Gold Group Properties Ltd v BDW Trading Ltd
Jurisdiction | England & Wales |
Judge | The Hon Mr Justice Coulson |
Judgment Date | 03 March 2010 |
Neutral Citation | [2010] EWHC 323 (TCC) |
Court | Queen's Bench Division (Technology and Construction Court) |
Docket Number | Case No: HT-09-464 |
Date | 03 March 2010 |
[2010] EWHC 323 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: The Hon Mr Justice Coulson
Case No: HT-09-464
Mr Jonathan Acton Davis QC (instructed by Field Seymour Parkes) for the Claimant
Mr Nicholas Dennys QC (instructed by Osborne Clarke) for the Defendant
Hearing Date: 5 th February 2010
The Hon Mr Justice Coulson:
By an application made on 17.12.09, the Claimant (whom I shall call hereafter “Gold”) seeks summary judgment, with damages to be assessed, against the Defendant (whom I shall call hereafter “Barratt”). The dispute between the parties arises out of a Development Agreement (“the Agreement”) dated 10th August 2007, relating to a substantial site at Gadoline House, Godstone Road, Whyteleafe, in Surrey. The intention was that Barratt would develop the site by building a large number of houses and flats, which would then be sold on long leases, with Gold (as the freeholder owner) and Barratt sharing the revenue generated by the sales. In the event, next to nothing happened on site between 2008 and 2009. The reasons for that inactivity lie at the heart of Gold's claim for summary judgment.
It is Barratt's case that it was a condition precedent to their commencement and carrying out of building works on site that the properties would fetch the minimum prices set out in one of the schedules to the Agreement. They argue that, because they had received advice that a fall in the property market meant that those minimum prices would not be achieved, they were not obliged to start work and/or the Agreement was frustrated. There is also an argument that, in these circumstances, Gold were in breach of contract for failing to re-negotiate the financial elements of the Agreement.
Gold, on the other hand, say that the minimum prices were inserted into the Agreement as a form of protection for Gold only, to guarantee them a minimum recovery from the development, and that there was nothing to justify Barratt's wholesale refusal to carry out the building works on site. Whilst they accept that the assessment of the damages flowing from what they maintain was Barratt's wrongful repudiation of the contract will give rise to issues which would require a separate quantum hearing, Gold say that Barratt have no realistic prospect of defending the claim on liability. Thus, Gold submit, summary judgment should be entered in their favour pursuant to CPR Part 24.
I consider that the following issues arise for my determination on this application:
(a) Construction Issues(Section 5 below)
(i) For whose benefit was the Fourth Schedule of the Development Agreement (i.e. the Schedule that set out the minimum prices?
(ii) Was the ability to realise those minimum prices a condition precedent to Barratt undertaking the development works?
(b) Frustration ( Section 6 below)
Was the Agreement frustrated as at 12 th January 2009?
(c) Breaches of Contract ( Section 7 below)
(i) Were Barratt in breach of contract as at 12 th January 2009?
(ii) Were Gold in breach of contract as at 12 th January 2009?
(d) Repudiation ( Section 8 below)
(i) Did Barratt wrongfully repudiate the contract in 2009 and, if so, was that repudiation accepted by Gold?
(ii) Did Gold wrongfully repudiate the contract in 2009 and, if so, was that repudiation accepted by Barratt?
Before addressing those issues, I set out in Section 2 below the limits of the court's enquiry on this application, before going on to identify in Section 3 the relevant terms of the Agreement and, in Section 4, the relevant facts. I am very grateful to leading counsel for their considerable assistance in dealing with the disputes between the parties.
THE LIMITS ON THE COURT'S ENQUIRY
Because this is an application pursuant to CPR 24, I am keenly aware of the limits upon the Court's enquiry into the issues. Ultimately, the only matter of relevance is whether Barratt has a real prospect of successfully defending the claim for wrongful repudiation and/or breach of contract. That is not a particularly high hurdle for a defendant to overcome. The authorities make it plain that, in order to satisfy this test, a defendant has to demonstrate a defence which is not 'false, fanciful or imaginary', and is better than merely arguable: see International Finance Corp v Utexafrica Sprl [2001] CLC 1361 and E D & F Mann Liquid Products v Patel [2003] EWCA Div 472.
Generally under CPR Part 24, the Court should endeavour to avoid, wherever possible, any sort of mini-trial on an application for summary judgment: see Swain v Hillman [2001] 1 All ER 91. At any subsequent trial, what matters is 'whose case is the more probable' whilst, under Part 24, 'the criterion which the Judge has to apply under CPR Part 24 is not one of probability; it is absence of reality': see Lord Hobhouse of Woodborough in Three Rivers DC v Bank of England (No.3) [2001] 2 All ER 513.
However, there can be no doubt that in the present case, the Court can and should look closely at the issues raised and the evidence relied on. There are four particular reasons for that. First, many of the issues are matters of construction of the Agreement. A judge dealing with a pure question of contract construction on a Part 24 application is in just as good a position to reach a conclusion on that question as the judge in any subsequent trial. Secondly, one of the principal issues in this case concerns the alleged frustration of the Agreement, and the authorities are clear that that is also a matter of law not fact (see Section 6.1 below).
Thirdly, in the present case, the dealings between the parties over the relevant period are summarised in a handful of documents and there is very little to suggest that these documents are not a complete record of the deterioration of the relationship between the parties at the relevant time. Finally, as we shall see, many of the background facts, including a number of the allegations of breach, are not – cannot be —disputed by Barratt.
There was nothing in the witness statement produced by Mr Champion on behalf of Barratt which suggested that there was any additional evidence on the issues raised by the application which, for whatever reason, had not been placed before the Court. When I raised that matter expressly with Mr Dennys, he raised three possible areas for further research: the background to the Agreement; the absence of the files belonging to a Barratt subsidiary, namely Barratt Thames Valley; and the failure on the part of Barratt to obtain any evidence from Mr Tuthill, the director originally responsible for this project who no longer works for Barratt. I deal with each of those alleged restrictions in the appropriate place below.
Accordingly, whilst I have very much in mind the principles noted in paragraphs 5 and 6 above, I have concluded that it is appropriate, in the particular circumstances of this case, to enquire rather more fully than is normal under CPR Part 24 into the issues that have arisen between the parties.
THE DEVELOPMENT AGREEMENT
Background
Of course, it is trite law that no contract can be construed in a vacuum, and that it is always necessary for the Court to have regard to the background to the contract when construing its express terms: see Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896. In the present case, neither side has suggested that there is any particular aspect of the background to the Agreement to which the Court should have regard. Although it was suggested by Mr Dennys that there may be relevant background material about which Barratt are presently unaware, that seems highly unlikely, particularly as their own witness, Mr Champion, has considered the issue and expressed no such caveat in his statement. Indeed, he refrained from referring to the negotiations at all because he said that he had been advised that “they are unlikely to be admissible to influence the meaning of the Development Agreement”.
The one part of the background that both sides referred to is the letter from Barratt to Gold of 7 th February 2007, which was in the following terms:
“Dear Mr Gold
Gadoline House, Godstone Road, Whyteleafe
Further to our meeting yesterday afternoon, I would like to confirm this Company's interest in the purchase of the above site and would further confirm that while I am happy to increase my offer of £7,700,000 to £8,000,000 (eight million pounds), subject to contract, this offer would be subject to vacant possession being available on completion.
I understand this might cause a tax problem, given that you have Ann Summers in occupation and likely to stay in occupation until alternative premises can be found/built.
As discussed I am happy to make the following proposal.
1. The Gold Property Group retains the freehold of the property and enters into a development agreement with Barratt Homes. Instead of a straightforward land purchase when one would normally exchange on such a purchase, Barratt Homes would enter into an Option to enter into the development agreement, the only condition being vacant possession.
2. On vacant possession, Barratt would complete the development agreement and would, under licence, construct on behalf of the Gold Property Group the properties with the benefit of the detailed planning permission.
3. In return for constructing the properties, the Gold Group of Companies would pay Barratt Homes:
• 45% of the first £18,000,000 of revenue and 5% of the first £18,000,000 as an agency fee for selling the properties
• A further 55% of the next £1,500,000 of revenue for constructing the properties and 5% for sales and...
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