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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Yewbelle Ltd v London Green Developments Ltd & Anor  EWHC 3166 (Ch) (08 December 2006)
Cite as:  EWHC 3166 (Ch)
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Strand, London, WC2A 2LL
B e f o r e :
| YEWBELLE LIMITED
|- and -
|(1) LONDON GREEN DEVELOPMENTS LIMITED
|- and -
|(2) KNIGHTSBRIDGE GREEN LIMITED
||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
Crown Copyright ©
Mr Justice Lewison:
|Planning obligations and planning conditions||73|
|How does the contract work?||78|
|The seller's analysis||78|
|The buyer's analysis||80|
|The condition can be waived||81|
|The authorities on conditional contracts||83|
|Does the contract work without an implied term?||90|
|The fall back position||101|
|Opportunity to waive?||101|
|What is an opportunity to waive?||105|
|Is the draft section 106 agreement compliant with the contract?||107|
|The third party land||112|
|The library lease||114|
|Did Yewbelle comply with its obligation?||118|
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).
"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."
"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."
"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."
"I can confirm that my clients have exchanged contracts for the sale of the above property and completion was due to take place on 15th September. However, the contract states that the buyer is not obliged to complete until an Agreement pursuant to s.106 of the Town and Country Planning Act 1990 has been entered into with the London Borough of Merton.
The S. 106 agreement was in an agreed form prior to my clients exchanging contracts for the sale of the property. Completion of the S. 106 Agreement should have been a formality but the London Borough of Merton then decided to impose additional unreasonable obligations for my clients to perform. My Clients are already obliged under the proposed S. 106 Agreement to make financial contributions to the Council in excess of £1M. The additional financial and other requirements now demanded by the London Borough of Merton at the eleventh hour are unacceptable and therefore a stalemate has occurred.
I understand that the buyer proposes a comprehensive redevelopment of the property in accordance with the proposed planning consent or any improved consent it obtains from the local authority. My clients are utterly frustrated at the position since they cannot complete the sale of the Property to the Buyer and the buyer cannot proceed with the redevelopment of the Property".
"We have agreed matters between us on the issues of the library and highway works, primarily through reapportioning existing s106 monies and would be grateful to receive reconfirmation of the details on these so that lawyers can finalise amendments necessary to the s106. I see no reason why the amended s106 cannot be resolved and then we only need to await Member agreement to the amended Conditions on 15th December for the issue of Planning permission."
"… I have reiterated my views to colleagues in Libraries and Property Management that finalising the wording of the S106 could proceed in advance of and separate from detailed negotiations between the Council's Property Management Section and the owner on the library. I am pursuing a similar approach with my legal advisor on the issue of highways works so as to break the current deadlock."
"Given the on-going discussions between the Council and the developer regarding the provision of the library as part of the scheme it is considered that the relevant head of terms (Number 11 in the March 2004 Committee report) regarding education be recast so as to refer to improved education of life-long learning. It is considered that such an adjustment would better reflect the scope of the scheme, which includes a key community facility, which the Council's adopted planning brief aspires to, and would ensure greater flexibility in the assignment of any S 106 benefits."
"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 and a lease of the library has been granted to the Council" (changes in italics)
"We had gone down this route thinking that it would resolve problems, yet here we were with still a reference to a lease back in [the] section 106 [agreement] and it was a feeling of utter frustration. They required it in here and it was sort of a case of, you know, where do we go from here?"
"It was therefore decided that whilst Yewbelle would try to find a solution to the problem of the library being built on third party land, LGD should be put on notice that we considered that the Sale Agreement to have come to an end given (i) the impasse reached over the terms of the library; (ii) that the Development would have to be amended and (iii) the difficulties faced in having a revised development of the Property approved which did not encroach on third party land."
"Mr Silk would have been party to the discussions we had at that meeting. We would have discussed where we were, we would have discussed what we had done, and the conclusion that was reached at the end of that meeting was that we were not going to be able to obtain a Section 106 agreement substantially in the form attached to the sale agreement."
"I attended a meeting on 1 February with Mr Hughes and Mr Lobetta at which I provided some drawings to show changes to the Development to avoid the third party land. It was agreed that given (i) there were still serious issues concerning the library; (ii) there was now the problem of having to amend the Development; and (iii) LGD had no intention of implementing the development permitted by the First Resolution, that LGD should be asked if it would complete without the benefit of the S. 106 agreement."
"I am therefore advised that it will not be possible for my clients to procure a Section 106 Agreement substantially in the form attached to the Sale Agreement between our respective clients. Would you please explain the position to [Mr Green] and see if he is willing to complete in the same terms and conditions contained in the Sale Agreement but without any Section 106 Agreement being in place. If [Mr Green] does not wish to complete or is not able to complete on this basis then I am instructed that my clients will have no option but to treat the Sale Agreement as at an end and return the deposit to your client."
"As your clients are well aware my clients cannot and will not complete without a Section 106 Agreement in place because funding would not be available. My client is quite happy to work with the planners and obtain an acceptable section 106 agreement either substantially in the form of that annexed to the contract (which we are confident can be obtained) or in a form wherein my client can (as contractually entitled) waive that requirement and then proceed to completion".
"The lawyer at the Local Authority subsequently [i.e. after the committee meeting on 15 December 2005] produced a revised draft of the S.106 Agreement purporting to give effect to the amended conditions. However, the amended draft still referred to the library and additional issues arose due to part of the proposed scheme still being in the ownership of a third party. At this stage, my clients were exacerbated at the situation hence my letter to you of 2 February."
"To the contrary, he can clearly obtain a Section 106 in substantially that form. That Section 106 Agreement would however provide that your client has to give the library back without premium or rent. That was always the case and is the case now. Your client cannot rely on this to get out of the contract."
"Your client has stated that he does not wish to complete the purchase of the Property without any Section 106 Agreement in place. Accordingly this letter should be treated as confirmation that the sale contract between our respective clients is now treated as being discharged due to my client's inability to procure a Section 106 Agreement substantially in the form attached to the sale contract".
"We would want the Developer to bear the cost of providing the library to a category A specification (which goes well beyond the shell and core finish) and will provide Merton with a virtually fully finished unit".
"Since I will be reporting to my client on our discussion I thought it would be helpful to summarise what you have said to me, namely :
1. The cost of fitting out the library is unlikely to be less than £750,000 discussed to date. The cost could well be greater bearing in mind your experience at Raynes Park and the fact that the fit-out cost at Colliers Wood could exceed £100/square feet.
2. It is your opinion that LBM will not fund the costs of the fit out from the total contribution to be made by my client of £1.080m.
The logical consequence of our discussions including the above points is that LBM would therefore require the draft Section 106 Agreement to be revised to provide for my client to bear the fit out costs as set out above. Could I please ask you to confirm that my understanding is correct by Wednesday of next week. If I do not hear from you by then I will assume my understanding is correct and that my client can proceed on this basis."
"Any matters concerning the section 106 agreement or the Planning Application are for our planning section to deal with. They are not part of my remit. I will work with the documentation that is provided either by the planners or the planning section in our legal services section who have supplied a copy of the S106 agreement."
"The Section 106 obligation has not been completed and planning permission has not yet been issued. The overall amount of financial contributions to the Council under the terms of the planning obligations is the subject of agreement although detailed arrangements with the owner for the provision of the library have yet to be finalised."
"The report also provided an opportunity for members to review the wording of the heads of terms to ensure that any education contribution could reasonably be directed towards financing a library as part of the proposals. The initiative to take the application back to Committee flowed from the knowledge that the application was in the process of selling the site and did not wish the sale to be delayed while further details were developed which could be superseded were the new owner to submit a fresh planning application. The Planning Applications Committee endorsed the report's recommendations."
|Original scheme||Amended scheme|
|1 bedroom flats||64||66|
|2 bedroom flats||145||128|
|3 bedroom flats||12||12|
|Library||629 sq m||629 sq m|
|Retail||370 sq m||370 sq m|
|Food and drink||102 sq m||102 sq m|
|Office||876 sq m||822 sq m|
"Subject to the remaining provisions of this Clause 3 the Seller shall sell and the Buyer shall purchase the property for the Purchase Price in accordance with the provisions of this Agreement."
"The Seller will use all reasonable endeavours by completion to obtain the completed S.106 Agreement and the Buyer will not be bound to complete until the S.106 Agreement has been obtained by the Seller subject to the Buyer hereby indemnifying the Seller against all obligations contained in the S.106 Agreement and the buyer paying the legal costs of the London Borough of Merton in connection therewith."
"the proposed Agreement to be entered into between the Seller (1), the Seller's mortgagee (if any) (2) and the Mayor and Burgesses of the London Borough of Merton (3) substantially in the form of the draft attached to this Agreement".
"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."
Planning obligations and planning conditions
"(1) Where an application is made to a local planning authority for planning permission—(a) subject to sections 91 and 92, they may grant planning permission, either unconditionally or subject to such conditions as they think fit; or (b) they may refuse planning permission
(2) In dealing with such an application the authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations…"
"(1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A and 106B as "a planning obligation"), enforceable to the extent mentioned in subsection (3)—
(a) restricting the development or use of the land in any specified way;(b) requiring specified operations or activities to be carried out in, on, under or over the land;(c) requiring the land to be used in any specified way; or(d) requiring a sum or sums to be paid to the authority on a specified date or dates or periodically.
(2) A planning obligation may—
(a) be unconditional or subject to conditions;(b) impose any restriction or requirement mentioned in subsection (1)(a) to (c) either indefinitely or for such period or periods as may be specified; and(c) if it requires a sum or sums to be paid, require the payment of a specified amount or an amount determined in accordance with the instrument by which the obligation is entered into and, if it requires the payment of periodical sums, require them to be paid indefinitely or for a specified period.
(3) Subject to subsection (4) a planning obligation is enforceable by the authority identified in accordance with subsection (9)(d)—
(a) against the person entering into the obligation; and(b) against any person deriving title from that person.
(4) The instrument by which a planning obligation is entered into may provide that a person shall not be bound by the obligation in respect of a period during which he no longer has an interest in the land."
i) relevant to planning;
ii) necessary to make the proposed development acceptable in planning terms;
iii) directly related to the proposed development;
iv) fairly and reasonably related in scale and kind to the proposed development; and
v) reasonable in all other respects.
How does the contract work?
The seller's analysis
The buyer's analysis
The condition can be waived
The authorities on conditional contracts
"If the provision in an agreement is of fundamental importance then the result either of a failure to perform it (if it is promissory) or of the event not happening or the act not being done (if it is a contingent condition or a condition precedent or a condition subsequent) may be that the contract either never comes into being or terminates. That may be so, whether the parties expressly say so or not." (Lord Slynn's emphasis)
"I do not, therefore, accept Mr. Pollock's argument that the effect of the failure of an event upon which further performance depends can only lead to the suspension of the party's obligation under the contract. In my opinion it depends on the proper construction of the contract as to whether on the non-happening of the event the parties' obligations are suspended or whether the contract ceases to bind."
Does the contract work without an implied term?
"The modern approach to the defences of laches, acquiescence and estoppel was considered by this court in Frawley v Neill  CP Reports 20 to which reference was made in the judgment of Mummery LJ in Patel v Shah  EWCA Civ 157, (2005) Times, 2 Mar, at . After reviewing the earlier authorities—and, in particular, observations in Lindsay Petroleum v Hurd (1874) LR 5 PC 221 at 229 and Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1279—Aldous LJ (with whom the other members of the court agreed) said this:
'In my view the more modern approach should not require an inquiry as to whether the circumstances can be fitted within the confines of a preconceived formula derived from earlier cases. The inquiry should require a broad approach, directed to ascertaining whether it would in all the circumstances be unconscionable for a party to be permitted to assert his beneficial right. No doubt the circumstances which gave rise to a particular result in the decided cases are relevant to the question whether or not it would be conscionable or unconscionable for the relief to be asserted, but each case has to be decided on its facts applying the broad approach.'"
The fall back position
Opportunity to waive?
i) The seller complies with its obligation to use all reasonable endeavours to complete the section 106 agreement and persists in those endeavours for a reasonable time;
ii) The seller then gives the buyer an opportunity to complete the sale without any section 106 agreement;
iii) The buyer chooses not to complete the sale.
What is an opportunity to waive?
"…where there is a right to elect the party is not bound to elect at once; he may wait and think which way he will exercise his election, so long as he can do so without injuring other persons, and accordingly in that particular case it was held that he had not lost his right to elect by a reasonable waiting under rather peculiar circumstances; but when he has once fully elected it is final."
Is the draft section 106 agreement compliant with the contract?
i) Yewbelle was substituted for KGL as "Developer"; KGL's chargee was omitted and LGD was added as a party;
ii) References to the chargee were omitted in the recitals, and instead they referred to the fact that a conditional contract mad been made with LGD;
iii) The date of the resolution to grant was changed from 11 March 2004 to 15 December 2005
iv) the overall £1.08 million contribution remained the same, although it was redistributed between the various elements of the draft agreement;
v) clause 15.2 (dealing with the library) added that no occupation of the Affordable Housing Units and Market Residential Units was to be permitted until 'a lease of the library has been granted to the Council' (the earlier draft had simply said "until the library [is] constructed to shell and core");
vi) landscaping works were omitted; and
vii) minor amendments to sense were made.
i) There was no change in the definition of "the Development", which continued to refer to 226 residential units, 370 square metres of retail, 876 square metres of offices and 629 square metres of library;
ii) There was no change in the definition of "the Red Land", to which the section 106 agreement was to apply. That land was to be identified on a plan attached to the agreement; but neither the draft annexed to the contract, nor the 21 December draft attached the plan;
iii) The draft did not delete reference to the Green Travel Plan or the Car Park Management Plan (which the committee had resolved should be replaced by conditions).
The third party land
The library lease
Did Yewbelle comply with its obligation?
"I find it impossible to say that they [i.e. the contract terms] impose on the buyer a contractual obligation to disregard the financial effect on him, and indeed everything else other than technical or operational practicality, when deciding how to discharge his obligation to use reasonable endeavours to agree to a commissioning date prior to 25 September 1996. If the obligation were to be strait-jacketed in that way, that is something which to my mind would have been expressly stated, and, as Mr Pollock's argument really conceded, this is not a situation in which it would be appropriate for the court to imply a term, not least because it is unnecessary to do so for purposes of business efficiency. The fall-back provision expressly states what is to happen if no early commissioning date is agreed."
"The GSA was an agreement drawn up between international energy companies intended to regulate their trading and financial relationship over a period of at least 15 years and involving hundreds of millions of pounds worth of business. They were plainly the product of much arm's length negotiation and careful legal drafting, which appears to have been calculated to provide sequentially for every contractual eventuality which might occur at the various stages of the development and operation of the supply contract. That being so, I see no reason to suppose that it was the expectation, let alone the obligation, of the parties that, in any area of activity in which room was left for manoeuvre or further negotiation, they were not at liberty to take into account their own financial position and act in the manner most beneficial to them, short of bad faith or breach of an express term of the contract."
"An undertaking to use one's best endeavours to obtain planning permission or an export licence is sufficiently certain and is capable of being enforced. An undertaking to use one's best endeavours to agree, however, is no different from an undertaking to agree, to try to agree, or to negotiate with a view to reaching agreement; all are equally uncertain and incapable of giving rise to an enforceable legal obligation."
i) On 15 June 2005 Ms Lauder said that she had been instructed that the library should be transferred to LBM at a peppercorn and without premium;
ii) Despite that, on 11 July she suggested a meeting to discuss terms of acquisition of the library, and told Mr Lobetta that LBM were looking for a compromise on the library;
iii) On 18 August Mr Lobetta reported to Mr Aziz that Mr Masson had said that he would like the library but was not confident of getting it as he appreciated that the developer had been "squeezed enough already";
iv) In early September, LBM suggested a rent of no more than £30,000 per annum, which "worked" for Mr Aziz;
v) In early October Mr Lewis said that the £1.08 million "pot" could be reallocated to help with the library fit out. He raised the question of a rent free period, but otherwise did not revert to the peppercorn rent proposal (which would of curse have obviated the need to discuss a rent free period);
vi) On 11 October Mr Lobetta said that his clients were willing to grant a lease for 20 years at £30,000 per annum with five-yearly rent reviews, but without a rent free period;
vii) On 6 December Mr Masson asked where the figure of £30,000 had come from and said that any rent would have to be negotiated;
viii) On 21 December 2005 Mr Lobetta received the revised section 106 agreement;
ix) On 2 February 2006 Mr Lobetta told Mr Segen that the condition could not be fulfilled, and on 10 March he said that the contract had terminated;
x) On 20 March Mr Silk e-mailed Mr Lewis to say that it "would seem expeditious if we could move forward to resolving terms for the library";
xi) On the following day Mr Masson indicated that LBM wanted a 125 year lease at a peppercorn and fit out to Category A. He confirmed this by letter of 22 March;
xii) At the meeting on 4 April Mr Masson seemed prepared to accept a rent of 15 per cent below a comparable office rent, but resiled from this in a conversation with Mr Hughes on the following day, when he reverted to the proposal for a peppercorn rent and a high quality fit out;
xiii) Since then Mr Masson has maintained his position, but it has never been challenged by Yewbelle.
i) Whether (and if so when) LGD had sufficient information on which to base a valid election or waiver;
ii) Whether (and if so when) it made a valid election or waiver.
i) They had not been pleaded;
ii) No disclosure had been given by LGD of materials relating to its detailed understanding of the planning position; and
iii) Mr Green had not been cross-examined about his state of knowledge of the planning position between the beginning of 2006 and 3 October 2006 (which was the date on which LGD purported to waive the condition).
i) These issues arose out of Yewbelle's own introduction of an unpleaded fall-back position
ii) He had cross-examined Mr Lobetta without objection about LGD's requests for information during 2006; and
iii) Full information about what had been going on behind the scenes had only been supplied on disclosure.