Persimmon Homes Ltd v Anthony John Hillier
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Newey,Lord Justice McCombe |
| Judgment Date | 09 May 2019 |
| Neutral Citation | [2019] EWCA Civ 800 |
| Date | 09 May 2019 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2018/0494 |
[2019] EWCA Civ 800
Lord Justice McCombe
Lord Justice David Richards
and
Lord Justice Newey
Case No: A3/2018/0494
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Mr John Martin QC (sitting as a Deputy Judge of the High Court)
HC 2015-004050
Royal Courts of Justice
Strand, London, WC2A 2LL
Timothy C. Dutton QC (instructed by Whitehead Monckton Limited) for the Appellants
Michael Fealy QC (instructed by Walker Morris LLP) for the Respondent
Hearing dates: 22 January 2019
Approved Judgment
This is an appeal against an order of John Martin QC, sitting as a Deputy High Court Judge, whereby he ordered the rectification of a share sale agreement, and a related disclosure letter, and declared the appellants to be in breach of warranties given by them in the agreement, as so rectified, and liable to pay damages. There are two grounds of appeal. First, the judge was wrong, on the evidence before him, to order rectification of the agreement and the disclosure letter. Second, and in any event, the disclosure letter was as a matter of law incapable of being rectified and the judge was therefore wrong to order its rectification.
The respondent to the appeal and claimant in the action, Persimmon Homes Limited (Persimmon), is a major housebuilding company which holds significant amounts of land for future development, including land for which planning consent has not been granted but which Persimmon considers to have development potential.
The appellants, Mr Hillier and Mr Creed, had built up and for many years ran a successful housebuilding business, mainly in Kent and Sussex. They too held properties or options to acquire properties with a view to future development, including properties without planning consent. This enterprise was conducted through a number of companies. These included Hillreed Holdings Limited (Holdings) whose subsidiaries included Hillreed Homes Limited (Homes), and Hillreed Commercial Limited whose subsidiaries included Hillreed Investments Limited (Investments). These companies were owned as to 95% by Mr Hillier and Mr Creed. Mr Hillier and Mr Creed alone also owned Hillreed Developments Limited (Developments).
By two share purchase agreements dated 5 October 2012, Persimmon purchased all the shares in respectively Holdings and Developments. It also agreed to purchase from Investments a freehold office building in Maidstone used as the Hillreed group's head office (the Maidstone freehold).
The rectification ordered by the judge related to the warranties given in the agreement for the sale of Developments and had the effect of including within the list of properties warranted to be owned by Developments the freehold interests in a property known as 11a Crawley Down Road, Felbridge, West Sussex and in the rear garden to a property known as 3 Crawley Down Road (the Felbridge freeholds). The judge ordered the disclosure letter given by Mr Hillier and Mr Creed to be rectified by restricting disclosures in relation to the property at Felbridge to “the land subject to the four option agreements” which refers to the options to purchase the rear gardens of the properties at 1, 5, 7 and 11 Crawley Down Road. The effect of the rectification of the agreement and the disclosure letter was that the sellers gave an unqualified warranty that Developments, inter alia, owned and occupied the Felbridge freeholds. (It is a curiosity observed by the judge that the agreement for the sale of Developments assumed that it held the benefit of the four options, whereas in fact they were held by Homes, but nothing turns on this as Persimmon acquired Holdings with its subsidiary Homes at the same time as it acquired Developments.)
The rear gardens of 1, 5, 7 and 11 Crawley Down Road, over which Homes held options, together with the rear garden of 3 Crawley Down Road, were capable of forming a single plot of undeveloped land, to which access could be given over 11a Crawley Down Road. (There was no rear garden to 9 Crawley Down Road.) The potential value of this complete site (the Felbridge site) was enhanced by the ownership of adjacent undeveloped land by another developer.
At all material times, including at the time of the share sale agreements, and thereafter, the Felbridge freeholds were owned by Investments, not by Developments. As a result, Persimmon indirectly obtained ownership of the options to purchase the rear gardens to 1, 5, 7 and 11 Crawley Down Road through its purchase of Holdings but did not obtain indirect ownership of the Felbridge freeholds, which were critical to any development of the Felbridge site.
The judge rejected Persimmon's case that, on their proper construction, the warranties of the properties owned and occupied by Developments included the Felbridge freeholds. There is no appeal against that decision.
The judge went on to consider and to accept Persimmon's alternative case for rectification of the warranties and the disclosure letter.
The judge summarised the applicable legal principles at [24]–[26], by reference to the decisions of this court in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 and Daventry DC v Daventry and District Housing Ltd [2012] 1 WLR 1333. This summary is not challenged but it is said that the judge did not correctly apply the principles to the evidence.
At [28], the judge stated that in order to deal with the rectification claim, it was necessary to set out the course of negotiations “in considerable detail”. Over the following 72 paragraphs, the judge examined the evidence with care and in detail but at no greater length than the case required.
For the purposes of this judgment, it is necessary only to highlight a few features and findings as regards the negotiations.
Having decided to sell their housebuilding business and, if the price were right, the landholdings, Mr Hillier and Mr Creed engaged KPMG in late 2011 to finder a buyer. In April 2012, KPMG contacted Persimmon with the proposal to sell a South East-based housebuilder, stating that “additional strategic land of 1900 units can be included in the sale if of interest”. Having signed a non-disclosure agreement, Persimmon was sent an information memorandum, containing a substantial amount of information on, among other things, the strategic landholdings. In addition to properties for which detailed or outline planning consent had been given, the memorandum stated that “The shareholders through a sister company Hillreed Developments control a significant portfolio of strategic sites in excess of 1900 units….The shareholders will consider including these in the Transaction”. The Felbridge site was described in the memorandum and it was said to be “Part owned, part held under option by Hillreed Developments”. The memorandum contained disclaimers by the sellers and KPMG as to the accuracy of the information contained in the memorandum.
On 8 May 2012, Persimmon submitted an indicative offer of £45.5 million for the share capital of Holdings and for “all strategic land interests” to which an indicative value of £2.5 million was ascribed. Persimmon was short-listed as a possible purchaser and informed that the shareholders would consider a sale of the shares of Developments “in the event that all or most of the strategic land is required by you”.
The judge found that three things were clear from the documents up to this point. First, Developments was proposed by KPMG as a vehicle for a sale of the strategic land if a purchaser were interested in all or substantially all of it. Second, the strategic land included the Felbridge site. Third, Persimmon had made an indicative offer that included the entirety of the strategic land.
A data package was provided to Persimmon at the end of May 2012. In summarising what it said about the Felbridge site, the judge found that it treated all the back gardens as included in one site with 11a Crawley Down Road. It referred twice to “Hillreed” without indicating any particular company, demonstrating as the judge found that Mr Hillier and Mr Creed paid little regard to the corporate structure. He also held that, objectively construed, the data package clearly suggested that, if Persimmon were to purchase Developments, it would acquire control of all the interests in the Felbridge site, regardless of which Hillreed companies were then entitled to such interests.
The judge held that answers provided on 11 June 2012 to questions raised by Persimmon, objectively construed in the light of the parties' prior dealings, amounted to confirmation that the sellers controlled “the entire site required”, that the site was the whole of the Felbridge site, including all five rear gardens and 11a Crawley Down Road, and that “ownership and control” of the entire site would pass to Persimmon if it bought all the strategic land interests.
On 15 June 2012, Persimmon sent an “indicative, non-binding, offer” of £32 million for Holdings, including £1 million for the strategic land interests. The judge held that the terms of the offer made clear that the consideration of £1 million related to all strategic land interests.
The significantly lower indicative price offered by Persimmon led to email exchanges and a meeting between the parties. The judge held that a lengthy email and its attachments sent by KPMG to Persimmon on 26 June 2012, objectively construed, made plain that the entirety of the Felbridge site was on offer and would be included in a sale of Developments if the price were right.
A further meeting took place on 19 July 2012 attended by Mr Hillier, Mr Creed,...
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