The Mayor and Burgesses of the London Borough of Barnet v Barnet Football Club Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | A.G. Bompas QC |
| Judgment Date | 13 February 2004 |
| Neutral Citation | [2004] EWHC 519 (Ch) |
| Docket Number | Case No: HC 03C00364 |
| Date | 13 February 2004 |
| Court | Chancery Division |
[2004] EWHC 519 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
A.G. Bompas QC Sitting as a Deputy Judge of the High Court
Case No: HC 03C00364
Grant Crawford (instructed by London Borough of Barnet) for the Claimant
Andrew Hunter (instructed by Clintons) for the Defendant
Hearing dates : Monday 12 January 2004 —Friday 16 January 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Deputy Judge:
Introduction
In these proceedings the Claimant, the London Borough of Barnet ("Barnet LB") is seeking rectification of two instruments.
i) The first is a Transfer, on Land Registry Form TR1, dated 27 March 2002 and executed under the seal of Barnet LB. The Transfer was signed by Bamet LB's Mayor and by the Borough Solicitor, Mr Jeff Lustig. The other party to the Transfer was the Defendant, Bamet Football Holdings Ltd ("Holdings"). On behalf of Holdings the Transfer was signed by Mr Tony Kleanthous as a director, as well as by Holdings' Secretary.
ii) The second is a Supplemental Deed also dated 27 March 2002. The Deed, sometimes referred to as "the Overage Deed", was executed in the same way as the Transfer.
The Transfer and the Deed were to give effect to a sale of the freehold of a football ground, with stands and ancillary facilities, known as "Underhill Football Ground". This is the football ground, occupied by Barnet Football Club Limited ("the Club"). It was and is held from the freeholder by the Club under a lease dated 20 August 1986. The Lease was for a term of 99 years from 25 December 1985 at an annual rent of £50. Broadly speaking the Lease requires the Underhill Ground to be used only by the Club for the playing of association football, and contains restrictions on alienation.
The agreement for the sale of the Underhill Ground was made in a written Contract, signed in two parts and exchanged on 27 February 2002. It was Mr Lustig in his capacity as Borough Solicitor who signed the part of the contract executed on behalf of Barnet LB. No rectification is sought of this Contract, although it is common ground that the two instruments of which rectification is claimed were in precisely the form required by the Contract.
What is said on behalf of Barnet LB is that the matter in the two instruments which requires to be rectified is the product of a mistake, a mistake which is equally to be found in the Contract and which occurred in the process of reducing to writing the transaction which had been negotiated between the parties.
Initially the rectification claim was pleaded and presented on alternative bases. The first was that of common mistake: it was claimed that Barnet LB and Holdings executed the two instruments, and the Contract, while labouring under a shared mistake as to what was contained in the two instruments and believing erroneously that the instruments gave effect to a (different) transaction about which they had both reached agreement. The second was that Barnet LB was labouring under such a mistake, but that Holdings had become aware of that mistake and had been guilty of sharp practice in taking advantage of that mistake and not disabusing Barnet LB.
In the event, however, the first basis of claim was not pursued with Mr Graham Slyper, the one witness called on behalf of Holdings, and is unsustainable. This is because there is really no ground for thinking that Holdings, or anyone on its behalf; was mistaken as to what was provided in the two instruments, or in the Contract, or as to the effect of what was provided, when those various documents were being executed. Barnet LB's rectification claim must therefore succeed, if at all, on the second basis. If it does succeed, Barnet LB also claims consequential rectification of the registered title to the Underhill Ground.
As an alternative to rectification of the two instruments of 27 March 2002, Barnet LB seeks a declaration that the Transfer "is void by virtue of section 123(2) of the Local Government Act 1972", and consequential rectification of the registered title.
Section 123(1) of the 1972 Act provides Barnet LB with a general power "to dispose of land held by them in any manner they wish"; but the power is prefaced with the words "Subject to the following provisions of this section…". Section 123(2) of the 1972 Act then provides as follows:
"(2) Except with the consent of the Secretary of State, a council shall not dispose of land under this section, otherwise than by way of a short tenancy, for a consideration less than the best that can reasonably be obtained."
The argument of Barnet LB is that the Secretary of State did not consent to the disposal of the Underhill Ground on the terms of the Contract and that that disposal was for a consideration which was less than the best that could reasonably have been obtained. Accordingly, submits Mr Grant Crawford, Counsel for Barnet LB, the disposal was beyond the capacity of Barnet LB and either void or capable of being avoided by Barnet LB. It should be noted, however, that Barnet LB does not in this action contend that the disposal was unauthorised specifically, Barnet LB does not claim that the sale of the Underhill Stadium on the terms of the Contract was outside the scope of the authority given by Barnet LB for the sale so that for that reason the Transfer and Deed are to be set aside.
Holdings denies that the consideration obtained was less than the best reasonably obtainable, while accepting that the consent of the Secretary of State was not obtained. However Mr Andrew Hunter, Counsel for Holdings, submits that by reason of section 128(2) of the 1972 Act Holdings' title to the Underhill Ground cannot be attacked on the ground of any failure on the part of Barnet LB to obtain the consent of the Secretary of State, always assuming that consent to have been required by section 123(2). Section 128(2) is in the following terms (omitting immaterial parts):
"(2) Where under the foregoing provisions of this Part of this Act … a local authority purport to … dispose of land, then-
(a) in favour of any person claiming under the authority, the … disposal so purporting to be made shall not be invalid by reason that any consent of a Minister which is required thereto has not been given … and
(b) a person dealing with the authority or a person claiming under the authority shall not be concerned to see or enquire whether any such consent has been given or whether any such requirement has been complied with."
The Transfer and Deed
The Transfer provides for the freehold title of the Underhill Ground to be transferred to Holdings for a price of £10,000. In addition the Transfer contains a restrictive covenant. It is short and clear. Leaving out certain immaterial words it is as follows (emphasis added):
"The Transferee to the intent and so as to bind the property hereby transferred … covenants with the Transferor … that for the period of ten years from the date hereof the Transferee and those deriving title under it will not use the land hereby transferred or any part of it for any purpose other than for the playing of Association Football by Barnet Football Club and for purposes ancillary thereto."
The Deed provides circumstances in which Holdings can require that the restrictive covenant should be modified or released early, before the lapse of ten years from 27 March 2002. In certain circumstances Holdings would have to pay Barnet LB further consideration for requiring the modification or release of the restrictive covenant; in others nothing further would be payable.
The material provisions of the Deed are as follows.
i) There are three recitals. These identify the Contract and the Transfer and add that:
"It was agreed in the course of negotiations leading to the Contract that the parties should enter into this Supplemental Deed the provisions of which are supplemental to the Contract and the Transfer"
ii) There are various definitions in clause 1. These include a definition of "the Cut-Off Period", which is to have the meaning given in clause 7.1. There is a definition of "Open Market Value", which is to have the meaning given in the schedule; and "Further Consideration" is defined as "the additional consideration calculated in accordance with the schedule". Finally there is a definition, in clause 1.6, of the expression "Permanently Relocate". This is to mean:
"the Football Club [that is Barnet Football Club Ltd] playing its first team Association Football fixtures at a site or sites other than [the Underhill Ground] for a continuous period in excess of ten years or having the settled intention of doing so for the foreseeable future"
iii) Clause 2.1 asserts that:
"By reason of the covenant restricting the use of the [Underhill Ground] contained in the Transfer the amount of the consideration to be paid for the initial acquisition of the [Underhill Ground] was [£10,000]"
iv) Clause 2.2 needs to be set out in full. It reads as follows (emphasis added):
"During the subsistence of this Agreement the Vendor at the request in writing of the Purchaser ("the Purchaser's Request") and upon prior payment of the Further Consideration will at the Purchaser's expense enter into a deed varying the covenants imposed by the Transfer (a "Deed of Variation") to such extent only as shall be in accordance with the terms of this Agreement SAVE THAT the Purchaser will not be required to pay the Further Consideration in the event that the Football Club Permanently Relocate to a stadium built by the Purchaser or a direct subsidiary...
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