A landbanking company that sold hundreds of small investors plots of land that would never receive planning permission has failed in its bid to sue them for the cost of maintaining non-existent roads.
The High Court in London ruled yesterday (6 October) that Terracorp Ltd, which is 95% owned by Canadian investor Baron Deschaur, cannot use covenants attached to the sale of the plots to extract ongoing payments from the purchasers.
The case centres on the business of landbanking, or buying farms or greenfield sites that don’t have planning permission, parcelling them into smaller plots, and selling them on.
Between 2002 and 2009, companies controlled by Terracorp Ltd sold hundreds, if not thousands, of plots, typically for between £10,000 and £30,000. Buyers had hoped that the land would go up in value if planning permission were obtained, even though there was, in reality, very little chance of planning permission being granted.
According to the judgment, most buyers couldn’t afford to pay the full price, so paid in instalments over a number of years, and many of them bought the land without consulting solicitors after being subjected to “hard sales talk”.
Planning permission has never been sought on any of the land, and most of it is being used by farmers to grow grass. Claims against Terracorp for misrepresentation have failed as agents working for Terracorp never expressly stated that it would seek to obtain planning permission or that planning permission was likely.
However, Terracorp is suing the purchasers, saying that a clause in a contact attached to their purchases obliges them to pay between £100 and £150 a year from the date of their purchase as “a proportion of costs incurred” for the maintenance of roads on the plots.
The case went to trial at the High Court in July and the trial judge, Mr Justice Mills, backed the small investors in his judgment, which he handed down yesterday.
At trial, lawyers examined the payment clauses in the contracts, and the arguments were more about grammar and syntax than law.
For example, one clause stated that the contractee would “pay on demand a proportion of the costs incurred in cleaning, maintaining and renewing any farm road, or any other existing road… constructed or to be constructed… The cost shall be £140.”
Lawyers for Terracorp argued that the grammatical subject of the sentence was not “a proportion of the costs incurred” but “£140”, which is contained in another sentence. They argued that the clause was an agreement to pay £140 a year.
The judge, in common with most grammarians, disagreed.
“The text… does not in my mind naturally read as an unconditional payment obligation… The covenant is to pay a share of the ‘costs incurred’ in or to ‘pay for’ defined services,” he said in his ruling.
Terracorp’s argument would mean “they will be getting payment for doing nothing, and that is not the natural meaning of the words and syntax chosen by the parties to express their bargain”.
The case involved more than 170 claimants who had originally been sued in the county court, and the judgment should apply to any other purchasers who are subject to the same contracts.
Terracorp Ltd v Rajesh Mistry and others
High Court (Mills J), 6 October 2020
Andrew Spink QC, Andrew Maguire and Stephen Butler (instructed by Griffin Law) appeared for the claimant/appellant.
Nicholas Bacon QC, Helen Swaffield and Martin Langston (of or instructed by Contract Law Chambers) appeared for the defendants/respondents.
