Developers agreeing to build either according to plans already approved by planning authority or in accordance with fresh plans subject to making fresh planning application within 12 weeks – Developers proceeding according to plans already approved – Belated discovery that insufficient land available – Developers claiming contract frustrated – Whether defence negated by alternative mode of performance
In 1981 the second respondent (L), a director and principal shareholder of the first respondent company (the company) took an assignment of a 20-year lease, granted by the appellant council 10 months previously, of a run-down commercial property in Luton. On January 10 1990 the council, following an application by L, gave their consent as planning authority to the execution of certain works (the permitted works) in accordance with approved drawings. At the date of the consent it was known to the council planning department and the architect who prepared L’s application that the permitted works could not be effected without acquiring a five-foot strip of council-owned land at the rear of the property. On September 18 1990 it was agreed that in consideration of a surrender of the lease by L and the execution of certain works (the agreed works) by the company the council would, on completion of the works within the space of 18 months (time to be of the essence) convey the freehold to the company for the sum of £20,000. The agreement permitted the respondents to elect whether to proceed strictly in accordance with the permitted works (scheme A) or in accordance with plans to be approved under a fresh planning application to be made within 12 weeks of the agreement (scheme B). It was common ground that no signatory to the agreement gave his mind to the problem affecting scheme A. During October 1991, with work on scheme A already in progress, it came to L’s personal knowledge that the demised land was too short for the scheme, but his efforts to obtain additional land from the council were unsuccessful. The work having ground to a halt, the council brought proceedings inter alia for possession of the surrendered premises and for a declaration that they were entitled to retain a £2,000 deposit received on signing the agreement. The action was dismissed by the county court judge who, having found that no scheme other than scheme A had ever been contemplated, declared that the contract had been discharged by frustration. The council appealed.
Held The appeal was allowed
1. Given the alternatives clearly expressed by the contract, strong evidence would have had to have been led to show that scheme A was the only one contemplated by the parties. With no such evidence before him the trial judge had no basis for finding that scheme B did not afford an alternative mode of performance over the 12 weeks following the signing of the agreement. The doctrine of frustration could not be lightly invoked and it did not avail a defaulting party to show that an alternative mode of performance would occasion greater difficulty or expense: see The Superservant 2 [1990] 1 Lloyds Rep 1.
2. Pill LJ dissenting: This was not an appropriate case for ordering a fresh trial.
Simon Birks (instructed by the solicitor to Luton Borough Council) appeared for the appellants; John Gilmartin (instructed by Sheratte Caleb & Co) appeared for the first defendant; the second defendant, Mr Levy, appeared in person.
