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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Portsmouth City Football Club Ltd. v Sellar Properties (Portsmouth) Ltd. [2004] EWCA Civ 760 (18 June 2004) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2004/760.html Cite as: [2004] EWCA Civ 760 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE LAWRENCE COLLINS)
Strand, London, WC2A 2LL |
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B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE MAURICE KAY
and
MR JUSTICE BUCKLEY
____________________
PORTSMOUTH CITY FOOTBALL CLUB LIMITED |
Claimant/ |
|
- and - |
Respondent |
|
SELLAR PROPERTIES (PORTSMOUTH) LIMITED |
Defendant/ Appellant |
____________________
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Michael Driscoll QC (instructed by Paris Smith & Randall of 1 London Road, Southampton, SO15 2AE) for the Claimant/Respondent
____________________
Crown Copyright ©
Lord Justice Chadwick :
The underlying facts
"There is a public foot path that requires to be crossed. PCC's estimate of the value of this land is £1,000,000."
The agreement of 21 October 1999
". . . the aggregate of such capital sum and the value of any non-capital monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane and for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . ."
The interest of the Club in minimising the amount which Sellar would be required to pay to the Council in connection with the Milton Lane crossing and the Barwood land – and so reducing the amount which the Club would, itself, pay Sellar for the option land – is emphasised by the terms of clause 13 of the option agreement of 21 October 1999:
"THE Vendor and the Purchaser shall act jointly to negotiate X (as defined in Clause 1.34) . . . with Portsmouth City Council and shall use all reasonable endeavours to negotiate the lowest [sum] (or least other consideration) in respect thereof as it is possible to obtain . . ."
Sellar's negotiations with the Council
"2. The Irvine Sellar Group are to surrender their leasehold interests in the Barwood site.
3. The Council will convey the freehold of the Barwood site, excluding that part required for stadium purposes to the Irvine Sellar Group
4. The Council will convey the freehold of Milton Lane, between points A and B to the Irvine Sellar Group"
The price proposed in that letter was £5.95 million. Subsequently, by a letter dated 23 August 2000, that figure was reduced to £4.25 million. At a meeting on 5 September 2000 between Sellar's agents and the Council's Head of Property Services an offer on substantially those terms was agreed, subject to contract. It is pertinent to note what was to be transferred for the payment of £4.25 million:
" 2. The payment outlined in 1 above is for the Council's freehold interest in the land known as the Barwood Site. This is currently let on a long lease to the Sellar Property Group. The payment also includes the freehold interest in Milton Lane that falls outside the lease and that is shown, for identification purposes only, shaded red on the attached plan."
The portion of Milton Lane to be transferred included, but was more extensive than, the portion over which the new spine road was to pass.
"In arriving at my valuation I had regard to the overall benefits to your client of access over the land and the valuation was agreed on the basis of one disposal. In those circumstances, it is not appropriate or necessary for me to provide an apportionment".
The supplemental agreement of 28 September 2000
"12. Clause 1.11 of the Main Agreement shall be deleted and replaced by the following:
1.11 "The Purchase Price means £2,000,000 (Two million pounds) PROVIDED THAT (a) the amount payable in respect of the Purchase Price shall be subject to variation in accordance with paragraph 8 of the second schedule and (b) there shall be deducted from the Purchase Price the Milton Lane Allowance and the Velder Avenue Allowance.
13. Clause 1.34 of the Main Agreement shall be amended and shall henceforth be read as follows:
"the Milton Lane Allowance" means such sum (not to be less than nil) calculated according to the formula
£1,100,000 - x
where x is the aggregate of such capital sum and the value of any non-monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane."
Clause 15 imposed an obligation on Sellar to use its best endeavours at its own cost to procure "that the existing cycleway/footpath which traverses the Stadium Site is diverted in a manner reasonably acceptable to [the Club] as soon as reasonable practicable . . .". In that context "the Stadium Site" means the Property and the existing Fratton Park Football Ground; and the reference to "the existing cycleway/pathway" is to the relevant portion of Milton Lane.
Implementation of the Council's planning objectives
These proceedings
The judge's reasoning
"It has not been suggested by either side that it was intended that the relevant words should bear a different meaning in the Supplemental Option Agreement to that in the 1999 Option Agreement, or that matters occurring after the 1999 Option Agreement are relevant to the interpretation of clause 1.34 as amended, though they are plainly relevant to its application".
And he observed, at paragraph 133, that:
". . . the parties accept that the words have the same meaning in the Supplemental Agreement as they do in the 1999 Option Agreement, and the continued inclusion of the same formula is equally consistent with neither party having spotted the point, or with each of them being content to leave the matter as it stood and not raise an issue which might require renegotiation."
"1. The Club and the Developer knew that the Council owned the freehold reversion in the Barwood Land and that the Developer had entered into an option to purchase the long leasehold interests in the Barwood Land but had not entered into a contract with the Council to buy the freehold.
2. The Club and the Developer knew that Milton Lane was a public footpath and that the Council was the highway authority but did not know the extent of the Council's freehold interest in the land over which Milton Lane passed or whether it had any freehold in it, but their advisers knew that the Council had title to the soil under half its width as owner of the Barwood Land.
3. The Club and the Developer considered that the Developer would, in order to build the Spine Road, need to acquire consent to cross Milton Lane and the right to build a Spine Road on the Barwood Land through variation of leases or the purchase of the freehold of the Barwood land.
4. Both parties had reason to believe that the Council might seek to extract a ransom payment for its consent for the Spine Road to cross Milton Lane and the Barwood Land. The Developer had budgeted for a figure of £1 million for the consent (and for any variation of the leases and for the freehold of the Barwood land) as the Club must have known."
"130. I consider that the expression "consent for the Spine Road to cross the roadway known as Milton Lane" means and clearly contemplates consent from the Council as highway authority. The natural and ordinary meaning of "consent" is no more than permission. Both parties knew that the Council was a highway authority and that Milton Lane was a public highway (footpath and cycleway), and they did not know when they entered into the 1999 Option Agreement or the Supplemental Option that the Council owned the whole width of the roadway. Consent was used as the word in relation to the crossing of Milton Lane but in relation to the Barwood Land the parties had specifically contemplated and referred to the "acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land.
131. Accordingly I do not accept that the expression "consent" includes all possible rights ultimately acquired by the Developer in connection with crossing of Milton Lane by the Spine Road and to secure the dedication of the Spine Road as highway. A formidable difficulty would arise in determining the content of the extended meaning for which the developer contends. . . . In particular I do not accept that the natural meaning of the words could result in the acquisition of the freehold being regarded as a consent, nor that it is intended to include all steps necessary to allow the Spine Road to be dedicated as a public highway. Nor do I accept the characterisation of the Club's argument by the Developer as the kind of "detailed semantic and syntactical analysis of words" deprecated by Lord Diplock in The Antaios [1985] AC 191. On the contrary, in the light of circumstances at the time of the 1999 Option Agreement, when the parties expected the Council to extract a ransom payment for the right to cross Milton Lane and to build the Spine Road over the Barwood Land, the natural and ordinary meaning is strongly confirmed by the factual matrix."
". . . the aggregate of such capital sum and the value of any non-capital monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane and for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . ."
[A] ". . . the aggregate of such capital sum . . . [etc] . . . as required from the Vendor [a] for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane and [b] for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . ."
[B] . . . the aggregate of such capital sum . . . [etc] . . . as required from the Vendor for and in consideration of its consent [a] for the Spine Road to cross the roadway known as Milton Lane and [b] for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . ."
". . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."
Lord Hoffmann made the same point in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913D-E, when he said:
The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had."
As I have said, commercial or business common sense seems to me to point strongly in favour of a construction of clause 1.34 of the option agreement of 21 October 1999 which includes the cost of acquiring from the Council, as landowner, whatever rights were required to enable the new road to be constructed over the Milton Lane crossing. To exclude that cost, while including the cost of acquiring the freehold of the Barwood land, the cost of obtaining any variation to the leases under which that land was held, the cost of any consents required under those leases and the supposed or anticipated cost of persuading the Council to exercise powers as highway authority, does seem to me to flout commercial common sense.
The submissions on this appeal
"In other words that which the Judge contemplated as being the giving of consent by the Council was a practical and legal impossibility. All of this was known to or was in the reasonable contemplation of the parties when they entered into the option agreement."
The powers of the Council as highway and planning authority
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) . . . Subject to the requirement that it should have been reasonably available to the parties . . . [the background] includes absolutely anything which could have affected the way in which the language of the document would have been understood by a reasonable man."
If proper effect is to be given to those principles the background knowledge, in the light of which the 1999 option agreement must be construed, must include knowledge of the powers exercisable by a local authority in relation to the obstruction and diversion of an existing highway; and knowledge of the courses open to a local authority in pursuit of a planning objective which required that a new roadway open to all traffic should cross an existing public footpath. The relevant powers are contained in statute. It seems to me unarguable that a reasonable man, in the position of the parties to the option agreement, would not take steps to inform himself of those powers and of the courses open to the local authority.
" It is the duty of the highway authority to assert and protect the rights of the public to the use and enjoyment of any highway for which they are the highway authority . . ."
That obligation is re-emphasised by section 130(3):
". . . it is the duty of a council who are a highway authority to prevent, as far as possible, the stopping up or obstruction of (a) the highways for which they are the highway authority . . ."
It is not, I think, in dispute that the passage of motor vehicles along a new roadway constructed across an existing footpath would interfere with the use and enjoyment by the public of the footpath.
The meaning of clause 1.34 in the original (1999) form
The meaning of clause 1.34 after amendment by the supplemental agreement
The amount of the Milton Lane Allowance
"In these circumstances I do not think it is open to the [Developer] to rely on the Council's failure to identify a sum referable to Milton Lane. Were it not for clause 13, I consider that it would be an uncommercial interpretation to rule out any deduction simply because the Council (and the Developer) had failed to identify the sum at the time of their contract. But X was not identified because the Developer decided not to seek a sum from the Council for the consent but to negotiate a wider deal which included the purchase of Milton Lane as part of a single purchase of the Barwood Land in breach by the developer of clause 13, and it cannot rely on the consequences of its breach: Alghussein Establishment v Eton College [1988] 1 WLR 587, HL. Cf. Cia Barca de Panama SA v George Wimpey & Co Ltd [1980] 1 Lloyd's Rep 598 (CA). "
" . . . if it had been appropriate to carry out the apportionment exercise, I would have preferred the result (if not necessarily the reasoning) for which Mr Newsom contended. Apportionment on the basis of acreage (for which Mr Heller contended) has nothing to commend it, but I also find the concept of the hypothetical bargaining for which Mr Newsom contended very artificial in this context (and not really supported by any practical experience of similar exercises). But common sense suggests that where two pieces of land without any inherent value are needed for the purpose required in this case, the price may reasonably be apportioned in substantially equal shares."
Conclusion
Lord Justice Maurice Kay:
Mr Justice Buckley: