Aviva Life & Pensions Ltd (Respondent/Claimant) v Kestrel Properties Ltd
| Jurisdiction | England & Wales |
| Judge | MR MARK CAWSON QC |
| Judgment Date | 09 November 2011 |
| Neutral Citation | [2011] EWHC 3934 (Ch) |
| Court | Chancery Division |
| Date | 09 November 2011 |
[2011] EWHC 3934 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
9 Rolls Building,
Fetter Lane,
London EC4A 1NL
Mr Mark Cawson QC
(Sitting as a Deputy Judge of the High Court) His Honour Judge Hull Honour Judge Hull
MR JONATHAN SMALL QC and MR ADAM ROSENTHAL appeared on behalf of the Respondent/Claimant.
MR JOHN MALE QC appeared on behalf of the Applicant/Defendant.
Approved Judgment
Wednesday, 9 November 2011
Introduction
By its Part 8 claim issued on 19 July 2011, the claimant ("Aviva"), seeks declaratory relief in relation to two points of law or construction concerning the provisions of an overage clause contained in clause 19 of an agreement for the sale of land.
I have before me an application by the defendant, Kestrel Properties Limited ("Kestrel"), dated 4 August 2011, made pursuant to CPR 11(1)(a) and (b). By that application, Kestrel seeks an order, under CPR 11(1)(a) or 11(1)(b) of the Civil Procedure Rules:
a. Declaring that the court has no jurisdiction in relation to the proceedings issued by Aviva under claim number H11C02463;
b. Alternatively, if the court does have jurisdiction, then by reason of the matters set out in the witness statement of Ian Patrick Travers dated 3 August 2001 in support of this application, the court should, in the circumstances, decline to exercise jurisdiction and should stay the proceedings.
The essence of Kestrel's challenge to the jurisdiction is that the points of law or construction raised by Aviva must be, or ought to be, decided by the independent expert already appointed to determined these and other points of law and the overage itself and not by the court.
Kestrel is represented by Mr John Male QC; Aviva is represented by Mr Jonathan Small QC, and with him Adam Rosenthal. I would like to express my thanks to counsel for their helpful written and oral submissions.
Background
On 5 November 1998, Kestrel entered into an agreement ("the Sale Agreement") with Sleepeezee Limited for the sale and purchase of the Sleepeezee factory, Morden Road, Merton ("the property"), under which the property was sold by Kestrel to Sleepeezee for the sum of £2 million, exclusive of VAT. Kestrel is part of the Capital & Counties group of companies, which is one of the largest property investment and development companies in the UK. Clause 19 of the Sale Agreement contains overage provisions in favour of Kestrel:
"19.1 In this clause the following words shall
have the following meaning:
'Excess'
means 50 percent of the amount by which the Enhanced Value exceeds the Base Price less half of the reasonable and proper costs incurred by the Buyer in obtaining a Planning Consent (such costs being approved in advance by the Seller, such approval not to be unreasonably withheld or delayed and shall be deemed to have been approved if no objection in writing with full reasons is made within 15 working days of the date of the Buyer requesting approval);
'Enhanced Value'
means the open market value for the freehold interest with vacant possession of the part of the Property on which a planning consent is to be implemented for residential, leisure, retail or office use (other than office use ancillary to another use or uses ancillary to an industrial use) ('Planning Consent') as at the date of the Buyer's Notice under clause 19.3;
For the avoidance of doubt the Property shall be valued taking into account all conditions of the Planning Consent and planning or other agreements entered into in connection therewith whether on or off the Property and any physical restraints or other limitations actually affecting the Property.
'Base Price'
Means the open market value for the freehold interest with vacant possession of such part of the Property (which has the benefit of a Planning Consent) but assuming such part had the benefit of planning consent for new light industrial and/or general industrial warehouse use with ancillary offices as at the date of the Buyer's Notice under clause 19.3 PROVIDED THAT the Base Price can never be less than the price paid under this Agreement or an appropriate proportion in respect of the part of the Property with the benefit of a Planning Consent.
'Buyer'
where the context permits includes the Buyer's successors in title.
'Implementation'
means the date on which a material operation comprised in the development authorised by the Planning Consent has begun as defined by Section 56(4)(a)-(d) inclusive of the Town and Country Planning Act 1990 and 'implement' shall be construed accordingly.
19.2 The Buyer shall not implement the Planning Consent as defined in clause 19.1 of the Property for a period of 21 years after the Completion Date without complying with the other provisions of this clause 19 PROVIDED THAT having complied with the provisions once in respect of the Property, or any part of the Property, they shall no longer apply nor affect the Property or the appropriate part of the Property, in respect of which the provisions have been complied with.
19.3.1 The Buyer shall notify (the 'Buyer's Notice') the Seller of any proposed implementation of a Planning Consent in respect of the whole or any part of the Property and shall provide the Seller with full details of the proposed implementation including the Enhanced Value and a calculation of the Excess.
19.3.2 The Seller shall within 28 days of such notification under clause 19.3.1 confirm in writing whether it agrees or disagrees such calculation stating its reasons. If no such response is received from the Seller within 28 days of the Buyer's Notice, a dispute will be deemed to have arisen and the provisions of clause 19.4 will apply.
19.4 In the event of the Seller and the Buyer failing to agree the amount of the Enhanced Value, Base Price or the calculation of the Excess within 28 days of the Buyer's Notice, such dispute or difference shall be referred to an independent and fit Surveyor with no less than 10 years experience in such valuations agreed between the parties or failing agreement as to who shall be appointed such appointment shall, at the request of either party, be made by the President for the time being of the Royal Institution of Chartered Surveyors. Such Surveyor shall act as expert (but not arbitrator) but shall invite the parties to make representations within 21 days of his appointment and shall make and notify his decision to the parties within 28 days of the expiration of the 21-day period for the making of representations."
The trigger to the overage provisions was the proposed implementation of a planning consent. On 17 March 2008, Aviva, which is one of the largest pension and insurance companies in the UK with extensive property investments and great expertise in property transactions, gave notice to Kestrel under the overage provisions, saying, in short, that the provisions were triggered, but that its contention was that there was no increase in value and that nothing was due to Kestrel under clause 19.
The development triggering the overage was the construction by Aviva of part of the property of the London site of the office of the Deputy Prime Minister's ultimately ill-fated FiRe Control project. Aviva agreed to let, and did let, this FiRe Control centre to the Secretary of State. In response to the notice given by Aviva, Kestrel responded on 4 April 2008, saying that Aviva had supplied insufficient information about the proposal and asking for building costs, details of floor areas, and the terms and conditions of the proposed occupation. Unsurprisingly, given Aviva's contention that there was no increase in value and therefore nothing due to Kestrel under the overage provisions in clause 19, a dispute arose as to the overage, if any, payable and the provisions of clause 19.4 came into play, albeit not within the time limits provided for by clause 19.4.
On 25 June 2008, Mr MD Plater RICS ("the expert") was appointed by the President of the RICS, failing agreement as to who should be appointed. As it seemed likely, if not inevitable, that various points of law or construction would have to be resolved before the expert could carry out the requisite valuation exercise, the parties in extensive correspondence between June 2008 and June 2010, discussed various ways of resolving or determining these legal or construction issues, including a case stated, to Mr Nicholas Dowding QC of Falcon Chambers, and reference to arbitration. Ultimately, Aviva and Kestrel signed up to a document headed "Agreed Procedure and Timetable" ("the APT"), Aviva signing the same on 19 July 2010 and Kestrel signing the same on 22 July 2010. The expert subsequently signed a copy of the APT and sent his signed copy to the parties on 26 July 2010.
The APT reads as follows:
"Stage 1 – Valuation Representations
1. Each party is to submit written representations to the Expert setting out its case on the amount of the Enhanced Value, Base Price and a calculation of the Excess [being defined terms In the Agreement] ("Valuation Representations"). Such representations are to be received by the Expert by no later than 4pm on 11 August 2010. The Valuation Representations are to identify clearly and explain any valuation assumptions rallied upon by the parties.
2. Each party will submit its Valuation Representations to the Expert in duplicate in sealed and clearly Identified envelopes; One Envelope will be market "Envelope 1—Other Party'' and one will be marked "Envelope 2—Expert".
3. By...
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