Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd

JurisdictionEngland & Wales
JudgeLord Justice Lewison:,Lord Justice Tomlinson:,Lord Justice Longmore:
Judgment Date23 May 2013
Neutral Citation[2013] EWCA Civ 577
Docket NumberCase No: A3/2012/2128
CourtCourt of Appeal (Civil Division)
Date23 May 2013

[2013] EWCA civ 577

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION

Mr Justice Roth

HC10C04600

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Longmore

Lord Justice Tomlinson

and

Lord Justice Lewison

Case No: A3/2012/2128

Between:
Telford Homes (Creekside) Limited
Appellant
and
Ampurius Nu Homes Holdings Limited
Respondent

MR JONATHAN GAUNT QC & MR ADAM ROSENTHAL (instructed by Dentons UKMEA LLP, London) for the Appellant

MR DAVID MAYALL (instructed by WGS Solicitors) for the Respondent

Hearing dates: 14 and 15 May 2013

Approved Judgment

Lord Justice Lewison:

In a nutshell

1

In October 2008 a developer and an investor enter into an agreement for lease. The development in question consists of four mixed blocks (A, B, C and D) comprising commercial units on the lower floors and over 300 flats above. The ultimate objective of the agreement is the grant of four 999 year leases of the commercial units to the investor. Under the terms of the agreement the developer agrees to build the blocks to shell and core, using due diligence, and using reasonable endeavours to procure completion of the works by target dates. The target dates are 21 July 2010 in the case of blocks C & D; and 28 February 2011 in the case of blocks A and B.

2

Work begins on blocks C and D. Although it is behind schedule, these blocks are completed on 19 January 2011 and 4 April 2011 respectively. In the mean time as a result of funding difficulties work on blocks A and B has been suspended. The investor complained bitterly. The developer assures the investor that it is committed to the project; and that it will resume work. Work is resumed on 4 October 2010. But on 22 October the investor claims to be entitled to terminate the agreement on the ground that the delay in carrying out the works is a repudiatory breach of contract by the developer. Roth J agreed, but gave permission to appeal. The question for us is: was he wrong?

3

Mr Gaunt QC, appearing for the Appellant with Mr Rosenthal, takes two principal points:

i) The judge did not adequately analyse what benefit the investor was intended to receive under the contract in order to decide whether the breaches of contract had deprived the investor of at least a substantial part of that benefit ; and

ii) In assessing whether the breaches of contract were repudiatory breaches, the judge did not concentrate on the right date; which was the date when the investor purported to terminate the contract.

4

In my judgment, for the reasons that follow, both points are well-taken. I would allow the appeal.

The relevant facts in more detail

5

Telford Homes (Creekside) Ltd ("Telford") is a property development and construction company. In 2007 it acquired a significant residential and commercial development scheme ("the development") on land close to the south bank of the River Thames at the border of Greenwich and Deptford in London SE8. The proposed development was to consist of four blocks: Blocks B, C and D laid out in a straight line; and Block A more or less at a right angle to Block B, with the triangular space between Blocks A, B and C designed to provide a raised piazza. The blocks were designed to be of varying height and provide commercial accommodation on the ground, first and second floors, with residential accommodation on the floors above, comprising a total of 371 flats, and two floors of underground parking below. The development was expected to involve an overall investment of some £102 million to bring to completion.

6

Ampurius Nu Homes Holdings Ltd ("Ampurius") is also engaged in property development.

7

On 7 October 2008 Telford and Ampurius entered into an agreement for lease, in which Telford was referred to as the Landlord and Ampurius was referred to as the Tenant. The agreement contained the following relevant provisions. It began with a number of definitions, as follows:

""Commercial Units" The Ground Floor and first Floor commercial units comprising 54,153.68 square foot Net Internal Area which includes open market space ("the Open Market Units") and affordable working space ("Affordable Workspace Units") all of which is shown coloured pink on the ground and first floor Plans annexed.

"Estimated Purchase Price" £8,426,181.40 plus VAT (including the parking spaces at £600,000) as calculated in accordance with clauses 4.3.1 and 4.3.2 apportioned between the Blocks as provided in clause 4.4;

"Landlord's Works" The construction of the Property to shell and core as set out in clause 2 and in accordance with the Plans and Specifications and to include the construction of the Parking Spaces;

"Parking Spaces" The 40 spaces edged red shown on the car park plans;

" Price" The sum of the Open Market Unit Price, the Affordable Workspace Unit Price and the Parking Space Price as set out in clauses 4.3.1 and 4.3.2 as apportioned between the Blocks in accordance with clause 4.4.

"Property" The Commercial Units and the Parking Spaces;

"Target Date" Blocks A and B 28th February 2011

Blocks C and D 21st July 2010."

8

By clause 1.2, a deposit of £421,309.07, being 5% of the Estimated Purchase Price, was payable on signing to Telford's solicitors. By clause 1.3, further deposits of £143,958.17 for Blocks A and B and £267,350.90 for Blocks C and D were payable to Telford's solicitor within 20 working days of notice from Telford to Ampurius that the concrete frame of the relevant blocks had been completed, as evidenced by a certificate from Telford's architect. By clause 1.4, if any of the deposits payable under clause 1.3 were not paid within 30 working days of the clause 1.3 notice, Telford was entitled to rescind the contract and retain the deposits already paid.

9

Clause 2 was headed "Landlord's Works" and provided insofar as material:

"2.1 The Landlord shall:—

(ii) regularly update the Tenant of any application development and progress made in connection with any matter concerning the development which may affect the Tenant's property …

2.3 The Landlord will procure that the Landlord's Works are carried out:

(i) in a good and workmanlike manner.

(ii) using good quality materials of their several kinds.

(vi) with due diligence.

2.4 The Landlord will use its reasonable endeavours to procure completion of the Landlord's Works by the Target Date or as soon as reasonably possible thereafter."

10

Clause 4 contained machinery for working out the eventual purchase price based on multiplying the net internal area of the part of the development to be leased by a differential rate per square foot. Completion was to take place 25 working days after the date when Telford's Architect certified that Practical Completion of the Landlord's Works in the relevant block had taken place. Clauses 4.5.1, 6.1 and 7 provided that on the Completion Date for each block Telford would grant to Ampurius a 999 year lease of the relevant block in the form annexed and Ampurius would pay the Estimated Purchase Price less the deposit as apportioned to that block; subject to a proviso that Telford could not serve a Certificate of Practical Completion in respect of Block C or D without the other or in respect of Block A or B without the other. The structure of the contract was such that (by tracing through the various definitions) Ampurius could be compelled to complete a lease of the commercial units in a block even though the residential component on the upper floors was still under construction.

11

At the time the contract was signed, the bulk of the excavation of the double storey basement and the foundation piling for the blocks had already been completed. For the remainder of 2008 and early 2009, works proceeded successfully on Phase I of the development. However, the continuing effect of the credit crunch falsified expectations of demand for the flats. On 23 March 2009 Telford's board resolved to stop work on blocks A and B, and to allow work on block C to slip in order to assist cash flow. In accordance with this decision, work on Blocks A and B was halted in June 2009, although work continued to the shell on Block A to the extent necessary for the delivery of the energy unit and car park entrance that served also Blocks C and D.

12

A meeting between representatives of the parties took place on 2 July 2009. At that meeting Ampurius were told for the first time that blocks A and B were on hold and that it was a condition that 85 pre-sales were made for the release of Phase II funding. At about the same time Telford managed to secure a cash injection, which made it unnecessary to slow the construction of blocks C and D. In consequence, therefore, the work on blocks C and D was not put back.

13

On 14 July 2009 Mr Fitzgerald, Telford's managing director, wrote to Ampurius. In his letter he said:

"…our development funding has temporarily been restricted to the amount required to deliver all basement works up to podium, all of block D, all of block C and a small amount of build works on A to facilitate the delivery of D & C. Therefore, we confirm that the concrete frames to blocks C and D should be complete on the dates previously advised (06/10/2009 block D and 27/10/2009 block C), that the commercial units within these blocks will be ready for completion on 21 st July 2010 for both Blocks D and C and that at present blocks A and B are on hold until the secured development finance is released."

14

On 8 October 2009, the Telford's solicitor wrote to Ampurius' solicitor advising that the concrete frames for Blocks D and C were expected to be completed on 26 October and 27 November respectively, triggering...

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