Yewbelle Ltd v London Green Developments Ltd

JurisdictionEngland & Wales
JudgeMR JUSTICE LEWISON,Mr Justice Lewison
Judgment Date08 December 2006
Neutral Citation[2006] EWHC 3166 (Ch)
Docket NumberCase No: HC06C02478
CourtChancery Division
Date08 December 2006

[2006] EWHC 3166 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

MR JUSTICE LEWISON

Case No: HC06C02478

Between:
Yewbelle Limited
Claimant
and
(1) London Green Developments Limited
Defendant
and
(2) Knightsbridge Green Limited
Part 20 Defendant

Mr Paul Morgan Qc And Mr Mark Warwick (instructed By Philippsohn Crawfords Berwald) For The Claimant And Part 20 Defendant

Mr Edward Bannister Qc And Mr Kevin Leigh (instructed By Segens) For The Defendant

Hearing dates: 21, 22, 23, 24 and 27 November 2006

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.

MR JUSTICE LEWISON Mr Justice Lewison

Introduction 2

The facts 3

The contract 16

Planning obligations and planning conditions 18

How does the contract work? 20

The seller's analysis 20

The buyer's analysis 20

The condition can be waived 21

The authorities on conditional contracts 21

Does the contract work without an implied term? 24

Automatic termination? 26

The fall back position 27

Opportunity to waive? 27

What is an opportunity to waive? 28

Is the draft section 106 agreement compliant with the contract? 29

Permitted departures 29

The third party land 31

The library lease 31

Did Yewbelle comply with its obligation? 32

Reasonable endeavours 32

Yewbelle's efforts 34

Other issues 37

Result 38

Introduction

1

Directly opposite Colliers Wood underground station, in the London Borough of Merton, there is a triangular site between the intersections of Merton and Colliers Wood High Streets, Christchurch Road and Priory Road. It consists of:

i) A 17-storey pre-cast concrete office building built in the 1960s. It is often called the Brown and Root Tower (after its principal tenant, for many years, Brown and Root) or simply "The Tower".

ii) A circular 5-storey multi-storey car park constructed at the same time as the Tower.

iii) An open space to the north (with a small surface car park).

2

The property was owned by Knightsbridge Green Limited ("KGL"), a subsidiary of Golfrate Holdings Limited ("Golfrate"). KGL entered into a contract to sell the property to London Green Developments Limited ("LGD"). After the date of the contract KGL transferred its interest to a sister company, Yewbelle Ltd. LGD was not bound to complete until the seller had entered into an agreement with the London Borough of Merton ("LBM"), as local planning authority, under section 106 of the Town and Country Planning Act 1990 in the form of a draft attached to the sale contract, or in substantially the same form. Some eight or nine months after the date of the contract, no section 106 agreement had been completed. Yewbelle now claims that the contract has been discharged. The question is whether Yewbelle is right.

3

I heard evidence from Mr Julian Lobetta, Yewbelle's solicitor; Mr Sean Silk, its planning consultant; and Mr Philip Green, the moving spirit behind LGD. Mr Aziz and Mr Hughes are the moving spirits behind Golfrate and its subsidiaries. Neither of them chose to give evidence.

The facts

4

The Tower and the multi-storey car park are unattractive buildings and the whole site is ripe for redevelopment. Indeed, the Tower has been voted one of the ugliest buildings in London. There is therefore much local interest, and some political pressure, to see it redeveloped. In April 2002 LBM produced a planning brief in respect of the overall site in order to encourage potential redevelopment. The planning brief included the statement that as part of the development LBM would want to see a community use, such as a public library, on the ground floor of the Tower. On 30 January 2003 a firm of architects submitted a planning application for the development of the property. It was allocated reference number 03/P0202 by LBM on 7 February 2003. The planning application itself identified, in outline, the steps to be taken as part of the development. The key elements of the proposed development were: the conversion of the Tower into flats, the erection of two six storey extensions to the Tower (north and south), the demolition of the multi-storey car park and its replacement by a ten storey building and the creation of a public park. Overall the development would consist of 226 residential units, 370 square metres of retail space, 629 square metres for "a new public library facility", a café/bar and 876 square metres of business and office space. The site covered by the planning application included not only the property owned by KGL, but also a small rectangular parcel of land at the south eastern corner, which was thought at the time to be owned by LBM. Part of the library was to be constructed on that parcel. LBM's planning officers recommended the grant of the application subject to the completion of a section 106 agreement and various conditions. LBM were particularly keen on the library, which LBM's officers later described as one of the Council's key aspirations. On 11 March 2004 LBM resolved to grant planning permission subject to the completion of a section 106 agreement and to various conditions. Heads of terms listed 16 items that were to appear in the section 106 agreement. None of those terms specifically related to the library.

5

Once the resolution to grant planning permission had been passed, work started on a section 106 agreement. By September 2004 a draft section 106 agreement was in existence. At this stage Golfrate put together a sales pack inviting buyers for the property. At the same time as looking for a buyer for the property, KGL's then solicitors worked towards finalisation of the section 106 agreement. By December 2004 the section 106 agreement appeared to be close to its final form. Clause 15.2 of the draft section 106 agreement then read (so far as material):

"the Developer covenants not to cause or permit occupation of the Affordable Housing Units and the Market Residential Units until the Class B1 Business Units and the library are constructed to shell and core."

6

By April 2005 the leading buyer for the Property was Barratts. However, at a late stage, in April 2005, LGD emerged as a competitor for the purchase. In the event LGD's offer of £13.75m for the property was accepted by KGL.

7

The parties' solicitors drafted a sale agreement. They met at the offices of LGD's new solicitors, Philipsohn Crawford Berward ("PCB") on 23 May 2005 to exchange contracts. At this "exchange" meeting Mr Green of LGD and his solicitor, Mr Segen, explained that the section 106 agreement had to be in place in order to enable LGD to obtain funding for the purchase. They therefore required a term in the agreement which deferred LGD's obligation to complete the purchase until there was a completed section 106 agreement; otherwise exchange could not take place. Mr Lobetta, a partner in PCB, believed that the draft section 106 agreement was in final form. However he decided to check on this and telephoned LBM. He spoke to Sharon Lauder ("Ms Lauder") the head of civic and legal services at LBM. He asked her whether the draft section 106 Agreement was in an agreed form. She said that if everything in the draft was agreed then she was in a position to engross the section 106 agreement for execution by the parties. A clause was inserted into the sale contract to deal with the section 106 agreement. It is that clause which is at the heart of the dispute. Exchange of contracts then took place. I will return to its detailed terms later. Both parties to the contract expected that the section 106 agreement would be completed within a relatively short period of time, and without substantial amendment.

8

On 2 June 2005 Mr Lobetta sent a fax to Ms Lauder. He said:

"I refer to our recent telephone conversation regarding the above property…… I am pleased to confirm that my clients agree to the latest draft of the Section 106 Agreement and therefore would you please arrange for engrossments of the document to be forwarded to me as soon as possible for execution by my clients and their funders."

9

On 7 June 2005 Ms Lauder replied. She simply explained that two plans were awaited. Then on 15 June 2005 her position changed. She wrote again. She said:

"Unfortunately my instructing officers have raised a couple of important issues on the draft agreement. Firstly I am instructed that the new public library within the development should be transferred to the Council at a peppercorn rent and without a premium.

I am also instructed that there is a lack of clarity on the highway works to be carried out by the developer on the Christchurch Road frontage … It is probable that your client will be required to enter into a S278 Highways agreement and Bond in order to carry out works on the public highway.

These issues were only brought to my attention within the last few days following my request for authority to complete the agreement."

10

Mr Lobetta's immediate reaction to this was contained in an e-mail to Mr Aziz of the same day. His concern was that if LBM insisted on the highway works, LGD might argue that they were not bound to accept the document. So far as the proposal about the peppercorn rent was concerned, Mr Lobetta simply expressed the hope that this should not be material to LGD but that he would need to inform LGD if Mr Aziz agreed to it. Mr Lobetta also advised KGL to engage a building surveyor or architect to advise on the section 106 agreement. Mr Aziz e-mailed Mr Green saying that it looked like the sale would have to be cancelled. Mr Green asked for a meeting; and a meeting was duly arranged. It took place at the Trocadero on 20 June 2005, attended by Mr Green, Mr Segen, Mr Aziz and Mr Lobetta. LBM's proposal for a lease of the library at...

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