The Court of Appeal ruled this week that a “development” means “the erection of a new building or buildings” and involves a change of use.
The ruling resolves a dispute over an option to buy a farm in West Sussex, thought to be valued at least £2m, for a 30% discount.
The case centres on an 18-year-old option to buy Bethwines Farm, near Chichester, held by development company Fishbourne Developments.
Under the agreement, which runs out on 31 December this year, Fishourne can buy the property for 70% of its market value if it obtains “planning permission… permitting any development of the property”.
In 2016, Fishbourne obtained planning permission to erect a new pitched roof on one of the farm buildings, and in 2018 used that to trigger the option.
This resulted in a court battle between Fishbourne and the current owner of the farm, Anne Stephens, the daughter of the person who made the original agreement.
The reason for the dispute is that the agreement was light on definitions, in particular, the definition of “planning permission” and “development”.
By the time it came to the Court of Appeal earlier this month, the main dispute was about the definition of “development”.
Lawyers for the owner argued that simply gaining permission to change a roof was not enough. Lawyers for Fishbourne said it was because that was the “plain meaning” of the words.
And in a ruling handed down this week, a three-judge panel backed the owner.
The ruling, written by Lady Justice Asplin, found that a “reasonable reader” of the agreement at the time it was made would “have in mind” that the option is over a farm “and approach the meaning of ‘development’ in that context”.
She said that Fishbourne’s definition “makes little commercial sense”.
“The inclusion of a 30% discount on the open-market value is indicative of an expectation that the purchaser/grantee would take steps to enhance the value of the land in order to be able to exercise the option. In other words, the planning permission which triggers the… option cannot be entirely inconsequential.”
She backed the lower court’s definition that a “development” means “the erection of a new building or buildings” and involves a change of use.
This case shows that context can make a huge difference in agreements, according to Julian Greenhill QC, who represented the owner.
“The case underlines the fact that, in the world of real property, context is, often enough, king. Those wishing not to be beholden to context will need to draft with care and precision, which was conspicuously missing here,” he said.
“The appeal concerned the trigger for a conditional land option over a 117-acre farm. At first sight, the wording of the clause defining the trigger might be said to favour the interpretation advanced by the appellant, Fishbourne. However, the Court of Appeal concluded that a narrower interpretation of the word ‘development’ was compelled by the factual and commercial context of the option and the land in question.”
Fishbourne Developments Ltd v Stephens
Court of Appeal (Macur LJ, Asplin LJ, Marcus Smith LJ) 16 December 2020
Mr John Litton QC and Mr James Neill (instructed by Fladgate LLP) for the appellant
Mr Julian Greenhill QC (instructed by Irwin Mitchell) for the respondent
