Agreement for lease –– Commencement of term –– Whether agreement void for uncertainty –– Failure to specify commencement of term –– Development agreement –– Implied terms –– Council promoting development scheme inconsistent with scheme underlying agreement –– Whether council entitled to withhold consents and promote alternative scheme
By an agreement dated 16 September 1996, the defendant agreed to develop land belonging to the claimant council (the property). The defendant contemplated a major retail scheme. The agreement, which was subject to conditions precedent, contained provisions under which the defendant would become entitled to the grant of a 999-year lease of the property. The agreement also required the defendant to prepare, and the council to consider and approve, a consultation study. Following the making of the agreement, the council accepted a consultant’s report and decided to promote the development of an alternative major retail scheme on a neighbouring site. They also decided that they would resist major retail proposals outside that neighbouring site. The defendant concluded that there could not be two major retail developments on neighbouring sites. In accordance with the terms of the agreement, the council provided a planning brief for the property, but the brief also made reference to their policies relating to the neighbouring site. The defendant incurred an expenditure of about £1m on the required consultative study. In the present proceedings, the council alleged that the agreement for lease contained in the development agreement was allegedly void for uncertainty, on the ground that the draft lease contained no commencement date. The defendant contended that there was implied into the agreement a term that the council’s acceptance and approval of the consultative study could not be unreasonably withheld. It also alleged that there was an implied obligation that the council would co-operate with the defendant in implementing the agreement, and that the council could not rely upon their preference for the development of the neighbouring site.
Held: (1) On the proper interpretation of the agreement and the draft clauses of the draft lease, the commencement date of the proposed lease was to be the date of execution of the lease. If there was any uncertainty as to the commencement date, the uncertainty was in respect of two events six weeks apart, which, in the context of a 999-year term, was not long and could be resolved by the defendant making an election for the earlier date; the earlier date was less favourable to the defendant and more favourable to the council. (2) If, contrary to (1) above, the clause providing for the grant of the lease was void, the council were estopped from relying upon that point; the parties were bound in equity in so far as they were not bound in contract. (3) The defendant was not entitled to a declaration in general terms that the council would co-operate in implementing the agreement and would do nothing to impede or frustrate its implementation. (4) There was an implied term that the acceptance and approval of the consultative study by the council was not to be unreasonably withheld. (5) As a matter of construction, the council could not reject the consultative study on the ground that they preferred a different scheme on the property or elsewhere. (6) The council were not entitled to reject the consultative study in the light of the contents of the planning briefs.
The following cases are referred to in this report.
Abu Dhabi National Tanker Co v Product Star Shipping (The Product Star) (No 2) [1993] 1 Lloyd’s Rep 397, CA
Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84; [1981] 3 WLR 565; [1981] 3 All ER 577; [1982] 1 Lloyd’s Rep 27, CA
Andrews v Belfield (1857) 2 CB (NS) 779
Baker v Baker (1993) 25 HLR 408
Bocardo SA v S&M Hotels Ltd [1980] 1 WLR 17; [1979] 3 All ER 737; (1979) 39 P&CR 287; [1979] 2 EGLR 48; 252 EG 59, CA
Braunstein v Accidental Death Insurance Co (1861) 1 B&S 782
Brilliant v Michaels [1945] 1 All ER 121
Brown v Gould [1972] Ch 53; [1971] 3 WLR 334; [1971] 2 All ER 1505; (1971) 22 P&CR 871
Clerical Medical & General Life Assurance Society v Fanfare Properties Ltd unreported 2 June 1981
Cadogan (Earl of) v Guinness [1936] Ch 515; [1936] 2 All ER 29
Corson v Rhuddlan Borough Council (1990) 59 P&CR 185; [1990] 1 EGLR 255, CA
Crabb v Arun District Council [1976] Ch 179; [1975] 3 WLR 847; [1975] 3 All ER 865, CA
Cryer v Scott Brothers (Sunbury) Ltd (1988) 55 P&CR 183
Dodsworth v Dodsworth (1973) 228 EG 1115, CA
Habib Bank Ltd v Habib Bank AG Zurich [1981] 1 WLR 1265; [1981] 2 All ER 650, CA
Harvey v Pratt [1965] 1 WLR 1025; [1965] 2 All ER 786
Hillas & Co Ltd v Arcos Ltd [1932] All ER 494; [1932] 43 Lloyd’s Rep 359; (1932) 147 LT 503, HL
Jones v Stones [1999] 1 WLR 1739; (1999) 78 P&CR 293; [1999] 3 EGLR 81; [1999] 42 EG 135
Lambert v FW Woolworth & Co Ltd [1938] Ch 883; [1938] 2 All ER 664, CA
Mackay v Dick (1881) 6 App Cas 251
Marshall v Berridge (1881) 19 ChD 233
Mona Oil Equipment & Supply Co Ltd v Rhodesia Railways Ltd [1949] 2 All ER 1014
Price v Bouch (1987) 53 P&CR 257; [1986] 2 EGLR 179; (1986) 279 EG 1226, Ch
Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444; [1982] 3 WLR 315; [1982] 3 All ER 1; (1982) 44 P&CR 153; [1983] 1 EGLR 47; 265 EG 215, HL
Trustees of National Deposit Friendly Society v Beatties of London Ltd [1985] 2 EGLR 59; (1985) 275 EG 54
Walsh v Lonsdale (1882) 21 ChD 9
Wilmott v Barber (1880) 15 ChD 96
This was a hearing of a claim by the claimants, Liverpool City Council, and by the defendant, Walton Group plc, for the determination of various questions arising under an agreement between the parties
Kim Lewison QC and Jonathan Seitler (instructed by Berwin Leighton Paisner) appeared for the claimant; Derek Wood QC and Janet Bignell (instructed by SJ Berwin) represented the defendant.
Giving judgment, NEUBERGER J said:
Introduction
1. In these proceedings, Liverpool City Council (the council) and Walton Group plc (Walton) each seek the determination of certain issues concerning their respective rights and obligations under an Agreement of 16 September 1996 (the agreement). The agreement was entered into by the council and Walton following considerations of a report from Mr Colin Slater, at that time head of the council’s estates department, by the council’s policy and resources committee (the committee) on 10 July 1996.
2. The report of 10 July 1996 (the report) and the agreement were each concerned with a possible redevelopment of an area in Liverpool city centre known as Chavasse Park (the property). At the time of the report and of the agreement, the property was subject to an option granted by the council to a company called Rosemary Chavasse Ltd (RCL) dated 29 March 1996 (the option agreement). RCL’s proposed development (known as the Discovery Park project) was dependent upon a grant from the Millennium Commission, to which RCL had made an application.
3. At the time of the report and the agreement, the local planning authority for the area including the property was Merseyside Development Corporation (MDC). About three years ago, however, the council became the local planning authority.
Facts
Report
4. The “purpose” of the report was stated to be to enable the committee to consider the renewal of the option agreement “and also a proposal for an agreement with… Walton… in respect of an alternative development proposal should [RCL’s] Millennium Bid fail”.
5. The report then set out its recommendation, which included the grant of an extension to the option agreement, but acknowledged that the Millennium bid might fail. The recommendation then continued:
In considering the alternative retail scheme (should the Millennium Bid fail) members would wish, in addition, to noting its potential significance in view of the level of investment and impact upon Liverpool to be certain the scheme is capable of being delivered as envisaged and would need to first be satisfied on a range of important issues.
It is further recognised that in order to provide the detailed information that is required by the… council to enable members to be satisfied as to the benefits or otherwise of the scheme (including information regarding the end users) it will be necessary for the Walton Group to expend considerable monies (at risk) to which end they would require a commitment from the… Council to treat with them in the event that the Discovery Park Project cannot proceed.
6. The recommendation section of the report ended with the proposal that the committee authorise officers to enter into a “conditional agreement” with Walton in respect of the property:
To enable that company to progress the details of the proposal (at risk) pending the outcome of the Millennium… Bid, that agreement to be conditional upon the Bid not succeeding and upon the Committee being satisfied that the scheme is appropriate in all respects and additionally satisfied in respect of other conditions as set out in Appendix A.
Appendix A ran to nearly three pages of detailed terms, which I do not need to set out, as they were subsequently embodied in the agreement.
7. The report then set out certain “information”, which included a description of the proposed development of the property by RCL, which, if its Millennium bid succeeded, would have involved a Discovery Park, including a media factory.
8. The report then turned to “the Walton Group Proposal”, which it described in these terms:
The scheme would comprise a development of some 1.1m sq ft of retail space on two levels with 2,000 to 4,000 car parking spaces below. It is proposed to include 150,000 sq ft of leisure facilities incorporating a 12-screen cinema complex, a bowling facility and substantial theme restaurants. Access would [be] from South John Street and Paradise Street and from the Albert Dock via a bridge link.
9. The report went on to identify the precise extent of the property, and explained that the existing bus station would be retained, that space would be reserved for a new media factory, but that there would not be room for the Discovery Park project. The report went on:
Some public open space would be provided. Walton… estimates 6,100 new jobs will be created. The scheme represents one of the largest retail developments in the country which would have a dramatic effect on the commercial standing of the city and is not dependant on grant funding.
10. The report stated that:
The Head of Planning & Transportation has considered the proposal and concluded that it might be feasible… A development of quality could improve Liverpool’s overall product and potentially strengthen the upper end of the market where the City Centre has known weaknesses. Competition in this area is likely to increase… Chavasse Park represents a unique development opportunity for retail development…
The Head of Planning & Transportation has concerns about the impact the scheme will have on the existing shopping areas both in Liverpool and the surrounding areas as there will inevitably be some abstraction of trade.
11. The report also stated that:
The Walton Group proposals are for the potential to create a retail and leisure development of regional and national importance… This is probably the only location and opportunity for major growth of the City Centre now or in the foreseeable future in Liverpool.
12. The report ended by setting out an number of options, with the recommendation that the option period under the option agreement should be extended for the benefit of RCL, but that an agreement be entered into with Walton:
On such terms that should the Millennium Bid be lost the sale proceeds to the Walton Group –– if the Millennium Bid is won then the agreement with the Walton Group is void.
13. That recommendation was duly adopted by the committee and accepted by the council. Between July and September 1996, negotiations between the council and Walton and its representatives took place, resulting in the execution of the agreement.
Agreement
14. The agreement is dated 16 September 1996, and all references in this judgment to clauses are to clauses of the agreement. Clause 1 contains definitions. The expression “the scheme” is defined in clause 1.8 as:
[Walton’s] proposed development of the Property in accordance with the relevant parts of the Report…
Clause 2 provides that the agreement is subject to the option agreement, and that if the option therein contained is exercised, the agreement should be “null and void”.
15. Clause 3 provides that the conditions set out therein –– “the First Conditions Precedent” –– are to be satisfied within “the First Period”, namely 12 months from the date that Walton is notified of RCL’s failure to exercise, or decision not to exercise, the option. These conditions are:
3.2 the provision by [Walton] of written and documentary evidence of sufficient funding to enable [it] to carry out and complete the Scheme…
3.3 The provision by [Walton] of written and documentary evidence of committed end users equating to 30% of the total letting area of the Scheme…
3.4. The provision by [Walton] of an independent Consultative Study in accordance with Clause 5.4 which will be subject to the acceptance and approval of the council whose decision shall be final.
16. Clause 3.5.1 provides that if any of the first conditions precedent “are not completed or fulfilled to the satisfaction of the Council within the First Period”, then the council can determine the agreement by seven days’ notice (the termination notice). Clause 3.5.2 states that if all the conditions are fulfilled “to the satisfaction of the Council”, then the council must notify Walton:
And the Second Conditions Precedent must then be fulfilled to the satisfaction of the Council within the Second Period.
17. Clause 4 contains the “Second Conditions Precedent”, and states that they must be satisfied within “the Second Period” –– ie within 12 months of the date upon which the council notifies Walton that the first conditions precedent have been satisfied. Clauses 4.1 to 4.11 set out the second conditions precedent, and they include:
4.1 The receipt by [Walton] of [detailed] planning permission [consents and approvals] to enable it to carry out and complete the Scheme.
…
4.6 The written approval by the Council as landowner of detailed plans drawings and specifications of the Scheme.
4.8 The result of an environmental survey be carried out by [Walton] being satisfactory to [Walton] to allow the Scheme to proceed…
4.9 The grant of [detailed] planning permission [consents and approvals] and any other appropriate Approvals being acceptable to the satisfaction of [Walton’s] funders…
18. Clause 4.12 provides for the council or Walton to serve on the other a termination notice if any of the second conditions precedent are not fulfilled “to the satisfaction of the Council within the Second Period”. Clause 4.13 provides:
If all of the Second Conditions Precedent are fulfilled… to the satisfaction of the Council and the Council will notify [Walton] that the Second Conditions Precedent have been fulfilled… (the Decision Notice) and the Council will grant and [Walton] will take the Lease and the Lease shall be completed within six weeks of the date of the Decision Notice…
19. The agreement provides for Walton to pay a deposit of £800,000, but clause 5.1 states that £25,000 is to be paid on the execution of the agreement, and the balance of £775,000 is to be paid when the council notify Walton that the first conditions precedent have been satisfied under clause 3.5.2. Clause 5.2 provides that, within six months of that notification, Walton must submit an application to the local planning authority for detailed planning permission for the scheme, and must thereafter use its best endeavours to obtain such permission, and must keep the council advised of the progress of the application.
20. Clause 5.3 imposes an obligation upon Walton:
To consult with the Council’s Head of Planning and Transportation and Head of Estates and such other appropriate Officers of the Council and [MDC] with a view to achieving a development which having regard to end user needs and commercial viability is considered appropriate and acceptable to the Council in terms of scale content form open space design and capability of satisfactory integration into the existing shopping centre within Liverpool City Centre
It will be recalled that MDC were the local planning authority at the time of the agreement.
21. Clause 5.4 of the agreement requires Walton:
To procure and bear the cost of such procurement of the Consultative Study to identify and consider such matters as [are] referred to in this clause.
Clause 5.4.1 obliges Walton to consult with the council’s head of planning and transportation and head of estates “to establish the Brief for the purpose of the Consultative Study”. Under clause 5.4.2, Walton is to notify the council “of the identity of the firm of consultants”, which is itself to provide information required by the council to support its use, and there is provision whereby the council can express dissatisfaction with the proposed consultants, whereupon Walton must put forward “further consultants to be approved by the council”, and there is provision that no consultant should be instructed until Walton “has received the written approval of the council”.
22. It is also necessary to refer to clause 5.4.3, which is in these terms:
Following agreement between the parties with regard to the Brief and the consultants… [Walton] shall procure and shall bear the cost of such procurement of the Consultative Study in accordance with the Brief and the Brief and the Consultative Study shall identify and consider such matters as:
5.4.3.1 The current provision of retail floor space in Liverpool City Centre…
5.4.3.2 The impacts of the Scheme on the existing retail provision within the City Centre.
5.4.3.3 The identification of demand and extent of appropriate leisure uses and the potential for creating a mixed development… the numbers such uses may attract and the impact on existing City Centre leisure facilities.
5.4.3.4 The best means of incorporating and integrating the Scheme within the existing and immediately adjoining retail provision in the City Centre generally.
5.4.3.5 The effect of the Scheme on the adjoining and surrounding highway network and the need extent and cost of any highway improvements.
5.4.3.6 The current provision of car parking in the City Centre and the requirement for additional spaces to serve the proposed development…
5.4.3.7 The employment potential resulting in the Scheme… and the potential effect on employment in competing retail and leisure areas.
23. The final provision of the agreement that I must mention is clause 5.4.4:
[Walton] shall provide the Council with a copy… of the Consultative Study and the Council shall advise [Walton] in writing whether it requires further information details or research or whether the Consultative Study is approved by the Council. If the Council does not approve the Consultative Study then it shall have the right to determine this Agreement upon seven days written notice to the Company… For the purposes of this clause the Council’s decision shall be final and binding and will not be a matter for negotiation and the Council shall not be liable for any costs claims or expenses which the Company has or will incur.
Draft lease
24. The draft lease referred to in clause 4.13 is annexed to the agreement. It is to be between the council as “the lessor” and Walton as “the lessee”. It opens with these words:
THIS LEASE made the… day of…199…
Clause 1 provides that the consideration for the grant of the lease is £15m, and the parcels clause refers to “ALL THAT land described in the first schedule (the premises)”. The habendum is in these terms:
TO HOLD the premises to the Lessee during the term of 999 years from and including the…day of…199… (the Term).
25. No rent is reserved by the draft lease. Clause 2 contains the lessee’s covenants. They include the following:
(i) To pay all rates and other sums “which are now or during the Term shall be assessed… upon the Premises”.
…
(iv) Within 3 months of the date of this Lease to commence and hereafter carry out and complete the redevelopment… of the Premises in accordance with plans and specification previously approved…
…
(xxv) To pay on the date of this Lease the Lessor’s legal and surveyor’s costs of £1m in total.
26. On the penultimate page, the precise identification of the property demised, as set out in the first schedule, is left to be filled in. The final page of the draft lease provides for the common seal of the council to be affixed in the presence of the head of legal services.
Subsequent events: general
27. Apart from considering some of the correspondence relating to the establishing of the brief for the consultative study pursuant to clause 5.4, it is unnecessary to describe the events subsequent to the agreement in much detail. The council continued to allow time to RCL to seek funding from the Millennium Commission, and therefore extended the option agreement from time to time. Meanwhile, in June 1998, the council retained surveyor Healey & Baker, to produce a report on the retail strategy for Liverpool city centre. In February 1999, Healey & Baker produced the Liverpool City Centre: Retail Strategy: Executive Summary Report, which recommended that the council should develop an area of land immediately adjacent to the property, known as the Paradise Street/Blue Coat Triangle Area (the PSDA) for a major retail scheme. On 2 March 1999, the council resolved to adopt a strategy of progressing the redevelopment of the PSDA for about 1.1 million sq ft of retail development (the PSDA development). On 30 April 1999, the council issued a consultation draft based upon this
28. In June 1999 the council issued proceedings against Walton in the High Court, seeking declarations that would enable them to continue extending the option agreement. On 3 September 1999, the Court of Appeal (reversing me on this point) held that RCL’s option had lapsed, and that, accordingly, the agreement had effectively become unconditional. As a result, on 1 December 1999, the council gave notice to Walton under clause 3.1 of the agreement, thereby starting time running for the performance of the first conditions precedent. Meanwhile, in August 1999, the council sought a development partner, with a view to processing the proposed PSDA development. Thereafter, in October and November 1999, the council had issued an outline development brief for the PSDA development. The council also issued a planning framework for the PSDA (the PSDA framework), which stated that the council would “resist” major retail proposals outside the PSDA. On 20 March 2000, the council selected, and published the name of, its preferred development partner for the PSDA.
29. In these circumstances, Walton is worried that the council are anxious to do all that they properly can to prevent the implementation of the scheme as defined in the report. Walton believe that it is commercially obvious that there cannot be two developments of around 1 million sq ft of retail space on two neighbouring sites –– the property and the PSDA –– and also that the council have made it clear, in the documents to which I have referred, that they would resist any significant retail development in Liverpool city centre other than on the PSDA.
30. These proceedings are not concerned with whether or not the council have been, are or may be in breach of their obligations under the agreement because of their friendly attitude towards the PSDA development and their concomitant hostile attitude to the scheme. It is fair to say that, on the bare facts as recited above, and in light of the correspondence that I have seen, I can well understand Walton’s concern that the council may not be honouring the spirit of the agreement, and may even be in breach, or close to being in breach, of their contractual obligations. Equally, it is fair to the council to say that they are in a potentially uncomfortable position, in that they obviously have contractual duties under the agreement, but they also have a public and statutory right, indeed duty, in part, but not exclusively, in their capacity as the local planning authority, to encourage developments that they believe to be in the best interests of Liverpool, and to discourage developments that they believe not to be in the interests of Liverpool.
31. On more than one occasion, Walton has asked the council for an explanation as to how their preference for the PSDA development can be reconciled with Walton’s contractual rights and the council’s contractual obligations under the agreement, and it has not received any detailed answer. On the other hand, it is also right to say that the council have more than once stated that they intend to abide by what they understand to be their contractual obligations under the agreement. For present purposes, all I need –– and can properly –– say is that Walton believes, with some apparent justification, that the council regret ever having entered into the agreement, and may well seek to do all that they properly can to put an end to the agreement.
Progressing of the agreement
32. By December 1999, the council had indicated that they would provide the first draft of the brief to the consultants to be agreed pursuant to clause 5.4.1. On 8 December 1999, Walton’s solicitor wrote to the council’s solicitor expressing concern that the council intended to include in the brief their “current planning policy”, and stating that:
The council is not entitled to include within the terms of the Brief provisions which will impede or obstruct the attainment of the very purpose for which the contract was entered into.
33. The council’s solicitor replied on 20 December 1999 to the effect that “the Agreement is subject to [the council’s] planning policy and… such planning policy has changed since the agreement was entered into”. On 23 December 1999, Walton’s solicitor replied, indicating that this was a matter to be considered if and when planning permission was sought for the scheme, and making it clear that it was not, in its view, a matter to be included in the brief.
34. The brief, as prepared by the council and sent to Walton on 19 January 2000, said that the consultants “must fully address those matters referred to in paragraphs 5.4.3.1/5.4.3.7 of the Option Agreement”. It contained a number of pages and annexes relating to planning policy, including a brief description of the PSDA framework, a copy of which was annexed to the brief. It stated that the contents of the PSDA framework “must be fully addressed in any submission”. On 7 February, Walton’s solicitor wrote complaining about the reference and inclusion of the framework to the brief, stating that Walton was “given little opportunity to consult with [the council] on the contents of the revised Brief but were effectively presented with a fait accompli”, and requesting further discussions. There then followed correspondence in which the parties’ respective solicitors debated the extent to which Walton had had an opportunity to comment on the terms of the brief, following which a detailed letter was sent to the chief executive of the council by Walton’s surveyor, Mr Charles Hubbard, of Edmund Kirby. He complained about the inclusion in the brief of “a requirement… that in compiling the Consultative Study, Walton’s consultants must fully address the planning framework for the PSDA which was annexed to the Brief”, and specifically about the reference to the passage in that framework where the council had stated that they would “resist major retail proposals outside the PSDA”. He contended that the inclusion of the PSDA framework as part of the brief represented a breach of the agreement by the council.
35. Eventually, the brief, containing the provisions to which Walton objected, was finalised and sent to the consultant, which, in due course, prepared a detailed consultative study, which is a very substantial document. I am told that Walton has spent in the region of £1m since the agreement became unconditional, and the majority of this sum, as I understand it, was spent on the study. Meanwhile, Walton has applied for planning permission for the scheme, and a planning application has also been made for the PSDA development. Although both applications were submitted to the council as the local planning authority, the council so far have not determined them, and Walton has appealed to the Secretary of State, and, accordingly, a public inquiry may be held.
Issues
36. There are two conceptually discrete groups of issues between the parties. The first arises from the fact that, in early 2001, a point that had not so far apparently occurred to either party was raised by the council. That point is that the agreement for lease contained in clause 4.13 is allegedly void for uncertainty on the ground that the draft lease contains no commencement date. That point raises two issues. First, whether, as a matter of construction, the agreement for lease contained in clause 4.13 is invalid. Second, if it is invalid, whether the council are effectively estopped from taking the point.
37. The other set of issues concerns the existence and extent of any implied obligations upon the council under the agreement. Both the council and Walton wish to know whether there is implied into clause 3.4 a term that the council’s “acceptance and approval” of the consultative study (the study) cannot be unreasonably withheld. Walton wishes to raise a number of other construction issues, largely because it wants to identify in advance, as far as possible, the precise extent of the council’s obligations under the agreement, because it is concerned about the council’s apparent hostility to the scheme. In principle, the council do not oppose the determination of these issues.
38. The first issue Walton wishes to raise is whether there is an implied obligation on the part of the council to co-operate with Walton in implementing the agreement, and not to do anything that would impede or frustrate that implementation. Second, Walton asks for a declaration that the council are not entitled to refuse their acceptance and approval of the study on the ground that they would prefer a development of the property other than the scheme and/or they would prefer the property to be developed by someone other than Walton. Third, Walton seeks a declaration that, when considering whether or not to approve and accept
39. The two latter declarations that Walton seeks turn on the construction of the agreement, and, in particular, clauses 3.4 and 5.4. However, before considering the effect of those clauses in connection with the latter two declarations sought by Walton, it seems to me appropriate to consider clause 5.3 and its interrelationship with clause 5.4. This is because the council contend that the purpose of the study is in part governed by clause 5.3, and also that clause 5.3 effectively entitles the council to put an end to the agreement if Walton cannot prepare a detailed version of the scheme that the council consider to be “appropriate and acceptable” in respect of the specific aspects described in the clause.
40. Further, the council contend that even if Walton would otherwise be entitled to the two last declarations it seeks, on the basis of the proper construction of the agreement, Walton is not, in the events that have happened, entitled to those declarations because of the contents of the brief.
41. In these circumstances, the remainder of this judgment deals with the following issues:
1. Whether the agreement for lease in clause 4.13 is void in law;
2. Walton’s estoppel argument if clause 4.13 is void;
3. The implied duty to co-operate;
4. Whether the council must be reasonable under clause 3.4;
5. Clause 5.3 and its interrelationship with clause 5.4;
6. As a matter of construction, whether the council can reject the study because they prefer a different scheme;
7. The effect of the reference to the framework and planning considerations in the brief;
8. Conclusions.
Is clause 4.13 of the agreement void?
Main point
42. The first question I propose to consider is whether, as the council contend, clause 4.13 of the agreement is void or unenforceable, on the ground that it does not constitute a valid contract for the grant of a lease. The basis for this contention is that the draft lease attached to the agreement contains no express start date. It identifies the proposed “term” as being “999 years from and including the…. day of… of 199… (the Term)”. The principle upon which the council’s case relies was stated by Lush LJ in Marshall v Berridge (1881) 19 ChD 233 at p245, in a passage cited and applied by the Court of Appeal in Harvey v Pratt [1965] 1 WLR 1025 at pp1026 and 1027:
There must be a certain beginning and a certain ending, otherwise it is not a perfect lease, and a contract for a lease must… contain those elements.
43. As was said by Lord Denning MR in Harvey at p1026D:
It has been settled law for all my time that, in order to have a valid agreement for a lease, it is essential that it should appear, either in express terms or by reference to some writing which would make it certain, or by reasonable inference from the language used, on what day the term is to commence.
That statement was itself expressed in very similar words to what Lush LJ said in Marshall at pp244-245.
44. Mr Derek Wood QC, who appears with Miss Janet Bignell for Walton, accepts that, in light of the way in which the habendum in the draft lease is phrased, this is not a case where it can be said that the commencement date of the lease “appear[s]… in express terms”. However, Walton’s contention is that, in view of other provisions of the draft lease, the terms of the agreement, the surrounding circumstances, and commercial sense, this is a case where one can, indeed should, conclude that the parties intended that the term, that is the 999 years to be granted by the lease, should begin on the date that the lease is actually executed.
45. I accept, and indeed I do not understand Mr Kim Lewison QC, who appears with Mr Jonathan Seitler for the council, to challenge, the proposition that if the other terms of the draft lease, the agreement and the surrounding circumstances enable one to conclude what the parties intended to be the start date of the lease, then that is really the end of this point. In this connection, it is germane to note how Lush LJ started his judgment in Marshall at p244:
I also am of the opinion that the agreement sought to be enforced is essentially defective on the ground… that it does not define nor can it be collected from it with reasonable certainty from what period the term is to commence.
46. The question that therefore falls to be determined is whether, after considering all those matters that can properly be taken into account when construing the agreement and the draft lease, one can, with “reasonable certainty”, be satisfied as to the date upon which the parties intended the lease to start. Before turning to that issue it is right to make one or two preliminary points.
47. First, on the basis of common sense, principle, and authority, an agreement for a lease can be valid even though the start date is defined by reference to a future event, which may not occur, and, if it does occur, the day upon which it will occur is uncertain: see per Evershed J in Brilliant v Michaels [1945] 1 All ER 121 at p125. In this case, the lease will be granted only if the two sets of conditions set out in clauses 3 and 4 of the agreement are satisfied, and, if they are, the council must serve a notice under clause 4.13, whereupon there is a six-week window within which the lease is to be completed.
48. The second point is that both Marshall, at p233, and Harvey, at p1025, were cases involving relatively simple (albeit invalid) agreements for lease. Neither of them involved a complex detailed contract, such as the agreemen. Neither of the contracts in those cases involved either party in substantial effort and expenditure in advance of the grant of the proposed lease. Both cases involved a very short and simple agreement running only to a few lines.
49. Third, there are a number of authorities that suggest, perhaps not altogether surprisingly, that when faced with the contention that a document that was executed by two parties, who clearly intended it to have commercial effect, is, in fact, void or unenforceable on the grounds of uncertainty or some similar principle, the court will lean in favour of upholding the document, provided, of course, it can properly do so. In Brown v Gould [1972] Ch 53 at pp56G-57, Megarry J quoted from an earlier unreported case of his own, where he had said:
I think the starting point on any question of uncertainty must be that of the court’s reluctance to hold an instrument void for certainty.
He went on to expand on that proposition by reference to authority and examples.
50. In Trustees of National Deposit Friendly Society v Beatties of London Ltd [1985] 2 EGLR 59 at p59G, Goulding J had to consider, albeit on very different facts, arguments not dissimilar from those raised by the council at the present time. He quoted the observation of Megarry J and then said:
That is a very broad principle, that the court leans against uncertainty, but, of course, a document may be so obscure and vague that the court cannot save it.
51. A little later, he said this at p61B:
It may be a matter of degree how far the court is to strive to avoid uncertainty, having regard to the extent to which an agreement has already been executed on one side or the other. I take the view that there has here been such performance on the tenant’s side as to justify the court a much more liberal approach to the validity of the document than in the case of a purely executory option where nothing but perhaps a nominal consideration had been given on either side.
52. At any rate, as a matter of strict principle, there are difficulties with that approach, however much it accords with commercial common sense and broad justice. It seems to me that, on analysis, it can be said to conflate two very different concepts, namely construction and estoppel. As a matter of construction, it is well established that a contract cannot change its meaning because of subsequent events, even if those events involve the conduct of the parties. Accordingly, if, as a
53. None the less, it is fair to say that there is higher authority to support the approach of Goulding J. In Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444* at p484F, Lord Fraser of Tullybelton expressly adopted a view expressed by Templeman LJ at p460C, to the following effect:
Where an agreement which would otherwise be enforceable for want of certainty or finality in an essential stipulation has been partly performed so that the intervention of the court is necessary in aid of a grant that has already taken effect, the court will strain to the utmost to supply the want of certainty even to the extent of providing a substitute machinery.
* Editor’s note: Also reported at [1983] 1 EGLR 47; (1982) 265 EG 215
Of course, that observation does not strictly apply to the present case: there is no “grant that has already taken effect” and there is no “machinery” for which the court is invited to provide a substitute. However, the notion that the court will strive particularly hard to hold valid a contract when it has been partially performed appears to derive some support from that observation.
54. In Corson v Rhuddlan Borough Council [1990] 1 EGLR 255, the Court of Appeal held valid an option to renew a lease at a rent to be agreed, but not to exceed £1,150 pa, in circumstances where the tenant was prepared to pay that sum. Ralph Gibson LJ, at p258A, cited the speech of Lord Thankerton in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at p511, where he said that both conveyances and commercial contracts:
fall to be construed by the same legal principles, and the problem for a court of construction must always be so to balance matters, that without violation of essential principle the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains.
55. Mr Wood argues that Walton has a particularly strong case for saying that the court should lean in favour of “saving” the agreement. This is a case of a lease to be granted pursuant to a detailed agreement that clearly was going to involve the prospective tenant in substantial expenditure that could be justified only if he had an enforceable, if conditional, agreement for a lease. Further, the point is one of exceptional technicality. That is because the lease is to be for a term of 999 years at no rent whatsoever, that is, as close as one could get to a freehold while remaining, as a matter of law, a leasehold. If the agreement had been for the sale of the land, rather than what is as close thereto as one could get, it would not have been open to the council to raise the present point: as Lord Denning MR accepted in Harvey at p1026, “on a sale of land there is an implied term that completion should be within a reasonable time”. However, even taken together, it seems to me that the facts of this case do not enable Walton to contend that the principle embodied in Marshall and in Harvey does not apply here; indeed, Mr Wood did not so argue. He does contend that the facts of the present case are such that if the second of the two observations I have quoted from Goulding J is correct, the court should lean as far as it possibly can to construe the agreement so as to hold it valid and enforceable.
56. With that rather lengthy preface, I turn to consider the central point raised by this issue, namely whether Walton is correct in contending that one can, with reasonable certainty, conclude, after taking into account all admissible material, that, as a matter of construction, the term, as defined in the draft lease, is to begin on the date upon which that lease is executed. In my judgment, even without leaning much in favour of holding the agreement for a lease valid rather than void, Walton’s argument is correct. In other words, I have reached the view “with reasonable certainty” that the term is to commence from the date of execution.
57. When reading the draft lease together with the agreement, and in particular with clause 4.13, it is pretty clear that the parties would have envisaged that the 999 years would start when the lease was executed. Under the agreement, Walton was to carry out a lot of work at substantial expense, and with a real risk that it would be all wasted, in return for which it was to be granted a very long, 999-year lease at no rent. The parties had set out a substantial number of hurdles that Walton had to cross, and if and when the council were satisfied that they had been crossed, the council had to serve a notice, whereupon the parties had six weeks within which to execute the projected lease, in return for which Walton was to pay a very substantial sum, and from which date, on any view, Walton’s obligation as lessee would arise.
58. It cannot be, and has not been, suggested that the parties could have intended that the term would start any later than the date of execution of the lease; indeed, provisions such as clauses 2(1) and 2(iv) would not make sense if it were otherwise, and any such suggestion would not accord, in any event, with commercial common sense. The only candidates that could properly be put forward as alternatives for the date upon which the term is to commence are the date of execution of the leases and the date upon which the decision notice is served (ie the date from which the six weeks for the execution of the lease commence). Looking at the matter from the perspective of persons of reasonable intelligence and commercial common sense, rather than from the perspective of property or equity lawyers, it appears to me that the earlier date, namely the date of the decision notice, would probably not even have occurred to them as the possible start date, and, if it had done, they would have dismissed it pretty promptly.
59. To a property or equity lawyer, there is some superficial attraction in the commencement of the term being the date upon which the council serves its “Decision Notice” under clause 4.13 of the agreement. After all, that is the date upon which the agreement for lease will be specifically enforceable, and upon which, under the rather quaint, if well established, doctrine in Walsh v Lonsdale (1882) 21 ChD 9, the parties could enter into the relationship of landlord and tenant, at least in equity. However, it is significant that the obligation to pay all outgoings under clause 2(i), and the three-month window accorded to Walton before it was obliged to start building in clause 2(iv), each run from the date of execution, and not from the date upon which the parties became contractually bound. Both provisions appear to me to indicate that the parties did not intend Walton to have the rights of a tenant from the date of the decision notice, and that they envisaged Walton’s obligations to start from the date upon which Walton became a legal tenant, ie from the date of the execution of the lease. Accordingly, even if the technical and somewhat artificial, albeit well-established, view of equity as to the position between contract and completion should be treated as having been in the minds of the parties, it appears to me that clause 2(i) and clause 2(iv) of the draft lease indicate that they intended the term to run from the date of execution. If that were so, there would have been no tenancy in equity, because the term would not have begun, even in equity, until execution.
60. There are some small drafting points that support this conclusion. First, the words used in the draft for the definition of “the Term”, namely “the… Day of… 199…” are identical to the words used at the very beginning of the document, namely “THIS LEASE made the… Day of… 199…”. In the absence of any indication to the contrary, it is well established, consistently with common sense, that where parties have used the same expression in a document, there is a presumption (albeit, obviously, a rebuttable presumption) that they have used the same expression to mean the same thing. In the context of a draft document, particularly where it is a date that the parties have left to be filled in, this is, of course, a small point, but none the less a point.
61. Second, the habendum is expressed in slightly unusual terms. Rather than the term being “for the term of 999 years…”, it is stipulated that it is to be “during the term of 999 years…”. To an ordinary and commercially minded speaker of English, the grant of a right or other interest that is expressed to enure “during 999 years” would carry with it the notion that it is to be enjoyed for a total of 999 years, no more and no less. Of course, it is very well established as a matter of law, and very well known to those familiar with drafting and interpreting leases, that the term in the habendum can be granted from any date, and, indeed, that it is not by any means uncommon to backdate the day from which the term is expressed to commence, even though, as a matter of law, the grant takes effect only from the date upon which the lease is executed: see, for instance, the discussion in Earl of Cadogan v Guinness [1936] Ch 515. I accept, therefore, that a lawyer involved in drafting or interpreting leases would have no difficulty with the notion of “the term” in the case of the present draft lease commencing on a date earlier than the execution of the lease, even in light of the word “during”. However, in my judgment, I am more concerned with the understanding of sensible commercial people in the position of the council and Walton when they entered in the agreement, and not with that of landlord and tenant lawyers.
62. Third, and to some extent connected with the second point, there is clause 2(i) of the draft lease, under which Walton is to covenant with the council to indemnify them in respect of all liabilities “which are now or during the Term shall be assessed charged or imposed”. It seems to me that that expression carries with it the notion that “during” means “throughout”, which, to a normal speaker of English, would suggest that there is a liability in respect of the whole period of 999 years for which the term is expressed to run. As a matter of law, that could be achieved only if the lease ran for 999 years, not for a shorter period (which would be the effect of the term being backdated to an earlier date than the date of its execution).
63. Fourth, there is clause 2(iii)(a), under which Walton is to “insure the Premises at all times during the Term”. Again, it can be said that a landlord and tenant lawyer would readily appreciate that that obligation could not apply until the date the lease was actually executed, and therefore it carried with it no obligation to insure in respect of an earlier date, even if the term started from an earlier date. However, if the term started earlier than the date of execution, then, particularly in light of the coupling of the words “at all times” with the words “during the term”, an ordinary speaker of English might be in some difficulty with the idea that the covenant did not carry with it an obligation to insure from the date upon which the term was expressed to start.
64. Mr Lewison points out that not only would it have been easy for the parties to have inserted “the date of this Lease” or similar expression, if that is what they had meant, rather than “… day of… 199…”, but also that they actually used the expression “the date of this Lease” in clause 2(iv), which contains the obligation on Walton to carry out the proposed redevelopment. I accept that, just as there is a presumption that the same expression in a document means the same thing, so there is a presumption, albeit I think rather a weaker presumption, that where the parties have used different expressions they mean different things. However, in this case that argument is weakened by two factors. First, clause 4(iv), unlike the first two lines and the habendum, is not on the first page. The draftsman may well have thought that, while the parties would fill in gaps on the first page (with dates) and the last two pages (with the description of the property and the seals and signatures), they may well not have bothered to look at the intervening pages when the lease came to be executed. In this connection, I note that there were a couple of gaps, in addition to the date itself, on the first page of the agreement, which were apparently written in handwriting on the date the agreement was executed, but there were no other gaps in the agreement, with the exception of the signatures on the last page. Further, in clause 2(i) the parties have used the word “now”, which, as I see it, means the same thing as “the date of this Lease” in clause 2(iv). Similarly, in the attestation clause, the parties have agreed that they should be recorded as having executed the lease “the day and year first before written”, another way of saying the same thing. Where the parties have used more than one expression to mean the same thing, there is not much force in the argument that one should not ascribe to them an intention that yet another expression has the same meaning.
65. Finally, as I have already indicated, the facts in the two cases relied upon by the council, Marshall and Harvey, were very different from those in the present case. While it cannot be suggested that the principle described and applied in those cases does not apply to every agreement for lease, one must be careful of applying the principle blindly. In those cases, as here, no commencement date was specifically expressed. However, in those cases there was no provision indicating when the parties intended the lease to be granted, let alone the relatively complex commercial machinery that is present here. In my judgment, accepting the council’s case on the present facts would involve “the law… incur[ring] the reproach of being the destroyer of bargains”.
Subsidiary point
66. If I am wrong, and there is, therefore, an uncertainty as to the date of commencement of the term, the choice would, as I have said, seem to be only between the date of execution and the date of the decision notice. Upon that basis, there is obvious force in the council’s argument that there is an uncertainty that invalidates the agreement for lease. However, even then, I would have concluded that the uncertainty was not one that invalidated the agreement for lease, albeit that that is a conclusion that I would have reached with diffidence. On this assumption, the uncertainty as to the start date of the lease would be limited to a period of a maximum of six weeks, which, in the context of a 999-year term, could be said to be virtually de minimis. None the less, the mere fact that it is such a tiny uncertainty, particularly in relative terms, is not, I think, sufficient of itself to dispose of the point. The fact remains that, unlike with a freehold, the beginning and the end of the term is an inherent feature of a leasehold interest. In my judgment, if the correct analysis is that it is uncertain whether the term starts on the service of the decision notice or the date of execution of the lease itself, then Walton can effectively resolve the uncertainty by electing for the earlier date, which, albeit in a de minimis sense, is the less favourable start date to Walton and the more favourable start date to the council, because it means that the lease, which is at no rent, will expire a little earlier.
67. This view must be assessed in light of the reasoning of the Court of Appeal in Corson. In that case, it was argued that any uncertainly in the requirement that the rent under the new lease was to be agreed was effectively resolved by the provision that the rent was to be no more than £1,250 pa, and by the tenant accepting that this was to be the rent under the new lease. The point can probably be best appreciated by reference to the judgment of Balcombe LJ, who, in the first paragraph of his judgment, said he was initially attracted to the argument that, as the provision in that case provided for a maximum annual rent of £1,150 and the tenant was prepared to pay this, the uncertainty problem was solved, but, in the end, he did not accept that argument. However, as I see it, the basis of his rejection was that the argument or construction “depends in part on hindsight, that in 1967 [when the original lease containing the option for a new lease was granted] it could not be predicated that the rent would necessarily be more than £1,150 pa.” That appears to have been the only ground for his rejection of the argument, and it does not seem to me that a similar point applies in the present case, in that the problem that arises, on this alternative view of the effect of the agreement and draft lease, namely that it is unclear whether the term is to start on the date of the decision notice or the date of execution, was apparent from the moment that the parties executed the agreement. The nature of the problem will remain the same up to the date upon which the lease falls to be executed, and the surrounding circumstances will not affect the nature of the problem, or, therefore, the solution to the problem.
68. It appears to me that, in those circumstances, one must ask how reasonable persons, in the position of the parties in this case when they executed the agreement, would have reacted to a question from the officious bystander (in accordance with the approach adopted towards the end of the judgment by Staughton LJ in Corson). The problem with
Conclusion
69. Accordingly, I conclude that, as a matter of construction, and in accordance with the principles laid down in the cases, the lease, if and when granted, will be for a term of 999 years from the date upon which it is granted. If that is wrong, then, albeit with some hesitation, I would be of the view that the term would be 999 years from the date upon which the council serve their decision notice.
Estoppel argument if clause 4.13 is void
Is there an equity?
70. If, despite my conclusion to the contrary, the agreement for lease contained in clause 4.13 is void for the reason advanced by the council, then Walton contends that, in the events that have happened, it would none the less be entitled to require the council to grant it a 999-year lease of the property in the event of the council being obliged to serve a decision notice under clause 4.13. Walton’s case in this connection is based upon proprietary estoppel.
71. The approach of the courts to the application of the doctrine of proprietary estoppel demonstrates the tension that inevitably exists between the desire to achieve a just result in a particular case and the search for principle. The latter, stricter, approach is to be found in the five requirements identified by Fry J in Willmott v Barber (1880) 15 ChD 96 at p105:
In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief. Thirdly, the defendant… must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know if he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with the knowledge of your legal rights. Fourthly, the defendant… must know of the plaintiff’s mistaken belief in his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly,… the defendant… must have encouraged the plaintiff in his expenditure of money or in the other acts…
72. The instinct for justice is perhaps best exemplified in the approach of Scarman LJ in Crabb v Arun District Council [1976] Ch 179 at pp192H-193A, where he said:
[T]he court, having analysed and assessed the conduct and the relationship of the parties, has to answer three questions. First, is there an equity established? Secondly, what is the extent of the equity, if one is established? And, thirdly, what is the relief appropriate to satisfy the equity?
73. It appears to me that, at least in this field, justice has tended to prevail over principle, not only because some of Fry J’s tests are plainly too narrowly expressed but also because the courts have tended to take a more flexible approach. Thus, it is clear that a proprietary estoppel can arise as a species of estoppel by convention: in other words, contrary to what Fry J suggested, an estoppel can arise even though both parties are proceeding under the same misapprehension: see, for instance, Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at p121 per Lord Denning MR in rather wide terms, and at pp126 and 130-131 per Everleigh and Brandon LJJ, rather more narrowly. The flexible approach may be seen in Habib Bank Ltd v Habib Bank AG Zurich [1981] 1 WLR 1265, in which Oliver LJ said at p1285B:
I believe that the law as it has developed over the past 20 years has now evolved a far broader approach to the problem… It is an approach exemplified in cases such as… Crabb… [1976] Ch 179.
Oliver LJ then quoted with approval an earlier judgment he had given at first instance to the following effect:
[T]he more recent cases indicate… that… proprietary estoppel… requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour.
74. None the less, the stricter approach of Fry J should not, I believe, be treated as thrown over altogether. If the court at least takes the five requirements (as modified by subsequent cases) into account, it will at least ensure a degree of rigour and consistency in its approach to claims based upon proprietary estoppel.
75. With that guidance in mind, I have little hesitation in concluding that if clause 4.13 of the agreement is void as a matter of strict law, equity has arisen in favour of Walton. From the date the agreement was executed, 16 September 1996, until 5 February 2001, when the council first put Walton on notice that clause 4.13 of the agreement might be unenforceable, Walton proceeded to expend substantial sums of money on the basis that all aspects of the agreement were enforceable, and, in particular, that clause 4.13 was enforceable. Walton incurred time, effort and money in prosecuting the proceedings during 1999 in connection with the agreement, and, following receipt of notice that the option agreement was not to proceed, it has incurred further substantial expense, time and effort in seeking to comply with the first conditions precedent and taking other steps.
76. In proceeding in this way, Walton was clearly acting in the reasonable belief that all aspects of the agreement were enforceable. It does not lie in the council’s mouth to argue otherwise, not least bearing in mind that the possible invalidity of clause 4.13 only occurred to their advisors in 2001, or so it would appear. Further, the council cannot have been in any doubt but that Walton proceeded with the earlier litigation, and set out to try and satisfy the first conditions precedent, in the belief and expectation that clause 4.13 of the agreement was enforceable. It would be absurd to think that Walton would have engaged in this expensive and time-consuming exercise if it had no enforceable agreement to obtain a lease.
77. I should mention that the council rely upon an observation of Aldous LJ in Jones v Stones [1999] 1 WLR 1739* at p1746, where he said, on the facts of that case:
[N]one of the essential elements needed to establish a defence of acquiescence was made out. Delay was not sufficient.
* Editor’s note: Also reported at [1999] 3 EGLR 81; [1999] 42 EG 135
I do not consider that that observation helps the council in the present case. The short last sentence merely emphasises that, on its own, delay will not give rise to a claim in acquiescence (or, at least perhaps in the absence of special circumstances, in estoppel). It is true that the council could, at least in one sense of the word, be said to have “delayed” in raising the contention that clause 4.13 was unenforceable. However, Walton’s estoppel argument is not based upon delay alone by any means.
How is the equity to be satisfied?
78. The second question raised by Walton’s estoppel argument is: given that the equity exists, how is it to be satisfied? On the face of it, there is plainly force and attraction in Mr Wood’s contention that, given that the estoppel is based upon the fact that Walton (and, indeed, the council) has been proceeding for a substantial time and (at least in Walton’s case) had expended considerable time, effort and money in the belief
79. However, estoppel is a flexible doctrine, and it must be right that, even if there is a claim based upon proprietary estoppel, the court is not forced to give effect to the equity that has arisen as a result of mistaken belief by converting the mistaken belief into actuality. In an appropriate case, a different remedy, such as the payment of money, may be appropriate. Furthermore, as Scarman LJ said in Crabb at p198G-H: “The court should, as it were, accord the minimum equity to do justice to the plaintiff.”
80. Having said that, it seems to me that the cases where this principle has been successfully relied upon by the person against whom the equity has been invoked involved claims for property or proprietary rights that, on analysis, amounted to something greater than the claimant would have got if his belief had been justified. Thus, in Dodsworth v Dodsworth (1973) 228 EG 1115, Russell LJ, giving the judgment of the Court of Appeal, said:
we do not think that it can be right to satisfy such an equity by conferring upon the defendants a greater interest in the property than was envisaged by the parties.
81. The Court of Appeal cited that observation and adopted the same approach in Baker v Baker (1993) 25 HLR 408, where Dillon LJ also said, at p412:
[I]n deciding how such an equity should be satisfied so as to do justice to the plaintiff the court must take into account the circumstances of the defendant, so as not to produce an order which would be oppressive to the defendant.
82. It does not appear to me that to hold that Walton was entitled to a 999-year lease of the property once the first and second conditions precedent are satisfied under the agreement would conflict with the principle enunciated by Russell LJ in Dodsworth. It would involve each party giving and receiving precisely what it envisaged and intended should be granted and received: namely a 999-year lease of the property on the one hand, and, on the other hand, £15m and the various lessee’s covenants. However, that does not automatically mean that the equity should be satisfied in the present case in the way suggested by Walton. None the less, I consider that giving effect to what the parties believed and intended is normally the proper course for the court to take, unless it can be shown that it is unfair or oppressive on the defendant, or some other more appropriate way of satisfying the equity has been established.
83. I do not consider that it would be unfair or oppressive on the council if they were required to grant Walton a 999-year lease of the property on the terms of the draft lease, if the first and second conditions precedent are satisfied within the timescale laid down by the agreement. On the contrary, while the council may be reluctant, for good or bad reasons, to grant such a lease, they have not put forward any grounds for believing that they would suffer any inappropriate hardship or unfairness if they were treated as bound to grant such a lease should those conditions be satisfied. As for the commencement date of the lease in those circumstances, I do not see how the council could object if the term, as therein defined, ran from the date of the decision notice.
84. Further, the alternative remedy suggested on behalf of the council does not seem to me to be satisfactory or fair. That suggestion is that Walton should be reimbursed by the council all the expenditure that it has incurred in the belief that the agreement for lease was enforceable. In the first place, that does not allow Walton any profit on the money it has expended. Second, it gives Walton no credit for the effort it has undoubtedly given to the project, and no compensation for the loss of profit on other projects that it might have undertaken in the alternative. Third, it does not take into account any increase in value that the property that the council, as the owners of the property, may have enjoyed as a result of Walton’s efforts. Finally, bearing in mind the exceptional technicality and unmeritoriousness of the point relied upon by the council to invalidate clause 4.13, I do not regard it as equitable that the council should effectively be allowed to buy off Walton’s equity in this way.
Conclusion
85. In these circumstances, if clause 4.13 is unenforceable as a matter of law, I would none the less hold that the parties are effectively bound in equity, in so far as they are not bound in contract, by the provisions of clause 4.13 of the agreement, and that any lease granted pursuant thereto would commence on the date of the decision notice.
Implied duty to co-operate
86. Walton contends that implied into the agreement is a term that the council “will cooperate with [Walton] in implementing the agreement and do nothing that will impede or frustrate the due implementation of the agreement”. The existence of a generalised implication of a term of this nature into provisions of many commercial contracts is often said to be justified by the well-known observation of Lord Blackburn in Mackay v Dick (1881) 6 App Cas 251 at p263:
[A]s a general rule,… where in a written contract it appears that both parties have agreed that something should be done, which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, that there may be no express words to that effect.
87. As Devlin J said in Mona Oil Equipment & Supply Co Ltd v Rhodesia Railways Ltd [1949] 2 All ER 1014 at p1017H:
The principle [Lord Blackburn] enunciates may be put more succinctly as Viscount Simon, LC, put it in Luxor (Eastbourne) Ltd v Cooper ([1941] 1 All ER 39), saying that where co-operation is necessary, it is implied that it is forthcoming.
88. In Mona Oil, it was argued that there was to be implied into the contract in that case a term that neither party would do anything to prevent or obstruct the performance of a condition precedent upon which the contract depended. In rejecting the existence of such an implied term, Devlin J said at p1017D-F:
[T]he proposed term, like all other implied terms, must be judged by the test whether or not it is necessary for the business efficacy of the contract. The fact that an act, if not prohibited by the contract, is one which would result in a party being robbed of the benefits which otherwise the contract would give him is certainly an important matter… but it is not necessarily the most important, and it is certainly not the only matter.
He then said at p1018D-F:
I do not need to inquire whether the defendants’ actions prevented or obstructed the plaintiffs from getting payment. I can ask myself whether there can be implied in this contract any term… prohibiting the acts complained of… in so far as I have found them proved. I can think of no term than can properly be implied other than one based on the necessity for co-operation. It is, no doubt, true that every business contract depends for its smooth working on co-operation, but in the ordinary business contract, and apart, of course, from express terms, the law can enforce co-operation only in a limited degree –– to the extent that it is necessary to make the contract workable. For any higher degree of co-operation the parties must rely on the desire that both of them usually have that the business should get done.
89. It seems to me that the law on the topic of an implied duty to co-operate and on an implied duty not to prevent performance is well summarised in Chitty on Contracts (28th ed) vol 1 at paras 13-011:
[T]he duty to co-operate and the degree of co-operation required is to be determined, not by what is reasonable, but by the obligations imposed –– whether expressly or impliedly –– upon each party by the agreement itself, and the surrounding circumstances.
90. In light of the principles as described in the cases and textbook to which I have referred, it seems to be that it would not be right to grant a declaration in the general form sought by Walton. Particularly in a case such as the present, where the contract in issue has many facets, it is not possible to say that there is a general duty to co-operate with a view to implementing the contract, or a general duty on either party not to do anything that impedes the implementation of the contract. One has to consider a particular facet or set of facts and ask oneself whether the principle enunciated by Lord Blackburn applies to them. I think it
91. However, that does not mean to say that there are no specific aspects of the agreement that carry with them an implied obligation on the part of the council of the sort alleged by Walton. Thus, it appears to me that Walton’s obligation under clause 5.3 to “consult” with the council’s officers carries with it a concomitant implied obligation on the part of the council not to prevent their officers entering into the consultations, and similar considerations apply to the obligation to consult in clause 5.4.1. As Mr Wood says, unlike many commercial contracts, the agreement in the present case envisages, indeed requires, a degree of co-operation between the parties at various stages. At least in some respects, it is not dissimilar from the not unfamiliar arrangement embodied in a development agreement between a landowner and a developer. It is obviously dangerous to construe the agreement by characterising or categorising it as a particular type of contract, and the nature of one of the parties, namely the council, can be said of itself to take the agreement out of the normal run of development contracts. However, there is some force in the point that the agreement’s underlying commercial thrust is that both the council and Walton are working towards a specific aim, namely developing the property in accordance with the scheme, with a view to the council getting £15m and Walton expanding its business as a property developer.
92. It may be that the nature of the agreement as I have just summarised it is a factor that would render the court a little more ready to imply a specific obligation on the part of the council to co-operate in relation to a specific matter, or, indeed, not to impede Walton’s attempt to implement the agreement. Even assuming that that is correct, it appears to me clear, from the authorities, and in light of commercial common sense, that one has to judge whether or not there is a duty to co-operate or not to impede very much on a case-by-case basis. In these circumstances, while it is clear that there are specific express obligations under the agreement on Walton that carry with them concomitant specific obligations on the council to co-operate (and, indeed, not to impede), I consider that Walton is not entitled to a declaration of the generalised sort that it seeks.
Must the council be reasonable under clause 3.4?
93. Walton contends that the council’s “acceptance and approval” of the “independent Consultancy Study” under clause 3.4 (the study) cannot be unreasonably withheld. Given that the only express qualification in clause 3.4 is to the effect that the council’s “decision shall be final”, this contention involves implying a term into clause 3.4. So far as recent authority is concerned, the proper approach was summarised by Millet J in Price v Bouch (1987) 53 P&CR 257* at p260:
There is no general principle of law that, whenever a contract requires the consent of one party to be obtained by the other, there is an implied term that such consent is not to be unreasonably refused. It all depends upon the circumstances of the particular contract.
* Editor’s note: Also reported at [1986] 2 EGLR 179; (1986) 279 EG 1226
94. This view was quoted with approval by Slade LJ and Waite J in Cryer v Scott Brothers (Sunbury) Ltd (1988) 55 P&CR 183 at pp193 and 202. At p194, Slade LJ said:
I see no reason why, in accordance with the ordinary principles of the law of contract, is should not be possible to imply a term of this nature in a restrictive covenant where this is necessary in order to give the contract business efficacy.
Waite J expressed himself in very similar terms at p202:
[T]he question to be asked in all cases is whether the implication of a proviso of reasonable grounds of refusal is necessary to give business efficacy to the transaction which the covenant to obtain approval forms part.
95. Both Slade LJ and Waite J went on to refer with apparent approval to observations of Megarry V-C in Clerical Medical & General Life Assurance Society v Fanfare Properties Ltd unreported 2 June 1981, where he distinguished between cases involving “a general and unrestricted consent” and “the approval of a specific matter”, and concluded that the court would be more ready to imply a proviso that approval or consent was not to be unreasonably withheld in the latter type of case, observing in connection with the type of case that he was considering:
The courts will not permit the party whose approval is required to misuse the requirement by refusing to approve a title or plans which are free from any tenable objection.
96. In two other fairly recent cases in the Court of Appeal, observations have been made that might suggest that a proviso that consent will not be unreasonably withheld is to be implied almost as a matter of course into a contractual provision that requires the consent of one of the parties: see per Megaw LJ in Bocardo SA v S&M Hotels Ltd [1980] 1 WLR 17* at p22 and per Leggatt LJ in Abu Dhabi National Tanker Co v Product Star Shipping (The Product Star) (No 2) [1993] 1 Lloyd’s Rep 397 at p404. The former observation was plainly obiter, and relevant authority does not seem to have been considered; indeed, it would appear quite possible that the point was not even argued. In the latter case, Cryer, which was by then binding upon the Court of Appeal, does not seem to have been cited, and, if it had been cited and its reasoning applied, I strongly suspect that the Court of Appeal in the later case would have reached the same decision as it actually reached.
* Editor’s note: Also reported at [1979] 2 EGLR 48; (1979) 252 EG 59
97. It is right to mention that there is a case, not cited in Price or in Cryer, that provides a little support for the proposition that, where a contract requires the consent of one party to the doing of something by the other party, there is normally to be implied a term that consent is not to be unreasonably withheld. The case is Braunstein v Accidental Death Insurance Co (1861) 1 B&S 782. In that case, all members of the court held that a term in an insurance policy that payment was to be made only upon “proof satisfactory to the directors of the company… of the death or accident” was to be given what Wightman J called “a reasonable construction”, and was therefore to be effectively subject to a proviso that consent was not to be unreasonably withheld. Crompton J expressed himself in terms getting close to laying down a general principle at p797:
I cannot conceive that any Company would put before a person desirous of effecting an insurance with them a stipulation that, in order to establish the occurrence of an accident insured against, their own directors might require any evidence, however chimerical, capricious, and unjust that the asking for it might be. The putting such a construction on a stipulation like this is opposed to the general rule, that when it is agreed that an act is to be done to the satisfaction of a party it must be understood to mean reasonably to his satisfaction. The cases where it is agreed between two parties that a disputed matter shall be determined by the certificate of a third person differ from the present, for there the act is to be done by a third person, whereas here it is to be done by one of the parties.
98. While that observation provides some support for the proposition that the court will imply a term that consent is not to be unreasonably withheld whenever a contract requires the consent of one of the parties to the doing of something by the other party, it seems to me that it cannot be right, as a matter of elementary principle, to hold that a particular type of provision in a contract is always to be construed in a particular way. Indeed, the idea that Crompton J was laying down a rule of inflexible general application appears to me inconsistent with the earlier decision of Andrews v Belfield (1857) 2 CB (NS) 779. In that
99. Turning, then, to the present case, I am of the view that there is to be implied into clause 3.4 a term that the acceptance and approval of the study by the council is not to be unreasonably withheld. First, as in Clerical & Medical and in Cryer, clause 3.4 involves “the approval of a specific matter”, rather than “a general and unrestricted consent”. Second, the acceptance and approval is to be an “independent” study to be prepared by consultants who have to be approved by the council (under clause 5.4.2), and from whom the council can request “further information details or research” once the study is produced. While obviously not inconceivable, it appears to me unlikely that the parties would have intended that it was open to the council to withhold their acceptance or approval of the study on unreasonable grounds.
100. Third, by the refusal of their acceptance and approval of the study, the council would be able to put an end to the whole agreement; if there were any doubt about that from clause 3.4 itself, it is quite apparent from clause 5.4.4. Accordingly, this is not comparable with the most familiar type of case, where a landlord’s refusal of consent to an assignment, an underletting, a change of use, or an alteration will not get close to putting an end to the lease, even though, in many cases, it will be of obvious importance to the tenant. Fourth, unlike in most cases, the parties clearly envisaged that by the time the study was submitted to the council for their approval, a great deal of money and effort would have been put into the project envisaged by the agreement by Walton. While, of course, money and effort can be invested by a tenant into a prospective alienation, change of use or alteration, it will rarely, if ever, be anything like the amount of effort and money ythat the parties must have envisaged Walton would expend in furthering the project embodied in the agreement by the time the study came to be submitted to the council.
101. Fifth, as Mr Wood points out, this is not a case where, by giving their approval, the council will have effectively given up any control over the projected scheme. It will still be open to the council, indeed it will be the duty of the council, and to take such steps as it considers appropriate as a public body in relation to planning matters. At the time of the agreement, they were not the relevant local planning authority, but they were still in a position to make representations to the MDC. As already mentioned, the council have become the local planning authority for the area including the property. In so far as the council believe that there are planning objections, or, indeed, other public interest objections, to the scheme as developed by Walton, the council are not giving up their right, indeed the council could not give up their right, to take such steps in relation to the proposed development, and, in particular, to the grant of planning permission, that they, as the local authority and/or local planning authority, believe to be appropriate. Additionally, the council have rights in respect of the study under clause 3.4 and the right to consider plans etc under clause 4.6.
102. Sixth, there is the fact, already mentioned, that the agreement plainly requires the parties to co-operate in a number of respects (and, in particular, in the present connection, in agreeing the brief), and therein the general nature of the agreement, which involves the parties working towards the preparation of a scheme that would lead to the grant of the lease. This renders it commercially unattractive, indeed commercially unrealistic, to suppose that they could have intended that the council could none the less withhold their approval to the study, thereby putting an end to the agreement, without grounds that could be characterised as reasonable.
103. I would echo the observations of Slade LJ in Cryer at p195:
If the construction of [clause 3.4] suggested by counsel on behalf of the [council] were correct, this would mean that the [council] could [be] in the position, by the arbitrary and capricious withholding of approval of [the consultative study], wholly to…. prevent… a development… by [Walton]. This cannot, in my judgment, have represented the intentions of the parties to the [agreement]. The contemplation of both sides was clearly that the [property] would be developed by… [Walton if it could satisfy the other conditions precedent]. The reservation of a right arbitrarily to withhold approval of the [study] would have been liable to defeat the purpose of the [agreement].
104. Mr Lewison relies upon the closing words of clause 3.4, which provide that the council’s “decision shall be final” so far as acceptance and approval of the consultative study is concerned. In my judgment, that express provision does not call into question the conclusion that one should imply a term that approval is not to be unreasonably withheld. It is not as if the absence of such a term would put it out of the court’s jurisdiction to consider, and, if appropriate, to override the decision of the council withholding their approval, even in the absence of an implied term that such a approval is not to be unreasonably withheld. First, if the decision were made on dishonest grounds, it would be open to Walton to challenge it through legal proceedings. Second, if, on the proper construction of the agreement, the council were entitled only to take certain factors into account when considering whether to accept and approve the study, then, if it could be shown that the council had taken into account another factor as a reason for rejecting the study, that also could justify interference by the court. In my judgment, the closing words of clause 3.4 serve to emphasise that the council’s acceptance or rejection of the study cannot be challenged, provided that the decision is reached on a lawful basis as between the parties. If that lawful basis requires the decision to be reached on reasonable grounds, then it will not be a decision reached in accordance with the clause if it is not justifiable on grounds of reasonableness.
105. In any event, it is dangerous to place too much significance upon the closing words of clause 3.4, given that clause 5.4.4 provides that the council’s decision to determine the agreement, if it rejects the study, “shall be final and binding”. If one attributes to the parties an intention that in no circumstances could a decision be challenged if it was expressed to be final, it makes it a little difficult to know what further strength can be given to a decision that is stipulated to be binding as well as final. In my view, the finality provision was included not for the purpose of cutting down the factors that can or cannot be taken into account by the council, but more to emphasise that once a decision is made, Walton has no right to require it to be reconsidered, provided that it was made taking into account the factors that could be properly taken into account, and ignoring those that could not.
106. The contention that an implied term that approval cannot be unreasonably withheld “would enable some third party (eg the court…) to substitute its own opinion for that of the council”, as is argued on behalf of the council, appears to me to be slightly wide of the mark. Where a step requires a person’s consent, the fact that there is an implied term that such consent is not to be unreasonably withheld does not mean that the court, or any other tribunal, can substitute its own view for that of the person whose consent is required. A judge who upholds the refusal of consent in such circumstances is not by any means necessarily indicating that he would have reached the same decision; he will merely have concluded that the decision to refuse consent was honestly arrived at, and was a decision that a reasonable person in the position of the decision maker could reasonably have arrived at, taking into account those factors that had to be, or could be, taken into account, and not taking into account irrelevant matters.
107. Mr Lewison also relies on the fact that clause 5.3 sets out matters upon which the council are to be consulted, and they include those that involve questions of taste and aesthetic appreciation, namely “scale,
108. Accordingly, I conclude that a term is to be implied into clause 3.4 to the effect that “the acceptance and approval of the Council” to the “independent Consultative Study” is not to be unreasonably withheld.
Clause 5.3 and its interrelationship with clause 5.4
Interrelationship of clause 5.3 and 5.4
109. Although obviously connected, in the sense that they are in the same agreement and are concerned with the same general matter, namely assessing and processing the scheme, and although there is a degree of overlap, I consider that clause 5.3 and clause 5.4 are concerned with different aspects. Clause 5.3 is directed to the development of the details of the scheme, as defined in very general terms in the report, and it involves continuing consultations between the parties, albeit within the time constraints laid down by the agreement. Clause 5.4, on the other hand, appears to me not to be concerned so much with refining and developing the details of the scheme, as so broadly defined in the report, but more with assessing specific factors, which are mostly directed to the demand for the scheme and its interrelationship with the surrounding areas. In broad terms, clause 5.3 is directed towards developing the details of a scheme that has been defined in very general terms, whereas, when clause 5.4.3 requires the consultants to consider the scheme, they only need to do so in the same general terms as those in which it is described in the report. It should be said at once that that is a slight oversimplification. Clause 5.3 extends to considering the “capability of satisfactory integration” of the scheme with the city centre, but, as I see it, that is entirely consistent with looking at the scheme as it develops in much more detail pursuant to that clause, and, presumably, in due course in accordance with the study, if it is accepted and approved. Parts of clause 5.4 envisage the possibility of some specific aspects of the scheme being considered, albeit in fairly broad terms. An example is clause 5.4.3.3, with its reference to “the… extent of appropriate leisure uses”, and I would also accept that many of the other subclauses envisage the possibility of a degree of specificity or detail being considered in the study, albeit, as I see it, in fairly general terms.
110. The structure of clause 5 and the purpose of clause 5.3 both appear to me to support the view that clause 5.4 is not, as it were, tied to clause 5.3. It is clear that clause 5.4 will be spent by the expiry of “the First Period” as defined in clause 3: that is because the council’s decision whether to accept and approve the study under clause 3.4 must be made before the end of that period if the agreement is to remain effective. Clause 5.1 governs the payment of the deposit, and the first part was effectively spent the day the agreement was made, and the second part only comes into effect at the end of the first period, provided the first conditions precedent are all satisfied. Clause 5.2, which requires Walton to submit an application for planning permission within six months of the end of the first period, clearly has effect well after the end of the first period. There is therefore no reason, in terms of the structure of clause 5, as to why clause 5.3 should, as it were, be impliedly treated as temporally co-extensive with clause 5.4. Indeed, given that clause 5.3 is not linked to clause 3 (concerned with the first conditions precedent) or clause 4 (concerned with the second conditions precedent), and given that there is no time limitation in clause 5.3 itself, there is no reason to think that the parties intended its effect to end at any particular time.
111. When one turns to consider the precise terms and effect of clause 5.3, it seems likely that the parties did indeed intend it to be a continuing obligation, and not to stop if and when the study was approved by the council under clause 3.4. Given that clause 5.3 was concerned with details working out of the scheme, there is good reason to think that the parties would have envisaged that, until details of the scheme had been crystallised, there would be a continuing obligation on the part of Walton to consult with the council’s officers and try and accommodate the council’s views so far as those details were concerned. The very fact that the parties envisaged a period, which could be as long as six months, between the council’s approval of the study under clause 3.4 and the submission of an application for planning permission under clause 5.2, suggests that the parties had in mind that Walton would by no means necessarily have finalised all aspects of the detailed scheme until well after clauses 5.4.3 and 3.4 were spent. In those circumstances, it would be positively surprising if Walton was not therefore under a continuing obligation to consult with the council for a time well after clause 3.4 was invoked. Further, even after an application for planning permission is made, it is by no means unusual, particularly in connection with a development as substantial and important as the scheme, for the developer to discuss alterations with the local planning authority. Given that the local planning authority at the time of the agreement was MDC and not the council, it again appears likely to me that the parties would have envisaged that Walton would have discussed with the council’s relevant officers any such proposed alterations before agreeing them with the local planning authority.
Meaning of clause 5.3
112. It seems clear that clause 5.3 imposes upon Walton a positive obligation to consult with the council’s representatives with a view to achieving a detailed version of the scheme that is “appropriate and acceptable to the council” in the respects identified in the clause. It also seems clear that there are certain terms implied into the clause. First, as I have already mentioned, there must be an implied obligation on the council not to prevent the officers therein referred to from taking part in reasonable consultations; indeed, I consider that the council are required to take reasonable steps to ensure that the officers concerned are reasonably available for consultation purposes. Second, it appears to me that the council must be reasonable in their attitude to what they consider “appropriate and acceptable”; my conclusion, I believe, essentially follows from the reasoning contained in the preceding section of this judgment. Third, there is an obligation on Walton to take all reasonable steps in order to accommodate the council’s reasonable requirements for the detailed scheme to be “appropriate and acceptable”. To my mind, that obligation is implicit in Walton’s obligation “to consult… with a view to achieving a development which… is considered appropriate and acceptable to the council…”.
113. In my judgment, clause 5.3 envisages, indeed requires, Walton and the relevant officers of the council to get together with the aim of Walton coming up with proposals that seek to take into account the council’s reasonable requirements. The clause takes the scheme as defined in the report as a given, in the sense that it represents the framework within which the parties are working, but I consider that a degree of deviation from that definition would be permissible as a matter of commercial common sense. Thus, the amount of leisure facilities in the scheme as developed does not have to be precisely 150,000 sq ft, and a cinema with 10 or 14 screens would not be outside the ambit of “the Scheme”.
114. What, however, is not clear from clause 5.3 is what happens if, after Walton and the council have both acted in accordance with their implied obligations, Walton none the less comes up with a “detailed Scheme” that is not “appropriate and acceptable to the council”. There
115. The council’s solution to this problem is that any issues that cannot be resolved pursuant to the procedure in clause 5.3 would, or could, effectively be incorporated in the brief to the consultants (which is not intended to be exhaustive in light of the words “such matters as” at the end of the opening part of clause 5.4.3) and the council can then consider what the study has to say about such issues; and if the study effectively agrees with Walton, then, subject to reasonableness, the council can refuse to “accept… [or] approv[e]” the study under clause 5.3, and then put an end to the agreement under clause 5.4.4. Mr Lewison makes the point that that is consistent with some of the statements in the report. Thus, the report states that members of the council would have “to be satisfied as to the benefits or otherwise of the Scheme (including information regarding the end users)”, and, in that connection, it was said to be “necessary for… Walton… to expend considerable monies (at risk)”. This ties in with another passage in the report that describes the projected agreement as being “conditional… upon the committee being satisfied that the Scheme is appropriate in all respects”. Further, the report refers to the head of planning and transportation concluding that the scheme “might be feasible” but being concerned about its impact “on the existing shopping areas”. He also says that the specific features to which the council can have regard under clause 5.3, and, in particular, the concept of “scale, content… and capability of satisfactory integration…” indicate that the parties accepted that the council were not, as it were, even bound to the scheme in principle. He also points out that even though the council were not then the planning authority for the property, both clause 5.3 and clause 5.4.1 envisaged the council’s head of planning and transportation being involved in the consultation processes under those two clauses.
116. The points have considerable force, but I am not persuaded that this argument is correct. It is fair to say that the agreement is not particularly clearly drafted in this connection, but that should not be taken as a criticism of those involved. First, it was drafted at a stage where there were so many possibilities that it would have been impossible to cater for all of them, and impracticable to try to do so. Second, bearing in mind the considerable uncertainties, there was a great deal to be said for keeping the document relatively brief and simple. Third, there is often much give and take in the drafting process, and parties may be well advised to accept provisions that are somewhat obscure, rather than raising the point with the other party, who may then insist upon the provision being clearly, but significantly less advantageously, phrased. If that course were taken, then the document may prove difficult to construe. That, I believe, is the position with regard to some of the rights of the parties under the agreement in the present case.
117. In my judgment, if there is an impasse of the sort I have described in the clause 5.3 process, after both parties have complied with their express and implied obligations, then the views of Walton would prevail. First, when the council’s views are to prevail, the agreement says so, as in clauses 3.4, 5.4.2 and 5.4.4; similarly, if either of the sets of conditions precedent are not satisfied within the requisite time, the council have the right to put an end to the agreement: clauses 3.5 and 4.12. The absence of any such provision in clause 5.3 therefore tends to suggest that the parties did not have in mind that Walton’s failure to satisfy the council under that clause would entitle the council to prevail or to bring the agreement to an end. Second, while the working of clause 5.3 is, as I have indicated, by no means pellucid, it does seem to me to be more consistent with this interpretation. Walton’s primary obligation under the clause is to “consult”, and the consultation process is to be “with a view to achieving” something that is “acceptable to the council”. While, as with any provision in a contract, the precise meaning and extent of such an obligation will inevitably depend upon the other terms and circumstances of the contract in which it is found, it seems to me that the primary nature of such an obligation is to consult with the aim of achieving an end, and not an absolute obligation to achieve that end. Third, if that is the meaning of clause 5.3, then there is no need to imply any term as to what happens if an impasse is reached. If both parties have complied with their express and implied obligations under the clause, and an impasse is reached, and that, as it were, is the council’s problem, rather than that of Walton, that in no way presents a conceptual problem so far as the further implementation of the agreement is concerned. On the other hand, it is unclear what happens if the council’s view is to prevail: Mr Lewison’s suggestion is that clause 5.3 and 5.4 must, in this context, be read together, so that the council can reject the study under clause 3.4 on this ground. However, as I see it, clause 5.3 and 5.4 are concerned with rather different aspects at different times, as I have mentioned.
118. It is true that the report contains observations that, at first sight, cast doubt on my rejection of the council’s case on the effect of clause 5.3. However, it seems to me that the construction of clause 5.3 that I prefer is not inconsistent with those observations. First, as I have already mentioned, clause 5.3, on this construction, requires Walton to do everything reasonable to render the detailed scheme “appropriate and acceptable to the council”, themselves acting reasonably, so far as the specific features mentioned in the clause are concerned. Second, in so far as any matters are covered by the study, the council, again subject to reasonableness, have the right to reject the study under clause 3.4. Third, clause 4.6 requires the council’s approval “of detailed plans, drawings and specifications of the Scheme”. While I have not heard argument on the point, it seems to me that the logic of the discussion in the previous section of this judgment strongly suggests that the council’s approval under this clause cannot be unreasonably withheld. However, a point upon which it would be inappropriate to express a view is the nature of the factors that the council can take into account when deciding whether or not to give their approval under clause 4.6. Even if those factors are relatively limited, the clause does give the council a further degree of control over the detailed nature of the scheme. Finally, of course, whether in the capacity of an interested public body making representations to the local planning authority (as would have been envisaged at the time of the agreement), or in their capacity as the local planning authority (as now turns out to be the case), the council would certainly be entitled, indeed obliged, to take into account all matters that they thought appropriate as a local authority when making representations in connection with, or actually determining, Walton’s planning application for the scheme.
119. Mr Lewison makes the point that certain aspects of clause 5.3 are inconsistent with the view that the scheme is a “given”, and that it is therefore inherent in the clause that the council could reject the scheme, and effectively put an end to the agreement, pursuant to the terms of clause 5.3. He draws attention to the reference to “end user needs”, “commercial viability”, “scale” and “integration”. Some of these aspects, as I see it, will be covered, at least to some extent, by the study, in light of subclauses 5.4.3.1, 2 and 4. In my view, the combination of clauses 5.4.3 and 3.4 delineate the extent to which the council are intended to have the power to override Walton’s proposals (subject always to reasonableness). As I see it, there is nothing inconsistent between my view of clause 5.3 and the extent to which “the scheme” is already defined in the report. First, the precise size of the major component, namely retail space, is not clear: it is described as “some 1.1m sq ft”. Second, the common parts and other space could, no doubt, be subject to debate. Third, there would be ancillary uses, the extent and size of which could be open to different views (and, in this connection, I note the reference to “substantial theme restaurants”). Last, even the defined area of leisure facilities was obviously not to be treated as confined to precisely 150,000 sq ft. The references to scale, end-user needs, commercial viability and integration are also consistent with discussion of the details of the scheme, eg whether there should be a department store, the number of supermarkets, the number of small units and issues of that nature.
120. Mr Stephen Culkin, the senior solicitor of the council, said in his witness statement that because the council were not the local planning authority at the date of the agreement, it was the intention of the parties, apparently pursuant to clause 5.3, that they should be given some sort
As a matter of construction, can the council reject the study because they prefer a different scheme on the property or elsewhere?
121. I do not find it entirely easy to relate the nature of the study, as set out in clause 5.3, with the way in which clause 3.4 is expressed. There is no problem if the study is positive about the scheme in respect of all the aspects upon which it reports. If the council are content with such a study, or have no reasonable grounds for disagreeing with it, then they must “accept… and approv[e]” the study; if they have reasonable grounds for doing so, then they can refuse to give their acceptance or approval. Whichever course they take, the consequences are clear: in the former event, subject to clause 3.1 to 3.3 inclusive being satisfied, the first conditions precedent will be satisfied, whereas, in the latter event, the council can serve a termination notice.
122. However, if the study suggests that the scheme is unsatisfactory in a relevant respect (eg its effect on the adjoining highway network), how is clause 3.4 to work? The council may agree with the adverse criticism in the study, and may think that, as a result, the scheme should be rejected. None the less, as a matter of ordinary language, the council would be “accepting and approving” the study, including its adverse criticism on the highway implications. In my judgment, in order to make sense of clause 3.4, a slightly artificial meaning has to be given to the words “acceptance and approval”. I consider that they mean that the council must accept and approve the study in the sense of accepting that they give a “green light” to the scheme. To give any other meaning would be perverse. In other words, once it is provided with the study, the council must consider it, and, as a result of its contents, the council can either “accept and approve” the scheme as the basis of the study, or reject it. However, that rather simple analysis hides a number of points. First, I do not see why the council should be treated as bound by any aspect of the study. Provided they have reasonable grounds for doing so, it is open to the council to disagree with one or more of the conclusions expressed in the study. Second, as I have already mentioned, particularly in relation to their rejection of any conclusion expressed in the study, the council must act reasonably. Third, if there is an aspect of the study with which the council disagree, or upon which the council think that insufficient consideration or information has been given by the consultants, then I think that, particularly if it would otherwise result in the council disagreeing with the views expressed in the study, or withholding their acceptance and approval, the council would have to indicate, in accordance with clause 5.4.4, that “it requires further information, details or research”. As I see it, if there is an aspect of the study with which the council disagree, then either the council must none the less approve the study or they must, in effect, give the consultants an opportunity to provide further research, information or arguments to persuade the council of their case. That is because the first sentence of clause 5.4.4 entitles the council to do one of two things upon receipt of the study, namely to approve it or to require further information.
123. Fourth, I consider that the council cannot withhold their “acceptance and approval” under clause 3.4 on a ground not connected with the specific matters with which the study is to deal. Clause 5.4.3 sets out the topics with which the study is to deal, and it seems to me that it would be commercially inconsistent and arbitrary if the council could reject the study because of issues with which the study is not concerned. It is true, as I have indicated, that clause 3.4 effectively operates as a potential “red light” or (subject to satisfaction of the other first, and all the second, conditions precedent) a “green light” for the scheme. However, the “acceptance and approval” referred to in the clause is clearly related to the study, and should not be treated as going beyond topics that it covers.
124. In these circumstances, is it open to the council to reject the study on the ground that it would prefer a different development of the property from the scheme? In light of my views as to the effect of clause 5.3, the interrelationship of clause 5.3 and 5.4, and the way in which clause 5.4.3 relates to clauses 3.4 and 5.4.4, and my reason for those views, I consider that the answer to that question is in the negative. It seems to me that, in so far as the matters to be dealt with in the study are concerned, they involve judging the scheme on its merits, and not by reference to some other possible development on the property. There is nothing in clauses 5.4.3.1 to 5.4.3.7 that suggests that when considering the scheme it is to be compared to other possible developments of the property. As I have mentioned, some of the topics on those clauses are purely factual (eg the current provision of retail floor space), and some of the topics clearly relate to the scheme, and do not involve any comparative factors (eg the best means of incorporating and integrating the scheme), but none of them require the scheme to be compared with some alternative development of the property. Although it is true that one would take into account other potential developments when deciding whether or not a particular scheme is desirable, it does not appear to me to follow that the assessment of any specific features of a particular scheme require, one to take into account alternative schemes. Depending upon its nature, it is conceivable that a particular feature might require a certain amount of investigation of alternative schemes, but I do not think that any of the factors mentioned in clauses 5.4.3.1 to 5.4.3.7 fall within that category. In my judgment, each of them involves assessing the scheme on its merits, by reference to the current position, but not by reference to other possible developments of the property.
125. In my opinion, if it is right that the study should not evaluate the scheme by reference to alternative possible developments of the property, then it would follow that the council’s “acceptance and approval” of the study cannot be based upon the council’s view that another possible development of the property would be preferable. That would be a factor extraneous to the topics that form the subject matter of the study, and therefore extraneous to the decision of the council on the study pursuant to clause 3.4. I believe that this conclusion is consistent with commercial sense. Although only a small part of the deposit, £25,000, will have been paid by Walton by the time that the study is considered by the council pursuant to clause 3.4, a very considerable amount of effort and money will have been spent by Walton by that time. It would seem hard on Walton, albeit that I accept that it would not be commercially absurd, if the council could put an end to all Walton’s rights under the agreement simply because they had decided that a somewhat different development scheme was preferable. If that were indeed the council’s right under clause 3.4, it would mean that Walton’s rights up to that point were virtually valueless, because the parties would have appreciated that it would always be open to the council to find some aspect of the scheme that they reasonably believed could be improved. It is true that there is more than one reference in the report to Walton putting in substantial money and effort “at risk”, but I do not think that takes matters any further forward on this point. Quite
126. Further, there is force in Mr Wood’s point that it is the scheme, as defined in clause 1.8, “which drives the agreement”. The lease is to be granted only after all the possible impediments to the scheme are out of the way. The first conditions precedent that Walton must satisfy, include showing that it can fund “the scheme”, that it has engaged qualified organisation who have experience with developments similar to “the Scheme”, and that it has projected tenants for more than 30% of “the Scheme”. Similarly, the second conditions precedent include many requirements specifically linked to “the Scheme”, eg the obtaining of planning permission, the acquisition of other interests in the area, the council’s approval of plans, a satisfactory environmental survey, and appropriate agreements for lease. In other words, Walton contends that the scheme is treated effectively as a given of the whole agreement, and that, at least in their capacity as contracting party, it is not open to the council to challenge it, save to the extent that it can be said to have been questioned or undermined by the topics dealt with in the study or by any other specific provision of the agreement. Of course, this argument does not involve questioning the council’s right to raise any argument it properly wish to raise in their capacity of a local authority, for instance in the planning or highways processes.
127. Further, I do not consider that my view as to the proper construction of the council’s rights under clauses 3.4, 5.3 and 5.4 results in unfairness to the council. Under clause 5.3, the council have a continuing right to have their reasonable views on the specific aspects of the scheme taken into account by Walton, and, indeed, Walton has the obligation to use all reasonable endeavours to accommodate the council’s wishes in connection with those aspects. Second, having received the study, and subject to requiring further information in connection therewith, the council effectively have the right under clause 3.4 to put an end to the agreement on any reasonable view they take on any of the topics dealt with in the study pursuant to clause 5.4.3.1. Third, the council have a right (subject to the limitations discussed in the next section of this judgment) to require the study to deal with other topics, in respect of which they then have similar rights under clause 3.4. Fourth, the council have a right in connection with plans etc under clause 4.6. Fifth, the council have rights, indeed duties, as I have already mentioned, in connection with the grant or refusal of planning permission for the scheme. Indeed, the council have rights and obligations as the local highway authority as well.
128. In my view, therefore, subject at least to any agreement to the contrary between the parties, the council are not entitled to reject the study under clause 3.4 on the ground that they would prefer the property to be developed in an way that is different to the scheme. Essentially for the same reasons, I do not consider that the council would be entitled to reject the study on the ground that they would prefer the PSDA development, and/or that their approval of the study would prejudice the prospects of the PSDA development. However, if, as seems likely, there is to be a planning inquiry at which the applications for planning permission for the scheme and for the PSDA development are both considered, that does not mean that the council cannot support the PSDA development application and/or oppose the application for the scheme, provided that such an attitude represents their bona fide view, in their capacity as the local planning authority. Indeed, if that did represent their view, the council would be under a duty to pursue that line at the forthcoming planning inquiry.
129. No argument was addressed to a connected question raised in Walton’s pleadings, namely whether the study could be rejected by the council on the ground that they would prefer someone other than Walton to carry out any development of the property. In my judgment, it would not be open to the council to take such a factor into account when deciding whether or not to accept and approve the study. I believe that conclusion follows from the reasoning in this section of the judgment. If there were no other grounds for rejecting the study, the fact that the council do not, for some reason, want Walton as the developer appears to me to be an extraneous circumstance, which cannot found a legitimate reason for rejecting the study. To hold otherwise would deprive the agreement of any point or value for Walton, which would, by the time that the study was submitted to the council, have spent a lot of money and time on the whole project. Further, as I have mentioned, clause 3.4 is concerned with the council’s acceptance or rejection of the study, and that study is to be concerned with those matters set out in clause 5.4.3, none of which appear in any way to be connected with the identity of the developer.
Effect of the brief
130. The council contend that even if, as I have concluded, the council could not otherwise refuse to accept and approve the study on the ground that they would prefer an alternative development of the property and/or because implementation of the scheme would impinge adversely on the PSDA development, it is open to the council to rely upon that ground in light of the contents of the brief. That argument proceeds as follows. My conclusion that the council cannot rely upon their desire or preference for an alternative development is ultimately based upon the topics specifically covered by clauses 5.4.3.1 to 5.4.3.7. However, as the closing words of the opening part of clause 5.4.3 make clear, by referring to “such matters as”, that list is not intended to be exhaustive, and the parties can agree that the brief will extend to other topics. In the event, runs the argument, the brief agreed between the parties requires the consultants to report on topics in addition to those specified in clauses 5.4.3.1 to 5.4.3.7, and, in particular, planning aspects, including the PSDA framework. Accordingly, contend the council, as the consultants have been instructed by the brief to include in the study a discussion of planning aspects, and in particular the interrelationship of the scheme with the PSDA framework, it is open to the council to refuse to accept and approve the study, even if it expresses a positive view of the scheme, notwithstanding planning considerations and the PSDA framework, because they honestly disagree with the views of the consultants on that topic. Alternatively, if the consultants conclude that the scheme is inconsistent with the council’s planning policy, and, in particular, the PSDA framework, then it would be open to the council, in effect, to put an end to the agreement by agreeing with that view pursuant to clause 3.4 and 5.4.4 (in light of the way I have concluded that the words “acceptance and approval” should be construed in clause 3.4).
131. I have come to the conclusion that the argument should be rejected, essentially for two reasons. First, it does not appear to me that, on its proper construction, the brief actually contains instructions to the consultants to produce a study that extends to topics other than those set out in clauses 5.4.3.1 to 5.4.3.7 of the agreement. The brief is divided into four parts. Part 1 is headed “Introduction and Scope of Brief”, and explains that the brief has been produced to comply with clause 5.4.1 and that:
The purpose of this Brief is to inform the Consultative Study… and also to provide guidance on the contents of an application for planning permission which, under the… Agreement, will follow in the Second Period. The Brief contains guidance on the policy issues which must be addressed in either the Consultative Study or a planning application.
Part 1 then goes on to say:
Whilst there may be some cross reference within this Brief, any Consultative Study or planning application must fully address those matters referred to in the [Clauses] 5.4.3.1/5.4.3.7 of the… Agreement.
132. Parts 2, 3 and 4 of the brief are respectively headed “Planning Policy”, “Transportation” and ” Planning Application Requirements”. Part 2 sets out many planning documents of national and local relevance, and, as I have mentioned, it refers to the PSDA framework, and states that “its contents must be fully addressed in any submission”.
133. In my judgment, the brief has to be read together with the agreement. It would be tolerably clear to the recipient of the brief that, in light of the terms of clause 5.4.3, and in light of the statement in the brief, the study should address those specific topics set out in clauses 5.4.3.1 to
134. Even if that is wrong, I consider that the council were not entitled to insist, over the objection of Walton, that the brief should require the consultants to report in the study on topics that would involve assessing or considering the scheme by reference to alternative possible developments of the property or possible developments on neighbouring land, such as the PSDA development. Given my view as to the scope of the study based upon the specific topics that it was to cover under clauses 5.4.3.1 to 5.4.3.7, it seems to me that any topic that involves justifying or questioning the scheme by reference to alternative developments of the property or to a development scheme on neighbouring land cannot be inserted into the brief, except perhaps by agreement, as they are not “such matters as” those topics set out in clauses 5.4.3.1 to 5.4.3.7. The very fact that the nature of the topics set out in those clauses is not such as would enable the council to reject the study on the grounds that they would prefer an alternative development of the property, or that the scheme would interfere with a preferred development on adjoining premises, indicates to me that the parties cannot have intended that any additional topic that enabled the council to reject the study on such a basis would be a matter that was “such as” those specific topics. Furthermore, my main reasons for concluding that it would not be open to the council to reject the study under clause 3.4 on the grounds of a preferred alternative development, and for the way I interpreted clause 5.3, also support my view that the council cannot insist upon including in the brief matters that, after being dealt with in the study, could justify the council refusing to approve and accept the study on such a ground.
135. In those circumstances, even if the brief as prepared by the council requires the consultants to include material in the study that involves assessing the scheme by reference to alternative developments of the property and/or by reference to possible developments of neighbouring premises, such as the PSDA development, I do not believe that the council thereby have the right to reject the study or the scheme under clause 3.4 on the ground of preferring an alternative development. That is because the council would be relying upon material in the brief that they wrongly insisted, over the justified objection of Walton, in being included in the brief. The terms of the correspondence relating to the contents of the brief made it clear to the council that Walton was objecting to the brief, requiring the consultants to include in the study an assessment of the scheme by reference to the PSDA framework and the PSDA development. That was something that, as I have indicated, the council were not entitled to insist upon being included in the brief, and that Walton was justified in objecting to being included in the brief. Because of the severe time constraints under the agreement, Walton had little option but to let the council send the brief, containing the items that the council insisted upon, to the consultants with a view to the study being prepared.
136. In these circumstances, its seems to me that the council are not entitled to rely upon any passage in the study as a ground for rejecting the study under clause 3.4, if that passage is in the study only because of the council’s wrongful insistence upon that topic being included in the brief. Although not directly in point, I think that support for this conclusion is to be found in a second proposition derived from Mackay, based upon the opinion of Lord Watson (rather than that of Lord Blackburn, from which I quoted earlier). The point is well made by Devlin J in Mona Oil at p1017H:
The… proposition, based on the opinion of LORD WATSON, advance a stage further [than that of Lord Blackburn] and gives the plaintiff in appropriate cases an additional form of relief. If the breach of the implied term prevents the plaintiff from performing a condition binding on him, he is to be taken as having fulfilled that condition…
At p1018B, Devlin J described that proposition as “rested… on well established doctrine”.
137. In this case, under clause 5.4, the parties envisaged that they would get together to prepare the brief, which would contain those topics specifically dealt with in clauses 5.4.3.1 to 5.4.3.7 and other topics that they agreed and that fell within the words “such matters as”, and, by implication, they also must have envisaged that neither of them could insist, against the will of the other, that the brief would include topics and matters that fell neither within clauses 5.4.3.1 to 5.4.3.7 nor within the ambit of topics falling within the scope of the words “such matters as”. On the basis of the passages that I have quoted from Mackay, Mona Oil and Chitty on Contracts, it seems to me that there must be an implied obligation on the part of each party not to insist upon including in the brief, contrary to the wishes of the other, any topic that falls outside the ambit of clause 5.4.3. Accordingly, if the council insisted upon including in the brief reference to the PSDA framework, and consequently required that topic to be dealt with in the study, that was a breach of the council’s implied obligation.
138. It does not seem to me to be much of an extension of the principle relied upon by Lord Watson in Mackay, to conclude that it is not open to the council to rely upon the fact that the study discussed the PSDA framework and the PSDA development to justify the council rejecting the study under clause 3.4, thereby enabling the council to put an end to the agreement under clause 5.4.4. The effect of Lord Watson’s principle is that a contracting party cannot rely upon the other party’s failure to perform a term of the contract when that failure was caused by the first party’s breach of that contract. In the present case, I am of the view that a contracting party cannot rely upon a state of affairs to his advantage and the other party’s disadvantage, pursuant to the provisions of the contract, when that state of affairs was brought about by the first party’s breach of that contract.
139. Of course, a principle such as that considered by Lord Watson in Mackay is not always to be applied blindly. However, it seems to me that the application of that principle (or rather of an extension or variation of that principle) in the present case would wreak justice. It would be an unfair and uncommercial result if, only because of their wrong insistence upon including reference to the PSDA framework and (by implication) the PSDA development in the brief, over the objection of Walton, the council could then rely upon the contents of the study relating to that issue to reject the study, for their own benefit and to Walton’s disadvantage. On the other hand, the conclusion that the council could not rely upon the PSDA framework and the PSDA development as a ground for rejecting the study under clause 3.4, in these circumstances, is not unrealistic or unfair from the council’s point of view. The PSDA framework and the PSDA development can, indeed almost certainly should, be taken into account by the council, in their public capacity, when considering the planning application for the scheme, and when making any submission to the Secretary of State in so far as there may be a planning appeal.
Conclusions
140. In these circumstances, my conclusions are as follows:
A1. (a) There is a valid and enforceable agreement for lease, whose term begins on the day on which the lease is executed;
(b) In the alternative, if the commencement of the term is uncertain, it is open to Walton to make it certain by electing that it should commence on the date of the decision notice;
2. In the further alternative, the council are estopped from contending that the agreement for lease is invalid, in which case the commencement date of the lease is the date of the decision notice.
B.1. There is no general obligation on the council to co-operate or not to impede or frustrate the implementation of the agreement;
2. The council can refuse only to accept and approve the study under clause 3.4 on reasonable grounds;
3. It is not open to the council to reject the study on the grounds that they would prefer the property to be developed for a purpose other than the scheme or by a different developer;
4. In considering whether or not to approve and accept the study, the council cannot take into account the PSDA development either in so far as that scheme involves an alternative development of the property or at all;
5. The last two conclusions are not affected by the terms of the brief.
