Persimmon Homes (South East) Ltd v Hall Aggregates (South Coast) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Wall,Lord Justice Aikens |
| Judgment Date | 22 October 2009 |
| Neutral Citation | [2009] EWCA Civ 1108 |
| Docket Number | Case No: A1/2008/2604 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 October 2009 |
[2009] EWCA Civ 1108
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEENS BENCH DIVISION
MR JUSTICE COULSON
HT07/260
Before: Lord Justice Rix
Lord Justice Wall and
Lord Justice Aikens
Case No: A1/2008/2604
A1/2008/2608
Mr Richard Wilmot-Smith QC & Mr John Denis-Smith (instructed by Messrs Boodle Hatfield) for the Appellant
Mr Tom Keith (instructed by Messrs Eversheds LLP) for the Respondents
Hearing dates: Tuesday 7th, Wednesday 8th & Thursday 9th July 2009
Lord Justice Rix:
By a Sale Agreement dated 22 December 1999 (the “agreement”), the defendants, whom the judge called “RMC”, as shall I, sold a large development site, which was about two kilometres in length and about 300 metres wide, known as Cherque Farm, Lee-on-Solent, in Hampshire. The buyer was the claimant, whom I shall call Persimmon. Nearly a decade later that site has been developed, but the parties are still in dispute about the financial consequences of the sale.
The reason for this dispute in practical terms goes back into the history of the site. Under RMC's ownership it had been used for sand and gravel extraction since about 1950, and when the workings had been exhausted, it had later been used for landfill, including putrescible waste. This made it difficult to price the sale of the land, because much work had to be done to make the site suitable for development. It was therefore agreed that the purchase price of the site would be based on its value as “clean, serviced land”. Although that expression was not used in the agreement, it has been common ground in this litigation that that was the fundamental pricing concept of the parties' bargain. Accordingly, it was agreed that the purchase price would be calculated by taking the notional value of the site as if it had been clean, serviced land (something which could be priced according to the market of the time), and then by deducting from that notional value the cost of the work necessary to render the site in a clean and serviced condition. The calculation of the appropriate deduction would therefore take into account potentially expensive works, such as the resolution of a methane gas problem engendered by the putrescible waste, the provision of public utilities for the site (but not for individual properties), including foul and surface water drainage, and the construction of a link road.
Moreover, the southern area of the site had not been filled in, following the sand and gravel extraction, to the same level as the rest. Therefore further works were required in order to bring up the level of this southern part to the level of the remainder of the site. Whereas the rest of the work, which the judge described as “the necessary rehabilitation works”, was to be done by Persimmon, but at RMC's cost to be taken as a deduction from the price, the in-fill of the southern area was to be undertaken by RMC at its own expense following the sale.
The judge, Coulson J, described the first of these two mechanisms as follows:
“Of course the difficulty was that many of these costs could not be accurately ascertained in December 1999, because the precise scope of the necessary rehabilitation works had not been defined. It appears that the parties decided that the best way of dealing with this problem was to calculate the initial purchase price by taking the notional value as the starting point, and deducting from an estimated figure for the costs of the necessary rehabilitation works. These were referred to as “benchmark costs”, and they were designed to represent the parties' best estimate of the costs of those works at the time that the Sale Agreement was entered into. However, those benchmark costs would be capable of adjustment, when greater certainty was possible, and that adjustment would, in turn, lead to an adjustment in the purchase price. That is the genesis of the clause 7A mechanism.”
I shall set out clause 7A below. It is headed “ Price Adjustment”.
As for the second mechanism, this was provided for by clause 12 of the sale agreement, which is headed “Post exchange works”. I shall set out that clause below as well, but the essence of it was that RMC would “remediate the void space” in accordance with Persimmon's reasonable requirements, using remediation materials provided by Persimmon from other parts of the site, hauling them to the landfill area in the southern part, and hauling away surplus materials, all at no cost to Persimmon.
The principal point raised by Persimmon on its appeal relates to what it submits was a third mechanism for ensuring that Persimmon would only pay for the site on the basis of “clean, serviced land”: namely that (at any rate with respect to certain works required in accordance with approvals given by the local highways authority and water undertaking) Persimmon would be entitled to a rebate on the price to the extent that the final incurred costs of the necessary rehabilitation works exceeded the clause 7A estimated costs. For this purpose Persimmon pointed to clause 14A of the agreement, headed “Approvals”. However, the judge held that this claim failed.
There is also a cross-appeal by RMC in relation to the clause 12 mechanism. What happened was that Persimmon did all the clause 12 remediation work itself, at its cost, and only subsequently sought to charge RMC with that cost which, under the agreement, should have been incurred by RMC. The judge found in favour of Persimmon on this claim, hence RMC's cross-appeal.
The points on appeal and cross-appeal are entirely separate, and I agree with what Aikens LJ has said about the latter in his judgment. In sum, on the point of waiver, there was no unequivocal representation. Although that issue must be looked at objectively, not subjectively, Mr Barrett's evidence merely confirms what is in any event inherent in the circumstances themselves, namely that one strong possibility in the situation was that Persimmon had overlooked the clause 12 provision. Mr Barrett's evidence is, moreover, directly relevant to the questions both of reliance and of what is just and equitable. On the point of mitigation, RMC's reliance on Toepfer v. Warinco [1978] 2 Lloyd's Rep 569 is misplaced. In that case, the buyers' failure to protest and stop the shipment had itself caused (in the sense that it had failed to prevent) the damages in question, which arose out of the sub-buyers' need to separate out the course-ground and fine-ground meal. Those damages would have been avoided if the shipment had been promptly stopped. In the present case, however, Persimmon's failure to call upon RMC to perform the work has not caused RMC any additional costs beyond those which under the agreement it was obliged to incur in any event. Any failure to mitigate would have neither caused nor contributed to any loss. If RMC had been called upon to perform, it would have incurred the costs that have been awarded against it as damages.
I therefore turn to set out the agreement terms which are relevant to Persimmon's appeal.
The Sale Agreement
The following provisions set out the structure of the pricing of the sale. Clause 7 identifies the price to be £29,892,380, to be paid in seven equal instalments between January 2000 and January 2006, as the site was transferred in seven separate parcels scheduled in that clause. Clause 7A sets out a price adjustment to the extent that “Costs” (defined as the “Costs referred to in the Fifth Schedule” and stated in clause 7A.1 to be “provisional estimated figures”), when once agreed by the parties or determined by an independent engineer, either exceeded or fell short of the scheduled Costs. Those scheduled Costs related to eleven separate items concerned with the remediation of the site. For example, the largest single item was item 3 described as “Remediation costs in accordance with the “Methane Gas Specification” as defined and set out in the 106 Agreement” which was provisionally costed in the sum of £8.2 million. The total of the provisional figures in the Fifth Schedule was £15,938,500. Thus, if the finally established Costs were greater than that figure, then the price of £29,892,380 would be reduced by the excess, and if the finally established Costs were less than that figure, then the price would be increased by the amount of the deficit. The logic of the agreement (although not expressly spelled out in the agreement) was that, pending the ultimate determination of the Costs, the price to be paid of £29,892,380 reflected the difference between a nominal remediated value of the site of £45,830,880 and the provisional estimated costs of the remediation of £15,938,500.
This was explained in an internal memo dated 20 December 1999 (two days before the date of the agreement) passed between employees of RMC and summarising the discussions with Persimmon. Although an internal document, the judge set it out (at para 32 of his judgment) as a useful and accurate summary of the pricing concept. The figures are very slightly different from the contractual figures, but the concept is well explained. The memo read as follows:
“The purchase price for the land is £29,892,372. This is to be paid in 7 instalments. It is based on a Gross Land Price of £45,830,872, which equates to £587,500 per net acre (78.01 net acres)…
The Purchaser's costs are to be deducted from the Gross Land Pri...
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