Speciality Shops Ltd v Yorkshire and Metropolitan Estates Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PARK |
| Judgment Date | 27 November 2002 |
| Neutral Citation | [2002] EWHC 2969 (Ch) |
| Court | Chancery Division |
| Docket Number | No: HC/290/02 |
| Date | 27 November 2002 |
[2002] EWHC 2969 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Strand
London WC2A
Mr Justice Park
No: HC/290/02
MISS JUDITH JACKSON QC and MR COURTENAY (Instructed by Messrs Fosters) appeared on behalf of the Claimant
MR A de FREITAS (Instructed by Messrs Dunn & Baker) appeared on behalf of the Defendant
Wednesday, 27th November 2002
Overview
In this judgment I refer to the Company, Speciality Shops Ltd as "SSL", although for some of the time relevant to this case it was called Speciality Shops Plc. I refer to the defendant, Yorkshire and Metropolitan Estates Ltd as "Y&M". Another company which is involved in the events is Wilson Bowden Developments Ltd, which I will call "WB".
The case concerns a development project in Norwich known as St Anne's Wharf. SSL owns most of the site and has an option to acquire the rest of it. SSL was acting in conjunction with Y&M, which was the corporate vehicle of a property consultant, Mr Brian Tanner. There was a project management agreement between SSL and Y&M. There was also a side letter, or "comfort letter", which (assuming that it was capable of having legal effect) gave some form of pre-emption or first refusal right to Y&M if SSL decided not to develop the site itself, but to sell it in an undeveloped state. SSL has decided to do just that, and has exchanged contracts to sell the site to WB.
Y&M says that SSL's exchange of contracts with WB "triggered" its rights under the comfort letter, and that the rights so triggered are not just contractual rights against SSL, but interests in the development site itself. It has sought to protect its interests by registering cautions at the Land Registry.
By this application SSL seeks to have the cautions vacated. I agree with the submissions advanced on behalf of SSL, and I shall direct that the cautions be vacated. This decision does not necessarily mean that Y&M is remediless. It may have a good claim for damages against SSL, but that is not before me now.
I should record that Miss Judith Jackson QC and Mr Charles Courtenay appeared for SSL. Mr Anthony de Freitas appeared for Y&M.
The Facts
The area of land which the case is about is a development site in Norwich, the St Anne's Wharf project. It is made up of three or four parts, of which two are directly relevant to this application: the Brewery site and the option land. The Brewery site is registered land and comprises two registered titles. SSL owns the Brewery site, and is the registered proprietor of the two titles. The option land is also registered land, and also comprises two registered titles. SSL does not own the option land, but it has an option to purchase it from the registered proprietor, a company called Knutsford Properties Ltd. I will refer to the option as "the Knutsford option". I mention for completeness that there is another substantial part of the St Anne's Wharf site, referred to in the case as the Readicrete site, which is unregistered land. SSL has a contract to purchase it. The contract is due for completion on 30th November 2002, which is only three days after the date on which I am delivering this judgment.
SSL is a property development company. Discussions about it acquiring and later developing the Norwich site began as long ago as 1995. SSL was working on the project with Mr Tanner, the property consultant. He operates through companies, or at least he has done in this instance. The defendant company, Y&M, is controlled by Mr Tanner. It is the company through which his services and expertise have been provided to SSL. The basic idea was that SSL would acquire the whole site and, when the time was right, carry out the redevelopment of it. Mr Tanner, through Y&M, would provide consultancy and project management serves. Y&M would be remunerated by monthly fees from SSL, and would also be entitled to receive from SSL a share of the eventual profit.
Negotiations for the detailed legal relationship between SSL and Y&M took place during 1995 and 1996. They culminated in agreed terms set out in a letter from SSL dated 26th February 1998, accepted by Mr Tanner on behalf of Y&M in a letter dated 2nd March 1998.
There was, however, one matter which was not covered by the agreement made in the exchange of letters, but which was dealt with in another way. It is the matter which this application has been about. The main agreement assumed that SSL would both acquire all the parts of the St Anne's Wharf site and carry out the development. There was, I assume, a potential for profit simply in the assembly of the complete site. But there was also another potential for further profit in the carrying out of a successful development. If SSL adhered to its intention, it would both assemble the site and carry out the development. So in that case Y&M would be entitled to a profit share in the complete profit, comprising both the site assembly profit element and the development profit element. But what if SSL, having assembled the site, changed its mind and, instead of developing the site itself, sold it to a third party? (In the event, that is exactly what seems likely to happen). Y&M would be entitled to a share of the site assembly profit, in so far as it was realised on resale by SSL, but it would not participate in any development profit.
In the negotiations in 1997 Y&M proposed that there should be inserted into the project management agreement a clause giving it (Y&M) a right of first refusal of the undeveloped site if SSL sought or intended to dispose of it to an independent third party. SSL was not willing to agree that there should be such a clause in the agreement. It did, however, agree that it would provide a "side letter" or a "comfort letter", and in the event such a letter was written on 8th April 1998.
The present application turns on the legal effect of 8th April 1998 letter. I will be referring to the letter from time to time as this judgment progresses, and I think that the course which is most convenient for a reader, is for me to set it out in full in an annexe at the end. I do that, and the reader who is unfamiliar with the case might find it convenient to break from this judgment at this point and read the letter. I record now that, while there are arguments that the letter was inherently incapable of taking legal effect (principally on grounds of absence of consideration or of an intention to create legal relations), the present application has proceeded on the basis that (for the purposes only of this application) the letter was capable of taking legal effect. In this connection I mention that in Y&M's letter of 2nd March 1998 (the letter which accepted the terms of the project management agreement) Mr Tanner wrote:
"…please accept this letter as my acceptance, subject to receipt of the comfort letter, the draft of which I think you already hold."
In 1999 there were changes in the ownership of SSL. It is now a subsidiary in a group headed by Delancey Estates Ltd (previously Delancey Estates Plc). On 8th January 2001, Delancey wrote to Mr Tanner at Y&M terminating the project management agreement. SSL, in the ownership of Delancey, continued with the process of assembling the site. On 8th January 2001 the only part of the entire St Anne's Wharf project which it owned was the Brewery site. Later in that month it entered into the option agreement with Knutsford Properties under which it has "the Knutsford option" to purchase the option land.
In September of 2001 it entered into a contract to purchase the Readicrete site (the part of the entire site which is not registered land). The Readicrete contract is the one which is due for completion in three days' time, on 30th November 2002.
By the time of the contract for the Readicrete site, or very soon thereafter, SSL must have decided that it no longer wanted to develop the Norwich site itself, and that instead the site should be sold. It agreed to give to Y&M an exclusivity period in which Y&M might put together some sort of financial backing to make an offer. This was not in precise compliance with the terms of 8th April 1998 comfort letter, which would only be "triggered" by SSL receiving an offer from a third party which it was minded to accept. However, Miss Jackson has said to me that SSL's conduct in giving Y&M the first opportunity to come up with an offer for the site was in accordance with the spirit of the comfort letter. I agree. However, Y&M's efforts to put together an offer package during the exclusivity period were not successful. In April 2002 SSL informed Y&M (through its solicitors) that it (SSL) had decided to place the St Anne's Wharf site on the open market.
Over the following months Y&M, in the person of Mr Tanner, continued to try to assemble a purchasing structure. It came close on two occasions, but the offers which it was able to make (or to arrange to be made by other parties) were not acceptable to SSL. I need not go into the reasons, which had to do with completion dates and the strength of financial backing of the offerors (or at least SSL's perception of that strength).
SSL, having placed the property on the market, did not take it off the market while Mr Tanner was still trying to put new offering structures together. SSL received a number of approaches from other prospective purchasers, one of which was Wilson Bowden Developments Ltd (WB). WB required SSL to agree to a condition that negotiations between the two parties should be confidential. The negotiations proceeded smoothly, and SSL exchanged contracts with WB on 23rd August...
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