Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd

JurisdictionEngland & Wales
JudgeLord Justice Patten,Lord Justice Floyd,Lord Justice Males
Judgment Date14 May 2019
Neutral Citation[2019] EWCA Civ 823
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3/2018/0390
Date14 May 2019

[2019] EWCA Civ 823

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

LEEDS DISTRICT REGISTRY

NORRIS J

[2018] EWHC 118 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Patten

Lord Justice Floyd

and

Lord Justice Males

Case No: A3/2018/0390

Between:
Gaia Ventures Limited
Claimant/Respondent
and
Abbeygate Helical (Leisure Plaza) Limited
Defendant/Appellant

Piers Hill (instructed by Geoffrey Leaver Solicitors LLP) for the Appellant

Mark Wonnacott QC and Harriet Holmes (instructed by Metis Law) for the Respondent

Hearing dates: 3 & 4 April 2019

Approved Judgment

Lord Justice Patten
1

This is an appeal from an order of Norris J requiring the defendant, Abbeygate Helical (Leisure Plaza) Limited (“Abbeygate”), to pay the sum of £1.4m plus interest to the claimant, Gaia Ventures Limited (“Gaia”), under the terms of an agreement entered into on 4 July 2003 as part of the transfer (“the 2003 Transfer”) to Abbeygate of two registered leases (title numbers BM230584 and BM245732) of an ice rink and adjoining loading bay which form part of what is known as the Leisure Plaza in Milton Keynes.

2

The transferor and tenant under the two registered leases was a company called Planet Ice Limited (“Planet”) which operated the ice rink (“the Ice Rink”) as a commercial venture. The remainder of the Leisure Plaza consisted of a ten-pin bowling alley and a nightclub/restaurant. It was built on and occupied part of a larger site (“the Site”) at Elder Gate in Milton Keynes the freehold of which was owned by the Homes and Communities Agency (“the HCA”). The freehold title was subject to a long lease (“the Superior Lease”) of the Site that had been granted in 1992 to First Leisure Trading Limited (“First Leisure”) and which contained covenants restricting any future development or reconstruction of the Site and the Leisure Plaza. Out of the Superior Lease First Leisure had granted four underleases. Two were the registered leasehold titles relating to the Ice Rink and the loading bay comprised in the 2003 Transfer (“the Ice Rink Leases”). The other two were underleases of electricity sub-stations (“the Transformer Leases”) which were also registered titles. One of the sub-stations provided power to land to the east of the Site which was owned by the Zurich Insurance Group (“the Zurich Land”) and occupied by two retail stores (Argos and Toys ‘R’ Us). The cabling connecting the Zurich Land to the sub-station was the subject of an express easement granted as part of the sale of the Zurich land in 1994 by HCA's predecessor in title, the Commission for the New Towns. The easement was along a defined route across the Site identified by reference to a plan.

3

The Leisure Plaza was not a commercial success and by 2003 both the bowling alley and the nightclub had closed. The Ice Rink continued to operate but was in need of major refurbishment. The local authority, Milton Keynes Borough Council (“the Council”), had carried out a feasibility study which confirmed that the Site required to be re-developed. But the Council (which was also the local planning authority) was keen to ensure that any re-development should produce as part of the scheme a refurbished and functioning ice rink.

4

Abbeygate was formed as a joint venture company between Helical Bar PLC and Abbeygate Developments Limited to acquire and re-develop the Site and any necessary adjoining land. In order to do this it was necessary either to acquire the freehold and the various leasehold interests so as to obtain a clear title or at least to acquire the Superior Lease and any relevant underleases and then agree variations of the terms of the Superior Lease which would permit the development to proceed.

5

On 30 May 2003 Abbeygate acquired the Superior Lease for the sum of £2m. On 4 July 2003 it entered into a contract with Planet Ice for the purchase of the two Ice Rink Leases for the sum of £1.525m. It was a term of the agreement that Abbeygate would at the option of Planet Ice grant a lease back of the Ice Rink and the loading bay so as to allow the Ice Rink to remain operational pending its refurbishment as part of the proposed development. The lease back option (which was exercised by Planet Ice) provided for the grant of a tenancy that was excluded by a court order from the protection of Part II of the Landlord and Tenant Act 1954. It was terminable at any time on giving three months' notice in writing. Under clause 19 of the agreement the transfer of the Ice Rink Leases to Abbeygate was also to contain the overage provisions which were set out in Schedule 1 to the agreement.

6

Under clause 2.1 of the overage provisions Abbeygate covenanted to pay to Planet Ice the sum of £1.4m (defined as the Additional Payment) not later than 10 working days after any Trigger Date. So far as material, the relevant Trigger Date was defined in clause 1.1.15 as:

“… the Date of an Acceptable Planning Permission…”

which, according to clause 1.1.6, meant:

“The date which following the grant of an Acceptable Planning Permission is three months after the Grant Date without a Challenge being made or in the event of such a Challenge the date upon which such Challenge has been abandoned or lost or finally disposed of leaving in place an Acceptable Planning Permission intact valid and of full effect.”

7

An “Acceptable Planning Permission” was defined in clause 1.1.2 as:

“a Planning Permission (granted by the local planning authority or the Secretary of State or an Inspector or where the context requires the outcome of any Challenge) which is granted on terms and subject to conditions which in the reasonable opinion of the Buyer are acceptable and commercially viable”.

8

But the definition of “Trigger Date” in clause 1.1.15 was subject to a proviso that “no date more than ten years after the [date of the transfer] will be a Trigger Date”. The longstop Trigger Date in the present case was therefore 4 July 2013.

9

Clause 4.5 of the overage provisions imposed on Abbeygate an obligation to:

“… use its reasonable endeavours to obtain an Acceptable Planning Permission but such obligation shall have regard to the current strategic and local planning policy and the advice of its consultants including Planning Counsel of at least five years standing from time to time and it shall not be obliged to do so for the duration of any period after which it is advised that it does not have a greater than 60% prospect of success provided that nothing herein contained shall prevent the Buyer from submitting more than one Application.”

10

The obligation was therefore expressly qualified so as to entitle Abbeygate to defer to local planning policy considerations and expert advice in determining how to progress the planning application. But the covenant to make the overage payment contained in clause 2.1 was also conditional on the provisions of clause 3. This provided:

“3.1 The obligation to make the Additional Payment contained in clause 2 hereof is conditional upon the Buyer having obtained a variation of the provisions of the registered leases and the Superior Lease to permit the use and development of the premises demised by the Superior Lease and the Property for all purposes contemplated by the Acceptable Planning Permission or alternatively the acquisition of any necessary interest in the Superior Lease or the registered leases so that the necessary variation is available to it or the registered leases are merged in the Superior Lease and the Superior Lease is merged in the freehold.

3.2 If on the Date of an Acceptable Planning Permission the condition set out in clause 3.1 above has not been satisfied the Trigger Date will be postponed until 10 working days after satisfaction of the said condition subject always to the proviso in clause 1.1.15 hereof.

3.3 The Buyer shall as soon as it considers strategically advisable (taking into account the requirements to obtain an Acceptable Planning Permission) commence and thereafter use reasonable endeavours to negotiate and agree with the parties entitled to the reversions immediately expectant on the determination of the terms of the registered leases and the Superior Lease the variations contemplated by clause 3.1 as soon as reasonably practicable.

3.4 The Buyer shall notify the Seller as soon as reasonably practicable after the satisfaction of the condition in clause 3.1 and shall at the request of the Seller provide the Seller with details of the progress made in satisfying the said condition.”

11

These provisions have given rise to a number of issues of construction. Clause 3.1 contains three alternative conditions at least one of which must be satisfied before the £1.4m becomes payable. Broken down they are (in the language of clause 3.1):

(a) Abbeygate having obtained a variation of the provisions of the registered leases and the Superior Lease to permit the use and development of the premises demised by the Superior Lease and the Property for all purposes contemplated by the Acceptable Planning Permission; or alternatively

(b) the acquisition of any necessary interest in the Superior Lease or the registered leases so that:

(i) the necessary variation is available to it; or

(ii) the registered leases are merged in the Superior Lease and the Superior Lease is merged in the freehold.

12

Gaia's case as pleaded is that of the three conditions at least condition (b)(ii) was practicable and capable of being achieved by the longstop Trigger Date so it is in relation to that condition that the clause 3.3 obligation to use reasonable endeavours falls to be judged. Although clause 3.3 refers to the “variations contemplated by clause 3.1” the word “variations” appears only in conditions (a) and (b)(i). But Mr Hill for Abbeygate accepts, as he did at the trial, that this must be construed as a reference to all...

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1 cases
  • Hai Jiao 1306 Ltd and others v Yaw Chee Siew
    • Singapore
    • International Commercial Court (Singapore)
    • 13 July 2020
    ...and to the extent that it is in conformity with the obligor’s arrangements: Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd [2019] EWCA Civ 823 at [81]. What constitutes best endeavours in each case is a fact-sensitive exercise and, like any other contractual clause, must be inter......
1 firm's commentaries
  • Failure to use reasonable endeavours: skating on thin ice
    • United Kingdom
    • JD Supra United Kingdom
    • 27 June 2019
    ...to use reasonable endeavours to enable a commercial site to be redeveloped: Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd [2019] EWCA Civ 823. Abbeygate contracted with Planet Ice to purchase leases relating to an ice rink. Abbeygate was required to make an additional payment to......

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