Gregory Projects (Halifax) Ltd v Tenpin (Halifax) Ltd & Anor

Gregory Projects (Halifax) Ltd (“Gregory”) proposes to develop an island site in Broad Street, Halifax; opposite the Town Hall. The development will consist of a multi-level retail, commercial and leisure development with ancillary car parking. The leisure components of the development are intended to include a cinema and a bowling alley. Tenpin Ltd is a company that operates bowling alleys; and its subsidiary, Tenpin (Halifax) Ltd (“Tenpin”), entered into a conditional agreement for lease with Gregory on 23 February 2007. By letter dated 23 February 2009 Tenpin purported to terminate that agreement under clause 4.1 of the agreement. The issue is whether it was entitled to. This in turn depends on whether the main provisions of the agreement had become unconditional.

The agreement for lease is elaborately drafted, but its drafting is not without its difficulties. The main provisions of the agreement become unconditional on the Unconditional Date, which was defined as the latest of the satisfaction of four conditions described as:

The Acquisition Condition

The Letting Condition

The Licensing Condition and

The Planning Condition.

The Acquisition Condition was the acquisition by Gregory of a freehold or long leasehold interest in the site, such that it was able to grant Tenpin the lease contemplated by the agreement for lease. The Letting Condition was the exchange of an agreement for lease with a cinema operator for premises within the development which either was or had become unconditional. The Licensing Condition was defined as:

I will return to these definitions and the procedure for obtaining the licences. The Planning Condition is the condition with which this case is principally concerned. It is defined as:

Planning Permission was defined as “detailed planning permission … in such form as to discharge the Planning Condition”. A “Tenant’s Unacceptable Condition” was defined as a condition falling within one of fourteen categories set out in the definition (e.g. one which increased the cost of the Tenant’s Works by more than 5 per cent) but the definition was subject to the express proviso that:

An “Unacceptable Condition” was defined as a condition of a Planning Permission or a term of a Planning Agreement “which is not reasonably acceptable to the Developer”.

Clause 2 of the agreement for lease is headed “Conditionality”. However, clause 1.1.8 says that:

Clause 2.1 provides that certain of the clauses of the agreement shall not apply until the Unconditional Date. These clauses include the Developer’s obligation to carry out the Developer’s Works; and the obligation to use reasonable endeavours to procure that the Practical Completion Date occurs on or before the Estimated Practical Completion Date, which is 27 months after the Unconditional Date. Clause 2.2 of the agreement for lease requires the Developer to comply with certain of its obligations contained in schedule 1 of the Acquisition Agreement; and once the Acquisition Condition had been satisfied to insure the development in accordance with clause 16 of the agreement for lease. Clause 2.3 requires the Developer to provide such information as the Tenant reasonably requires in respect of the progress of satisfying the Planning Condition; the Acquisition Condition and the Letting Condition. There is no such obligation as regards the Licensing Condition presumably because obtaining the licences is the Tenant’s responsibility under clause 3. Clause 2.4 prohibits the Tenant from objecting to the application for planning permission and requires it to assist the Developer “to obtain” an Acceptable Planning Permission. Clauses 2.5 to 2.7 must be quoted in full:

Clause 2.8 applies a similar procedure to the case in which it is necessary to enter into a Planning Agreement as a precursor to the grant of planning permission. However it applies to the draft Planning Agreement and to the proposed conditions to be attached to the planning permission. In other words, any objection must be raised before the grant of planning permission and necessarily, therefore, before the satisfaction of the Planning Condition. Clause 2.9 provides for the Developer to enter into the Planning Agreement if it and the draft conditions “are acceptable or deemed to be acceptable to the Tenant”. Clause 2.10 applies the same procedure to any appeal. Clauses 2.11 says:

The “End Date” is defined as 23 February 2009.

Clause 3 requires the Tenant to make a bona fide application for the grant of a Premises Licence and a Gaming Licence. It must keep the Developer informed of progress. Clause 3.3 entitles the Tenant to waive the Licensing Condition by notice in writing. Clause 3.4 requires the Tenant to notify the Developer within ten Working Days of the grant or refusal of the Premises Licence and Gaming Licence. Clause 3.5 provides:

Clause 4 is headed “Rescission and Disputes” and provides:

Clause 6 (which only comes into operation on the Unconditional Date) requires the Developer to carry out the development. Clause 7 requires the Developer to use reasonable endeavours to procure that the Practical Completion Date occurs on or before the Estimated Practical Completion Date. This latter date is 27 months after the Unconditional Date. The only other provision of the agreement for lease to which I need refer is clause 25. This provides for a dispute resolution procedure. But it only applies where the agreement expressly provides for it to apply. If neither clause 25 nor clause 4.2 applies, any dispute must therefore be resolved by the court.

Satisfactory premises and gaming licences were granted on 23 May 2008. It is agreed that this satisfied the Licensing Condition. Gregory completed its acquisition of the site on 1 December 2008. It is agreed that this satisfied the Acquisition Condition. On 11 February 2009 an agreement for lease between Gregory and a cinema operator became unconditional. It is agreed that this satisfied the Letting Condition.

On 28 October 2008 Calderdale Metropolitan Borough Council planning committee decided to grant planning permission subject to a number of conditions. Many of these conditions (some 39 in all) require details of materials, and arrangements for such matters as waste control, crime prevention, landscaping etc. to be submitted to the council for approval before development can begin. The written grant of planning permission was issued and dated on the following day, 29 October 2008. On 4 November 2008 Gregory wrote to Tenpin to say:

However, that letter did not enclose a copy of the written decision, as required by clause 2.6. It is agreed that no copy of the written decision was sent by Gregory to Tenpin until 26 February 2009, three days after the End Date. However, even in November 2008 Tenpin had plainly repented of its decision to enter into the agreement for lease; because it wrote to Gregory to say that it did not intend to fit out the unit or trade from the site; and had no desire to enter into the agreement for lease. Little more happened until 23 February 2009 when Tenpin’s solicitors served (by post and by fax) notice claiming to rescind the agreement for lease pursuant to clause 4.1. It was at one time argued that the notice was premature; but Mr Gaunt QC, appearing for Gregory, no longer presses that point. As I have said, Gregory supplied Tenpin with a copy of the planning permission on 26 February 2009. Tenpin has never suggested that any of the 39 conditions attached to the permission is unacceptable.

Mr Gaunt says that the sole question is whether a planning permission with the requisite characteristics had been granted before the End Date. If it had, then even though there may be a dispute about whether the planning permission complied with the contractual definition, the Planning Condition has been satisfied. The other provisions of the agreement and in particular clauses 2.5 and 2.6 are mere machinery and do not affect the question to be asked and answered.

Mr De Garr Robinson QC, appearing for Tenpin, says that that is an oversimplified view of the agreement for lease taken as a whole. He says that when one examines the structure of the agreement, and the interplay between its various clauses, it can be seen that in order to satisfy the Planning Condition, the Developer must serve on the Tenant a copy of the planning decision not less than ten working days before the End Date. Only in that way will the parties have the necessary certainty to enable them to decide whether or not the Unconditional Date has occurred and, if it has not, whether or not to exercise their rights under clause 4.1. If that is wrong, he goes on to say that the Unconditional Date will not “properly” have occurred as required by clause 4.1 unless clause 2.6 has been complied with before the End Date. And that, too, requires Gregory to send Tenpin a copy of the planning decision not less than ten days before the End Date.

At one stage Tenpin argued in correspondence that compliance with clause 2.6 was a condition precedent to satisfaction of the Planning Condition. If that argument were correct it would mean that a failure by Gregory to forward a copy of the planning decision to Tenpin “forthwith” had the consequence that the Planning Condition could not be satisfied. If, say, the planning permission had been granted one year before the End Date, but Gregory delayed for three months in forwarding a copy, it would have failed to comply with its obligation to forward a copy “forthwith” and thus would have failed to comply with a condition precedent, even though there was plenty of time before the End Date for the operation of the clause 2.6 procedure and the resolution of any dispute. Mr De Garr Robinson did not press this argument, and in my judgment, rightly so.

The question is one of interpretation of the agreement for lease. In other words, I must decide what meaning the agreement for lease would convey to a reasonable person having all the background knowledge of the parties. The court has no power to alter or improve the meaning of the agreement for lease, or to make it fairer. Even where the court is invited to imply a term, the exercise is still one of interpretation. In such a case, although the instrument may not have contained that term expressly, the court may conclude that the agreement taken as a whole and read against the relevant background must contain that term. The court is not adding to the agreement, it is merely spelling out what the agreement actually means: Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988.

Mr De Garr Robinson stressed the emphasis that the agreement for lease places on speed. Under clause 2.5 “as soon as reasonably practicable” after the planning decision Gregory must “forthwith” notify Tenpin. Under clause 2.6 Gregory must “forthwith” send Tenpin a copy of the planning decision notice. Once sent, the parties have only ten working days to decide whether it is acceptable or not. Time is of the essence of that period. If they decide that it is unacceptable, they must give reasons and clause 2.7 does not permit any addition or alteration of those reasons. All these provisions are designed to enable the parties to know where they stand as quickly as possible. Clause 2.11 contains an express link to clause 4, so that it is plain that the purpose of the procedural provisions in clause 2 are designed to ensure that the parties know where they stand before having to decide whether they will terminate the agreement.

So far, so good. However, clause 2.6 does not contain a final time limit by which the planning decision must be sent, and although time is said to be of the essence of the ten day period it is not made of the essence of the obligation to send the decision forthwith. So where does the ten day cut off point come from? Mr De Garr Robinson says that it comes from the method of satisfying the Planning Condition. From Gregory’s viewpoint an Unacceptable Condition is one which is “not reasonably acceptable to the Developer”. Thus before it can be said that a planning permission is free from Unacceptable Conditions, Gregory must have performed an exercise of judgment in relation to it. It must have decided which conditions, if any, are unacceptable to it. It is true that there may be a challenge to its judgment, on the ground that the judgment was not reasonable, in which case that dispute would have to go to arbitration under clause 4.2. The resolution of that dispute may not take place until after the End Date. But at least Tenpin would know where Gregory stood, and the reasons for its stance. Likewise Tenpin must perform a similar process in order to decide whether a planning permission contains Tenant’s Unacceptable Conditions. Even if it does, Tenpin must have the opportunity to give notice under the proviso to the definition that it will treat a condition as not being unacceptable. Otherwise, if Gregory wanted to rescind the agreement for lease it could sit on a planning decision containing Unacceptable Tenant’s Conditions until after the End Date and exercise its right to rescind without giving Tenpin the opportunity to treat the conditions as acceptable. It is in order to promote “equality of arms” between the Developer and the Tenant that Gregory was required to send Tenpin a copy of the planning decision “forthwith”, so that the ten day period would run for both of them. Accordingly the Planning Condition cannot be satisfied on the date of grant of the permission. It can only be satisfied at the end of the ten day period when the exercise of judgment has taken place (or the deeming provision takes effect).

Thus the question whether the Planning Condition is (or is not) satisfied depends upon the judgment processes provided for in clauses 2.6 to 2.10. This process needs to have been followed in order to allow the rescission mechanism in clause 4.1 to work properly. This is how the agreement is structured: if the Developer does not forward a copy of the Planning Permission to the Tenant, the ten working day judgment period cannot start running and the Tenant cannot be expected to exercise its option to rescind the Agreement.

The starting point, as it seems to me, is what the agreement for lease actually says about the moment when the Planning Condition is satisfied. It says that the Planning Condition is satisfied on “the obtaining” of planning permission of a particular kind. If that event triggers the Unconditional Date it starts the clock ticking for the development timetable. So one would naturally expect it to be a single and readily ascertainable moment. Suppose that Gregory forwards a copy of a planning decision to Tenpin and, on the following day gives notice that the permission is acceptable. Two days later, Tenpin gives notice that the planning permission is unacceptable, and the dispute is referred to arbitration. Some months later, the arbitrator decides that Tenpin is wrong. When was the Planning Condition satisfied? On the date of grant? When Gregory gave notice that it was acceptable? When Tenpin (wrongly) gave notice that it was not? At the end of the ten day period envisaged by clause 2.6? Or when the arbitrator reached his decision? The natural answer is that the planning permission was, from its date of grant, an acceptable planning permission and that that is the date on which it was “obtained”. There may have been a dispute about whether it was the right kind of planning permission but in retrospect one can see that it was. As Mr Gaunt put it the “obtaining” of planning permission is the other side of the coin from the “grant” of planning permission. It merely looks at the same act from the perspective of the grantee rather than the grantor. I add that this is the way in which the word is used in clause 2.9 which envisages entry into a planning agreement “in order to obtain” the planning permission (i.e. to procure its grant). So this interpretation has the merit of internal consistency. Mr De Garr Robinson, however, contrasted the use of the word “obtaining” in relation to the satisfaction of the Planning Condition with the use of the word “grant” in relation to the satisfaction of the Licensing Condition. “Obtaining” he said is used in the sense of “establishing”. There are two reasons why I do not find this argument persuasive. First, even on Mr De Garr Robinson’s interpretation, the mere service of notice under clause 2.6 will not establish whether or not a compliant planning permission exists if the parties are in dispute. That will not be known until the dispute is resolved, which Mr De Garr Robinson accepts may be after the End Date. Second, I cannot attribute to the draftsman of the agreement for lease the linguistic precision that this argument implies. To give one example for the moment: clause 2.6 itself says that if either party fails to give notice within the ten day period, the planning permission is deemed to be an Acceptable Planning Permission. Read literally, this means that if, say, the tenant gives prompt notice that the permission is not acceptable but the developer fails to give notice at all, the planning permission is deemed to be acceptable. But that is an absurd conclusion. Clause 2.6 must mean that the deeming provision operates only against the party who fails to serve notice in time. That is a case in which a term must be implied.

If, as I think, planning permission is obtained for the purposes of the agreement for lease when it is granted, Mr De Garr Robinson’s argument becomes much more difficult. What if the planning permission was not in fact issued until nine days before the End Date? As Mr Gaunt pointed out, a reader of the agreement for lease would naturally suppose that the Planning Condition could be satisfied at any time up to the End Date itself, and would be surprised to be told that in fact the grant of planning permission in the last ten days of that period was too late.

Mr De Garr Robinson laid stress on the obligation of Gregory forthwith to send a copy of the planning decision to Tenpin. A person could not be expected to exercise a right to rescind unless he knew he had it; and unless Tenpin had a copy of the planning permission, it could not know whether the right to rescind had arisen or not. There are, I think, a number of answers to this point. First, clause 2.5 required Gregory to notify Tenpin that the decision had been made, even before the decision notice had been issued. This obligation was complied with. So Tenpin knew that a decision had been made and could have called upon Gregory to send it a copy of the decision under clause 2.6. It did not. Second, a planning permission is a public document. Armed with knowledge that the decision had been made, Tenpin could have inspected the permission at the council’s offices. There is no evidence that it tried to. Third, the same point would arise in relation to satisfaction of the Acquisition Condition and the Letting Condition. But it is not suggested that the Tenant’s ignorance of the true position as regards those conditions would affect the right to rescind.

The draftsman of the agreement for lease was, to some extent, alive to the possibility that there might be uncertainty at the End Date. Thus he provided in clause 3.5 for a postponement of the End Date if it were not clear that a licence was safe from challenge. On the other hand, there is no similar extension of time if there is a dispute about satisfaction of any of the other conditions. Clause 2.3 contains a requirement on the part of Gregory to keep Tenpin informed about progress in satisfying three of the conditions, but there is no equivalent machinery to that provided by clauses 2.6 to 2.9 in relation to satisfaction of the Acquisition Condition or the Letting Condition. If, therefore, there is a dispute about either of those conditions, potentially both the Developer and the Tenant may be unclear about the position of the other. It can be seen therefore that the draftsman reacted to the possibility of uncertainty in a variety of different ways. Uncertainty about satisfaction of the Acquisition Condition and the Letting Condition is left at large. Uncertainty about the Licensing Condition is dealt with by postponing the End Date. And uncertainty about the Planning Condition is mitigated by the procedure contained in clauses 2.6 to 2.9. However, these different ways of dealing with uncertainty do not, in my judgment, lead to the conclusion that clause 2.6 must mean that a copy of the planning decision must be given to the Tenant not less than ten days before the End Date; and that unless that has been done the Planning Condition is not satisfied. Clause 2.6 simply does not say that.

I should add that Mr De Garr Robinson sought comfort from the heading to clause 2 (“Conditionality”). I do not consider that it helps. First, in very general terms that clause is about conditionality, but that general proposition does not help to decide the importance that the parties placed on any particular part of clause 2. For example, clause 2.2 required Gregory to insure the development once the Acquisition Condition had been satisfied. But it was not (and in my judgment could not have been) suggested that a failure to insure would have meant that the remainder of the agreement for lease was incapable of coming into effect. Second, despite the heading, all the provisions of clause 2 are immediately binding. Third, clause 1.1.8 says in terms that the headings are not to affect the interpretation of the agreement. The cases are divided on the question whether in these circumstances a heading should be taken into account (SBJ Stephenson Ltd v Mandy [2000] FSR 286, 297 and Doughty Hanson & Co Ltd v Roe [2009] BCC 126 § 71 say “Yes”, while Orleans Investments Pty Ltd v MindShare Communications Ltd [2009] NSWCA 40 § 68 says “No”). Where, as here, the contract says in terms that headings “shall not affect the interpretation” it seems to me that respect for party autonomy means that the headings cannot be allowed to alter what would otherwise have been the interpretation of the clause in question.

Mr De Garr Robinson argued that if he was wrong about the true meaning of clause 2.6 then the use of the word “properly” in clause 4.1 came to his rescue. It was not sufficient that the Unconditional Date had occurred. It must have “properly occurred”. The word “properly” must be taken to have added something, on the principle that a contract should be interpreted so as to give effect to all parts of it.

In support of this submission Mr De Garr Robinson relied on clause 3.5 which postpones the End Date in certain circumstances. One of the contemplated scenarios is that a Satisfactory Premises Licence has in fact been granted before the (original) End Date, but is liable to or actually is subject to challenge. The End Date is, in consequence, postponed. If the challenge to the licence is never made or, if made is unsuccessful, then in retrospect one can see that a Satisfactory Premises Licence was indeed granted before the (original) End Date. In those circumstances Mr De Garr Robinson said the postponement of the End Date was entirely pointless. The licence in fact granted was a Satisfactory Premises Licence and always was, so that the Licensing Condition was in fact satisfied on the (original) End Date with the result that the Unconditional Date occurred on the (original) End Date. But since the parties intended that the Licensing Condition should not be satisfied unless there were a licence which was incapable of challenge, the Unconditional Date had not “properly” occurred. This reasoning process could be extrapolated to satisfaction of the Planning Condition, with the result that the Planning Condition could not be satisfied unless clause 2.6 had been complied with. If it had not been complied with then even if in retrospect one can say that an Acceptable Planning Permission had been granted before the End Date, the Unconditional Date had not “properly” occurred.

Clause 3.5 is far from perfect, but it goes too far to say that postponement of the End Date is pointless. If the challenge to a Satisfactory Premises Licence succeeds, then postponement of the End Date has the obvious purpose that the Tenant’s right to rescind is preserved. If the End Date had not been postponed, then it would have been open to argument whether the parties’ positions crystallised on the End Date so that a subsequent successful challenge to the licence had to be ignored. I agree, however, that if the challenge fails then there seems to be no point in postponing the End Date. Ex hypothesi the Licensing Condition has been satisfied so that clause 4.1 cannot be invoked on that ground. The development timetable runs from the Unconditional Date, and postponement of the End Date does not alter the Unconditional Date. These deficiencies in drafting do not give the reader confidence in a minute linguistic analysis to tease out hidden meanings.

Moreover, clause 4.1 itself is a very difficult clause to understand. I repeat the first part of that clause for convenience:

Apart from the obscurity of “properly occurred” there is also the phrase “then while such situation continues”. The clause appears to be looking at a fixed point in time, namely the End Date. Either the Unconditional Date has occurred by that date or it has not. What is done is done and history cannot be rewritten. What, then, does it mean to say that the right of rescission exists while that situation continues? It may be that the draftsman is contemplating that the Unconditional Date can occur after the End Date by late satisfaction of one or more of the conditions. But if that is the case, then the uncertainty of which Mr De Garr Robinson complains is exacerbated. In addition the manner of rescission is “upon the terms of Standard Condition 7”. The agreement for lease does not define “Standard Conditions” and if one were to look at the Standard Conditions of Sale current at the date of the agreement for lease one would see that Standard Condition 7 had nothing to do with rescission. I make these additional points because it seems to me to be dangerous to attribute to a single word in a clause this poorly drafted an intention to bring in a test of compliance with a modified version of clause 2.6 as a condition precedent to the occurrence of the Unconditional Date, where that is nowhere stated in terms.

Accordingly I reach the conclusion that what matters is whether a planning permission having the requisite characteristics has been granted on or before the End Date; and that the resolution of the question whether a particular planning permission does or does not have those characteristics need not be initiated let alone concluded before the End Date.

In the course of his address Mr De Garr Robinson said that if I ruled against him on construction (as I will) I should adjourn the trial to enable him to put in evidence directed to the question whether the planning permission was such as to satisfy the Planning Condition. The suggestion floated was that the conditions attached to the planning permission were such that it might not be possible to tell whether the conditions were acceptable or not. This suggestion was made for the first time by Mr De Garr Robinson orally. It had not been foreshadowed in correspondence or in the evidence. Even the oral suggestion did not amount to a positive case that the planning permission was non-compliant. Tenpin has had the planning permission for the best part of eight months, and the proceedings have been on foot since June 2009. On 11 August Tenpin was given permission to bring a Part 20 claim. That Part 20 claim did not raise this issue. It is clearly important to both parties (as Mr De Garr Robinson repeatedly said) to know where they stand. On the basis of my ruling the clock started ticking for the development timetable eight months ago. In my judgment it is too late to ask for an adjournment on such speculative grounds. I refuse an adjournment.

Mr De Garr Robinson has undoubtedly persuaded me that the agreement for lease interpreted in the way for which he contends would have been a much better agreement from Tenpin’s point of view. But he has not persuaded me that that is what it actually means. Accordingly, despite Mr De Garr Robinson’s able submissions I conclude that:

The Unconditional Date occurred before the End Date as defined in the agreement for lease and

Tenpin was not entitled to rescind when it purported to do so.

I will therefore make declarations to that effect, and dismiss the Part 20 claim.