Chantry Estates v Anderson

This is an appeal from the judgment of Morgan J on 3 October 2008, [2008] EWHC 2458 (Ch). Permission to appeal was refused by the Judge and by Mummery LJ on the papers. It was subsequently granted by Moore-Bick LJ at a renewed application for permission which he heard on 29 February 2009. At that hearing the second appellant, Mrs Anderson, was represented by counsel and the first appellant was not. At this hearing it is the other way round.

Moore-Bick LJ gave permission to appeal confined to a single question, namely whether or not a certain term terms should be implied into the option agreement which he had to consider. It is quite clear that so far as that issue is concerned, the two appellants had and have a single common interest and a common enemy. There is no question of any conflict between them so far as that issue is concerned. Indeed in a note which we have just been shown, which we understand was prepared by an American lawyer over the weekend on behalf of the second appellant, it is said as follows:

The second appellant sought a number of adjournments. Apart from at least one earlier, an application was made last week which I refused. A further application was made this week on Monday. I refused that too. I was concerned with the fact that further delay would be quite unfair on the respondents, who had already had the appeal pending for over a year since permission was given. On top of that it was quite clear that, so far as I can see, although the second appellant has lost her legal representation, all the points she was going to advance were going to be made on behalf of the legally represented first appellant, as indeed is now confirmed by the note which I have just read out. It is in those circumstances that we proceeded to hear this case. We were concerned why the solicitors for the second appellant had withdrawn so late. We have seen a note from the solicitors and as far as I am concerned I propose to say no more about it.

Having said that much about the representation, I can turn to the case itself. Morgan J gave summary judgment ordering specific performance of a contract for the sale of a property, 63 London Road, Camberley. The claimants, Chantry, said that the contract existed because they had validity exercised an option to purchase given to them by the two appellants in a written contract at 26 September 2006. Morgan J so held. The defendant appellants say that at the time when the option was purportedly exercised the time for doing so had expired and accordingly there was no binding contract for sale.

The case turns, as is common ground, on the agreement of 26 September 2006. I turn to the provisions relevant to this appeal. The agreement in clause 1 contains a number of definitions. The relevant ones are “Challenge Period” and “Option Period”:

Clause 12 sets out the intending seller's obligations. Mr Hutchings in his splendidly clear and concise argument invited us to get something out of Clause 12 (1) a clause requiring the seller to keep the property effectively in good order and not to make things more difficult if the option is exercised. He said this showed an onerous obligation and it would be therefore more unlikely that the option period during which the obligation on the intending seller would potentially run for a substantial period. I am not impressed with that – the clause requires no more than that the property be kept in the same condition as at the time of the option. It is not onerous to require an owner to keep his property in good condition.

Clauses 12.2, 12.3 and 12.4 read as follows:

Finally it is necessary to refer to Clause 19, headed “PURCHASE PRICE” but in fact dealing with other matters:

Following the signing of the agreement the following events happened. On 9 March 2007 the planning permission referred to in Clause 19 was refused. On 21 March 2007 Chantry instituted an appeal. The basic six month period provided for in the agreement expired on 25 March 2007. On 4 April 2007 Chantry did that which is said to amount to a breach of the implied term of the agreement, that is to say, it asked for the appeal which it had made to be put into abeyance.

On 27 April, later in the same month, Chantry sought planning permission for a nursing home development. That in due course was granted. Chantry purported to exercise their option on 2 May 2008. Shortly thereafter Chantry withdrew the appeal which had been put into abeyance.

Mr Hutchings’ submission is that the basic machinery set up by this agreement was to provide an essentially six month period which could be and would be extended only as a result of any events which were beyond Chantry's control. He took us to the various provisos and said they had all that in common. I confess I am not even convinced by that. There is no obligation on Chantry to act with expedition anywhere in the agreement except in one place; that is in Clause 19, which did require Chantry as soon as reasonably practicable to resubmit the earlier planning application referred to, namely for 20 apartments with underground parking.

The agreement contains and clearly contemplates that there may be other planning applications made by Chantry. The provisions which I have read out about the obligations of the intending seller to assist shows that Chantry are given a free hand to make lots of applications. Nor am I convinced that the agreement contemplates only a short period. There is after all the very odd back stop provision that the option period shall not exceed the perpetuity period. But more generally than that, this is a commercial contract in which the buyer would obviously be trying to maximise his profit and it contemplates that he will be making planning applications clearly with that object in mind.

The basis of Morgan J's judgment is that it simply was not necessary to imply any of the suggested terms. The suggested terms are: (1) that the claimant/respondent would pursue any appeal against the refusal of the grant of planning permission (within the meaning of the proviso to the definition of 'option period' contained in clause 1 of the option agreement) using reasonable efforts and with reasonable expedition; (2) that the claimant/respondent would not take any active steps to ensure that the determination of any appeal taken in extending the options period as defined remained in abeyance or was delayed. In the course of argument Mr Hutchings added, “was placed or remained in abeyance” and a further alternative was suggested, “not for the sole purpose of extending the option period”.

We were referred essentially to one authority on the question of implied terms, that being the most recent, Belize Communications Limited v Belize Telecom Limited & Anr [2009] UKPC 11. The judgment of the Privy Council was delivered by Lord Hoffmann. He considered the question of what is meant by an implied term in perfectly general terms, making it clear that the question is one of construction and not one where the court adds to the contract something which is not there after one has gone through the process of construction. He said at paragraph 16:

He then went on to say that the meaning concerned is that which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed. He went on to say in paragraphs 17 and 18 as follows:

It follows that what one is looking for as the reasonable addressee is whatever the agreement means in context. That may be something else from what at a first look it apparently means. But that will be so when the only meaning consistent with the other provisions of the instrument read against the relevant background is that something else. Lord HoffmannHe said in the same paragraph:

So when one approaches this option agreement one asks and is required to ask whether in its provisions as to the option period must mean what is contended for by the proposed implied terms. And I simply do not see why it must. It works perfectly well without it. Things might be different if it were possible to extend the option period indefinitely by simply applying successively for the appeal to be kept in abeyance but that is not the law. The planning inspector is not entitled and in practice does not keep appeals pending indefinitely. The agreement perfectly reasonably allows Chantry to make planning applications, to pursue planning applications to its best advantage solely to see whether it is worth exercising the option. The option can be exercised the day after the agreement or it can be exercised at the end of the option period, which includes a determination of the appeal if such happens, concerning the planning application identified in Clause 19.

There was some debate as to whether the option period runs even after the determination of that, because Clause 19 contemplates when that has failed that Chantry must make another application for the 20 flats with overground parking. As I see it that could string things out even further. Mr Morgan for the respondent did not go so far as to submit that "the written planning permission or appeal decision" referred to in the definition of “challenge period” means either the underground parking planning application or any subsequent application for overground parking, but he did say that the mere fact of this provision suggests that the underground parking permission did not on the face of the document contemplate the more urgent and therefore shorter time requirements suggested by the appellants. I accept that.

The plain fact is that on any reasonable view this agreement does not need to contain the suggested terms. One is not driven to the conclusion that it must mean. those terms. This may have been a bad deal, it may have been a good deal but it was the deal the parties entered into. I would dismiss this appeal.

I agree.

I also agree. The tragedy behind this dry issue of law is that the real purpose of the first defendant in trying to resist a summary order for specific performance of his obligation to convey the house was to try to extract more money for it than was due under the option. The defence he filed in person makes this perfectly plain. The only result, I fear, will have been the diversion of much of the proceeds into the pockets of lawyers.