CPC Group Ltd v Qatari Diar Real Estate Investment Company

Hearing date: Ist December 2009

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Warren :

Introduction

This is an application by the Claimant (“CPC”) for directions for an expedited trial. The application is opposed by the defendant (“QD”).

The dispute concerns the site of the former Chelsea Barracks (“the Site”) which, until 2007 housed the Guards regiments. On 5 April 2007, the Site was acquired by Project Blue (Guernsey) Ltd (“PBGL”) for £959 million. PBGL was the joint venture company of CPC and QD, with CPC holding a minority share.

An application for planning permission was made to Westminster City Council (“WCC”) on 2 April 2008 based on a design by Rogers, Stirk Harbour + Partners.

During the course of late 2008, negotiations between CPC and QD resulted in the sale by CPC to QD of its interests, namely shares and loan notes, in PBGL. The sale and purchase agreement (“SPA”) is dated 6 November 2008.

The SPA

The SPA provides for an initial and a deferred consideration. The initial consideration was duly paid. The amount of the deferred consideration, calculated in accordance with Schedule 4, depends primarily on the scope of the planning permission eventually obtained. It is capped, in any event, at £81 million.

I need to refer to a number of paragraphs of Schedule 4. As well as providing the mechanism for the calculation of the deferred consideration, it imposes a number of obligations on QD designed to ensure that a suitable planning permission is obtained.

Paragraph 5(a)(i) requires QD to use all reasonable but commercially prudent endeavours to procure a Planning Permission free of Legal Challenge. “Planning Permission” is a term defined by reference to the Planning Application. “Planning Application” is another defined term; it is the original planning application

“as may be varied or any new application which may be made for the development of the [Site] by or consented to by [QD]…..”

The SPA contains provision for variation of the Planning Application or even the making of a wholly new application. In the absence of a modified or new planning application, QD is under an obligation to procure planning consent in accordance with the original planning application.

Paragraphs 5(c) to (e) are placed under the heading “Changes to the Planning Application”.Paragraph 5(c) applies (subject to paragraphs 5(d), 5(e) and 5(f)) where a material variation is proposed to the Planning Application but the Planning Consultant (DP9 LLP) has expressed the view that such variation could prejudice the chance of obtaining Planning Permission but QD nonetheless still wishes to proceed with the variation. In such a case CPC and QD are to review the variation to see if it is in their respective interests to make the variation. If they agree, then the variation forms part of the Planning Application for the purposes of Schedule 4.

If agreement cannot be reached, CPC and QD are to make a joint request to the Planning Consultant “to confirm whether such a variation would reduce the chance of successfully obtaining Planning Permission without Appeal to less than better than evens (meaning less than 55%”).

The Planning Consultant will either give that confirmation or he will not. If he opines that the chance is better than evens, the variation takes effect. If he opines that the chance is less than evens, the variation may not be made unless QD pays to CPC the sum of £68.5 million, after which QD may make the variation and the provisions of the Schedule cease to apply save as they relate to an item defined as the Rights of Light Threshold Payment.

That last provision reflects, and is consistent with, the rather wider “get out of jail” (but not free) card given to QD by paragraph 5(aa) which gives QD a right of election at any time to pay CPC £68.5 million, upon which payment the obligations in Schedule 4 fall away save for any that relate to the Rights of Light Threshold Payment.

Paragraph 5(d) provides, (subject to paragraph 5(e)) that no variation which is likely to result in a material reduction of Developable Area may be made unless the Planning Consultant confirms to CPC and QD jointly that to maintain the Planning Application without such variation would reduce the chance of successfully obtaining Planning Permission without Appeal to less than better than evens or unless paragraph 5(c)(ii) is exercised ie payment of £68.5 million.

Paragraph 5(e) is not material for present purposes.

Paragraphs 5(a) to (e) deal with variations.Paragraph (f) deals with withdrawal and provides that the Planning Application shall not be withdrawn unless certain conditions are fulfilled. So far as relevant for present purposes the conditions are

“(i) ….the Mayor has indicated that he intends to exercise his power to direct [WCC] to refuse the Planning Application……([one of the events amounting to] a “Deemed Refusal”); and

(ii) the Planning Consultant recommends to [QD] and [CPC] jointly that a revised Planning Application stands a better chance of a delivering a Planning Permission than the pursuit of an Appeal of the previous planning application”.

Where those conditions are both satisfied, QD has a choice under paragraph 5(f)(iii):

a. to withdraw the Planning Application provided that it submits a replacement application with a view to securing the objectives of paragraph 5 of Schedule 4

“with all due diligence and expedition to meet the reasons for the Deemed Refusal provided that such changes do not go further than is necessary to meet those reasons for the Deemed Refusal otherwise the resubmission will be treated as a variation and the provisions of paragraph 5(c), 5(d) and 5(e) shall apply to the proposed changes”

b. to continue with the Planning Application where the Planning Consultant has advised that there is a chance equal to or better than evens of success of an Appeal.

Paragraph 5(g) deals with new applications. If QD wishes to submit a planning application for the Site other than the Planning Application while the Planning Application and any Appeal remain undetermined, such application is to be referred to the Planning Consultant as if it were a material variation under paragraph 5(c) and is not to be submitted other than in accordance with that paragraph.

Paragraph 9 of the SPA makes provision for what is to happen where under the SPA, CPC and QD are jointly to appoint any person or firm or to give joint instructions. If either party fails to engage in the process, the issue can be referred to expert determination under paragraph 10, the expert to determine the terms of appointment or instruction.

Observations on paragraph 5 Schedule 4 SPA

I make the following observations on the provisions of paragraph 5 Schedule 4 of the SPA at this stage:

They are clearly designed to protect CPC by ensuring that the Planning Application with or without amendments, is pursued in order to deliver a planning consent leading to a development with the best developable area and the best financial return to CPC. QD can remove CPC by paying it £68.5 million at any time. And in no case is CPC to receive more than £81 million.

Paragraph 5(c) covers cases where a material variation worsens the chances of success of the Planning Application, and describes the circumstances in which the variation may proceed. The paragraph does not cover a case where a variation improves the chances of success.

However, paragraph (d) prevents a variation which reduces the Developable Area (and thus the amount payable to CPC) even if it improves the prospects of success unless proceeding with the unvaried Planning Application would “reduce” the chance of success to less than evens (in context meaning “result in” the chance of success being less than evens).

Neither paragraph 5(f)(i) nor paragraph 5(f)(ii) is entirely clear in its effect.Paragraph 5(i) contemplates a case where the Mayor “has indicated that he intends to exercise his power”. His power only arises in fact when WCC has decided that it wishes to grant the permission, following which the Mayor has a period of time in which to direct WCC to refuse the permission. On one reading of paragraph 5(f)(i) it might be said that he cannot properly indicate an intention to exercise his power prior to WCC's decision that it wishes to give permission. But there is another view: the Mayor can perfectly properly address his mind to the Planning Application at any time, and perfectly properly say to the parties that his current view is that he does not like the plans and that his current intention, if no alterations were made, would be to exercise his power if and when WCC made its decision in favour of granting permission, albeit that he would have to give the matter fresh and formal consideration at that stage. Accordingly, on another reading of paragraph 5(f)(i), it might be said that such a warning to the parties is an indication of intention for the purposes of that paragraph.

Another matter which is not clear from paragraph 5(f)(i) is to whom the indication must be made in order to fall within paragraph 5(f)(i). Is it enough that he tells an official in a private meeting? Is it enough that he tells the Deputy Mayor who then tells...