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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Groveholt Ltd v Hughes & Anor [2010] EWCA Civ 538 (20 May 2010) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2010/538.html Cite as: [2010] EWCA Civ 538 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION) Peter Smith J
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE WILSON
and
MR JUSTICE HENDERSON
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GROVEHOLT LIMITED |
Respondent |
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- and - |
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ALAN HUGHES & ANR |
Appellant |
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Mr Neil Kitchener QC & Mr Zachary Bredemear (instructed by Messrs Jones Day) for the Respondent
Hearing dates : 14/15 January 2010
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Crown Copyright ©
Lady Justice Arden :
BACKGROUND
(1) The complex web of agreements surrounding the development of the Quarry
"11.1 the Site Assembly Costs are known and certain by exchange of all Site Assembly Agreements and the Infrastructure Costs are known and certain to the extent that tenders for the carrying out of the works within a practicable timescale have been received and accepted and the costs thereof (including any fees) thus calculated
11.2 (in the event that clause 10 has effect) the payment due from the Vendor under clause 10.2 is known and at such time when such costs are so identified and known, then any further payments then due and payable to the Vendor under the said clauses 5.1.2 to 5.1.5 hereof after deducting amounts due to the Purchaser under clause 8.3 and 10 hereof shall be payable to the Vendor such payment being made within ten days thereof "
(2) The events which have happened
(3) Earlier decisions on the effect of the agreements
"Here completion has occurred and the land has been conveyed. The subsequent payments provided for by clause 5 cannot be treated in isolation as simple, unpaid instalments of the purchase price of the land. In every case of this kind it is necessary to analyse carefully what the real consideration for the payment in question is (cf Hyundai Heavy Industries Ltd v Papadopoulos [1980] 1 WLR 1129). What the [Hughes/Chelverton Agreement] provided for was for Mr Hughes to receive a net sum calculated by the interaction of clause 5 on one hand and clauses 8.3 and 10 on the other. The netting off was not a mere matter of convenience. It reflected the commercial reality that the increased value of the land by reason of the grant of permission was conditional on the costs of effecting the development remaining within viable limits. If Mr Hughes were to be entitled to receive the overage payment without any reference to the level of [the Costs] he would be getting something for which the contract did not provide. "
"[Mr Hughes] does not, by reason of the disclaimer of the [Hughes/Chelverton] Agreement by the liquidator of Chelverton or otherwise, have any right to the payment as debts of the sums of money referred to in clauses 5.1.2, 5.1.3 and 5.1.5 of the [Hughes/Chelverton] Agreement and accordingly such sums are not secured by the Charge".
"[97] In any event, a construction of the [Hughes/Chelverton] agreement which had the effect of entitling Mr Hughes to additional purchase consideration in respect of the planning consents without taking full account of the costs of putting the site into a state where the development the subject of those planning consents could be implemented would, in my judgment, be to fly in the face of 'business common sense' (to use Lord Diplock's expression in The Antaios (see para [72] above)). The provision for additional purchase consideration in clause 5 reflects the fact that the grant of a relevant planning consent will increase the value of the Chelverton Land in the hands of Chelverton. But that increase in value must inevitably be dependent upon the amount of the preparatory costs which a developer will have to incur. So I can see no commercial sense in an additional purchase consideration which does not reflect the amount of those costs."
"[Mr Hughes] is obliged to deduct from any payment to which he would otherwise be entitled under the agreement dated 9 April 1998 ("the Agreement") the amount of Infrastructure and Site Assembly costs incurred by Chelverton, Sainsbury and Groveholt provided that they are Infrastructure or Site Assembly costs within the meaning of the Agreement, save to the extent that [Mr Hughes] would have been entitled as against Chelverton to reduce the amount of the costs to be deducted under clause 11 of the Agreement by reason of a breach of contract by Chelverton or for any other reason."
THE JUDGMENT UNDER APPEAL
DISCUSSION
The amendments disallowed by the judge – an overview
Paragraphs 31 and 32: "Rerunning" of issues already decided and abuse of process (respondent's notice)
The condition precedent issue and the implied term issue
"When it implies a term in a contract the court is sometimes laying down a general rule that in all contracts of a certain type - sale of goods, master and servant, landlord and tenant and so on - some provision is to be implied unless the parties have expressly excluded it. In deciding whether or not to lay down such a prima facie rule the court will naturally ask itself whether in the general run of such cases the term in question would be one which it would be reasonable to insert. Sometimes, however, there is no question of laying down any prima facie rule applicable to all cases of a defined type but what the court is being in effect asked to do is to rectify a particular - often a very detailed - contract by inserting in it a term which the parties have not expressed. Here it is not enough for the court to say that the suggested term is a reasonable one the presence of which would make the contract a better or fairer one; it must be able to say that the insertion of the term is necessary to give - as it is put - "business efficacy" to the contract and that if its absence had been pointed out at the time both parties - assuming them to have been reasonable men - would have agreed without hesitation to its insertion."
"15.9 To the extent that the Actual Costs exceed £5 million plus VAT they shall be borne by the Seller and the Seller agrees to indemnify the Buyer On Demand against All Costs and Expenses in Excess of £5 Million Plus VAT Incurred by the Buyer in connection with the Infrastructure Works and/or the Site Assembly Process."
The matrix issue
"On the other hand, it may then be argued that having taken the opportunity to renew their contract, the parties must be taken to have entered into a new contract on the date of the (last) variation to it. If the latter view is correct, it may also alter the nature of the factual matrix of fact which may be considered in considering the contract."
The non-Hughes/Chelverton Agreement Costs issue
"The Court of Appeal clearly determined that Mr Hughes in claiming his entitlement to an enhanced price for the Property was subject to a requirement to give credit for the works that were carried out to enable that enhanced value to be achieved. What the Court of Appeal did not do was give any guidance as to how that exercise was to be decided. It arises under the Hughes/Chelverton Agreement but Chelverton of course is not a party to the current dispute. Self-evidently Groveholt is not a party to that Agreement. Equally the works do not appear to necessarily have been done under the auspices of the Hughes/Chelverton Agreement. I say necessarily because no disclosure has taken place and as I have set out above there are other contractual arrangements between different parties which were applicable to the work. In particular it is significant that whilst Chelverton disclaimed the Hughes/Chelverton Agreement it did not disclaim the benefit of the Chelverton/Groveholt Agreement and in particular the obligations on behalf of Groveholt to carry out the Infrastructure Works and its indemnity against the obligations arising under the Novation Deed."
"89. Mr Hughes has raised various arguments one of which is a matter of construction that no claims can be made if the work was done by Sainsburys but not under the Chelverton/Hughes Agreement. Such an argument in my view is not open to Mr Hughes as a result of the Court of Appeal decision which plainly decided that if work was done that enhanced the value then credit must in some way be given for that. It was the examination of that principle which led to the changes in stance of Groveholt during the Part 24 hearing as set out above. Disclosure in my view is necessary (not in all probability limited to the parties to this litigation) in order to see how the Infrastructure Works were carried out. This is not as Mr Strauss QC submitted seeking to look at ex post facto events as an aid to construction of the Hughes/Chelverton Agreement; it is more a question of finding out what actually happened. Subject to the overriding decision of the Court of Appeal it seems to me that all arguments remain open and cannot be finally determined at this stage. "
Disposal of this appeal
Lord Justice Wilson:
Mr Justice Henderson:
"31. The operation of clause 8.3.2 of the Hughes/Chelverton Agreement, both before and after 16 September 1998, was dependent upon Sainsbury operating the machinery in clause 15 since only through operation of the accounting procedure in clause 15 could the aggregate costs be ascertained in relation to the Sainsbury land; in particular, only once the aggregate costs in relation to the Sainsbury land had been ascertained could it be ascertained whether and by what amount the Infrastructure Costs and costs of Site Assembly exceeded £4.5 million in accordance with clause 8.3.2. In the premises, it was a condition precedent to the liability of Mr Hughes under clause 8.3.2 that the machinery set out in clause 15 culminating in an account of aggregate costs should be operated by Sainsbury. Further or alternatively, it was a condition precedent that Sainsbury should serve a demand pursuant to clause 15.9.
32. Further, by reason of the interrelation of the Sainsbury and the Hughes/Chelverton Agreement, both before and after the Supplemental Agreement, there was an implied term in the Hughes/Chelverton Agreement as varied and supplemented by the Supplemental Agreement that in relation to the Infrastructure Works and Site Assembly, Chelverton would not seek to recover from Mr Hughes under clause 8.3.2 of the Hughes/Chelverton Agreement, in respect of the Sainsbury land more than the aggregate costs as specified under the Sainsbury Agreement.
33. Further [at least] following the changed arrangements entered into consequent upon conclusion of the Novation Deed and Supplemental Agreement, the Sainsbury Agreement is admissible as part of the factual matrix for the purpose of construing the provisions of the Hughes/Chelverton Agreement as varied and supplemented by the Supplemental Agreement.
…
50. The Infrastructure Works Contract and/or the Site Assembly Agreements were not one entered into under the auspices of the Hughes/Chelverton Agreement in that:
(i) Sainsbury did not operate the provisions of clause 15 in relation thereto and was not required to do so by Groveholt/Chelverton:
(ii) Pursuant to the provisions of the Sainsbury/Groveholt Agreement Sainsbury has borne the entire cost of the Infrastructure Works and Site Assembly. [Groveholt contributed £2.25m. Chelverton made no contribution;]
(iii) Neither Sainsbury nor Groveholt acted as the agent of Chelverton in relation to the performance of the Infrastructure Works and/or conclusion of the Site Assembly Agreements;
(iv) The Infrastructure Works Contract was not put out to tender by Sainsbury with five civil engineering contractors or at all contrary to the requirement of clause 15.1.3 of the Hughes/Sainsbury Agreement as substituted by the Loan Agreement;
(v) Sainsbury did not consult with Chelverton or Groveholt in relation to the performance of the Infrastructure Works and/or the conclusion of the Site Assembly Agreements;
(vi) Sainsbury has not prepared an account of the aggregate cost of the Infrastructure Works and Site Assembly contrary to the requirement of clause 15.7;
(vii) Sainsbury reached an agreement with the liquidator Chelverton at the time of entry into the Sainsbury/Groveholt Agreement in April 2004 not to make a claim against Chelverton in the liquidation."
"Infrastructure Works" | means the works relating to the Relief Road and construction of estate roadways and services and all such other works as may be necessary to provide fully levelled and serviced sites to enable the Sainsbury Development to be implemented upon the Property All such works being in accordance with the details set out in the Third Schedule hereto |
"Site Assembly Costs" | means the costs or other consideration required to complete the Site Assembly Process and which is mentioned in paragraph G of the Fourth Schedule hereto |
Relief Road
The cost of design and construction of a road from Dale Road to Bakewell Road including traffic controlled signals at its junctions with Bakewell Road and Dale Road, the cost of bridges over the railway line and River Derwent and all professional fees relating to the design and implementation of such road and bridges. Further including the cost of all landscaping, demolitions and excavations. The road to be constructed to adoptable standards to the satisfaction of the relevant highway authority. The road to include gas, electricity, water, telecom and foul and surface water drainage of sufficient capacity to serve the Property.
The cost of design and construction of a pedestrian bridge or crossing over the railway line linking Plot A to the new public car park…"
(A) In order for the Parties to obtain and implement Planning Permission it is anticipated that various transactions will have to be negotiated and concluded with owners of adjoining land in order that the Infrastructure Works can take place in particular including the construction of the Matlock Inner Relief Road diverting the route of the current A6 Bakewell/Matlock Trunk Road that also there can be an extension of the railway track link of Peak Rail plc into the current British Rail Terminus at Matlock including the re-routing of such link and also the ancillary matters and works referred to in the S.106 Agreement are executed
(B) Accordingly it is anticipated that the following arrangements will (inter alia) need to be concluded:-
1. An agreement with Derbyshire Dales District Council for exchange of land in accordance with the Agreement reached in principle in a letter dated the 5th August 1996 with the Council …"