Chelsfield Advisers is locked in a multi-million-pound dispute with the Qatari Diar Real Estate Investment Company over the site of the US embassy in Grosvenor Square, which is set to be redeveloped.
Today, honours were left even in a preliminary ruling in the complex battle over the site, which the US embassy is scheduled to vacate in 2018, to be relocated as part of a major development near Battersea Power Station on the south side of the Thames.
Judge Richard Spearman QC made findings today in favour of both Chelsfield and Qatari Diar and said that the “overall winner” may not emerge until the outcome of a subsequent trial in which, among other things, Chelsfield seeks payment of a £10m advance planning payment.
He awarded summary judgment to Chelsfield on its claim for a declaration that a development fees agreement (DFA) remains in existence between the parties, but refused to make an order requiring Qatari Diar to instruct an expert to complete a determination of the terms of a development management agreement (DMA) or to execute the DMA once the expert has determined its terms.
In 2008, Chelsfield and another party, Qinvest LLP, were accepted by the US government as preferred joint bidders for the purchase and redevelopment of the embassy. Qatari Diar subsequently bought out Qinvest LLP’s interest in that arrangement.
Qatari Diar and Chelsfield then agreed that they would not purchase and develop the property together as a joint venture. Instead, Qatari Diar would buy out Chelsfield’s interest, and once the property had been purchased by a Qatari Diar group company, Chelsfield would provide development management services.
On 1 November 2009, a DFA was entered in writing, providing for a £15m buy-out fee to be paid to Chelsfield and that, in the event that terms of the DMA were not agreed within five months, they were to be determined by an expert.
On the same day, Qatari Diar entered into a contract with the US government for the purchase of the property, and its leaseback pending relocation of the embassy in 2018.
In addition to the buyout fee, the DFA provided that Qatari Diar would pay Chelsfield an arrangement fee of £5m for the services which Chelsfield had performed in connection with the acquisition and development of the property, and a costs contribution of up to £1.5m in reimbursement of the costs that it had incurred. These payments were all duly made by Qatari Diar.
Clause 3 of the DFA provided that Chelsfield would be appointed as development manager pursuant to a DMA in consideration of development management fees of £100,000 per month for the first three years of the period until planning permission was obtained and planning incentive fees, capped at £20m and to be calculated by reference to the amount of permitted floorspace authorised by the planning permission obtained.
Clause 4 of the DFA provided that, on completion of the sale and leaseback of the property pursuant to the contract made between the US government and Qatari Diar, it would pay Chelsfield an advance planning payment of £10m – an advance on the planning incentive fees to which Chelsfield would be entitled under the DMA.
The parties began negotiations over the form of the DMA in 2010, but no agreement was reached and completion of the property purchase took place on 28 August 2013.
Accordingly, pursuant to the DFA, Qatari Diar applied to the Royal Institute of Chartered Surveyors for the appointment of an expert. Tony Bingham was appointed on 6 May 2014.
However, in August, Chelsfield started proceedings seeking, among other things, payment of the advance planning payment of £10m and, a month later, Qatari Diar wrote to Chelsfield indicating that it had lost trust and confidence in Chelsfield’s ability to deliver under the DFA and DMA and that accordingly it was treating the DFA as at an end.
It served a defence in the advance planning payment claim contending that because of the termination of the DFA it was not liable to make this payment, and Chelsfield then launched these separate proceedings for a declaration that the DFA had not been determined.
Qatari Diar argued that the DFA was subject to an implied term that it would only continue in existence for so long as a relationship of mutal trust and confidence subsisted between the parties.
However, the judge ruled that Qatari Diar “has no real prospect of establishing that the DFA is subject to the implied term”. As a result, he said that Chelsfield was entitled to a declaration that the CFA remains in existence.
However, declining to make the further orders sought by Chelsfield, he said that the sensible course would now be to consolidate the outstanding issues in the present claim with the advance planning payment claim.
He added: “In addition, bearing in mind that both sides have succeeded in part on the present application, that there is some connection between the issues in the advance planning claim and the remaining issues in the present claim, and that the overall winner may not emerge until after the trial of all those issues, it may be just and reasonable to order that the costs of the present application should follow the event in that trial.”
Chelsfield Advisers LLP v Qatari Diar Real Estate Investment Company and anr Chancery (Deputy Judge Richard Spearman QC), 15 May 2015
John McGhee QC (instructed by Mishcon de Reya LLP) for the claimant
Alain Choo-Choy QC (instructed by Hogan Lovells International LLP) for the defendants
