Morris and Another v Glendore Investments Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 18 December 2003 |
| Neutral Citation | [2003] EWHC 3091 (Ch) |
| Court | Chancery Division |
| Docket Number | HC 03 C 00347 |
| Date | 18 December 2003 |
[2003] EWHC 3091 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lawrence Collins
HC 03 C 00347
Mr Jeremy Cousins QC and Mr Philip Kremen (instructed by Robert Brand & Co) for the Claimants
Mr Michael Douglas QC (instructed by Shranks) for the Defendants
Approved by the Court for handing down
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.
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I Introduction
The claimants ("the Morris brothers") are the freehold owners of 1, 2 and 3 Northfield Avenue, West Ealing, London W13 ("the Property"), which was originally built as a cinema. At the outset of the transaction which is the subject of this case, part of the Property was used as a snooker club by the Morris brothers, and part as a cinema on a lease by them to the cinema operators. The defendants ("Glendore") were, until a change of name in September 2001, Albion Glendore Investments Ltd. On February 16, 2001 the Morris brothers entered into an agreement with Glendore ("the Agreement") pursuant to which Glendore was granted an option to purchase the Property ("the Option") for £1.32 million ("the Option Price") in consideration of the payment of a £15,000 option fee.
The dispute in this case centres upon whether Glendore has lost the right to exercise the Option, or whether the Option has been validly exercised and should (as Glendore counterclaims) be made the subject of an order for specific performance or damages in lieu. The Morris brothers maintain that upon the true construction of the Agreement, alternatively having regard to its implied terms, Glendore can derive no assistance from any provisions of the Agreement providing for the extension of the period in which the option could be exercised. If the Option has been validly exercised, then there is no dispute that an order for specific performance must follow.
Glendore also counterclaims for the recovery of £142,250, which was advanced to the Morris brothers by Glendore to facilitate their purchase of a leasehold interest to which part of the Property was subject at the time of the Agreement. There is no dispute that this money is recoverable.
II Pre-agreement
Through the introduction of a friend of the Morris brothers, Mr Cragg (who was subsequently paid a fee by Glendore), Mr Freeborn of Glendore entered into discussions with the Morris brothers for an option to buy the Property, with a view to developing and selling it. Mr Freeborn's evidence was that he explained to them that the purchase price would be directly related to the costs of redeveloping the Property and the potential profit he could make on a further sale. He told them that the land value at the time of purchase was usually 25% to 35% (and in the witness box Mr Alan Morris confirmed that there had been talk of 33%) of the sale value depending on site conditions and the planning consent that could be obtained.
Mr Freeborn's evidence was that he told the Morris brothers about the time periods involved and the delays which might occur; that the period for determining a planning application was supposed to be 8 weeks but that there could be a significant amount of additional time taken in negotiating between the parties in order to try to meet any comments or objections to the proposed scheme; that if a planning application was refused there were a number of ways of appealing including written representations, informal hearing or public enquiry; that it was possible to put in further applications; that he could not really say how long an appeal would take but that in his experience if the appeal was by way of written representations or informal hearing it could take between six to eight months. At no time did he give any commitment as to how long the whole process would actually take. He did explain that if all went to plan, he would hope to have a planning consent within the year but that it was impossible to be sure exactly how long it would take to secure a satisfactory planning permission. Mr Alan Morris' evidence was that he did not recall any talk of appeal and that Mr Freeborn gave him a rough estimate of 3 months for the process.
On November 29, 1999 Mr Freeborn wrote on behalf of Glendore to the Morris brothers confirming the terms, subject to contract, which would be offered for an option to acquire the freehold incorporating the snooker club and cinema. The option fee was to be £15,000 which would be deducted from the purchase price when the Option was exercised, and the purchase price would be £1.3 million. The Option Period would be the time necessary to negotiate with the planners, submit an application(s) for planning permission and receive a planning consent satisfactory to Glendore plus such time as was necessary for an appeal to be finally determined should the planning application be refused and should Glendore consider that there was a reasonable chance of success. The offer was accepted, subject to contract and without prejudice, on December 9, 1999. Mr Alan Morris' evidence was that he took no independent advice about the development value of the Property.
From late 1999 or early 2000 the Morris brothers negotiated with the tenants of the cinema for a surrender of their lease. By May 2000 a surrender had been agreed in principle, and by November 2000 the agreement for surrender had been approved by the court. Glendore agreed to advance £142,250 to the Morris brothers to fund the surrender, on the terms that it was secured on the Property, and was to be interest-free for 12 months from the date of drawdown but was to attract interest thereafter. After some further delays the surrender was completed in June 2001, and the loan was drawn down on June 6, 2001.
III The Agreement
The Option Price agreed in 1999 was £1,300,000. Subsequently (either because of the delay, or because the Morris brothers found that they would have to pay more for the surrender of the cinema lease than they expected) it was agreed that it should be increased to £1,320,000.
The Agreement was executed on February 16, 2001. The Option was granted by clause 2 of the Agreement, which provided that:
"In consideration of the Option Fee paid by the Grantee to the Grantor (the receipt of which the Grantor hereby acknowledges) the Grantor grants to the Grantee the option of purchasing the Property at the Purchase Price and subject to the provisions of this Agreement."
Clause 3 of the Agreement provided:
"3.1 The Grantee will at its own expense apply to the local planning authority for Planning Permission for the Development
3.2 Following the submission of the application for Planning Permission the Grantee will if requisite or desirable in order to obtain it enter into discussion or negotiation with the local planning authority
3.3 The Grantee may agree with the local planning authority the extension of the statutory period for the giving of notice of its decision under Section 78(2) of the Town and Country Planning Act 1990….
3.4 The Grantor shall comply with the following obligations:-
3.4.1 The Grantor will co-operate with the Grantee and will not object to any planning application made by the Grantee …
….
3.5 The Grantee may appeal against any Planning Refusal
3.6 The Grantee will prosecute any such appeal with all due diligence and will conduct its part in the appeal proceedings in a good and efficient manner…."
The exercise of the Option was governed by clause 4:
"If the Grantee wishes to exercise the Option and at any time during the Option Period serves notice on the Grantor by means of a notice…. and makes payment to the Grantor of the Deposit [of £100] on or before the date of service of the Option Notice, such valid service of the Option Notice and payment of the Deposit shall create a binding sale and purchase agreement whereby the Grantor shall sell and the Grantee shall purchase the Property at the Purchase Price on the terms of, and subject to the matters mentioned in, this Agreement"
The Definitions and Interpretation clause of the Agreement (Clause 1) defined: (a) "The Option Period" as "the period commencing on the date of this Agreement and expiring at 5:00 p.m. on the Termination Date", and (b) "The Termination Date" as "the 16 th November 2001 which date shall be extended (if any of the circumstances set out in the Third Schedule hereto apply) until the relevant date set out in the Third Schedule."
The Third Schedule (entitled "Circumstances extending the Termination Date") provided:
"1. If prior to the Termination Date an application for Planning Permission has been made but the written decision of the local planning authority shall not have been received by the Grantee prior to the Termination Date then the Termination Date shall in such circumstances be extended to a date being ninety eight days after receipt in writing by the Grantee of the decision upon such application.
….
3. If prior to the Termination Date (as extended pursuant to Paragraph 1 …) hereof:
3.2 notice of appeal has been given to the Secretary of State in respect of a Planning Refusal but the result of such application on appeal shall not have been received in writing by the Grantee prior to the Termination Date then the Termination Date shall be extended to a date:
(a) being 98 days after receipt in writing of the decision upon such application or appeal;
(b) being the date of withdrawal of such appeal Provided that if an application for Judicial Review is made within such 98 day period the Termination Date shall be further extended until fourteen...
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