Sale of land – Contract – Overage – Parties entering into contract for sale of land – Dispute arising over meaning and effect of overage clause — Surveyor determining on how additional consideration’ to be calculated – Claimants seeking order that interim determination be set aside – Whether interim determination containing manifest error – Claim dismissed
By an agreement dated 11 January 2000, the claimant purchased from the defendant local authority certain freehold land comprising the former playing field of a college in Stafford for the sum of £107,000. The agreement contained a development claw-back clause (“the overage clause”) which set out the circumstances in which the defendants might be entitled to receive additional consideration after completion if planning permission for the site was obtained in the future. Under that clause, overage was to be calculated by reference to the difference in open market value of the site with the benefit of planning permission, and the value assuming the permission did not exist and the defendants were to be entitled to 50% of the difference.
An issue arose as to the interpretation of the words “additional consideration” in the overage clause. The parties gave a surveyor the power to determine the correct meaning of those words. The surveyor, having taken the advice of counsel and applying the principles laid down in Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 EGLR 119, decided in an interim determination that the broad intent of the agreement was that the claimant should pay, by way of additional consideration, an amount reflecting the uplift of value brought about by the unlocking of the development potential of the property. He concluded that the intention had been that the parties were to share equally the planning gain obtained in respect of the site.
The claimant sought an order that the determination be set aside on the ground that the surveyor had reached a manifestly erroneous interpretation of the clause, in concluding that the phrase “assuming the permission does not exist” should be construed as meaning not only that planning permission had not been granted, but also that the recommendation of the planning officer leading to the grant of permission had not been made and the resolution of the planning committee to grant the permission had not been passed. The words used required the surveyor to ignore the existence on the valuation date of the planning permission itself, but not to ignore other matters relating to planning permission, in particular the recommendation of the planning officer that permission should be granted, which resulted in a relatively small difference between the two values for the purpose of calculating overage.
Held: The claim was dismissed.
The words “manifest errors” applied only to errors in figures and obvious blunders, not to errors in judgment. All errors were manifest when discovered but a clause such as that referred to in the present case was intended to be confined to oversights and blunders so obvious as to admit of no difference of opinion. The question then was whether it was relevant to consider whether the error was one that affected the result. It was only possible to say that something had gone wrong if reference was made to the contract and the position on the ground: Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832 applied; Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 EGLR 119 and Cadogan Petroleum plc v Tolley [2009] EWHC 3291 (Ch) considered.
In the present case, the court had been asked to construe the agreement but to determine whether the decision of the surveyor, in the light of counsel’s opinion, contained a manifest error. The claimant had to establish not only that the reasoning was wrong, but that it was manifestly wrong. On the facts, there was nothing manifestly wrong about determination. The parties, by the agreement, had given the surveyor the power to determine that decision in law and fact. It was not manifestly erroneous for him to apply the principles in Chartbrook and apply that to the words “the permission”, and come up with a wording which reflected the intent, namely that the parties were to share equally the planning gain obtained in respect of the site. It had not been intended that the planning gain would be largely pocketed by the claimant, which was the logical conclusion of the application of the literal wording in the agreement. The surveyor had given perfectly acceptable reasons for his conclusion and they were not manifestly erroneous.
John de Waal QC and Nicholas Brookes (instructed by Ansons LLP) appeared for the claimant; Wilson Horne (instructed by Staffordshire County Council) appeared for the defendants.
Eileen O’Grady, barrister
