Option agreement — Construction — Option to purchase land conditional upon making planning application for development of the property — Judge finding condition not met by appellant — Whether application in respect of part of the property sufficient — Whether application made in respect of whole of the property — Appeal dismissed
In November 1996, the first respondent vendor granted an option to SF Ltd, for a consideration of £5,000, to purchase 45 acres of land in Rotherham, South Yorkshire. The land was a restored open-cast mining site within a 32ha “strategic site” that, at the time the option was granted, was earmarked for development in the local planning authority’s draft UDP. The price payable for the land was £100,000 “per developable acre”, which was defined as “each acre of the Property in respect of which planning permission… is granted… for development” upon an application by the purchaser, excluding areas of open space. The purchaser undertook to submit a planning application “for development of the Property” by a specified date and to use reasonable endeavours thereafter to obtain permission.
In March 1998, SF Ltd assigned the option to the appellant. By that time the authority were against the development of the land except as part of a comprehensive scheme covering a much wider area than the strategic site. The appellant submitted a planning application for the option site in respect of “45 acres — 42.5 acres of open space and 2.5 acres… for a company HQ”. The proposed development involved landscaping works to around 40% of the land. Outline permission was granted by an inspector on appeal, on the basis that a development of that size would not prejudice the comprehensive development of the area. There was no possibility at that stage of obtaining permission for a larger development on the site. The appellant then purported to exercise the option agreement to purchase the land at a price of £250,000, calculated by reference to the 2.5 acre building development, and excluding the landscaped open space. The vendor maintained that the exercise of the option was not valid, and subsequently transferred the land to the second respondent.
The appellant brought a claim for specific performance, which the judge dismissed after finding that there had been no planning application in respect of “the Property”, as required by the option agreement, since the appellant’s application had not related to the whole site. On appeal, the appellant contended, inter alia, that: (i) “the Property” had to mean the whole property or any part of it, and (ii) the application had, in any event, been for development of the whole site, since the landscaping works, which involved engineering operations, amounted to “development” in the sense in which that word was used in the planning legislation. The appellant also suggested that a term be implied, in order to make the agreement workable, that it would apply for the best planning permission reasonably available at the time of application. The vendor cross-appealed, contending for a purchase price that took into account the landscaped areas in the event that the option was found to have been validly exercised.
Held: The appeal was dismissed.
1. The property was identified in the agreement as 45 acres. Accordingly, the required planning application for “the Property” had to be for the whole, or substantially the whole, of that area. On the appellant’s interpretation, the vendor lost the chance of realising the value of much of the land just because only a small-scale development was permitted within the window provided for the exercise of the option. The appellant’s suggestion that it could make an application for part only of the land, provided it complied with an implied term safeguarding the vendor’s interests, was to be rejected. To import such a term would require more than mere implication, and would involve remaking the agreement to cover matters that the parties had not envisaged at the time of contracting. They had reached agreement against the background of the draft UDP, and had not anticipated the authority’s unwillingness to permit development of the whole site. Nor was it necessary or reasonable to imply such a term. The appellant might otherwise be unable to exercise the option. The appellant had paid very little for the option, and the parties had intended it to bear that risk.
2. It was a question of fact and degree whether a planning application was for development of substantially the whole of the land. The 2.5 acre building development was clearly insufficient. The landscaping works were not “development” in the ordinary sense of that word. The appellant’s technical interpretation, based upon the planning legislation, was not appropriate. The word “development” would not convey that meaning to a reasonable person with the background knowledge reasonably available to the parties at the time of contracting: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 applied. Even if that interpretation were accepted, landscaping to only 40% of the site, was not development of substantially the whole site. It was unnecessary to consider the cross-appeal.
Derek Wood QC and Martin Dray (instructed by Irwin Mitchell, of Sheffield) appeared for the appellant; Francis Tregear (instructed by Nabarro Nathanson, of Sheffield) appeared for the respondents.
Sally Dobson, barrister
