Walton Homes Ltd v Staffordshire County Council
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Peter Smith,Peter Smith J |
| Judgment Date | 08 October 2013 |
| Neutral Citation | [2013] EWHC 2554 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC131700675 |
| Date | 08 October 2013 |
[2013] EWHC 2554 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Peter Smith
Case No: HC131700675
Mr John de Waal QC and Mr Nicholas Brookes (instructed by Ansons LLP) for the Claimant
Mr Wilson Horne (instructed by Staffordshire County Council) for the Defendant
Hearing dates: 30 th July 2013
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.
INTRODUCTION
This trial raises a short but interesting argument on the meaning and effect of an agreement for sale of land between the Defendant (1) and the Claimant (2) dated 11 th January 2000. The dispute is over the meaning and effect of an overage clause.
The point was extremely well argued by both sides.
BACKGROUND
The Claimants ("Walton") seek an order that the Interim Determination ("the Determination") of Mr David R Johnson DipArb, FRICS, FCIRArb MEWI dated 17 th December 2012 be set aside on the ground that on the question of the correct interpretation of the relevant clause in the transfer dated 14 th February 2000 pursuant to the Agreement it is manifestly erroneous.
It will be seen that I am not being asked to construe the Agreement. Nor is this an appeal in any form against that Determination.
The only issue before me is whether the Interim Determination contains a " manifest error".
Mr de Waal QCb and Mr Brookes who appear for Walton accepted that was the position. He also accepted that the effect of the clause in the Agreement (see below) is that all determinations as to fact and law arising under it are to be determined by a surveyor expert and such decision is " final and binding on the parties subject to the Surveyor providing each of the parties with a detailed statement setting out the reasons for making the decision which the Surveyor has arrived at."
This was an inevitable concession in view of the well known case of Jones v Sherwood Computers [1992] 1 WLR 277 C.A. It is insufficient for the present application if the Decision is arguably wrong and it is even insufficient if the decision is wrong providing it was in accordance with his instructions and does not contain any manifest error. The circumstances when a determination by an expert can be challenged are tightly circumscribed (per Potter J in Healds Foods Ltd v Hide Dairies Ltd 112/94 and the Court of Appeal 6/12/96 see Cadogan Petroleum Plc & ors v Tolley & ors [2009] EWHC 3291 Ch at paragraph 31).
The hurdle of opening the door in the case of a manifest error is even more tightly circumscribed.
In Lindley & Banks on Partnership (paragraph 10–73) the learned authors expressed a view as to what manifest was and it has long been said in previous editions of Lindley that manifest errors " applies only to errors in figures and obvious blunders, not to errors in judgment, e.g. in treating as good debts which ultimately turn out to be bad, or in omitting losses not known to have occurred. All errors are manifest when discovered; but such clauses as those referred to here are intended to be confined to oversights and blunders so obvious as to admit no difference of opinion".
That sentence was cited with approval by Potter J in the Healds Food Ltd case above.
In Veba Oil Supply & Trading Gmbh v Petrotrade Inc [2001] EWCA Civ 1832 Simon Brown LJ as he then was echoed the observations of Lindley as set out below:-
"30 Although that conclusion is sufficient to dispose of the appeal, I would touch briefly on the alternative basis for decision relied upon by the Buyers, the reference in clause 10 to "manifest error". Morison J below went no further than to say that he was "inclined to the view that there was a manifest error here, due to the wrong test being used.
31 Morison J had previously considered the meaning of "manifest error" in ( Conoco (UK) Ltd v Phillips Petroleum unreported, 19 August 1996) where, following dicta in earlier cases, he held that manifest error referred to: "oversights and blunders so obvious as to admit of no difference of opinion".
32 The question then arising is whether it is relevant to consider whether the error is one that affected the result. Considering that question in Conoco v Phillips , Morison J said this:
"… it seems to me that there is no room for any debate as to whether the oversight or blunder would or would not have made any material difference to the result. If it could be shown that there was a manifest error then in my judgment that would be an end of the case. If fraud was shown, I cannot accept that it would be open to debate as to whether the fraud did or did not affect the result; so also would manifest error."
33 I confess to some difficulty with this approach. Fraud, of course, would vitiate the determination irrespective of whether it affected the result: "Fraud or collusion unravels everything" (per Lord Denning in Campbell v Edwards ). The exception for "manifest error", however, seems to me of a rather different character and to be designed essentially to fill the gap in the law created by the development to which I have already referred: the overthrow of theDean v Princeprinciple of setting aside determinations for mistake. Nowadays, if parties wish to contract on the basis that they will not be held to mistakes made by the expert in the course of carrying out his instructions, they must needs include a term like this with regard to manifest error. But if they do, is it then really to be said that provided only the mistake is obvious, the determination will be avoided irrespective of whether it could affect the outcome? In this context I am inclined to think not. Take the very error committed in Frank H. Wright (Constructions) Limited v Frodoor, the erroneous inclusion of a 'not' in the report. I do not think that that ought properly to be regarded as a "manifest error". Rather I would extend the 'definition' of manifest errors as follows: "oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion". (emphasis added).
34 If, of course, the error consists of a departure from instructions, then, assuming I am right in my earlier conclusion, it will never be necessary to ask whether in addition that error amounts to a "manifest error": it will vitiate the determination in any event. If, however, I am wrong in my earlier conclusion – if, in short, the Inspectors' use of the wrong test method here ought properly to be regarded as an immaterial departure from their instructions – I would not conclude that it nevertheless constituted a manifest error such as to entitle the Buyers to set aside the determination on that alternative basis.
35 That, however, is by the way. For the reasons given earlier, I would hold the determination not to be binding because of the Inspectors' material departure from their instructions, and accordingly dismiss this appeal."
Finally Sir Kim Lewison's book Interpretation of Contracts (chapter 18 section 7) adds some observations on manifest error as follows:-
"Some clauses permit a challenge on the ground of "manifest error". In Conoco (UK) Ltd v Phillips Petroleum (UK) Ltd Morison J said that a "manifest error" referred to "oversights and blunders so obvious as to admit of no difference of opinion". In IIG Capital LLC v Van Der Merwe Lewison J said that:
"A manifest error" is one that is obvious or easily demonstrable without extensive investigation."
If the mistake is obvious then it may be that it does not also need to be demonstrated immediately and conclusively. In Menolly Investments 2 Sarl v Cerep Sarl Warren J considered a provision referring to "manifest error" in a certificate of practical completion given under a building contract. He said:
"That is not to say that the only evidence admissible is the certificate itself. The certificate must, after all, be construed against the background of the contract under which it is given and its subject matter, as well as in the context of the factual matrix against which manifest error is to be Judged. Mr McGhee gives the example of the complete absence of an extra storey which the contractor has promised to build. This of course is a fanciful example; if a certifier were actually to certify the building as practically complete in such a case, it is obvious that something serious has gone wrong and that the certificate cannot stand. But the point is that it is only possible to say that something has gone wrong if (a) reference is made to the contract (which includes provision of the extra storey) and (b) the position on the ground i.e. that the extra storey has not been built. It cannot be the case that the obvious error must be apparent on the face of the certificate itself."
In Natoli v Walker , Kirby P said:
"Obviously, there is difficulty with the word "manifest". What may be "manifest" to one judicial officer may fail to persuade another. The criterion cannot be the swiftness of mind of the sharpest intellect. Nor can it be the perception of one whose whole career has been devoted to examining and reflecting upon building contracts. An objective, not a subjective, test for what is "manifest" is contemplated. But the word will not go away. Against the background of its history in this context it requires swift and easy persuasion and rapid recognition of the suggested error".
TERMS OF THE AGREEMENT
In order to analyse the submissions it is necessary to start with the terms of the Agreement. It was dated 11 th January 2000 and was...
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