The question that arose in Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd [2019] EWCA Civ 823 was whether a developer had used “reasonable endeavours” to satisfy conditions in an overage agreement “as soon as reasonably practicable”. And, if not, was the developer liable to pay damages in lieu of the overage, in the sum of £1.4m?
The developer had entered into a network of conditional agreements concerning the development of a site in Milton Keynes – and accepted an obligation to pay overage to one of the parties with whom it was dealing if the overage conditions were satisfied within the next 10 years – ie before 4 July 2013. As it happened, everything finally came together 4 days after the longstop date. Consequently, the developer claimed that it was not liable to make the overage payment – but the would-be recipient of the overage smelled a rat.
The High Court noted that the developer “had retained considerable influence over when and in what order the conditions were satisfied”. And, despite the developer’s arguments that it would have been commercially irresponsible to have committed itself to a development that it could not fund, the judge ruled that the developer had not promised to use reasonable endeavours to satisfy the overage conditions “as and when convenient”, or “when it suits our fund flows”. It had promised to do so “as soon as reasonably practicable” – and, had the developer complied with its obligations, its liability to pay the overage would have been triggered before the long stop date in the overage agreement. Therefore, the developer was liable for damages in the sum of £1.4m, plus interest.
The Court of Appeal has upheld the decision. It ruled that, essentially, this was a case in which a developer had accepted an obligation to use reasonable endeavours to achieve an outcome (putting all the necessary site assembly arrangements in place and obtaining a clear title to the land) as soon as reasonably practicable. But it did not do so. On the contrary, it had devoted its energies to ensuring that the outcome would not be achieved until after the date when it would escape liability to make the overage payment. The judge had found that the developer’s actions were deliberate – and that was a breach of the agreement.
The developer had argued that, even if it had performed its obligations, the outcome could not have been achieved in time. But, although no one could say for certain what would have happened in a counter factual world where the developer had been using reasonable endeavours in negotiations with third parties, the Court of Appeal considered that, in so far as there was a lack of evidence about this, the problem was of the developer’s own making. To say that the outcome could not have been achieved in time was “ambitious” in circumstances where the developer’s witnesses had been disbelieved. And, when the developer did finally get around to negotiating seriously with the relevant parties, there had been little or no difficulty in bringing those negotiations to a successful and prompt conclusion.
Consequently, the judge had been entitled to conclude that, had the developer used reasonable endeavours to satisfy the conditions as soon as practicable, it would have succeeded in doing so.
Allyson Colby, property law consultant
