Castlebay Ltd v Asquith Properties Ltd

LORD JUSTICE CHADWICK: This is an appeal from an order made on 6th June 2005 by Mr James Allen QC, sitting as a Deputy Judge of the High Court in the Leeds District Registry in the Chancery Division, in proceedings brought by Castlebay Limited against the appellant, Asquith Properties Limited.

The proceedings arise out of an option agreement made between the parties and dated 18th August 2003 upon the terms of which Castlebay, a company registered in the Isle of Man, granted to Asquith an option to purchase property at Grammar School Street, Bradford, at a purchase price of £1,000,000. The option consideration was £15,000. The option was exercisable by the service of a notice at any time during the "option period", a term defined in the agreement. As defined, the option period expired on the "termination date". The termination date was defined to mean 22nd December 2004, unless, on that date, the circumstances fell within one or other of five subparagraphs; of which, for present purposes, the relevant was 1.1:

If circumstances did fall within one or other of subparagraphs 1.1 to 1.5 in the definition of "termination date", the termination date was postponed until 21 days after the earlier of the occurrence of one or other of three events set out under subparagraphs 2.1 to 2.3. In the present context, the relevant date or event would have been the date 14 weeks after the date of the grant of a planning permission: see subparagraph 2.2. But, in any event, the termination date was not to be later than 22nd June 2005.

The primary issue between the parties was whether, on 22nd September 2004, a decision was awaited in respect of a planning application submitted by or on behalf of Asquith to the local planning authority; which, in this case, was the City of Bradford Metropolitan District Council. The judge found that no such decision was then awaited. Accordingly, the option period determined; the option was no longer exercisable after that date; and the option notice, served on 15th April 2005, was of no effect.

That issue turns on the meaning to be given, in the context of the agreement of 18th August 2003, to the expression "a decision in respect of a planning application. "Planning application" is also defined in the agreement. The expression means:

"Planning permission" is also a defined term. It means:

The underlying facts may be summarised shortly. On 12th February 2004 Asquith submitted an outline application in respect of "a proposed new build residential development with limited office and A3 use", at a location described as City Gate, Hamm Strasse, Grammar School Street, Bradford. The matters for which approval was sought were siting of buildings, access, design and landscaping. Approval for external appearance was not sought in that application. The activity to be carried out on the site was described as "residential, office, leisure" on a combined floor space of 13,724 m², apportioned as to 12,504 m² to residential use, 1,000 m² as to office use, and 220 m² to leisure use. The number of parking spaces was specified; as were the surface materials for vehicular access and hardstanding and the nature of the lighting. The application was not made in the joint names of Castlebay and Asquith. It was made in the name of Asquith alone; although it contains a certificate that, on 13th February 2004, the day after the date of the application, notice of the application was served on Castlebay. On one view it was not a "planning application" within the meaning given to that expression by the agreement - which requires that the application be in joint names - but no point has been taken on that.

The application was amended by a letter of 4th May 2004 from Asquith's architectural consultants to the Council in which it was requested that the application be treated as omitting the reserved matters for design and landscaping and so as to include only siting of buildings and access. Although not happily expressed, we are asked to assume that what is meant by that request is that the approval of design and landscaping were to be treated as reserved matters.

On 2nd August 2004 Bradford Metropolitan District Council notified Asquith that outline planning permission had been granted in respect of the application made in February 2004, as amended by a revised plan received on 23rd June 2004 which showed altered access. There is no reference in that grant to the amendment made by the letter of 4th May 2004, but its effect is carried through into the conditions.

The permission of 2nd August 2004 was granted, subject to 17 conditions, the first of which was in these terms:

On 17th December 2004 Asquith submitted a reserved matters application, seeking approval in respect of design, external appearance and landscaping - the matters reserved by condition 15 of the outline permission. Again, that application was not made in joint names; although notice of it was given to Castlebay. The application was accepted as valid by the Council on 20th December 2004, two days before the option period would have expired under the terms of the agreement.

On 23rd December 2004, Messrs Wells Connor & Co, solicitors for Asquith, wrote to Castlebay's solicitors, Messrs Lee & Priestley, in these terms:

Lee & Priestley replied on 7th January 2005; in a letter which contained the following paragraphs:

Two further points were taken in a letter from Lee & Priestley, dated 7th March 2005. The first was that under 4.1 of the agreement Asquith were required to make a planning application within six months following the date of the agreement, with time being of the essence. The letter went on:

No point on clause 4.9 is now pursued; but the first of those two points - that a planning application which is said to include the reserved matters application made on 17th December 2004 could not have been made within the six month period prescribed by clause 4.1 of the agreement - was argued before the judge and is raised in this court by way of respondent's notice.

The issues raised in the correspondence between the parties' solicitors were not resolved. On 12th May 2005, Castlebay issued a claim form under CPR Part 8 seeking the following relief:

That application came before the judge on or about 6th June 2005. As I have said, he held that the option period had determined on 22nd December 2004; on the basis that, on that date, no decision was awaited in respect of a planning application submitted by or on behalf of Asquith to the local planning authority.

The judge's reasons are set out in paragraphs 33 and 41 to 45 of his judgment. After referring to the provisions in sections 57, 58, 70 and 92 of the Town and Country Planning Act 1990, and to articles 3 and 4 of the Town and Country Planning (General Development Procedure Order) 1995, (SI 1995/419) he said this at paragraph 33:

It followed, in the judge's view, that the only relevant application for planning permission was that made on 12th February 2004. Outline planning permission was granted on that application on 2nd August 2004, and no decision in respect of that application was awaited on 22nd December 2004. Accordingly, the judge ordered that the entry in the charges register of the title to the development site be cancelled; and he ordered that the defendant, Asquith, be restrained from applying for registration of any further entry. He gave permission to appeal, expressing the view that the defendant had a real prospect of success on an appeal, as this court might not uphold his construction of the agreement. Subsequently, he stayed his order of 6th June 2005 pending the appeal.

As I have said, Asquith has appealed from the order of 6th June 2005. It does so on the grounds set out in section 7 of the appellant's notice. They may be summarised - fairly, I think - as a contention that the judge was wrong to construe the expression "application for planning permission for the Development" - where that expression appears in the definition of "planning application" in the agreement - so as to exclude the application made on 17th December 2004 for approval of reserved matters.

What is said, in effect, is that approval of reserved matters was necessary to enable the development to be carried out; so that the phrase "application for planning permission for the Development" must be given a meaning which reflects that need. The appellant points out, also, that, contrary to the view which the judge expressed, "planning application" is not a term of art used in the planning legislation.

It is common ground, I think - and, if not, it seems to me beyond dispute - that the agreement of 18th August 2003 must be construed with the planning legislation in mind. The planning legislation is, plainly, part of the background which the parties to an agreement of this nature must be taken to have in mind at the time when they make the agreement; and, indeed, the agreement itself makes a number of references to the Town and Country Planning Act 1990, which it includes as a defined term.

It is convenient, therefore, to refer to the relevant provisions of the 1990 Act. They are primarily contained in Part III of the Act. Section 57(1) imposes the underlying requirement:

Section 62(1) - in the form in which it was when the agreement was made in August 2003 - provided that:

Section 65 of the 1990 Act is in these terms, so far as material:

Section 70 of the Act provides for the determination of applications. Subsection (1) is in these terms:

Section 78 provides a right of appeal against planning decisions and the failure to take decisions. Subsections (1) and (2) are in these terms, so far as material:

Section 92, to which section 70(1) is made subject, is concerned with outline planning permission. It is in these terms, so far as material:

Section 336(1) of the 1990 Act contains general definitions. The following are of relevance in the present context. "Planning permission" means permission under Part III of the Act. That is to be seen in contrast with the definition of "planning decision", which means a decision made on an application under Part III. "A planning decision" is, plainly, a wider definition than a decision to grant or refuse a planning permission. There is no statutory definition of "planning application"; but the phrase "application for planning permission" within the Act must mean an application for permission under section 58(1) and not an application for approval of reserved matters under section 92(2)(a). That that is the correct view is confirmed by the decision of the Divisional Court in R v Bradford upon Avon Urban District Council, ex parte Bolton [1964] 1 WLR 1136 at pages 1147 and 1148.

As I have said, the relevant Development Order for the purposes of section 62 of the 1990 Act is the General Development Procedure Order 1995. Article 1(1) of that Order contains definitions of "outline planning permission" and "reserved matters":

Article 3 of the General Development Procedure Order provides for an application for outline planning permission. Article 3(1) is in these terms:

Article 4 of the 1995 Order addresses applications for approval of reserved matters:

It is clear that received planning wisdom - as embodied in the editorial comments in the Encyclopaedia - is that an application for approval of reserved matters is not an application for planning permission. And, as I said, that has a firm foundation in the decision of the Divisional Court in the Bradford upon Avon case.

It follows from that analysis of the statutory provisions that the judge's summary in paragraphs 33 and 41 of his judgment is plainly correct. Indeed, I do not understand that summary to be the subject of any serious criticism on this appeal. What is said, however, is that - whatever may be the correct meaning of the expression "application for planning permission" in the context of the legislation and the 1995 Order - the expression which the judge was required to interpret is that in the agreement: "application for planning permission for the Development". Reading that expression together with the agreed definition of the development, the relevant application, it is said, is an application for planning permission for development comprising "the demolition of any buildings on the property and the construction and erection of dwellinghouses apartments and flats on the property, as the grantee may require together with any car parking access roads and other facilities and/or development as the grantee shall reasonably require to facilitate the development of the property for residential purposes". And it is said that "planning permission for the Development" cannot have been obtained until all reserved matters had been approved; because until all reserved matters had been approved the grantee, Asquith, was not in a position to carry out the development which is contemplated by the agreement.

In support of that submission, we were taken to the decision of this court in Hargreaves Transport Ltd v Lynch [1969] 1 WLR 215. It is important to have the facts of that case in mind. The vendor, Mr Lynch - who was a demolition contractor - had applied to the local planning authority for outline planning permission for use of the site as a transport depot. While that application was outstanding, he entered into a contract for the sale of a site to Hargreaves Transport Limited - which, as its name suggests, was a transport company. Condition 9(a) of that contract was in these terms:

Outline planning permission was granted for the use of the site as a transport depot; so satisfying, at first sight at least, condition (i). But the outline permission imposed a condition for reserved matters approval in these terms:

The purchaser sought to rescind the contract and recover the deposit which it had paid. It was held by this court that it was entitled to do so. Lord Denning MR said this, at page 219A and B:

It can be seen, therefore, that the decision in Hargreaves turned on the particular circumstances of that case set out by Russell LJ in his judgment: the urgency known to both parties for the purchaser to start to use the site as its depot as soon as possible; the uselessness of the site to the purchaser until work could be started on it; the fact that the purchaser could not lawfully start work until the condition requiring approval of detail was resolved. Those circumstances were enough - and, in Russell LJ's words, just enough - to justify construing clause 9 in the sense of it being a reference to a planning consent which would enable work to start on the site forthwith.

I turn, therefore, to the agreement in the present case. It is, of course, an option agreement. The grantee of the option, Asquith, has a limited period - the option period - in which to decide whether it wishes to exercise the option and purchase the property. There is an obvious tension between the interest of the owner, Castlebay, in not restricting its power to dispose of the site elsewhere for longer than is reasonably necessary to enable Asquith to reach an informed decision, and the interest of Asquith in having as long as it needs to reach a decision, with as much assurance as it can obtain from the local planning authority that it will be able to develop the site as it wishes. That tension is resolved by the provisions which define the option period; and, in particular, the provisions which determine the termination date on which that period will end.

It can be seen, at once, that the parties agreed that the termination date would fall on or within two dates which were six months apart. The option period would not terminate before 22nd December 2004; and it would not extend beyond 22nd June 2005. So Asquith had until 22nd December 2004 to satisfy itself as to the matters which would affect its ability to develop - whether or not it needed that time - and it would have only until 22nd June 2005 to satisfy itself about those matters - again whether or not it needed any more time. That was the essence of the bargain which the parties struck. But there was an opportunity for an extension within the six month period.

The circumstances which would lead to the option period continuing after the 22nd December 2004 - and, potentially, for a further six months - are set out under the five subparagraphs in the definition of "termination date". They were these:

Those paragraphs have to be read with the definitions of "appeal" and "proceedings" in mind. "Appeal" is defined as:

It is to be noted that "appeal" is defined in terms which include an appeal to the Secretary of State under section 78(1) of the Act against the refusal of a planning application. Section 78(1) of the Act, which I have read earlier, makes a clear distinction between paragraph (a), the refusal of an application for planning permission, and (b) the refusal of an application for any consent, agreement or approval of the authority required by a condition imposed on a grant of planning permission. In other words, section 78(1) makes a distinction between the refusal of an application for planning permission and the refusal of an application for approval of reserved matters, a distinction which is common throughout the Act and the General Development Procedure Order.

It is relevant to see for how long the period is extended in the circumstances that one or other of the five paragraphs of the definition of "termination date" are satisfied. The extension was for 21 days after the earlier of: 2.1, the date on which proceedings are exhausted and a planning permission is not granted or upheld; 2.2, the date 14 weeks after the date of grant of planning permission unless prior to such date proceedings shall have been instituted, in which case it shall be the date referred to in paragraph 2.1; and 2.3, the date six weeks after the date of issue of a refusal by the Secretary of State, unless within such period proceedings shall have been instituted in which case it shall be the date referred to in paragraph 2.1. In that context "refusal" is also a defined term. It means:

I have read those provisions in order to see whether they shed some light upon what the parties had in mind in the present case. But, taken together, they support whichever conclusion is reached once it is decided that "planning application" does mean an application for planning permission in the Town and Planning sense; or it is decided that "planning application" does have the wider meaning for which the appellants contend - that is to say, does include an application for approval of reserved matters.

For those reasons I do not find assistance in those various provisions, save this: this is clearly an agreement which has been drawn with the provisions of the planning legislation fully in mind. In those circumstances, I would expect the parties to have intended, by the phrase "application for planning permission", the meaning which that phrase has long been recognized to bear in the context of planning legislation. If there were a context which required that meaning to be enlarged,, the court would give effect to that requirement, as it did in the Hargreaves case. But, absent any context which requires some larger meaning, I am left with an agreement which is intended to strike a balance between the interests of the owner and the interests of the grantee. And I am left with the firm conclusion that, if these parties had intended some meaning to be given to the phrase, "any application for planning permission" wider than the meaning which that phrase normally bears, they would have made that clear.

The parties have not made that clear. So I am left with the meaning which the judge gave to that phrase; which is the meaning which it bears in planning legislation. There is no reason in the present case to give a wider meaning by reason of circumstances analogous to those in the Hargreaves decision. There was a balance to be struck between the interests of the two parties; and it is impossible to take the view that a balance struck by giving that phrase its normal planning meaning other than a sensible and commercial meaning arrangement.

For those reasons, I would dismiss this appeal. I do not find it necessary to consider the point raised by the respondent's notice.

LORD JUSTICE RIX: I agree. I agree.