Mr Moraes appeared on behalf of the Seller.
The property
4. Fitzroy Square is a substantial 6 storey Grade 1 listed building, built in brick and faced Portland stone, as part of a terrace of houses, by Robert Adam in circa 1792-1794. It was later converted to office use resulting in some damage to its historical form. Until recently, it was used as offices.
5. Grafton Mews is situate at the rear of
The parties
6. The Seller is Fitzrovia Properties Limited, a company registered in the
7. The Buyer is Fitzroy Developments Ltd, a company registered in the
The planning history: pre-contract
8. In June 2008, the Seller wished to apply for planning permission and other statutory consents for the conversion of
9. On 17th June 2008, the Seller’s architects wrote to the planning authority, the London Borough of Camden (“
10.
11. Part of
12. Appendix A made further detailed points as to the approach which would be adopted in relation to a section 106 agreement. It referred to an agreement under section 106 and ‘also to “heads of terms”. It stated that the applicant’s intention to agree to appropriate heads of terms would be a matter that the relevant planning committee would take into account when considering the application for planning permission. The Appendix continued:
“So that we can correctly inform the Committee of your intentions, you will need to confirm agreement to the heads of terms, and the Agreement itself will need to be prepared at risk prior to your application being presented to the Committee. We will also seek the Committee’s agreement to require completion of the legal agreement within a very limited time period, or failing this for the application to be reviewed and possibly treated as withdrawn.”
13. The Appendix stated that any section 106 agreement must follow
“The [committee] will not normally consider an application recommended to be subject to a Section 106 (s278) Agreement unless the terms of the Agreement have already been confirmed and agreed in writing. The usual approach is therefore not to report an application to the [committee] until the Section 106 (s278) Agreement has been agreed in draft and is in a form ready to be executed (subject to any further modification. following committee resolution)”
14. On 27th August 2008, the Seller applied for planning permission for its intended development. The application was supported by a document described as “Code of Sustainable Homes Assessment”; that appears to have been a report prepared by Eight Associates dated 26th August 2008. After correspondence with
15. On 6th May 2009, Eight Associates revised pans of their earlier report of 26th August 2008. The revised report stated that it was prepared for the Seller’s architects. The report was a lengthy document extending to nearly 90 pages. It was in two parts. The first part was a preliminary assessment of how the Code for Sustainable Homes would apply to the apartments to be built at 11 Grafton Mews. Appendix 1 to the report summarised the provisions of the Code. The second part of the report was in the same form as had been issued on 26th August 2008 and had not been revised. The second part was a preliminary assessment of how the EcoHomes rating system applied to the conversion works at
16. The report prepared by Eight Associates dealt in detail with the scores which would be achieved by the development both in relation to the mews building (to which the Code for Sustainable Homes applied) and in relation to
17. On 26th May 2009, the Seller’s architects submitted a further application which was similar to, but not identical to, the application which had been made in 2008. The application was again for planning permission for conversion of
The contract
18. On 29th June 2009,the Defendant as the Seller and the Claimant as the Buyer entered into a contract for the sale and purchase of the property. The purchase price was £5,700,000. The Claimant paid a deposit of £570,000. Completion was to be 5 working days following the Unconditional Date. The parties agreed that subject to satisfaction of the Condition (as specified in the Special Conditions) and the terms of Schedules 1 and 2 of the contract, the Seller was to sell and the Buyer was to buy the property at the purchase price.
19. The Special Conditions provided that the provisions of Schedules 1 and 2 of the contract were to apply and the Seller and the Buyer were to comply with their respective obligations set out in those Schedules. It was further provided that immediately upon satisfaction of the Condition, the provisions of Schedule 3 were to apply to the contract. The contract incorporated the Standard Conditions of Sale (Fourth Edition). Condition 11 of the Special Conditions cross referred to the provisions of the Standard Conditions dealing with notices to complete and referred to “a defaulting party”. Condition 13 of the Special Conditions referred to the Contract (Rights of Third Parties) Act 1999 and referred to “a third party”. Condition 19 of the Special Conditions referred to the Land Registration Rules 2003 and referred to an “Unrepresented Party”.
20. Schedule 1 to the contract was headed “Planning Conditionality”. Paragraph 1 of Schedule 1 contained a large number of definitions. The more significant definitions for present purposes are as follows:
1. Definitions
1.1 In this Agreement unless the context otherwise specifically requires the following defined terms shall have the corresponding meanings:-
Condition: the occurrence of all the following events:-
a) the grant of Satisfactory Planning Permission and the receipt by the Buyer of a written copy and
b) the expiry following the grant of the Satisfactory Planning Permission of the period of 3 months without the Satisfactory Planning Permission becoming subject to Proceedings, or (in the event that the Satisfactory Planning Permission does become
subject to Proceedings within that period) the Proceedings being finally disposed of (including the expiry of any time limit for making an appeal against the result of any Proceedings) so as to leave in place the Satisfactory Planning Permission; and
c) the completion of all Statutory Agreements (on terms satisfactory to the Buyer) which are necessary to enable the Satisfactory Planning Permission to be implemented and the Development to be brought into use;
Condition End Date: 15 December 2009, provided that if at that date the Planning Condition has not been satisfied in any one or more of the following circumstances, the Condition End Date shall be postponed as follows:
a) if an Appeal has been lodged against a Planning Refusal or is otherwise in progress and the Secretary of State (or an inspector acting on his authority) has not then issued his written determination or decision, the Condition End date shall be the date 10 working days after the date of issue of that determination or decision;
b) where either the period of 3 months mentioned in paragaph (b) of the definition of the Condition has not then expired, or Proceedings are then in progress, the Condition End Date shall be the date 10 working days after the date on which such period expires without Proceedings having been instituted or such Proceedings are finally disposed of (including the expiry of any time limit for making an appeal against the result of any Proceedings);
c) where a decision or determination of the Secretary of State under Article 14 of the Town and Country Planning General Development (Procedure) Order 1995 is awaited in respect of the Seller’s application for the Planning Permission the Condition End Date shall be the date 10 working days after the date of issue by the Secretary of State of his decision or determination;
d) where the parties shall have agreed with the Planning Authority or any other relevant authority, undertaker or company but not documented the principal terms of any Statutory Agreement, the conclusion of which would or would be likely to lead to the grant of Satisfactory Planning Permission, then the Condition End Date shall be the date 10 working days after the issue of the Planning Permission on or following the completion of such Statutory Agreement, provided further that if the Condition End date is extended pursuant to any or all of paragraphs (a), (b), (c) and (d) and at any time before the Condition End Date (as extended in accordance with whichever of those paragraphs applies) any of the circumstances specified in any other of those paragraphs arises, then the Condition End Date shall be whichever is the latest of the dates provided for in the relevant paragraphs.
Development: the construction on the Property of a house and two staff flats fronting Fitzroy Square of about 6,988 square feet Gross External Area and seven flats plus a staff flat fronting Grafton Mews totalling approximately 8,195 square feet Gross External Area for use as residential dwellings;
Onerous Condition: any condition or restriction imposed under a Planning Permission (whether on its face or listed as a condition under it), or an obligation contained in or imposed by a Statutory Agreement entered into or required to be entered into as a condition or necessary requirement for the grant or implementation of the Planning Permission, which is included in the list of conditions set out in Schedule 2 part 3 but, for the avoidance of doubt, the Acceptable Planning Conditions are not Onerous Conditions;
Planning Act: the Town and Country Planning Act 1990
Satisfactory Planning Permission: Planning Permission which is free from Onerous Conditions and contains the Required Planning Conditions;
Statutory Agreement: any agreement which is expressed to be made pursuant to any one or more of the following provisions:-
a) Section 106 of the Planning Act
b) Section 33 of the Local Government (Miscellaneous Provisions) Act 1982;
c) Section I 11 of the Local Government Act 1972;
d) Sections 38 or 278 of the Highways Act 1980; or
e) Section 104 of the Water Industry Act 1991;
or any provision of similar intent, or any agreement with the water or sewerage undertaker or other appropriate authority or company as to the supply of water to or drainage of surface water and effluent from the Property or an agreement with any competent authority or body relating to other services which either pany is required to enter into in connection with the Development;
Unconditional Date: the date the Condition shall have been satisfied or waived pursuant to this Agreement.
21.Schedule 1 to the contract contained the following relevant provisions:
2. The Condition
2.1 This Agreement is conditional upon prior satisfaction of the Condition although the obligations that relate directly or indirectly to the satisfaction of the Condition shall apply from the date of this Agreement.
2.2 The Buyer may at any time prior to the Unconditional Date (by written notice to the Seller referring expressly to this Clause) waive the Condition, in which event the Condition shall be deemed to have been satisfied.
3. Obtaining of Satisfactory Planning Permission
3.1 The seller has submitted to the Planning Authority a Planning Application in a form approved by the Buyer and the Buyer’s Monitoring Surveyor.
3.2 The Seller shall at its own expense use all reasonable endeavours to secure the Satisfactory Planning Permission in accordance with this Agreement as soon as reason ably practicable.
3.3 The Seller may with the Buyer’s consent, if it at any time it appears necessary or desirable in order to obtain the Satisfactory Planning Permission, amend or withdraw any Planning Application and submit a new one in a form approved by the Buyer and the Buyer’s Monitoring Surveyor;
3.4 If necessary or desirable in order to obtain a Satisfactory Planning Permission the Seller will enter into discussion or negotiation with the Planning Authority and use all reasonable endeavours to procure that the appropriate parties enter into such Statutory Agreements in accordance with this Agreement as soon as reasonably practicable in a form approved by the Buyer and the Buyer’s Monitoring Surveyor (acting reasonably).
3.5 The Seller shall appeal against a Planning Refusal if reasonably required by the Buyer and the Seller’s proper costs shall be met by the Buyer.
3.6 The Seller will keep the Buyer, the Buyer’s Monitoring Surveyor and its other professional advisers reasonably informed of the progress of all Planning Applications and Appeals and Proceedings.
3.7 The Seller as owner of the Property, if it appears necessary or desirable to do so to facilitate the grant of a Satisfactory Planning Permission, at its own cost shall enter into any one or more Statutory Agreements, provided that:
3.7.1 the obligations contained in the Statutory Agreement shall not operate unless the Satisfactory Planning Permission is implemented; and
3.7.2 the Statutory Agreement shall provide that the Seller shall be relieved of all liability for the obligations contained in it after it has parted with all interest in the Property provided that the Seller shall pay and indemnify the Buyer in respect of financial payments under any Statutory Agreement up to £44,000 (towards, inter alia, education in the borough and open spaces).
4 Onerous Conditions
4.1 When the Seller receives notice of any planning decision resulting from any Planning Application (whether original, amended or resubmitted), or the result of any Appeal or Proceedings, whether issued by the Planning Authority, the Secretary of State (or an inspector acting on his authority) or the Court, the Seller shall notify the Buyer of the decision or result as soon as practically possible.
4.2 Within 2 working days of the Seller receiving a Planning Permission the Seller shall send a copy of the Planning Permission to the Buyer, the Buyer’s Monitoring Surveyor and the Buyer’s Solicitors including a copy sent by email to naphaporn@nailerparkhotel.co.th
4.3 The Buyer shall within 5 working days of receipt give notice in writing to the Seller stating whether the Planning Permission is a Satisfactory Planning Permission or whether it is subject to any Onerous Conditions.
4.4 If the Buyer does not notify the seller in writing within 5 working days of receipt of a Planning Permission whether the Planning Permission is a Satisfactory Planning Permission or whether it is subject to any Onerous Conditions then the Planning Permission will be deemed not to be a Satisfactory Planning Permission.
4.5 The Seller [it should be “the buyer”] may waive its right to treat a Planning Permission as a Planning Refusal because of the presence of any Onerous Conditions, by giving to the Seller written notice to that effect, and the Planning Permission will then be deemed to be a Satisfactory Planning Permission.
5 Assistance from the Buyer
5.1 The Buyer agrees:
5.1.1 that it will at the request and cost of the Seller co-operate and give all such assistance and make such representations in relation to any such Planning Application as the Seller shall reasonably require; and
5.1.2 generally that it will use reasonable endeavours (other than the payment of money) to assist the Seller to obtain Satisfactory Planning Permission.
6 Rights of rescission
6.1 If the Conditions shall not have been satisfied by the Condition End Date, then the Seller and the Buyer shall each have the right to rescind this Agreement by giving written notice of rescission to the other at any time after the Condition End Date (but before the Condition is satisfied), and this Agreement shall then immediately cease to have effect.
6.2 If this Agreement is rescinded pursuant to Clause 6.1:
6.2.1 the recission shall be without prejudice to the rights of any party against any other party in respect of any previous breach of their obligations under this Agreement, but otherwise no party shall have any claim against any other party;
6.2.2 the Buyer shall cancel any registration of this Agreement.
22. Schedule 2 to the contract, provided (so far as material):
Schedule 2
Part 1 Acceptable Planning Conditions
Part 2 Required Planning Conditions
Part 3 Onerous Conditions
A condition or conditions in a planning permission or in a Statutory Agreement shall be an Onerous Condition if it or they:
1 Prevent the commencement or the continuance at any stage of the Development or the bringing into use or the continuance at any stage of the use of the Development for residential use (being the use of the house fronting Fitzroy Square and each of the flats on Grafton Mews as separate residential units without restriction) or if such use may only occur with the agreement or the co-operation of any third party save in respect of the staff flats where there may be a restriction preventing their use other than as ancillary to the use of the house.
2 Limit the period and the times for which the Development can be used for the residential purposes.
3…
4…
5…
23. Schedule 3 to the contract contained detailed terms providing for the Seller to carry out “the Building Works”. This term was defined so as to refer to the works of, and in connection with, the carrying out of the Development (i.e. as defined in Schedule I to the agreement), including certain specified works such as those required to construct the Development in accordance with “Necessary Consents”, which included the Planning Permission (i.e. as defined in Schedule l). By paragraph 2 of Schedule 3, the Buyer (following the transfer of the freehold to the Buyer) was to permit the Seller to enter the Property for the purposes of fulfilling the Seller’s obligations under the agreement, in particular, the obligation to carry out the development. Paragraph 4 of the Third Schedule provided for the Seller to prepared detailed specifications and drawings in accordance with the Planning Permission, which was to be obtained, and in accordance with the plans annexed to the contract. The detailed specifications and drawings were to be submitted to the Buyer for its approval. By paragraph 7 of Schedule 3, the Seller was thereafter to carry out, or procure the carrying out of, the Building Works within specified time limits. By paragraph 13 of Schedule 3, the Buyer was to bear the cost of all sums paid by the Seller in carrying out the Building Works but so that the Buyer’s obligation to pay was not to exceed the amount of a specified cap or caps.
24. On 3rd July 2009, the Buyer registered a unilateral notice at the Land Registry in relation to the Seller’s registered title to the property in respect of the agreement of 29th June 2009.
Further planning history
25. On 1st August 2009, the Seller’s architects wrote to the solicitors for the Buyer attaching a draft section 106 agreement. The architects explained that they had drafted this document based on a previous section 106 agreement that had been entered into with
26. On 16th September 2009,in an email from
27. Although the precise sequence of events is not clear, it seems that in September 2009, the Seller commissioned a report from Bobby Gilbert & Associates,
28. It is clear from later documents that a copy of the Bobby Gilbert report was supplied on behalf of the Seller to
29. On 21st October 2AA9,
30. As I have explained, the contract dated 29th June 2009 provided for a Condition End Date of 15th December 2009. The Condition had not been satisfied by 15th December 2009. Before that date the parties had considered what action might be taken. Initially, they considered the possibility of an appeal against the local planning authority’s non- determination of the planning application. In the event, on the 16th December 2009, the Seller and the Buyer entered into a further agreement. This further agreement substituted the date of 12st March 2010 for the original date in the definition of Condition End Date. This further agreement also provided that if a Statutory Agreement was required in the form attached thereto, or incorporating such amendments as the parties should agree, then such Statutory Agreement would not be an Onerous Condition for the purpose of establishing whether a Satisfactory Planning Permission had been obtained. The further agreement also provided that if a Statutory Agreement was required in the form attached, then the parties would be responsible for payment of the financial payments payable under the Statutory Agreement in the proportions therein specified.
31. The draft Statutory Agreement attached to the further agreement was a draft of an agreement to be entered into with the local planning authority under section 106 of the 1990 Act. The draft agreement so attached was drafted so that it was to be executed by the vendor, by the Royal Bank of Scotland plc, as mortgagee of the property and by the London Borough of Camden. The definition of the Development referred to a report which was the Eight Associates report.
32. On 24th December 2009, the Buyer’s solicitors registered a unilateral notice in relation to the Seller’s registered title in respect of the agreement dated 16th December 2009.
33. By 10th February 2010, the solicitors for the Buyer had received from
The planning officer’s report
34. On 17th February 2010, the planning officer at
35. The officer’s report described the proposed development by referring to the proposed change of use of 7 Fitzroy Square together with the new building at 11 Grafton Mews, to the alterations in association with the change of use of 7 Fitzroy Square and the new building at 11 Grafton Mews and to the demolition of the existing building at 11 Grafton Mews. The report then referred to the drawings which showed the proposed development and then to the “supporting Information” which had been provided by the applicant to the planning authority. This included the reports prepared by Eight Associates and by Bobby Gilbert.
36. Paragraph 2.2 of the report recorded that the applicant’s proposals had been amended since they were originally submitted. One such change was intended to increase the eco-value of the green wall; this was a reference to green vegetation being grown up a wall which separated the front and rear parts of the development. Another change was the omission of a roof terrace in the new mews building. .
37. At paragraph 5 of the report, the officer identified the relevant planning policies. These included policy SD9 (Resources and Energy) and Camden Planning Guidance 2006 relating to sustainable design and construction. At paragraph 6 of the report, the officer referred to the key issues which included sustainability and energy sources and refuse and recycle storage.
38. The officer’s report then referred to:
(1) the report of Eight Associates and also to an email of 9th February 2010 which provided further information about sound insulation (at paragraph 6.3.6);
(2) the materials to be used in the construction (at paragraph 6.a.2.3);
(3) the provision of the “green wall” (at paragraph 6.4.2.5);
(4) refuse and recycle storage (at paragraph 6.9.1); and
(5) cycle storage (at paragraph 6.10.2).
39. The report recommended that the five matters referred to in paragraph 38 above should be the subject of planning conditions. Consistently with this, the report later set out draft conditions to be attached to any planning permission. Draft conditions 2 and 3 dealt with the approval of materials, and draft conditions 4, 5 6 and 7 dealt with the green wall, acoustic matters, cycle storage and refuse and recycling, respectively.
40. Paragraph 6.8 of the officer’s report dealt with sustainability and energy matters. It referred to the general requirements of policy SD9. It then referred to the Eight Associates report as setting out that the mews building would achieve code level 4 (with a score of 68.90). The officer then summarised various points from the Eight Associates report. She referred again to the mews building achieving Code Level 4 which he said was above the national and local requirements of Code Level 3. The officer then referred to the Bobby Gilbert report and to the applicant’s “commitment” to improve energy efficiency and reduce COz emission. At paragraph 6.8.5, the report stated:
“The applicant has shown a commitment towards producing an energy efficient building. It is recommended that all sustainability measures, including energy efficiency measures should be secured via S. 106 legal agreement.”
41. At paragraph 7.4, the officer’s report recommended the grant of planning permission “subject to conditions and a S.106 agreement with the terms that are listed below”. There followed Heads of Terms, one of which was “Sustainability (including energy efficiency) measures”. Later in the report, the officer expressed the reasons for granting planning permission subject to a section 106 agreement. These included the statement that the proposal accorded with the specific policy considerations in respect of what were said to be the principal considerations, which included improvements to biodiversity, environmentally sustainable development measures and use of renewable energy technology.
42. The planning officer’s report clearly shows the degree of importance which she attached to the way in which sustainability measures were to be adopted in the proposed development. It is convenient at this point to refer also to the oral evidence I heard about the significance of those sustainability measures. The Buyer called Mr Anthony Browne, an architect of A J Browne & Company, who acted for the Buyer in connection with this project. Although the planning application was made by the architects instructed by the Seller, Mr Browne was closely involved at various stages with the planning process in this case. He described the relevant planning policies which
Between the planning officer’s report and the planning committee meeting
43. On 18th February 2010,
44. On 25th February 2010, the Seller’s solicitors emailed the Buyer’s solicitors confirming their “definitive instructions” to the effect that the Seller approved the February draft section 106 agreement. On the same day, the Buyer’s solicitors emailed
45. Having regard to the issues at the trial, it now seems obvious that there was a difference between the way sustainability measures were treated in the planning officer’s report and in the February draft section 106 agreement. Paragraph 6.8.5 of the planning officer’s report recommended that sustainability measures and energy efficiency measures should be secured by a section 106 agreement. However, the February draft did not appear to contain provisions which secured such matters, although that draft did contain a definition of development which referred to the report by Eight Associates, but not the report by Bobby Gilbert. There was some examination in the course of the oral evidence as to what the representatives of the Seller thought, if anything, about that. I think that it is not necessary for me to consider that evidence as to the subjective states of mind of the representatives of the Seller. Indeed, if I had to assess that evidence I think that I would have had difficulty in accepting everything I was told about what the Seller thought and what it believed. I do not think that anything in this case turns upon the subjective beliefs of the parties. When I come to consider whether something was agreed as to the terms of the proposed section 106 agreement, I will look at matters objectively and at what the parties did and said to each other. In that regard, what is clear is that no one, whether on behalf of
The planning committee meeting
46. The Development Control Committee of
After the planning committee meeting
47. On 1st March 2010,
48. On 2nd March 2010, there was a project meeting between the representatives of the Seller and of the Buyer. The meeting discussed the various steps that were to be taken to carry out the development. There was no mention by anyone of a possible discrepancy between the planning officer’s recommendation as to the content of the section 106 agreement and the February draft.
49. By 3rd March 2010,
50.
On 9th March 2010, there was a further project meeting involving representatives of the Seller and of the Buyer. The parties discussed completion of the contract. A note of the meeting stated that the section 106 agreement had been signed by
The March draft section 106 agreement
51. In the afternoon of 10th March 2010,
52. At 15.18 on 10th March 2010,
53. In the March draft section 106 agreement, the definition of “the Development” included a reference to the reports by Eight Associates and Bobby Gilbert. This draft also contained new definitions of “Occupation Date” and “the Sustainability Plan” as follows:
“Occupation Date” – the first date when any part of the Development is occupied and the phrases “Occupy”, “Occupied” and “Occupation” shall be construed accordingly
“the Sustainability Plan” – a plan including a post construction review securing the incorporation of sustainability measures in the carrying out of the Development in its fabric and in its subsequent management and occupation based on Code for Sustainable Homes dated 06.05.09 by Eight Associates and “Fitzroy Square Energy Strategy” by Bobby Gilbert &. Associated (sic) Ltd dated 09 September 2009″
54. The March draft contained a new clause 4.8, as follows:
“4.8.1 Not to Occupy or permit the Occupation of the Development until the Council has confirmed in writing that the measures incorporated in the Sustainability Plan as approved by the Council have been implemented in the construction of the Development.
4.4.8 (sic) Following the Occupation Date the Owner shall not Occupy or permit Occupation of any part of the Development at any time when the Development is not being managed in strict accordance with the Sustainability Plan as approved by the Council and shall not occupy or permit occupation of the Development otherwise than in strict accordance with the requirements of the Sustainability Plan.”
55. At 17.11 on 10th March 2010, the Buyer’s solicitors emailed the March draft to the architects and the solicitors acting for the Seller. The Buyer’s solicitors wrote that the specific measures to be incorporated into the Sustainability Plan must be agreed with Camden at the earliest opportunity in the design and build programme in accordance with clause 4.8.1 of the March draft. They stated that they would not want the Buyer to take occupation only to be told by
56. At 17.20 on 10th March 2010, the Buyer’s solicitors emailed the Buyer and various representatives of the Buyer. The solicitor said that, subject to instructions, she was content with clause 4.8 in the March draft. She then went on to express concern about the definition of Sustainability Plan. She said that certain matters were not clear. The specific measures to be adopted, the future compliance implications, and the degree to which the sustainability and energy measures were onerous, were all stated to be unclear. She referred to the possibility of seeking further clarity.
57. There was no relevant communication between the parties on 11th March 2010.
58. At 10.37 on 12th March 2010, the Seller’s solicitor replied to the Buyer’s solicitors’ email of 15.06 of l0th March 2010 and stated that he would “review the same shortly”.
59. At 15.35 on 12th March 2010, the Buyer’s architect responded to the Buyer’s solicitors’ email of 17 .20 on lOth March 2010. He stated that he had read the revised section 106 agreement and he was content that the sustainability and energy measures limited to the new flats to be built in Grafton Mews were acceptable and were not “onerous”.
60. At 17.23 an 12th March 2010, the Buyer’s solicitors emailed the Seller’s solicitors stating on behalf of the Buyer that the draft planning consent subject to completion of the section 106 agreement would be a Satisfactory Planning Permission. The Buyer’s solicitors then stated:
“Please would you ensure that the minor changes to the draft S106 agreement that have been sent to [the Seller’s architects] are approved by them on your client’s behalf to enable the 5106 agreement to be engrossed, executed and completed.”]
61. On 16th March 2010, the Seller’s solicitors emailed the Buyer’s solicitors with the Seller’s instructions. [It was said that the changes to the section 106 agreement were an “Onerous Condition” as far as the Seller was concerned. It was said that the sustainability obligations would add between £100,000 and £150,000 of cost to the construction process which would make the building contract uneconomic. It was said that the Seller was obtaining detailed costings. The Seller would only agree to “these new obligations” if the Buyer agreed to bear the cost.
62. On l6th March 2010, the Buyer’s solicitors replied rejecting the contentions put forward by the Seller’s solicitors. The Buyer’s solicitors referred to the reports by Eight Associates and by Bobby Gilbert and to the report of the planning officer. It was said that the Seller had no reasoned justification for refusing to accept the March draft section 106 agreement.
The first notice of rescission
63. On 18th March 2010, the Seller’s solicitors sent to the Buyer’s solicitors a notice which purported to be a notice pursuant to clause 6.1 of the agreement rescinding the agreement on the basis that the Condition had not been satisfied by the Condition End Date. On the same day, the Buyer’s solicitors replied stating that the Condition End Date had been postponed pursuant to paragraph (d) of the definition of that term.
64. On 22nd March 2010, the Buyer’s solicitors wrote to the Seller’s solicitors contending that the purported notice of rescission was invalid on the ground that the Condition End Date had not yet been reached. The Buyer’s solicitors again contended that the Condition End Date had been postponed pursuant to paragraph (d) of the definition of that term. The Seller’s solicitors replied on 23rd March 2010 joining issue with the Buyer’s solicitors. In connection with paragraph (d) in the definition of Condition End Date, it was said that there had to be an agreement by the Seller as well as the Buyer with
Later events
65. On 29th March 2010, at the request of the Buyer’s solicitors,
66. On 6th July 2010,
67. On 8th July 2010, the Seller’s solicitors wrote to the Buyer’s solicitors enclosing a further notice seeking to rescind the agreement pursuant to clause 6.1 of it. This notice was stated to be without prejudice to the earlier rescission notice of 18th March 2010. The notice of 8th July 2010 referred to the letter from
68. On l2th July 2010,
69. On 13th August 2010, the Seller’s solicitors applied to the Land Registry for the cancellation of the two unilateral notices which the Buyer had registered in relation to the Seller’s registered title. Those applications were objected to by the Buyer and were referred to the Adjudicator to the Land Registry. On l7th December 2010, the Adjudicator directed that the matter before him be adjourned pending the outcome of the High Court proceedings to which I refer below.
70. On 11th February 201I, the Buyer’s architects applied to
The proceedings
71. On 12th April 20I0, the Buyer brought the present proceedings against the Seller. The Buyer relied upon paragraph (d) in the definition of Condition End Date as postponing the Condition End Date until 10 working days after the issue of the Planning Permission on or following the completion of a Statutory Agreement. For this purpose, the Buyer contended that “the parties” i.e. the Seller and the Buyer had agreed with Camden the principal terms of the March draft section 106 agreement and that the conclusion of the March draft would, or would be likely to, lead to the grant of Satisfactory Planning Permission. In the alternative to the contention that the Seller had agreed the principal terms of the March draft, the Buyer contended that the Seller’s failure to agree the principal terms of the March draft was a breach of the agreement and that the Seller was not entitled to rely on its own breach of contract as enabling it to serve a rescission notice. The Buyer’s claim was later amended to deal with the second rescission notice of 8th July 2010. The Buyer claimed declarations to give effect to its contentions, orders in relation to completion of the March draft section 106 agreement and other relief.
72. In its Defence, the Seller denied that the Condition End Date had been postponed pursuant to paragraph (d) in the definition of that term. The Seller contended that it had effectively rescinded the agreement pursuant to the first, alternatively, the second notice of rescission. The Seller served a Counterclaim in relation to the Buyer’s two unilateral notices. The Seller sought an order requiring the removal of the unilateral notices and also claimed damages on the basis that the Buyer was in breach of the duty imposed by section 77 of the Land Registration Act 2002.
73. As I have already stated, on 18th July 2007, the Seller charged the property to the Royal Bank of
The issues
74. The following issues between the Buyer and the Seller were considered in the course of the trial:
(l) Who are “the parties” in paragraph (d) of the definition of the Condition End Date?
(2) What are “the principal terms” of a Statutory Agreement as referred to in paragraph (d) of that definition?
(3) What is required by the phrase “agreed … but not documented” in paragraph (d) of that definition?
(4) Did the March draft section 106 agreement comply with clause 3.7.2 of the agreement?
(5) Did the relevant parties agree with
section 106 agreement?
(6) If the Seller did not agree with Camden the principal terms of a section 106 agreement in accordance with the principal terms of the March draft section 106 agreement, was the Seller thereby in breach of the agreement so that the
March draft as a ground for asserting that the Condition End Date was not postponed and so that the Seller cannot seek to rescind the agreement;
(7) Was the first notice of rescission effective to determine the agreement?
(8) Was the second notice of rescission effective to determine the agreement?
(9) If the agreement has not been determined, what relief ought to be granted to the Buyer?
(10) If the agreement has been determined, was the Buyer in breach of the duty imposed by section 77 of the Land Registration Act 2002?
The first issue
75. The first issue is: who are “the parties” in paragraph (d) of the definition of the Condition End Date? The Buyer submits that “the parties” are the parties to the agreement to buy and sell the property, that is, the Buyer and the Seller. The Seller submits that “the parties” are the intended parties to the relevant Statutory Agreement. The Seller then submitted that, as the draft section 106 agreements in this case were to be executed by the bank, “the parties” included the bank. Each side took me in detail to the provisions of the agreement and made submissions as to how the provisions were intended to operate.
76. The Buyer submitted that the ordinary meaning of “the parties” used in a contract is the parties to that contract and that it was obvious that this was the intended meaning in paragraph (d) of the definition of Condition End Date. It was further submitted that this interpretation was supported by considering (a) the consistent usage elsewhere in the document, (b) the approach adopted where someone other than the parties to the contract was intended to be referred to, (c) the inappropriateness of the expression if used to denote the parties to the Statutory Agreement and (d) the consequences of adopting the Seller’ s construction.
77. The Seller submitted that a reference to parties agreeing the terms of a Statutory Agreement was plainly a reference to the parties, or the intended parties, to the Statutory Agreement. When the contract referred to the parties to that contract it referred to them in a different way, by the defined terms of Seller and Buyer. It was not envisaged that the Buyer would be a party to a section 106 agreement so that it cannot have been expected for the purposes of a postponement of the Condition End Date, pursuant to paragraph (d) of the definition, that the Buyer’s agreement to the principal terms of the section 106 agreement would be required. The Buyer was protected in relation to the terms of a section 106 agreement, which might impact on it, by other provisions in the contract. What was needed for the purposes of paragraph (d) was the agreement of the persons who would be required to enter into the Statutory Agreement. Thus if the Seller and the Buyer agreed the principal terms of such an agreement but a necessary additional party, such as a mortgagee, did not agree then one would not have the necessary confidence that the Statutory Agreement would ever be completed but yet (if the Buyer’s construction were adopted) the Condition End Date would be postponed.
78. I agree with the Buyer that, speaking generally, a reference in a contract to “the parties” would normally be taken as a reference to the parties to that contract. Thus, one’s initial reaction to the use of the words “the parties” in paragraph (d) is that it is referring to the parties to the contract in which paragraph (d) appears. However, I doubt if this initial reaction takes one very far in view of the fact that paragraph (d) immediately goes on to refer to “any Statutory Agreement” so that a question is raised in one’s mind as to the possibility that a reference to the parties might after all be a reference to the parties to the intended Statutory Agreement.
79. I do not attach much significance to the fact that the agreement defines the two parties to that contract as the Seller and the Buyer and that the agreement contains numerous references to the Seller and the Buyer. Those references are of course appropriate when the agreement seeks to refer to the position of one of the parties. If the Buyer’s submission as to the construction of paragraph (d) were correct, it would have been possible to have used the words: “where the Seller and the Buyer shall have agreed”. The phrase “the Buyer and the Seller” is used in Special Condition 1 but there are other places in the agreement where the words “the parties” or “a party” are used when they refer to the Seller and the Buyer or one of them. The words “the parties” are an entirely natural way of referring to the Seller and the Buyer. Further, there are provisions in the agreement where the intention is to refer to someone who is not a party to that agreement and clear language to that effect is used. A particularly apposite example of this is in paragraph 3.4 of schedule l; the reference there is to Statutory Agreements and the intended parties to such agreements are referred to as “the appropriate parties” who will enter into such agreements.
80. If the parties had intended, in paragraph (d), to refer to the parties who would be expected to enter into the Statutory Agreement it would have been more accurate to have referred to them as “the intended parties” or “the proposed parties” because, at the point in time which is relevant for paragraph (d), there is no concluded Statutory Agreement and therefore no parties to such an agreement. Further, if “the parties” means the intended parties to the Statutory Agreement then paragraph (d) goes on to show that the words do not mean all such parties but, instead, the parties other than the relevant public authority or other similar body.
In the case of a section 106 agreement, the normal position would be that the current owner of the property in question would execute the agreement but a contracting purchaser of the property would not do so. I think that the Seller and the Buyer would have understood this was the normal position when they entered into the agreement in this case. Therefore, if the Seller’s construction of paragraph (d) were correct, this would produce the result that the Condition End Date would be postponed where there was agreement between the intended parties to the Statutory Agreement, even where the Buyer was unhappy with the terms of that Statutory Agreement. The proposed Statutory Agreement would not thereafter actually be entered into unless its terms were approved by the Buyer, acting reasonably: see paragraph 3.4 of schedule 1. This could produce the result that the Condition End Date was postponed, in a way which might be contrary to the interests of the Buyer in a particular case, but yet there
might be a long delay, or a stalemate, as to the completion of a proposed Statutory Agreement and the satisfaction of the Condition. In my judgment, because a Statutory Agreement must be approved by the Buyer, acting reasonably, it is natural to read the reference in paragraph (d) to the parties agreeing the principal terms of the Statutory Agreement as including the Buyer in “the parties”.
82. I have considered whether the operation of the relevant provisions could produce a situation where the Condition End Date is postponed but yet one never reaches the point where the Condition is satisfied. In such an event, I have considered whether one construction or the other of “the parties” in paragraph (d) produces a more workable contractual result. When the Condition End Date is postponed pursuant to paragraph (d), it is postponed until 10 working days after the issue of the Planning Permission on or following the completion of the Statutory Agreement. The Condition refers to the grant of Satisfactory Planning Permission and the completion of all necessary Statutory Agreements. On the Buyer’s construction of paragraph (d), what happens if the Seller and the Buyer agree the principal terms of a proposed section 106 agreement but a mortgagee is a necessary party to such an agreement and the mortgagee is not contractually obliged to execute the agreement and declines to do so? On the Buyer’s construction, the Condition End Date is postponed but the Condition will not occur. On the Seller’s construction, what happens if the Seller and the mortgagee agree the principal terms of the section 106 agreement but the Buyer does not agree those terms and objects to them on reasonable grounds? On the Seller’s construction, the Condition End Date is postponed but the Condition does not occur. It was submitted to me that these positions of deadlock would be dealt with by the court implying a suitable term to give business efficacy to the contract and I was referred to Yewbelle Ltd v London Green Developments Ltd [2007]2 EGLR 152, It may be that the court would be able to imply a suitable term depending on the precise nature of the difficulty that needed to be addressed. However, having identified that there is a potential for a stalemate, subject to a possible implication of a term, on both of the rival constructions put forward, I do not see that one construction or the other is to be preferred by reference to these considerations and I therefore do not give weight to them. In these circumstances, it is not appropriate for me further to discuss the
question of the suggested implied terms.
83. I have now identified the various considerations which are relevant to the meaning of “the parties” in paragraph (d). In my judgment, the arguments in favour of the Buyer’s construction are significantly stronger than the rival arguments and I am persuaded by them. I therefore hold that “the parties” in paragraph (d) is a reference to the Seller and the Buyer.
The second issue
84. The second issue is: what are “the principal terms” of a Statutory Agreement as referred to in paragraph (d) of that definition? The parties did not make specific submissions as the meaning of this phrase. However, when they addressed me as to whether there had been agreement on “the principal terms”, there appeared to be a difference, at least in emphasis, between the rival approaches. In my judgment, it will be helpful to address the meaning of the phrase before considering whether there was, on the facts of this case, agreement on whatever are the principal terms.
85. The use of the word “principal” clearly shows that it is not necessary that every term in the proposed Statutory Agreement has been identified and agreed. The word “principal” involves a question of degree. Some express terms will not be sufficiently significant to be “principal” terms. It is also relevant in this context to refer to the point that paragraph (d) refers to a situation where the parties have “not documented” the principal terms. The parties must have contemplated a situation where it is possible to say that there is agreement on the principal terms, even where they expect that the principal terms will need to be “documented”, that is, drafted using more detailed and specific language. In such a case, the more detailed and specific language would not be considered as a principal term in its own right. Conversely, there will be other cases where there is a measure of agreement on an important term but where
that measure of agreement will involve further work of negotiation and expression and where the further expressions which are used will themselves be part of the principal terms. In such a case, assessing the matter as one of degree, it may be
appropriate to conclude that before the further expression of the terms is agreed, the parties have not yet reached the stage of agreeing the principal terms.
The third issue
86. The third issue is: what is required by the phrase “agreed . .. but not documented” in paragraph (d) of that definition? The parties did not make specific submissions as the meaning of this phrase. However, when they addressed me as to whether there had been such agreement, there appeared to be a difference, at least in emphasis, between the rival approaches. As with the second issue, it will be helpful to address the meaning of the phrase before considering whether there was, on the facts of this case, the necessary agreement.
87. I think that it is clear that there may be an agreement for the purposes of paragraph (d) even though the agreement is not contractually binding. It is often the case that parties are taken not to have made a contractual agreement until the consensus between them is set out in a document, which may need to be amended or revised, and then executed by the parties. For the purposes of paragraph (d), the relevant agreement is something that may come before the point where the agreement is documented. Further, paragraph (d) indicates that the Statutory Agreement is something which may be ‘concluded?’ later in time. What is required is the assent of the parties, in a way that need not be contractually binding, to the principal terms of an intended Statutory Agreement. The assent may be oral and need not be written. Further, in the same way as it is legally possible to infer from conduct that parties have made a contract, so too it must be legally possible to infer from conduct that parties have agreed the principal terms of an intended contract.
88. The agreement must between the parties to the contract and the relevant authority. In the case of the draft section 106 agreement at the centre of this case, the necessary agreement is an agreement by the Seller and the Buyer with
The fourth issue
89. The fourth issue is: did the March draft section 106 agreement comply with clause 3.7.2 of the agreement? This point was raised by the Seller. Clause 3.7 of schedule 1 to the agreement obliges the Seller to enter into one or more Statutory Agreements if it appears that it is necessary or desirable to do so to facilitate the grant of a Satisfactory Planning Permission. This obligation is subject to the two provisos contained in clauses 3.7.1 and 3.7.2 respectively. Clause 3.7.1 refers to the obligations in the Statutory Agreements not operating unless the Satisfactory Planning Permission is obtained. It is accepted that this requirement was met. Clause 3.7.2 relevantly
provides:
“the Statutory Agreement shall provide that the Seller shall be relieved of all liability for the obligations contained in it after it has parted with all interest in the Property . . .”
90. Section 106(4) of the 1990 Act provides that a section 106 agreement “may” provide that a person shall not be bound by the obligation in respect of any period during which he no longer has an interest in the land.
91. The first draft of a section 106 agreement in this case was prepared by the architects for the Seller. On 1st August 2009, when they sent that draft to the Buyer’s solicitors, they explained that they had based the draft on a previous section 106 agreement with
“Neither the Owner the Lessee or the Mortgagee nor their successors in title nor any person deriving title from them shall be bound by the obligations in this Agreement in respect of any period during which it no longer has an interest in the Property but without prejudice to liability for any breach committed prior to the time it disposed of its interest.”
92. When the Buyer’s solicitors sent a draft section 106 agreement to
93. When Camden produced its own draft section 106 agreement on I 3fr August 2009, that draft contained the same clause (without the words “the Iessee”).
94. Based on the above drafts of the section 106 agreement, I can find that the provision quoted above is in the template used by
95. Clause 3.7.2 of the contract refers to the Seller being relieved of all liability for the obligations contained in it after it has parted with all interest in the property. Under the provision quoted above, the Seller is relieved of all liability for obligations that would otherwise arise during the period after it has parted with its interest in the property. However, as the provision makes clear, the Seller is not relieved of liability for breach of obligations prior to that time.
96. Taking clause 3.7.2 entirely literally, it can be argued that it is open to two interpretations. The wider reading of it would require that the section 106 agreement should relieve the Seller of liability not only for the period after it has parted with its. interest but also but accrued liability which arose before it parted with its interest. The narrower reading would be confined to the Seller being relieved of future liability but not of accrued liabilities.
97. In my judgment, having regard to the evident purpose of clause 3.7.2 I would incline to the narrower construction. Further, I think that it is permissible to construe clause 3.7.2 by reference to the
98. In any event, the provision drafted by the Seller’s own architects survived (with the removal of the words “the Lessee”) in all subsequent drafts of the section 106 agreement. The Seller does not dispute that it agreed the February draft section 106 agreement which contained that provision. In my judgment, the Seller has clearly waived any right it might have had to object to that provision (I hold that in fact it had no such right). Further, the relevant question for present purposes arises under paragraph (d) of the definition of Condition End Date. The question is whether the Seller had agreed the principal terms of a draft section 106 agreement. It cannot be disputed that the Seller agreed a series of draft section 106 agreements which contained the relevant provision. The Seller cannot now say for the purposes of paragraph (d) that it did not on the facts agree to a draft section 106 agreement because it contained the relevant provision.
The fifth issue
99. The fifth issue is: did the relevant parties agree with
100. There is or may be a small point as to the time of the day when the Condition End Date would be reached, subject to the possibility of a postponement under paragraph (d). In my view, that time is 12 midnight at the end of l2th March 2010. On another point, the Seller had referred me to Condition 1.3 of the Standard Conditions of Sale which were incorporated into the contract. That Condition deals with a notice which is received after 4 p.m. on a working day being treated as received on the next working day. However, that Condition is not relevant to the question as to the point in time when the Condition End Date is reached.
101. The principal question which was argued as to this fifth issue was: did the Seller agree with
102. In the course of answering this question, there are two matters which are quite clear and can be stated at the outset. The first is, as the Buyer emphasises, that the Seller had throughout the planning process sought permission for a development which would satisfy the sustainability and energy policies of
103. The second matter, as the Seller emphasises, is that the Seller did not specifically agree with the Buyer, or with
104. As I understand it, counsel for the Buyer puts his case essentially in two ways. The first way is to focus on the matters referred to in paragraph 102 above and on the definition of Development in the various drafts of the section 106 agreement up to and including the February draft. The second way the case is put is to focus on what was stated by Camden in its note, following the pre-application meeting with the Seller’s representatives in July 2008, taken together with the contents of the planning officer’s report of 17th February 2010 and the lack of objection by the Seller to anything in that report.
105. The first way in which the Buyer puts its case is to emphasise the matters referred to in paragraph 102 above, to refer to the terms of the various section 106 agreements and the definitions of Development in those agreements (including the February draft section 106 agreement). The Buyer relies on the fact that the definition of Development in the February draft refers to the report by Eight Associates. The Buyer also points to the provisions in the February draft dealing with a Construction Management Plan and a Lifetime Homes Plan.
106. I am not persuaded by the first way in which the Buyer puts its case. The definition of Development in the February draft does refer to the report by Eight Associates. However, it does not refer to the report by Bobby Gilbert. Further, and even more importantly, the precise function and effect of the reference to the Eight Associates report in the Definition is obscure. That definition refers to a large number of documents which were provided to
107. In my judgment, the March draft section 106 agreement contains new provisions which go significantly beyond those of the February draft and anything which was reasonably to be contemplated up to the time of the February draft. The definition of Development is extended to refer to the Bobby Gilbert report although, in view of the lack of clarity of the effect of such references (a matter I have referred to above), I do not attach great weight to that matter. The definition of Sustainability Plan refers to the works involved in carrying out the Development, to a post construction review of that matter and also to continuing obligations in relation to management and occupation of the completed development. The definition states that the Sustainability Plan is to be based upon the reports by Eight Associates and Bobby Gilbert but does not go further to spell out the detailed provisions of such a Plan. Clause 4.8 is also, in my assessment, a significant obligation. I attach particular importance to the second part of clause 4.8. This refers to the period after completion of the Development where the continuing management and occupation of the completed properties is to remain controlled by the Sustainability Plan. The second part of clause 4.8 states that if such management and occupation does not conform to the Plan, then such occupation must not continue. It seems to me that this part of clause 4.8 is a provision of major importance as to the continued use of the completed development. The provision is expressed to apply without limit of time after the completion of the development.
108. Paragraph (d) in the definition of Condition End Date does not require the Seller to agree every term of a proposed section 106 agreement. It only requires there to be agreement on “the principal terms”. The fact that agreement on matters of detailed drafting is not required is also shown to the reference to terms being agreed but not documented. The difference between a principal term and another term is a matter of degree. So too is the difference between a matter of drafting and a matter which is more substantial than a matter of drafting. My assessment is that the definition of Sustainabilty PIan and the terns of clause 4.8 in the March draft, and in particular the second pan of clause 4.8, judged as a matter of degree, are comfortably on the principal terms side of the line and they go beyond matters of drafting.
109. In my judgment, the Seller’s agreement to the February draft, taken together with everything else in the background, particularly the fact that the Seller used the reports by Eight Associates and Bobby Gilbert to support its planning application, does not amount to an agreement by the Seller with
110. The second way in which the Buyer puts its case is to emphasise Camden’s note following the pre-application meeting, the terms of the planning officer’s report and the Seller’s lack of objection to anything in that report.
111. When setting out the relevant facts, I referred to the note sent by
ll2. I have also referred in detail to the planning officer’s report. Counsel for the Buyer emphasised the parts of that report which referred to the reports by Eight Associates and Bobby Gilbert and paragraph 6.8 of that report, culminating in paragraph 6.8.5, recommending that all sustainability and energy measures should be secured by a section 106 agreement.
113. I have also referred to the lack of any objection by the Seller when the Seller’s representatives attended the planning committee on 25th February 2010.
114. I am not persuaded by the second way in which the Buyer puts its case. In February 2010, the Seller’s representatives knew that
115. So far I have considered separately the first and second ways in which the Buyer has put its case. In opening its case, these two ways were put by the Buyer as alternatives. Nonetheless, I will also consider these two ways of putting the case in combination, rather than as alternatives. Even doing that, I am not persuaded that I can hold that the Seller agreed the principal terms of the March draft. The objections which I find to the two ways of putting the case operate in tandem as they do in the alternative.
116. There was no real focus at the trial on whether the Buyer had agreed with
The sixth issue
117. The sixth issue is: if the Seller did not agree with Camden the principal terms of a section 106 agreement in accordance with the principal terms of the March draft section 106 agreement, was the Seller thereby in breach of the agreement so that the Seller cannot rely on the absence of agreement on the principal tenns of the March draft as a ground for asserting that the Condition End Date was not postponed and so that the Seller cannot seek to rescind the agreement?
118. On this issue, the Buyer relies upon the principle that a party to a contract is not entitled to take advantage of its own wrong. That principle is helpfully discussed in the 4th ed. of the Interpretation of Contracts, by Sir Kim Lewison, at paragraph 7 -10. There was no dispute as to the existence of the principle as there described.
119. In this case, the Buyer submitted: (1) the Seller’s failure to agree with Camden the principal terms of the March draft section 106 agreement amounted to a breach of an obligation, pursuant to an express term of the contract, owed to the Buyer; (2) the direct result of that breach was that the principal terms of the March draft were not agreed with Camden by the end of 12th March 2010; (3) the Seller’s notice of rescission in reliance on paragraph 6.1 of schedule 1 to the contract was dependent upon the Condition End Date not being postponed pursuant to paragraph (d) of the definition of that term; (4) the Condition End Date would have been postponed pursuant to paragraph (d) of the definition, if the Seller had performed its obligations under the contract instead of having broken them; and (5) in this way, the Seller was taking advantage of its own breach of contract, which the relevant principle prevented it from doing.
120. The essential question in relation to this sixth issue is whether the Seller committed a breach of contract which resulted in the principal terms of a section 106 agreement not being agreed by the end of 12th March 2010.
121. The Buyer relies upon paragraphs 3.2 and 3.4 in schedule I to the contract. Paragraph 3.2 obliges the Seller to use all reasonable endeavours to secure the Satisfactory Planning Permission as soon as reasonably practicable. Paragraph 3.4 requires the Seller, if it is necessary or desirable in order to obtain a Satisfactory Planning Permission, to enter into discussion or negotiation with the Planning Authority and to use all reasonable endeavours to procure that the appropriate parties enter into such Statutory Agreements in accordance with the contract, as soon as reasonably practicable, in a form approved by the Buyer.
122. I also refer to paragraph 3.7 in schedule 1 to the contract, pursuant to which the Seller is obliged to enter into a Statutory Agreement if it appears necessary or desirable to do so to facilitate the grant of a Satisfactory Planning Permission. It may also be relevant to refer to the obligations on the Seller pursuant to schedule 3 to the contract dealing with the carrying out of the Building Works to construct the Development. “Building Works” are defined by reference to (amongst other things) the relevant planning permission and any relevant section 106 agreement. Under paragraphs 7.1 and 7.2 of schedule 3, the Seller is obliged to commence and complete the Building Works. There is also an obligation in paragraph 5.1 of the third schedule concerning the obtaining of planning permission but this would not seem to add anything to the provisions of schedule 1 in relation to planning permission.
123. The Buyer submitted that the Seller was in breach of these obligations in that it did not communicate with Camden, following sight of the planning officer’s report, and did not seek to negotiate with Camden a suitable term to be included in a section 106 agreement dealing with the planning officer’s recommendation that sustainability and energy matters should be secured in a section 106 agreement. I do not accept that submission. At all times up to 25th February 2010,
124. The Buyer next submitted that the Seller was in breach of contract in the period 1Oth to 12th March 2010 by failing to agree the principal terms of the March draft with
125. 12th March 2010 was a Friday. At 10.37 on that day, the Seller’s solicitors emailed the Buyer’s solicitors stating that they would review the matter shortly. At 17.23, the Buyer’s solicitors emailed the Seller’s solicitors asking them to ensure that the draft section 106 agreement was approved.
126. The time from the Seller’s representatives’ receipt of the March draft to the end of 12th March 2010 was short. The Buyer’s solicitor did not say to the Seller that it was obliged to enter into the March draft. Instead, the Buyer’s solicitors asked the Seller to confirm that it consented to the draft or that it approved it. It seems to me that the Seller was entitled to consider the March draft and the impact on its position. I have already said that the definition of Sustainability Plan and clause 4.8 were sufficiently significant to be “principal terms” of the draft. I also think that the terms did deserve to be considered in detail and it would not be obvious to the Seller’s solicitors or architects that they could be approved at once. Indeed, I think that the relevant terms had a number of undesirable features. First, the definition of Sustainability Plan is very vague, particularly in a case where the detailed plans describing the Development were not in harmony with the details considered in the report by Eight Associates. Secondly, the second part of clause 4.8 has major implications for the continued use and occupation of the completed development.
127. The Buyer submitted that even though the Seller was asked to consent to the March draft and/or to approve it, in law, the Seller had no option but to execute it, if the Buyer approved it. I am not certain that this submission is correct. There is a reasonable argument that the Seller did have an interest in the terms of the section 106 agreement as the Seller had building obligations imposed by schedule 3 to the contract by reference to any section 106 agreement. Further, it is arguable that the reference to “reasonable endeavours” in paragraphs 3.2 and 3.4 of schedule 1 to the contract would allow the Seller to take that interest into account in determining what its endeavours should be. But even if the submission is legally correct, what the Buyer asked the Seller to do was to approve the March draft and the Seller was entitled to a reasonable time in which to do so. A reasonable time had not expired by the end of 12th March 2010.
128. I have also considered a wider point as to how the terms of the section 106 agreement might matter to the Seller. Under all of the draft section 106 agreements, the Seller was to be relieved of future liability when it parted with its interest in the property. The contract provided for the Seller to transfer its interest to the Buyer shortly after the Condition was satisfied. There could be a period of months from the grant of planning permission to the satisfaction of the Condition because the definition of Condition incorporated a period for a possible judicial review of a planning permission. Nonetheless it can be argued that if a Satisfactory Planning Permission were granted then the Seller would cease to be bound by the section 106 agreement not very long thereafter. As against that argument, there is the possible interest which the Seller had by reason of the building obligations in schedule 3 to the contract. Further, although this might be more theoretical in this case, if the Buyer had failed to complete the purchase, the Seller might well remain the owner of the property for a longer period. Having taken into account these matters, I remain unable to conclude that the Seller was in breach of contract in the period from 10th to 12th March 2010.
129. I conclude in relation to the sixth issue that the Seller is not seeking to take advantage of its own wrong.
The seventh issue
130. The seventh issue is: was the first notice of rescission effective to determine the contract? Because the Condition End Date was not postponed pursuant to paragraph (d) of the definition of that term, it remained the end of 12th March 2010. The Condition was not satisfied by that date. Nor was it satisfied by the date of the notice of rescission on 18th March 2010. There was no issue as to the form of the notice of rescission. It follows that this notice was effective to determine the contract.
131. The Buyer submitted that: (1) the attempt by the Seller to rescind the contract was an unmeritorious attempt to take advantage of a minor difficulty, if it was even that, in finalising the drafting of the section 106 agreement; (2) the Seller appreciated at all times that the development would have to be constructed in accordance with the reports of Eight Associates and Bobby Gilbert, which reports were commissioned by the Seller and were positively relied upon for the purpose of obtaining planning permission; (3) the Seller always understood that the subject of those reports would be dealt with by a planning condition or a planning obligation and there was no material difference between the two ways of dealing with the matter; (4) the evidence I heard about why the Seller was unhappy with a planning obligation, when it would have been happy with a planning condition in the same terms, did not stand up to scrutiny; and (5) the Seller’s solicitors’ email of 16th March 2010 was a naked attempt to extract more money from the Buyer. There is considerable force in these submissions. It may well be that the Seller has been able to escape from an unprofitable contract by a somewhat adventitious turn of events. Nonetheless, the Buyer was put in a position of difficulty when
The eighth issue
132. The eighth issue is: was the second notice of rescission effective to determine the agreement? This question does not arise. I do not think that it is appropriate to discuss whether the second notice of rescission would have been effective if the contract had remained in being until that notice was served on 8th July 2010. I have referred to any matters of fact which might be material if this point needs to be considered further on any appeal against my judgment.
The ninth issue
133. The ninth issue is: if the agreement has not been determined, what relief ought to be granted to the Buyer? Again, this issue does not now arise and I do not think that it would be helpful to discuss the relief which I would have been minded to grant if the situation were otherwise. There was no real dispute of fact about the position of the Seller, which was said to be relevant in some way or other to the resolution of this issue. Further, if the contract remained in force, it might be relevant to consider the attitude which would be adopted by the bank in relation to further performance of the contract and the extent of the bank’s obligations in that regard. As the position of the bank was deliberately not explored at the trial before me, and as I have held that the contract has been determined, I take the view that it is inappropriate to discuss the attitude I would have adopted if I had held that the contract remained in force and in advance of being able to deal with the position of the bank.
The tenth issue
I34. The tenth issue is: if the agreement has been determined, was the Buyer in breach of the duty imposed by section 77 of the Land Registration Act 2002?
135. Whilst the contract remained in being, the Buyer was entitled to protect its rights under it (and under the variation agreement of 16th December 2009) by the registration of unilateral notices in relation to the Seller’s registered title. As I have held that the contract came to an end on 18th March 2010 it follows that those notices should now be removed from Seller’s registered title. I understand there is no dispute as to the court’s power to order the removal of the unilateral notices in a case where the court has held that the contract has been rescinded.
136. The Seller submits that the Buyer has committed a breach of the duty imposed on it by section 77 of the Land Registration Act 2002, that the breach has caused the Seller loss and damage and that I should direct an inquiry as to damages. For some reason, the Seller has chosen to put forward its claim to damages exclusively on the basis of section 77 of the 2002 Act and not pursuant to the contractual obligation on the Buyer, pursuant to paragraph 6.2.2 of schedule 1 to the contract, to cancel any registration of the contract. A claim under paragraph 6.2.2 would appear to involve no difficulty but yet no such claim has been made. Even when I raised the matter at the trial, there was no application by the Seller for permission to amend its claim to add a claim to the self same damages based on an allegation of a breach of paragraph 6.2.2.
137. Section 77 of the Land Registration Act 2002 is in these terms:
’77 Duty to act reasonably
(1) A person must not exercise any of the following rights without reasonable cause:
(a) the right to lodge a caution under section 15,
(b) the right to apply for the entry of a notice or restriction, and
(c) the right to object to an application to the registrar.
(2) The duty under this section is owed to any person who suffers damage in consequence of its breach. “
138. In the present case, the Buyer applied for the entry of two unilateral notices and these were entered on the Seller’s registered title on the 3rd July 2009 and 24th December 2009 respectively. When the Buyer applied for the entry of these notices, it had the benefit of the contract and it was entitled to act as it did. Section 77(1)(b) of the 2002 Act refers to a person exercising the right to apply for the entry of a notice without reasonable cause. If that wording is taken literally then the Buyer’s application for the entry of notices was obviously fully justified. There was no argument before me as to whether the language of the section should be taken literally or whether it could be given a wider meaning so that words “exercise … the right to apply for the entry of a notice …” could extend to a case where a party fails to take action to remove a unilateral notice which was entered at a time when that party was entitled to apply for the entry of that notice but where circumstances had changed. As the matter was not argued and as I have concluded that the Seller fails to show that the Buyer acted, or failed to act, “without reasonable cause” I will not discuss the point further. If I had held that the Buyer had conducted itself without reasonable cause, then I would have wished to be satisfied that the wording could be stretched quite so far as it would have to be to cover this case.
139. I therefore proceed to consider whether the Buyer acted or failed to act in this case “without reasonable cause”. The Seller relies on the notice of rescission of the contract on 18th March 2010 and on a letter written by the Seller’s solicitors to the Buyer’s solicitors on 23rd March 2010. In that letter, the Seller’s solicitors explained to the Buyer in detail the Seller’s case in support of the notice of rescission. The letter added that if the Buyer did not immediately confirm that the unilateral notices would be removed by the Buyer and that the contract had been rescinded then the Seller would hold the Buyer responsible for any loss that it might suffer by it not being able to dispose of the property to another buyer at a higher price. The Buyer was not prepared to remove the unilateral notices and on 12th April 2010, it issued the present proceedings asserting that the contract remained in being. I have now held that the Seller was right all along and that the contract came to an end on 18th March 2010.
140. The reference to reasonable cause is not further defined or elaborated in the 2002 Act. In the course of the submissions I was taken to two earlier decisions, to which I will now refer.
141. The first case was Clearbrook Property Holdings Ltd v Verrier [9741] 1 WLR 243. The actual decision related to whether the court should order the vacation of a caution, registered under the Land Registration Act 1925 to protect an alleged estate contract. The court ordered vacation of the caution but exercised its power to grant an injunction against the registered proprietor to restrain a disposal pending trial of the issue as to the existence of the contract and required the cautioner to give a cross-undertaking in damages. In the course of the discussion, the judge (Templeman J) was referred to section 56(3) of the 1925 Act which provided that a person who lodged a caution “without reasonable cause” would be liable to pay to any person who sustained damage as a result “such compensation as may be just”. The judge did not decide what was meant by “without reasonable cause”. He suggested that it was “at least arguable” that a person who “genuinely believes” that he was entitled to specific performance and issued a writ for that purpose “under legal advice” could say that he acted with reasonable cause.
142. The second case was Anderson Antiques (UK) Ltd v
143. Although it was relevant to refer to these two decisions in the absence of any other authority, in the end they do not really assist. In my judgment, the concept involved in a reference to reasonable cause is reasonably clear and it is probably inappropriate to attempt to elaborate or gloss the statutory language. Instead, I will attempt to apply the statutory wording to the facts of the case.
144. In the present case, I have examined in detail the issues between the parties as to the rescission of the contract. Although I have ultimately found against the Buyer, I consider that the Buyer had a reasonably arguable case to the effect that the contract remained in being. I consider that the existence of a reasonably arguable case, certainly in the present case, is sufficient to show that the Buyer had reasonable cause to continue to have the benefit of the unilateral notices against the Seller’s registered title.
145. The Seller pointed out that it could have applied to the court for an order removing the unilateral notices and if it had done so and if the court had acted in accordance with the usual practice illustrated, for example, in Tucker v Hutchinson (1987) 54 p&CR 106 the court would have allowed the unilateral notices to remain pending the trial of the claim but on terms that the Buyer give to the Seller an undertaking in damages. The short answer to that submission is that although the Seller might have protected itself in that way, it did not seek to do so and so does not have the benefit of an undertaking in damages. Its attempt to rely on section 77 requires it to show that the Buyer acted or failed to act without reasonable cause and, in my judgment, it has tailed to do show what is required.
The result
146. The result is that the Buyer is not entitled to the relief which it seeks and the Seller is entitled to appropriate declaratory relief and an order providing for the removal of the unilateral notices but the Seller is not entitled to an inquiry as to damages pursuant to section 77 of the Land Registration Act 2002.
