Quay House Admirals Way Land Ltd and another v Rockwell Properties Ltd

Building contract – Restriction on title – Removal of restriction – Development agreement requiring entry in land registry of restriction on title to property – Defendant having potential power to restrain or prevent project from proceeding – Claimants applying to remove restriction – Whether contract including implied term that defendant consent to removal of restriction – Whether court to exercise inherent jurisdiction to amend register – Claim allowed The claimants were two investment vehicles administered by a property investor (F). The first claimant owned Quay House, near Canary Wharf and the second claimant was the business entity. The building was to be developed by the defendant as a hotel and serviced apartment building, a substantial project with a completion developed value in excess of £200m. A dispute arose out of the development agreement between the parties. The claimants purported to terminate the agreement and sought to continue the development with other developers. A key provision of the agreement required the entry in the land registry of a restriction on the title to the property which, in some circumstances, gave the defendant the power to restrain or prevent the project from proceeding. The claimants made an interim application for that restriction to be removed, on the basis that the project could not proceed whilst it continued to exist. The defendant argued that, since the restriction was intended to protect it from what had happened, it would be wrong to remove it at this stage. The primary question of whether the agreement was on foot or not was still to be decided. Therefore, the claimants assumed that they were wrong in contending that the contract was terminated and said that the express provisions of the contract itself required the defendant to consent to the removal of the restriction. However, if the contract did not so provide, the claimants sought an order removing the restriction, as an interim remedy, exercising the inherent jurisdiction of the court to amend the register. Held: The claim was allowed. (1) The general presumption was that the parties had expressed every material term which they intended should govern their contract, whether oral or in writing. The court might be prepared to imply a term if the language of the contract itself, and the circumstances under which it was made, gave rise to an inference that both parties must have intended the term. However, that was true only where the implication of the term was necessary in order to make the contract work. The court had to be satisfied that both parties would have told the notional officious bystander that that was what was meant. However, even if that test was satisfied, the term to be implied had to be capable of being formulated with sufficient clarity and precision: Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701, Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, Socimer International Bank Ltd (in liquidation) v Standard Bank London Ltd [2008] Bus LR 1304 and Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] EGLR 8 considered. In the present case, there was no understanding or agreement at any stage that the restriction would be removed prior to the approach to financiers for second stage financing. It was clearly wrong to suggest that there could be any implied term to that effect in the contract. The court could not make a contract for the parties by implying terms that were not there. There was no implied term requiring the removal of the restriction. (2) The purpose of the general requirement to use best efforts was to create an inchoate obligation, which could be applied to unforeseen circumstances on a case-by-case basis. The clause mandating the restriction was inserted explicitly to protect the defendant in the event of a dispute of this kind. When the contract was entered into, the defendant had identified the property as ripe for development. F agreed to fund the first stage of the project which included the acquisition of the property. The aim and effect of the restriction was to ensure that F could not use it for any purpose other than the agreed development business plan. The true construction of the intentions of all parties at the time of entry into the contract was that the obligation to secure the success of the project would have overridden the desire to retain the restriction. If the restriction was to be removed, the defendant’s claims had to be protected pending trial. Further, the defendant’s obligations under the agreement created an obligation on it to withdraw the restriction where that was necessary for the project to successfully proceed. Since the project could not proceed with the restriction, the court would order the defendant to perform what would be its obligation under the contract if the contract were to be held to be still on foot. The proper remedy was an impersonal order requiring the restriction to be removed: Calgary and Edmonton Land Co v Dobinson [1974] Ch 102 considered. (3) The court had an inherent jurisdiction to vacate any entry in the register, even in respect of matters which were regulated by statute. Applying that approach, there was no provision in the Land Registration Act 2002 that the inherent jurisdiction of the court was somehow displaced by the creation of an extrajudicial mechanism for application to the registrar directly for the amendment of the register. Consequently, the inherent jurisdiction of the court to order the register to be amended, as the claimants sought, remained intact. Any use of an inherent jurisdiction was subject to, and conditioned by, the overriding objective for the case to be dealt with expeditiously and fairly. The question before the court whether the entry should be removed from the register was the same regardless of the mechanism by which it was put there, and had to be approached in the same way using the same criteria. Any other approach would result in needless complexity: Nugent v Nugent [2014] 1 EGLR 15 considered. (4) There was a serious issue to be tried which was compensable by damages. The interests of all parties were best served by the project continuing as nearly as possible on its original timescale. That was most likely be achieved if the claimants were able to raise construction financing by the removal of the restriction. The claimants would be ordered to pay £1.5 million into court to secure the defendant’s potential claim under the agreement. Joanne Wicks QC and Jonathan Chew (instructed by Stephenson Harwood LLP) appeared for the claimants; Jonathan Seitler QC and Harriet Holmes (instructed by Gowling WLG (UK) LLP) appeared for the defendant. Eileen O’Grady, barrister Click here to read a transcript of Quay House Admirals Way Land Ltd and another v Rockwell Properties Ltd