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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd & Ors [2021] EWHC 3015 (Ch) (11 November 2021) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2021/3015.html Cite as: [2021] EWHC 3015 (Ch) |
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BUSINESS AND 
PROPERTY COURTS OF ENGLAND AND WALESPROPERTY TRUSTS AND PROBATE LIST (ChD)
Fetter Lane London EC4A 1NL |
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B e f o r e :
SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
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| BROOKE HOMES (BICESTER) LIMITED | Claimant |
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- and – |
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| (1) PORTFOLIO PROPERTY PARTNERS LIMITED (2) P3 ECO (BICESTER) HIMLEY LIMITED(3) DESIMAN LIMITED(4) DESIMAN 2 LIMITED(5) CFJL PROPERTY PARTNERS LIMITED | Defendants |
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KIRK REYNOLDS QC and JULIA PETRENKO (instructed by Underwood Solicitors LLP) for the Defendants
Hearing dates: 6, 7, 8, 11, 12, 13, 14, 15 and 18 October 2021
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VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties and/or their representatives by email and release to BAILII. The date and time for hand-down is deemed to be 11 November 2021 at 10:30 AM.
Mr Hugh Sims QC:
INTRODUCTION
Bicester, in Oxfordshire, was designated for the building of a zero-carbon "eco-town" in 2009. Four eco-towns were then announced by the UK government, but Bicester is the sole survivor of that concept, and much of it is still yet to be built.
Bicester, drawn up by Farrells Architects, included the development on some 1,000 acres of land of c. 6000 units of zero-carbon homes, with a mix of affordable housing, infrastructure, schools and leisure facilities. The North-West Bicester site was the largest single strategic site allocated in the adopted Cherwell District Council ("CDC" or "the Council") local plan, and central to its housing targets being met.
venture involving some of the parties to this litigation.
v Morgan equity", or constructive trust, arises over certain of the land, and/or for equitable compensation, or a claim for damages, in excess of £500 million, in lieu of an order for specific performance and/or by reason of alleged breaches of contract and/or misrepresentation.
THE BACKGROUND FACTS
Portfolio Property Partners Limited ("PPP"), to be set up on 22 June 2009, with a view to collecting in a portfolio of the land for development for the eco-town. It was envisaged it would be a parent company for the "P3 Group" and other companies were set up, including the Second Defendant, P3 Eco (Bicester) Himley Limited ("P3 Eco"), which was incorporated on 31 August 2010. In the event whilst described as a group, PPP was not a shareholder in the "subsidiaries", such as P3 Eco, though they were controlled by the same directors. Mr Nardelli is the principal shareholder in, and a director of, PPP, and he is also a director and shareholder in P3 Eco. Whilst not strictly a group, where I refer to the P3 Group below that should be taken to include references to PPP and P3 Eco so far as the context requires. References to the P3 parties below is to both the first and second defendants. I should also add that the parties referred in their evidence, and in submissions, to P3 as shorthand for some or all of the P3 Group, PPP and P3 Eco. As a result on occasion below references, quotations or summaries which refer to P3 also include references to PPP and/or P3 Eco, though I shall endeavour to maintain the distinction in this judgment.
portfolio for development, after incorporation of PPP and P3 Eco, by approaches to the local landowners. The land in question is predominantly agricultural land, owned by various farming families. One of the options which was secured in relation to the Exemplar Site was with the Phipps family. There are two other options which concern the land relating to this dispute.
Bicester, and ON245153, being land lying to the West of Howes Lane, Bicester. This was subsequently varied on more than one occasion, including to extend the first exercise option date until 6 months after grant of planning permission. The option price for the first option was £150,000 per acre. It was also subsequently recognised as including an option over title ON318263, known as land at Himley Barns, Chesterton, Bicester, though this did not appear in the original text.
various other parties. As recorded in that agreement A2D was the selected registered provider for the provision of affordable housing in the project, as defined in that agreement, and as provider of private sale plots in the Exemplar site, and having an option to provide up to 10 per cent of other private sale units.
Bicester. This provided for an option period of 4 years, a deposit of £2m to be paid within 28 days of confirmation of a resolution to grant, and a price of £5m (or 80% of a market price to be determined in accordance with a formula). On a pro rata basis (and assuming a 30 acre site) this was £166,666 per acre, so a little more expensive than the Murfitt Henson Option, which no doubt reflected the more advanced progression of the project by this time.
village (Class C2), flexible commercial floorspace (Classes A1, A2, A3, A4, A5, B1, C1 and D1), social and community facilities (Class D1), land to accommodate one energy centre and land to accommodate one new primary school (up to 2FE) (Class D1). Such development was to include provision of strategic landscape, provision of new vehicular, cycle and pedestrian access routes, infrastructure and other operations (including demolition of farm buildings on Middleton Stoney Road). The entirety of the 227 acres was referred to in the planning application as the proposed "Himley Village". I shall refer to it as that below, albeit noting it has yet to be built.
Brooke Homes Limited ("BHL"). He set up BHL in order to capitalise on their position as a utility contractor, as various utility providers were keen to sell land. Land was purchased by Mr Holleran, via his corporate vehicles, at Deal and later Chatham, both in Kent, as a result of these connections. Mr Holleran had set up Brooke Homes Developments Limited ("BHDL" or "Brooke") for the acquisition of the land at Chatham, a former Southern Water depot. This had planning permission for 110 residential units and BHDL intended to develop the site in accordance with a planning permission using a modular housing concept. The Brooke companies had acquired BOPAS accreditation for modular housing and had an association with Adston, who constructed modular housing units in Ireland. They had a factory facility in Ashford, Kent. A third party identified that Brooke/Mr Holleran might be a suitable developer on the project at Himley Village, with modular housing being compatible with the eco-town concept, and made the introduction to the P3 Group/Mr Nardelli in or about early 2015.
Brooke side, and by Mr Nardelli and Graham Johnson, on the P3 Group side, at which they discussed the possibility of Brooke purchasing land at Himley Village and developing the site using modular building techniques. At or shortly after this meeting it was also discussed that Brooke might set up a modular house building factory at Bicester and that the P3 Group would assist in locating a suitable site for this. After Mr Holleran had concluded he was interested in the proposition he set up Brooke Homes (Bicester) Limited, the Claimant company ("BHB" or "Brooke"). Brooke were interested in acquiring private development lands at the Bicester site to facilitate a large scale residential opportunity over the coming years, and the P3 Group viewed them as a good match for the project and would help to obtain planning permission. It was also explained at this meeting or shortly after that the affordable element of the housing, 30% of the 1700 units, would be located elsewhere on the Himley Village site. At about this time the P3 Group was moving away from a relationship with A2D as the social housing provider to Rent Plus.
Village from the P3 Group. The initial private residential development land purchase was intended to comprise 100 acres, sold at a price of £800,000 per acre, with the intention of further options being acquired and granted over a further 400 acres, or 500 acres in all ("the Property"). The parties contemplated they would quickly enter into a conditional sale agreement ("CSA"), for the initial 100 acres, and agreed a deposit of £4 million (or 5% of the purchase price) would be payable when they did. They also agreed that an immediate non-refundable deposit would be made immediately in the sum of £250,000, which was duly paid by BHB. As Mr Nardelli put it in his evidence this deposit bought them the opportunity to be involved in a flagship opportunity. Due to this substantial up-front payment, and to protect its position BHB, required a period of exclusivity, which was agreed as being to 20 working days after the planning application had been determined, or the entry into the CSA, whichever was earlier.
viewed by the parties as forming part of one overall agreement, though they are referred to in the pleadings, and in the evidence, on occasion as the "Three Agreements" or "the Agreements".
via a unilateral notice. This generated much debate between the parties and the conveyancers. Also during 2015 and 2016 there were discussions with other landowners to secure options, including the Gammond and Malins families, though these subsequently lapsed. In addition by 2016 it became apparent that it would be necessary for BHB to acquire not simply the private residential land but also the affordable housing land, since the local planning authority required this to be interspersed through the site, rather than be held in separate blocks, as originally contemplated under the Heads of Agreement. This was agreed by the parties, and suitable amendments made in the CSA as then drafted. In addition during this time efforts were made to locate a factory site for BHB, and a pre-application submission was made to CDC. In the event the factory site concept did not proceed.
variation to the Pains Option, no doubt having in mind that the resolution to grant might soon trigger the need to find £2 million, and agreed to pay an initial immediate deposit of £100,000 on 19 December 2016 and £1.9 million within 28 days of confirmation of grant of planning permission (as opposed to resolution to grant).
via the Pre-Payment. BHB also incurred time and expense in contributing to the venture, and in particular to assist move the planning application forward to the position where the section 106 agreement was agreed, and an outline grant obtained.
Property Partners Limited ("CFJL"). On 31st May 2017, CFJL entered a conditional contract with Rosemary Louise Henson and Julian and Catharine Murfitt for the sale to CFJL of part of the Property in 3 phases ("the CFJL Agreement"). There were later written supplemental agreements between these parties (made on 7 March 2018 and 22 June 2020). BHB only came to learn about CFJL sometime later, in 2018. The CFJL Agreement enables a purchase of the land from Murfitt Henson at a significantly lower price than the Murfitt Henson Option (about half in relation to some of the land). The Murfitt Henson Option was also varied, by a supplemental agreement, entered into on 31 May 2017, on the same day as the CFJL Agreement. By this agreement P3 Eco agreed with Murfitt Henson that the rights under the Murfitt Henson Option would be subordinated to that of CFJL: under clause 4.1 it provided that so long as the CFJL Agreement was in force P3 Eco would not exercise the option in the Murfitt Henson Option.
Limited ("Desiman"), who funded this acquisition via a facility agreement of the same date. The total loan from Desiman to P3 Eco at this time was a short term loan of c. £2.3m, some of which was used for this transaction. The 10 acre parcel of land subsequently became registered under title number ON339648. BHB did not become aware of this transaction until after the event. Mr Nardelli and the P3 parties sought to reassure BHB that this transaction would not adversely affect their position or rights, and that this was commercial land. Steps were also being taken to try to finalise the section 106 agreement during early to mid 2018, and by this time the parties considered they were not far off securing a completed section 106, though in the event that did not come until much later.
very strained. Each have subsequently come to blame each other for their failure to conclude the CSA. The P3 Group had continued with their discussions with another potential purchaser, L&G, and BHB was increasingly concerned about this, and what they perceived to be non-action on the part of P3 Group and their conveyancing solicitor. BHB sought comfort from the P3 Group in relation to their concerns, and sought to reassert their rights under the Three Agreements. Some verbal assurances were given, but a formal comfort letter was not signed off by any of the P3 parties. BHB complain that the P3 parties acted in a repudiatory manner in the period September 2018 to November 2018, which repudiation BHB did not accept.
property to BHB. They sought various relief, in addition to a claim for damages for breach of contract, including: injunctions to restrain the P3 parties, from taking any steps whatsoever towards disposing or actually disposing or granting any interest in any part of the Property other than to BHB, and to prohibit the exercise or amendment of the section 106 agreement; a declaration that the P3 Group's interest in the Property was subject to a trust or equity in favour of BHB to give effect to the Three Agreements and/or prevent the P3 parties from dealing with a third party in relation to the Property; further or in the alternative an enquiry as to what sums should be paid by the P3 parties by way of equitable compensation; further or in the alternative an order for specific performance.
Property and these were registered on 19 December 2018 on title numbers ON339648, ON25153, ON318263, ON245151 and ON237022. Those UNs give notice of a pending land action and refer to these proceedings.
Properties (UK) Limited ("Countryside")) for the sale of parts of the Property and wished to enter into a settlement which enabled that sale to proceed. He also explained that the P3 Group were worried that time on the Pains Option was running out.
viewed from BHB's perspective, they anticipated receiving payment of the first payment of £3m from P3 by no later than 6 weeks and 3 working days after the grant of planning permission, which was then anticipated as being imminent, or a long stop date of 6 months from the date of the Tomlin Order. BHB contend certain assurances were made to them in relation to the P3 parties' ability to pay. The Tomlin Order also included an undertaking on the part of the P3 parties to keep BHB fully informed in relation to the grant of planning permission and the sale of the Property.
Village. This was a trigger point for various matters, including the Tomlin Order payments. However the anticipated sale with Countryside did not complete and the P3 parties failed to make the first payment to BHB, due by 17 March 2020. BHB caused the stay on the proceedings to be lifted and fresh directions were given by order made on 6 May 2020. The parties continued to have negotiations in the meantime both in relation to the claim and also in relation to wider and further potential joint venture in relation to the development at Bicester. An issue arose as to the extent to which those communications should remain privileged, though in the event such a contention was withdrawn, and the parties agreed that all such material was admissible before me at trial, subject to submissions as to its relevance and weight.
varied, by a first supplemental agreement in March 2018, which provided that the total purchase price for the land would be £15 million, payable as to four million for phase 1. By a supplemental agreement on 22 June 2020 Mr Nardelli had negotiated a further extension on phase 1 of that agreement to 26 August 2020. He had not secured any formal extension beyond that. This put CFJL in a precarious position, and also the P3 parties and Mr Nardelli and Mr Johnson, given their obligations to Desiman and the claim brought by BHB.
Limited, ("Desiman 2"). Under this contract CFJL contracted to transfer these two parcels of land to Desiman 2 on the following terms, amongst others, namely: (1) The land sold comprised 59 acres; (2) the sale price was £4 million (£67,796 per acre); (3) there was also an option in the agreement for CFJL to buy the land back from Desiman 2 within 5 months and 2 weeks of completion at the price of £19,047,238.23, subject to the Claimant's UNs being removed or a deed of priority entered into. The sum of £19,047,238.23 was the calculation by Desiman of the total sum due to it by way of lending and fees, not just from CFJL but also from the P3 parties. This contract was completed the same day, on 23 October 2020, and the land was transferred by CFJL to Desiman 2 for £4 million, and is now registered in the name of Desiman 2 under Title Number ON360325. On its face this is something of a curious transaction.
v16.1). In the oral evidence of Mr Lindley, the Defendants' expert valuer, it was confirmed that the amount of land in contemplation was to enable 500 units to be built. Subsequent to that oral evidence a plan has now been provided which shows, consistently with the oral evidence of Mr Lindley, that what is in contemplation is effectively phase 1, or land sufficient to enable 500 units to be built, and totals some c. 50 acres. Whether or not the proposed sale to Countryside is market value is disputed. BHB contend for a market valuation of £39 million in relation to this first phase, based on the expert evidence of Mr Hewetson. The Defendants have not adduced any expert evidence as to the market value of the proposed sale to Countryside, but contend the contemplated sale is an ordinary arms-length transaction. For their part they have adduced expert evidence from Mr Lindley who has opined that a scheme involving a sale of 1,190 units would only be worth £39 million.
value of the Property (defined as comprising all of the 500 acres), which is claimed in the sum of £47,556,495 in relation to the initial 100 acres, and in the sum of £106,744,782 in relation to the additional 400 acres, and (ii) loss of profit, arising by reason of the failure to acquire, develop and sell the Property, put in the sum of £464,034,954. There is also a claim for consequential losses which is not quantified. Finally, there is also a suggestion in the schedule of loss that BHB "reserve their entitlement to recover a minimum sum of not less than £12m agreed to be paid to them by the Defendants in accordance with the terms of the Tomlin Order agreement together with any further losses accruing in the event of the failure of the Defendants to comply with their obligations under the Tomlin Order in respect of the transfer of the additional 400 acres".
THE ISSUES
1. What were the P3 parties' obligations under the Heads of Agreement, Exclusivity Agreement and Addendum Agreement ("the Agreements")?
2. Are the Agreements still
(1) Did BHB withdraw from the transaction in or around December 2017 and, if so, were the P3 parties released from any contractual restrictions relating to entering into dispositions after this date?
(2) Alternatively to (1), did the Exclusivity Period expire 20 working days after the determination of the planning application (consent having been granted on 30 January 2020) and, if so, were the P3 parties released from any contractual restrictions relating to entering into dispositions after this date?
(3) Alternatively to (1) and (2), is the Exclusivity Agreement still alive for the reasons pleaded in paragraph 22G of the Amended Particulars of Claim?
3. Is and was CFJL at all material times under the effective control of PPP or P3 Eco?
4. Did the P3 parties breach the Agreements? In particular did the P3 parties:
(1) fail to take all reasonable endeavours and fail to move forward with good faith throughout the period of the Agreements?
(2) negotiate with third parties for the sale or lease of any parts of the
(3) sell or charge any parts of the
(4) act in a manner amounting to repudiatory breaches by their two emails of 24 September 2018, letter of 21/26 November 2018 and/or oral statements made on 22 November 2018?
5. If the P3 parties have breached the Agreements, (i) in what way (ii) did any such breach cause BHB any damage and (iii) what is the measure of any damage?
6. What, if any, trust affects the Property or estoppel or equity has arisen in favour of BHB and what is the effect of the same?
7. Did the Defendants collude together "to steal a march on the Court" and try to avoid BHB obtaining specific performance or another proprietary remedy as alleged in paragraph 22F of the Amended Particulars of Claim and paragraph 22H of the Amended Reply?
8. Did Desiman incite a breach of the agreements between BHB and the P3 parties?
9. Is the proposed sale to Countryside a sale at an undervalue? [Note: BHB sees this as an issue but the Defendants do not].
10. As to the claim for misrepresentation:
(1) Did the P3 parties make any of the representations alleged in paragraph 22A of the Amended Particulars of Claim to BHB?
(2) Were any of those representations false?
(3) If so, did any such false representation induce BHB to enter into the Tomlin Order?
(4) If so, did the representation cause any loss and, if so, what is the quantum of the loss?
11. Is BHB entitled to the relief claimed in the Amended Particulars of Claim against the Defendants by way of injunction, declaration, enquiry as to equitable compensation, Specific Performance of the Agreements and damages?
THE WITNESSES AND OTHER RELEVANT PERSONS
video platform. The technology worked effectively during the course of oral evidence, with only the occasional technical glitch which did not substantially impede the progress of trial. I should second here the observations of Mr John Kimbell QC in Re One Blackfriars Ltd [2021] EWHC 684 (Ch) at [20]. There are practical advantages to conducting a trial via a video platform, which enables the judge to see the documents, the witness and notes all in close proximity and at the same time. I will set out in this section of my judgment my overall impressions of the witnesses of fact I heard, and the approach I have taken to making findings of fact. I will deal with the expert evidence separately below.
v Kogan [2019] EWCA Civ 1645 at [88]. All of the evidence is to be considered, though it will usually be appropriate, especially in cases which relate to events some time ago, as here, to start the judicial enquiry with a consideration of the contemporaneous documents, where available, and evidence on which undoubted or probable reliance can be placed. The fallibility of human memory is well established and there is a particular risk in cases, such as this one, that more recent events colour how a witness recalls more historic events. In short, the oral evidence is best assessed against the documents and natural or probable inferences from them. The manner in which oral testimony is given also has its role to play, though the role played by the demeanour of the witness when giving evidence tends to be overstated.
view he had of the P3 parties, and Mr Nardelli in particular, by 2018, and him seeking to put "words in their mouths" by this date when he was sending emails. However he gave them an opportunity to say when they disagreed with his email summaries and, by and large, they did not. Therefore, where there is any conflict of fact between him and the P3 parties' witnesses I generally prefer his evidence. Where there are exceptions to that I identify them.
Brooke/Mr Holleran from 2015 in the UK. His role was initially focussed on a site in Chatham, but soon his time was taken up, predominantly, on seeking to develop the Himley venture with the P3 Group. There were some aspects of his oral evidence which were a development on his witness statement, which needs to be treated with some caution, though his evidence was largely uncontroversial, and I have no reason not to accept it generally.
Limited ("Dekra"), which also entered into an agreement with the P3 Group concerning part of the land at Himley Village. Some caution is required in relation to his evidence because he/Dekra have issued proceedings against the P3 parties in Birmingham District Registry, which proceedings have yet to be determined. In the event the principal challenge to his evidence from Mr Reynolds QC, acting with Ms Petrenko for the Defendants, was as to the doubtful relevance or assistance his evidence was likely to be to the facts in issue. I have already indicated during the course of trial that I substantially accept those submissions, since much of his evidence was taken up with an attempt to provide similar fact evidence concerning the way Mr Cunnington/Dekra has also allegedly been treated by the P3 Group or to discredit the P3 parties. I cannot begin to form a view on the accuracy or otherwise of those allegations within this trial. His evidence was of some limited relevance however in that he provided evidence that the P3 parties had agreed to enter into a joint venture agreement with him on 19 August 2014 which included an intention to develop 5 acres of land at Himley and over the same land as fell within the Agreements made with BHB. Beyond this, I place no weight on his evidence.
partner in Stitt & Co. He was the conveyancing solicitor who worked for BHB in the latter part of 2017 (in succession to Anna Zatouroff, who left the firm) and into 2018. I found his evidence to be careful and reliable, consistent with the contemporaneous documentation, and I have no hesitation in accepting it where it added to the contemporaneous documents. Stitt & Co took over the conveyancing file, on behalf of BHB, from Gary Wainwright, formerly of McMillan Williams.
Veale Wasbrough Vizard LLP ("VWV") and he continued to act for the P3 parties from VWV after that time, and also came to work for CFJL. He candidly accepted in his oral evidence that his clients' instructions required him at times to not disclose matters to third parties and, in 2018, to cease to move the joint venture forward with BHB. That made his position more uncomfortable. Given the time he worked for the P3 parties he is likely, in my judgment, to have lost some objectivity. He also, at times, sought to advocate his client's case, albeit some of the questions tended to conflate him with his client and so I make some allowance for this. I think it is important, nevertheless, when assessing his evidence, to recognise those limitations placed on him.
very experienced businessman and property developer. For many years he had a close professional and personal relationship with Sir Terry Farrell, one of the world's leading master planning architects. Together with Farrells what became the P3 Group were able to put together a consortium to prepare proposals for presentation to CDC to assist them submit a successful bid for the eco-town located in North-West Bicester. Mr Johnson was central to those efforts for the P3 parties. Whilst cognisant of his duties of collective responsibility, Mr Johnson focused on the master-planning aspects of the venture at Himley and Mr Nardelli focused on securing the required land from the local landowners as well as being the main communication point with funders. I also conclude that Mr Nardelli played more of the lead role in communications with BHB and Mr Holleran, though on many occasions Mr Johnson was a witness to those events too. Mr Johnson liaised more with the architects, Penoyre & Prasad, led by Sunand Prasad, former president of RIBA, the planning consultants, Turley, and the planning authorities, together with Mr Ives of BHB.
partner of his as a shareholder, to prevail over pre-existing contractual obligations to BHB.
Bicester site by Ian Inshaw, a co-director of the P3 parties. Mr Inshaw was not called to give evidence. He is a former army officer, and had (in 2008) recently retired as the Commander in charge of the Bicester Garrison. This was the centre of the logistics for the army and of significant military importance. His finance director at the Bicester Garrison was Barry Wood, who by then was the leader of CDC. Thus, although Mr Inshaw played an important early role in matters concerning the P3 Group, and Himley, he seems to have played less of a role in the matters relating to this case. I note he was not drawn into giving any personal guarantees, for example. I conclude, out of the board of directors of the P3 parties, comprising of Mr Johnson, Mr Inshaw and Mr Nardelli, that the principal decision maker was Mr Nardelli, followed next by Mr Johnson.
very persuasive and reassuring" in his communications. I agree with that description, but I do not think that equates with reliability in this instance. Save where corroborated by the contemporaneous documents I was not satisfied I could safely rely on the oral evidence of Mr Nardelli. I say so for seven main reasons. The first is that other of the witnesses called by the Defendants, including Mr Fellows and Mr Smith, concluded he had been less than frank with them when it suited him. I accept their evidence in that respect. Secondly, he admitted he kept matters relating to CFJL, and its contract with the Murfitt Henson in 2017, deliberately hidden from BHB because of his/the P3 parties' financial interests in doing so. Thirdly, I conclude he had the tendency to tell a party what they want to hear, or what will advance the interests of the P3 parties, and the project at Himley, which he passionately believes in, having invested over 12 years into it. Transparency and accuracy took second place to this in my judgment. Fourthly, I conclude that not only did he keep matters hidden from BHB but that he was also willing to lie to keep matters hidden. I refer in this respect to my findings in paragraphs 196-199 below. Fifthly, his evidence was contradicted by a number of the BHB witnesses, who I prefer generally, and whose evidence was not the subject of any substantial or successful challenge. Sixthly, like Mr Johnson, I think he allowed his personal and family financial interests in the P3 parties, and in the setting of CFJL, which included family members as shareholders, to prevail over pre-existing contractual obligations to BHB. Seventh, his witness statement was influenced in my judgment by the breakdown in relations between the parties. To his partial credit he accepted some of his more severe criticisms of BHB could not stand when giving oral evidence and under cross examination.
property investment company, residential landlord and private non-regulated lender. Desiman lend only for commercial property related ventures, providing mainly short term bridging or mezzanine finance, and has now been lending for 15 years. Since 2017 its main focus has been to carry out more lending, though it retains a residential property portfolio. Mr Fellows has a background as an estate agent, and often makes judgments on investments without formal valuation evidence or input. This make up and approach by Desiman, in my judgment, substantially explains the less than conventional approach taken by Desiman to the lending advanced in this case. So far as Mr Fellows' oral evidence was concerned, at times he was prone to make speeches in what he considered would be supportive of Desiman's case, and he did not (without some judicial interruption) give a short and straight answer when one ought to have been forthcoming. So I think his evidence needs to be approached with some care. Overall however I am satisfied that he was doing what he considered was in the best commercial interests of Desiman, he tended to leave matters of detail to Mr Smith, and once this is understood his actions and evidence are readily understood.
very quick to seize on the opportunity to argue Desiman's case, and sometimes slow to provide direct answers to question from Mr Jefferis, acting on behalf of BHB. Generally speaking I conclude he was doing his best to answer questions accurately and to assist the court. I think more caution is required as regards the evidence he gave as to his recall of advice he gave to his client in 2018-2020, for the simple reason that he kept no file notes. I do not consider there is anything suspicious about this, since the relationship was a longstanding one and this was not a client who expected detailed notes or reports. But it does mean I need to be cautious about what he says he now recalls, given he has been involved in numerous discussions since then, and given the vagaries of memory.
THE ISSUES: ANALYSIS AND CONCLUSIONS ON THE ISSUES
Issue 1: What were the P3 parties' obligations under the Agreements?
Introduction
venture in relation to the land at Himley. Whilst a joint venture is a frequently used business vehicle it is not recognised in English law as a distinct legal concept or term of art: see, for example, Cullen Investments Ltd and ors v Brown and ors [2017] EWHC 1586 (Ch) at [257]; Ross River Ltd and anr v Waveley Commercial Ltd and ors [2013] EWCA Civ 910; [2014] 1 BCLC 545 at [34] per Lloyd LJ. The term "joint venture" is, therefore, little more than a short-hand for a specific commercial project or activity pursued by two or more participants. It begs the question rather than answering it. Answers are to be found by considering the legal structures and obligations and duties arising from those. In this instance that is to be found in the contractual arrangements. Whilst the parties referred to themselves on occasions as "partners", or forming part of a "consortium", it forms no part of BHB's case that there was a partnership falling within the scope of the Partnership Act 1890 and no joint corporate vehicles were used.
Limited v Fate Limited (In liquidation) & Others [2019] EWHC 43 (QB) at [11] as follows:
"Ultimately the question that I here need to resolve is a question of contractual interpretation. I should therefore briefly set out the correct modern approach in English law to contractual interpretation (see also my summary of the law in Harry Greenhouse v Paysafe Financial Services Ltd [2018] EWHC 3296 (Comm) at [11]). The court must ascertain the meaning of the words used by applying an objective and contextual approach. The court must ask what the term, viewed in the light of the whole contract, would mean to a reasonable person having all the relevant background knowledge reasonably available to the parties at the time the contract was made (excluding the previous negotiations of the parties and their declarations of subjective intent). Business common sense and the purpose of the term (which appear to be very similar ideas) may also be relevant. Important cases recognising the modern approach include Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 , HL, especially at 912-913 ( per Lord Hoffmann giving the leading speech), and Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 The Supreme Court in Arnold v Britton [2015] UKSC 36, [2015] AC 1619 , clarified that the words used by the parties are of primary importance so that one must be careful to avoid placing too much weight on business common sense or purpose at the expense of the words used; and one must be astute not to rewrite the contract so as to protect one of the parties from having entered into a bad bargain. In Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 , at [14], Lord Hodge, with whom the other Supreme Court Justices agreed, said that there was no inconsistency between the approach in Rainy Sky and that in Arnold v Britton : 'On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing.'"
The Heads of Agreement
Brooke Homes (Bicester) Ltd (BHB) or their respective nominees". It was agreed at trial that notwithstanding the somewhat loose definition of the P3 Group, both of the P3 parties were intended to be a party to the Heads of Agreement, and all the Agreements. Thus references to "P3" in the Agreements include references to both the P3 parties.
"Title: Title will be good and marketable title.
Agreement: Subject to satisfaction of certain conditions set out under 'Land Acquisition', BHB or their nominee will purchase private residential development land shown coloured pink and blue on the attached plan marked 592-SK-030 with Outline Planning Consent from P3. The initial private residential development land purchase will comprise 100 acres.
Future Options: P3 agree to grant BHB options over further land in tranches of 50 acres up to a maximum of 400 acres of additional private residential development lands that they secure, subject to P3 securing and attaining outline planning consent on said lands. The additional 400 acres covered by this agreement will be from the lands hatched brown on the attached plan marked Cherwell Local Plan SA
The total private residential lands forming part of this Agreement is therefore 500 acres."
"Mutual Benefit: The transaction will be structured in a manner which will most effectively achieve the desired commercial and financial outcome for both parties.
Compliance: [omitted]
Land Acquisition: BHB will enter into a conditional sale agreement with P3 to purchase an initial 100 acres subject only to: i. the consent being granted for the outline planning application submitted on 31 December 2014, and ii. P3 using their reasonable endeavours to assist in providing suitable facilities for BHB as detailed in 'Facility Requirement'.
These lands will be acquired in 3 tranches: 25 acres on obtaining of outline consent, 25 acres 12 months thereafter and 50 acres after a further 12 months (24 months post completion of acquisition of initial tranche).
Payments in line with the "Land Cost" (see below) will be made on the date of transfer of ownership of each tranche of land. Scope will exist for BHB to accelerate the acquisition of said lands if necessary during the period.
Exchange of contracts for the conditional sale agreement will be treated as consideration for the granting of the options outlined in the 'Future Options' paragraph above.
The future options outlined in the relevant section above will be granted as soon as possible after exchange of contracts for the initial 100 acres, and may be exercised by BHB on attainment of outline planning consent, which P3 agree to seek in a proactive and transparent manner.
Residential Density: The Agreement and Future Options are on the basis of a minimum density of 14.1 private residential units to the acre.
Land Cost: The parties agree the following land costs for private development lands: - £800,000 per acre for the first 100 acres - £1m per acre for the remaining 400 acres
Overage: The parties also agree to the following Overage provisions."
"First 100 Acres
In addition to the land cost per acre outlined in the previous section, an overage will be paid consisting of the higher of the increase in the Halifax HPI from date of acquisition of first 25 acres, or a 20% overage on sales over and above an average £241 psf on residential units built on this 100 acres.
Additional Lands
[omitted]
Affordable Housing: P3 will be responsible for the provision of land necessary for social housing provision from land other than the land subject to this agreement. P3 already has established relationships with social and affordable housing associations and other providers.
Disbursement of Cost: BHB will pay £250,000 on signing heads of terms such sum to be non refundable. The balance of £3,750,000 will be paid on exchange of contracts of the conditional sale agreement, representing a 5% deposit on the initial 100 acres
P3 will be responsible for securing necessary outline planning consents. BHB will be responsible for securing all necessary detailed or reserved matters consents.
If any of the conditional provisions of the contract for sale are not satisfied for whatever reasons, BHB shall be entitled to the refund of the balance of the deposit paid on exchange but not the payment made on the date hereof
For the avoidance of doubt the exchange of contracts on the conditional sale agreement will be treated as consideration for and the obligation to grant of the Future Options on the remaining lands in accordance with the "Land Acquisition" paragraph above
Section 106: BHB acknowledge that P3 are still in negotiation with the local council pertaining to the level of Section 106 contribution required throughout the development.
BHB agree to cover the cost of any Section 106 applicable to the whole 500 acre acquisition, over and above any gross overage payable to P3 (see Overage section below [sic]). This is on the basis that Section 106 will not exceed £10,000 per residential unit. In the event that the Section 106 liability exceeds £10,000 per unit the parties agree to share such excess costs equally"
venture, but as appears above, and below, it was catered for contractually.
"Site Services: P3 to be responsible for the provision of infrastructure and services including energy to the boundary of all lands being acquired by BHB. P3 will also facilitate all necessary connections. BHB will be responsible for all site specific infrastructure and services.
BHB commit to covering the cost of services up to a level of £2,000 per residential unit. Any excess over and above this level will be covered by P3, given their position where they could exercise some level of control in negotiating with the relevant service providers."
"Facility Requirement: P3 agree to use reasonable endeavours to identify a site on commercially acceptable terms a suitable facility for the manufacture/fabrication of housing pods located either on site (but not within the curtilage of the land subject to the conditional sale agreement or the Option agreement referred to herein) or within close proximity of the site centre with suitable access to the site. The initial requirement is for 75,000 to 100,000 square feet under roof, rising to 200,000 square feet, with a similar hard surface requirement throughout.
Legal Enforcement: Given the considerable expense being incurred by all parties and in the interest of timely completion, the terms of this document will be considered binding to both parties.
Representation: [omitted]
Good faith: Each party shall act in good faith throughout the period of this Agreement."
"Agreement: The parties shall use all reasonable endeavours to enter into a final binding Agreement which captures legally these Heads of Agreement acting in good faith towards each other by 31st March, 2015.
Governing law: These heads of agreement shall be governed by the laws of England & Wales."
limits on the obligations under the Heads of Agreement, which they suggested were unlimited in time. I will therefore turn to consider the Exclusivity Agreement now, also noting it was executed on the same date.
The Exclusivity Agreement
Property" which is defined by reference to the land at Himley Village as described in the Heads of Agreement. The parties were also defined similarly to the Heads, and there was no suggestion at trial they were any different from the Heads notwithstanding the loose terminology used. The "Transaction" was defined as being "The conditional sale agreement and the option agreements as described in the annexed Heads of Agreement", the "Deposit" as being the £250,0000, and the "Exclusivity Period" as being "From 14 April 2015 to 20 working days after the Planning Application is determined or the parties entering into the Transaction, whichever date is the earlier". It is common ground that whilst the "Planning Application" is not a defined term this was a reference to consent being granted for the outline planning application submitted on 31 December 2014.
"1.1 P3 acknowledges receipt of the Deposit.
1.2 In consideration of the Deposit paid by BHB to P3 it is agreed that:
1.2.1 during the Exclusivity Period P3 will not in relation to any residential property:
1.2.1.1 market the Property;
1.2.1.2 invite entertain or accept subject to contract an offer for the purchase or lease of the Property from any third party;
1.2.1.3 sell or lease or enter into an agreement to sell or lease in respect of the Property to any third party;
1.2.1.4 instruct its solicitors to submit a draft contract for sale or agreement for lease in respect of the Property to solicitors acting for any third party;
1.2.1.5 enter into a contract for any disposition or development of the Property nor grant any right of pre-emption over it
1.2.1.6 otherwise negotiate with any third party for the sale or lease of the Property to any other third party
unless BHB withdraws from the Transaction or unless this agreement otherwise comes to an end.
1.2.2 in return for the exclusivity granted to BHB by P3 by this agreement BHB will not: approach directly or indirectly the registered owners or occupiers of any of the properties within the land that is the subject of this Agreement and detailed in the annexed Heads of Agreement
1.3 If BHB serves a notice requiring completion of the Transaction on P3 ("Notice To Complete") within the Exclusivity Period, P3 shall enter into the Transaction.
1.4 In the event that the Transaction proceeds to binding legal completion P3 will allow credit to BHB for the amount of the Deposit by way of set off of such liabilities as maybe or become due from BHB in relation to the Transaction."
"In the event that BHB does not serve Notice To Complete on P3 during the Exclusivity Period the parties hereto agree that:
2.2 P3 shall be entitled to retain the Deposit absolutely by way of agreed compensation and liquidated damages.
2.3 The liability of BHB shall be limited to the amount of the Deposit.
2.4 The parties shall have no further obligations to each other arising from the terms of this Agreement or in relation to the Transaction and BHB shall procure that all documentation relating to the Transaction in the hands of its solicitors or other legal representatives are forthwith returned to the solicitors for P3 on written demand made at any time thereafter."
Heads of Agreement revisited – duration of reasonable endeavours & good faith
Property are defined to be continuing ones "unless BHB withdraws from the Transaction or unless this agreement otherwise comes to an end". I conclude therefore that since the parties intended that the restrictions on P3 continued unless BHB withdrew from the Transaction, or the Agreement otherwise had terminated, that the parties must also have intended that the "all reasonable endeavours" obligations, and other obligations in the Heads of Agreement, should similarly be demarcated and they are unlikely to have concluded there should have been an earlier date in relation to the Heads of Agreement, if the question had been posed to them at the time. Again in my judgment it makes no objective or commercial sense for a different period to apply. It is likely however that the debate between "reasonably obtainable", withdrawal, and whether reasonable endeavours have been exhausted is largely academic.
The Addendum
"1. In order to facilitate P3 in acquiring land that will be subject of the Heads and the Future Option agreements referred to therein BHB have agreed that they will provide this payment to assist with this ("the Pre-Payment").
3. The parties are in the process of agreeing terms for a conditional sale agreement ("the CSA"). The Pre-Payment shall form part of the Purchase Price referred to in the CSA and shall reduce the amount payable on exchange of contracts and shall be deductible from the Purchase Price on completion.
4. In the event that the CSA is not entered into by 31 December 2016 or if entered into does not become unconditional by that same date then the Pre-payment shall be repaid without deduction or offset to BHB within 5 working days of demand or in accordance with the terms of the CSA if applicable
5. This Addendum shall be attached to the Heads as an amendment thereto."
Village. Indeed it positively asserts it has already acquired an equitable interest in it, including based on a Pallant v Morgan equity based on, amongst other things, the contention this is a failed joint venture. I should also add that the mere fact that BHB could demand the money back after this date does not mean that the P3 parties were released from their continuing obligations under the Agreements if P3 did not do so. I should also add that in my judgment the date of 31 December 2016 does not represent the end date for the parties obligations under the Heads of Agreement either, for reasons which I have already stated above. Nor did either party submit it was at trial.
Summary
i) to use all reasonable endeavours to enter into a final binding Agreement which captured the Heads of Agreement, including the entry into a conditional sale agreement for the initial 100 acres, and to continue those efforts during the Exclusivity Period, subject to arguments as to exhaustion or withdrawal;
ii) acting in that respect, and more generally in relation to the Agreements, and throughout their duration, in good faith towards each other; and
iii) the contemplated transaction (which included both entry into the initial CSA and further options over additional land) would be structured in a manner which most effectively achieved the desired commercial and financial outcome for both parties, for their mutual benefit; and
iv) to abide by the restrictions set out in the Exclusivity Agreement during the Exclusivity Period; and
v) for P3 to repay BHB the Pre-Payments (save for the initial Deposit of £250,000) after 31 December 2016, if BHB elected to ask for the money back.
Enforceable contract for sale of land?
variations, fell short of being an enforceable contract for the sale of land, whether in relation the overall 500 acres or in relation to the initial 100 acres. This is for a number of reasons.
Property under the Heads of Agreement, P3 did not hold options over the full extent of this land, as was known to BHB at the time. It only held option rights over a lesser amount of land, of approximately 250 acres. I find this was known at the time, and it is reflected in the structure of the Heads of Agreement.
value housing. It has transpired that the planning application, due to the relative densities of private land, affordable housing, open spaces and other uses, only yields a lesser acreage for private residential development, of about 84 acres. The parties mutually agreed to this change, but it is nevertheless a change from the Heads. Moreover, it became apparent to the parties that idea that P3 would separately be responsible for the provision of affordable housing would not work, because the planning authority required affordable housing to be mixed in with the private units, referred to in evidence as "pepper potting". Again the parties agreed to this change, and agreed a price for the sale of the affordable land to BHB, but it was a change from the Heads.
Village land would form part of the 100 acres. It is submitted by the P3 parties that it is a necessary precondition to an enforceable sale of land that specific property is identified for sale. Without that there can be no enforceable contract. P3 rely upon an analogy to be drawn from the law relating to chattels. It is not possible to create a trust over a specific number of tangible goods which are comprised in a larger quantity of the same tangible goods, unless the specific goods are identified and segregated. Thus for, example, they submit a settlor cannot create a trust of 4 out of 20 cases of Ch Latour 1990 Wine or 20 out of his flock of 100 sheep. They refer to Underhill and Hayton on the Law Relating to Trusts and Trustees (19th Edition) at paragraph 8.14, citing Re London Wine Company (Shippers) Ltd [1986] PCC 121). For this reason also, they submitted, the Agreements could not and did not give rise to a "trust arising in favour of a purchaser under a contract to purchase the land".
Ltd v Cobbe [2008] 1 WLR 1752 at [19] and [20]. It seems likely to me the test should not be substantially different for a contract for the sale of land, though this point is capable of further debate, as it might be argued the test should be less strict for constructive trusts; see Herbert v Doyle [2010] EWCA 1095 at [91] per Morgan J. I note here that when the parties came to draft the CSA they contemplated a mechanism (identified in many of the drafts as being clause 28) whereby the land would be marked on plans and that this would be provisional and subject to change, with any dispute resolved via a dispute resolution mechanism. This reinforces my view that the identification of land would not present a problem if both parties acted in good faith and discharged their reasonable endeavours obligations. The land values across the whole did not vary significantly.
v Doyle above at [71] & [72] per Arden LJ (as she then was)). But none of that takes away from the fact that the Agreements as they then stood had not travelled that journey.
variation to the Agreements, as it has to do so to arrive at a workable development scheme. This is because of the terms of section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989, which provides that:
(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.
(4) Where a contract for the sale or other disposition of an interest in land satisfies the conditions of this section by reason only of the rectification of one or more documents in pursuance of an order of a court, the contract shall come into being, or be deemed to have come into being, at such time as may be specified in the order.
variation of the Heads of Agreement since that would require the court to look at not just the Heads of Agreement, but other documents where other ad hoc agreements have been reached, or which records ad hoc oral agreements as to variations. Thus the varied agreement which is sought to be enforced would not be incorporated in one signed document and would all foul of section 2(1). That does not mean, however, that BHB cannot rely on a constructive trust. Section 2(5) of the same Act provides that nothing in section 2 affects the creation or operation of resulting, implied or constructive trusts. This leaves open the door to a constructive trust based on a Pallant v Morgan equity. Whether such an equity or trust arises here is considered further under issue 6 below.
Further consideration of the content of 3 of the main contractual obligations
All reasonable endeavours
v Granadex [1980] 2 Lloyd's Rep 608 at 613; and Rhodia International v Huntsman International [2007] EWHC 292 at [33] and [59] per Flaux J (as he then was). Some best endeavours clauses might however be said to require, depending on their context, the sacrifice of some commercial interests on the part of the party, whereas an obligation to use all reasonable endeavours is probably less likely to do so: see Yewbelle Ltd v London Green Developments [2007] EWCA Civ 475, [2008] 1 P & CR 279, [2007] 23 EG 164 (CS) at [29], and per Vos J (as he then was) in CPC Group Ltd v Qatari Diar Real Estate Investment Company [2010] EWHC 1535 (Ch) at [252]. Ultimately however, even these categorisations do not tell the whole story, since the precise requirement will depend on the precise wording and context in which that wording arises. So even with "all reasonable endeavour clauses" some subordination of commercial interests may be required (cf. the approach taken at first instance in Jet2.com Limited v Blackpool Airport Limited [2011] EWHC 1529, which was approved by the majority of the CA: see [2012] EWCA Civ 417). The mutual benefit clause in this case has some bearing in this context.
v The King [1934] 2 KB 17 and Walford v Miles [1992] 2 AC 128), though Mr Reynolds did not advance such a submission on behalf of the Defendants, and they accepted that the reasonable endeavours and good faith obligations contained in the Agreements were enforceable. No doubt they had in mind, when making that concession, to the principles set out in Rix LJ in Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD [2001] 2 Lloyd's Rep 76, in which it is emphasised that in commercial dealings 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. The courts will assist the parties to preserve rather than destroy bargains, on the basis that what can be made certain is itself certain. I believe that principle is reflected in the approach taken by Arden LJ in Herbert v Doyle referred to in [82] above. Cases such as Petromec Inc v Petroleo Brasileiro SA Petrobas (No 3) [2005] EWCA Civ 891, [2006] 1 Lloyds Rep 121 at [115]-[121] show that the courts will now be willing to recognise an obligation to negotiate on some matter using reasonable endeavours, or in good faith, where it is found in a binding agreement.
Good faith
Vos J suggested in CPC Group Ltd v Qatari Diar Real Estate Investment Company above at [246] that this required, in the context of the contract in that case, a requirement to "adhere to the spirit of the contract, which was to seek to obtain planning consent for the maximum Developable Area in the shortest possible time, and to observe reasonable commercial standards of fair dealing, and to be faithful to the agreed common purpose, and to act consistently with the justified expectations of the parties. I do not need, it seems to me, to decide whether this obligation could only be broken if QD or CPC acted in bad faith, but it might be hard to understand, as Lord Scott said in Manifest Shipping Co v Uni-Polaris Shipping Co [2003] 1 AC 469] how, without bad faith, there can be a breach of a 'duty of good faith, utmost or otherwise'." What "bad faith" means in this context may require some further consideration. It probably does not require dishonesty. Like reasonable endeavour clauses, the precise nature of the obligation takes its colour from the rest of the terms of the agreement.
view is that good faith clauses do contemplate a duty to act honestly, but something short of dishonesty may also suffice. So in Sheikh Al Nehayan v Kent [2018] EWHC 333 (Comm) Leggatt J (as he then was) stated at [175] that:
".....In Paciocco
v Post Office Ltd [2019] EWHC 606 (QB) at [711] Fraser J summarised a duty of good faith as meaning that "the parties must refrain from conduct which in the relevant context would be regarded as commercially unacceptable by reasonable and honest people. An implied duty of good faith does not mean solely that the parties must be honest." This has also been endorsed by Teare J in New Balance Athletics, Inc v The Liverpool Football Club and Athletic Grounds Ltd [2019] EWHC 2837 (Comm) at [44]. the existence of the duty was common ground. As to its content, Teare J referred to the analysis of Fraser J in said at [44].
i) A duty to act honestly, judged by reference to reasonable and honest people;
ii) The observance of reasonable commercial standards of fair dealing;
iii) Fidelity or faithfulness to the common purpose, or contractual purpose; and
iv) More generally to act consistently with the justified expectations of the parties.
variation from what the Heads of Agreement stated. Both parties accepted at trial that, for example, a change of circumstances might require some adjustment to the Heads of Agreement, but this would not result in the obligations ceasing.
Mutual benefit
variations to the terms set out in the Heads of Agreement. If the counter-party requests a reasonable variation which is of no, or no substantial detriment, to the other party, but can clearly be seen to be of benefit to other party, and to achieving the desired commercial and financial outcome for both parties, for mutual benefit, then the parties were expecting each other to agree to the same. This also informs, in this case, the assessment of whether or not all reasonable endeavours or good faith obligations have been discharged. It also informs, in my judgment, the question of whether or not a party is to be viewed as having withdrawn from the contemplated transaction, or it had come to an end.
Issue 2: Are the Agreements still valid and binding?
valid and binding is critical to whether or not there is a contract which can be specifically performed. It does not necessarily conclude the question of whether or not an equity or constructive trust arises, but also has some bearing on that issue.
Sub-issue (1) – withdrawal
variation was suggested by BHB to the transaction, even a substantial one, as long as it was a variation which might reasonably be said to fall within the joint venture the parties were embarked on together. If the P3 parties considered the variation was objectionable and wholly outside any reasonable request for variations, the P3 parties were in judgment under an obligation, by way of necessary or obvious implication, to put BHB on notice that by such a proposal the P3 parties intended to treat BHB as withdrawing, and give BHB a reasonable period of time to agree to withdraw their request for such a variation. Otherwise any proposed variation by a counter-party would have triggered an ability on P3's part to walk free of the restrictions set out in the Exclusivity Agreement. BHB would have paid the Deposit of £250,000 for nothing. This is not workable as a concept. So in my judgment some form of notification and a reasonable period to recant is required. This notification simply did not happen. But even if I am wrong in my interpretation of clause 1.2.1 in this respect, and no such notice was required, I consider the P3 parties' case falls down on the facts.
versions of the CSA which had passed between the parties over a 2 year period before then and the fact that on 5 December 2017 Mr Winter, the conveyancer for BHB, emailed Mr Marsden, for P3, saying he had been informed that "it had been agreed with your client that the nature of the transaction was to change from an exchange of contracts conditional upon obtaining planning (as currently drawn) to an exchange of contracts for the site but with a simultaneous completion of the Phase 1 Land, notwithstanding negotiations over the 106 agreement/planning permission are still ongoing". The fact that what was being proposed was now a "brand new stand-alone contract", in the words of Mr Winter in his email of 21 December 2017, shows, P3 submits, that BHB had withdrawn from the transaction as set out in the Agreements.
varied so that the section 106 obligations would fall on BHB and in return there would no overage provisions. I do not doubt these represented substantial variations from what had originally been contemplated in the Heads of Agreement, but they were not attempts by BHB to withdraw from the overall bargain. They are no less substantial than the parties' agreement that the land transfer would include land designated for affordable housing, not just land which had permission for private residential units. The parties had agreed substantial amendments, too, in relation to the amount of private residential land which would be transferred, down from 100 acres to 84.4 acres. The P3 parties did not submit that the fact that when the parties had agreed to these variations BHB had withdrawn from the Heads of Agreement. They accepted the proposition that a mere suggestion of some types of variation would not constitute withdrawal, but suggested what happened in December 2017 was different. I disagree. Whilst on 21 December 2017 Mr Winter sent a "brand new stand-alone contract" for Phase 1, because Mr Marsden had failed to send it to him, or in a satisfactory form, in his evidence, it is also to be noted that he also sent at the same time a revised Phase 2 and 3 contract. This showed, in my judgment, that this communication cannot reasonably be interpreted as an intention to withdraw or a withdrawal.
view of BHB that whilst much time had passed since the signing of the Heads of Agreement BHB wished to make it clear that they still viewed them as "very much in force." There was no contemporaneous rejection of this assertion by either of Mr Johnson or Mr Nardelli. A few months later, when BHB became aware that no apparent progress was being made on the negotiation of this simplified contract, by mid 2018, they expressly stated that they would revert back to the initial terms. This was communicated by Mr Costello in an email from him to Mr Nardelli and Mr Johnson on 3 July 2018. In his oral evidence Mr Johnson complained that in this email Mr Costello was seeking to position himself on better commercial terms in relation to the overage provisions. When taken to the email later in his oral evidence Mr Johnson acknowledged that Mr Costello had not in fact sought to negotiate the overage provisions, but nevertheless he sought to emphasise that he had sought to alter other matters in favour of BHB, such as the section 106 liabilities and the provisions in relation to site infrastructure and services. Mr Johnson used those factors to support the lack of response by the P3 parties to this email, but whatever the rights and wrongs of those assertions, in my judgment this evidence undermines the contention that BHB had withdrawn from the transaction as referred to in the Agreements.
viewed by the parties as still being in force or not at this time is relevant to the question of withdrawal. On 12 September 2018 Mr Costello, Mr Holleran and Mr Doyle on the BHB met with Mr Nardelli and Mr Johnson to discuss matters. Mr Costello recorded his recollection of this meeting in the following terms:
"We discussed the project, our relationship, the support we had given and continued to give, our grievances and their assurances (all verbal) that everything would be okay, that they wouldn't circumvent us, that we were all in it together etc. I asked would they sign a letter of comfort to this effect. Steve Nardelli said that they didn't have a problem in principle signing such a letter but that it would be complex to draft and that we should concentrate on the matters at hand first (the project), as switching our focus to drafting such a document would take away from what we were trying to achieve. This response seemed evasive and largely true to form. As the meeting progressed, I wrote up the text of a short letter of comfort. As we approached the end of the meeting, I read out what I had drafted and they acknowledged that it sounded reasonable and committed to reviewing it and getting back to us the following day, asking me to type it up and e-mail it to them which I did. A sightly amended version was emailed subsequently."
Brooke to raise sufficient funds from Octopus prior to outline planning. They rely on exchanges which show that they were concerned that the section 106 was not sufficiently advanced to support a binding offer of lending from Octopus. I do not consider this supports their case on withdrawal by BHB. At its highest it might be said to show that the P3 parties had their doubts that the new more restricted contract would fly, but it was certainly not coupled with any contemporaneous communication by the P3 parties to BHB to the effect that it was being viewed by the P3 parties as tantamount to a withdrawal from the obligations under the Heads of Agreement. All of BHB's witnesses firmly rejected the notion that anybody considered that by seeking to negotiate a more restricted contract focused on phase 1, with accelerated provisions, constituted a withdrawal from the Heads of Agreement. I accept that evidence.
Sub-issue (2) – Exclusivity Period expiring 20 working days after planning consent?
Sub-issue (3) – the Tomlin Order representations and other matters
limited basis and for a limited time, and in the meantime that BHB "took comfort from your repeated assurances that we will not in any way be adversely impacted, that you and P3 will stand over all our Agreements and that you will not in any way attempt to circumvent us." This shows that BHB still viewed the Agreements as being very much alive at this time and in my judgment supports the conclusion that Mr Nardelli in particular had sought to reassure them that the P3 parties accepted they would continue to honour them. In other words, BHB's agreement to a relaxation or waiver of certain of the restrictions should be viewed as temporary only and limited to L&G only for this short period of time. But it does not support the submission that the Exclusivity Period endured beyond the period agreed in the Exclusivity Agreement.
very promptly, were given by the Defendants to the Claimant before the date of the Tomlin and even after January 2020" and conclude by asserting that "The Claimant will assert that the Exclusivity Period was extended, by reason of the matters pleaded above, to a date after the trial herein".
"94. A[t] the meeting Mr Nardelli said he wanted to meeting [sic] with me to try and get the dispute with us settled. He said P3 were worried that their options were running out on the Paines [sic] land and that if this happened we would all lose out. He said he needed £7m. I told him we had the money available to exercise the option from Lend Invest and all we required was for him to complete the sale of the land to us.
"95. He complained we had cost him millions by our court case and the unilateral notices. I said he had brought this on himself. He started with a settlement offer of a straight cash payment of £6m for us to drop our claim and release the unilateral notices. He said he had organised funding from a body called Desiman. They had agreed to lend him the money he needed to exercise the option on the Paines [sic] land and that he did not need any help from Land Invest. He said that his funder would not advance any money unless the unilateral notices were released. He also said he had an offer to purchase the land from a large developer but that they would not go ahead with the purchase until the unilateral notices had been released.
96. I told him that his offer was not sufficient. Over the next couple of days we had several telephone conversations in an attempt to agree a settlement figure. He increased his offer to £10m and I countered with £15m until we finally agreed a figure of £12m. He said he would aim to get me a £1m advance payment by Christmas.
97. At the time Mr Nardelli did not disclose the identity of the developer who wanted to buy the land. We subsequently discovered in the marketplace that this was Countryside. Steve never admitted or denied this was the case.
98. These terms were agreed with Steve direct. We shook hands and agreed if for whatever reason the payments were not forthcoming from a sale he had standby funds ready and would always stand over our deal which would not be prejudiced by delay. He assured me he would only ever deal with us in relation to the land and would make sure our unilateral notices remained in place to secure our position until we were paid. He said he would instruct his solicitor to document these terms in a Tomlin Order. I had never heard of this expression before."
limits elapsing in a Tomlin Order which might subsequently be revived is a matter which required some forethought, and a clear position recorded in this respect in the Tomlin Order. Nothing was mentioned about it in the Tomlin Order.
limited period of time, based on an implied term, is correct to a point, but it does not assist BHB to take their case to a point where it can be concluded the Agreements remain alive to trial.
very public matter which could not be hidden from view. Moreover, Mr Johnson of the P3 parties notified BHB of the grant promptly.
Overall conclusion on Issue 2
Issue 4: Did the P3 parties breach the Agreements?
Sub-issue (1): Did the P3 parties fail to take all reasonable endeavours and fail to move forward with good faith throughout the period of the Agreements?
Introduction
Village outline planning application.
various issues did come up in the period May 2015 to December 2017, neither BHB nor its conveyancers made any complaints about a lack of good faith or a failure to use reasonable endeavours during this time. In support of that as Appendix B to their written opening they set out an analysis of the exchanges between the conveyancers during this period.
The lack of a red line plan
Village was going to be permitted to be used for private residential development and could not therefore provide a definitive 'red-line' plan identifying the land which might be sold to Brooke. However this was not an insurmountable problem and Mr Marsden identified a reasonable solution, through the introduction of clause 28 into the draft CSA, which, at least as initially drafted, contemplated provisional demarcation of the lands to be transferred, but with the potential for this to be varied, using an expert surveyor to resolve any dispute in this respect. The first version of the CSA which was sent by Mr Marsden to Mr Wainright, the conveyancing solicitor initially acting for BHB, on 22 May 2015 included an early version of clause 28 which provided, in summary, that once planning permission had been granted the parties would meet to review and revise the Plans relating to each phase.
very close to agreeing a CSA at various states during the period 2015 to 2017. By way of example by 14 October 2015 v6 had been produced and in a covering email from Mr Marsden to Mr Wainwright Mr Marsden indicated that Mr Wainwright's amendments were accepted. That said, the position in relation to the precise area of land remained somewhat fluid in the drafting and by this time Mr Marsden was indicating that in relation to the 100 acres some of it may need to come from other land. From the end of 2015 into the middle of 2016 there was little activity between the conveyancers, but I see no suggestion that this was due to the P3 parties dragging their heels during this time. Indeed Mr Marsden appears to have picked up the baton on 5 August 2016 to seek to recommence the negotiations, having by this time moved firm. The parties again appear to have been close to reaching agreement towards the end of 2016. At this time BHB changed its instructions from Mr Wainwright to a new firm, Stitt & Co. The solicitor involved on BHB's part then became Anna Zatouroff.
version 13 of the CSA, which included the amended clause 28, which had now been amended to refer to the plans 3,4 and 5 being prepared after the grant of planning permission. In his oral evidence Mr Marsden accepted that, even in later iterations of the contract where the machinery and definition of the "Property" had moved on somewhat, there was nothing to stop the P3 parties from identifying the overall parcel of land to be transferred as part of the initial land transfer, even if the three phases within that might require some adjustment. The fact is however the P3 parties never did produce such a plan showing the overall land to be transferred as part of the CSA documentation at any time, and nor did they at any time produce any provisional phasing maps. Mr Costello chased for the documents in his email of 2 January 2018 noting that having the "transfer deeds and (compliant) plans referred to" were crucial for funders. According to Mr Costello, following various chasing and meetings at which Mr Johnson and Mr Nardelli cited various reasons why matters needed to be delayed, Mr Johnson produced an indicative version of a potential red-line drawing on 31 January 2018, but this was heavily flawed (it was not scaled) and the P3 parties never got to the stage of instructing their solicitor to offer up a certain parcel of land with a draft contract which could be signed off. It was Mr Costello's evidence that funders required this basic step for funding to progress. I accept that evidence and nothing was produced which could satisfy funders. Most funders would require the land over which they wish to acquire security to be identified with some precision, or sufficient certainty. I conclude that by the end of 2017 the identification and provision of plans which identified the land to be sold and annexed to the CSA was a course which could reasonably have been adopted. There is no adequate explanation from the P3 parties, in my judgment, as to why they were not produced. Whilst not strictly speaking necessary for my conclusion as to a breach of the requirement to make all reasonable, or best, efforts, I conclude that the P3 parties had various "plates" to keep spinning and that it probably suited them to keep the identification of the parcels of land somewhat vague, bearing in mind the pre-existing contract with Dekra, which contained a small parcel of land within the same area, and also the potential for some argument with A2D. In this respect I also consider they were not acting transparently, or in good faith.
Village phase 1 land for 500 residential units, comprising 24.823 acres of private and 6.35 acres of social and affordable land (plus associated non-developable land, which judging by other emails in early 2018 would take the overall parcel of land to c 51 acres in all). The agreed sale price of £22,080,900 was recorded. He went on to say "Our clients have agreed the site areas involved comprising part of Murfitt/Henson option land and part of the Pains option land. Detailed plans can now be prepared." This suggestion notwithstanding, detailed plans to enable the sale contract to be finalised were never prepared by the P3 parties. Mr Winter confirmed that the failure to attend to such basic property matters such as the plan and the necessary transfer forms were matters which could and should have been progressed. In my judgment the requirement to use all reasonable endeavours and act in good faith required this, and the failure was a breach.
Property, that this was incorrect and that their assumption was that the section 106 would not be signed prior to drawdown. I might add this is consistent with the credit approved heads of terms document issued by Octopus on 1 December 2017 which contained no such condition. Mr Mackenzie did confirm that they would need to see the draft section 106 and that this permitted the development or disposal of phase 1 in isolation. Mr Johnson confirmed in his evidence that by early 2017 the P3 parties had secured a concession that 500 units could be built before the road was completed. His oral evidence was to the same effect, that the section 106 draft, at least by 2018, did not prevent development of phase 1 in isolation. By mid July 2018 both parties had done a lot more work with CDC and Oxfordshire County Council to progress the detailed drafting of the section 106, with schedules and appendices, and on 16 July 2018 Mr Johnson circulated a revised draft section 106 to Mr Costello. That ought to have facilitated progress on securing funding from Octopus. However the property matters, the plans and the transfer deeds, had not been attended to. They should have been, if the P3 parties had been using all reasonable endeavours. It would have been to the mutual benefit of the parties and achieved the desired outcome of a sale of the first of the three tranches. In my judgment it was not open to them to just focus on the section 106 alone.
Title numbers
properties falling within the Murfitt Henson Option. This refers to the position in relation to title number ON318263. The second schedule to the Murfitt Henson Option originally referred to title numbers ON245151 and ON245153, and not title ON318263. This issue was raised on behalf of BHB by Mr Wainwright in June 2015 and Mr Marsden subsequently made enquiries. On 11 November 2015 Mr Marsden emailed Mr Wainwright attaching the Official Copy Entry for title number ON318263. Shown on the title register was a unilateral notice which referred to the Murfitt Henson Option. Mr Marsden explained, this land was subject to the Murfitt Henson option.
A2 Dominion Rights
venture.
version 9 of the CSA to Mr Marsden which contained his suggested way forward. This version contained, amongst other things, a new "Buyer's Unacceptable Condition" and a revised definition of "Property". In essence, this version of the CSA provided for an either/or scenario for BHB's benefit. The new "Buyer's Unacceptable Condition" referred to the situation where A2D claimed to exercise any alleged rights relating to the land. In this scenario, if BHB wanted to, it did not have to proceed with the acquisition of the private land. If A2D did not claim and exercise any such rights, then BHB could acquire both private and social land.
version 10 of the CSA (which made minor amendments only, and which accepted the changes made in version 9). Mr Marsden said, in his covering email, "looks like we are nearly there". On 10 November 2016 Mr Wainwright emailed Mr Marsden asking further questions in relation to A2D. Mr Marsden replied on 25 November 2016 setting out further detail on the relationship between the P3 parties and A2D.
limited degree in the latter part of 2017. But I do not consider it has any great significance in isolation. As I have indicated above, however, it was likely to be one of the factors which discouraged the P3 parties from putting forward a final red line plan which they were willing to commit to.
Sub-issue (2): Did the P3 parties negotiate with third parties for the sale or lease of any parts of the property subject to the Agreements ("the Property") and, if so, were such negotiations with the knowledge and consent of BHB?
Introduction
valuation they had obtained to assist the P3 parties with their negotiations with L&G.
Conclusions and reasoning
Bicester. They told BHB that they would not be adversely impacted by any deal with L&G and that their position would be protected and they asked BHB for assistance in the framing of a pitch to L&G. This BHB did by providing the P3 parties with projected financial information, including a desktop valuation in relation to the potential value of the first tranche of the initial purchase (namely 500 units), which included anticipated sales values, build prices, profitability and so on (broken down by phase). This desktop valuation was from Mr Hewetson of Matthews & Goodman, the expert instructed on behalf of BHB in this case. He gave a valuation at this time of £37m, reflecting a value of £1.2m per across 31 acres. In his covering email of 20 November 2017 Mr Costello described this as being a very "rich" figure and set out a number of reasons. In his oral evidence Mr Costello said he did so because he did not want to encourage the P3 parties to think the land was too valuable as it then stood. I find that this is likely to be so. Mr Hewetson similarly rejected the notion that his valuation was rich.
voluntary arrangement ("CVA"). This CVA was caused in part by the problems on the Chatham project and the dispute with Adston, which problems had started earlier, and in 2018. All of this meant that Mr Holleran was inclined to allow the discussions with L&G to continue for some time, on the understanding that it would not prejudice BHB's position. It is also clear BHB only agreed to this waiver of their rights for a limited period of time and on certain terms. Thus in an email on 17 August 2018 from Mr Costello to Mr Nardelli, copying in, amongst other things, Mr Johnson and Mr Holleran, stated as follows:
"We had, at one of our last meetings agreed to finalise the Contract for the sale of the land at Himley Farm from you to us in tandem with your ongoing negotiations with Legal & General re a possible sale to them. We had agreed that were Legal & General to come forward with a suitable offer in a timely manner, this would take precedence and we would then sit down to discuss a carve us, ensuring that neither of us were adversely affected.
When we met on Wednesday we cited that this hadn't happened - there being no engagement from your lawyers, despite several chasers on the contract. From both us and our lawyers.
You advised on Wednesday that the actual L&G offer (with firm pricing etc.) has been promised and was expected by you before the end of this week, at the latest (them actually having said you would have it Wednesday morning). This is against the backdrop of it going before their Board next Wednesday. We agreed that next Wednesday, 22 August should also represents the long stop with them.
Given the tight timeline we have agreed to defer finalisation of the Sale Contract outlined above (P3/Brooke at Himley) for the few days to see how L&G pans out."
"I write to confirm that we (Portfolio Property Partners Limited, P3 Eco (Bicester) Himley Limited and any associated parties) are in discussion with Legal & General (L&G) pertaining to the sale of lands at Himley Farm, Bicester to L&G.
We acknowledge and stand over the terms of our existing Agreements with Brooke Homes (Bicester) Limited (Brooke Homes), including the Heads of Terms and Exclusivity Agreement, both dated April 2015. Furthermore we confirm that Brooke Homes will not in any way be circumvented by any L&G deal, should it ultimately go ahead. In this regard any Agreement with L&G will only be finalised once agreed with Brooke Homes.
We agree to a longstop date of 14 September 2018 for receipt of Heads of Terms from L&G.
We confirm that we are in negotiations with no other party and confirm our agreement not to enter any such negotiations without the agreement of Brooke Homes.
Should the L&G deal not proceed to Heads of Terms by the long stop date we will immediately engage with Brooke Homes to complete the final agreement with Brooke Homes.
Both Section 106 and any L&G Agreement will be reviewed collectively (P3 & Brooke) and will not be signed off prior to agreement between us."
"As you know we continue to have discussions with Legal and General and have just had confirmation of a meeting with them tomorrow. We will be in a better position to consider then where matters stand and should meet you again as soon as we can this week".
"For the avoidance of doubt I did not say that the comfort letter had been agreed as drafted. I simply said that Steve was discussing it with our lawyer and we would write. As it happens Legal and General confirmed a meeting for tomorrow after we had spoken and it seemed sensible to wait until after that before discussing our position. We are very happy to meet you later this week as soon as we can but wish to place on record that there is no legal contract between us".
limited one which had been withdrawn by 14 September 2018 absent formal confirmation of comfort from the P3 parties which was not forthcoming. The P3 parties continued to negotiate with L&G without the consent of BHB in breach of the Exclusivity Agreement.
"You will see the minimum guaranteed price is £45M, potentially rising to in excess of £60M with overage, and a payment on signing of at least £4.5M.
This was scheduled to be signed by the end of November, but last week A2 Dominion withdraw from providing the infrastructure funding and discussions are now taking place between the Councils and government with L&G and ourselves to deal with it. This is well advanced over the last couple of weeks and delivery will be speeded up as a result.
It has delayed completing our deal with L&G until early in the New Year which is why we may need some additional back-up funding if possible."
VWV re-sent to BHB version 6 of the draft CSA, as previously circulated on 14th October 2015 and offered to enter into the same. BHB did not accept this and in its Reply to the Defence at paragraph 21 it referred to the fact that it referred to the incorrect deposit, the absence of any accompanying redline map, the wrong acreage per phase, purporting to suggest that it would be for 100 acres of net developable private land despite only 84.4 acres being available, and noted the absence of any reference to site services or social and affordable lands.
VWV sent to HA Law, now acting for BHB, a further version of the CSA and offered to enter into the same. The P3 parties submit that this version took into account some of the comments made in BHB's Reply, including amending the "Property" clause to refer to acres of land for development of both private housing and social housing. This revised draft does contain a reduced deposit sum of £3,375,920, caused by the fact that the acreage had changed from 100 acres to 84.4 acres. It does not however contain any indication that there would be a transfer of the social and affordable land. The covering letter wrongly suggests, in my judgment, that the parties could ignore the commercial and practical reasons why they both had agreed to variations from the Heads of Agreement, including on this topic. Unfortunately the positions of the parties had by this time become somewhat entrenched by the litigation.
VWV on 12 August 2019, attaching a further version of the CSA which they said that BHB would enter into also has an air of unreality about it. This version contained several changes from the previous version including changing the definition of "Property" such that P3 was required to sell 100 acres of land for private residential development subject to a minimum dentistry of 14.1 units to the acre, and for P3 to provide the social and affordable housing from other land. BHB's own witnesses, including in particular Mr Costello, confirmed this would not work. Again, in my judgment, litigation had clouded the position by this time.
viewed from August 2019 onwards then it is mainly the presence of the lock-out restrictions which, if honoured, would have drawn the parties back into negotiations. This would most likely have been focussed, at least initially, on a narrow purchase to permit the development of phase 1 of the initial conditional sale agreement (i.e. for 500 units), or, possibly, a buy-out, in a similar fashion to what in fact was agreed in the Tomlin Order, albeit that such Tomlin Order was drafted on a suspensory only basis.
Sub-issue (3): Did the P3 parties sell or charge any parts of the Property to third parties in breach of the Agreements and, if so, what is the consequence of this?
Introduction
Property or any pre-emption rights (clause 1.2.1.5); and otherwise negotiating with any third party for a sale of the Property to any other third party (clause 1.2.1.6). In addition the duty to act in good faith under the Heads of Agreement is of relevance in this context.
(i) 31 May 2017 transaction involving the Murfitt Henson, CFJL and the P3 parties
Property which was the subject of the Agreements. It was an agreement between the Murfitt Henson families and CFJL and so ostensibly, viewed on its own, this could not be said to constitute a breach by the P3 parties. On the same day a supplemental agreement was entered into in relation to the Murfitt Henson Option. This was an agreement which was entered into by P3 Eco and it provided in clause 4.1 that: "The parties hereto agree that so long as the CFJL Agreement is in full force and effect that the Buyer shall not exercise the option in accordance with clause 4.1 of the Original Agreement." Without this subordination clause the Murfitt Henson families could not have entered into the CFJL Agreement.
value, this was not a decision he could take without BHB's consent. He had caused the P3 parties to enter into the Agreements pursuant to which it was agreed that the parties would pursue a joint venture for the sale of land by the P3 parties to BHB and it formed no part of that agreement that a third-party company could be introduced, without the consent of BHB. Whether or not the CFJL Agreement should be treated by the court as an effective introduction of a genuine third-party actor is considered further under issues 3 and 7 below.
(ii) transfer of 10 acres on 7 March 2018
property constituted a breach of the Agreements, without their consent.
value of £8m". I had initially thought this was another example of Mr Nardelli playing fast and loose with the truth, but in fairness to Mr Nardelli it would appear that there may have been some change in the land which was being offered to Desiman for security between December 2017 and February 2018 (as indicated by an email of 5 February 2018 from Mr Marsden to Mr Smith). I think this only takes Mr Nardelli so far, however, as even he accepted that in the planning application the 10 acres eventually settled on was only predominantly commercial, and not wholly so. Mr Johnson, in response to the complaint from BHB that at least part of this land was residential, suggested in paragraph 113 of his first statement that BHB could not argue this because they had not entered into a CSA. In my judgment this is not an attractive point for the P3 parties to make, given my conclusions above as to why ultimately a CSA could not be concluded. Mr Nardelli may have sought to justify the position on the basis it was mainly or likely to be designated as commercial land, but this is in circumstances where he was not being fully transparent with BHB. In any event this point does not assist the P3 parties since they agreed in the Exclusivity Period to restrictions which covered private residential land. I find that at least part of the 10 acres was likely to involve some private residential land, or in any event it could do so. A comparison between the width of the 10 acre land as identified in the plan attached to the transfer made on 7 March 2018 and the phase plans annexed to Mr Hewetson's expert report shows the former is larger than the latter, and thus suggests not all of the 10 acres was likely to be for commercial development and a significant portion of it was or was likely to be designated for private residential development. These actions on the part of the P3 parties involved a breach of clauses 1.2.1.5 and/or 1.2.1.6, since it involved the P3 parties in a contract for any disposition of part of the residential development land and also involved the P3 parties negotiating with a third party (the Murfitt Hensons) for a sale of the Property to any other third party (CFJL). The fact that CFJL transferred this parcel of land on to P3 Eco does not mean it was not a breach.
viewed by Mr Nardelli as wholly commercial land. I repeat what I have said in the paragraph immediately above in that respect. Secondly, Mr Nardelli did not advise or permit Mr Marsden to advise BHB of the use of CFJL until after 7 March 2018. Thirdly, in a telephone call between Mr Costello and Mr Nardelli on 27 March 2018 Mr Nardelli sought to reassure Mr Costello by telling him certain matters which were set out by Mr Costello, by way of summary, in an email of 28 March 2018 at 12:27pm sent by Mr Costello to Mr Nardelli, copying in Mr Johnson, Mr Holleran, Mr Doyle and Mr Ives. Save for one matter (which suggested that Mr Nardelli told Mr Costello that Underwood solicitors were only acting in relation to the sale of the commercial lands for the farmers, whereas I conclude Mr Nardelli did tell Mr Costello that they were acting for the lender not the farmer), I conclude that what is summarised in this email accurately reflects the gist of what was said by Mr Nardelli. It stated as follows:
"I'm most disappointed by this response. When we spoke late yesterday evening you promised that you would send an email confirming everything you said in the call, namely: - the CFJL Property Partners is a P3 Eco entity, despite revised shareholding - lands acquired and being acquired by this vehicle are limited to the commercial lands at Himley - no other lands are being acquired by you or any associated entity (other than via the pre existing options, backed into our agreement, that we are familiar with) - this transaction in no way impinges the transaction being completed between you/P3 and Brooke Homes - you are being, and have been entirely honest with us throughout on this process - Underwood solicitors are only acting in relation to the sale of the commercial lands, for the farmers - Clarity on all of the above will be evident from land registry filings over the next week or two - none of these actions on your part are designed to adversely affect us - No sale will take place on the commercial land without having full consideration of all S 106 requirements, to ensure our collective position on the residential lands is protected
Unless I hear to the contrary from you before the close today I will take the synopsis above as an accurate reflection of the call and the current position. It reiterated the assurances Graham gave me when we spoke earlier in the afternoon. Again, please come back to me Graham if any of this is incorrect."
limited to the commercial lands at Himley was not correct, and nor was the suggestion that no other lands were being acquired other than via the pre-existing options, backed into the Heads of Agreement. The CFJL Agreement entered into in May 2017, taken together the variation of the Murfitt Henson Option at the same time, showed this was untrue, though this document was not disclosed until the litigation process, some time in 2020. Unfortunately I conclude that BHB's plea for honesty and transparency was met with yet further secrecy and dishonesty on the part of Mr Nardelli. Mr Johnson was copied in on this email traffic and did not say anything to correct it.
property in question. This is reflected also in statutory definitions, such as the Law of Property Act ("LPA") 1925. Section 205(1)(ii) of LPA 1925 contains the following general definitions: ""Conveyance" includes a mortgage, charge, lease, assent, vesting declaration, vesting instrument, disclaimer, release and every other assurance of property or of an interest therein by any instrument, except a will; "convey" has a corresponding meaning; and "disposition" includes a conveyance and also a devise, bequest, or an appointment of property contained in a will; and "dispose of" has a corresponding meaning". This supports my conclusion that a "disposition" as set out in the Exclusivity Agreement is wide enough to include a charge.
(iii) transfer of Pains Option land on 6 January 2020
Village land was required as security for this; on one reading of the offer letter it may have required all of the land to form part of Himley Village, on another reading it was not, and this point was not explored in oral evidence with Mr Holleran). Mr Nardelli's reaction to this, according to Mr Holleran, was that P3 did not need support from Mr Holleran in this respect because of the proposed sale to the then unidentified third party developer (now known to be Countryside). I accept the evidence of Mr Holleran in this respect.
(iv) transfer of additional Murfitt Henson land on 23 October 2020
Property to any other third party (Desiman 2).
viewed as an absolute owner of this land, or whether it is in substance to be viewed as holding it effectively as security, and subject to an equity of redemption, under issues 3 and 7 below.
Sub-issue (4): Did the P3 parties act in a manner amounting to repudiatory breaches by their two emails of 24 September 2018, letter of 21/26 November 2018 and/or oral statements made on 22 November 2018?
Introduction and emails of 24 September 2018
November 2018 communications
various background matters and complaints and sought an undertaking from the P3 parties that they would honour the Agreements and would not enter into any contract with L&G or any other party without their prior written consent. In reply to this, on the same date, Mr Nardelli repeated the assertion that when it became clear that BHB would not proceed to exchange in accordance with the Agreements that they came to a natural end at that point. For reasons already set out above that was not correct and I conclude this exchange also amounted to a repudiatory breach. A meeting was also held on 22 November 2018 which was explored in oral evidence where Mr Nardelli stated that there was no ongoing contract and he also, say BHB, threatened the P3 parties that if they pursued the legal route then he would wind up the P3 parties and let the land revert to the farmers. Mr Nardelli in his evidence acknowledged he may have referred to those possible outcomes, not by way of threat but because they were possible outcomes if the matter was litigated. Again in my judgment this conduct, and indeed the continuing conduct of the P3 parties until 2020, when the Exclusivity Period elapsed, did constitute ongoing breaches of the Agreements.
Issue 5: If the P3 parties have breached the Agreements, (i) in what way (ii) did any such breach cause BHB any damage and (iii) what is the measure of any damage?
(i) Categories of breaches found
very much focussed on the complaint in relation to the conditional sale agreement. I conclude therefore that the extent of any claim for damages must be limited to at most the initial 100 acres.
Village land (which has still not be undertaken, even to date), was the initial 500 units, equating to c. 31 acres of private residential units (of c.350 units) and 6.35 acres for the affordable units. Taken together with other greenspace/corridor land a larger area of land was in contemplation (of c.50 or 51 acres), but the development land numbers are the numbers the parties focussed on for the purposes of ascertaining land value, and potential profit to be made from the development. This became the focus of the parties' negotiations towards the end of 2017 and resulted in the suggestion, at the end of 2017, of a narrower initial contract focussed on the first 500 units. In my judgment this reflected, to a large extent, and with the possible exception of the failure to provide plans starting a little earlier, and putting to one side the breaches in relation to CFJL which in my judgment fall into a different conceptual category, both parties discharging their duties to negotiate and act in good faith.
(ii) Causation
Principles – loss of chance?
viewed as a loss of opportunity/chance case, in which case the question is whether a real and substantial chance of some benefit has been lost. The P3 parties submitted that it was the former and that BHB must establish on the balance of probabilities that but for the breach it would have entered into a conditional sale agreement on terms which were financially advantageous to it. BHB initially advanced its case on the basis that no discount should be applied to its claim however when the question was raised by me in trial as to whether or not the claim should be viewed instead as being a lost opportunity BHB conceded this might be so and it advanced its submissions in closing on both bases. The P3 parties maintained their position in closing that the matter should be assessed on a balance of probabilities basis, but assisted me by providing further relevant case law and commentary on the matter. I shall now briefly consider the same.
Ltd v Blackpool Airport.Ltd [2012] EWCA Civ 417 at [65] that assessing damages for breach of a reasonable endeavours obligation could be "problematical." Trietel, The Law of Contract, 15th Ed, suggests at 2-100, footnote 508, that damages might be awarded on the basis of a loss of chance and refer in support of this suggestion to Petromec Inc v Petroleo Brasileiro SA Petrobas [2005] EWCA Civ 891; [2006] 1 Lloyd's Rep. 161 at [118] per Longmore LJ; and Walford v Miles (1991) 62 P & CR 410 at 423 (Bingham LJ (dissenting). Walford v Miles was in fact a case of a negative obligation, not a positive one, but the obligation under consideration in Petromec was a positive one. Longmore LJ emphasised in Petromec at [118] that the courts normally can and do find ways to assess losses, even in problematical cases, stating as follows: "No doubt there could be argument in the present case as to whether, if negotiations did not proceed (but should have proceeded) in good faith, they would have embraced an uplift and whether, in that event, the uplift would have been in any particular amount, but it is not uncommon for courts to have to assess, by way of calculating damages, whether a claim against a third party was good or not and for how much it might have been settled. Any exercise in relation to uplift would raise similar (but not insurmountable) problems." When assessing damages by reference to the conduct of third parties the courts will typically resort to the loss of chance approach. The law is tolerant of imprecision, and when assessing economic loss that loss should be measured or estimated as accurately or reliably as the nature of the case permits: see One Step (Support) Ltd v Morris-Garner and another [2019] AC 649 at [95](8).
Ltd v Co-operative Retail Services Ltd [2004] EWHC 1476 (Ch). This case concerned a claim that the defendant, "CRS" for short, had breached an exclusivity agreement and claimed damages on the basis that if that agreement had been honoured then the parties would have entered into a contract on beneficial terms to the claimant. At [14] Lloyd J (as he then was) accepted a loss of chance approach as being the correct one and analysed the matter as follows:
"Cases where the damages claimed are for the loss of a chance of a benefit start before Chaplin v. Hicks [1911] 2 KB 786, but that is as far as I need to go back. There has been a good deal of development of the cases recently, and Counsel cited to me Allied Maples Group Ltd v. Simmons & Simmons [1995] 1 WLR 1602 and also Coudert Brothers v. Normans Bay Ltd [2004] EWCA Civ 215. In most cases, including those two recent cases, a loss of chance case depends on assessing the likely hypothetical act of a third party. In the present case it depends on the hypothetical act of CRS or CWS. In that respect this case is like Chaplin v. Hicks rather than those recent cases, in that what the Claimant complains of is that it was deprived, by CRS' breach, of the chance of entering into an agreement with CRS itself (or its successor, CWS). Likewise, Miss Chaplin complained of being kept out, in breach of contract, of a competition among 50 people, to 12 of whom the Defendant was committed to offering a contract. It could not be said for certain that he would have offered her a contract, if she had been able to take part, but she lost the chance that he would have done so. That does not seem to me to alter the principle, namely that the Claimant must show that, as a result of the Defendant's breach, it has lost a real or substantial, not merely a speculative, chance of gaining the benefit in question. Here the benefit is said to be that of entering into a contract to buy Sandbrook Park at £15.25 million, being less than its market value, so that the Claimant would have been able to make a profit on it by resale."
Limited v Fate Limited (In liquidation) & Others [2019] EWHC 43 (QB). This case concerned a claim in damages for damage caused by the negligence of one of the defendants, Fate. Fate entered liquidation and the claim was pursued against the insurers under the Third Parties (Rights Against Insurers) Act 2010. Palliser's claim for loss of profits failed, but by way of obiter dicta the following was said at [27], and this is relied on by the P3 parties in this case:
"Before looking at the evidence, I should make clear the relevant standard of proof that, as a matter of law, I am required to apply. This was not in dispute between the parties. The burden of proof lies on the claimant and, even though this issue goes to quantum rather than liability, the test that the claimant must satisfy can be referred to as the 'all or nothing balance of probabilities' test. Although when assessing damages resting on hypothetical events, damages can be awarded that are proportionate to the chances – one might call these 'damages for loss of a chance' or, synonymously, 'damages for the chances of loss' – such proportionate damages are inappropriate where the uncertainty is as to what the claimant (in contrast to a third party) would have hypothetically done. The correct picture of the law on proof in relation to damages is therefore that where the uncertainty is as to past fact, the 'all or nothing balance of probabilities' test applies. Where the uncertainty is as to the future, proportionate damages are appropriate. Where the uncertainty is as to hypothetical events, the correct test to be applied depends on the nature of the uncertainty: if it is uncertainty as to what the claimant would have done, the all or nothing balance of probabilities test applies; if it is as to what a third party would have done, damages are assessed proportionately according to the chances. For that general distinction between past fact and future or hypothetical events, see Mallett v McMonagle [1970] AC 166 at 176 ( per Lord Dilock). That there is a contrast between the test applicable to what hypothetically the claimant would have done and what hypothetically a third party would have done emerges from cases such as Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 , CA, and 4 Eng Ltd v Harper [2008] EWHC 915 (Ch), [2009] Ch 91 , at [41] - [92]. In the Court of Appeal in Gregg v Scott [2002] EWCA Civ 1471, [2003] Lloyd's Rep Med 105 (affirmed without discussing this point at [2005] UKHL 2, [2005] 2 AC 176), Mance LJ, as he then was, said at [71]: '[T]he rationale of the distinction … must, I would think, be the pragmatic consideration that a claimant may be expected to adduce persuasive evidence about his own conduct (even though hypothetical), whereas proof of a third party's hypothetical conduct may often be more difficult to adduce.' There is also a very helpful passage in J Edelman, McGregor on Damages (20th edn, 2017) at para 10-062 (the same wording was in the previous edition written by the late Harvey McGregor, McGregor on Damages (19th edn, 2014) at para 10-060): 'While at first glance it may seem somewhat strange to have different tests applicable to hypothetical acts of the claimant and hypothetical acts of third parties, it can be seen to make sense, with nothing at all arbitrary about it and with no need to bring in public policy to justify it. For a claimant can hardly claim for the loss of the chance that he himself might have acted in a particular way; he must show that he would have; it cannot surely be enough for a claimant to say that there was a chance that he would have so acted. The onus is on a claimant to prove his case and he therefore must be able to show how he would in fact have behaved. There is no such onus on third parties.'
In this case, the essential uncertainty on quantum that I am faced with is as to what the claimant, Palliser, would hypothetically have done had there been no fire at 228 York Rd. The 'all or nothing balance of probabilities' test therefore applies."
v Raleys Solicitors [2019] UKSC 5, [2020] AC 352 at [20].
Causation - findings
viewed from August 2019 onwards then it is the presence of the lock-out restrictions in the Exclusivity Agreement which, if honoured, would have drawn the parties into negotiations which would most likely have been focussed on a narrow purchase to permit the development of phase 1 of the initial conditional sale agreement (i.e. for 500 units), or possibly a buy-out, in a similar fashion to what in fact was agreed in the Tomlin Order. I conclude the phase 1 sale was still most likely at this stage, but I think the parties would have also explored a negotiated release. My reasons for this substantially overlap with those set out when considering breaches from the start of 2018, which I set out below.
viewed from the start of 2018, it is likely that the parties would have successfully concluded a conditional sale contract at least on a narrow basis, by reference to the phase 1 development i.e. for 500 units. It is possible that it would have included provision for involvement by BHB in relation to a wider scheme, but whether it did so and on what terms is much more speculative. I will concentrate therefore in this judgment on the 500 unit, phase 1, aspect. I deal with what remained of the initial 84.4 acres of contemplated private residential development separately in paragraph 278 below. In percentage terms I assess the prospect of a narrow contract on phase 1 for 500 units being achieved, and being acquired by BHB as a developer, as being 60%. I arrive at the above conclusions for the following reasons:
Property, on 11 April 2018.
value of the land. We now know such a conditionality was met, in January 2020, when the section 106 agreement was granted, and in my judgment both parties knew that there was a good prospect of obtaining the section 106 agreement on this scheme which enabled a build out of phase 1 alone from 2018.
Village with Adston or using a modular method.
view as communicated to Desiman (as referred to in an email of 6 December 2017 between the broker and Desiman) was that the residential land was worth in the region of £1 million per acre. This meant that the price agreed with BHB of £800,000 per acre would, in his view, likely deliver a profit to BHB on the basis of land value as it then stood, alone, but he was also motivated by being able to move the overall project forward. If he knew that he was bound, until after the section 106 agreement had been granted, to continue negotiations in good faith with BHB, and also could not have negotiations with any other third parties, he would have concluded that an agreement should be concluded with BHB as quickly as possibly, albeit on the best terms reasonably available. That is because the Murfitt Henson and Pains Options were all going to have trigger dates associated with the grant of planning. Putting it simply, the P3 parties could not afford to wait and jeopardise those valuable rights, or lose them.
Vistry, dated 14 June 2021.
value in the land the ability to secure the land under the Options was a valuable right against which funding was likely to be possible in some shape or form.
variations as had already been negotiated and potentially subject to further ones. It could have sold on the rights for a profit even if it had not acquired any profit from developing the land. Indeed the value in the Heads of Agreement contract, and the fact that the parties had ended up closer to planning consent being granted, was a reason why Mr Nardelli and Mr Johnson felt that they wished to escape from the Heads of Agreement.
variation to the existing Option and to do so in such a way that it would not involve a breach of the Exclusivity Agreement. I remind myself of the principle that damages are to be assessed by reference to the principle that the defendant can ordinarily be expected to choose the compliant contractual route which costs them the least. I also remind myself that under the Addendum BHB had some contractual protection in relation to payments made to the P3 parties.
via an arrangement with the P3 parties, does not affect the matter for causation purposes. However I think it is likely that BHB would have secured some further interest in the land at Himley Village, probably on the basis that part of the land would be viewed as being purchased and owned by them. Overall, therefore, I consider that this is a further factor in support of the conclusion that the parties would have travelled further down the joint venture than they did, and probably earlier than might otherwise have been the case, rather than significantly altering the question of causation and losses beyond that I have already set out above. I also bear in mind, when deciding that ultimately these breaches do not affect the causation and loss findings I have already made to any substantial degree, the other findings I have made under issues 3 and 7 below.
(iii) Measure of damages and quantification
Preliminary point 1 - Negotiating damages?
Ltd v Morris-Garner and another above. It is not uncommon where there is a restriction which prevents a person from being able to deal with land, without the consent of another person, that the court will conclude that one possible method for quantifying damages is by reference to the amount which the claimant might reasonably have demanded as a quid pro quo for the relaxation of the obligation in question. In closing submissions BHB submitted this was one approach open to me and invited me to make such findings if I considered it appropriate to do so, by way of a "minimum" sum. By contrast the P3 parties submitted that this approach was not open to BHB because it was not a case which had been advanced by BHB, at least until closing. I note in passing that in paragraph 43 above that BHB had reserved their right to seek to recover "a minimum sum of not less than £12m agreed to be paid to them" under the Tomlin Order. However, it was not being advanced in the manner I have identified, and plainly an order to enforce the Tomlin Order is no longer possible, given its terms and the fact that BHB elected to lift the stay. I need to consider carefully, therefore, whether it would be fair for BHB to be permitted to run this point now, and I have regard in this respect to the recent guidance from the Court of Appeal in Satyam Enterprises Ltd v Burton [2019] EWHC 2584 (Ch) at [35]-[36].
very substantial damages claim being advanced. He submitted this was very different from the position of assessing a hypothetical negotiation and that the parties had not adduced evidence as to what their respective positions would have been in such a negotiation. I accept the submission that it cannot be assumed that there is necessarily an equivalence between the two, but I struggle to see how the factors which are likely to be relevant to the assessment of a hypothetical negotiation whereby the rights of the BHB are being bought out is any different from the factors which the court is required to consider when assessing damages by reference to either a loss of chance basis or the likelihood of the parties concluding a conditional sale agreement. The fact that the parties themselves contemplated a potential "carve-up" in relation to L&G was of course a feature of the evidence and it seems to me I cannot properly consider what the most likely outcome would be without considering the possibility that a negotiation by way of release may have occurred. Nevertheless I accept that it is possible the parties might have wished to adduce further evidence, including, potentially expert evidence on the valuation of what the hypothetical bargain might have been, if a claim for negotiating damages had been made in BHB's particulars of claim. Having that in mind, I will approach the matter cautiously. I consider it would only be appropriate to assess damages on this basis if I concluded that it was the most likely outcome on the hypothetical counterfactual I need to consider, which is not the same as the actual events which occurred. I do not conclude it is, so the point does not arise. I should state however that if I had concluded that a carve-out, whereby BHB would have agreed to the release of its rights for a monetary sum, then I would have concluded it would only be appropriate to make findings on liability and I would have given the P3 parties, and BHB, the opportunity to submit evidence to show what they contend that negotiation figure would be, and for there to be a further hearing on quantum to decide that matter.
Preliminary point 2 – the limitations of the expert evidence adduced
valuation evidence which was adduced had some unsatisfactory features, and did not provide me with much reliable evidence on site servicing costs of this site. Both sides recognised that the experts had in some respects struggled to provide evidence which would assist the court on certain key areas, including site servicing costs, but nevertheless neither side wished to have an adjournment, and both asked me to do the best I could with the material I had in front of me. I will now do so. I shall now turn to identify some of the key features of the expert valuation evidence and where that evidence assists, or not, as the case may be.
The expert evidence
valuation expert evidence from Mr James Hewetson of Matthews & Goodman. He is an experienced chartered surveyor with over 40 years in practice. He had inspected the site in December 2017 and also again in June 2021. He provided valuations as at September 2018 and June 2021, though he also confirmed in his oral evidence that the development land values at Bicester had remained more or less static since 2017. As he provided valuations in 2017 I will start with those when analysing his evidence. I simply note here however that Mr Hewetson's valuations concentrated on phase 1 – the first 500 units, and valued this aspect at £39 million. He also was of the opinion that the build out profit on phase 1 amounted to £36 million. The P3 parties called Mr Thomas Lindley of Savills. He is also an experienced chartered surveyor. He provided valuations as at December 2017, February 2021 and as at May 2021. He did not offer any valuation for the phase 1 scheme, but instead provided a valuation of 84.4 private residential acres, the pared back version of the initial 100 acre contract contemplated under the Heads of Agreement, which translated into valuations in 2021 of £39.2 million or £27.5 million in December 2017 in relation to scheme for 1,190 units. The essential difference between those figures was because he made a deduction in 2017 for the uncertainties associated with the planning process at that time. Whilst I do not doubt that both experts were doing their best to assist the court on matters they were instructed on, this short summary shows that the experts were passing like ships in the night. The court did not get the benefit of two opinions on the same thing. In addition, for reasons which became apparent, there were substantial uncertainties in the opinions they offered and in key respects they were making assumptions which were outside their field of expertise, based on information from others. This makes the quantum assessment task necessarily more imprecise than it might otherwise have been. As I have noted above, both parties have indicated they are content for me to pursue this approach.
valuation of the initial 500 units. That does not mean I should ignore what Mr Lindley has to say, but it is necessarily less helpful to the task at hand.
value was described as "Phase One… comprises 500 units, of which 350 are for the private sector and 150 for Intermediate tenure, on a developable land area of 12.55 hectares (31 acres)". He considered in this report various comparables, and he also carried out a gross development value appraisal. He concluded on the basis of that appraisal that the 350 private sector houses would sell at £370 sq ft, with the affordable housing at lesser sums. Pausing there I note that on the question of the value of affordable housing to a developer Mr Hewetson's evidence was that this was frequently viewed as being simply a cost item, which would not generate any profit for the developer. Mr Lindley agreed with that, though he considered more recently some profit was capable of being made on social and affordable housing. On balance I find that this point is likely to have been viewed as broadly profit neutral at the time and does not require adjustment to the figures. Turning back to the first report of Mr Hewetson, and his appraisal, he projected an overall revenue of £183 million. Against that various deductions had to be made, and he ended up at a residual site valuation of £37 million, allowing for developer's profit of 20% on private sales only at £25.9 million. I set out the appraisal table below:
|
Item |
Factor |
Amount |
|
Sales Revenue |
|
|
|
350 Private Sector Houses |
£370 per sq ft |
£154,293,700, |
|
105 Affordable Rent Flats and Houses |
65% of market
|
£ 19,227,360 |
|
45 Shared Equity Flats and Houses |
55% of Market
|
£ 9,647,040 |
|
Total |
|
£183,168,100 |
|
Build Cost |
£140 psf base build |
£ 79,171,400 |
|
Contingency |
5.0% |
£ 3,958,570 |
|
Site Servicing |
£15,000 per unit |
£ 7,500,000 |
|
CIL/Section 106 |
£10,000 per unit |
£ 5,000,000 |
|
Development Monitoring Fees |
7.0% |
£ 6,344,098 |
|
Acquisition Costs |
6.5% |
£ 2,401,354 |
|
Finance |
7.0% |
£ 10,269,340 |
|
Sales agents and legal fees |
1.7% (Private Sales) |
£ 2,622,993 |
|
Marketing Budget |
2.0% (Private sales) |
£ 3,085,874 |
|
Developer's Profit |
20% (Private Sales Only) |
£ 25,870,570 |
|
Residual Site
|
|
£ 36,943,902 £ 37,000,000 |
valuation report of the market value of the phase 1, 500 unit scheme, in December 2017. In this report he provided a market value opinion of £40 million. He looked at comparable evidence and also carried out a development appraisal. His figure for the overall gross development value, at £183,168,100 remained unchanged. In this report he concentrated on a comparative method, and concluded a market value per plot of £80,000 equating to £1.29 million per acre, which delivered the headline valuation, though noted that a slightly adjusted appraisal came in at £36.5 million, which was used as a check.
valuations vary to some degree, but the valuation process relating to 500 units remains constant. Much of the report is built on the earlier reports mentioned above. He again considers comparable evidence, and reaches similar conclusions. However, Mr Hewetson also considers in this report current offers for phase 1.
Vistry on 5 October 2020, and a detailed revised offer as set out in a letter of 14 June 2021. This confirmed an offer for the 500 unit development at a net purchase price of £39 million. It assumed a section 106 contribution of just under £10 million based on an overall assumed section 106 cost at £32 million. It is not clear what figure they have provided for in relation to site servicing. Mr Hewetson concluded that this was a very detailed letter and provides the strongest support out of the offers for the price of £39 million.
property are not contained in the draft. So it is not entirely easy to work out whether or not the offer may involve, similar to the TWG offer, some element of separate overage or other transfer of value associated with other later transfers (or, precisely, where the section 106 contributions would fall; see paragraph 40 above in this respect). Mr Hewetson went on to note, however, that the amount assumed for section 106 contributions was very high compared with Vistry, with a difference of about some £6 million. On closer inspection of the Vistry offer in oral evidence Mr Lindley identified what he considered was a likely error in the Vistry offer in relation to the section 106 costs, because it is now known the section 106 costs total c. £45 million, not £32.5 million as assumed by Vistry. An adjustment on this basis would bring the offer down to £34 million.
valuation methodology, and he reiterates that in arriving at his opinion, of what he now describes in his report as the "Market Selling Value", he has had regard to the offers he referred to earlier in his report, with support from land sales (i.e. a comparative approach) and the results of his residual appraisals (original and as updated). He was criticised for this approach by Mr Reynolds, on the basis that the least valuation methodology is likely to be offers, though it was not suggested they could never be taken into account. In my judgment there is some justification in this criticism, though in reality Mr Hewetson's opinion can clearly be seen to have been based, originally, on a comparable and residual valuation approach. I agree however that care needs to be taken in relation to how much reliance can be placed on the Vistry or Countryside offers for two main reasons. First, they are not consummated bargains. Secondly, they do not contain all the information relating to the bargain which might be relevant to their assessment. In my judgment some of the difference between the Vistry and Countryside offers may be explicable on the basis of different assumptions as regards section 106 costs, though I cannot discount the possibility that where these costs actually fall may not be entirely visible, or that there may be other relevant factors not known to me.
valuing the phase 1 land on the basis of the "Market Selling Value" and he was asked in questions in oral evidence and in advance of trial what he meant by this. In the clarification he gave in his letter of 30 July 2021 he explained that this description was intended to reflect his assumption that the buyer was a developer, as opposed to the price paid by someone in the position of a master developer, who might take on the project and build out part of it and then sell it on, having made a profit, to a developer. Whilst I agree the label is unconventional, I accept the oral evidence of Mr Hewetson that it did not ultimately affect his view of market value and a developer was most likely to pay the highest price for the land. I accept that evidence. This demonstrated another significant difference between the expert evidence of Mr Hewetson and Mr Lindley. Mr Lindley assumed, due to the scale of the project, that the buyer would be a master developer who would obtain reserved matters consent and install all infrastructure necessary in order to sell serviced parcels to housebuilders and other housing developers. The difficulty with this is two-fold. First, it is valuing a different scheme from the 500 units. Secondly, it does not reflect the valuation exercise which I need to concentrate on, which is the likely shape of the narrow phase 1 contract as negotiated by the parties having regard to what is in the Heads of Agreement, and seeking to capture the same in the Heads of Agreement, save where otherwise varied.
limitations on which his evidence assists the task I have to perform. However I should consider here two aspects of his opinion which have particular relevance, alongside the points which were put to Mr Hewetson in this respect.
very high level assessment". It turned out it was based on his discussions with other colleagues in relation to other sites. However the details in that respect had not been shared with Mr Hewetson in advance of their joint discussions and could not really be explored at trial. Mr Lindley accepted that a more precise analysis would require the input of a quantity surveying expert.
valuation as "rich" he disagreed and said he stood by it. He concluded that Mr Costello was positioning itself so as to not encourage the P3 parties to think the site was too valuable. I have already indicated that Mr Costello said much the same thing and I accept that evidence. Thirdly, I note that Mr Holleran gave some evidence as regards the input of BHB when it came to assisting in relation to the section 106 agreement and site servicing matters. His background and expertise is of course in groundworks and utilities.
"We assisted them in relation to negotiation of the Section 106 Agreement. We also assisted with infrastructure issues, in particular we identified that the proposed district heating main was not suitable. We involved Vince Colby of VCB Consultants. He was a renewable energy consultant. We also organised assistance with Brookfield Infrastructure Services who assisted them with delivery of the district heating and infrastructure and we helped them renegotiate with Vince Colby and Manly. We also secured a connection for SSC Electricity to provide electricity connections and sub-stations, secured connections for them with Thames Water for sewage and water which were required for delivery of the first 500 units."
venture, though that is not relevant to the quantification question I am considering now and I do not take it into account.
values to the plot boundary and with spine roads laid out. There was some potential ambiguity in the oral evidence of Mr Lindley as to precisely what this meant and which spine roads, though I conclude that, at least in relation to phase 1, there was only likely to be one spine road of any relevance. But Mr Lindley concluded no safe reliance could be placed on these figures because they related to much smaller sites than the present.
valuers were able to give any precise evidence on this point, but their evidence was that the cost of servicing could have been as much as £10,000 to £40,000 per unit (or plot) depending on where the line was drawn and how much infrastructure (in particular spine roads) work and servicing work was required within or outside the boundary. Mr Lindley's evidence was that the cost of servicing would be £40,000 per plot by comparison with other large sites and translated onto a scheme involving 1,190 units, though he considered the cost to BHB would have been less than this according to the Heads of Agreement, though he was not able to put a figure on it. Mr Hewetson's evidence was that his research indicated £10,000 to £30,000 per plot. The split of site servicing costs as contemplated in the Heads of Agreement was, even on Mr Lindley's evidence, more favourable to BHB. An adjustment down to the upper end of Mr Hewetson's range, for example, would mean a saving to BHB of £10,000 per plot, which on 1,190 units is £11.9 million. In my judgment I should accept Mr Hewetson's figure of £15,000 per plot (or £7.5 million in total) for site servicing costs for the contemplated development under phase 1.
"BHB agree to cover the cost of any Section 106 applicable … This is on the basis that Section 106 will not exceed £10,000 per residential unit. In the event that the Section 106 liability exceeds £10,000 per unit the parties agree to share such excess costs equally"
viewed against the total cost which would otherwise fall onto the landowner, a saving to BHB of some £9.95 million. In these circumstances it seems to me that Mr Hewetson's assessment of the section 106 costs judged by reference to an open market purchaser is substantially less favourable than the Heads of Agreement terms. BHB would have been looking at about £18k per unit (or £9m), not £21k per unit (or £10.5m), as assumed by Mr Hewetson in the Joint Statement. This would represent a saving to BHB compared to an open market purchaser of about £1.5 million.
valuing different things on different bases, and at different times.
My conclusions
value is of the 500 unit scheme on the open market, without reference to the Heads of Agreement, then the market value is best assessed by starting with a gross development value appraisal basis. That is informed by consideration of comparables, but I find the comparables of less assistance since none were truly comparable to the site in question, either in relation to its size or the requirement for zero-carbon homes. The offers are useful as a cross-check, though I do not consider they should be used as anything more than that. I conclude therefore it is best to start with Mr Hewetson's first appraisal, in 2017, which yields a residual site valuation of £37 million. This then needs to be adjusted to allow for higher section 106 costs, from £5 million to £10.5 million. This reduces the valuation down to £31.5 million. I make no deduction or change for the site servicing costs for the reasons given above.
Vistry offer) it would translate into a figure of £54.9 million. But that requires adjustment to allow for the fact that out of the 500 units there is a portion of affordable housing. If one assumes that the valuation is assessed only by reference to the development of the private units, which in my judgment is an accurate estimate (albeit from time to time it may be some small profit is made by the developer) then this translates into a value of £38.43 million (taking the ratio of private against the overall total). This would suggest that the market value of £31.5 million is on the low side, though it was Mr Hewetson's evidence that if anything there may be a cost rather than a benefit associated with affordable housing which would take the figure down.
Vistry and Countryside. In my judgment the Vistry offer is a detailed one which has been the subject of detailed work by Vistry and also has gained from adversarial scrutiny. If one makes adjustments to allow for that then the Vistry offer would be worth £34 million. The Countryside figure is ostensibly at £27.5 million, but the entire documentation has not been fully disclosed.
valuations one would expect a range of c. 10%. For more difficult valuations the range may be more significant and exceptionally difficult valuations can generate 15%, or even higher ranges, from competent surveyors acting reasonably. On a valuation figure of £31.5 million that would suggest a potential lower end figure of £27 million and an upper end of the range of about £35 million. In broad terms this enables a rationalisation of the three categories of evidence I have considered, albeit it might suggest the figure I have alighted on is on the conservative side.
valuation of the 500 unit phase is £31.5 million.
valuation whether a valuation date is taken in 2018 or to date. Mr Hewetson's evidence was that the development land values had not changed significantly, which evidence I accept. I do not consider any discount should be applied for the contingency associated with the section 106 being granted having regard to the fact that it is now known that the section 106 agreement was granted and outline planning consent has been granted (applying the principles to be derived from Golden Strait Corpn v Nippon Yusen Kubishika Kaisha [2007] UKHL 12: where an event has already happened by the time damages are assessed the court should have regard to what had actually occurred so that estimation was no longer necessary).
valuation to BHB, assessed by reference to the phase 1 land contract which they would have acquired under this scenario was £33 million.
value and the profit. They contend this is double counting and suggest BHB should not be able to claim a loss of profits in circumstances where it has not taken the risk of development and cite the decision of Lewison J (as he then was) in Vision Golf Ltd v Weightmans (a firm) [2005] EWHC 1675 (Ch) at [51]-[52]. That case concerned the forfeiture of a lease and a claim in negligence against solicitors. In that context a claim for loss of profits on top of the claim for the lease was rejected because it would be expected that the valuation would take into account the profit which could be earned. In my judgment this supports the notion that care needs to be taken not to allow for a loss of profit claim which is already reflected in a capital value, but it would be to draw too much from this case to suggest a claim for loss of profit cannot be made. Indeed it seems to me that where the claimant is seeking to acquire an asset for development, as opposed to simply acquiring the asset, the circumstances are different. The profit is being generated through the development activity not simply the use of the asset as it is. Moreover, it makes more sense to assess the loss of profits at the date of that intended development, rather than take the value of the asset as at the date of acquisition, in circumstances where the developer was not intending to simply flip the land on, but to build out.
value to BHB of £33 million, less £20,281,976 million (being the sum which the parties had agreed BHB would be paying to the P3 parties for the phase 1 land in 2018, and reflected in the figures of Mr Hewetson in the table in section 11 of the Joint Statement in the sum of £22,081,976, less the payments already made by BHB against that sum of £1.8m). That would mean a claim for £12,718,024, or if a 60% loss of chance is applied, a claim for £7,630,814 million. However in my judgment this would under-compensate BHB, since it does not take into account what BHB intended to do with the asset. They intended to build out for a profit after development.
valuation I have found above. In my judgment it would involve double counting to simply add this on to the land value figure stated above, and to do so would also be inconsistent with the scenario under contemplation here, which is that BHB would have acquired as a developer and built out.
limits on the principle that the law is tolerant of imprecision or uncertainties and this matter has passed that limit.
A footnote – consequential loss claim
property (16 large apartments 20,000 sq ft) were well advanced and projected to yield a profit £56m. It was claimed that the claim for consequential loss in this respect is ongoing and continues to accrue until payment or settlement.
Issue 6: What, if any, trust affects the Property or estoppel or equity has arisen in favour of BHB and what is the effect of the same?
Introduction and rejection of primary submission
property in the period between contract and completion the vendor holds the property on trust for the purchaser. It cites the passage in Snell's Equity, 34th Ed (2020), at para 24-002 in support of this proposition.
valid but it does mean that the priority of the interest, if valid, is protected. The anterior question as to the validity of the claim for an equitable interest, therefore, remains to be answered.
variations made to the Heads of Agreement since are relied on to support the assertion that such a contract for sale had come into existence it runs into the problem that such a contract would be unenforceable as a contract for sale of land under section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989; (3) the time for performance has now ceased.
Pallant v Morgan equity
The principles and submissions
v Morgan [1953] Ch 43. A convenient summary of the requirements of a Pallant v Morgan equity (though recognising the need to maintain the flexibility of equity to respond to new circumstances where the need arises) is to be found in Snell's Equity, 34th Ed, at para 24-039:
"A Pallant v Morgan equity typically relates to specific property that is not at first owned by either of the parties, A or B. A and B form a common intention that A will take steps to acquire the property; and that, if A does so, B will obtain some interest in it. They may contemplate, for example that A will buy the property, subdivide it and convey part of it to B, or that it will be acquired by a corporate vehicle, the shares in which will be divided between A and B. The common intention need not be recorded in writing, but its main term must be agreed between the parties. The equity cannot arise where the agreement is expressed to be subject to contract, or where A and B realise that their agreement is legally unenforceable because they plan to enter into a binding agreement in the future.
In reliance on A's assurance or B's expectation that B would acquire an interest in the land, B then does something which confers an advantage on A in acquiring the property or which is detrimental to B's ability to acquire it on equal terms. B may, for example, withdraw from making his own bid to acquire the property, with the consequence that A acquires the property more cheaply than he would otherwise have done. The effect is that it would then be unconscionable for A to keep the property for itself. But A does nothing unconscionable if he resiles from an agreement that was expressed to be subject to contract or which both parties realised was not legally binding between them. Where A and B are commercial parties dealing at arm's length, B takes the risk that a binding agreement may not materialise.
The effect of the equity is that A becomes bound by a constructive trust to prevent him from benefiting by his unconscionable breach of the agreement. A may, for example, hold the property on trust for himself and B jointly. The effect is to force A to bargain with B for the proper implementation of their agreement or to allow the division of the proceeds of sale between them."
Homes v Luff Developments [2000] Ch 372, Lord Justice Chadwick reviewed the relevant first instances authorities and drew together the principles. He expressed that he did this because he understood it was the first time that the Pallant v Morgan equity, protected by a constructive trust, had been argued in the Court of Appeal. He stated this at page 397 (with bold emphasis added by me):
"It is important, however, to identify the features which will give rise to a Pallant v. Morgan equity and to define its scope; while keeping in mind that it is undesirable to attempt anything in the nature of an exhaustive classification. As Millett J. pointed out in Lonrho Plc. v. Fayed (No. 2) [1992] 1 W.L.R. 1 , 9b, in a reference to the work of distinguished Australian commentators, equity must retain its "inherent flexibility and capacity to adjust to new situations by reference to mainsprings of the equitable jurisdiction." Equity must never be deterred by the absence of a precise analogy, provided that the principle invoked is sound. Mindful of this caution, it is, nevertheless, possible to advance the following propositions.
(1) A Pallant v. Morgan equity may arise where the arrangement or understanding on which it is based precedes the acquisition of the relevant property by one party to that arrangement. It is the pre-acquisition arrangement which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently with it. Where the arrangement or understanding is reached in relation to property already owned by one of the parties, he may (if the arrangement is of sufficient certainty to be enforced specifically) thereby constitute himself trustee on the basis that "equity looks on that as done which ought to be done;" or an equity may arise under the principles developed in the proprietary estoppel cases. As I have sought to point out, the concepts of constructive trust and proprietary estoppel have much in common in this area. Holiday Inns Inc. v. Broadhead, 232 E.G. 951 may, perhaps, best be regarded as a proprietary estoppel case; although it might be said that the arrangement or understanding, made at the time when only the five acre site was owned by the defendant, did, in fact, precede the defendant's acquisition of the option over the 15-acre site.
(2) It is unnecessary that the arrangement or understanding should be contractually enforceable. Indeed, if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v. Morgan equity; equity can act through the remedy of specific performance and will recognise the existence of a corresponding trust. On its facts Chattock v. Muller, 8 Ch.D. 177 is, perhaps, best regarded as a specific performance case. In particular, it is no bar to a Pallant v. Morgan equity that the pre-acquisition arrangement is too uncertain to be enforced as a contract—see Pallant v. Morgan [1953] Ch. 43 itself, and Time Products Ltd. v. Combined English Stores Group Ltd., 2 December 1974 —nor that it is plainly not intended to have contractual effect—see Island Holdings Ltd. v. Birchington Engineering Co Ltd. , 7 July 1981.
(3) It is necessary that the pre-acquisition arrangement or understanding should contemplate that one party ("the acquiring party") will take steps to acquire the relevant property; and that, if he does so, the other party ("the non-acquiring party") will obtain some interest in that property. Further, it is necessary that (whatever private reservations the acquiring party may have) he has not informed the non-acquiring party before the acquisition (or, perhaps more accurately, before it is too late for the parties to be restored to a position of no advantage/no detriment) that he no longer intends to honour the arrangement or understanding.
(4) It is necessary that, in reliance on the arrangement or understanding, the non-acquiring party should do (or omit to do) something which confers an advantage on the acquiring party in relation to the acquisition of the property; or is detrimental to the ability of the non-acquiring party to acquire the property on equal terms. It is the existence of the advantage to the one, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it. Pallant v. Morgan [1953] Ch. 43 itself provides an illustration of this principle. There was nothing inequitable in allowing the defendant to retain for himself the lot (lot 15) in respect to which the plaintiff's agent had no instructions to bid. In many cases the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market. That will usually be both to the advantage of the acquiring party—in that he can bid without competition from the non-acquiring party—and to the detriment of the non-acquiring party—in that he loses the opportunity to acquire the property for himself. But there may be advantage to the one without corresponding detriment to the other. Again, Pallant v. Morgan provides an illustration. The plaintiff's agreement (through his agent) to keep out of the bidding gave an advantage to the defendant—in that he was able to obtain the property for a lower price than would otherwise have been possible; but the failure of the plaintiff's agent to bid did not, in fact, cause detriment to the plaintiff—because, on the facts, the agent's instructions would not have permitted him to outbid the defendant. Nevertheless, the equity was invoked.
(5) That leads, I think, to the further conclusions: (i) that although, in many cases, the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market, that is not a necessary feature; and (ii) that although there will usually be advantage to the one and correlative disadvantage to the other, the existence of both advantage and detriment is not essential—either will do. What is essential is that the circumstances make it inequitable for the acquiring party to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the non-acquiring party has acted. Those circumstances may arise where the non-acquiring party was never "in the market" for the whole of the property to be acquired; but (on the faith of an arrangement or understanding that he shall have a part of that property) provides support in relation to the acquisition of the whole which is of advantage to the acquiring party. They may arise where the assistance provided to the acquiring party (in pursuance of the arrangement or understanding) involves no detriment to the non-acquiring party; or where the non-acquiring party acts to his detriment (in pursuance of the arrangement or understanding) without the acquiring party obtaining any advantage therefrom."
v Lidl UK GmbH [2018] 2 P & CR 7, but, submitted Mr Jefferis, that does not affect the situation here.
v Morgan constructive trust arises in favour of BHB. Mr Jefferis submits that this plainly bites on any land in the name of either of the P3 parties and extends to lands held by their nominee or those with whom they colluded.
v Yeoman's Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, and he relies on the observations of Lord Scott at [30]-[32].
venture" falling within the relevant principles. He went on to emphasise that the Heads of Agreement contained the following terms (some of which I have already cited above, but some I have not and so for convenience I shall set them out here as relied on by Mr Jefferis):
"Mutual Benefit: the transaction will be structured in a manner which will most effectively achieve the desired commercial and financial outcome for the parties".
Anticipated Demand: Both the parties agree that there is considerable scope to roll out significantly more residential units, over and above those referred to above. Both P3 and BHB commit to using their best endeavours to work jointly to help facilitate additional demand with a view to growing the actual delivery of completed residential units over the medium term.
Good faith: Each party shall act in good faith throughout the period of this Agreement
Agreement: The parties shall use all reasonable endeavours to enter into a final binding Agreement which captures legally these Heads of Agreement acting in good faith towards each other…".
partners and resolve all other matters including the affordable housing provision in "that spirit of partnership which has stood us in good stead so far".
"22. The solicitors worked together in trying to agree a suitable contract and we very much worked hand in hand with P3 as in effect a 'consortium member', which was how Steve Nardelli referred to us over the following years as I said earlier, in various meetings, presentations which we attended jointly with P3 (council, farmers and indeed consultant).
30. We also all worked closely with Steve and Graham in relation to dealing with the land owners with whom they held and were seeking options. On one occasion we arranged an event at the RAC Club in order to entertain the Mailins family (from whom P3 were trying to acquire significant lands, which would back into our subsequent 400 acres) and their professional advisors. The event was also attended by Steve Nardelli and Graham Johnson. Of course, we covered the cost. This event followed a meeting with PWC, where senior PWC personnel outlined the work they were doing on our behalf pertaining to financing acquisitions.
38. The dealings in relation to the A2 issue and how we were told they had been resolved demonstrates a failure of P3 to deal with us in an open and transparent way. Notwithstanding the issues in relation to A2, Steve was always keen to gloss over pertinent issues and say that it was important that we move forward to finalise the contract so that we could proceed as planning partners (and consortium members) and resolve all other matters including the affordable housing provision in the "spirit of partnership which had stood us in good stead so far".
108. These were very much forward-thinking discussions between two parties that were partnering together."
venture, which has failed to come to fruition, and that the P3 parties and their nominees and those with whom they colluded cannot walk away with all the fruits of the joint work and expense. By joint he means including the work of BHB.
v Morgan equity arises is a different matter.
v Morgan equity had considered by Arden LJ in Herbert v Doyle [2010] EWCA 1095. She explained at [57] the "common thread" in the speeches of Lord Scott and Lord Walker is that "if the parties intend to make a formal agreement setting out the terms on which one or more of the parties is to acquire an interest in property, or, if further terms for that acquisition remain to be agreed between them so that the interest in property is not clearly identified, or if the parties did not expect their agreement to be immediately binding, neither party can rely on constructive trust as a means of enforcing their original agreement."
venture was made "subject to contract". As Lewison LJ explained, at [79], that label meant neither party intended to be bound unless and until a formal contract was made and it followed therefore that the parties "took the commercial risk that one or other of them might back out of the proposed transaction" and that the claimant "never expected to acquire any interest in the land otherwise than by way of a legally enforceable contract".
v Morgan equity or equity by proprietary estoppel cannot succeed because:
(1) The Heads of Agreement, Exclusivity Agreement and the Addendum were agreements by negotiated by experienced commercial parties who were advised by lawyers;
(2) The Heads did not amount to an agreement for sale. The parties, who had experience of the property world, knew that under the terms of the Heads there was no absolute obligation on either of them to enter into the conditional sale agreement ("CSA"). Rather the obligations were more limited, in that the parties were required to use reasonable endeavours and good faith in negotiating a CSA;
(3) In these circumstances, there was no representation or assurance that BHB would acquire any interest in the Property. Rather, as BHB knew, it was an inherent risk under the Heads that, even if the parties (acting in good faith) spent time and money negotiating, agreement might not be reached and would not acquire any interest in the Property. BHB chose to run this risk;
(4) BHB did, however, have contractual protection. First, it had the benefit of the Exclusivity Agreement which imposed restrictions on P3 relating to disposition of the Property whilst CSA negotiations were ongoing. Secondly, it had the benefit of the Addendum Agreement which dealt with the risk that agreement of the CSA might not be possible by providing for the return of monies paid by Brooke (less the initial £250,000);
(5) Imposing a constructive trust or proprietary estoppel would thus contradict the parties' contractual intention. The parties' expectations were that, if possible, they would enter into a CSA but that, if this was not possible, the position was dealt with by virtue of the Addendum Agreement.
v Morgan equity is based on a common intention constructive trust of the kind enunciated in Gissing v Gissing [1970] 2 All ER 780, [1971] AC 886, or whether it might be better rationalised on the basis that the cases in question involved a breach of fiduciary duty. In a dissenting judgment of Etherton LJ Crossco No 4 Unlimited and others v Jolan Ltd and others [2011] EWCA Civ 1619 a strong argument was put forward in favour of the latter, though the majority (Arden LJ and McFarlane LJ) concluded that it could not be doubted that the ratio was the former, and it required a higher court to conclude otherwise. At [130] Arden LJ concluded that "Applying the requirements for a constructive trust of this kind, as explained by Chadwick LJ in the Banner Homes Group case (see [76], above), the critical question in the constructive trust claim on this appeal is, therefore, whether the conduct of the Gill's side was unconscionable." This was a reference back to the passage in Banner Homes I have already quoted and highlighted at [285]. At [107] Arden LJ also recognised that the absence of a concluded agreement on all terms is not necessarily a bar to an equity arising, putting in context what she said in Herbert v Doyle above.
(1) BHB had paid the £250,000 non-refundable deposit;
(2) BHB paid £1.8m to facilitate the P3 parties advancing the planning position, which they did gaining a resolution to grant, S106 and outline consent;
(3) At least £233,600 of BHB's payment to the P3 parties via their accountant, Calder and Co, of £250,000 on 31 May 2017 was (unknown to BHB at the time) paid towards the CFJL deposit under the CFJL Agreement with the Murfitt Hensons on 31 May 2017;
(4) BHB paid for part of CFJL's contractual rights. It was submitted this also gave rise to a constructive trust as BHB provided the money for the deposit;
(5) BHB kept on spending money on contractual negotiations;
(6) BHB, to the knowledge of the P3 parties, spent money on advancing planning for detailed consent. There is an issue whether the P3 parties discouraged this expenditure. BHB's evidence was that there was no such discouragement. It was to the P3 parties' advantage that planning was advanced as far as possible;
(7) Mr Ives gave evidence of the work which he did and his meetings with the Council, with Mr Nardelli and/or Mr Johnson. Mr Ives was, BHB submitted, a clear, forthright and credible witness;
(8) Mr Ives also explained, in frank terms, that his work on the factory on certain land (called the Bonners land) was done at the P3 parties' request and for their benefit, in order to try to avoid having a large warehouse right next to the eco residential site. It was not the best option for BHB, as the military site was much cheaper, with the building already in place.
Pallant v Morgan equity – my conclusions
Homes did not contemplate that BHB would acquire an interest in land on P3 acquiring such an interest in land, but instead that BHB would acquire such an interest when a conditional sale agreement was entered into. This was and remained in the future. Therefore there was no agreement for acquisition of land which P3 was acting inconsistently with. P3 was acting inconsistently with the Agreements, as I have found, but that gives rise to a contractual claim in damages, not an equity.
valuable contractual right.
v Morgan equity has arisen (as opposed to an argument for some form of remedial constructive trust; that might be thought to be a desirable development, but at present English law does not recognise it).
v Morgan equity can only arise if there is an enforceable contract for the sale of land. Clearly they can, and if the equity was relegated to such a role there would be no utility in it. An informal agreement which contemplates one party will gain an interest on another acquiring a property can give rise to such an equity. But not in circumstances where the parties have agreed that no proprietary interest will be conferred on the claimant until a point in the future which has not yet arrived. Or to put it another way there was no expectation of a land interest until the conditional sale agreement had been entered into. There being no such expectation there is nothing for the alleged unconscionable acts to "bite on".
"In order to facilitate P3 in acquiring land that will be subject of the Heads and the Future Option agreements referred to therein BHB have agreed that they will provide this payment to assist with this ("the Pre-Payment")."
limited equity on BHB which might be protected by the court declaring that any interests in the land acquired by CFJL should stand charged in favour of the P3 parties' liabilities to BHB. But ultimately I have concluded this would be to conflate, wrongly, two different matters. The matter can be tested in this way: if money is paid over by A to B without any expectation that it would result in A being conferred an interest in land until a future event had occurred, which has not yet occurred, but B wrongly diverts it to C, can it be said that nevertheless A should have some interest in the land because of that wrongful diversion. In my judgment it does not. There may be other remedies, but I cannot see this should result in the conferral of an equity.
Fiduciary duties – another route?
v Morgan equity a fiduciary relationship must exist, that one did exist here. I raised with counsel whether or not the decision of Rose J (as she then was) in Pennyfeathers Ltd v Pennyfeathers Property Co. Ltd [2013] EWHC 3530 (Ch), in which an unsuccessful attempt was made to rely on a Pallant v Morgan equity, might be of relevance. In that case the claimants won on their primary case and Rose J stated at [97] that it was not necessary to consider Pallant v Morgan. So, what was said was obiter dicta. Rose J nevertheless addressed the matter in some detail. She rejected the contention that fiduciary duties were owed on the facts. The points of principle, as she saw them, were stated at [99] in the following terms:
"99. The Claimants referred me to the decision in Ross River
i) As a matter of general principle, the court should be slow to introduce uncertainty into commercial transactions by the over-ready use of equitable concepts such as fiduciary obligations. Thus, the court should not use equitable principles 'to make up for what might be seen as deficiencies (in the events which happened) in the agreed contract' (see paragraph 31 of the judgment of Lloyd LJ).
ii) Where the relationship is governed by contract, then the terms of the contract are of primary importance and wider duties will not lightly be implied, in particular in commercial contracts negotiated at arms' length between parties of comparable bargaining power (see paragraph 56 of the judgment quoting from the judgment of Briggs J in Ross River
iii) The fact that the alleged fiduciary has his own, personal interest in the exploitation of the development, to which he is entitled to have regard, does not rule out the existence of a fiduciary duty: paragraph 55.
iv) The existence of a fiduciary duty in such a case is
very fact sensitive, and each case must turn on its own facts. He submitted that: the parties owed one another fiduciary duties of good faith, right from the start; the terms expressly provide for good faith and to act for mutual benefit; added to this, Mr Nardelli more than once spoke of acting as partners (and the parties names and/or logos were included alongside each other in "consortium" documents); and he emphasised that you do not judge an agreement by its title alone. He submitted that this plainly was a joint venture agreement, with the parties looking forward to working together for years ahead.
partners was no more, in my judgment, that the sort of language commercial parties might use to show goodwill intent to each other. Mr Jefferis did not submit this was in fact a partnership under the 1890 Act. Fourthly, I agree the Agreements plainly involved the parties on a joint venture, but it was a joint venture governed by contractual relations. I repeat what I said at the start of Issue 1 in this respect. I consider it is possible that the P3 parties might have owed fiduciary duties as an agent in the event that, for example, they had entered into a conditional sale agreement, and the P3 parties was gathering in property to enable that agreement to be fulfilled. But, again, that was in the future. But even if I am wrong about that it does not follow that a breach of these duties should be said to give rise to an equitable interest in the land itself.
The last submission
Property. If BHB succeeds in its claim for damages against the P3 parties then he submitted they may become insolvent. That may or may not be so, but the courts have never granted a constructive trust simply because the defendant may become insolvent. The law has other remedies at its disposal, where insolvency is involved to protect creditors or contingent creditors, but generally speaking a claimant has to take the defendant as they find them. In my conclusion this final submission laid bare the lack of merit in the contention advanced in favour of some form of equity or proprietary interest being recognised as submitted by BHB.
Issue 3: Is and was CFJL at all material times under the effective control of P3 or P3 Eco? and
Issue 7: Did the Defendants collude together "to steal a march on the Court" and try to avoid BHB obtaining specific performance or another proprietary remedy as alleged in paragraph 22F of the Amended Particulars of Claim and paragraph 22H of the Amended Reply?
Introduction
veil. On clarification, in closing, Mr Jefferis also submitted that issue 7 had relevance to his claim that CFJL, Desiman and Desiman 2 all should take subject to the equities or proprietary interest or claim of BHB. As I have concluded that BHB does not have any such rights to specific performance or other proprietary remedy or equity then it seems to me this latter point falls away. Nevertheless I shall briefly deal with it below. I shall start however by considering the principles relating to the piercing of the corporate veil and whether those are to be applied here in relation to CFJL and if so to what effect.
Piercing the corporate veil - principles
v Petrodel [2013] 2 AC 415 Lord Sumption JSC considered the relevant principles in relation to what remains of piercing the corporate veil, and he noted that cases might be divided into cases where the concealment principle applied and cases where the evasion principle was invoked. In the former the court was not piercing the corporate veil but instead looking behind the concealed façade to discover the true facts which the corporate structure is concealing. The second, the evasion principle is a true invocation of piercing the corporate veil and the court may disregard the corporate veil, according to Lord Sumption (at [27]) "if there is a legal right against the person in control of it which exists independently of the company's involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement. Many cases will fall into both categories, but in some circumstances the difference between them may be critical." He similarly summarised the evasion principle as follows at [35]:
"I conclude that there is a limited principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil. Like Munby J in Ben Hashem v Al Shayif [2009] 1 FLR 115, I consider that if it is not necessary to pierce the corporate veil, it is not appropriate to do so, because on that footing there is no public policy imperative which justifies that course. I therefore disagree with the Court of Appeal in VTB Capital v Nutritek [2012] 2 Lloyds Rep 313 who suggested otherwise at para 79. For all of these reasons, the principle has been recognised far more often than it has been applied. But the recognition of a small residual category of cases where the abuse of the corporate veil to evade or frustrate the law can be addressed only by disregarding the legal personality of the company is, I believe, consistent with authority and with long-standing principles of legal policy."
view that it may be Lord Sumption's classification was not necessarily exhaustive of the doctrine. She stated at [92]:
"I am not sure whether it is possible to classify all of the cases in which the courts have been or should be prepared to disregard the separate legal personality of a company neatly into cases of either concealment or evasion. They may simply be examples of the principle that the individuals who operate limited companies should not be allowed to take unconscionable advantage of the people with whom they do business. But what the cases do have in common is that the separate legal personality is being disregarded in order to obtain a remedy against someone other than the company in respect of a liability which would otherwise be that of the company alone (if it existed at all)."
veil is based on the evasion principle, absent further development of the law. Often cases which involve mis-use of corporate personality will be capable of being addressed effectively in other ways, sometimes because of the application of trust principles, or agency principles, whether or not that is concealed or not. On the facts in Prest v Petrodel the court did not find it necessary to invoke the evasion principle because it found that, drawing suitable inferences based on concealment and lack of disclosure from the husband, that the companies held the properties beneficially for the husband, such that they were available when making an order for ancillary relief in matrimonial proceedings. In assessing whether or not the evasion principle applies it may also be useful to ask, having regard to the observations of Baroness Hale as mentioned above, whether or not unconscionable advantage has been taken of that separate legal personality.
Piercing the corporate veil – my conclusions
viewed as, and directed as, if they were all part of one group, the P3 Group, and there was little distinction made between them. In my judgment CFJL was viewed as being umbilical to P3 Eco and/or PPP and under their control, via the decision making led by Mr Nardelli. I note that no board minutes of any meetings concerning any of the material transactions have been produced or drawn to my attention which would evidence an independent decision-making process in relation to each of them. Nor has any other documentation been produced to demonstrate these were operated by independent decision making. The decisions were all made together, and in relation the relations with BHB were in the main led by Mr Nardelli, with some participation from Mr Johnson. I have seen no evidence of participation by Mr Inshaw and he was not tendered as a witness.
verbally that "CFJL Property Partners is a P3 Eco entity, despite revised shareholding." In my judgment this was a reference to CFJL and gives rise to the implication that CFJL was acting as an agent or nominee for P3 Eco and PPP, absent any clear documentary disclosure to the contrary. Mr Nardelli's email in response, on the same P3 Eco email address stated: "CFJL is an independent company controlled by us as directors". I agree with Mr Jefferis that the use of the word "us" is indicative that it was controlled by the P3 Eco directors on behalf of P3 Eco and PPP. I conclude this was true. As noted above Mr Johnson was copied in on this email.
partners, of the three directors (in addition to the directors themselves) and Mr Nardelli and Mr Johnson stated it was set up to enable this company to capture the profits to be made from the ventures, for the benefit of their families and future generations. In my judgment Mr Nardelli summarised it accurately in his email of 28 March 2018 when he told Mr Costello that he could safely ignore the different shareholdings.
property interests it acquired in relation to Himley Village to one or other of the P3 parties so as to enable the P3 parties, in due course, to discharge its contractual obligations to BHB, should that be required. In my judgment this was effectively an admission of agency or nominee role for CFJL, or came very close to it.
viewed as being an agent or nominee.
view that the P3 parties were in control of the CFJL rights, and could direct them where they wished.
verbally, as recorded in the email exchanges on 28 March 2018, and in writing, as evidenced in those same email exchanges. I refer to my findings in paragraph 199 above. Mr Johnson stood by and did not correct the position.
veil should be lifted, or the legal personality of the company CFJL "pierced", to deprive the P3 parties of any advantage caused by the introduction and interposition of CFJL. In my judgment unconscionable advantage was sought to be taken through the use of the separate legal personality of CFJL. The fact that Mr Nardelli and Mr Johnson might also have wanted to benefit their families is not exculpatory. I note that it is possible that in the event of the winding up the P3 parties a liquidator might have at their disposal other potential claims under the Insolvency Act 1986, which would bring any assets held by CFJL back into the P3 parties. It is also possible that a claim could be advanced by BHB under section 423 of that Act. But I do not read the analysis of Lord Sumption in Prest to suggest that because there is the existence of other possibilities of unpicking the wrongdoing, the court should not pierce the corporate veil where the evasion principle is applicable. That would be an inefficient use of court resources, and I conclude is inconsistent with the majority in Prest.
Alleged collusion to avoid specific performance or other proprietary relief
voluminous underlying documents in any detail.
Village may be summarised as follows. P3 needed to obtain alternative finance to acquire parts of the land so that it did not fall into the hands of third parties. It was in these circumstances that P3 approached Desiman and entered into the facility agreements with them. The allegations made by BHB of collusion, "stealing a march" are complained of as being vague, by the Desiman parties, and are denied.
very patient and supportive and demanded a price in return for that. Mr Nardelli had little other options at the time.
value in the existing parcels of land over which Desiman held security. I accept that evidence. Mr Jefferis sought to contend that there was already sufficient existing security. That may, or may not, prove to be the case, but in my judgment Desiman was within its rights to wish to seek a first charge security in relation to further lending.
view of my conclusions in relation to the value of this land I conclude this sale was less than it was worth to CFJL. A so called "option" was granted as a schedule to this contract to enable CFJL to buy the land back from Desiman. The price however was not £4 million but instead £19,047,238.23. This document, on its own, makes no sense. It was explained in evidence that the sum of £19,047,238.23 was the calculation by Desiman of the total sum due to it by way of lending, fees not just from CFJL, in the sum of £4 million, but also from the P3 parties. CFJL was clearly acting simply as a nominee and under the direction of the P3 parties in this respect and Desiman still viewed the P3 parties as being the borrower. This contract was completed the same day, on 23 October 2020, and the land was transferred by CFJL to Desiman 2 for £4 million and is now registered in the name of Desiman 2 under Title Number ON360325. Mr Fellows explained in his evidence that there was no intention for Desiman 2 to make any profit. The intention was that Desiman would earn the agreed fees and interest as had previously been agreed when envisaging the loan being from Desiman to the P3 parties. Desiman 2 was simply being used as a convenient holding vehicle for the land. It is apparent to me, in the circumstances, that the true intention was, as before, a lending relationship and that the transfer of land to Desiman 2 as security. The matter can be tested in this way. If, as has happened, the time for the buy-back has expired, Desiman 2 could turn around and say, bad luck we now own the land, even though the P3 parties and CFJL had fully repaid all that was due and owing would Desiman be entitled to say no? In my judgment they would not. Mr Fellows did not suggest otherwise and emphasised that irrespective of what the document might say Desiman would transfer the land back on payment in full.
Ltd [2005] UKHL 41. There is a distinction between an absolute assignment and an assignment by way of security. In order to determine whether the security instrument is an assignment or a charge, the substance of the instrument has to be considered as a whole: see Bexhill UK Ltd v Razzaq [2012] EWCA Civ 1376, supra, at [45] per Aikens LJ citing Hughes v Pump House Hotel Company Limited [1902] 2 KB 190. Key factors will be whether the assignor has retained any rights or title in relation to the debt or whether it has passed in its entirety. In Ardila Investments NV v ENRC NV & Anr [2015] EWHC 1667 (Comm) at [10] – [23], Simon J held that the assignment in that case was not absolute but operated by way of security. In particular, he held that although the instrument referred to an absolute assignment it was expressly subject to "a proviso for re-assignment on redemption of the Secured Liabilities". This proviso for redemption was held to be inconsistent with an absolute transfer of title. Simon J went on to identify other features of the instrument which had the effect of reserving to the "assignor" rights and powers in respect of the security assets.
viewed as an assignment by way of security. Even if the contractual documentation would not ordinarily be construed as such I consider that it ought to be interpreted (if necessary by way of constructional rectification) as providing for a right of re-assignment on redemption to the Desiman parties. Should it have been necessary I would also have concluded that the contractual documentation did not reveal the full and true picture in this respect (which would also have enabled rectification on a wider basis, or simply enabled the court to look through the document to the true intent behind it). This does not affect my conclusion, however, that this is valid security.
Ltd v Scott [2015] AC 385. In this case, the purchaser of a house represented to the vendor that, if she sold the property to him, she could stay in the house indefinitely. The purchaser acquired the property with the assistance of a mortgage, which was secured by a charge over the property. When the mortgagee bought possession proceedings, the vendor sought to defend on the basis that the purchaser held the property on a constructive trust and/or subject to proprietary estoppel in her favour, and that this right overrode the charge. This argument was rejected. As Lord Collins explained at [79] only personal rights were acquired initially and the rights were only capable of becoming proprietary and taking priority over a mortgage when the acquisition of the legal estate occurred. But, following the decision in Abbey National Building Society v Cann [1991] 1AC 56, there is no "scintilla temporis" between the acquisition of the property and the grant of the charge, during which time legal title to the property would vest in the purchaser free of the charge. The reasoning of the House of Lords in Cann is not limited to the grant of charges, they submitted, citing Whale v Viasystems Technograph Ltd [2002] EWCA Civ 480.
Village when BHB and the P3 parties entered into the Heads or the Exclusivity Agreement. Thus, any rights BHB had in relation to the land were necessarily personal only at least until the P3 parties and/or CFJL acquired the relevant parts of the land; (2) on 7 March 2018 title to the 10 Acres was transferred by the Murfitt Hensons to CFJL which, in turn, transferred title to the land to P3 Eco. Desiman funded this acquisition and was granted a charge over this land; (3) on 6 January 2020 the Pains transferred title to the Pains Land to PPP. This acquisition was funded by Desiman, which was granted a charge over the land; (4) The reasoning of the Supreme Court in Southern Pacific and the House of Lords in Cann means that Brooke cannot claim priority over Desiman's Charges . At no time was title to the land vested in P3 or CFJL free of Desimans' Charges; (5) This analysis also applies to the Further Murfitt Henson Land. On 23 October 2020 there were back-to-back transfers between (i) the Murfitt Hensons and CFJL (ii) CFJL and Desiman 2. Given that Desiman funded the acquisition of this land, the substance and reality of the dealing was that CFJL did not acquire freehold title to it free of the obligation to transfer the land to Desiman 2, and BHB cannot claim priority over Desiman 2; (6) They also added, BHB has another problem in relation to the 10 Acres in that the priority of any proprietary interest it did have was not protected and was, in accordance with s.30 of the Land Registration Act 2002, postponed on completion of the first legal charge by registration.
via an exercise of Option rights or via the CFJL contract then this line of reasoning would not work. I do not find that to be the case, but the point was not explored in detail in submissions. Secondly, if the P3 parties were acting in a fiduciary capacity and Desiman and parties were knowingly assisting in that respect then I suspect matters would have unravelled for Desiman. But no such case was advanced and I have rejected the submission that the P3 parties were acting as a fiduciary. Thirdly, in relation to the 23 October 2020 transaction these submissions support my conclusion that the 23 October 2020 transaction should be viewed as an unconventional way of Desiman acquiring security. As it happens, based on these secondary submissions, it probably need not have structured the transaction in the way it did.
Issue 8: Did Desiman incite a breach of the agreements between BHB and the P3 parties?
Introduction – the principles as to tortious inducement of breach of contract
Ltd v James Kemball Limited [2021] EWCA Civ 33 at [21]. The four ingredients are as follows: (1) There must be a breach of contract by B; (2) A must induce B to breach their contract with C by persuading, encouraging or assisting B to do so; (3) A must know of the contract and know that its conduct will result in breach of the contract; (4) A must intend to procure the breach of contract either as an end in itself or as the means by which it achieves some further end. A fifth matter requires consideration: (5) If A has a lawful justification for inducing B to break B's contract with C, that may provide a defence against liability. Considering each of those in further detail here.
v Allen [2007] UKHL 21, [2008] 1 AC 1 at [5], liability for inducement of breach of contract is an accessory liability and is thus dependent upon the contracting party having committed an actionable wrong.
Ltd v Lowthian [1966] 1 WLR 691 union officials threatened a building contractor with a strike unless he terminated a subcontract for the supply of labour. The defendants obviously knew that there was a contract—they wanted it terminated—but the court found that they did not know its terms and, in particular, how soon it could be terminated. Lord Denning MR said, at pp 700–701: "Even if they did not know the actual terms of the contract, but had the means of knowledge—which they deliberately disregarded—that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not." [41] This statement of the law has since been followed in many cases and, so far as I am aware, has not given rise to any difficulty. It is in accordance with the general principle of law that a conscious decision not to inquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact: see Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2003] 1 AC 469 . It is not the same as negligence or even gross negligence…" Consistently with the above, Lord Nicholls explained in OBG at [202] that an honest belief by a defendant that his conduct will not involve a breach of contract is inconsistent with an intention to induce breach of contract, even if that belief is "muddle-headed and illogical".
v Dodd & Co Ltd [2020] QB 781. In this case, prior to recruiting a new employee, an employer obtained legal advice as to the enforceability of covenants in the prospective employee's previous contract of employment. The gist of that advice (which turned out to be wrong) was that, whilst the matter was not risk free, it was more likely than not that the covenants were ineffective and unenforceable [2]. Lewison LJ explained at [27]: "in order to be liable for the tort of inducing a breach of contract, you must know that you are inducing a breach of contract. "Are" is not the same as "might be". You must actually realise that the act you are procuring will have the effect of breaching the contract in question. "Will have" is not the same as "might have"….. it is for the claimant to prove the defendant's actual knowledge of the breach; not for the defendant to prove an absolute belief that there would be no breach." The judge went on to articulate the important policy consideration that persons be able to act on legal advice even if turns out that advice is wrong, saying that at [34] "As everyone knows lawyers rarely give unequivocal advice……to insist on definitive advice that no breach will be committed would have a chilling effect on legitimate commercial activity".
view "if the advice is that it is more probable than not that no breach will be committed, that is good enough" ([36]). The claim against the new employer was unsuccessful.
Partners v First National Finance Corp Plc [1989] 1 WLR 225, taking reasonable steps to protect an equal or superior contractual right may be justified even if this will cause a party to break their contract. The facts of that case concerned a charge holder who had loaned sums to enable a developer to acquire a site. At the same or similar time, the developer entered into a contract with a group of architects giving them the right to develop the site. This proved more difficult than expected and the development stalled. The lender had the usual remedies of calling in the loan etc. open to it but, instead of exercising those, it financed the build itself but insisted, as part of doing so, that the architects be replaced (see paragraph 227F). The architects' claim for inducement of breach of contract was rejected by the Court of Appeal holding that the interference with the architects' contract was justified as being in defence and protection of an equal or superior right under the charge.
Analysis and conclusions on tort of inducement of breach of contract
First ingredient – breach of contract
Second ingredient – inducement
Third ingredient – knowledge
verify that they could do what they were proposing to do. A similar obligation is contained in clause 11.2 of the facility document. The mere fact that Desiman were keen to secure land which was important to the development as a whole, as is evident from the contemporaneous emails, is simply them looking after their own commercial interests and there is nothing sinister in that in my judgment.
vis-à-vis the rights of BHB) is not good enough. The Desiman parties could have obtained the court documents in these proceedings from the P3 parties, or from the Court (the court proceedings being referred to on the UNs at the Land Registry). I agree with Mr Jefferis that the absence of any written record showing what Mr Smith did to investigate matters when he became aware of the contract with Brooke or indeed advice given over the telephone does require consideration. However I do not believe there is anything suspicious in it. Mr Smith had a close working relationship with Mr Fellows and he stated Mr Fellows was not the type of client who wanted reports in writing. There is in any event plenty of contemporaneous email traffic between Mr Fellows, Mr Smith and Mr Marsden from which deductions can be made as to the state of mind of the parties at the time.
"Is the s 106 Agreement now in an approved form? I understand that the s 106 agreement needs to be completed in over to get over an exclusivity agreement clause (in favour of Brooke) which provides exclusivity to Brooke until 21 days after planning permission (and hence the sl06 agreement) has been obtained. May I see the agreement please?
How are things progressing with Brooke? Reading between the lines, perhaps unfairly, I sense that there is an issue with Brooke. Hence the need to complete the s106 to escape the exclusivity.
Is the contract agreed with Brooke? If not, what is outstanding? Can you please send me the current draft and summarise what remains in dispute?"
vexatious, that it was brought on the basis of an agreement which had expired. Desiman had also been recently told that the claim had settled; (4) Thus, even if the grant of the second charge by P3 amounted to a breach of the Exclusivity Agreement, Desiman did not know this.
verify that the contemplated acts would not constitute a breach. The amended facility documentation contained a revised facility agreement which contained a repetition of clause 11.2, to similar effect. Most significantly, during this period, in my judgment, is the fact that Mr Nardelli had been repeatedly assuring and seeking to reassure Desiman that they need not worry as the matter would be settled. Mr Smith gave evidence confirming that, after requesting further information on receipt of the email of 7 February 2019 from VWV he received an e-mail from Katie Hickman of VWV on 15 February 2019 where further information was provided about the claim.
verse" on or about 18 July 2019. Mr Marsden referred back to the email from Katie Hickman and he explained his client was making efforts to dispose of the action. Overall, Mr Smith stated that the impression given by both the information provided by Mr Nardelli and Mr Marsden/VWV was that the claim was not a concern, would be resolved, and a sale was expected still to proceed to either BHB or Legal & General, as had been advised previously. The claim was in fact settled on 22 November 2019. Mr Smith was informed of this by Mr Marsden. I am satisfied that Mr Smith was entitled to rely on what Mr Marsden had told him.
VWV that the CFJL Agreement enabled the land to be purchased for virtually half what would have been payable under the Option Agreement. Mr Fellows explained that Mr Nardelli had explained to him that he did not want to disclose the confidential terms relating to this to BHB for fear it would cause a further negotiation exercise with them. I accept Mr Fellows and Mr Smith's evidence that this is what Mr Nardelli told them. It explained to them his sensitivity in relation to CFJL and the use of CFJL.
verse" from the P3 parties a few times, and accepting oral assurances. He drew my attention to the fact that Mr Smith took a hasty view, in the few days between 20 October 2020 when he received the pleadings to 23 October 2020 when the deal was completed, and apparently relied solely on his own view of the merits of BHB's case, when he was not a litigator. He noted that Mr Smith did not seek counsel's advice.
value. The purchase price declared to the Land Registry on the sale from CFJL to Desiman 2 was only £4m. There was an option to buy back but at £19.2m, when £4m had been paid. The option has now expired, and the Defendants assert it has not been renewed. So, CFJL, he submits, has only an alleged oral promise to sell it back, which would not be enforceable under section 2 of the Law Reform (Miscellaneous Provisions) Act 1989. If the P3 parties are insolvent or become insolvent the 59 acres will, no doubt, rest in Desiman 2, he suggests. This transfer to Desiman 2, not the P3 parties, was not justified. The transfer could have been to the P3 parties, which was a party to these proceedings. The transfer to Desiman 4 was knowingly done to better their position because Desiman was not then a party to proceedings. He submitted the Court will not allow its jurisdiction to evaded by this sort of conduct.
view of this transaction. On its face it is a curious one. It certainly provides ammunition in support of the complaint that Desiman was inciting a breach of contract. However in my judgment what was happening here was not so much to do with any belief or concern as regards a contractual breach, but the desire by Desiman to insulate itself in relation to BHB's proprietary claim and obtain first ranked security. The reason why the land was transferred into Desiman 2 was, as I have found above, in order to enable first ranked security to take place.
valid.
Ltd v Lowthian as quoted in paragraph 353 above. For the reasons identified above in paragraph 381 above I do not consider that Desiman was working to exclude BHB from the site, but in any event this is not the correct question to ask. As for whether or not they had knowledge that was to take place was a breach of contract or that they were wilfully blind, I accept there is evidence which requires an answer from Desiman in this respect.
"58. The exclusivity agreement provided that the aforesaid "P3 Group" would not in relation to any residential property market the property or negotiate with any third party for the sale or lease of the property or enter into any contract for any disposition or development of the property unless Brooke were to withdraw from the transaction.
59. It was my opinion, as advised to Desiman at the time, that Brooke's conduct in failing to agree the sale and purchase agreement demonstrated a withdrawal from the proposed transaction
… I considered that the documentation, albeit poorly drafted, did not anticipate that the exclusivity should apply beyond 31 December 2016
64. Neither Rosemary Louise Henson nor Julian Francis Murfitt and Catherine Rachel Murfitt had entered into any direct contractual arrangement with Brooke. Brooke's purported interest in the property derived from the 2010 Option granted in favour of P3Eco. The 2010 Option itself had come to an end due to no notice having been given by P3Eco to the landowners within the option period to purchase the land (the option period had expired due to the passage of time since the grant of the planning permission)."
verify this evidence is a factor which gives me pause for thought as to whether I should accept his evidence in this respect. I also consider that Mr Fellows was accurately described by Mr Smith as being "in deep" by this time and he judged that he needed to proceed with this transaction to protect the position of Desiman, and this was the reason for using Desiman 2. He was concerned the land would be lost if it was not purchased. This might be said to lend some support to the notion that Desiman and Desiman 2 proceeded with this third transaction with reckless indifference as to the contractual rights of BHB.
view was that the Exclusivity Agreement had come to an end on any analysis given the passage of time since the grant of planning permission. I note, but for my conclusions in relation to the impact of the Tomlin Order, I would have come to the same conclusion.
Fourth ingredient – intent
Defence of justification
very beneficial deal for Desiman 2. It was not to protect loans on the first two transactions.
vehicle for Desiman in relation to this transaction. That is made plain from the contract which refers to sums owed to Desiman. In addition Desiman 2 was a subsidiary of Desiman 2. In my judgment therefore the actions take by the Desiman parties can and should be viewed together and Desiman wished to take steps to ensure the further Murfitt Henson land was acquired to protect its existing lending and security package. I would have concluded it was taking reasonable steps for it to do so but for the fact that I think there is some justifiable criticism in the way it sought to structure the transaction, which was at best confusing and which at worst might be said to have been an attempt to frustrate the proprietary rights or claims of BHB. Ultimately, I have concluded it did not and that it is likely that Desiman would have secured its rights free from any claim by BHB in any event because it acquired its security at the same time as this land was brought into the fold of the P3 parties (including CFJL). I do not consider however the steps taken can be described as reasonable ones and so therefore do not consider this defence would have been made out if the other elements of the cause of action had been made out.
Causation and loss
Issue 9: Is the proposed sale to Countryside a sale at an undervalue?
Issue 10: The misrepresentation claim
Introduction
very much a fall-back claim for BHB, in case I concluded that they lost rights or were prejudiced by entering into the Tomlin Order by the expiry of the Exclusivity Period during the stay. Ultimately, I have concluded they have not been so prejudiced. There is no need for them to rescind the Tomlin Order, since it provided them with the ability to lift the stay and continue with these proceedings. They have lifted the stay and have established their claim to the extent it was valid. The significant change of position the Tomlin Order brought about was that BHB agreed to the section 106 agreement having priority over their UNs. However nothing turns on that since I have concluded BHB do not have a priority claim. Moreover no doubt BHB would have wished this to happen to enable the section 106 agreement to be concluded and planning to proceed. It seems to me, in the circumstances, the misrepresentation claim would only have any relevance should I be wrong in any of my conclusions on the issues I have already decided. In the circumstances, I will state my reasoning and conclusions here on the misrepresentation claim in short order, and consider the elements of representation, falsity and inducement in relation to each of the allegations at the same time. I take the misrepresentations from those alleged in paragraph 22A of the Amended Particulars of Claim.
The first alleged misrepresentation
The second alleged misrepresentation
The third alleged misrepresentation
The fourth alleged misrepresentation
"He said he had organised funding from a body called Desiman. They had agreed to lend him the money he needed to exercise the option on the Paines land and that he did not need any help from Land Invest. He said that his funder would not advance any money unless the unilateral notices were released. He also said he had an offer to purchase the land from a large developer but that they would not go ahead with the purchase until the unilateral notices had been released."
"It was good to meet yesterday and get Wednesday week in the diary for our next follow up meeting to stay abreast of developments at Bicester.
As we all agreed we need to ensure that the S106 is optimised and not signed until there is clarity and agreement on either a sale with the party you are negotiating with or suitable funding in place to allow you move forward, which you feel is effectively there. It's good that you completed with Pains on Monday and have, as you said flexibility with Murfin Henson in order to avoid any critical timing issues for any of us re S106 sing-off [sic].
As we said at the meeting we have alternative funding opportunities so it is critical that we are told straight away if you anticipate any issues with what you are doing so we can set everything in motion (finalising DD etc in a timely manner, conscious as we said of the timelines for such a process."
view of this email sent by Mr Costello on 16 January 2020, and I conclude they probably came later. In addition I cannot be satisfied that material reliance was placed on such assurances. I note in particular that the Tomlin Order did not finally settle the case, if payments were not made, so it is pregnant with the suspicion that the P3 parties may well not pay the money and did not have a solid standby finance agreement in place. I also note from Mr Holleran's witness statement, as referred to in paragraph 406 above that it would seem Mr Holleran had made the decision to accept the proposed terms, and they were agreed, and the assurance as to standby funds came after that.
Issue 11: Is BHB entitled to the relief claimed in the Amended Particulars of Claim against the Defendants by way of injunction, declaration, enquiry as to equitable compensation, Specific Performance of the Agreements and damages?
values have remained static during the relevant period. I provisionally conclude it should be treated as an award of damages assessed at trial, given the nature of the award I have made, which reflects a loss of opportunity to make a profit. I am willing to hear further submissions and argument on that point following the hand down of judgment, as it would suggest no award for interest should be made, but the parties have yet to address me on that.
POSTSCRIPT 1: FOR THE PARTIES
Bicester is the sole survivor of the eco-town concept, and much of it is still yet to be built. According to the World Meteorological Organization, the concentration of atmospheric CO2 has now reached 413 ppm. The UK is currently hosting the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow (on 31 October – 12 November 2021). It is still not too late for the parties to co-operate to enable the project to proceed at a quicker pace than hitherto, to help contribute to a more sustainable housing stock, and a reduction in carbon emissions.
POSTSCRIPT 2: REMOTE OR E-TRIALS
via a video platform using electronic technology with witnesses being called to give evidence from across the UK, and from Spain, without the need to travel. In the Annual COMBAR lecture given by Sir Geoffrey Vos, the then Chancellor of the High Court, on Tuesday 12th November 2019, entitled Future Proofing for Commercial Lawyers in an Unpredictable World, he forecast that climate change would be a factor in the future conduct of litigation and use of modern technology. Covid-19 protocols have accelerated the pace of that change. In my judgment efficiency under CPR 1.4(2)(l) can include the consideration of carbon reduction efficiency. It is not the only factor, of course, and each case should be considered on its own merits, with the ultimate decision being made in order to deal with matters justly. The parties and their legal representatives are to be commended here, however, for effectively co-operating in this respect in enabling this "remote" trial to proceed efficiently. I prefer the term "e-trial", or "e-hearings", however, as no objective observer would conclude that the trial process was "remote". Any future hearings in this matter should proceed in the same way, by way of an e-hearing, absent any further application for a contrary direction.