An option agreement is to be construed by reference to the factual matrix at the date it is entered into and not subsequent events.
The High Court has dismissed a claim for specific performance of an option, rejecting an argument that the option allowed multiple extensions of the option period in Denton Homes Ltd v Cobb and another [2023] EWHC 1924 (Ch).
By deed of 17 March 2016, the defendants granted the claimant an option to buy land off Send Marsh Road, near Woking, for a fixed price of £1.4m during the option period, in consideration of payment of £100,000. The option period was defined as four years from the date of agreement and subsequently extended, by variation agreements, to 29 January 2021.
The deed envisaged that there might be more than one planning application and required the claimant to use reasonable endeavours to obtain permission for residential development “as soon as reasonably practicable and in any event within the option period”.
The option period could be extended in three circumstances: if the claimant was awaiting a written decision on a planning application; if the claimant was pursuing an appeal; or if planning permission was granted within the last 50 days of the option period. Did these provisions allow the claimant to have multiple extensions of the option period subject to the longstop date of 16 March 2022?
The claimant made a planning application in November 2019 which had not been determined by the end of the option period. An appeal lodged on 28 January 2021 extended the option period but was dismissed and so the option expired on 14 December 2021. However, on 10 December 2021 the claimant made a fresh application for planning permission, and on 15 March 2022 sought to exercise the option.
The claimant argued that the factual matrix to be considered in construing the deed included events up to the date of the last extension of the option period in November 2020. The court disagreed. The contract had a meaning when entered into having regard to the factual matrix at the time. It was inherently improbable that the parties intended the same words to have different meanings in agreements solely intended to extend the option period.
The literal meaning of the extension clauses was to allow limited extension of the primary option period in specified circumstances. They could not be treated as enabling the claimant to combine extensions under the different provisions, and there was nothing in the commercial purpose of the provisions which pointed to permitting multiple extensions.
Louise Clark is a property law consultant and mediator
