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Cite as: [2017] EWHC 244 (Ch)

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Neutral Citation Number: [2017] EWHC 244 (Ch)
Case No: A30BM445

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
15/02/2017

B e f o r e :

HHJ DAVID COOKE
____________________

Between:
Anderson Properties Ltd
Claimant
- and -

Blyth Liggins (a firm)
Defendant

____________________

James Jeffs (director) for the claimant
Mark Cannon QC (instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 27,28,31 October, 1,3,4 November 2016

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    HHJ David Cooke:

    Introduction

  1. The claimant Anderson Properties Ltd is a company effectively owned and controlled by Mr. Jeffs, who represented it before me. It sues the defendant firm of solicitors alleging negligence in the drafting of a conditional contract for the purchase of a development site at Newlands Hurst, Droitwich. The contract, as is common for a developer's purchase, was conditional on the grant of planning permission acceptable to the developer by a stipulated date. As the last possible date loomed, with no planning permission having been obtained or even applied for, the claimant exercised its right under the contract to waive the condition. The seller, a charitable company called Newlands Hurst Ltd ("the Charity"), however refused to complete, alleging that the contract was unenforceable for uncertainty. That arose, principally, because the obligations on completion included the grant of a lease and underlease back of a part of the site to be defined by plans, but although the contract had attached to it agreed forms of the lease and underlease they contained no plans.
  2. Mr. Jeffs was advised that the Charity's argument was probably good, and in due course the claimant accepted a payment of £125,000 from the Charity to abandon any claim it had to enforce the contract. It now sues the solicitors alleging that they were in breach of obligation to draft a contract that was enforceable, claiming damages on the basis it has lost the chance of pursuing a number of alternative outcomes, ie
  3. i) It could have obtained planning permission and sold the land with the benefit of it, or

    ii) It could have gone on to complete Phase 1 of the development and sold the land with the benefit of planning permission for Phase 2, or

    iii) It could have completed the whole development itself.

    The damages claimed as set out in a schedule of loss (Bundle A/p 67) are put at just under £8m. This is based on a suggested 50% chance that the claimant would have completed the whole development, 25% that it would have developed Phase 1 but not phase 2 and 25% that it would not have undertaken any development itself but sold the land with planning permission.

  4. Negligence is denied, and causation and the quantum of loss are in dispute.
  5. The contract and allegations of negligence

  6. I begin with a more detailed description of the contract, the circumstances in which it came to be entered into and the allegations of negligence in its drafting. It is only if the claimant succeeds on these issues that questions of causation and loss become relevant.
  7. Mr. Jeffs is a surveyor who worked at a number of firms before establishing his own business under the name Anderson Properties. He became interested in the possibilities of property development and in particular in development of care facilities. Although he had set up the claimant company some years before the events I am concerned with, it does not appear that it has ever had any substantial business activity other than pursuit of the development at Newlands Hurst. In early 2008 he was introduced to that possibility by two contacts of his, Jean-Pierre Ellis and David Hefford, who had already made an offer to the Charity trustees, which they had accepted subject to contract, to buy the site for £5.3m.
  8. The site at Newlands Hurst was about 6 acres on the outskirts of Droitwich, in an area in which it was likely that development would in future be permitted. It was owned by the Charity, which operated a residential facility in an old house on the site for about 15 adults with learning disabilities. This facility needed to be replaced, but the Charity did not have the means to do so. Mr. Jeffs renegotiated the deal Messrs Ellis and Hefford had agreed with the Charity Trustees, the revised terms being set down in the contract in issue in these proceedings, which was signed on 12 December 2008. He was advised by Mr. David Lester, a partner at the defendant firm who had acted for him on previous matters. The lead in negotiations for the Charity was taken by Mr. Derek Rawlings, advised at the time by Mr. Scott of Parkinson Wright solicitors.
  9. The structure of the deal in outline (as further renegotiated after exchange) was as follows:
  10. i) The proposed development was referred to as a "care village" and comprised three main elements:

    a) A 20 bedroom residential unit for adults with learning difficulties, physical disabilities and/or dementia. It was intended that the existing Newlands Hurst residents would be moved into this unit when it was completed and thereafter looked after for life by the purchaser, subject to continuing payment of fees at their existing level. This was referred to as the "Care Facility".
    b) An 80 bed nursing home, and
    c) A number, originally envisaged to be about 120, of single and double bedroom apartments to be sold to older persons on the basis that they would have available to them (for a fee) care facilities and services provided on site. These were referred to as "close care units" or "supported housing". The part of the site on which they would be built was referred to as the "Supported Housing Site".
    d) It was envisaged that there would be other facilities on the site, such as a GP surgery, pharmacy and communal facilities for residents of all of the parts.

    ii) The layout of the various elements was not specified in the contract. Mr. Jeffs was throughout the negotiations adamant in his instructions to the defendant that he required flexibility to negotiate the best arrangement he could with the local planning authority, Wychavon DC. His preference was to do this before a formal application was submitted, so that, it was hoped, the application would be agreed and supported by planning officers. He was particularly interested in obtaining permission for the greatest possible number of close care apartments, which he no doubt envisaged would be the most profitable part of the development. The contract therefore provided a mechanism by which

    a) The purchaser (ie the claimant) would prepare a draft full planning application. This necessarily would show the proposed layout of the buildings roads and other facilities on the site
    b) That draft would be approved by the Charity, such approval not to be unreasonably withheld or delayed, and
    c) The claimant would then make an application in the approved form, and have the right to pursue it to appeal and judicial review.

    iii) Completion would be subject to receipt of a planning permission satisfactory to the claimant, though the claimant had the right to waive this condition.

    iv) On completion the Charity would transfer the whole site to the claimant, and

    a) The claimant would pay £400,000, less a deposit of £10,000 paid on exchange
    b) The claimant would grant a 999 year lease of "the Care Facility" to the Charity at a nominal rent, in the form attached to the contract. That form defined the area to be leased by reference to "the plan annexed". No such plan was however attached to the draft form of lease
    c) The Charity would immediately grant an underlease of the same premises back to the claimant, for a term just less than 999 years and again at a nominal rent.

    v) The claimant undertook in the contract to construct "the Care Facility" within 18 months of completion. In the meantime the Charity would continue to accommodate the residents in the existing building (and was granted a licence to occupy for that purpose) but on completion of the new Care Facility the business and assets of the Charity would be transferred to the purchaser which would thereafter accommodate the residents in the new Care Facility. Depending on the terms of the planning permission obtained, the old house would either be demolished or refurbished as part of the claimant's development (but not as part of the Care Facility).

    vi) On completion of the Care Facility the claimant would pay a further £1.4m, subject to deduction of certain additional costs if incurred. This amount was referred to as "the Further Sum" and was to be secured by a legal charge over the Supported Housing Site, in the form of a draft attached to the contract, to be granted at completion. This charge also required a plan to be attached to define the land charged, but none was included in the draft.

    vii) The claimant had an option, exercisable within 48 months after completion of the Care Facility, to pay a further amount of £1.7m referred to as "the Supported Housing Site Price", in which event it would retain for itself all proceeds of the development and sale of the apartments to be built on that part of the site. In default, a schedule to the contract provided for what was described as a joint venture development, but was in substance only an obligation on the claimant to pay the Charity 16.25% of the net proceeds of sale of each apartment as and when built and sold by it. If this obligation was exercised, the percentage share of proceeds was also to be secured by the legal charge.

  11. The structure which involved the Care Facility being first leased to the Charity and then immediately leased back to the purchaser for an effective term of 999 years at first sight appears strange. Mr. Jeffs accepted that once the Care Facility was built the Charity would in practice have no role in its operation, nor would it have any other activity on the site. It would hold the intermediate reversion and be entitled to receive a nominal rent and nothing more. The explanation that emerges from the correspondence appears to be twofold:
  12. i) The underlease back to the claimant contained a covenant to build the Care Facility in terms corresponding to the obligation in the contract. Mr. Scott said this was required so that if the claimant defaulted in completing the facility, the Charity would be able to forfeit the underlease and complete the works itself.

    ii) Mr. Scott advised that the retention of the Charity's limited interest in the site would enable it to say it was maintaining its charitable purpose even though it had ceased to be responsible for the residents.

  13. The contract (D/1) provided an obligation on the claimant to submit a planning application. The relevant terms were:
  14. "4.1 The Buyer shall as soon as reasonably practicable and in any event before 10 December 2009 [or such extended period of time as the Seller shall approve…] submit a Planning Application to the Local Planning Authority … The planning application shall first be submitted to and first approved by the Seller in draft (such approval not to be unreasonably delayed or withheld).
    1.33 'Planning Application' means an application for the Planning Permission
    1.35 'Planning Permission' means full planning permission for the construction of a care village on the Property retaining the existing principal house (at least until the Care Facility is constructed) including the Care Facility
    1.9 'the Care Facility' means a new residential care facility for persons with physical and learning disabilities capable of delivering at least similar services to those presently offered by the Seller in accordance with CSCI NHS Trust and all other statutory requirements at the date of completion
    2.2 The sale and purchase of the Property… is conditional upon:
    2.2.1 the Unconditional Date occurring prior to the Termination Date…
    2.4 Unless the Unconditional Date has occurred this agreement shall automatically determine upon the Termination Date …
    1.52 'the Unconditional Date' means three months after the grant of the Satisfactory Planning Permission …
    1.40 'a Satisfactory Planning Permission' means a Planning Permission which is not subject to an Unreasonable Condition [defined in clause 5]
    1.51 'Termination Date' means 6 March 2011 unless on that date … the Planning Application has not yet been decided … when the Termination Date shall be extended until the expiry of three months from the issue of the decision by the Local Planning Authority…
    2.3 The Buyer has the sole benefit of the condition referred to in clause 2.2.1 above and made by written notice given at any time prior to the Termination Date unilaterally waive the condition and upon the giving of notice to that effect the Unconditional Date shall be deemed to have occurred."
  15. Thus the obligation on the claimant required it to prepare a draft application for full planning permission, have it approved by the Charity and submitted to the local authority by the date specified. The claimant did not however prepare any application, even in draft form. Mr Jeffs and the architects he engaged on behalf of the claimant submitted proposals to the local authority and held a considerable number of meetings with the relevant and his superiors, in which they debated the design and layout of the buildings and facilities on the site. I do not propose to go into the detail of those discussions; Mr Jeffs took the view that the planning officer was being unreasonable and inconsistent and he continued to press for the most advantageous proposal he could achieve.
  16. Further, Mr Jeffs consistently instructed the architects that he wished to submit an application for outline permission, rather than full permission. I am satisfied from reading the contemporary correspondence that a principal motivation for this was to save money on the application fee, notwithstanding Mr Jeffs' denial in the witness box. Such an application would not have complied with the obligation in the contract and a grant of outline planning permission would not have satisfied the condition. If it had been submitted but was still undecided at the Termination Date, since it would not have been a Planning Application as defined it would not have operated to extend the Termination Date.
  17. Mr Jeffs said that if he had been advised by his architects that an outline application was the best way to proceed, the Charity would have agreed a variation of the contract, but it is apparent that that was not the architects' advice; their clear recommendation was to proceed with a full application. Secondly, no approach was ever made to the Charity seeking such a variation. Mr Jeffs also said, somewhat inconsistently, that it would have been open to him to make an application that was in form an application for outline permission, but left so little to be determined as reserved matters that it was in effect a full permission. There is no indication in the contemporary correspondence that this is in fact what he proposed, and in any event unless the Charity agreed a variation, it would not have complied with his obligation.
  18. The Charity agreed five successive extensions of the date for submission of the planning application, the last of which expired on 5 March 2011, the day before the contractual Termination Date. When it became clear this would not be met, Mr Jeffs sought to negotiate a further extension of time for submission and a 12 month extension of the Termination Date. Initially it appeared as if the Charity would be willing to agree such an extension, and a draft document was prepared. However on 4 March 2011 Needham and James, who were now acting for the Charity in place of Parkinson Wright, sent an email (C8/2360) stating that the Charity had decided not to agree any further extension and that if the contract did not become unconditional by 6 March it would terminate. Mr Jeffs instructed Mr Lester to serve notice making the contract unconditional, which he did on the same day.
  19. Under the terms of the contract, this meant that completion was due to take place on 29 April 2011, and the two firms of solicitors set about preparing the documents required for completion. The Charity agreed to extend this to 6 May 2011, but made clear that it would not agree any further extension. It is common ground that it would still have been open the claimant to complete after that date unless a notice to complete was served, in which case the contract would terminate if completion had not taken place within 10 working days thereafter.
  20. Mr Lester asked Mr Jeffs to provide him with a plan suitable for inclusion in the lease, telling him what would be required to make it a suitable conveyancing plan. Mr Jeffs found a plan among the papers already prepared, but Needham and James rejected this, without (at first) saying exactly why. There was some discussion about whether Mr Jeffs ought to have asked the architects to prepare a suitable plan but was unable to do so because, as was apparent from the correspondence, the architects had refused to undertake any further work until their outstanding fees had been paid. Ultimately, in my view, that issue is irrelevant; the fundamental issue at that stage was not the quality of the plan as such, but the fact that the area to be outlined on it as the land to be demised by the lease had not been agreed by the Charity. A better quality plan produced by the architect would not have solved this problem.
  21. On 2 June 2011 the Charity's solicitors wrote alleging that the contract was unenforceable, inter alia on the ground that there was no plan attached to the draft forms of lease and underlease. They also said in that letter that the reason the plan produced was unacceptable was because it indicated a Care Facility that was only 25% of the size the Charity had expected. Mr Jeffs took separate advice. On 13 April 2012, the claimant entered into a full and final settlement agreement with the Charity under which it was paid £125,000 and acknowledged that the contract was null and void.
  22. The allegations of negligence

  23. The pleaded allegations are that the defendant solicitors were under a duty to act with the care and skill of a competent solicitor, and that had they done so they would have caused the contract to be enforceable, and to be so drafted that it would not be reasonably arguable to be unenforceable. This pleading therefore seeks to assert a guaranteed result of the drafting. It is pleaded that the contract was unenforceable, alternatively reasonably arguable to be unenforceable, because
  24. i) There was uncertainty as to the land to be comprised in the lease, underlease and Seller's Charge over the Supported Housing Site, by reason of the absence of plans when the contract was executed,

    ii) The schedule providing for joint venture development of "close care housing" as part of the "care village" on the Supported Housing Site did not define these terms.

    (see paras 31-2 of the Particulars of Claim at A/11).

  25. It is admitted that the defendant was under a duty to exercise reasonable skill and care to seek to ensure that the terms of the contract were enforceable. That in my judgment is the correct standard, and does not amount to a guarantee of a result. Mr. Cannon accepted that there could potentially be a breach of this duty if the contract were so badly drafted that a reasonably competent solicitor ought to have realised that there was a reasonable argument that it was unenforceable, causing the client loss in establishing its enforceability even if it was ultimately successful in doing so. This was an aspect of the basic duty to take reasonable skill and care in the drafting and not a separate duty to draft the contract so that no reasonable argument could be raised as to its enforceability. In the circumstances of this case I do not have to express any opinion on the subtleties of distinction raised by this formulation, and do not do so. Given the ease and inventiveness with which parties with an interest in escaping their apparent obligations may produce arguments to suit their purpose, and the potential to pursue such arguments irrespective of merit for negotiating purposes, in my view the court would have to be very cautious in formulating any duty on solicitors or other professionals so to draft their documents as to anticipate and forestall any such argument.
  26. There is also an allegation at para 33 of the Particulars of Claim that contrary to the claimant's instructions the defendant failed to ensure that the contract was assignable. This allegation is admitted, but is of no assistance to the claimant since, as Mr. Jeffs accepted, it caused no loss. The claimant did not seek to assign the contract before it came to an end.
  27. The principal focus of the case was on the absence of a plan outlining the Care Facility. The claimant's case is that the contract should have had a plan attached to it when it was signed, even though the final location of the proposed care facility could not be identified at that stage. If this had been done, it is said, the claimant would have been able to enforce completion of the contract and so acquire the land, and would have been in a position to pursue its planning application after completion. The contract could have provided a mechanism by which the area provisionally identified in such a plan would be modified in the event that when the claimant came to submit its planning application a different layout was proposed, and/or if the layout had to be changed during the course of the application prior to the grant of an acceptable planning permission. The contract did contain a very similar mechanism in respect of changes after submission of an application, which I refer to below.
  28. The defendant's position is that the contract provided a perfectly sensible mechanism which would have resulted in the identification of the location and area of the Care Facility by the date for completion, in that this would have been apparent from the plans necessarily prepared for the purposes of the planning application, which would have been approved by the Charity. That approval, Mr Cannon submits, would constitute agreement as to the area to be let under the lease and the underlease, as a result of which the court would readily imply an agreement to draw up a plan showing that area for the purposes of attachment to the agreed form documents. If the claimant had followed the mechanism provided for in the contract, therefore, there would have been no uncertainty when it came to completion and the contract would have been enforceable.
  29. Mr Cannon accepted that in the circumstances in which that mechanism had not been followed so that there was no agreed planning application from which an agreement as to the area to be leased could be identified, the contract was in practice unenforceable once the condition had been waived. It was not however, he submitted, negligent of the solicitors to have failed to anticipate in drafting the contract the possibility that their client might wish to be able to complete the contract in circumstances in which he had entirely failed to comply with the mechanism it anticipated.
  30. Mr. Cannon points to the abundance of authority to the effect that where parties have reached an agreement they intend to be legally binding, and particularly where one or all parties have relied on that agreement by expending money or incurring obligations in the expectation that it would be enforceable, the court will be very reluctant to find that their agreement is void for uncertainty and will seek if possible to find a way in which it can be interpreted and applied so as to be enforced as they intended. He referred me to the summary of this approach by Leggatt J in Novus Aviation Limited v Alubaf Arab International Bank BSC(c) [2016] EWHC 1575 (Comm) at [60]:
  31. "Even when a document (or relevant part of a document) is intended by the parties to be legally binding, there are circumstances in which it may be regarded as too uncertain to be enforceable by a court. Such a conclusion should, however, be one of last resort. English law aims to uphold and give effect to the intentions of the parties, not to defeat them. As Lord Tomlin observed in Hillas & Co Ltd v. Arcos Ltd (1932) 43 Ll.L.Rep. 359, 364, the aim of the court 'must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains.' Accordingly, where the court is satisfied that the parties intended that their bargain should be enforceable, it will strive to give effect to that intention by construing the words used in a way which gives them a practical meaning: see e.g. Brown v. Gould [1972] Ch. 53, 56-58; BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163, [2002] 2 P. & C.R. 25, para 23; Maple Leaf Macro Volatility Master Fund v. Rouvroy [2009] EWHC 257 (Comm), [2009] 1 Lloyd's Rep 475, para 235; Barbudev v. Eurocom Cable Management Bulgaria EOOD and others [2012] EWCA Civ 548, para 32."
  32. As to the position where performance requires some matter to be agreed or determined in the future, Mr. Cannon refers me to the principles summarised by Rix LJ in Mamidoil-Jetoil Greek Petroleum Co SA v. Okta Crude Oil Refinery AD [2001] EWCA Civ 406; [2001] 2 Lloyd's Rep 76 at [69]:
  33. "In my judgment the following principles relevant to the present case can be deduced from these authorities, but this is intended to be in no way an exhaustive list:
    Each case must be decided on its own facts and on the construction of its own agreement. Subject to that:
    1. Where no contract exists, the use of an expression such as 'to be agreed' in relation to an essential term is likely to prevent any contract coming into existence, on the ground of uncertainty. This may be summed up by the principle that 'you cannot agree to agree'.
    2. Similarly, where no contract exists, the absence of agreement on essential terms of the agreement may prevent any contract coming into existence, again on the ground of uncertainty.
    3. However, particularly in commercial dealings between parties who are familiar with the trade in question, and particularly where the parties have acted in the belief that they had a binding contract, the Courts are willing to imply terms, where that is possible, to enable the contract to be carried out.
    4. Where a contract has once come into existence, even the expression 'to be agreed' in relation to future executory obligations is not necessarily fatal to its continued existence.
    5. Particularly in the case of contracts for future performance over a period, where the parties may desire or need to leave matters to be adjusted in the working out of their contract, the Courts will assist the parties to do so, so as to preserve rather than destroy bargains, on the basis that what can be made certain is itself certain. Certum est quod certum reddi potest.
    6. This is particularly the case where one party has either already had the advantage of some performance which reflects the parties' agreement on a long term relationship, or has had to make an investment premised on that agreement.
    7. For these purposes, an express stipulation for a reasonable or fair measure or price will be a sufficient criterion for the courts to act on. But even in the absence of express language, the Courts are prepared to imply an obligation in terms of what is reasonable."
  34. These principles are plainly relevant to the present case. The contract was a commercial bargain of substantial value relied on as enforceable by both parties. The claimant paid a deposit of £10,000. It expended a great deal of effort and spent or incurred substantial liabilities for professional and other costs in preparing for its planning application and seeking funding to pursue the development of the site if it obtained permission in the belief that it had a binding contract. The obligations to grant a lease and leaseback were executory obligations pursuant to a contract that had come into existence, not matters under discussion in a contract yet to be made. There were very good reasons for leaving the precise areas of land to be governed by the agreed form documents as a matter to be determined after exchange, since the claimant did not know what the attitude of the planners would be to the proposed development and wished to have the maximum flexibility to negotiate with them and amend designs so as to secure their approval. Although the three intended elements of the care village were known in the broadest of terms, reaching agreement with the planners (or devising a scheme that the claimant was prepared to pursue to appeal) might require radical rearrangement of the location and layout of these elements within the site and/or changes in the size and design of the buildings. The Charity was content to leave all these matters to the claimant to discuss with the planners. It had an interest in the outcome so far as concerned the new Care Facility into which its residents would move, and it retained an influence over the eventual scheme by virtue of the requirement that its agreement was required before the formal planning application was made. The stipulation that such agreement could not be unreasonably withheld shows that the parties accepted that some objective standard would have to be applied to consider whether the plans eventually produced provided for a scheme that complied with the essential bargain they had made.
  35. If an application for full planning permission had been made, Mr. Rouse the claimant's planning expert said that it would have to include the design and layout of all the buildings, their scale, height and external appearance and the means of access and landscaping. The degree of detail might vary and there would always be a need for more detailed drawings for the actual construction, but these overall features would be shown. He agreed that from the plans attached to the application you would be able to tell which part of the site was to be the proposed care facility and which were the proposed apartments. No doubt the plans would also show the location and layout of ancillary facilities and features such as a GP surgery, car parks and amenity areas.
  36. What the lease and underlease required was a plan with an area outlined in red to show the premises demised, on which the care facility building was to be constructed. It cannot realistically be doubted that the planning application would identify which building this was to be and where it would be on the site, or that in the course of agreement of that application the parties would not have agreed that this was the building the lease would refer to. That line would not however necessarily be drawn exactly around the envelope of the building, as there might be adjacent areas that would be regarded as part of the care facility. For example, in principle the 20 bed unit might be provided with its own car park. It might have a specific outdoor area for residents to sit outside. No doubt other examples could be given.
  37. It was put to Mr. Rouse that the plans would show the division of the site between the various buildings to be constructed on it, and he agreed, but I do not think his evidence on that point goes as far as Mr. Cannon would wish. He was asked about this in the context of an example of a site on which 40 houses were to be built, when one would expect that each house would have its own clearly demarked area of land for garden use. The same would not necessarily be the case with buildings of the nature under consideration here, on a shared site where part of the philosophy was for a degree of interaction between the different facilities. Since the plans for planning permission purposes would not be required to show any distinction between the leased and retained areas, they would not necessarily have a line drawn showing the boundary of the leased land.
  38. Conceivably, then, there might be some scope for debate about how much, if any, land surrounding the care facility building should be regarded as part of the Care Facility as defined and so to be demised in the lease. But in light of the principles above it is in my view inconceivable that any such debate would result in the contract being held to be unenforceable.
  39. The issue has to be tested in this way. Suppose that the contract mechanism had been followed and the claimant had prepared an application for full planning permission, with all the detail required on the site plans and supporting documents, and that this application had been approved in writing by the Charity (or alternatively that any objection by it had been determined by the court to be unreasonable). Given the Charity's interest in the proposed care facility, its agreement (or the overruling of its objections) must establish that the buildings and layout of the site were sufficient to identify a care facility that complies with the claimant's obligations under the contract, at that stage. Of course there are further obligations that would arise during the construction and fitting out of the care facility, but the obligations as regards setting out the site and buildings for the facility must have been complied with.
  40. Suppose further that the Charity then refused to complete, refusing to agree a plan to be attached to the agreed form lease. Is it likely that a court would find it was able to do so? Bearing in mind the matters referred to above and also
  41. i) That the size, design, layout, position and specification of the care facility, including the decision as to what ancillary land should be included, were essentially to be determined by the purchaser subject only to the requirement that it be capable of delivering services at least similar to the old facility

    ii) That subject to that requirement being satisfied the Charity had little real interest in the precise boundary of the land to be leased. Once the facility was built the Charity would hold only a largely notional intermediate reversion entitling it to possession for a brief period in 999 years time. In the event it sought to forfeit the underlease and build the facility itself it would be able to do so as long as the land demised included the building area and any surrounding land reasonably necessary for operation of the facility

    I have no doubt the court would strive to uphold the enforceability of the contract. It would be able to do so, for instance, by finding that there was an implied term that the land to be demised would include the relevant buildings and such surrounding land as was reasonably necessary to be occupied exclusively for the operation of the care facility, and that the parties were under an obligation to agree a plan identifying such land, in default of which the court could do so, applying objective standards.

  42. There were also provisions for preparation of a schedule identifying shared rights over and in favour of the leased land. No point has been taken about that before me, but to the extent they were undefined at the date of the contract I have no doubt the court would identify and enforce an implied obligation to define them as those that were reasonably required when the lease came to be executed.
  43. Accordingly, in my judgment had the purchaser followed the mechanism provided by the contract and submitted a full planning application, the contract would have been enforceable. One must then ask whether it was negligent of the solicitors to draft the contract in such a way that it might be unenforceable if this mechanism was not followed by their own client as intended. Should they have anticipated that Mr Jeffs might wish to enforce completion notwithstanding he had not complied with what he had agreed to do? Towards the end of the hearing I asked Mr Jeffs if it was his case that he had instructed the solicitors that he required to be able to enforce completion even if no planning application had been made. He responded that although he could not identify any document to conform it, he was confident that he had done so.
  44. I am sorry to say that in that respect, as in a number of others, I consider that Mr Jeffs was simply willing to say whatever was necessary to promote his case, and I find that no such instructions were given. First, there is no trace of them in the documentary record, or even of any consideration between Mr Jeffs and his solicitor of what his position would be if he failed to submit an application.
  45. Second, there came a point in the discussions between the respective solicitors as to the form of the contract at which they specifically addressed whether a plan should be attached to the draft form of lease. On 2 December 2008 Mr Lester emailed Mr Scott saying "In anticipation of exchanging contracts in the next week or so… we will need plans suitable for conveyancing purposes… to be attached to the documentation showing the various areas referred to within [it]… perhaps James [Jeffs] and John Reynolds could liaise together with a view to producing those." Mr Scott replied the same day (C 2/680) saying "I was trying to avoid that necessity. I do not regard the plan showing the position of the new facility as critical." Evidently, Mr Lester's first instinct had been that there ought to be a plan but Mr Scott was taking the view that its preparation could sensibly be left until the eventual layout of the scheme was agreed with the planners and set out in the formal planning application.
  46. This email was copied on to Mr Jeffs (C 2/681) who telephoned the next morning to give his instructions (manuscript note at page 682, transcribed at 683) which included "OK plans". Mr Lester was thus instructed to agree that plans be dispensed with, which he duly did later that day (p685). No doubt it would have been for Mr Lester and not Mr Jeffs to appreciate the possible significance in legal terms of the absence of plans, but I do not believe that if he had by that stage been instructed by Mr Jeffs that the contract should anticipate that a planning application might not be made before completion, Mr Lester would have failed to realise that a default plan would be required. The contract already provided that if the layout had to be changed after the planning application had been made, adjustments would be made to the lease documents. If it had been in Mr Lester's mind that the contract might have to be completed at a time when they had been no application at all, he could not have failed to realise that some similar mechanism would be required with a default plan to identify and if necessary subsequently amend the area to be leased as and when an application was submitted and approved.
  47. Further, Mr Jeffs must have appreciated that the reason why Mr Scott had proposed that there be no plans was his expectation that the plans would be drawn up once the planning application had been made. If it had been in his mind that he might require to complete before any such application had been made, it must be likely that he would have told Mr Lester so and asked the question whether this mechanism would still work. The fact that he did not is it seems to me a good reason to infer that this possibility had not occurred to him at that stage. There is no sign of his having become aware of the possibility between then and exchange of contracts. For these reasons I find no instruction was given to Mr Lester that the contract should be enforceable irrespective of whether a planning application was made.
  48. It also seems to me that the fact that it was the seller who suggested that a plan was not necessary at the contract stage would be an additional reason why the court would find it a highly unattractive argument for the same seller later to say that the absence of such a plan enabled it to resile from the contract, and therefore do everything legitimately possible to uphold the bargain.
  49. Mr Jeffs, and Mr Lester on his behalf, carefully negotiated in detail the procedure for making the planning application. It was not expressed in the contract as being an option on the purchaser's behalf but as its obligation. Mr Jeffs must have known that the contract created that obligation and there is no indication that he raised the possibility that he might not comply with it, still less that he gave instructions to Mr Lester that he must be free to ignore it. In such circumstances, in my judgment the solicitor cannot be criticised for failing, in the absence of specific instructions to do so, to draft the contract so that it became in effect optional for such an application to be made. The solicitor's role is to draft a contract to implement his client's instructions as to the agreement made and not, unless clearly so instructed, to introduce mechanisms by which that agreement can be circumvented.
  50. Further, it must be highly unlikely that if any such proposal had been put to the Charity it would have been agreed. Without extensive changes to the contract, it would have opened up the possibility of (at least) an indefinite delay after completion before any application to build the new care facility would be made, and therefore an indefinite extension to the period in which the Charity would have to continue looking after its residents in the old building. The whole purpose of the longstop date would be undermined, and the Charity would have had no means of putting an end to the period of delay by serving a completion notice.
  51. It follows in my judgment that the fundamental allegation of negligence on the defendant's part fails and the claim must be dismissed. In case the matter goes further however I go on to consider briefly what the position would have been had I come to the conclusion that negligence was established.
  52. Causation and loss

  53. The defendant's case is that even if the contract had been enforceable, the claimant did not have access to the funds that would have been required to complete the purchase, so that none of the scenarios envisaged by it would ever have been possible. Further, even if it could have completed, it had no real prospect of obtaining the funds to complete any part of the development itself, so that the scenarios envisaging any such development stood no realistic chance of fulfilment. Further still, the evidence shows that the sale values of the properties to be built would have been such that no profit could have been realised in the alternative scenario of selling the land undeveloped but with planning permission.
  54. Could the claimant company have obtained the funds to complete?

  55. The onus is of course on the claimant to prove, on the balance of probabilities, all the elements of its case on causation and loss, which logically starts with the question whether, if the contract had been enforceable, it would have been in a position to complete the purchase. The evidence shows in my judgment that the claimant company and Mr Jeffs between them did not at any material time have any substantial resources of their own that could have contributed toward the £390,000 required to be paid to the seller on completion. There is no evidence that the claimant company had any resources of its own at all. Mr Jeffs was very vague about his own wealth, but accepted that he had not at any material time owned a house. He said he had had an interest in a company called Aspire, but was unable to say if he still held it in 2011, let alone what it was worth. He maintained he had earned substantial amounts from other property transactions but was very unspecific about what these were and what if anything he had made from them. Whatever they may have been, I find that by the time completion was due in April 2011 he had effectively no surplus resources of his own that could have been applied to complete the purchase or subsequent development.
  56. This is because it is clear that the company and Mr Jeffs were completely strapped for cash by that date, and Mr Jeffs had borrowed large amounts on expensive terms from personal contacts of his, Mr & Mrs Mitchell, which he used for personal purposes and to keep the company going in a hand to mouth way. This is illustrated by the fact he was seeking to put in an outline planning application, rather than a full one, mainly (as I find having read the contemporary documents) in order to save on the cost. The architects, it is very clear from the correspondence, were very concerned that they were not being paid, and by 3 May 2011 had refused to do further work to the extent that Mr Jeffs was unable to ask them to prepare a plan for the purposes of completion and had to propose that an old one prepared much earlier should be used (C9/2693). They sued for their fees in March 2012. The drainage consultants had already done so and obtained a consent order for payment of £6800 in April 2011 (on which the claimant defaulted). In July 2011 solicitors for a planning consultant threatened proceedings for outstanding fees of £19,600 (C9/2677.1)
  57. Since September 2009, it appears, Mr Jeffs had been funding his living costs and the costs of pursuing this and other projects from monies borrowed from Mr & Mrs Mitchell. His correspondence with Mr Mitchell (eg C6/1865) is full of assurances that the projects are proceeding well with investors very interested but combined with statements that his cash flow is very tight with creditors pressing for which he needs short term funds. On 2 February 2011 Mr Jeffs signed a loan agreement (C7/2309) recording that he had borrowed £377,500 to date from Mrs Mitchell, in respect of which he had agreed to pay a premium of £100,000 to her, and that she agreed to lend a further sum to bring the total advance to £450,000. There is no account of what happened to this further money (or indeed the previous advances) but given the fact that suppliers continued to be unpaid there cannot have been any free cash remaining from it in April 2011.
  58. Such was Mr Jeffs' desperation for cash that although the Charity stated its position that the contract was unenforceable on 2 June 2011, for several months thereafter Mr Jeffs did not disclose this to Mr Mitchell and pretended that he was continuing to work towards submitting a planning application. Indeed 4 days later on 6 June he wrote saying he had a long stop date of 30 June to put in the application (which was entirely untrue) and he needed £30,000 of further funding to "take the matter through to planning". He cannot have had any intention of spending further on pursuing the planning position until the contract issues were resolved and so I infer was intending to use the money, if obtained, for other purposes. He maintained thereafter to Mr Mitchell, who was evidently providing funding on the basis that it would enable the project to proceed, that there were "several people" interesting in investing once the planning had been obtained, although no documentary evidence of any such interest has been provided. Mr Jeffs accepted in cross examination that he had been dishonest with the Mitchells, though he maintained this was to spare Mrs Mitchell anxiety as she had recently been ill. I reject that; it could hardly have been conducive to her health to discover in due course that she had provided further finance for a project that was, unless the Charity changed its position, dead in the water.
  59. It is not clear whether Mr & Mrs Mitchell actually advanced any further money after 2 June 2011. They did lend the full amount of £450,000, so at some point after 2 February 2011 Mr Jeffs received another £72,500. Whether that was before or after 2 June, he does not appear to have applied it to the creditors who were pressing in relation to this project, and has given no other account of how any of the £450,000 was spent. He said in cross examination that some of it had been spent on his personal living expenses and that the Mitchells would have been aware of that, though I am bound to say that such correspondence as in the bundle in relation to requests for advances from Mr Mitchell is all on the basis that funds are needed for project expenses. I note that when it came to raising funds for completion from Mr Warwick (see below) Mr Jeffs told Mr Warwick he had spent about £47,000 on the project to date (C8/2565) which if correct means that almost all of the Mitchells' money went elsewhere. In the same correspondence he acknowledged that his cash flow position was "dire".
  60. Eventually in September 2013 Mrs Mitchell sued for just over £601,000, comprising the advance of £450,000, £100,000 premium Mr Jeffs had agreed to pay and interest since the contractual payment date. Although by then Mr Jeffs or the claimant company had received £125,000 from the Charity to compromise any claim to enforce the sale contract none of that can have been applied to reduce the debt to the Mitchells, and nor does it appear to have been used to pay the other creditors referred to above. Mrs Mitchell obtained judgment by consent (C9/2768) in November 2013 on terms that enforcement was stayed pending resolution of this claim, which was issued in February 2014.
  61. From all this background I infer, and therefore find, that in March 2011 when notice was served to make the purchase contract unconditional Mr Jeffs and the claimant had no funds available of their own with which they could have completed. Further, they had no effective access to funds from Mr & Mrs Mitchell, either because they had already drawn the full £450,000 or, if any remained undrawn at that date, they must have had other more pressing needs for the cash since anything they did receive after that date was spent elsewhere without meeting the liabilities due to project creditors.
  62. Mr Jeffs sought to raise the funds to complete by way of loan from another contact of his, Mr Peter Warwick, whom he approached on 19 April 2011. He sent an email (C8/2494) in which he copied a summary of the project he had previously sent to someone else, evidently unsuccessfully. He said that he needed £410,000 to complete by 56 days (presumably from 4 March). It is not clear where this figure came from since it is neither the sum due to the seller on completion (£390,000) nor the total required to complete (pleaded at £468,000 including SDLT, see A/67) and said he was looking for a partner to fund that amount "plus my costs to date and the final costs to put in planning which in total will make the initial investment about £700,000".
  63. Mr Warwick gave evidence. It is accepted that he is a wealthy businessman who could have afforded to pay the amounts sought at short notice if he chose. He was questioned on the basis that this would have been about £400,000, but I approach it on the basis he could also have funded the stamp duty and other costs required to complete if he had decided to go ahead. Although he was sent details of the project, it is in my view apparent from the correspondence he had with Mr Jeffs that he did not wish to get involved in the detail of evaluating the project and its prospects with a view to becoming a risk bearing participant in it. This was partly because of the short time within which funds were required, but also because, as he said in an email to Mr Jeffs sent on 8 May 2011 (C9/2610), he had previously "had my hands seriously burnt developing" with the result that "I could safely say that developing is probably the last venture I would get into on my account again!".
  64. He went on however to say "I would be prepared to assist by way of a financing arrangement that would allow you to make the initial acquisition and after that I would be open to discussions on further funding. However I am sure you will appreciate that I would need full security and supported PG's to cover the amounts involved along with a 'bonus' at various stages of the project… I can confirm that… funds can be made available within 48 hours of all PG's and security being agreed etc". The requirement for security and supported guarantees was repeated in a further email 10 May (p2615) in which Mr Warwick said he assumed that the guarantees would be given by Mr Jeffs and his wife and supported by security "over the matrimonial home".
  65. This of course was a requirement Mr Jeffs was unable to comply with, since he did not own a house. Without directly saying so, he responded (p 2618) to say his "cash flow position is presently dire" so that he could not fund any valuations of the property, and although he was happy to provide guarantees "I do not think though I am able to provide more to you than PG's and the security of the shares and the land and buildings on site". That would have meant that Mr Warwick would effectively have no asset security other than the land. If a profit could not be realised from that, shares in the company would have no value. From the correspondence, Mr Warwick does not appear to have been willing to drop the requirement for security over personal assets, although he did agree to drop a requirement that security over the land the company was to buy should show a loan to value ratio (LTV) of no more than 50% because he accepted that Mr Jeffs would not be providing funding to pay 50% of the purchase costs. He said on 10 May (p2621) "I had already made the assumption that you would not be funding 50% hence the reason for a bonus from proceeds of sale… However I have been assuming you would be able to contribute some form of deposit. Due to the level of funding on LTV that is why PG's need to be supported with security!".
  66. There appears to have been no further discussion about the details of any funding Mr Warwick might have provided after this point. Mr Warwick thus did not get to the stage of instructing solicitors to advise on the proposal and prepare documentation necessary to implement it. He chased Mr Jeffs in an email on 26 May 2011 to ask "Are you still working towards a completion?" (C9/2647) to which Mr Jeffs replied that nothing had happened and he was still waiting for answers to enquiries made on 6 May. In fact, he had instructed Mr Lester to tell the Charity's solicitors that his proposed care home operator Mr Ellis appeared to have withdrawn and to request permission for another operator (unidentified) to inspect the care home with a view to evaluating the operation. This was not acceptable to them. They were also concerned at a request that had been made to be able to assign the benefit of the contract to an unnamed third party.
  67. On 2 June 2011 the Charity's solicitors said that the reason why the plans that had been submitted for the lease were unacceptable was that "they appear to propose a care facility to be constructed on the area which is approximately 25% of the size of that anticipated". It was in that letter that they gave notice that they had been advised that the contract was unenforceable and said that in the light of the fact that no planning application been made the Charity was not willing to engage in further negotiation to reach agreement on the matters not specified by the contract. From that point, the prospect of completion disappeared and there was no further discussion of how it might have been funded.
  68. Mr Warwick's evidence as to what would have happened if discussions had progressed seemed to me to be rather cautious. It is apparent from the correspondence, in my view, that his willingness to be involved was on the basis that he was not taking a risk dependent upon the success of the development proposal. He wanted to be a lender with security for the value of his loan and to have personal guarantees also supported by security. He was to take a reward if the project succeeded (by way of a 20% interest in the claimant company or any profit it made) but was not willing to depend on that success for repayment of the principal amounts he advanced. He had emphasised in the correspondence, and repeated in the witness box, that his practice once terms had been agreed in principle was to send the papers to his lawyers and to proceed only if they advised that the documentation was satisfactory. He accepted that if the matter had proceeded his instructions to the lawyers would have been on the same basis as his email correspondence with Mr Jeffs.
  69. That correspondence, although inconclusive, shows that Mr Warwick would have required firstly satisfactory security over the land to be acquired and secondly personal guarantees from Mr and Mrs Jeffs, also supported by security. Although Mr Warwick said in his witness statement that in view of the pressure of time he would have agreed to make the advance without requiring a valuation of the land, he did not say that he would have been prepared to waive either of these requirements for security. The onus is on the claimant to show that Mr Warwick would have waived these requirements. If that was the case, the obvious way to prove it would have been by direct statement to that effect in the witness statement, but no such statement appears.
  70. Nor in my judgment can it be inferred from the other evidence that Mr Warwick would have been so willing; in fact the evidence points the other way. Mr Warwick confirmed in cross examination that he would have wanted to be sure that monies he was advancing would be repaid. He would not be drawn on what it would have taken to satisfy him in order to proceed, beyond saying that he would have turned the matter over to his lawyers, left it to them to ask any questions they thought relevant, and been prepared to proceed only if they had advised him that "the paperwork and everything was supported correctly".
  71. It is hard to see that Mr Warwick's solicitors could have advised him that security over the land would be sufficient in circumstances where it would have emerged that the Charity would have interests over the land which, no doubt, it would have insisted would rank in priority to any charge. These would have included its own charge over the Supported Housing Site. That charge would not be released until the purchaser had constructed the Care Facility and paid the Further Sum of £1.4m, and had either paid the additional £1.7m to buy out the Charity's participation in the apartments or completed the construction of all of them and paid the required proportion to the Charity. Thus, Mr Warwick could not be sure he would have a first charge until sufficient funding had been provided to pay at least £3.1m to the seller and fund the cost of constructing the Care Facility, which cost he had not evaluated. Further, the Charity would have a lease over the area intended for the care facility which, if the purchaser defaulted on its obligation to construct that facility, could have left the Charity in possession of that area such that Mr Warwick's security would bite only on the reversion after 999 years. He would have been advised, in my view, that without at least a valuation of the land and of the prospects of the project being followed through to a successful conclusion of construction and sale, he could not count on any repayment from security over the land.
  72. Further, it continued to be Mr Warwick's assumption, as he made clear in the witness box, that Mr and Mrs Jeffs had personal assets such as a house and/or a pension fund over which they could have provided security to support their guarantees. On the evidence before me, they had no such assets at all. It must be assumed that Mr Warwick's solicitors would have asked about assets and liabilities of Mr and Mrs Jeffs, and so would have been told about the obligation to pay at least £550,000 to Mrs Mitchell. The due date for payment to her under the loan agreement was September 2012 but there could have been no realistic prospect that anything would have been built and sold at Newlands Hurst by that date, so the only way of meeting this liability would have been if the Newlands Hurst land had been almost immediately sold to someone else at a profit. Without a valuation (which in turn would require an estimation of the funding required to complete the project by a purchaser) no reliance could have been placed on any such profit being made.
  73. Mr Jeffs had two other potential projects in mind at the time for which he was also attempting to raise funds, but he had not told Mr Warwick about these; they seem to have been entirely reliant on unwritten understandings with the owners of potential development land and there is (to put it no higher) no evidence that Mr Warwick would have been persuaded that the prospect of realisation from these projects was such that he could treat them as security for a guarantee by Mr Jeffs.
  74. Thus, if Mr Warwick had advanced even the sum of £410,000 that had been mentioned, he would inevitably in my view have been advised that the personal guarantees he sought were not only unsecured but effectively worthless since Mr and Mrs Jeffs would have had no assets other than their shares in the claimant company (which could be of no additional value to the security over the land it would acquire) and unsecured liabilities of at least £960,000. In practice, the position would have been even worse because there were other creditors that Mr Jeffs had disclosed to Mr Warwick in connection with the Newlands Hurst project of about £50,000, and Mr Warwick would no doubt have been asked to fund these and other costs required to obtain planning permission for the land.
  75. It follows inevitably in my judgment that Mr Warwick would have been advised that the personal guarantees were not satisfactory and he should not proceed on that account either. Given his evidence that he would not have proceeded unless his lawyers advised him that he should, I find that he would not in fact have made available the funds required to complete.
  76. That conclusion would also be fatal to the claim, since all of the scenarios relied upon by the claimant would fall away if it had not been able to complete the purchase of the land.
  77. Could the claimant have funded any part of the development?

  78. If I had found that the claimant would have been able to complete the purchase, I would also have found that contrary to its case there was no realistic prospect that it would have been able to raise the funds required to proceed with any part of the development on its own account. Mr Jeffs accepted in his evidence that matters were very difficult for property development in the period following the financial crisis in 2008, but maintained that notwithstanding this there were lots of investors interested in funding or participating in developments such as Newlands Hurst. It is right to say that the two valuers who have given evidence both took the view that notwithstanding the market difficulties, funding could have been obtained. However, in my judgment the contemporary evidence is such that it must be concluded that such funding was not available, or at least not available to the claimant company.
  79. Mr Jeffs' evidence was that he and others on his behalf had made extensive attempts to attract investment funding. Some of the materials prepared by Mr Jeffs and by other intermediaries whom he approached with a view to identifying investors are contained in the bundle. They take the form of prospectuses describing the Newlands Hurst project and the two others in which Mr Jeffs said he had a business opportunity. An example is at C7/2251, which Mr Jeffs sent to a number of people in December 2010 using the (apparently invented) name "Arden Properties Ltd". None of these resulted, so far as can be seen from the evidence before me, in any documented expression of interest from any investor capable and willing to proceed. Mr Jeffs was unable to provide the detail of any single investor who had indicated that he was willing to proceed, even orally and/or contingent upon planning permission being obtained. It cannot have been the case that bank funding was available to a borrower such as the claimant company, at least unless a substantial part of the risk was taken by equity investors, since otherwise Mr Jeffs and those he was dealing with would simply have approached banks with a proposal, which they never did. Mr Jeffs' oral evidence was that bank funding would have required at least 50% equity investment.
  80. The problem for the claimant company was that it had no resources of its own and neither it nor Mr Jeffs had any effective track record in any development on anything but a very small scale. Also in December 2010 Mr Jeffs approached CB Richard Ellis, the well-known property consultants, with a view to their canvassing potential investors. Their advice (C7/2255) included "There is very little [bank] development finance around and [this is] unlikely to change [in the] near future [ie] 2011, 2012 etc. The themes emerging in the sector pertinent to what we are trying to do are as follows… development finance needs to be de-risked – looking for an experienced developer with track record, ability to pre-let part of income and a general aversion to anything "greenfield", extra care communities and care villages… Institutions and specialist investors continue to have a lack of understanding of the care villages sector and want annuity-type income… Care schemes must be phased to try [to] generate early cash…". It is not clear how far matters progressed with CBRE, but it would appear from the above that they considered the market was unsympathetic to what would have been a development of a care village on a greenfield site by a developer with no track record. At all events, Mr Jeffs could not identify that they had produced any potential investors.
  81. A third strand of approach seems to have been through a Mr van der Woude who in February 2011 summarised the results of approaches he had made to 10 potential investors or groups of investors (C7/2307). These were for the most part negative although three apparently had not given a final answer. It does not seem that he was very optimistic about finding a backer, since his email begins "My two glimmers of hope this year for a major backer were…". It does not appear that he was able to produce any worthwhile investment proposals. Mr Jeffs became very defensive when questioned about this, saying that he understood that Mr van der Woude had approached a great number of people and there might have been more positive responses than referred to in this email, but he could not say there had been or identify who they might have been from.
  82. Thus the direct contemporary evidence is that despite extensive efforts both directly by Mr Jeffs and through all of the contacts that he could muster, not a single potential equity investor capable of taking the project forward was identified. There is no reason to suppose that Mr Jeffs, who professes to be an expert in the field, and the professional and personal contacts he made use of, were inadequate to identify any potential sources of finance there might have been. I conclude that it must be the case therefore that all the identifiable potential investors were not interested in some or all of (a) the sector generally (b) the particular proposals under consideration and (c) working with Mr Jeffs and the claimant company. There is no indication in any of the relevant documents that this lack of interest was because planning permission had not yet been obtained, so there is no reason to think that the attitude of any of the potential investors would have been different if the matter had proceeded as far as obtaining planning permission.
  83. To the extent that the expert valuers have expressed the view, some years later, that notwithstanding difficulties in the market they consider that funding would have been available to pursue the development, in my judgment they are being too sanguine in their approach and the contemporary evidence of the results of actual enquiries is to be preferred. I placed no weight on Mr Jeffs's assertions that there were plenty of potential investors available and he could easily have raised any amount of funds required. That is entirely inconsistent with the contemporary evidence and unsupported by anything independent. As in other respects, in my view Mr Jeffs was prepared to assert any matter he considered necessary to pursue his case.
  84. I find therefore that there would have been no realistic prospect of the claimant proceeding with any part of the development on its own account, and its only prospect of realising anything on the project would have been to seek to sell the land with the benefit of planning permission to another developer who would have been prepared to pursue it.
  85. Could the land have been sold at a profit?

  86. Assuming such a purchaser could have been found, whether or not this would have generated any profit for the claimant depends upon the price that could have been achieved for the land in its undeveloped state, which in turn would have depended upon the valuation a potential purchaser would put on the completed development and the costs required to pursue it to completion. In that respect, the two planning experts called by the parties both agree that there would have been no fundamental difficulty in eventually obtaining planning permission for a development along the lines proposed. It is however clear that in order to obtain such permission it would have been necessary to reduce the scale of development from that originally proposed, and in particular to reduce the number of apartments on the site from the 99 originally discussed with the planners to the 87 which they had already indicated would be the maximum permissible. Mr Jeffs sought to say that this might not have had any effect on the eventual sale value, since the 87 apartments might have been larger than originally planned and so have sold for higher prices. I do not accept that; Mr Jeffs was not able to point to any plans or documents showing that the planners' objection had been on the basis that the overall square footage of the development could be maintained but it must be divided into fewer but larger units. It must be overwhelmingly more likely that they wished to reduce the scale of the buildings and so the number of apartments would have to be reduced accordingly.
  87. The quantity surveyors produced estimates of the cost required to complete the development which were substantially in agreement with each other. Unfortunately, these were based on the 99 original apartments. Based on these, the two valuers (Mr Mason for the claimant and Mr Ellis for the defendant) estimated the eventual sale value of the property and, derived from that, the price at which the undeveloped land might have been sold. These estimates were also based on the 99 apartments. Initially there was substantial disagreement between them as to these figures, but following a meeting shortly before trial they produced a second joint statement dated 27 October 2016 (B/509) in which they agreed average values for the apartments proposed to be built and the other elements of the proposed development and that based on these the price a developer would have paid to buy the land with planning permission as at May 2011 (referred to as the "residual value" of the land) would have been £1.5 million.
  88. Mr Cannon submits that this figure would have to be adjusted downwards because, firstly, of the reduction in the number of apartments from the scheme as considered by the valuers, and secondly because the valuers had taken no account of any planning requirement that might have been imposed either to designate a proportion of the apartments as affordable housing or to pay a financial contribution to the local authority in lieu. This was a matter that was in dispute with the planners; potentially they might have insisted on up to 30% of the flats being made available as affordable housing, which would therefore have sold at a significantly lower price. Mr Jeffs maintained that he would have been able to satisfy the local authority that the nature of the care facilities to be provided on site to owners of the apartments was such that those apartments would fall into a planning use category which was exempt from the obligation to provide affordable housing. The balance of the planning evidence was, in my view, that this was unlikely and it would have been more likely that Mr Jeffs would have been able to achieve the alternative scenario he put forward, i.e. that he would have been able to negotiate a financial contribution in lieu of the provision of affordable housing. The amount of that contribution could not be determined with certainty since it would depend on negotiation, and if it had been necessary in order to reach a conclusion I would have had to do my best from the evidence to make an estimate of what it might have been, and what effect it would have on the residual value of the land.
  89. However it is not necessary to seek to evaluate these adjustments precisely. This is because the claimant's pleaded case is that in the scenario ("scenario 3") in which the land was sold without being developed it would have incurred acquisition costs totalling £2,958,000. It follows that on the basis of the joint statement as to valuation, it would not have made a profit in this scenario and has accordingly suffered no loss from not being able to pursue it.
  90. Shortly after signing the joint statement, and apparently after a conversation with Mr Jeffs although he denied that this had influenced him, Mr Mason sent an email to Mr Jeffs saying that he had reconsidered what he had agreed with Mr Ellis and considered that the value of the apartments should be increased from the agreed figure of £16.75 million to £19.2 million. The effect of that would have been to increase the residual value in 2011 to £4 million, sufficient to show a profit of just over £1 million, before the adjustments Mr Cannon referred to. I did not however find the reasons that he sought to give in cross examination for this late change of heart persuasive, and none of them were accepted by Mr Ellis. It was I think particularly telling that the values he now proposed were greater not only than the jointly agreed figures, but those that Mr Mason himself had previously given.
  91. I should say also that Mr Jeffs submitted that all of these figures were much too low and the potential value of the apartments was much greater than either valuer had assumed. He referred to figures he said had been achieved on the sale of other apartments at other sites, but without these having been referred to the experts for consideration as to whether they were true comparables, I am not prepared to place any weight on Mr Jeffs' opinion as against those of the experts.
  92. I find therefore that the residual value of the land, if it had been sold with planning permission to a developer in mid 2011, was no higher than the £1.5 million set out in the joint statement of the valuation experts, and accordingly that in that scenario, which would have been the only one realistically achievable by the claimant, it would be unable to show any loss from the negligence alleged.
  93. That date is in my judgment the correct date which to assess the relevant loss, since that is the date on which on the claimant's case it suffered loss by being unable to complete the purchase. Other figures were put forward for valuations at later dates which were higher because of subsequent changes in market values. Had the market gone the other way, these figures would have been lower. Those valuations are in my judgment irrelevant since, in principle, the loss is to be assessed at the date it was incurred. On that basis also, therefore, the claimant would have failed.
  94. Other participants

  95. I mention finally that if any loss had been established, in addition to assessing the adjustments Mr Cannon referred to, which in principle were correct, I would also have reduced the damages to reflect the participation in profits that Mr Jeffs had promised to Messrs Ellis and Hefford on the one hand for their introduction (30%, as he told Mr Warwick) and Mr Warwick on the other for his financing (20%). Although these were referred to as shares in the company, no documentation was drawn up to give effect to them and as with most things concerning Mr Jeffs' business dealings the exact method was left to be sorted out later. It is perfectly possible therefore that what would have emerged was a profit share payable as a liability of the company rather than a shareholding in it.
  96. Whichever it was, given that in the circumstances no such participation is now likely to proceed and Mr Jeffs (and his wife) would therefore be the only eventual beneficiaries of any surplus in the company, he (or they) would be overcompensated if no adjustment were made for the value they would have had to transfer to others if the transaction had proceeded as the claimant alleges it should. I accept that this may be said to involve an element of piercing the corporate veil, but it would be necessary to avoid an unjust windfall to Mr and Mrs Jeffs.
  97. Conclusion

  98. For these reasons, therefore, the claim is dismissed. I will list a hearing at which this judgment will be handed down. If the order can be agreed, there need be no attendance. If there are matters arising that can be dealt with in no more than half an hour, and if convenient to the parties, I will however deal with them on that occasion. If longer is required, there need be no attendance at handing down and the parties should seek to agree a time estimate for a later hearing.


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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2017/244.html