Implied term – Contract for sale of old building – Completion conditional upon buyer applying for planning permission for residential development – Buyer making important changes to proposed scheme in order to meet council concerns – Council rejecting one version of scheme – Buyer lodging appeal – Seller purporting to rescind – Whether buyer in breach of implied obligation to make reasonable efforts to obtain permission within a reasonable time – Whether buyer acting reasonably at all material times
In 1977 the claimant bought a Victorian building, a former convalescent home, standing behind sand dunes at Lytham St Annes, Lancashire. The building, which had a volume of some 7,000m³, lay empty over the following 20 years. During that time, the area was designated green belt and the dunes were designated as a Site of Special Scientific Interest. On 7 August 1998, by which time the building had become badly dilapidated, the claimant contracted to sell the building to the defendant, which was confident that planning permission could be obtained, on appeal if necessary, for converting and enlarging the building into a block of flats. A clause (the completion date clause) required the defendant to apply within three months for detailed planning consent for a new residential development. The clause went on to provide:
“The Completion Date shall be 28 days after satisfactory… permission for a minimum of 16 residential units… If such application… is not lodged within three calendar months… then the Completion Date shall be 17 weeks from the date hereof. Alternatively completion shall take place 28 days from the Buyer serving notice on the seller of the Buyer’s wish to complete regardless of the situation at that time in respect of the said planning application.”
On 12 October 1998 the defendant lodged a planning application accompanied by drawings prepared by an architect, H, who had ascertained that the council’s planning officers would accept some increase in the overall volume of the development. The drawings showed a scheme (the H scheme) for 29 flats of modern design with a total volume of 8,670m³. During November and December 1998, H worked on a substantial revision of the scheme after learning that the planning committee was averse to any increase of volume. In early January 1999 H submitted a scheme falling within the limits of a “compromise” figure of 8,100m³. At about the same time, the defendant, having gathered from informal soundings that some committee members also had design objections to the H scheme, engaged a different architect to prepare a more traditional scheme (the F scheme). During March and April 1999, the F scheme was revised in order to meet concerns expressed by council officers over landscaping and layout matters. On 12 July 1999 the F scheme was submitted to the council, where it was well received by the planning officers. However, notwithstanding the recommendation of those officers, the planning committee rejected the scheme at a meeting held in September 1999. On 15 October 1999 the defendant lodged an appeal against that refusal.
On 30 November 1999 the solicitor acting for the claimant, who had found an alternative buyer for the building, wrote to the defendant claiming that, because of the lapse of time, its client was no longer bound by the contract. On 23 February 2000 the council planning committee approved a new version of the H scheme, as revised in the light of observations received by H from English Nature and the Royal Fine Art Commission. However, that resolution was followed by a decision of the Secretary of State to call in the application and direct a public inquiry. Shortly afterwards, the claimant issued proceedings claiming that he was entitled to treat the contract as repudiated because the defendant was in breach of an implied obligation to make reasonable efforts to obtain the grant of planning permission within a reasonable time.
Held: The contract was still on foot at the date of the claim.
1. The termination date clause was defective in that: (i) it did not expressly oblige the buyer to progress the planning application; (ii) it made no provision as regards an appeal against refusal; (iii) it gave no date by which planning permission had to be obtained; and (iv) it set no long-stop date for completion or determination of the contract.There was a spectrum of possible implications: to use best endeavours (see Fischer v Toumazos [1991] 2 EGLR 204); to use all reasonable efforts (see Hargreaves Transport Ltd v Lynch [1969] EGD 87); or to use reasonable efforts. The alleged term, which was at the lowest of the spectrum, should be implied because of the express obligation to lodge a planning application. The case of Tesco Stores Ltd v Gibson (William) & Son Ltd (1970) 214 EG 835, where there was no such obligation, was accordingly distinguishable.
2. Where, as in the present case, no ultimate date had been set for obtaining permission, it could not be said, so long as reasonable efforts were being made, that a reasonable time had expired. In such a case, it was proper to equate performance of the implied obligation and the period within which the condition was to be satisfied: see per Lord Steyn in Total Gas Marketing Ltd v Arco British Ltd [1998] 2 Lloyd’s Rep 209, and the view taken in Batten v White (No 2) (1960) 12 P&CR 66 (Russell J). The case of Re Longlands Farm, Long Common, Botley, Hants [1968] 3 All ER 552 did not compel a contrary conclusion.
3. In the light of the planning officers’ reactions at the time, H could not be said to have acted unreasonably in submitting the first version of his scheme. Nor could it be said, on the evidence before the court, that the substitution of the F scheme was an unreasonable decision for the defendant to take. Although the defendant was not obliged to appeal against refusal (see Hargreaves (supra)), the question whether to do so was a matter of choice for that company.
David Berkley QC and Susanne Muth (instructed by Gorna & Co, of Manchester) appeared for the claimant; Peter Smith QC and Stephen Pritchett (instructed by Halliwell Landau, of Manchester) appeared for the defendant.
Alan Cooklin, barrister
