Persimmon Homes (South East) Ltd v Hall Aggregates (South Coast) Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE COULSON,Mr Justice Coulson |
| Judgment Date | 10 October 2008 |
| Neutral Citation | [2008] EWHC 2379 (TCC) |
| Docket Number | Case No: HT-07260 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 10 October 2008 |
[2008] EWHC 2379 (TCC)
Mr Justice Coulson
Case No: HT-07260
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
TECHNOLOGYCONSTRUCTION COURT
Royal Courts of Justice
Strand,
London, WC2A 2LL
Richard Wilmot-Smith QCJohn Denis-Smith (instructed by Boodle Hatfield ) for the Claimant
Thomas KeithJames Bowling (instructed by Eversheds LLP) for the Defendants
Hearing dates: 14, 15, 16, 2223rd July 2008
Approved Judgment
A. INTRODUCTION
Pursuant to the terms of a Sale Agreement dated 22.12.99, the defendants (whom I shall call RMC) agreed to sell to the claimant (whom I shall call Persimmon) a large development site known as Cherque Farm, Lee-On Solent, in Hampshire (“the site”). The purchase price was £29,892,380. This figure was capable of being adjusted pursuant to clause 7A of the Sale Agreement, whilst clause 14A of the Sale Agreement provided a mechanism for the further payment of costs thereafter in certain limited circumstances. In these proceedings, Persimmon have identified 28 Claim Items which, they say, either triggered the price adjustment mechanism so as to decrease the purchase price for the site payable by them (clause 7A), or entitled them to a cash payment from RMC (clause 14A). They seek declarations to that effect.
In addition, clauses 12.212.3 of the Sale Agreement obliged RMC to carry out certain remediation works at the site. It is common ground that Persimmon did not expressly require RMC to carry out these worksthat, moreover, they performed the works themselves. Persimmon now claim the costs of carrying out this work as damages for breach of contract. They also claim the costs of carrying out diversion works to a road within the site known as Sandhills Lane, which works, they say, were required to ensure that RMC could continue to use their land adjacent to the site for commercial purposes.
The principal issues at the trial were therefore:
a) Whether or not, on a proper construction of the Sale Agreement,the other subsequent agreements reached between the parties, the 28 items of claim triggered the mechanisms under clauses 7 and/or 14A;
b) Whether Persimmon's claims for damages has been made out in principleon the facts.
Once the court has issued declarations in respect of the 28 Claim Items, the quantification of any items on which the claimant has been successful will be carried out by an independent engineer in accordance with the mechanism set out in clause 7A of the Sale Agreement. For reasons which are explained in greater detail below, although all the issues relating to the damages claims are to be dealt with by the court, there is an issue under that heading which, if it becomes relevant, will have to be decided at a subsequent hearing or, if the parties agree, by the independent engineer.
I propose to deal with the issues between the parties at this trial in this way. In Section B I set out a description of the site. In Section C I set out the applicable principles of lawrelevant background to the Sale Agreement. In Section D I set out the express terms of the Sale Agreement which are relevant to the resolution of the issues. At Section E I set out my analysis of the proper construction of the Sale Agreement. In Section F I then set out the background to the Settlement Agreement of June 2001 and, under Section G I identify the termsthe proper construction of that Settlement Agreement. At Section H I set out the relevant background to the further Settlement Agreement of December 2003 and, at Section I, I deal with the natureeffect of that further Agreement. At Section J below I deal briefly with the events after December 2003.
The principal disputes between the parties concern the 28 Claim Items, in respect of each of which Persimmon seek a declaration that the purchase price be reduced or that the costs associated with the item be paid by RMC. I deal with those individual claims, from 1–28, at Section K below. There is, I regret, a certain amount of unavoidable duplication within that lengthy section of the Judgment. I then address the other area of dispute between the parties, namely the claims for damagesthe claim for an indemnity. I set out the background to those claims at Section L belowat Section M I analyse the issues between the partiesset out my conclusions as to the validity of the claims for damages. I do the same exercise for the claim in respect of the work at Sandhills Lane at Section N below. Finally, at Section O, I briefly summarise my conclusions.
Before embarking on these exercises, I should express my thanks to counsel for the efficient way in which the oral evidence, both factualexpert, was condensed into two days of hearing,for the lucidity of their openingclosing submissions. It was, however, much less satisfactory that, in a dispute where just about everything turned on the construction of the various Agreements, both counselthe court had to grapple with 15 witness statements, many running to 30 pages or more,23 full lever arch files of contemporaneous documents. The vast majority of the statements,the paper mountain that went with them, were wholly irrelevant to the issues at trial or their resolution.
B. THE SITE
The site was some 2 kilometres in lengthabout 300metres wide, lying between Broom Way to the northPortsmouth Road to the south. To the west of the site were residential houses. To the east was a quarry owned by RMC. That quarry was served by Sandhills Lane, which connected with Broom Way.
The site had been used for sandgravel extraction since about 1950. Following the completion of the sandgravel extraction, the site was used for landfill and, in some areas that landfill included putrescible waste. This gave rise to a problem with methane gas which, as we shall see, had to be dealt with by Persimmon as part of their development of their site, but the costs of which were expressly taken into account in the calculation of the purchase price.
Although the site was largely flat, the southern area of the site, which was to become phases 67 of the development carried out by Persimmon, had not been filled in to the same extent. Thus, at the southern end of the site, further landfill works were required in order to bring the level up to the level of the remainder of the site. It is this work which gives rise to the damages claim.
C. RELEVANT BACKGROUND TO THE SALE AGREEMENT
C1. Principles
It has always been the law that a commercial contract must be construed in the light of the surrounding circumstances: what Lord Wilberforce described in Reardon—Smith Line Ltd v Hansen-Tangen [1976] 1WLR 989 at 995–996 as “the genesis of the transaction, the background, the context, the market in which the parties are operating.” Of course, this requirement was explainedexpanded by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 in which he identified the following five key principles concerning the interpretation of contracts:
i. “Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
ii. The background was famously referred to by Lord Wilberforce as the 'matrix of facts' but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the partiesto the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
iii. The law excludes from the admissible background the previous negotiations of the partiestheir declarations of subjective intent…
iv. The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionariesgrammars; the meaning of the document is what the party using those words against a relevant background would reasonably have been understood to mean….
v. The 'rule' that words should be given their 'naturalordinary meaning' reflects the commonsense proposition that we do not easily accept people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the rule does not require judges to attribute to the parties an intention which they plainly could not have had….”
One of the unhappy consequences of these passages is that parties to commercial disputes, in which the interpretation of the contract is in issue, can be tempted to put in a large amount of evidencedocumentation by way of 'background'. There has been more than a suggestion of that in this case. This is despite the fact that, in BCC v Ali [2001] 1AC 251, Lord Hoffmann qualified his phrase 'absolutely anything' by saying that this could only mean 'anything which a reasonable man would have considered relevant'he made plain that his speech in Investors Compensation Scheme was not designed to “encourage a trawl through 'background' which could not have made a reasonable person think that the parties must have departed from conventional usage”.
Accordingly, it is always necessary for the court to consider the factual background to a commercial contract even if the wording...
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