Council granting option to first defendant – First defendant’s intended development dependent on funding from Millennium Commission – Council contracting to lease to second defendant – Entitlement of second defendant contingent upon failure of first defendant to exercise option – Commission agreeable in principle to fund first defendant – Option expiring – Final decision of Commission still awaited – Second defendant claiming contingency fulfilled – Judge holding council negotiators had exceeded powers conferred by resolution authorising contract with second defendant – Judge alternatively allowing rectification on basis of common mistake – Second defendant’s appeal allowed
In 1995 the respondent council were considering two alternative schemes for the regeneration of Chavasse Park (the site) which they owned in the centre of Liverpool. The first (the RCL scheme) was devised by the first defendant (RCL), a voluntary body formed for the purpose of working with the council on developing the site as a National Discovery Park. The second scheme, which had been proposed by the second defendant (Walton), contemplated a commercial development for retail and leisure use. At all material times the interested parties were aware that: (i) the council did not intend to proceed with the Walton scheme unless and until it proved impracticable to go ahead with the RCL scheme; (ii) the RCL scheme could not be implemented unless RCL was successful in an application to the Millennium Commission (the Millennium bid) for a substantial award of public money towards the cost of the discovery park project. By an agreement (the RCL agreement) made on 29 March 1996, the council granted to RCL an option to take a 250-year lease of the site, such option to be exercised within an “option period” that was capable of extension in certain events relating to the progress of the Millennium bid. On 24 April 1996 the Millennium Commission announced that RCL’s application had been placed on a shortlist.
On 10 July 1996 the council’s head of estates (S) presented a report to the relevant committee seeking their authorisation to enter into an agreement with Walton, such agreement to be conditional, inter alia, on the failure of RCL to receive full allocation of funding from the Millennium Commission “or the bid not otherwise proceeding”. Having considered the report the committee resolved that the council would enter into an agreement to dispose of the site to Walton “on such terms that , should the Millennium bid be lost, the sale will proceed . . . and if the bid is successful the Agreement with [Walton] will be void”. On 16 September 1996 the council entered into an agreement (the Walton agreement) whereby, subject to certain conditions, Walton could call for a 999-year lease of the site: one of the conditions (the RCL condition) being “the failure [by RCL] to exercise or the decision not to exercise the option as provided for in the [RCL agreement]”.
On 19 February 1997 the Millennium Commission announced its decision “in principle” to award £27m towards the cost of the RCL scheme. On 31 March 1999 the option period (as extended) under the RCL agreement expired. On 13 April 1999 Walton purported to call for a lease pursuant to the Walton agreement. The council maintained that the RCL condition should be taken to be unfulfilled so long as the final decision of the Millennium Commission was unknown. In High Court proceedings taken by the council it was held that, although the condition did not, as a matter of construction, have the effect contended for by the council, Walton’s claim to a lease should be denied because: (i) the responsible council officers, in agreeing to the wording of the condition, had acted outside the authority conferred by the resolution of 10 July 1996; alternatively (ii) the agreement had been concluded under a common mistake, and should therefore be rectified so as accord with the wording of that resolution. Walton appealed to the Court of Appeal.
Held: The appeal was allowed.
1. It was well established that the resolution had to be construed in the light of the report that preceded it: see Attorney-General, ex rel Co-operative Retail Services Ltd v Taff-Ely Borough Council (1981) 42 P&CR 1. Thus construed, the resolution, while insisting that the RCL agreement should have priority over the Walton agreement, did not go so far as to require S to ensure that the Walton agreement would be voided on acceptance of the Millennium bid regardless of whether RCL continued to enjoy rights under the earlier agreement. Such a requirement would be inconsistent with the evident wish to have an immediate contractual arrangement continuing to subsist subject to the RCL option. The word “bid”, as used in the resolution, should accordingly be taken to refer to the RCL project as distinct from the application for Millennium funding. Furthermore, even if S’s authority had been circumscribed in the manner alleged, it would, in the circumstances, have been incumbent upon the council to draw that limitation to Walton’s attention: see Pole v Leask (1860) 28 Beav 562.
2. Since the officers charged with negotiating the Walton agreement had acted within the terms of S’s report, it could not be said that they had an intention different from that recorded in the agreement. The intention of the officers could be attributed to the council: see per Lord Hoffmann inMeridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. The council had accordingly failed to establish the common mistake necessary to support their claim to rectification.
Derek Wood QC and Janet Bignell (instructed by Bermans, of Liverpool) appeared for the appellant, Walton Group plc; Peter Smith QC and Lesley Anderson (instructed by Halliwell Landau, of Manchester) appeared for the respondent council.
Alan Cooklin, barrister