London Borough of Barnet v Barnet Football Club Holdings Ltd

Judgment

The Deputy Judge:

Introduction

1. In these proceedings the Claimant, the London Borough of Barnet (“Barnet LB”) is seeking rectification of two instruments.

i) The first is a Transfer, on Land Registry Form TR1, dated 27 March 2002 and executed under the seal of Barnet LB. The Transfer was signed by Bamet LB’s Mayor and by the Borough Solicitor, Mr Jeff Lustig. The other party to the Transfer was the Defendant, Bamet Football Holdings Ltd (“Holdings”). On behalf of Holdings the Transfer was signed by Mr Tony Kleanthous as a director, as well as by Holdings’ Secretary.

ii) The second is a Supplemental Deed also dated 27 March 2002. The Deed, sometimes referred to as “the Overage Deed”, was executed in the same way as the Transfer.

2. The Transfer and the Deed were to give effect to a sale of the freehold of a football ground, with stands and ancillary facilities, known as “Underhill Football Ground”. This is the football ground, occupied by Barnet Football Club Limited (“the Club”). It was and is held from the freeholder by the Club under a lease dated 20 August 1986. The Lease was for a term of 99 years from 25 December 1985 at an annual rent of £50. Broadly speaking the Lease requires the Underhill Ground to be used only by the Club for the playing of association football, and contains restrictions on alienation.

3. The agreement for the sale of the Underhill Ground was made in a written Contract, signed in two parts and exchanged on 27 February 2002. It was Mr Lustig in his capacity as Borough Solicitor who signed the part of the contract executed on behalf of Barnet LB. No rectification is sought of this Contract, although it is common ground that the two instruments of which rectification is claimed were in precisely the form required by the Contract.

4. What is said on behalf of Barnet LB is that the matter in the two instruments which requires to be rectified is the product of a mistake, a mistake which is equally to be found in the Contract and which occurred in the process of reducing to writing the transaction which had been negotiated between the parties.

5. Initially the rectification claim was pleaded and presented on alternative bases. The first was that of common mistake: it was claimed that Barnet LB and Holdings executed the two instruments, and the Contract, while labouring under a shared mistake as to what was contained in the two instruments and believing erroneously that the instruments gave effect to a (different) transaction about which they had both reached agreement. The second was that Barnet LB was labouring under such a mistake, but that Holdings had become aware of that mistake and had been guilty of sharp practice in taking advantage of that mistake and not disabusing Barnet LB.

6. In the event, however, the first basis of claim was not pursued with Mr Graham Slyper, the one witness called on behalf of Holdings, and is unsustainable. This is because there is really no ground for thinking that Holdings, or anyone on its behalf; was mistaken as to what was provided in the two instruments, or in the Contract, or as to the effect of what was provided, when those various documents were being executed. Barnet LB’s rectification claim must therefore succeed, if at all, on the second basis. If it does succeed, Barnet LB also claims consequential rectification of the registered title to the Underhill Ground.

7. As an alternative to rectification of the two instruments of 27 March 2002, Barnet LB seeks a declaration that the Transfer “is void by virtue of section 123(2) of the Local Government Act 1972”, and consequential rectification of the registered title.

8. Section 123(1) of the 1972 Act provides Barnet LB with a general power “to dispose of land held by them in any manner they wish”; but the power is prefaced with the words “Subject to the following provisions of this section...”. Section 123(2) of the 1972 Act then provides as follows:

“(2) Except with the consent of the Secretary of State, a council shall not dispose of land under this section, otherwise than by way of a short tenancy, for a consideration less than the best that can reasonably be obtained.”

9. The argument of Barnet LB is that the Secretary of State did not consent to the disposal of the Underhill Ground on the terms of the Contract and that that disposal was for a consideration which was less than the best that could reasonably have been obtained. Accordingly, submits Mr Grant Crawford, Counsel for Barnet LB, the disposal was beyond the capacity of Barnet LB and either void or capable of being avoided by Barnet LB. It should be noted, however, that Barnet LB does not in this action contend that the disposal was unauthorised specifically, Barnet LB does not claim that the sale of the Underhill Stadium on the terms of the Contract was outside the scope of the authority given by Barnet LB for the sale so that for that reason the Transfer and Deed are to be set aside.

10. Holdings denies that the consideration obtained was less than the best reasonably obtainable, while accepting that the consent of the Secretary of State was not obtained. However Mr Andrew Hunter, Counsel for Holdings, submits that by reason of section 128(2) of the 1972 Act Holdings’ title to the Underhill Ground cannot be attacked on the ground of any failure on the part of Barnet LB to obtain the consent of the Secretary of State, always assuming that consent to have been required by section 123(2). Section 128(2) is in the following terms (omitting immaterial parts):

“(2) Where under the foregoing provisions of this Part of this Act ... a local authority purport to ... dispose of land, then-

(a) in favour of any person claiming under the authority, the ... disposal so purporting to be made shall not be invalid by reason that any consent of a Minister which is required thereto has not been given ... and

(b) a person dealing with the authority or a person claiming under the authority shall not be concerned to see or enquire whether any such consent has been given or whether any such requirement has been complied with.”

The Transfer and Deed

11. The Transfer provides for the freehold title of the Underhill Ground to be transferred to Holdings for a price of £10,000. In addition the Transfer contains a restrictive covenant. It is short and clear. Leaving out certain immaterial words it is as follows (emphasis added):

“The Transferee to the intent and so as to bind the property hereby transferred ... covenants with the Transferor ... that for the period of ten years from the date hereof the Transferee and those deriving title under it will not use the land hereby transferred or any part of it for any purpose other than for the playing of Association Football by Barnet Football Club and for purposes ancillary thereto.”

12. The Deed provides circumstances in which Holdings can require that the restrictive covenant should be modified or released early, before the lapse of ten years from 27 March 2002. In certain circumstances Holdings would have to pay Barnet LB further consideration for requiring the modification or release of the restrictive covenant; in others nothing further would be payable.

13. The material provisions of the Deed are as follows.

i) There are three recitals. These identify the Contract and the Transfer and add that:

“It was agreed in the course of negotiations leading to the Contract that the parties should enter into this Supplemental Deed the provisions of which are supplemental to the Contract and the Transfer”

ii) There are various definitions in clause 1. These include a definition of “the Cut-Off Period”, which is to have the meaning given in clause 7.1. There is a definition of “Open Market Value”, which is to have the meaning given in the schedule; and “Further Consideration” is defined as “the additional consideration calculated in accordance with the schedule”. Finally there is a definition, in clause 1.6, of the expression “Permanently Relocate”. This is to mean:

“the Football Club [that is Barnet Football Club Ltd] playing its first team Association Football fixtures at a site or sites other than [the Underhill Ground] for a continuous period in excess of ten years or having the settled intention of doing so for the foreseeable future”

iii) Clause 2.1 asserts that:

“By reason of the covenant restricting the use of the [Underhill Ground] contained in the Transfer the amount of the consideration to be paid for the initial acquisition of the [Underhill Ground] was [£10,000]”

iv) Clause 2.2 needs to be set out in full. It reads as follows (emphasis added):

“During the subsistence of this Agreement the Vendor at the request in writing of the Purchaser (“the Purchaser’s Request”) and upon prior payment of the Further Consideration will at the Purchaser’s expense enter into a deed varying the covenants imposed by the Transfer (a “Deed of Variation”) to such extent only as shall be in accordance with the terms of this Agreement SAVE THAT the Purchaser will not be required to pay the Further Consideration in the event that the Football Club Permanently Relocate to a stadium built by the Purchaser or a direct subsidiary company within the borough boundaries of the London Borough of Barnet for the time being the said stadium to have a minimum of 6,000 seats and to be constructed to meet the then prevailing standards required by the English Football Association PROVIDED ALWAYS that the provisions of this clause will only be of effect (a) in the event that the Football Club Permanently Relocate to a stadium with facilities at least equivalent to that which it enjoys at the date hereof and (b) if planning permission is granted in respect of the [Underhill Ground] as an exception to Green Belt policy or the Green Belt designation in respect of the Property is removed.”

v) Clause 2.3 is also important. It provides as follows (emphasis added):

“If at any time within the Cut-Off Period the Football Club shall enter into liquidation whether compulsory or voluntary (save for the purpose of amalgamation or reconstruction) or has a receiver appointed of its undertaking then the Vendor will at the Purchaser’s expense and upon prior payment of the Further Consideration enter into a Deed of Variation to such extent only as shall be in accordance with the terms of this Agreement”

vi) Clause 3 deals with the contents of the Deed of Variation which could be required pursuant to clauses 2.2 and 2.3. This is to be in the form agreed between the parties and, in default of such agreement, to be settled by leading conveyancing counsel appointed by agreement or by the President of the Law Society. Surprisingly the Deed contains no express guidance as to what should be included in the Deed of Variation; but in view of the provisions dealing with the assessment of the Further Consideration, the contemplation must be that the extent of the modification of the restrictive covenant would depend, at any rate in part, upon what was proposed to be done with the Underhill Ground during the remainder of the ten-year period.

vii) Clause 4 provides for the ascertainment of the Further Consideration in accordance with the schedule and for its payment. Broadly speaking the Further Consideration is to be 60% of the excess of the “Open Market Value” of the Underhill Ground over and above £10,000. The Open Market Value is itself to be agreed between the parties or settled by an expert and is to be the best price at which the freehold of the Underhill Ground could have been sold for cash consideration by private treaty assuming (a) vacant possession, (b) that “the state of the market levels of values and any other circumstances were on any earlier assumed date of exchange of contracts the same as on the date of the Purchaser’s Request” and (c) that “the relevant Deed of Variation has already been entered into”.

viii) Clause 7 is headed “Cut-Off Period”. The first words of sub-clause 7.1 are, “This Agreement shall endure for a period of 10 years from the date hereof.” The remainder of that sub-clause provides further that “on the expiration of the said period all the provisions of this Agreement shall cease to operate and be of no effect...”; and sub-clause 7.2 provides for Barnet LB, if requested, to cooperate with Holdings at the end of the ten-year period in doing whatever might be needed to “discharge” the Underhill Ground, but “without prejudice to the continuing effect of all the provisions contained or referred to in the Transfer.”

14. It is important to note two features of the arrangements provided by the Transfer and the Deed.

i) The first, and obvious feature, is that the Deed’s life, like that of the restrictive covenant, is limited to ten years. After that time the Underhill Ground will be free of the restrictive covenant; and no further amount is to be paid to Barnet LB pursuant to the Deed, This ten-year cut-off is central to the arrangements and “sticks out like a sore thumb” (to use the language of Mr David Stephens, one of the witnesses called by Barnet LB).

ii) The second is that the payment of any further amount by Holdings to Barnet LB is in effect optional. Payment is to be made only if Holdings wishes to have the restrictive covenant modified or released before the lapse often years. Even then there are circumstances in which there can be no obligation resting on Holdings to pay for the modification or release, namely on the Club’s permanent relocation to a stadium within Barnet.

15. As a device for securing for Barnet LB a share of any development profit which, except in the event of the Club’s relocation within Barnet, might in the future be made from the development of the Underhill Ground otherwise than as a football stadium, if that is what the restrictive covenant and the Deed were supposed to establish, these arrangements as they stand are in my judgment inept. As the ten-year period elapses the value of the restrictive covenant as a bar to development, and hence as a device for securing to Barnet LB a share of any development profit to be made on the Underhill Ground, will diminish to the point of extinction. This is quite apart from the fact that, on the Club “permanently” relocating within Barnet during the ten-year period, no part of any development profit would need to be shared with Barnet LB for releasing the restrictive covenant.

16. The argument advanced by Barnet LB is that the restrictive covenant and the Deed were supposed to establish just such a device. The rectification claim seeks the elimination of the ten-year cap in order to make the device fully effective. Barnet LB’s alternative argument, that based on section 123 of the 1972 Act, is that in the absence of rectification the Underhill Ground was not sold for the best consideration reasonably to be obtained.

17. In order to see how these arguments come to be made it is necessary to say something about the parties, the witnesses, and the context in which the events unfolded.

18. However, I should say at the outset that in my judgment Barnet LB got a poor bargain, a fact known to Holdings. Barnet LB was “in the position of a trustee in relation to the land which it holds on behalf of the community”: that was how Morison J described the relevant local authority in a case (The Queen on the application of LIDL (UK) GmbH v Swale Borough Council (Unreported, 23 February 2001)) cited to me by Mr Hunter. One may perhaps sympathise with the community which Barnet LB serve; but it is difficult to sympathise with Barnet LB. Sadly Barnet LB did not act in relation to the sale of the Underhill Ground with care, and Holdings has taken advantage of that.

19. The question is whether Holdings is entitled to keep what on the face of the Transfer and the Deed in their present form it appears to have. For the reasons I explain, in my judgment it is,

The Parties

20. Barnet LB is of course the local authority for an area of north London. That area included land designated as Green Belt, part of which was the Underhill Ground.

21. I have not been provided with a copy of the constitution of Barnet LB. However the witnesses called on its behalf have explained to me what procedures and authorities would be required for the sale of land. Broadly speaking the individuals concerned would either be members, that is elected Councillors, or officers, that is salaried employees or officers. The sale would need to be proposed to and sanctioned by the elected members by an appropriate organ or individual. Once given, the sanction would delegate to some officer the further conduct of the sale, authorising that officer to conclude the sale. The formulation of the proposal for sanction would be prepared by an officer, who would have negotiated the proposal.

22. In the present case it was Mr Stephens who negotiated and prepared the relevant proposal. He is now Barnet LB’s Chief Valuer and Development Manager, and at the time was Property Services and Valuation Manager. He is also a Member of the Royal Institution of Chartered Surveyors, and has over 31 years of post-qualification experience as a general practice surveyor and valuer.

23. Two procedures were available for obtaining the sanction of elected members. Barnet LB had a “cabinet” of elected members to which decision making power was delegated. Alternatively a “delegated powers” procedure was available. The proposal could be considered and commented on by senior officers and an elected member. With the agreement of the elected member, the proposal could then be decided upon by a senior officer.

24. In the present case it was initially Mr Stephens’ expectation that the proposal should be decided upon at a meeting of Barnet LB’s Cabinet held on 16 July 2001. To this end he prepared a draft Report to Cabinet: in form the Report was to be that of “the Cabinet Member for Resources” (at the time Councillor Chopra), and to have been contributed to by “Head of Development and Regeneration” (at the time Mr Paul Chadwick, Barnet LB’s Acting Head of Regeneration), while nevertheless acknowledging that Mr Stephens had been one of the authors of the Report.

25. In the event, for reasons which do not matter, the proposal was not considered at that meeting. Instead, following the meeting of 16 July 2001, the “delegated powers” route was followed. This involved the preparation by Mr Stephens of a Delegated Powers Report (“the DP Report”). The proposal as set out in the DP Report was considered by three officers, one being the Chief Executive, Mr Leo Boland, another being the Borough Treasurer and the third being Mr Lustig. The elected member who considered the proposal and gave sanction for the sale to be authorised in this way was Councillor Chopra. Finally, on 13 November 2001, the proposal was considered by Mr Paul Chadwick. On that day he approved the sale by signing the DP Report.

26. The effect of the approval was to delegate to Mr Lustig as Borough Solicitor the further conduct of the sale. Within his department the case was allocated to Mr Steven Strange, at the time a Principal Legal Assistant. He handled the conveyancing for Barnet LB, consulting Mr Stephens as necessary. His immediate superior and team leader was Philomena Jemide; and on one occasion he consulted her. Although Mr Lustig signed all the material instruments on behalf of Barnet LB, there is no indication that he had any other involvement in the conveyancing once Mr Chadwick signed the Delegate Powers Report.

27. The witnesses called by Barnet LB were Mr Stephens, Mr Strange and Ms Jemide. Their evidence impressed me as direct and helpful and, subject to an important qualification, I accept what each said. The qualification is that they were giving evidence about meetings and conversations, often with only limited assistance from contemporaneous records. Inevitably they could not remember accurately all the detail of what took place.

28. No evidence was given by any of the other Council officers or members. The witnesses who did give evidence did not know of any reason why these others could not have been called.

29. Holdings, a company formed at about the beginning of April 2001, has one shareholder and director, Mr Kleanthous. He and his wife held the vast majority of the shares in the Club until 26 February 2002, when their shares were transferred to Holdings. In practice Mr Kleanthous has at all times been in a position to control what is to happen to the Lease.

30. As mentioned, one witness was called on behalf of Holdings. This was Mr Graham Slyper, a Fellow of the Royal Institution of Chartered Surveyors. Since 1975, several years after qualifying, he has worked for Strettons Chartered Surveyors, of which he is now a director with responsibility for the property auction department (a department which realised some £115 million during 2003). He is a director of the Club. However he had no formal position in relation to Holdings.

31. In connection with Holdings’ purchase of the Underhill Ground it appears that Mr Slyper acted as a director of the Club and as an adviser to Mr Kleanthous and Holdings. He was plainly the agent of those three persons in his dealings with Barnet LB. He also kept Mr Kleanthous informed as negotiations progressed, reporting to Mr Kleanthous and copying him on much of the correspondence.

32. Although Mr Slyper was modest about his skills other than in relation to the auctioning of property, he impressed me as astute and competent. I have no doubt that he was at all times well on top of the negotiations being conducted with Barnet LB.

33. On a number of points I was unable to accept Mr Slyper’s evidence. These I explain later in this Judgment. On occasion Mr Slyper tended, I dare say unintentionally, to put an attractive varnish on what was really a tale of failure and mismanagement by Barnet LB of which Holdings has been the witting beneficiary.

34. Critically, I am sure that Mr Slyper recognised in December 2001 that in what appeared to have been placed on the table by Barnet LB in relation to the sale of the Underhill Ground the balance of advantage was hugely in favour of his principals and was nothing like what he had been discussing with Mr Stephens back in the Summer of 2001. I am also sure that he thought that the change from what he had been discussing was inexplicable except on the ground of some mistake or failure within Barnet LB. Had Barnet LB made the change as a matter of conscious decision, perhaps as a matter of policy or for some purpose of negotiation, he would have expected Barnet LB to draw attention to the change and its reasons. I am sure that Mr Slyper thought that it would not be prudent to enquire directly of Barnet LB about the reasons for the change. Instead Mr Slyper sought to confirm indirectly that the documents which were being put forward were not the product of some drafting error and represented what Barnet LB intended to do.

35. There was one other witness, Mr B.R. Maunder Taylor, FRICS, MAE, who was the joint expert instructed by the parties in late 2003. He is and has been for many years a partner in the firm of Maunder Taylor practising from Whetstone. He says that his firm is a general practice suburban firm of Chartered Surveyors, Managing Agents and Estate Agents, and that he is and has been involved in all aspects of the firm’s business. He is a Member of the Academy of Experts. For these proceedings he gave a report dated 17 December 2003 supplemented by a letter dated 6 January 2004. His evidence was directed to the question whether Barnet LB had sold the Underhill Ground for the best consideration reasonably obtainable.

36. To give his report he had been provided with, among other documents, a report dated 14 August 2002 by a Mr E.F. Shapiro FRICS as well as the “Report of the Independent Panel into the sale of land at Underhill”, and he commented upon these documents and drew inferences from matter contained within these documents. Copies of the documents were included in the trial bundle and read by me, without objection by either of the parties, in connection with Mr Maunder Taylor’s evidence.

37. The Report of the Independent Panel was, as I understand it, made in the Summer of 2002, the independent Panel being three individuals of suitable experience and standing who had been engaged by Barnet LB’s Ad Hoc Scrutiny Committee to inquire into and report back on all relevant matters relating to Barnet LB’s sale of the Underhill Ground.

38. Mr Shapiro is consultant to the firm of Moss Kaye practising from Swiss Cottage. He has many years experience in dealing with the valuation, sale and letting of residential and commercial property, principally in the Greater London area. His report was given in August 2002 on the instructions of Barnet LB’s Chief Executive.

39. Having heard Mr Maunder Taylor explain certain aspects of his report and letter I have come to the conclusion that I cannot accept his evidence in all respects.

40. It is right that I should explain particular points in Mr Maunder Taylor’s evidence which I found unsatisfactory. This I do later in this judgment, when I set out my conclusions about Barnet LB’s claim that the disposal of the Underhill Ground was for a consideration which was less than the best that could reasonably be obtained.

The back ground

41. The Underhill Ground is a relatively constricted site of some 3.5 acres. On three sides it is surrounded by residential roads. On the east one side there is a small area of land owned by Barnet LB but occupied by a Scout Group arid the St John’s Ambulance. I say no more about this area of land, although it naturally featured in discussions between the Club and Barnet LB as to what might be done with the Underhill Ground. To the south is a much larger area of land owned by Barnet LB. The northern portion of this land is occupied by a cricket club.

42. Until about May 2001, when it was relegated following an unsuccessful season, the Club was in the Football League. However following upon recommendations made in the Taylor Report to improve public safety at football grounds, the facilities at the Underhill Ground had ceased to meet the minimum requirements imposed by the Football League. There were two main problems. The first is that the playing area has a significant slope. The second is that the existing stands are not able to accommodate with safety the minimum numbers required by the Football League, namely 6,000 spectators (a minimum which was to rise to 10,000). Furthermore, without incorporating part of the land to the south the Underhill Ground could not be redeveloped with stands accommodating 6,000 spectators, much less 10,000.

43. Up until 2001 the Club had been under threat from the Football League that it would be removed from the League by reason of its inadequate facilities; but a short dispensation had been allowed to the Club to give it time to secure adequate facilities. The Club, on the other hand, wished to remain in the League and after relegation its ambition was to return to the League.

44. For some time before 2001 the Club had been in discussion with Barnet LB about its future. I was not given any detail about these discussions; but the general picture is that Barnet LB was in principle willing to assist the Club to resolve its difficulties with its ground, provided that the Club remained within Barnet. It was the wish on the part of Barnet LB that the Club should remain within Barnet that gave the Club its negotiating position. On the other hand I have been told that the Club wished to remain in Barnet, which had been its home for many years: the Club was, after all, Barnet Football Club.

45. In this context I was shown a letter dated 25 September 2000 from the Club to the Leader of the Council. At about the time of this letter, perhaps shortly after, a purchase of the freehold of the Underhill Ground started to being discussed between Barnet LB and the Club. This letter, written following a meeting between those parties, contained such comments as:

“The immediate concern is to secure the tenure of the Club at Underhill and to satisfy the detailed requirements of the Football League, whilst simultaneously looking for an alternative site for the Club in the longer term. This was the preferred choice for both parties.”

and

“The existing lease at Underhill will be. assigned to another company, with the clear understanding that, should the Club relocate within the borough, the Club would be entitled to the full marriage value which would be exclusively used for the development of the alternative site. Alternatively, if the Club relocate outside the borough, the situation would be as it exists now, in that the normal commercial marriage value would apply.”

and

“Both sides expressed their strong commitment to all of the above issues, which would allow the Club to secure itself within the London Borough of Barnet, a decision that will be welcomed by all parties... The Chairman for his part made it very clear that he, together with the fans, desperately wants the Club to stay in the borough.”

Value

46. The letter of 25 September 2000 had made reference to “marriage value”. This needs a little clarification, as it is central to the case.

47. It seems to be common ground that land in the area of the Underhill Ground with vacant possession and planning permission for residential development could be in the order of £1.5 or £1.6 million per acre: the precise value would of course depend upon the terms of the planning permission. It could therefore be suggested that if anyone were to acquire both the freehold of the Underhill Ground and the Lease, and were to obtain planning permission for residential development, that person would have an asset worth some £5.5 or £5.6 million.

48. For football use the yearly rental value of the Underhill Ground in its then condition was in the order of £30,500 per annum. Taking into account the rent reserved by the Lease (only £50 per annum), Mr Shapiro suggested a capital value for the leasehold interest of about £245,000 (ignoring any possibility of marriage with the freehold), a value with which Mr Maunder Taylor agreed.

49. It would be possible to value the freehold interest of Barnet LB in the Underhill Ground as comprising as one element the right to receive pursuant to the Lease £50 annually for 84 years. The present value of that right, could be assessed at between £600 and £1,000. Mr Maunder Taylor’s suggested figure was £620. Mr Stephens had in April 2001 proposed a figure of £985. In addition the freehold interest comprised the reversionary value of the land at the expiry of the Lease. Mr Maunder Taylor suggested that at present values this would be only £300,000, which deferred for 84 years he valued at only £470. The £300,000 was predicated on the basis that at the end of the term the land was be dedicated to football use and had no further hope value; that is to say, no further value from the hope that planning permission could be obtained for development. Accordingly, Mr Maunder Taylor viewed the “pure reversion” as being worth only just over £1,000.

50. However, if it were assumed that at the end of 84 years there would be planning permission for residential development of the Underhill Ground, the calculated value of the reversion approaches £10,000: to the present value of the ground rent would need to be added the present value of the land for development (that is £5.5 or £5.6 million discounted back). Mr Maunder Taylor said that on this basis he would come to a figure between £9,000 and £10,000. From this one can conclude that the greater the hope of planning permission at the end of 84 years, the closer the calculation of the value of the reversion approaches to £10,000.

51. The marriage value of the freehold and leasehold interests is the difference between the value of the land with vacant possession and the aggregate of the values of each separate interest. Assuming planning permission for residential development of the Underhill Ground, the marriage value is well in excess of £5 million (ie. say £5.55 million less £255,000 (being £245,000 plus £10,000)). Obviously, however, the precise amount of the marriage value will depend on the chance of planning permission being obtained and the time when it might be obtained.

52. Thus, when the letter of 25 September 2000 referred to the marriage value, it was that £5 million odd (or less, depending on the prospects of appropriate planning permission) which was being referred to. The letter contemplated that the whole of that value would pass to the Club, if the Club were to relocate within Barnet. Only if the Club relocated outside would the Club share the marriage value with Barnet LB.

53. It will be appreciated that if the Club’s proposal contained in the letter were accepted, the Club would be gaining an asset which would potentially be of considerable value: on one contingency (relocation within Barnet) it would gain the whole of any marriage value, a value which could be of up to £5 million depending upon the likelihood (or perceived likelihood) of appropriate planning permission becoming available for redevelopment of the Underhill Ground. As to this likelihood there is little evidence. Plainly, however, there was at least some prospect that at some time, whether or not in the immediate future, the planning status could change to permit some development. The negotiations between Mr Slyper and Mr Stephens were, indeed, conducted on this assumption. Mr Slyper’s repeated efforts, described later, to negotiate Mr Stephens down as to the proportions in which any development profit should be divided amply demonstrates that from his perspective at least there was something worth arguing about.

54. The reference to “normal commercial marriage value” in the letter has not been explained to me. However, there was evidence before me that a 50/50 split of marriage value is quite usual. On the alternative contingency posited in the letter, namely relocation outside Barnet the marriage value was proposed to be split in some ratio between Barnet LB and the Club, possibly a 50/50 ratio.

The relevant events

55. It is possible to begin the narration of the relevant events with a letter of 6 March 2001, again from the Club to the Leader of Barnet LB. The letter drew attention to the problem with the Underhill Ground as a suitable ground for the Club, suggested that a sale of the freehold of the Underhill Ground to the Club was required “to provide us with at least some degree of security” but had not been agreed to by representatives of Barnet LB, warned that “in order to safeguard our position the club has no alternative other than to seek a suitable location ... outside of Barnet”, and stated that it was intended “to instigate a referendum of our supporters sometime during April when we shall ask for their endorsement of our decision”.

56. The letter was plainly calculated to put pressure on Barnet LB to assist the Club if the Club were to remain in Barnet. It appears to have been effective. On 14 March 2001 the Leader of the Council replied to say, in connection with a sale of the freehold to the Club, “...we have indicated quite clearly our willingness to take that forward”. And at the end of the month Mr Stephens received verbal instructions to negotiate for Barnet LB a sale of the freehold to the Club. Mr Slyper had written to him referring to “the reluctantly taken decision that Barnet Football Club must now consider options outside of the borough”, pointing out that Mr Slyper had “nevertheless” agreed “that the Board of BFC will continue to consider any alternatives which may be put by the Council”, and inviting Mr. Stephens to come back within the next few days with any proposals to take forward a sale of the freehold of the Underhill Ground.

57. On 12 April 2001 Mr Stephens and Mr Slyper had a meeting at which Mr Stephens set out his proposals. For this meeting he had prepared a document in which he set out various values for the Underhill Ground, including a value of £10,000 for Barnet LB’s freehold interest (that being a value of the reversion without taking into account any prospect of a marriage value) and a value of £165,000 for the Club’s lease (again without taking into account any marriage value). The document had three “options”.

i) The first was for Barnet LB to sell the freehold to the Club “without any restrictions”, the vendor receiving 100% of the marriage value. On this basis Mr Stephens suggested a price of approximately £5.4 million.

ii) The second was for Barnet LB to sell the freehold subject to a covenant restricting use to Association Football. However Mr Stephens contemplated that within 20 years such a covenant might be open to modification under section 84 of the Law of Property Act 1925. He therefore contemplated that after 20 years the Club would have the Underhill Stadium free from restriction. He placed a price of approximately £1.3 million on the freehold if sold on this basis, being the full residential development value of the land discounted back for 20 years deferral.

iii) His third option was for the freehold to be sold subject to the restrictive covenant, but with a provision “that if the land is sold freehold or long leasehold for any purpose other than the playing of Association Football then the Council will be entitled to a payment of £5,577,600” (that being his assumed value of the land for residential development) with an adjustment by reference to any change in the Retail Price Index. On the basis of this option the price for the land would be £10,000.

58. There are no contemporaneous notes of the discussion between Mr Stephens and Mr Slyper (although Mr Stephens did make a file note a few days after the meeting), and their recollections of the meeting are not the same. What is clear is that Mr Stephens gave a copy of his document to Mr Slyper, and that the discussion centred on Mr Stephens’ third option. It is also clear that Mr Slyper had no hesitation in agreeing with Mr Stephen that in principle a price of £10,000 would be acceptable for the reversion, disregarding any marriage value. Further, Mr Slyper did not accept that Barnet LB should be entitled to the whole of the marriage value. His position was that the marriage value should be shared equally.

59. Mr Stephens’ document, it will be noticed, drew no distinction between a case where the Club moved outside Barnet and a case where the Club remained within Barnet. There is no evidence that this distinction was discussed at the meeting.

60. There is an issue as to whether there, was any discussion of the question of the freehold being subject to a “football only” restriction pending the time when the further sum might become payable. Mr Stephens thought that there was discussion of the point; Mr Slyper’s evidence is that there was not. I think it unnecessary to resolve this question, as Mr Stephens accepted in cross-examination that at the most the discussion was to the effect that the point would be considered further.

61. On 18 April 2001 Mr Slyper sent an e-mail to Mr Stephens pressing him “to continue our discussions” as “the matter is extremely urgent”. Mr Stephens’ evidence is that at the meeting of 11 April he needed to give further consideration to Mr Slyper’s suggestion that on a development there should be a split of the marriage value.

62. It appears that at about this time Mr Slyper spoke with Mr Stephens, the upshot being that Mr Slyper was to come back to Mr Stephens with the basis of a legal agreement for the sale of the freehold. There were two topics discussed.

i) First, Mr Slyper pointed out to Mr Stephens that what he proposed for option 3 was objectionable in that it did not take account of the fact that the land was at present designated Green Belt. His provision requiring the payment of over £5 million in the event of a sale would trigger the payment whatever the planning status of the land at the time of sale, even though the prospect of obtaining planning permission for development might only be, say, 33%. To back up this argument Mr Slyper described the approach which the inland Revenue Valuation Officer had taken towards certain Green Belt land owned by a Strettons client which appears to have resulted in the land being valued at 25% of residential development value (50% reduction to reflect risk of change of use not being allowed with a further 50% reduction to reflect the risk that the type of development permitted might not be the most profitable possible).

ii) Second, the marriage value split was discussed. As to this, Mr Stephens’ position remained that in the event of the Club relocating outside Barnet it should be Barnet LB which would obtain the whole of marriage value, although it seems that he was willing for Barnet LB to share the marriage value if the Club remained within Barnet.

63. Mr Slyper’s written evidence contains a suggestion that he may have told Mr Stephens that in the case of the Strettons client the land was subject to a ten-year claw back provision and that a ten-year claw back was common. This was put to Mr Stephens in cross-examination, and denied by him. I accept what he says. It was not at this time, or indeed at any time in his discussions with Mr Slyper, suggested by Mr Slyper to Mr Stephens that the applicable claw back on a sale of the Underhill Ground should be limited to only ten years, or that in general a ten-year claw back was common. Indeed, as appears from the second option in Mr Stephens’ note for his meeting on 11 April, Mr Stephens considered that a restriction for twice that length, for 20 years, would entail that Barnet LB would be selling something for which an immediate payment of over £1 million should be sought, far in excess of the £10,000 price which was under discussion.

64. At about the end of April 2001, Mr Slyper prepared and e-mailed to Mr Stephens “a draft of the proposed Agreement”. This contemplated a sale for the freehold for an unspecified price with a further contingent price. The latter was to be payable in the event of the Club ceasing to use the Underhill Ground and the freehold being sold for development. Broadly there was only to be payment of an unspecified percentage of the development profit in the event of the Club relocating outside Barnet.

65. Mr Stephens’ evidence is that he was always under great pressure of work. This may explain why he appears to have taken no step until the end of May, when he prepared a briefing note setting out the position. This summarised the three options in his first paper, and made the point that his third option would leave Barnet LB able to decide what part of the proceeds of the Underhill Stadium it might wish to invest in a new stadium, if the Club moved and the land were sold. He pointed out the response from Mr Slyper, and noted that “clearly the proposals from Barnet FC are designed to give the Club the lion’s share of the full development value whether or not they remain within the Borough”.

66. At this point it is convenient to mention that Mr Stephens was well aware of the requirements of section 123(2) of the 1972 Act. Indeed, both the Report to Cabinet and the DP Report contained paragraphs explaining why the proposal for which sanction was being sought would comply with those requirements. He was conscious throughout the period of his involvement that, absent the Secretary of State’s consent (and there was never any thought by anyone that this consent should be sought), the sale of the Underhill Stadium would need to be for the best consideration that could reasonably be obtained.

67. On 14 June 2001 Mr Stephens prepared a further briefing note. This explained that “the following basic proposals have been negotiated”, namely the sale of the freehold for £10,000, that the Club should have the whole of any development profit if it were to build and move permanently to a new stadium within the Borough, and that on relocation outside the Borough or “just” leaving the Underhill Ground the net proceeds of sale in excess of the original price would be split 60/40 between Barnet LB and the Club. However the briefing note indicated that the proposal from Mr Kleanthous was that instead of the Club it should be a holding company which should be the purchaser.

68. From this time on the purchaser was always to be an unspecified holding company of the Club. Holdings was identified only after the end of 2001 as the proposing purchaser. But the negotiations were carried forward with Mr Slyper and Mr Kleanthous as representing the Club acting on behalf of the prospective holding company. Also from this time on the marriage value split was not to apply in the event of the Club relocating within Barnet.

69. The negotiation of the “basic proposals” referred to in the briefing note must have happened in the few days before 14 June 2001. In particular Mr Stephens must have spoken with Mr Kleanthous, as appears from an e-mail sent by Mr Slyper on 12 June, although Mr Stephens now has no memory of the conversation. This referred to such a conversation, and commented that “the only sticking point would appear to be the percentage split of the site value if the club relocate from the borough”. Mr Slyper said that 50/50 rather than the 60/40 in favour of Barnet LB was “the fair solution both commercially and morally”. What he overlooked was that Mr Stephens appears in his conversation with Mr Kleanthous to have conceded that the whole of the marriage value was to be passed to the Club in the event of the Club remaining within the Borough. In other words it was Mr Slyper’s contention that on one possible set of circumstances the Club should have the whole of any development profit which might be made; on the alternative the Club should have half (not 40% only).

70. By 2 July 2001 Mr Stephens had prepared a draft Report to Cabinet. This was summarised as being for Cabinet “to approve the sale of the freehold interest in the Underhill Stadium to Barnet Football Club subject to the Council sharing in any future development value.” Forming part of the draft Report was another document referred to as “the exempt report”. The draft Report described the sale as having been “provisionally agreed” with the Club, the material terms being

i) (by para 8.4.1) that the price was to be £10,000,

ii) (by para 8.4.2) that on the holding company building a new stadium facility within the borough and Barnet FC moving to that facility as its permanent ground (that is, remaining and playing at the new facility for at least ten years), the full value arising from the sale of the land at Underhill was to “be entirely for the benefit of the holding company”,

iii) (by para 8.4.3) that (emphasis added)

“If Barnet FC relocates to a stadium outside the borough or just leaves Underhill stadium (or a new stadium within 10 years) or ceases to exist, and the Underhill Stadium is sold, the holding company will be entitled to 40% of the net proceeds of sale in excess of the [£10,000] price (subject to appropriate index linking) and the Council will be entitled to 60%”, and

iv) (by para 8.4.4) that

“there will be provision in the transfer for the holding company to allow Barnet FC to play at the Underhill Stadium whilst it remains the Club’s main ground”.

71. As to the third element, that in paragraph 8.4.3 of the draft, the exempt report stated:

“...Barnet FC did want a 50/50 share of the net proceeds but in the officers opinion this would not have properly reflected the fact that the lease is a wasting asset and therefore the terms would not have satisfied Section 123 requirements.” In other words, the exempt report was drawing attention to the fact that for the Council to sanction a 50/50 split rather than a 60/40 split and to complete a sale on that basis would involve a contravention of the prohibition in section 123(2) of the 1972 Act in the absence of approval by the Secretary of State. So far from being invited to consider sanctioning such a split as an alternative to a 60/40 split, the Cabinet was being told that it could not.

72. These documents were sent by Mr Stephens to Mr Slyper. There are three points to notice.

i) The first is that the documents contained no express reference to a restrictive covenant being placed on the Underhill Ground on its sale by Barnet LB. On the other hand the fourth element, that in paragraph 8.4.4, was self-evidently aimed at securing for the Club the right to continue playing at the Underhill Ground, unless and until some alternative was developed: given that this was supposed to be by way of “provision in the transfer”, it was likely to be achieved by some type of covenant, whether positive or restrictive.

ii) The second, it seems to me, is that what was set out in paragraph 8.4.3 of the document, that containing the third limb of the terms of the proposed sale, was plainly intended to cover any case not covered by the second. That is to say, the third limb was intended to provide for Barnet LB to have a share of any development profit on a sale of the Underhill Ground in any circumstances where there had not been a permanent relocation of the Club within Barnet. It cannot have been contemplated by Mr Stephens that there could be a sale of the Underhill Stadium at an uplifted price reflecting the marriage value in circumstances which were not regulated by one or other of the second and the third limbs: it must have been expected by him that on any such sale the case would either be within the second limb or within the third limb and could not be anything else.

iii) The third point is that the third limb did not require for its applicability any time limit. Only one time limit was contemplated for either limb, this being that in order for “the holding company” to qualify for the 100% enjoyment of any re-sale profit the relocation of the Club within the Borough had to be “permanent”, entailing that it had to last for a minimum of ten years.

73. There was then an exchange of e-mails between the Mr Stephens and Mr Slyper.

i) First, Mr Slyper took objection to three points He did not take any objection to the point in paragraph 8.4.4, the requirement for the holding company to allow the Club to play at the Underhill Ground. Those he objected to were as follows:

a) First, there was what he called the “ten-year rule” in the second limb. As to this he pointed out that the case should remain within the second limb, despite that rule, even in a case where the Club relocated more than once within Barnet.

b) Second, he objected to the 60/40 split saying that “we still consider [the split] should be 50/50”.

c) Third, he said that the base figure for measuring any profit on sale of the Underhill Ground should either be £45,000 (plus index linking) to reflect the acquisition cost of both the leasehold and freehold interests, or “existing use value on the date of disposal”.

ii) Next, Mr Stephens immediately agreed to the first and third of these points, but not the 50/50 split.

iii) Finally Mr Slyper responded by e-mail on 3 July saying that “in the main the document does cover the matters agreed, although there are a few small amendments required ... and which I detail below”. He did not detail anything about the split of profit. I shall revert to this point, but in my judgment it is significant. He did not stipulate for a time limit to be imposed for Barnet LB to be entitled to share in any profit on resale. What he did was to insist on the base figure for measuring profit being the existing use value; and he proposed various amendments to take account of his comment concerning the “ten-year rule”, in particular to allow the Club to move out of Barnet temporarily while a new facility was being constructed within Barnet. One of these was to suggest an alteration to the text in relation to the third limb of the terms of sale quoted above.

74. After this exchange Mr Slyper and Mr Stephens spoke on 4 July and Mr Stephens agreed to Mr Slyper’s points in his second e-mail, that of 3 July, agreeing to amend his draft Report accordingly. By e-mail on 4 July Mr Slyper reported this conversation to Mr Kleanthous.

75. As it seems to me Mr Stephens and Mr Slyper were by this stage agreed as to the main points of the proposed sale. Those points were set out in the draft Report to Cabinet, but with the two changes of principle set out in Mr Slyper’s second e-mail, that of 3 July. In particular, I have no doubt that by this stage Mr Slyper and Mr Kleanthous had accepted that if Barnet LB were at any time (not just within a specific period, whether ten years or any other time) to sell the Underhill Stadium on the terms in the first draft Report, subject to the relevant amendments, a profit split of 60/40 in favour of Barnet LB would be required. And I have no doubt that they were anxious to purchase the Underhill Stadium on those terms. In other words, they accepted that Barnet LB’s entitlement to the 60/40 split would be without limit of time; but of course Barnet LB would have no entitlement at all in the event of the Club’s permanent relocation within Barnet.

76. It was submitted on behalf of Holdings that Mr Slyper’s objection to the 60/40 split in his first e-mail, that of 2 July, showed that the precise split was still a matter for negotiation. I cannot accept this. Certainly there would not be a binding contract once Barnet LB sanctioned the sale. But Mr Slyper knew that a sanction given for a sale on terms of a 60/40 split could not authorise a sale on terms of a 50/50 split; and he had never suggested to Mr Stephens that it was pointless seeking to have the sale sanctioned on the terms of a 60/40 split as such a split would be unacceptable to Holdings. Rather, he had recognised that Mr Stephens would not seek to have a 50/50 profit split sanctioned, and would not because he thought that such a split could not be sanctioned as failing to satisfy section 123(2) of the 1972 Act. In my judgment the second e-mail, that of 3 July, conceded just that point. In the absence of that concession it would have been a pointless waste of time for the Cabinet to be invited to consider the Report and to sanction a sale on the terms recommended in the Report.

77. I am confirmed in this view by the letters of 16 July and 14 August written by Mr Slyper, as described below. Those documents make it crystal clear that Mr Slyper considered that what was contained in the first draft of the Report to Cabinet, as amended by the 3 July e-mail, represented an agreement, albeit not binding. It is also crystal clear from those documents, as well as from subsequent correspondence, that Mr Slyper and Mr Kleanthous were anxious to conclude their purchase of the Underhill Ground on those terms. The short and obvious point is that, whether the profit split was 60/40 or 50/50; for the comparatively insignificant sum of £10,000 Holdings would be getting a bargain: there were circumstances in which Holdings might keep the whole of any profit, namely on relocation to a stadium within Barnet.

78. Mr Stephens, following his conversation with Mr Siyper on 4 July, amended his draft Report. The amended draft was not, in the event, finalised for submission to Cabinet. Importantly, it was not sent to Mr Slyper and the evidence is that he never saw the amended draft.

79. The amended draft Report contained a drafting error. This error came to have considerable significance. In Mr Stephens’ attempts to accommodate Mr Slyper’s suggested amendments he displaced, in paragraph 8.4.3 dealing with the third limb of the proposals, the words “within 10 years” outside the brackets in which they had previously stood. Thus paragraph 8.4.3 of the draft Report came to read as follows (emphasis added):

“If Barnet FC permanently relocates to a stadium outside the borough or just leaves Underhill stadium (or a new stadium built at the Underhill location or elsewhere in the borough) within 10 years, or ceases to exist, and the Underhill Stadium is sold, the holding company will be entitled to 40% of the net proceeds of sale in excess of the base value of the facility as a football stadium and (sic) the time of disposal, with the Council being entitled to 60%. This provision would allow Barnet FC to move to a stadium outside the Borough to temporarily ground-share whilst a new stadium is being built at Underhill or elsewhere in the Borough.”

80. However, in the section of the Report which contained the Cabinet Member’s conclusions and recommendations it was said that the terms negotiated would realise a price for the freehold which reflects the current lease and the annual income, “ensure that Barnet FC can continue playing at the ground”, and “Provides the Council with a proper share of any future development value if the Underhill is sold and Barnet FC no longer plays in the borough.” There was no limit to the time during which Barnet LB’s entitlement would last.

81. There is some obscurity of language in paragraph 8.4.3 of this version of the draft Report; and the interrelation between paragraphs 8.4.2 and 8.4.3 is not easy. The problem with paragraph 8.4.3 is that as they stand the limiting words “within 10 years” might be understood as implying a requirement that the operation of paragraph 8.4.3 is subject to an overriding time limit of ten years applicable in all circumstances.

82. As I see it, there are several indications in the document that such an interpretation could be wrong.

i) First, the Cabinet Member’s conclusion makes it clear, in my view, that Barnet LB is supposed to be obtaining a “proper share” of any future development value in circumstances where the Underhill Ground is sold and the Club no longer plays within the Borough: there is no time limit suggested for this. Moreover, the indication from that conclusion is that paragraph 8.4.2, where it applies, is supposed to be the only circumstance in which Barnet LB is not to obtain that share of development value.

ii) This view is supported by the introductory paragraph of the Report, which explains (emphasis added) that the proposal under consideration is “to approve the sale of the freehold ... subject to the Council sharing in any future development value.”

in) Third, the concluding words of paragraph 8.4.2 by themselves suggest that paragraph 8.4.3 (the paragraph which gives the share of value) is supposed to apply in any case where paragraph 8.4.2 does not, so that a ten-year cut-off in 8.4.3 would not be appropriate.

iv) Fourth, the ten-year time limit does not, as a matter of grammar, cover a case where after ten years the Club ceases to exist and the Underhill Ground is sold. And it is not at all clear that the ten-year limit is linked to a case where the Club relocates to a stadium outside the borough, rather than one where it “just leaves Underhill stadium”. There could be some logic in such a distinction, if an aim was to discourage the purchaser from allowing the Club to leave the Borough.

v) Fifth, the last sentence in paragraph 8.4.3 is difficult to understand. Nothing in paragraph 8.4.3 has the effect of allowing 8.4.3 to be suspended in a case where the relocation outside Barnet is temporary pending the construction of a new stadium within Barnet.

83. As I see it a careful and perceptive reader of the Report might well have asked himself or herself precisely what the words “within 10 years” were intended to convey, and quite possibly might have reached the conclusion that there must have been some drafting error in the document and that the words were supposed to be inside the brackets, thereby corresponding with almost identical words similarly placed in paragraph 8.4.2 of the document. I am sure that such a reader would not have thought that what was being proposed as the terms of sale was clearly that there was to be a ten-year cut-off for any possibility of claw back payment for Barnet LB, and that there was no realistic doubt about that point, even if such a reader were ultimately to conclude that there was supposed to be a ten-year cut-off in all circumstances.

84. As mentioned, the draft Report was not considered at the meeting of the Cabinet on 16 July. A decision was taken within Barnet LB that the matter would proceed through the delegated powers route, being put to Councillor Chopra for his sanction “under his delegated authority as Cabinet Member for Resources” (to quote from an e-mail sent on 20 July 2001 by Mr Stephens).

85. Following 16 July Mr Slyper wrote to Mr Stephens to express dismay that “the draft Underhill agreement” was not considered at the Cabinet meeting, and (emphasis added) pressed for him “to use your influence to ensure that our negotiated agreement can be quickly confirmed and implemented.”

86. Mr Slyper wrote again on 14 August to chase Mr Stephens about the agreement. In this document he commented (emphasis added) that “the very long delay since the provisional agreement was reached on Underhill does not fill me with confidence that the borough can deliver on its assurances”.

87. Meanwhile, on 23 July 2001 Mr Stephens sent his first draft of the DP Report to each of Mr Leo Boland, the Borough Treasurer and Mr Lustig. The draft DP Report had the appearance of a document prepared by a process of cutting and pasting from the amended draft of the Report to Cabinet, including unchanged other than immaterially the “Conclusions and Recommendations” quoted above. What had been paragraphs 8.4.2 and 8.4.3 became paragraphs 11.4.2 and 11.4.3. The only change to these important paragraphs was the addition, at the end of paragraph 11.4.3, of text which had been included in the exempt report relating to the fact that “Barnet PC did want a 50/50 share of the net proceeds” and that” “in the officers opinion ... the terms would not have satisfied the Section 123 requirements”.

88. Mr Boland replied on 23 July 2001 saying that he was happy with the draft. There is no evidence as to the response of the Borough Treasurer. Mr Lustig’s response was sent on 30 August 2001. He told Mr Stephens that he understood “the thrust of the on-sale provisions”, but warned against over-complication in case “we miss a trick that way”. He went on to summarise what he perceived to be the key provisions, namely that the Club should be allowed to play at the Underhill Stadium unless it should find and move to another facility during that time, and that

“Unless Barnet FC has relocated to another suitable ground within the Borough and the holding company or its successor in title has provided and developed or will provide and develop that other ground, then on any sale of Underhill the sale proceeds division provisions will apply.”

This summary, it seems to me, conveys that Mr Lustig did not think that the claw-back payment possibility had a ten-year time limit: in other words, he had not understood the draft DP Report to be recommending and seeking authority for any such time limit.

89. Little seems to have happened until the end of October 2001, despite Mr Slyper writing to chase Mr Stephens during September. By the end of October, however, Mr Slyper had spoken to Barnet LB’s Mayor about the matter, and had written to Mr Stephens asking for confirmation that “the Underhill freehold purchase was scheduled to be ratified last Thursday”. Mr Stephens responded by explaining that the DP Report had been “finalised last week” and sent to the Cabinet Member for approval.

90. The Cabinet Member who approved the DP Report was Councillor Chopra. This approval having been given it was signed on 13 November 2001 by Mr Chadwick as Acting Head of Regeneration.

91. The material provisions of the finalised DP Report reflected what had gone before. Mr Lustig’s comments referred to above were not taken into account at all by Mr Stephens in the preparation of the finalised DP Report. In short the document was in no important respect changed from the amended draft Report to Cabinet or from the finalised DP Report considered by Mr Lustig. It summarised the approval sought as being of “the sale of the freehold ... to a holding company on behalf of Barnet Football Club subject to safeguards for Barnet Football Club having future use of the stadium and to the Council sharing in any future development value”. And the document’s conclusion was (as in the amended draft Report to Cabinet) that

“The terms negotiated will achieve the following

(1) Realises a price for the freehold which reflects the current lease and the annual income.

(2) Ensures that Barnet FC can continue playing at the ground.

(3) Provides the Council with a proper share of any future development value if the Underhill Stadium is sold and Barnet FC no longer plays in the borough.”

92. As to the detail of the “provisionally agreed” terms for the sale, this followed the draft DP Report, described above. There were some differences of wording, but none of any substance. Those worth mention are the following:

i) What had been paragraphs 11.4.2 and 11.4.3 were renumbered as 11.4.3 and 11.4.4 respectively.

ii) The new paragraph 11.4.3, which dealt with the second limb of the sale proposals, was changed to require that the building of the new facility within Barnet (this being building that would be required for the purchasing holding company to avoid an obligation to share any value arising on a sale of the Underhill Ground), should be by the purchasing holding company “at its own cost”. (By these words Mr Stephens intended, as he explained in evidence, to convey that the cost of the building should not fall on the Council.)

in) The new 11.4.4, which dealt with the third limb of the sale proposals (that which had previously been in 11.4.3) was now introduced by the word “Alternatively”.

93. A couple of days before Mr Chadwick signed the DP Report Mr Stephens had told Mr Slyper that “the report has been passed to Legal for them to start the necessary work”, and asked for details of “your solicitors”. On 13 November Mr Slyper wrote to Mr Stephens and explained that “the Club’s solicitors” were to be Good, Cardona & Co. Having heard nothing by 23 November Mr Slyper chased Mr Stephens. When Mr Stephens responded on 27 November he explained that he had been on leave and fully tied up with other issues.

94. The documents show that during October and November pressure had been brought by Mr Slyper and Mr Kleanthous through at least one elected member of Barnet LB. On 30 November 2001 Mr Kleanthous was sent by Graham Beattie, Barnet LB’s Director of Environment, an e-mail explaining that the draft contract documentation was being prepared and would be with Good, Cardona & Co by Wednesday 12 December. This e-mail was sent to, among others, the Leader of the Council, Mr Chadwick, Mr Lustig, Mr Stephens and Mr Strange.

95. Late in November 2001 Mr Strange had been given instructions to draft the contract documentation for the proposed sale. These instructions seem to have comprised, or at least included, the signed DP Report.

96. On 30 November Mr Strange sent to Mr Stephens an e-mail in which he described something of the pressures he was now under. With the e-mail was attached a draft of the Contract, the e-mail drawing attention to certain clauses. One was clause 13, the clause containing the restrictive covenant. The clause, which as drafted contained no time limit, was explained as being to ensure that “the holding company purchasers cannot redevelop the site without entering into a Deed of Release”, and that the provisions for the Deed of Release would be included in an Overage Deed. Not mentioned by Mr Strange was the requirement in the DP Report that the terms of sale were to provide for “Barnet FC to be permitted to continue playing association football at the Underhill Stadium” subject to the overage provisions.

97. Over the next couple of days Mr Strange prepared a draft Overage Deed. On 3 December 2001 he sent to Mr Stephens by e-mail a copy of this, and asked for his comments on certain provisions. The document sent made it strikingly clear that no claw-back could become payable after ten years, including several references to “the Cut-off Period”, an expression defined in the document as “10 years from the date hereof”. Further, clause 7.1 stipulated that the agreement should endure only for ten years. In Mr Strange’s e-mail he asked Mr Stephens to particularly note, among others, clause 7.1, and added “the ‘Cut-Off Period’ is the ten-year period referred to in your DP Report”.

98. What had happened evidently was that Mr Strange had read the DP Report, as approved, as authorising a sale of the Underhill Ground under which such right to a claw-back payment as was given to Barnet LB would in all circumstances be limited to a period of ten years. However, as he said and I accept, he wanted Mr Stephens to comment on this point. After all, the point was quite fundamental; and as it seems to me the DP Report was not particularly clear on the point.

99. Meanwhile Mr Strange sent the draft documents he had prepared to Ms Jemide for her comments. In connection with clause 13 of the draft Contract she questioned whether the restrictive covenant should not be limited to ten years only, thus bringing it into line with the time limit in the draft Overage Deed. She has explained in evidence that she thought that paragraph 11.4 of the DP Report provided for a division of the proceeds of sale of the Underhill Ground if the Club were to leave within ten years. Her perception, so far as it goes, seems to have been similar to that of Mr Strange. In the light of Ms Jemide’s comments Mr Strange amended clause 13 of the draft Contract to include a ten-year limit.

100. On 7 December Mr Stephens sent back to Mr Strange comments on the draft Overage Deed. He made no comment at all about the ten-year cut-off provision. Mr Strange understood, as he said in evidence, that in the absence of comment from Mr Stephens on clause 7 the latter was giving his confirmation that Mr Strange was correct in what he had drafted.

101. Also on 7 December Mr Stephens came to Mr Strange’s office where the two men spoke about other matters. Mr Strange made an attendance note, however, recording that Mr Stephens “agreed all amendments” with the exception of a particular one relating to the definition of what relocation might be taken to be “permanent”, which he wanted to have defined as ten years.

102. It is possible that Mr Stephens never became aware that the restrictive covenant prepared by Mr Strange had had a ten-year time limit introduced. Both he and Mr Strange say that the meeting in Mr Strange’s office had been brief and anyway had not been arranged for the purpose of considering the draft documents. However, in my judgment the likelihood is that at the meeting with Mr Strange Mr Stephens was shown the amendment to the restrictive covenant set out in the draft Contract. Given that the meeting took place two years ago, Mr Strange’s note is probably the best guide as to the detail of what was discussed. His note conveys that both the draft Contract and the draft Overage Deed were discussed, not simply the draft Overage Deed. The amendment to the restrictive covenant provided for by the draft Contract was probably the most important amendment to that document.

103. Mr Stephens was asked about his failure to comment on, much less to object to, the provisions relating to the ten-year cut-off, when his evidence (evidence which I accept) was that in the light of what had previously been discussed with Mr Slyper he had intended that there should not be any such cut-off. He had no explanation, other than to acknowledge that he completely missed this important point. It is possible that by December 2001 the considerations which he had been conscious of down to July 2001 had slipped his memory.

104. At all events, so far as can be told, whether through choice or necessity, Mr Stephens did not give the draft documentation the attention which it required. His failure was of a piece with the fact that Mr Lustig’s sensible comments on the draft DP Report made in the 30 August 2001 e-mail to Mr Stephens were in no way reflected in the finalised DP Report, an omission which was never explained.

105. On 10 December Mr Strange sent to Good, Cardona & Co the draft Contract and the draft Overage Deed. His letter summarised paragraphs 11.4.3 and 11.4.4 of the DP Report as his “instructions”: to all intents and purposes the material parts of those paragraphs were quoted. Mr Slyper’s evidence is that he did not see the draft documents until just before Christmas. He could not recall whether or not he ever saw Mr Strange’s covering letter of 10 December; but it seems that it was not sent to him when he was sent the draft documents.

106. Mr Slyper recognised, when he received the draft documents, that the substance of the transaction which those documents would implement was different from that which had been discussed in July 2001, that for the first time there was a ten-year cut-off to any claw back right for Barnet LB.

107. Mr Slyper said in cross-examination that it was seeing the cut-off which helped him to recommend to Mr Kleanthous acceptance of the 60/40 split rather than to hold out for a 50/50 split. I do not accept this. First, Mr Slyper also said that he had in fact thought at the time that the addition of the cut-off did not give Holdings any advantage, as no-one had in mind the Club moving from the Ground after ten years. If that had indeed been his thought (and I do not think it was), it makes it difficult to see why the cut-off should have been of any relevance when he was recommending acceptance of the transaction put forward. Secondly, I am sure that Mr Slyper and Mr Kleanthous had long before, by July 2001, come to accept that the profit split would have to be 60/40, and had done that at a time when they expected the claw back to be without limit of time. An obvious reason to accept that split was because there were circumstances in which there would be no claw back at all and Holdings would have the whole of any development gain. Further, as mentioned above, even on the basis of a claw back which was without any limit of time, Mr Stephens’ position had been that a 50/50 split could not be accepted by Barnet LB as that would not have complied with section 123(2) of the 1972 Act. A purchase by Holdings on the basis of a 50/50 split was not achievable by Holdings, as had been apparent long before.

108. I am also sure that Mr Slyper appreciated that the introduction of the ten-year cut-off, which represented a significant improvement for Holdings in the balance of advantage compared with what had previously been negotiated, was inexplicable except on the ground of some failure within Barnet LB, whether that failure was a simple drafting error or was a failure in the decision making process. Mr Slyper in cross-examination agreed that he was surprised to see the ten-year cut-off. Had the cut-off been introduced as a deliberate change, whether as compensation for some other advantage to be given to Barnet LB by Holdings or for some other reason, Barnet LB could reasonably have been expected to explain the reason. Instead the documents were simply put forward as giving effect to what had already been negotiated.

109. On the other hand Mr Slyper did not know precisely what the failure was within Barnet LB. He knew nothing of the way in which the draft Report to Cabinet have been transposed into the finalised DP Report, or of the subsequent drafting of the conveyancing documents and deliberations between Mr Stephens, Mr Strange and Ms Jamide. He did not know whether or not the documents sent to Good, Cardona & Co represented the transaction which Barnet LB now intended.

110. On 8 January 2001 Mr Good of Good, Cardona & Co both spoke to Mr Strange and wrote to him. On the phone he asked about the period of ten years in the context of the definition of “permanent relocation”. In his letter he called attention to clause 13 of the Contract, the restrictive covenant provision, and asked for its complete removal. His stated ground for this request was that part of the draft clause dealing with use of the land as ancillary to a football club was drafted in a way which was unduly restrictive. It should be noted that this objection to the drafting of the clause was most odd as a basis for requesting the entire elimination of the provision rather than simply the alteration of the drafting of the restrictive covenant.

111. Mr Slyper was asked about Mr Good’s request for the deletion of the restrictive covenant. At first he agreed that it was he who had instructed Mr Good to make the request: he said that having seen the introduction of a limit of ten years where previously there had been no limit, he would have suggested seeking to have the clause removed altogether on the ground that if you do not ask you do not get. He later said, however, that he did not remember instructing Mr Good to make the request.

112. In my judgment Mr Slyper’s first answer was correct and that he did suggest to Mr Good that he should request the removal of the covenant. It is probable, in my judgment, that he did this to “test the water” over the ten-year time limit contained in the draft clause and to ascertain whether or not that time limit was simply a drafting error.

113. Mr Slyper also spoke with Mr Stephens about the clause. Their discussion was concerned with the scope of the “ancillary use” which would be permitted or prohibited by the clause. Mr Stephens had before him his copy of clause 13, his copy having no 10-year time limit Mr Slyper had before him a different version, his being the version sent out by Mr Strange containing the limit. There is no evidence that the two men discussed the ten-year time limit, and neither became aware that the other had before him a different version of the clause.

114. Following this exchange concerning clause 13, Mr Strange sent to Good, Cardona & Co a letter confirming the revised version of clause 13, the revised version still including the ten-year time limit.

115. Broadly the draft documents had been agreed by these few exchanges. Exchange seems to have been held up at the stage of enquiries before contract. Apart from certain trivial changes asked for by Good, Cardona & Co in February 2002 there was only one point of substance. At the last minute, the draft Overage Deed was changed, at the request of Mr Slyper, to broaden the type of change in planning status of the Underhill Ground which would entitle Holdings to require, within the ten-year period, the release or modification of the restrictive covenant without having at the same time to make any further payment to Barnet LB. Mr Stephens was consulted in relation to the February 2002 changes; but again he did not remark on the ten-year cut-off, even though he wrote a letter to Mr Slyper on 20 February 2002 in which he commented on certain provisions of the Overage Deed.

116. I have already explained how the Contract came to be executed on 27 February 2002, and the Transfer and Deed on 27 March 2002.

The rectification claim

117. With this narration of the facts I can set out my conclusions as to the rectification claim.

118. To succeed on its rectification claim Barnet LB must establish the following ingredients:

i) that there was before the execution of the document to be rectified some previous accord between the parties manifested by some outward expression;

ii) that the document to be rectified does not accurately set out the terms of that previous accord;

iii) that Barnet LB intended the document to carry out and not to vary those terms, mistakenly believing that the document did carry out those terms;

iv) that Holdings knew that Barnet LB had the mistaken belief;

v) that Holdings was guilty of some sharp practice in allowing Barnet LB to execute the document with that mistaken belief; and

vi) that the document if rectified as asked would accurately represent the terms of that previous accord or, in other words, the true intention of the parties as expressed in that accord.

119. Mr Crawford submitted that the standard of proof is the civil standard as to each of these ingredients while accepting that, the case being one of rectification, the evidential burden on Barnet LB is heavy. Mr Hunter, in contrast, submitted that in relation to the fourth and fifth of these elements the standard of proof is the criminal standard. For this he based himself on the quite general comment made by Evans J in Atlantic Marine Transport Corp v Coscol Petroleum Corp (The ‘Pina’) [1991] 1 Lloyd’s Rep 246 at 250 (left column), where the Judge said, in relation to “the heavy burden of proof which rests upon any party claiming rectification”, that

“that burden ... is proof to a criminal standard, although under a different name, because that is the equivalent of being ‘sure’ (per Mr Justice Mustill in The Olympic Pride) and, I think, of ‘convincing proof’ (per the Court of Appeal in Jocelyne v Nissan (p 98)).”

120. I reject Mr Hunter’s submission on this point. It is now clear law that as a general rule in civil proceedings such as the present the standard of proof is the civil standard: that is, a matter is proved if it is established on the balance of probabilities. It is also clear law that the weight of evidence required to establish a fact will be greater the greater the gravity of the matter in hand. In my judgment Mr Crawford is correct in his submission, based as it was on the clear exposition by Lord Nicholls of Birkenhead in Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] 563 at 586B-H.

121. The cases referred to by Evans J in The ‘Pina’ demonstrate just this point; and there are numerous statements to similar effect in other reported cases. Notable amongst these is the judgment of Buckley LJ in Thomas Bates Ltd v Wyndham’s Ltd [1981] 1 WLR 505 where, at 514G-H, he referred to the well known-dictum of Denning LJ in Hornal v Neuberger Products Ltd [1957] 1 QB 247 at 258 and said “That, in my judgment, encapsulates the law about the standard of proof required in civil proceedings applicable to all civil proceedings, and as applicable to cases of rectification as to any other kind of civil action.”

122. In my judgment Evans J cannot be taken to have laid down that, as a general proposition in relation to rectification claims it is the criminal standard which applies. Rather, as I see it, he was seeking simply to emphasise the weight of the evidential burden which lies upon a claimant. I should add that, contrary to Mr Hunter’s submission, there is nothing in Evans J’s judgment to suggest a distinction between standards of proof for the various ingredients which a claimant needs to establish in a rectification claim. Such an approach would in any case be altogether at odds with the general principle stated by Lord Nicholls in the Re H case, a principle which in the context of a rectification claim had previously been applied by Buckley LJ in the Thomas Bates case.

123. I have already mentioned that the instruments of which rectification is claimed in this action are those executed in March 2002, namely the Transfer and the Deed, and not the Contract. As those documents carried into effect without any mistake what had been provided for in the Contract, it might be thought that the second ingredient required for a successful rectification claim cannot possibly be satisfied.

124. I would be very reluctant to decide the case on this point. The substance of the complaint made by Barnet LB is that the Contract was just as defective as the documents of which rectification is claimed. As Mr Crawford submitted, it would be a pointless technicality to seek rectification of the Contract, as that has now ceased to serve any continuing purpose. I am not persuaded that Holdings had any illusions as to the nature of Barnet LB’s claim or that it would have made any difference at all to Holdings’ conduct of this case if Barnet LB had sought in terms to have the Contract rectified.

125. In what follows I shall treat the claim as one in which, in the same way as in Craddock Bros v Hunt [1923] 2 Ch 136, rectification of both contract and conveyance falls to be considered at the same time.

126. Considering the first ingredient which Barnet LB needs to establish, I accept that in July 2001 there was an accord between Mr Stephens on the one hand and Mr Slyper (and, so far as necessary, Mr Kleanthous) on the other. Mr Slyper and Mr Kleanthous, I have no doubt, sufficiently represented Holdings, so that it can be taken that Holdings was party to that accord. The accord is that which I have set out earlier in this Judgment.

127. I also accept that none of the Contract, the Transfer and the Deed accurately set out the terms of the accord reached in July 2001. In particular I have no doubt that back in July 2001 the ten-year limit to the claw back, and the ten-year limit to the operation of the restrictive covenant, were not contemplated by any of Mr Stephens, Mr Slyper, Mr Kleanthous or Holdings as part of what was to be the terms of sale of the Underhill Stadium.

128. The fundamental objection to Barnet LB’s rectification claim, it seems to me, concerns the third ingredient set out above. I am not satisfied that Barnet LB intended any of the Contract, the Transfer and the Deed to carry out the terms agreed in principle in July 2001. The following considerations are relevant.

129. Mr Stephens, it is clear, had by July 2001 done no more than to arrive at a negotiated accord with Mr Slyper which could be put to Barnet LB to approve and authorise. Without authorisation any purported contract made on behalf of Barnet LB would not have been binding. Therefore, as it seems to me, Mr Stephens’ state of mind is immaterial. It does not matter what he thought or intended when he prepared his amended Report to Cabinet, or when he prepared the first draft of the DP Report or the finalised DP Report. What matters for the purpose of rectification is what Barnet LB intended, not what Mr Stephens intended; and the intention of Barnet LB is to be collected from the terms of authorisation given or, perhaps, from the state of mind of the individuals who gave that authorisation. The relevant authorisation was given by the process of approving and signing off the finalised DP Report.

130. Assuming the state of mind of the relevant individuals to have been the determining criterion, it might be argued that there is evidence in the form of the e-mail sent by Mr Lustig to Mr Stephens on 30 August 2001, to which I referred earlier in this Judgment: it might be argued from this that Mr Lustig must have understood draft DP Report as seeking sanction for a sale on the terms understood and intended by Mr Stephens in July.

131. There are, however, insuperable obstacles to this. During 2002 Mr Lustig was interviewed by the Panel conducting the Independent Inquiry. He told the Panel, “...I have made this point consistently, that the documentation was drafted in accordance with the instructions that were given.” His position seems to have been, therefore, that when he signed the Contract and the subsequent documents they were in fact in accordance with the finalised DP Report, this being because the finalised DP Report both (a) had sought authorisation for a sale on terms that there would be a ten-year limit on the right to any claw back payment and (b) comprised the instructions that were given. It is possible, but difficult, to imagine that had he been called to give evidence that he would have said that he intended the documents, when he signed them, to provide something different. But Mr Lustig was not called to give evidence. It was never suggested on behalf of Barnet LB that he could not be called. Therefore, as it seems to me, it is impossible to conclude that Mr Lustig understood the finalised DP Report as having any sense other than that which he told to the Panel when he was being interviewed.

132. Mr Lustig is the only person involved in the process of approving the DP Report whose state of mind might be guessed at. How any of Mr Boland, the Borough Treasurer, Councillor Chopra or Mr Chadwick understood the document, or what they thought was being authorised, can only be inferred from the fact that they approved the DP Report. In short, the state of mind of Barnet LB, if required to be ascertained from the state of mind of these individuals, must be assumed to have been to approve whatever the DP Report in fact authorised.

133. The point can be summarised as follows. Mr Stephens prepared a document. By reference to that document a decision was taken to sell the Underhill Ground to Holdings. What Barnet LB understood and intended to be the terms of the sale is to be collected from that document, as it is that document which, as sanctioned, contains the decision taken by Barnet LB and the instruction to its lawyers as to the sale. If, through error on Mr Stephens’ part, the document did not in fact communicate what Mr Stephens intended that it should, that error does not alter what was understood and intended by Barnet LB, in contrast with Mr Stephens.

134. I entirely accept that the intention and understanding of an individual officer, such as Mr Lustig, Mr Strange or Mr Stephens, could be relevant when considering Barnet LB’s rectification claim: in an appropriate case the officer’s intention could be attributed to Barnet LB. What I do not accept is that such an individual’s intention could be so attributed where it is at odds with what was in fact subsequently authorised, the authorisation having been given by other individuals whose state of mind can only be inferred from the document which both (a) contained the authorisation given and (b) was the document by reference to which the authorisation was given.

135. It will be apparent, from what I have said earlier in this Judgment, that I have misgivings about what the DP Report did in fact authorise. I do not find the DP Report particularly clear; and I can see an argument that the DP Report did not in fact authorise the sale which in the event was carried out. But that is not an argument which Barnet LB has advanced: in particular in this action there is no claim to avoid the sale on the ground that it was unauthorised. On the contrary, it seems to be Barnet LB’s position that Mr Stephens’ error in the drafting of what became paragraph 11.4.4 of the DP Report had the effect of causing Barnet LB to authorise, admittedly by mistake, a sale of the land subject to a restrictive covenant and right of potential claw back of no more than ten years’ duration. That, at any rate, seems to have been the stance adopted by Mr Lustig when questioned by the Panel conducting the Independent Inquiry.

136. It follows, in my judgment, that Barnet LB cannot succeed in its claim to rectification.

137. In case I am wrong in my conclusion about the intentions of Barnet LB at the time of entering into the Contract, I consider the position on the assumption that Barnet LB intended, and mistakenly believed, that there would be no time limit on the potential claw back right. Have the fourth and fifth ingredients of the rectification cause of action been established by Barnet LB?

138. These two ingredients, those at paragraph 118(iv) & (v) above, are both directed at the single question, Was the conduct of Holdings “unconscionable” and such that it is not unfair, or “inequitable” (to borrow the expression of Buckley LJ in the Thomas Bates case at 515G), to hold Holdings to the bargain which Barnet LB intended, being a different bargain from that provided for by the terms of the Contract? For this reason the two ingredients are closely related.

i) On the one hand actual knowledge of the precise mistake is not required in order to establish the fourth ingredient: “shut-eye” knowledge is certainly sufficient.

ii) On the other hand the type of conduct which will suffice to establish the fifth ingredient is likely to depend, at least in part, on what the defendant knows or suspects. Where the defendant knows precisely what the mistake is, merely to execute the relevant document without pointing out the mistake to the other party may be sufficient: his fault will lie in having suppressed the fact that he has recognised the presence of the mistake. This was what happened in the Thomas Bates case. Where, however, the defendant suspects that there is something which the claimant would have wished to improve upon if he had thought of it, which may be the product either of a drafting mistake or of a failure in the decision making processes within the other party, but does not know which, more would be required, as it seems to me, to make the defendant’s behaviour capable of being characterised as involving “sharp practice”. For example the defendant may have sought to distract the other party from the mistake.

139. I have already explained that in my judgment Mr Slyper appreciated that the introduction of the ten-year time limit was inexplicable except on the ground of some mistake or failure within Barnet LB.

140. However this conclusion is not by itself sufficient, as I see it, to justify a conclusion that Holdings was guilty of sharp practice so as to require Holdings to be held to a bargain which it did not intended to enter into when executing the Contract. In my judgment Holdings did sufficient to satisfy itself that Barnet LB’s inclusion of the ten-year limit in the documents put forward appeared to be intentional and not the product of a drafting error in the draft Contract and Overage Deed. Specifically, Holdings by Mr Good and Mr Slyper called attention to provisions of the Contract which in plain terms imported the ten-year time limit, they discussed the material provision both with the lawyer dealing with the conveyancing and with Mr Stephens as the person who had negotiated the transaction the previous year. Barnet LB had ample opportunity to question and, if unintended, to remove the ten-year time limit.

141. Of course, Holdings did not say in terms to Barnet LB that the introduction of the ten-year limit was an unlooked for be benefit for Holdings, or that it was not what had been discussed the previous year; and Holdings did not ask Barnet LB why the ten-year limit had been introduced. But in my judgment it is not necessary for a party to a proposed contract to go that far where (a) the contract is a negotiated commercial transaction, (b) the other party is an apparently competent organisation of substance with apparently competent lawyers and staff, and (c) the process by which the unlooked for benefit is put forward by that organisation is unknown but apparently there is no unintentional error of drafting on the part of the draftsman of the proposed contract.

142. The final ingredient required to be established by Barnet LB in order to succeed on the rectification claim is that the rectified documents would carry into effect what had been intended and agreed. I set out my views on this only briefly, as the claim in my judgment fails for other reasons.

143. On behalf of Holdings it was submitted that the final element would not be satisfied. The argument is that the restrictive covenant which came to be included in to the Transfer and which is an essential element for the operation of the Deed and the making of any claw-back payment was not a matter which was agreed upon. In short, so it was submitted, the rectification asked for by Barnet LB would be to make a new bargain for the parties which they had never agreed.

144. I do not accept this argument. The accord reached in July 2001 was predicated upon the Club having the right to play at the Underhill Ground until such time as the Underhill Ground might be disposed of for development. The restrictive covenant, as it seems to me, serves this purpose by dedicating the Underhill Ground to that purpose until the provisions of the Deed are operated with a view to development of the Underhill Ground. It also serves the mechanical purpose, in conjunction with the Deed, of giving some incentive for the purchaser to pay the overage payment: as mentioned, the Deed itself does not place on the purchaser any obligation to make any overage payment at all.

The Local Government Act 1972

145. In relation to Barnet LB’s claim under the 1972 Act the first issue is one of fact. Was the consideration less than the best that could reasonably be obtained?

146. Mr Shapiro gave it as his view that £10,000 did not represent “the open market value” of Barnet LB’s freehold interest in the Underhill Ground: his view was that if offered in the open market, subject to and with the benefit of the Lease, “it would have achieved a price very significantly in excess of £10,000”. He reasoned as follows:

“Purchasers in the market would have considered that redevelopment for residential purposes would be a realistic possibility if Barnet Football Club vacated the land. If this were to happen Barnet Football Club, or its Receiver or Liquidator (as appropriate), would then have joined with the freeholder with a view to selling for development at the best price achievable. The open market would currently appreciate that planning permission did not exist for residential purposes, that the site was zoned as Green Belt, and that Barnet Football Club would only seek to vacate if they could not redevelop on the site (with or without acquiring additional land) or if they could no longer function as a Football Club. Thus whilst buyers in the market would not have paid a price which reflected the residential development value they would have paid a price to reflect hope value.”

He went on to say that he thought the “minimum price” which would have been achieved if the Club were not in the market themselves would have been in the region of £100,000. This figure, he said, could not be established as the product of a valuation calculation but was his estimate based on his knowledge of the market and perception of speculators operating within the market.

147. To my mind Mr Shapiro’s argument is convincing, whether or not his “minimum” figure of £100,000 is too high. At the end of 2001 it would have been obvious that sooner or later there was likely to be some movement in the position at the Underhill Ground, that there was some prospect of development being allowed at some time in the future, that the Club was in the market for the freehold, and that the freehold interest could be an important lever. I am sure that £10,000 could probably have been bettered, if the freehold had been placed on the open market without any restriction.

148. However this is not the end of the matter. When the freehold was disposed of, Barnet LB sought to reserve for itself a right to share in any future development value. Barnet LB has not sought to establish that on the open market the price achievable would have been greater than £10,000 had the freehold been disposed of on the terms provided for in the Contract (that is, a disposal subject to a possible claw-back of 60% of development gain (a) limited to ten years and (b) excluding certain cases where a gain was made within the ten years). What has been argued is that the particular terms contained in the Contract were not the best reasonably achievable on the actual sale to Holdings.

149. I am sure that this argument is correct. It is fanciful to suppose that Mr Slyper or Holdings would have rejected the proposed sale, if Mr Strange had sent out a draft of the restrictive contract and a draft Overage Deed both being unlimited in point of time but providing, of course, for Holdings to be entitled to develop the Underhill Ground and either (a) to keep the whole development profit should the Club relocate permanently within Barnet or (b) otherwise to keep 40% of that profit. In my judgment that is in substance what they were expecting and had been pressing to receive since July 2001.

150. At this point it is convenient to explain why in my judgment Mr Maunder Taylor’s evidence does not support Holdings’ argument that the consideration received on the sale was the best reasonably obtainable.

Mr. Maunder Taylor’s evidence

151. I have explained that I have approached Mr Maunder Taylor’s evidence with caution. Particular points which I found to be unsatisfactory are as follows:

i) In paragraph 6.4.4 of his report Mr Maunder Taylor stated that in his opinion “the principles of [the] formula calculation” in paragraph 8.4 of the revised draft Report to Cabinet “are clear and can be readily applied by a valuer in the event that the circumstances described arise”; and he added that the principles in that paragraph and 8.5 “do satisfy the requirements of” section 123 of the 1972 Act. However, when asked to consider those paragraphs in the course of his oral evidence he accepted

a) that paragraph 8.5 is inaccurate in that there are circumstances in which on any construction of paragraph 8.4 those provisions do not give Barnet LB a share of any future development value; and

b) that paragraph 8.4 is unclear in that, at the least, it is not obvious whether or not the ten-year time limit applies in a case where the Club “ceases to exist”.

ii) In paragraph 6.3.8 of his report Mr Maunder Taylor said:

“What has happened in the subject case is that the Defendant has paid existing use value subject to a formula by which they will pay additional value if and when:

a) An appropriate planning permission is granted.

b) Barnet Football Club are able to release possession of the subject land.”

Yet in my judgment, for the reasons I have explained, that is not a fair description of what has happened: the summary ignores the ten-year cut-off, and ignores the fact that the trigger for any further payment within that period is the making of a request by Holdings. What is more, Mr Shapiro had in paragraph 4.5 of his report (a report commented on and in some respects criticised by Mr Maunder Taylor) drawn attention to these two important features of the arrangement. Mr Maunder Taylor accepted that his own description was not accurate. He also said that these features, once appreciated, meant that the balance of advantage in the transaction was considerably in favour of Holdings.

iii) Mr Maunder Taylor gave it as his understanding, in paragraph 6.3.18 of his report,

“that the purpose of the ten-year cut-off period takes into account that relocation or reconstruction of a stadium is already overdue and, at the date of the Agreement, it was expected that the problem would be resolved comfortably within that period.”

When giving his oral evidence Mr Maunder Taylor agreed that the word “might” was more appropriate than the word “would”. In any event, the materials referred to by Mr Maunder Taylor in his letter as providing the basis for his understanding could not reasonably’ support that understanding. By way of illustration he said that “It is in Section 4.5.16 of the Inquiry Report in which the introduction of the ten-year cut-off is proposed by” Barnet LB; but the relevant proposal was concerned only with the question when the Club’s relocation within Barnet was to be considered as permanent (namely ten years from relocation) and in no way demonstrated an expectation on the part of Barnet LB that “the problem would be resolved comfortably within” ten years from the sale of the freehold. The three following paragraphs of the Inquiry Report made it plain that the ten-year relocation provision was distinct from the ten-year cut-off.

152. The point noted in the last sub-paragraph is important for this reason. It was by reference to his understanding of the parties’ supposed expectations Mr Maunder Taylor offered in his letter an opinion as to whether Barnet LB’s disposal of the Underhill Ground was reasonable. This also was relied upon by him as a basis for his opinion that consideration was not less than the best that could reasonably be obtained.

153. He rested his conclusion that the transaction was reasonable on the ground that “there was good reason to believe that this problem would be resolved one way or another within ten years, only time will tell whether it actually is, and that therefore a 10-year cut-off period was reasonable”. But the whole point of the restrictive covenant and the Deed was that if the resolution should be otherwise than by a redevelopment of the Underhill Ground for football only or by a relocation of the Club within Barnet, there could be a development profit to be shared with Barnet LB; and there was no particular time limit as to when that profit might be realised. Certainly, there was no assurance that it would be within only ten years, if it was ever to be realised.

154. It seems to be this same supposed expectation of a resolution within ten years which is the foundation for his view that on the basis that the ten-year cut-off had been included by mistake:

“the inability of the Council under the terms of the Transfer and Supplemental Deed to receive any part of the marriage value on redevelopment of the land after 10 years does have the effect that the disposal of the freehold reversion is for a consideration that represents the best that could reasonably be obtained.”

155. There were two other reasons offered by Mr Maunder Taylor in his letter to support this view. However, he agreed, when asked in his oral evidence, that both of these are irrelevant in relation to a transaction which was proceeding by way of a sale at a current use value only but with an overage payment, and therefore irrelevant to his conclusion. Accordingly, his conclusion concerning the reasonableness of the consideration was rested on his view about the negotiating position between the parties, a negotiating position which was founded (in Mr Maunder Taylor’s view) on the expectation of a resolution of the situation within ten years. But Mr Maunder Taylor accepted in his oral evidence that if Holdings’ position was correctly reflected in the first draft of the Report to Cabinet (that is, that Holdings would accept an obligation to make an overage payment without limit of time) Barnet LB did not achieve the best result. What is more, the Inquiry Report shows that Holdings had at no time sought any time limit as to the obligation to make an overage payment, and that the time limit was introduced by mistake.

156. Accordingly, if - as I am sure - Mr Maunder Taylor was mistaken when concluding that “... in view of everything set out in the Inquiry Report, there must be some doubt as to whether the Defendant would have, or could prudently have, agreed what the Claimant now seeks”, his view about whether or not the consideration was the best reasonably to be obtained is not supported. Rather, I think he was right when accepted in his oral evidence that Barnet LB did not achieve the best result.

Consequences of non-compliance with Section 123(2)

157. I have already referred to Holdings’ argument, that by reason of section 128 of the 1972 Act, it matters not that section 123(2) was not complied with.

158. In my judgment Holdings’ argument on this point is correct. In R v Pembrokeshire, ex p Coker [1999] 4 All ER 1007 Lightman J considered section 128(2) in the context of an application for judicial review of a decision by a local authority to grant a lease of certain property to a third party. At the time of the application the lease had been granted. The aim of the applicant was to have the lease set aside on the ground that it had not been for the best consideration reasonably obtainable and had thus been made in contravention of section 123(2). The Judge refused the application on a variety of grounds, one being that the third party’s lease could no longer be impeached. As he said (at page 1013h):

“The language of s.128(2) is perfectly clear and unambiguous: in favour of a person claiming under the council (and that includes [the third party] as lessee under the lease), the lease is not invalid even if a higher rent or greater consideration could have been obtained and the necessary consent of the minister was not obtained.”

Lightman J went on to hold that the protection afforded by section 128(2) was available equally whether the disposition was sought to be impeached in proceedings for judicial review or any other proceedings. As he pointed out, the protection does not, of course, prevent examination of the legality of the conduct of a council in making a disposition. What it does, in the language of the Judge is:

“to protect the title of [the lessee] from exposure to risk of the invalidity of the lease by reason of the failure of the council to obtain a required consent and precludes the grant of any relief impugning the validity of, or setting aside, the lease on this ground.”

159. In the Pembrokeshire County Council case what was under consideration was a lease. It has not been submitted on behalf of Barnet LB that it makes any difference that the disposition in point in the present case is a conveyance of a freehold. In this I think Mr Crawford is right. In Structadene Ltd v Hackney LBC [2001] 2 All ER 225 Elias J clearly thought that section 128(2) was equally applicable where what was disposed of was a freehold as where the disposal involved the grant of a lease. In either case the disponee is a person “claiming under the authority”.

160. Mr Crawford nevertheless submitted that section 128(2) was not apt to confer protection where it was the council itself which was challenging the disposal and seeking to recover the land disposed of. I disagree. The section does not lay down any limits as to the circumstances in which the “person claiming under the authority” can rely upon the statutory validation: sub-section (2)(a), the provision conferring protection on the title of such a person, is perfectly general.

161. Mr Crawford sought to meet this point by submitting that in the present case Holdings is not such a person, but is only a “person dealing with the authority”, so that the protection given by sub-section (2)(a) is not applicable. To support this he argued that the section draws a distinction between persons “claiming under the authority” and persons “dealing with the authority”, the second of these classes of person being dealt with only in sub-section (2)(b).

162. Sub-section (2)(b), in contrast with sub-section (2)(a), does refer to both classes of person. But the distinction, it seems to me, is between those who are currently in the course of some transaction which will lead to a disposal, and those, such as Holdings in the present case, who already have the benefit of a completed disposal. The former, it seems to me, are those “dealing with the authority”. Sub-section (2)(b), in contrast with sub-section (2)(a), is apt to include persons who have not yet had the completed disposal in their favour: the purpose of the sub-section is to absolve those persons, as well as persons with completed disposals, from any need to be concerned about the question whether the relevant consent was required or obtained.

163. In the event Barnet LB’s claim to avoid the sale of the Underhill Stadium in reliance on section 123(2) of the 1972 Act is precluded by reason of section 128(2).

164. Mr Hunter made an alternative submission in relation to section 123(2) of the 1972 Act. This was, in effect, that Barnet LB’s proceedings in this Court were misconceived and should, instead, have been brought by way of judicial review. However, there is no requirement of the Civil Procedure Rules for Barnet LB’s claim against Holdings to be by way of judicial review. As Mr Crawford rightly submitted, this action is simply aimed at vindicating a private law right of Barnet LB. Indeed, I cannot see how the present action could properly had been brought by Barnet LB as a judicial review proceeding. I would not have rejected Barnet LB’s claim based on section 123 of the 1972 Act on the ground that Barnet LB had used the wrong procedure.

Conclusion

165. Nevertheless, for these reasons I have given, Barnet LB’s action fails and is to be dismissed.