Pretoria Energy Company (Chittering) Ltd v Blankney Estates Ltd
| Jurisdiction | England & Wales |
| Judge | Joanne Wicks |
| Judgment Date | 14 June 2022 |
| Neutral Citation | [2022] EWHC 1467 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2021-001940 |
[2022] EWHC 1467 (Ch)
Joanne Wicks QC
Sitting as a Deputy Judge of the High Court
Case No: BL-2021-001940
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Ms Sally Anne Blackmore (instructed by Jackamans solicitors) for the Claimant
Mr Dov Ohrenstein (instructed by Roythornes Limited) for the Defendant
Approved Judgment
Joanne Wicks QC sitting as a Deputy Judge of the High Court:
Introduction
These proceedings concern a claim for breach of contract. The Claimant is a company in the business of operating anaerobic digestion (“ AD”) plants, producing biogas and electricity from organic matter. The Defendant is a farming business. The Claimant contends that the parties entered into an agreement in November 2013 under which the Defendant agreed to grant the Claimant a 25-year lease of a site in Lincolnshire for the purpose of an AD plant. This agreement is to be found in a document called “ Heads of Terms of Proposed Agreement between Blankney Estates, Lincolnshire and Pretoria Energy Company Limited Subject to Full Planning Approval and appropriate consents and easements” (“ the HoT”). I include a copy of this document in an appendix to this judgment. The Claimant's case is that the Defendant repudiated that contract, and became liable for damages, in September 2014. The Defendant contends that there was never a binding contract by which it agreed to grant the Claimant a lease. Its case is that the only enforceable contract between it and the Claimant to be found in the HoT was an exclusivity or “lockout” arrangement (“ the Lockout Provision”), by which the parties agreed, until 31 July 2014, not to enter into negotiations with third parties.
By an order dated 1 December 2021, Master Clark ordered that the following issue be tried as a preliminary issue:
“ Is the document titled “Heads of Terms of Proposed Agreement” (identified in paragraph 7 of the Particulars of Claim) a binding and enforceable agreement between the parties other than in respect of the Lockout provision referred to in paragraph 2 of the Defence?”.
Evidence on the preliminary issue was given by way of witness statements from Steven Ripley, a director of the Claimant, on the Claimant's behalf and from Timothy Banks, a director of the Defendant, on its behalf. Counsel, Ms Sally Anne Blackmore for the Claimant and Mr Dov Ohrenstein for the Defendant, agreed that it was unnecessary for either of them to cross-examine the other's witness: although there are differences of evidence between the witnesses, particularly as to their subjective intentions or understandings, it is agreed that these are irrelevant to the determination of the preliminary issue.
I am grateful to both Counsel for their clear, helpful and comprehensive submissions.
Events prior to the HoT
In 2012, the Defendant had some unused land at Heath Farm, Metheringham Heath, Lincolnshire, comprising a former flax factory and adjoining field, registered under title number LL302872 (“ the Site”). It was put in touch with the Claimant, which was looking for a site for an AD plant. Mr Ripley explains that it was his intention to develop three AD plants: one, at Chittering, Cambridgeshire, obtained planning permission in 2012 and was in the course of being constructed in 2013. A second opportunity was identified at Mepal, Cambridgeshire, for which planning permission was obtained in 2013. The Heath Farm site would have been the third.
Following some initial discussions, by email of 9 July 2013 Mr Ripley sent Tim Harper, the Defendant's Farm Manager, a written proposal (“ the Proposal”). This had five headings: “Lease”; “Contract Maize Growing”; “Digestate”; “Gas Supply” and “Energy Connection”. These headings reflected the fact that, in addition to the grant of a lease of the Site, the parties had been discussing various other commercial arrangements. “Contract Maize Growing” referred to a proposal that the Defendant would grow maize to be sold to the Claimant as fuel for the AD plant. “Digestate” is an organic fertiliser, a byproduct of the production of biogas through AD; the discussions included the prospect that the Claimant would supply solid and liquid digestate to the Defendant from the AD plant. “Gas supply” related to the potential that the Claimant would supply electricity and/or biomethane generated by the AD plant to the Defendant. Under the heading “Energy connection”, the Claimant confirmed that it had energy connection sites available to it (I understand for the supply of methane to the National Gas Grid) and was negotiating exact connection points and methods; it asked the Defendant to assist and co-operate in regards to any wayleaves required. Under the heading “Lease”, the proposal was for a rent of £150,000 per annum, based upon a “bare land site” and for a 25-year period. The Proposal concluded
“ As discussed, this is a framework proposal in how we see this project moving forward…The offer is subject to a planning permission being granted…”
On 15 July 2013, Mr Banks wrote an email to various colleagues attaching the Proposal and referring to the discussions he and Mr Harper had been having with the Claimant, about seeking board consent to continue with negotiations. He described the discussions as being “ at an early stage” and there being “ much more work to be done should this proceed”. He explained that he had asked the Claimant for its proposal and had requested 3 key points to be included:
“ 1. There is no expectation of financial partnership with Blankney as far as the investment goes.
2. The proposal is in the form of a lease which is independent [of] any agreement to supply feedstock, receive digestate or solids and purchase energy.
3. Any agreements to do the above are negotiated as entirely separate agreements and not of a term linked to the underlying lease.”
He described the lease offered as “ for the flax site (assuming demolition at our expense of the factory) and the adjoining field, MH15, which amounts to some 27 acres.”
On 7 October 2013, Mr Banks sent Mr Ripley a survey and quotes for demolition of the existing building on the Site, which the Defendant intended to carry out regardless of whether the proposal – which he referred to as an “option agreement” – with the Claimant bore fruit. By email of 11 October, Mr Banks followed this up with confirmation that he had the consent of others “ to proceed with the preparation towards planning and the preparation of a contract between ourselves…Accordingly please accept this email as our consent to now work rapidly towards the preparation of a document to reflect the Heads of Terms which we can ultimately incorporate into an agreement.”
Andrew Shaw, the Claimant's Finance Director, responded with the first draft of the HoT. In his covering email of 1 November 2013 he said
“ Should you be happy with the Heads of Terms, I would suggest we sign those off. The agreement is subject to planning and, with your agreement, I will start work on the draft lease with the lawyers as this will be the key element as we move forward.”
This first draft – “ Draft A” — included a cover sheet in the form of the HoT as eventually signed. It started with the following
“ The Proposed Agreement is to encompass the provision of a leased site to Pretoria Energy Company Limited. The site will be for an anaerobic digestion plant for the production of gas & electricity.
The agreement will consist of four constituent parts, the core element being the lease. The three other elements are available and negotiable, but any or all elements may be terminated by agreement between the parties and the giving of six months notice one to the other.”
The four “constituent parts” of the agreement were then numbered: 1. Lease; 2. Contract Maize Growing; 3. Digestate and 4. Gas Supply. A fifth heading was “Energy connection”, in line with the Proposal. There was then a paragraph headed “Acceptance”. This said
“ These Heads of Terms of Agreement are agreed and signed on the understanding that the formal agreement will be drawn up within 1 month from planning consent being achieved and subject to the consents and easements being obtained.”
There were signature boxes for signature on behalf of the Claimant and Defendant.
There appear to have been discussions on the HoT and on 7 November 2013 Mr Shaw produced a second draft, Draft B, of the HoT. Again, his email suggested to Mr Banks that if he were happy with the document, he should sign and return it for signature by Steven Ripley. In Draft B, both the opening and the closing sections had been amended from those in Draft A. In the opening section, there was an additional sentence confirming that the Claimant would be responsible for “ all costs of these Heads of Terms, Planning, the Lease and the final Agreement.” There was also an addition to the paragraph under the heading “Acceptance” which said
“ It is also understood that both parties, on signature, agree to be bound by complete confidentiality and adherence to all the terms, pricing and conditions of these Heads of Terms until the Final Agreement is accepted and signed.”
I shall refer to this as the “ Adherence Amendment”.
There appear to have been further discussions about the drafting of the HoT later that day and it seems likely that there was a further draft produced which has not made its way into the trial bundle. I say this because at 21:57 that evening, Mr Shaw wrote to Mr Banks commenting on various drafting points, saying
“ I thank you for your addition to the final paragraph regarding exclusivity. I feel this addition demonstrates the total commitment of both parties to work together on this exciting project.”
This must be a reference to the Lockout...
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