MP Kemp Ltd v Bullen Developments Ltd

MR JUSTICE NUGEE: This is the return date for the continuation of an interlocutory injunction which was granted to the Claimant, MP Kemp Ltd, by Sales J on a without notice application on 16 April 2014, restraining the Defendant, Bullen Developments Ltd, and Mr Mark Sargeantson from taking any further steps in an expert determination, Mr Sargeantson being the expert appointed to hear the determination.

MP Kemp Ltd is a company owned by Martin and Joan Kemp, who I will call "Mr and Mrs Kemp". It is the owner of agricultural land to the south-west of Norwich. This land is adjacent to the Norwich Research Park, a collaboration of a number of scientific research organisations, including the University of East Anglia, the Norfolk and Norwich University Hospital, and others.

In 2009 the local planning authority, the South Norfolk Council, published the Norwich Research Park Development Framework, which envisaged further development of the park, including onto land owned by the Kemps.

By an Option Agreement dated 29 November 2011, the Claimant agreed with the Defendant to grant it an option over parts of its land extending to some 254 acres ("the Property"). The option period was 25 years.

I must refer to some of the provisions of the Option Agreement. The parties to it were the Claimant company, Mr and Mrs Kemp themselves (who were parties in case it turned out that they owned one of the fields forming part of the Property to which title was unregistered), and their son, Mr Benjamin Kemp, as owners' representative, as well as the Defendant.

The scheme of the agreement was that the Defendant could exercise the option once outline planning permission had been granted, and could do so as many times as it liked in respect of the whole or any part or parts of the Property. The price payable was the Purchase Price, which, as defined, was the figure resulting from the calculation in Schedule 2. Schedule 2 set out a calculation to which I will come.

By clause 10 the Defendant could at any time try to agree the Purchase Price and the form of transfer with the Claimant before exercising an option. If agreement was not reached within ten working days, the Defendant could then serve a formal Price and Transfer Determination Notice on the owners' representative (that is Mr Benjamin Kemp), confirming that it required the Purchase Price and form of transfer to be agreed or determined in respect of the whole or any part or parts of the Property, and the parties were then to use reasonable endeavours to agree the Purchase Price and/or the form of transfer of the Property or any part or parts of it.

By clause 10(3), if agreement had not been reached within a further ten working days from service of the Price and Transfer Determination Notice of the Purchase Price and the form of transfer, the matter might be referred by either party for determination in accordance with clause -- it says "23 hereof", but it is common ground that the Option Agreement where it refers to "clause 23", which it does in a number of places, was intended to refer to clause 24.

Subject to clause 10, under clause 11, which governed the exercise of the option, the Defendant could exercise the option by serving an Option Notice, which could be done once outline planning permission had been granted. The notice could be served whether or not the Purchase Price and form of transfer had already been agreed or determined in accordance with clause 10. If the Purchase Price and form of transfer had already been agreed, then the Option Notice to be served would specify the Purchase Price and attach the agreed form of transfer, and completion would then take place 20 working days later.

If the Purchase Price and the form of transfer had not been agreed, then the Option Notice was to contain an offer, the procedure then being governed by clause 11.4.1, which reads:

Under 11.4.2:

If there was no such notice withdrawing the Option Notice, then the transfer was to be completed within five working days of determination. The practical effect of this is that the Defendant was never bound to complete the purchase of any parts of the Property until it knew what the price and terms of such a purchase were.

I should read clause 24 in its entirety. It provides as follows:

Schedule 2, which is headed "Purchase Price", sets out the details of how to calculate the Purchase Price. The starting point is by finding the Market Value, which is dealt with in paragraph 1.1 and is defined as follows:

"Planning Permission" being defined as:

Having found the Market Value is then necessary to identify the Developer’s Costs. They are defined by paragraph 1.2, which it is not necessary to read. It is common ground that they do not include the infrastructure costs; that is, the costs of providing the Property or the relevant part or parts of it with services and infrastructure that have already been taken account of under paragraph 1.1 in finding the Market Value.

Paragraph 3 provides that the Purchase Price for the Property should be 80 per cent of the Market Value of the Property after deduction of the Developer’s Costs, and then very helpfully sets out a hypothetical example which shows that one deducts the Developer’s Costs from the Market Value and takes 80 per cent of the resulting amount.

Paragraph 5 provides:

It then says:

In July 2012 the Defendant decided to seek to draw down an initial parcel of about 34.5 acres as a first tranche (which I will call "tranche 1"). This was, in fact, before the grant of outline planning permission, but in confident anticipation of it. Outline planning permission was in fact granted on 30 January 2013 by the South Norfolk Council for, in effect, the expansion of the Norwich Research Park over some 74 acres.

In August 2012 Mr Nigel Handley, on behalf of the Defendant, therefore opened negotiations with Mr Benjamin Kemp proposing a Market Value for the tranche 1 land of £5.175 million, a figure which was based on an independent valuation given by a firm of valuers called Brown & Co to the Defendant.

At a meeting on 2 October 2012, after various intervening meetings, the parties agreed a figure of £6 million for the Market Value, that meeting taking place around the kitchen table in the farmhouse belonging to Mr and Mrs Kemp.

A transfer of tranche 1 was duly completed on 14 December 2012. The Purchase Price, after deduction of Developer’s Costs from the Market Value and taking 80 per cent of the resulting sum, was £3,120,050. At the same time a formal deed of variation was entered into in order to allow the early release of certain money which was held in escrow.

In July 2013 the Defendant decided to draw down a second tranche of land. Again, Mr Handley contacted the Kemps and, in October 2013, told Mr Benjamin Kemp that the Defendant wanted to draw down a second tranche of 21.33 acres. He proposed £2.3 million as the Market Value, again based on a valuation by Brown & Co. Mr Benjamin Kemp's reaction was that this figure was far too low. He suggested a value of £6 million.

In due course the Defendant served a formal Price and Transfer Determination Notice and then invoked clause 24 of the agreement and applied to the President of the RICS for the appointment of an expert surveyor. Mr Sargeantson was duly appointed in January 2014 and embarked on the determination, giving some procedural directions with a view to progressing it.

In February, however, solicitors instructed by the Claimant, Birketts, wrote a letter expressing serious concerns about various matters. One particular matter, and the basis of the current proceedings, concerns the infrastructure costs which have been taken into account in arriving at the Market Value of the tranche 1 land.

There is no dispute that in the course of the negotiations for the tranche 1 land Mr Handley provided Mr Benjamin Kemp on 4 September 2012 with a letter containing a breakdown of anticipated infrastructure costs amounting to some £14 million. This was not simply for the 35 acres in tranche 1, but for the total 74 acres allocated for development.

As formulated in the Particulars of Claim in this action, the Claimant's case is that in the course of negotiations Mr Handley orally told Mr Benjamin Kemp that the entire £14 million of infrastructure costs shown in that letter would be taken into account in determining the Market Value of the tranche 1 land, but would not be double counted and therefore would not be taken account of in relation to subsequent drawdowns.

This is said to give rise to (1) a variation under which the definition of Market Value in clause 1.1 of Schedule 2 of the Option Agreement was varied:

“...such that on the first drawdown of 35 acres in December 2012, rather than a ‘fair, proper and reasonable account’ being taken of the Infrastructure Costs, all £14 million Infrastructure Costs for the 74 acres of the Property for which the outline planning permission was ultimately granted in January 2013 would be taken into account.”

And a variation of the same definition:

“... such that on any subsequent drawdown(s) of the remaining 39 acres, or any part or parts thereof, no account would be taken of the Infrastructure Costs up to £14 million, such that the Market Value for such purposes would, in effect, be the Residual Land Value (as defined in [the] Particulars of Claim).”

On the basis of these claims, the Claimant applied to Sales J on 16 April without notice, but after giving informal notice to the Defendant, for an injunction which restrained the continuation of the expert determination, its case, in a nutshell, being that what I might call the variation or estoppel argument (1) was not something for Mr Sargeantson to decide, it was a matter for the Court, and (2) should be decided before Mr Sargeantson continued his valuation, as he needed to know the answer to the question before proceeding to determine the Market Value.

The Defendant's case, in summary, is that clause 24 of the Option Agreement is sufficiently wide that the variation/estoppel arguments are within the ambit of the matters that can be determined by the expert, Mr Sargeantson, and hence there is no reason not to allow him to proceed. Indeed, these proceedings should themselves be stayed either because the Court has no jurisdiction or because it should decline jurisdiction to allow the determination to proceed. The Defendant has issued a cross-application to that effect. Sales J granted the injunction until further order and, as I have already said, this is the return date for that without notice injunction.

This gives rise to a number of issues. I propose first to deal with the argument that there has been a variation of the Option Agreement, as it is accepted that this turns on a very short point.

It is well established, and common ground, that the Option Agreement itself, being a contract for the sale or other disposition of an interest in land, has to be in writing to satisfy section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (see Spiro v Glencrown Properties [1991] Ch 537) and that any material variation to the Option Agreement also has to be in writing (see McCausland v Duncan Lawrie [1997] 1 WLR 38).

Mr Stoner QC, who appears for the Claimant, accepted that this was so. His submission was that the pleaded variations, which were entirely oral, were nevertheless arguably valid as they did not involve the variation of a material term (see the judgment of Morritt LJ in McCausland at 49F-G, where he said:

He went on to say that the term in that case, which was a change in the completion date, was a variation to a material term.

Mr Stoner submitted that in the context of an option extending over 254 acres, a variation in dealing with the infrastructure costs as part of the process of finding the Market Value of less than 40 acres was arguably not material.

I do not accept this submission. I accept the submission of Mr Rainey QC, who appeared for the Defendant, that in a contract for the sale of land the price is always a material term and any variation to the price, even a modest one, is a variation of a material term for these purposes.

In any event, the practical consequences of the variation argued for here would appear to be very substantial. The figure put forward by the Defendant for the Market Value of the tranche 2 land, £2.3 million, was based, as I said, on the valuation by the Defendant's valuer, Brown & Co. This is a residual valuation of the familiar type, which allows over £3.7 million of infrastructure costs against tranche 2. It is self-evident that if that figure is omitted from the residual valuation of tranche 2, the Market Value would increase by several million pounds and 80 per cent of that would feed through to the Purchase Price.

Therefore, even if I am wrong to accept Mr Rainey's submission that any variation in the sale price of land is a variation of a material term, it seems to me impossible to deny that a variation that can lead in practical terms to a difference in price of several million pounds must be any stretch of the imagination be regarded as material. In these circumstances, as I have already explained, Mr Stoner accepts that the variation claims cannot succeed as the variations were not in writing. In practical terms, therefore, the only claims that need to be considered are the estoppel claims.

It is convenient to take next the question whether the estoppel claims come within the ambit of the expert determination clause in clause 24, as Mr Stoner accepts that, if they do, a stay of these proceedings should be granted.

The question concerns what is sometimes called the jurisdiction of the expert. Indeed, this is how Thomas LJ described it in Barclays Bank Plc v Nylon Capital LLP [2011] EWCA Civ 826 at paragraph 21, where he said:

I myself prefer the phraseology used by Hoffmann LJ (as he then was) in Mercury Communications v Director General of Telecommunications [1995] CLC 1125, where he referred to “the decision-making authority” of the valuer or other decision-maker, as the word "jurisdiction" has to my mind the flavour of a Court or tribunal or arbitrator, rather than that of an expert.

Be that as it may, it is common ground that this is purely a question of construction of clause 24.

Mr Stoner referred me to the well-known principles laid down by Lord Hoffmann in ICS v West Bromwich [1998] 1 WLR 896 at 912 – 3, in particular his fourth principle that:

Mr Stoner also referred me to the well-known decision of the Supreme Court in Rainy Sky v Kookmin Bank [2011] 1 WLR 2900. Again, the principles are very familiar, but they can be summarised in the words of Lord Clarke at paragraph 30:

Clause 24, as I have already referred to, provides that any dispute that arises between the parties on any matter arising out of the agreement may be referred to the expert.

Mr Stoner on this wording makes, in effect, four points.

Firstly, he says that it is apparent from the Option Agreement that the words "any dispute" do not mean what they say. The Option Agreement instances various matters that can specifically be referred under clause 24 (erroneously referred to as clause 23) as follows: first, the provisions which I have already referred to, namely clause 10.3, which refers to agreement not having been reached of the Purchase Price and/or the form of transfer; then clause 11.4.1, which again refers to "agreement not having been reached of the Purchase Price and/or the form of transfer" (see also clause 11.4.2); and, finally, paragraph 5 (inaudible due to coughing), which refers to failure to agree on the Purchase Price. As Mr Stoner points out, the first two of these are confined to the Purchase Price or the form of the transfer, and the third to the Purchase Price alone.

Then there is clause 5.6, which deals with what happens if one reaches the end of the option period and there are still matters outstanding and reads as follows:

Mr Stoner says that read with the other references, this must itself be treated as referring to the Purchase Price or the form of transfer. He therefore submits that in effect this is all that clause 24 is dealing with.

I do not accept that submission for a number of reasons. Firstly, I accept that these provisions show that the paradigm example of the use of clause 24 that was envisaged by the contract was to determine the Purchase Price or the form of transfer in the event of disagreement. But the structure of the agreement is not to say that certain things (ie the Purchase Price or the form of transfer) are capable of being referred and then to specify how such matters, when referred, are to be dealt with. Clause 24 says that any dispute can be referred. The other parts of the contract then instance certain specific things which can in particular be referred under clause 24. No doubt it was envisaged, and no doubt correctly, that the most likely source of dispute between these parties was over the price and the form of transfer, but on the face of clause 24 the clause is not confined to these matters.

Secondly, clause 5.6 itself says that if any matter is outstanding at the end of the Option Period, then the Option Period is to be extended. Again, no doubt it was envisaged, and no doubt correctly, that the most likely matter to be outstanding was a dispute over the Purchase Price and the form of transfer, but again on its face it is not confined to such disputes.

Thirdly, there is in fact another provision in the contract, which is clause 11.6, which deals with the division of any compensation available in the event of a compulsory purchase order. It is not necessary for me to read it, but it in its own terms goes beyond the question of Purchase Price or form of transfer.

I therefore do not accept Mr Stoner's submission that the only disputes within clause 24 are the disputes specifically identified as referable to clause 24 and the other clauses of the agreement. These are, no doubt, the paradigm cases but they are not the only cases referred to in the clause.

Mr Stoner's second submission is that the disputes within the ambit of clause 24 are confined to disputes arising out of the agreement. Mr Stoner says that the dispute as to the estoppel claims does not arise out of the agreement, it is something external to the agreement or, as he put it, outwith the four walls of the agreement. He accepted that it could be said to be a dispute “related to” the agreement, but he said it was not one “arising out of” the agreement. Mr Stoner relied on the general principles stated in Barclays Bank v Nylon, namely that unlike in the case of a clause referring matters to arbitration, there is no presumption in favour of giving a wide and generous interpretation to clauses conferring jurisdiction on the expert (see per Thomas LJ at paragraph 28).

Again, I do not accept the submission. The dispute here is whether, in assessing the Market Value under paragraph 1.1 of Schedule 2 for the tranche 2 land, the infrastructure costs are to be disregarded up to £14 million. This is admittedly not a dispute that arises on the wording of the agreement as written. It is not a question of construction. But it seems to me that it is a dispute as to a matter which arises out of the agreement. I do not regard this point as capable of any great elaboration. However, I cannot accept that the reasonable, objective observer would understand clause 24 as meaning that the parties intended that the question of valuation of the Market Value of the land was to be referred to the expert, and for that purpose the question of the fair and reasonable account to be taken of the costs of providing the Property with services and infrastructure was also to be something determined by the expert, but that the question whether the parties agreed what should and should not be included by way of infrastructure costs was not something to be referred to him. That does not seem to me to make any commercial sense or to derive any support from the language of clause 24. "Any dispute on any matter arising out of this agreement" as a matter of ordinary language, in my judgment, is apt to include a dispute as to which infrastructure costs are properly to be included in the assessment of the Market Value under Schedule 2, paragraph 1.1, whether the basis for that dispute is technically a question of construction, or is a question of fact, or, as in this case, is a question of estoppel.

Mr Stoner's third point is that the nature of the expert procedure contemplated by clause 24, namely the fact that the expert is required to be a surveyor, he is required to have 20 years' post-qualification experience in the valuation of land and development, and that he is required to give notice of his decision within a maximum of 20 working days of the matter being referred to him, all suggest that the clause was not intended to deal with questions of estoppel.

Mr Stoner relies on the decision of Henderson J in Persimmon Homes Ltd v Woodford Land Ltd [2011] EWHC 3109 (Ch). There it was common ground that an expert determination clause did not cover a claim for rectification of a contract, as rectification is a remedy which can only be granted by a Court, but one of the questions argued was whether a related estoppel claim was covered by the clause or not.

At paragraph 24(d) Henderson J records the submission of Mr Pymont QC as follows:

At paragraph 27 Henderson J continued:

He then at paragraph 28 went on:

At paragraph 31 he said:

At first sight this judgment does indeed provide powerful support for Mr Stoner's submission that here too the parties must be taken to have intended that the estoppel claim was outside the ambit of clause 24. But I think one needs to be very cautious. The main basis of Henderson J's decision is, I think, that once one excludes rectification, as it was common ground one had to, one must also exclude the closely related questions of construction or estoppel which turned, essentially, on the same facts.

That may or may not be so, but it is rather different from the present case where there is no question of rectification. Although Henderson J also relied on the procedural difficulties, with all respect to him it is not clear to me on what basis this arises as a question of construction.

In principle, it should have been possible to construe clause 24 on the day on which the Option Agreement was executed and before any question of estoppel arose. What is the interpretation of clause 24 which would permit the expert to determine some questions, but not others?

Apart from the two suggestions which I have already rejected, it is not at all obvious to me what is the rival interpretation of clause 24 which can be put forward. It can scarcely be said that clause 24 means "any dispute (other than an estoppel dispute)" as there is no textual basis for that at all. Nor can it really be suggested that it means "any dispute (other than one giving rise to a conflict of fact)" or the like. As Mr Rainey pointed out, even confining clause 24 to matters that are indisputably within its ambit, such as the Purchase Price or the clause 11.6 determination or the form of transfer, these may involve legal questions (and especially in relation to the form of transfer) or questions of fact (especially in relation to clause 11.6, but also in relation to the Developer’s Costs and the like under Schedule 2), and it may indeed be necessary for the expert to do more than just use his expertise as a valuer.

So the mere fact that factual questions are involved and it may involve the expert having to form a view whether the estoppel is made out on the facts, or indeed whether it is viable as a matter of law, is no sure guide as to whether it is within clause 24.

In my judgment, there is no interpretation of clause 24 which can be identified which neatly excludes the estoppel claims from the ambit of the clause.

Finally, Mr Stoner referred to Rainy Sky and suggested that the words "any dispute" could not be given a literal interpretation. There is, I think, a tendency in cases of construction to use "literal" as if it were a pejorative term, in contradistinction to a commercial and sensible meaning. Of course I accept that if a literal interpretation produces a commercially nonsensical result, the Court will try to find another more sensible meaning. But I do not accept that adopting a literal interpretation is by itself a suspect thing to do.

On the contrary, to start with what might be called, to use a less pejorative term, the ordinary meaning of the words used in the contract, it seems to me a good place to start. The Rainy Sky principles can only be invoked if there are two rival interpretations to choose between. I am far from persuaded that there is here a rival interpretation which would justify the conclusion that the estoppel claims were outside the ambit of the clause or that, if there is, it would make more commercial sense to construe clause 24 as excluding the estoppel claims. It is not at all obvious to me that the parties must be taken to have contemplated that a dispute of this kind, which is ultimately a dispute as to what costs should be taken into account in the value of land, could not be decided by an experienced surveyor as part of the expert determination rather than through Court proceedings, which are likely to be slower and more expensive.

For these reasons, in my judgment, Mr Rainey is right that on a true construction of clause 24 it is wide enough to include a dispute as to whether the Defendant is estopped from seeking to include infrastructure costs up to £14 million in the calculation of the Purchase Price, as alleged in the Particulars of Claim. In these circumstances, Mr Stoner, as I have said, accepted that there should be a stay of these proceedings and the injunction should be discharged.

It is not strictly necessary for me to say anything about the remaining issues, but I will indicate my views in case I am wrong on the question of construction of clause 24.

In that case, the next question would be whether the Court should nevertheless grant a stay of the proceedings, as a matter of discretion, on the ground that it is more convenient to allow the determination to proceed first.

Here the most lucid analysis in the authorities is, as so often, that given by Hoffmann LJ (as he then was) in the Mercury case, a dissenting judgment but one upheld by the House of Lords. The whole passage in his judgment from the heading "Prematurity" on page 1139 to the end of the judgment is material, but it is too long to read out.

The salient points are that there are two distinct principles involved. One is a matter of substantive law. Thus, if the valuation of a parcel of shares has been entrusted to an expert but he has not been told how to do it, the Court will not intervene, either beforehand or afterwards. This is because this is a matter entrusted to the expert, that is within his decision-making authority, and the parties are therefore bound by what the expert decides in the absence of fraud or collusion.

The other distinct principle is that where an expert has been told how to do something, for example, that shares should be valued with reference to the net profits over three years, that is something where the Courts will intervene if it is shown that the expert has not done what it was agreed he would. If he has not valued by reference to the net profits over three years, he has gone outside his decision-making authority. However, even in such a case the Court will not generally intervene in advance. It will generally leave the expert to get on with it, and only intervene if it can be shown afterwards that the expert got it wrong.

These principles were summarised by Lightman J in British Shipbuilders v VSEL Consortium Plc [1997] 1 Lloyd's Rep 106, in five legal principles, of which principles (3) and (5) are as follows:

The principles were again summarised by Vos J in Ackerman v Ackerman and others [2011] EWHC 3428 (Ch) at paragraphs 258 to 262. At paragraph 262 he summarised the point as saying:

In the present case, if (1) the estoppel claims are well founded in fact and law and (2) they are not, as a matter of construction of clause 24, a matter for the expert himself to determine, the practical effect is that the parties will be seen to have instructed the expert to value the land by omitting the infrastructure costs up to £14 million. That is analogous to directing accountants to value shares by reference to three years' net profits. It means that if Mr Sargeantson values on a different basis, it can be challenged by the Claimant afterwards. That would require the Claimant to show both that the estoppel claims were factually and legally sound and that they were not matters for the expert to determine, and that Mr Sargeantson in fact did not value that way, the latter point being one which may not always be easy to show. But if the Claimant can establish this, then it can ask the court to intervene.

But as the citations from Mercury and VSEL show, the general principle is that the Court will not intervene beforehand. Why not? Because the expert may not get it wrong, he may get it right. It is different if, as in Mercury itself, it is perfectly clear what the decision-maker (in that case the Director General of Telecommunications) is going to do. But here it is not at all clear what Mr Sargeantson is going to do. All he has said is that if a legal issue is raised he will consider it, if necessary with the benefit of legal advice. There is no reason on the evidence to conclude that he is likely to go wrong. If the Claimant puts the estoppel claims before Mr Sargeantson, there is every reason to think that Mr Sargeantson will decide them and value accordingly.

Mercury is an illustration that, despite the general rule, the Court will on occasion refuse to stay proceedings. Another example where the Court will intervene in advance is shown by Barclays Bank v Nylon. That was a case where the issue was whether the expert should be embarking on any determination at all. That is not this case and rather different considerations apply.

A third example is the decision of the Court of Appeal in National Grid Co Plc v M25 Group Ltd [1999] 1 EGLR 65. In that case the Court of Appeal allowed an appeal against the decision of Pumfrey J, who had granted a stay of proceedings on the basis that the proceedings involved questions of construction which had been entrusted to the expert. But Pumfrey J had said that if he had had a discretion, he would have allowed the proceedings to continue.

Mummery LJ, with whom the other two members of the court (Thorpe and Stuart-Smith LJJ) agreed, said that Pumfrey J was wrong to conclude that the expert had power to decide the questions of construction. He therefore allowed the appeal and refused to stay the proceedings.

Although Mummery LJ cited from the judgment of Hoffmann LJ in Mercury, he did not refer to the passages where Hoffmann LJ referred to the reluctance of the court to make a pre-emptive ruling on the construction of the principles according to which the decision-maker is required to decide. And though he cited from the speech of Lord Slynn in the House of Lords in that case, all that Lord Slynn said was that:

I do not find it easy in the circumstances to discern from the judgment of Mummery LJ what in that case were the factors for deciding not to grant a stay in accordance with the usual practice. It may be that he was simply upholding the way in which Pumfrey J said that he would have exercised the discretion had he held that he had such a discretion.

It appears from Hoffmann LJ's analysis in Mercury that the guiding principle is one of practical convenience, the main factors being: (1) that until the expert has made his decision, the question of whether he has applied principles wrongly is hypothetical, as it is not known what principles he will apply; and (2) that it is not a legitimate reason for asking the court to intervene in advance, that it may be evidentially difficult to determine whether the expert has in fact applied the right principles or the wrong ones.

In the present case, the practical considerations seem to me as follows:

(1) As with most questions of discretion, there are usually factors to be weighed up on both sides. The disadvantage of granting a stay of the proceedings until after the expert determination has concluded are fairly self-evident. First, the expert will not know what principles he should be applying. He will inevitably have to proceed on some basis, but that may turn out later to be the wrong basis. In that case, the process will have been wasted and he will have to start again. That risk can in some cases be mitigated by the parties asking the expert to make alternative determinations, but (a) I do not think the expert can be required to do that and, in any event, (b) that only really works if there is a simple yes/no question of principle so that the expert can say, "If the answer is 'yes' my determination is X pounds and if the answer is 'no' it is Y pounds." In many cases there are numerous possible variations canvassed (see, for example, the list of questions in the National Grid case) and this is not a practical solution, although in the present case it might be a possible way forward.

Secondly, depending on the nature of the issue, there may be practical difficulties in expecting the expert to decide what principles will apply. It is one thing if there is a short point of construction on which the expert may invite representations and, if not himself a lawyer, take legal advice and reach a view. It is potentially something else if the question is one of hotly contested fact, where, in order to come to a sensible conclusion, the expert might have to hear from the parties without any power to compel witnesses, order disclosure, or require questions and cross-examination to be answered. The parties may find they go through an expensive and elaborate process before the expert to persuade him what principles will apply and then have to repeat the process in court proceedings when his decision is later challenged.

(2) On the other hand, to refuse to stay proceedings also has inevitable potential disadvantages. It is not entirely clear if the Court has power to order a stay of the expert determination pending the conclusion of the court process. The parties may often agree this, and if they do not there are some fairly strong indications by both Chadwick and Simon Brown LJJ in an interlocutory application for expedition of the appeal in the National Grid case [1999] L RTR 206 that the Court does have power to grant such a stay.

Chadwick LJ, at page 211, said:

Simon Brown LJ said, at page 212:

He then referred to the line of authority exemplified by Ackner LJ's decision in Bekhor v Bilton [1981] QB 923, 942 where he said:

And added:

On the subsequent substantive appeal Mummery LJ, having said that he would allow the appeal and not stay the proceedings, added:

But these latter words are tentative and not a decision, and the comments of the Lords Justices in the former appeal were without hearing adverse argument.

In the Handbook of Rent Review, the editors comment, having referred to both appeals, in chapter 11.11.11:

I certainly do not propose to settle it myself, but on either view there are potential disadvantages. If the Court does have power to grant a stay and imposes one, the effect of allowing the court proceedings to continue first is to impose an inevitable delay on the expert determination until what could be a quite lengthy court process has finally concluded. This is not what the parties usually intend by referring matters to expert determination, which is, generally speaking, intended to be a quick and relatively cheap decision by an independent expert. In the present case clause 24, as I have mentioned, required the expert to give his decision within 20 working days.

However, if the Court does indeed have no power to grant a stay, the effect of allowing the court proceedings to continue is that the parties are faced with having two parallel disputes going on at the same time, one in Court and one before the expert, with inevitable duplication of costs and, it seems to me, the potential for tactical manoeuvring by one side or the other in the hope of getting one answer before the other and being able to turn that in some way to their advantage.

So on either view of the law there is a potential for either delay or cost or both in allowing the court proceedings to continue, and all this in circumstances where the proceedings may turn out to be entirely unnecessary as, until it is known how the expert has decided, it cannot be known whether there is anything to challenge. That is what Hoffmann LJ meant by saying such questions are hypothetical; that is, they may never arise. That is why the actual decision in Mercury was different, where, absent a Damascene conversion, it was known that the Director General would apply principles which Mercury contended were the wrong ones.

As this summary shows, the question is not always an easy one, there being potential disadvantages in either course. On the facts of this case, however, if the question had been a live one I would have granted a stay of proceedings. It is easier to explain why, after examining the question, which arises on the Claimant's application for an injunction as to whether there is a serious issue to be tried.

The application for an injunction is put forward as something to be determined in accordance with the well-known principles inAmerican Cyanamid v Ethicon [1975] AC 396. Under those principles the first question is whether there is a serious issue to be tried. Mr Stoner submits that there is. His case is based on oral statements said to have been made by Mr Handley to Mr Benjamin Kemp in the course of negotiations. There is, he submits, a conflict of evidence disclosed in the witness statements that cannot be resolved at this stage, and if his clients' version of events is found to be correct then the estoppel argument is arguable as a matter of law.

Mr Rainey, however, challenges both the factual and legal basis for such a claim. I will take the legal challenge first.

The basis for the estoppel is said to be an assurance by Mr Handley that the infrastructure costs of £14 million were to be taken into account in valuing tranche 1 but would not be taken into account for subsequent tranches. This gives rise to a claim that the Defendant is estopped from seeking to include the infrastructure costs up to £14 million in the calculation of the Purchase Price for tranche 2.

Mr Rainey says, and I agree, that this is a species of promissory estoppel, that is a promise by the Defendant not to include £14 million of infrastructure costs in valuing tranche 2, which was said to have been acted on by the Claimant in agreeing to the value of £6 million as the Market Value for tranche 1.

Leaving aside the factual difficulties in this case, to which I will come, this type of estoppel (that is an estoppel under which one party to a contract agrees not to insist on the rights under the contract) is difficult to distinguish from a variation of the contract modifying the parties' rights. It is noticeable that the relief sought in paragraph 3 of the prayer in practical terms has the same effect as the relief sought in paragraph 2, which pleads relief in the form of a declaration as to a variation.

But a contractual variation to that effect, as already discussed, will be void and ineffective for non-compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act.

Mr Rainey submits that any attempt to enforce the same promise or assurance by way of an estoppel is equally barred by section 2. I should add here that this does not seem to me to be a case of proprietary estoppel under which the Claimant invokes an equity over the Defendant's Property. The ability of a Claimant to rely upon a proprietary estoppel in the face of section 2 itself gives rise to a number of difficulties, but I do not think it relevant to the present claim and do not find it necessary to discuss them.

For his submission, Mr Rainey relies on the decision of the House of Lords in Actionstrength v International Glass [2003] 2 AC 541. That was a case not on section 2, but on section 4 of the Statute of Frauds 1677, which provides:

The facts, as alleged by Actionstrength, can be briefly summarised as follows.

St-Gobain Glass UK Ltd (“St-Gobain”) wished to have a new factory built. It engaged International Glass Engineering Inglen SPA (“Inglen”) as main contractor. Inglen engaged Actionstrength as subcontractor. Inglen did not pay Actionstrength and Actionstrength threatened to withdraw its labour. St-Gobain then orally agreed with Actionstrength that if they stayed on site St-Gobain would ensure that Actionstrength received the money due to it from Inglen.

By the time the case reached the House of Lords it was not disputed that this oral agreement took effect in law as a guarantee and could not be enforced as a contract by virtue of section 4 of the Statute of Frauds. It was, however, relied on as giving rise to an estoppel.

Actionstrength's argument was that the oral assurance or promise was itself a representation that the promise would be enforceable. This argument was rejected by the House of Lords, which held that a promise by St-Gobain to pay Inglen's debts to Actionstrength could not be regarded as a representation that the promise was enforceable, as to do so would mean that every oral promise to answer for the debts of another would be enforceable, not admittedly as a contract but as an estoppel, and that would in effect repeal section 4: see, in the speech of Lord Bingham, paragraph 9:

Lord Hoffmann at paragraph 26 said:

Lord Walker at paragraph 52 said:

Their Lordships accepted that the decision was confined to the case where what was relied on by way of assurance was the bare promise itself. It would be different if there were an assurance over and above that: see Lord Bingham at paragraph 9:

Lord Hoffmann at paragraph 29 said:

Lord Clyde at paragraph 34 said:

Then, later on:

Lord Walker at paragraph 50 referred to the decision of Brooke J in Bank of Scotland v Wright, where Brooke J had said:

Then at paragraph 51:

See also paragraph 52, referring to a concession that:

It is said by Mr Rainey in the present case that in the same way what is relied upon here is simply a verbal promise or assurance that the Defendant would not bring £14 million of infrastructure costs into account in the valuation of tranche 2; that this is tantamount to a variation of the Option Agreement and prima facie unenforceable under section 2; and that no representation was made that the promise would be enforceable or that the section 2 point would not be taken.

Mr Stoner has two answers to this. One was to say that in this case the pleaded assurances were that type of extra assurance referred to in Actionstrength that might give rise to an estoppel. I do not myself think that this is an answer to the point. The ratio of Actionstrength, as I understand it, is that it is not enough to point to a promise or assurance that the party will do something (in that case an assurance by St-Gobain that it would pay Inglen's debts to Actionstrength) as giving rise to an estoppel taking the promise outside the statute. What is needed is some representation that such an assurance would be legally enforceable, for example a representation that the party concerned “would honour the agreement despite the absence of writing, or that it was not a contract of guarantee”, or that “the promise was to be honoured”, or an assurance not to plead the statute, or that it would be treated as enforceable. None of the representations in the present case goes beyond an assurance that the £14 million infrastructure costs would not be taken into account in the valuation of tranche 2. None, to my mind, involves the extra representation over and above the assurance itself to the effect that the assurance would be legally binding, as suggested might be necessary in Actionstrength.

Mr Stoner's other answer to Actionstrength is that the assurance amounted in effect to a collateral contract and it was not necessary for such a collateral contract to be within section 2. The difficulty with this is this is not how the case has either been pleaded or argued to date. Mr Rainey accepted that it might very well be possible to amend to plead a collateral contract, but no such amendment has yet been sought.

As at present advised, it does seem to me that the Actionstrength doctrine places a real difficulty in the way of the Claimant's estoppel argument. Once it is accepted that the effect of the estoppel is tantamount to a variation of the contract, I find it hard to distinguish between the assurance by St-Gobain that it would answer for the debts of another, which was unenforceable by virtue of section 4 of the Statute of Frauds and could not be given effect to as an estoppel as that would subvert the policy behind section 4, and an assurance by the Defendant that it would not bring the £14 million infrastructure costs into the valuation for tranche 2, which is unenforceable as being a variation of the Option Agreement by virtue of section 2 of the Law of Property (Miscellaneous Provisions) Act 1999 and cannot be given effect to as an estoppel, as that would subvert the policy behind section 2. The policy behind section 2 is pretty plainly the same as that given by Lord Hoffmann in relation to section 4 in the Actionstrength case at paragraph 19, namely that:

The real question, therefore, seems to me to be whether the estoppel does operate as a variation of the Option Agreement. There is undoubtedly a strong case for saying that it does, as the practical effect of the estoppel is to rewrite the definition of "Market Value" in Schedule 2, and it is of course noticeable that this is how it has been pleaded by the Claimants themselves.

So I consider that there are real difficulties in the way of the estoppel argument. However, I am conscious that I have not heard the oral evidence. I cannot, therefore, reach any conclusions as to precisely what was said, which may affect the question. Although I see the strength of the argument that the estoppel operates as tantamount to a variation, I do not exclude the possibility that fuller argument might persuade a Court that it was not to be regarded as a variation, particularly in the light of Mr Stoner's suggestion of a collateral contract.

I therefore do not conclude that on this basis there is no serious issue to be tried, but I do regard there as being real and serious legal difficulties in the way of the Claimant's estoppel case.

The other basis on which Mr Rainey challenges the estoppel claim is a factual one. I am, of course, conscious that I have not heard oral evidence and it is not the practice of the Court to try issues of fact upon the basis of witness statements untested by cross-examination, particularly in circumstances where the Defendants have served voluminous evidence and the Claimant has not served any evidence in reply.

As was said by Lord Diplock in American Cyanamid:

However, the Court can, it seems to me, look at the evidence to see, again in Lord Diplock's words later on in American Cyanamid:

He does go on to say:

Here I do take the view that the factual difficulties in the Claimant's case are formidable. It is not necessary for the purposes of this application to deal with them in any great detail, but there are three particular points which are striking.

Firstly, there is no documentary support for the Claimant's case. Mr Benjamin Kemp himself explains that he does not have a habit of taking notes of meetings. However, there are in evidence notes, apparently made by Mr Handley, of the relevant meetings, both in manuscript and in a typed-up version which is not simply a transcript, but is a fleshed out version.

Mr Handley's evidence is that he took the manuscript notes at the meetings in question. That is going to be challenged by Mr Benjamin Kemp, but the notes are inherently likely to have been made either at or shortly after the meetings in question.

For the meeting around the farmhouse kitchen table on 2 October, his note, so far as relevant, reads as follows:

The explanation of that note given by Mr Handley in his evidence is as follows:

On the face of it, if that account is accurate, the note is completely destructive of the allegation that Mr Handley assured Mr Benjamin Kemp that £14 million infrastructure costs were all taken into account in the first tranche, something that is the foundation of the Claimant's claim.

(2) Moreover, the Defendant, as appears from that citation from Mr Handley's witness statement, had a professional valuation from Brown & Co of the 35 acres in tranche 1 before negotiating with the Claimant. That valued the 35 acres at £5.175 million, which was the source of the offer put forward by the Defendant. It is entirely clear from that valuation, which is in evidence, that Brown & Co did not put the entirety of the £14 million infrastructure costs into its calculation of the Market Value of the tranche 1 land. They in fact used an earlier estimate of some £12.3 million infrastructure costs. Some of these were already apportioned between tranche 1 and the rest of the 74-acre site, £2.5 million to tranche 1 and £1.3 million to the balance. The remainder of the costs were not, but Brown & Co split them themselves on a pro rata basis between the 35 acres and the remaining 39 acres. That led to them adopting a figure of about £5.75 million for the 35 acres, which, with a £500,000 contribution to off-site highway work, takes one to a total of about £6.25 million, as referred to by Mr Handley.

These facts are for practical purposes virtually indisputable. In these circumstances, it seems to me wholly unrealistic to suppose that Mr Handley told Mr Benjamin Kemp that the costs of £14 million were included in the Market Value for tranche 1. I do not see any circumstances in which that would have been a sensible thing for him to say or would have been in the Defendant's interests. Mr Benjamin Kemp did not have the Brown & Co valuation at the time, and he did have the breakdown of the £14 million costs for the 74 acres, and it is not perhaps too difficult to see that he might have jumped to the conclusion that all £14 million costs were taken account of, so leading to his own perception that the value of the land, after deducting £14 million infrastructure costs and reaching a Market Value of £6 million, was the equivalent of a £20 million value for the serviced land.

But I do not find it remotely plausible to think, and it has not been suggested to me why it should be the case, that Mr Handley, who did have access to Brown & Co's valuation, would assure him that the £14 million costs had all been taken into account. I fail to see why he would do such a thing. I can well see that he might have assured Mr Benjamin Kemp that there would be no double counting, but on the Defendant's case there is indeed no double counting. The essential allegation is that the Defendant assured the Claimant that all £14 million infrastructure costs had been taken into account in tranche 1, so they would not be taken into account in tranche 2. It is this which seems, on the evidence which I have referred to, so implausible a scenario.

(3) Mr Rainey pointed to the evolution of the Claimant's case in the correspondence. In particular, he pointed to two documents, the first being an email of 5 December 2013 from Mr Benjamin Kemp sent to Mr Handley, which reads, so far as relevant, as follows:

I interpose to say that if one takes the 34.5 acres that comes out at just over £20 million:

This email, as appears on its face, does not say that the question of the whole £14 million for the 74 acres had been taken into account in the Market Value of the tranche 1 land or was something that he had been assured about or that had been agreed, as now alleged. On the contrary, it is put forward as his understanding of what happened and his view of what had been allowed for, premised on the assumption that Brown & Co initially valued the serviced land at £590,000 per acre.

The second document that Mr Rainey relies on is a letter of 5 January 2014 from the Claimant's surveyors Bastin Steward, in which Mr Steward said that, among other things, they had been instructed to raise the following matters. Paragraph 3 is:

Again, it does not suggest that the instructions which Mr Steward at that stage had from the Claimant were that there had been an agreement that the entire £14 million had been taken into account in valuing the tranche 1 land and would not be taken into account in relation to tranche 2 land.

It does sometimes happen, of course, that cases which look quite difficult at the interlocutory stage turn out at trial to be well founded, and Mr Stoner rightly cautioned me against trying to resolve the conflicts of evidence on the material before me. I do not therefore conclude that the Claimant's case is unarguable and bound to fail. However, I do regard it, for the reasons that I have sought to express, as a case which faces very obvious and severe factual difficulties.

In these circumstances, I revert to the question whether this would be a case where it would be appropriate to stay the proceedings as a matter of discretion, if I had not already concluded that this was a case where the estoppel claims fell within the ambit of clause 24. In circumstances where the case sought to be put forward by the Claimant, although not wholly unarguable, faces both legal and factual difficulties of the sort I have summarised, it does not seem to me to be appropriate to allow the Court’s proceedings to go forward. To do so, as I have explained, would require the parties either to put the expert determination on hold or to pursue both the expert determination and the court proceedings at the same time, and there are disadvantages in both courses which I do not think it right to impose on the parties for the sake of permitting such a difficult case to go forward first.

Therefore, if this had been a live issue I would, in the exercise of my discretion, have granted a stay of the proceedings. That would have enabled the parties to continue the expert determination, including, if the Claimant wished to do so, the question of the estoppel claims and would then have permitted the Claimant, if so advised, to challenge the resulting expert determination if the expert did not apply the principles which the Claimant considers that it ought to have done.

As it is, however, I will grant the stay on the basis that the matters sought to be raised in this action are matters to be determined by the expert as part of his determination of the Market Value and fall within his decision-making authority.

There are a number of other issues which have been raised which I do not in the event regard as necessary to take up further time with. I will record them briefly.

(1) There is clearly an issue of construction raised in paragraph 44 of the Particulars of Claim. No separate argument was addressed to me on this aspect of the case and, in the light of my conclusions on the construction of clause 24, it falls to be dealt with by Mr Sargeantson as part of his determination.

(2) Had the question of an injunction been a live one, there would have been questions of what prejudice would be suffered by the Claimant if the injunction were refused or by the Defendant if the injunction were granted respectively. To some extent they mirror the advantages or disadvantages which I have referred to above. It is not necessary to say any more about them, nor about the balance of convenience or the status quo.

(3) One point taken by Mr Rainey was that an injunction would only be granted to restrain a legal wrong. In the case of the Defendant, that, he said, required allegation of a breach of contract, and he submitted there neither was nor could realistically be any allegation that the Defendant had acted in breach of contract in invoking an expert determination procedure provided for under the contract. Mr Stoner's answer was that the injunction could be granted in support of the Claimant's legal rights, including its rights as a result of the estoppel claims. It is not necessary to resolve this point, which involves some quite intricate analysis.

(4) Mr Rainey also said that there was no possible basis for the injunction against Mr Sargeantson. Mr Sargeantson regarded the actions of the Claimant as unnecessarily aggressive and, when asked, readily agreed to abide by any order of the Court. He is not before me and I did not understand any relief to be now sought against him. In these circumstances, I do not regard it as necessary to consider whether there was any basis for joining him to the application. I will simply say that it is not obvious to me that he had done or threatened to do anything that was legally wrong.

(5) Mr Rainey raised questions about whether the Claimant was justified in bringing the application before Sales J on a without notice basis. To investigate this question would require a detailed examination of the chronology of the dispute, which is now all water under the bridge. I do not regard this as serving any useful purpose.

(6) Mr Rainey also raised various issues of material non-disclosure before Sales J. Such allegations are always to be taken seriously, and to deal with them properly would take a considerable amount of time. I do not, however, see that this would now fulfil any useful purpose. Mr Rainey said it would affect the question whether the without notice injunction should be discharged ab initio or not. I understand the theoretical point but I have not understood what practical difference it might make. I do not, therefore, propose to deal with these allegations.

I should, however, record that Mr Rainey expressly accepted that Mr Stoner did not deliberately suppress anything before Sales J. Indeed, on the basis of the notes of the hearing which I have seen, Mr Stoner went to some lengths to draw the judge's attention to matters which the Defendants might wish to say if they were present.

For the reasons given above, I will on the Defendant's application grant a stay of the proceedings and I will discharge the injunction granted by Sales J on 16 April 2014, which was expressed to be granted until further order.

I will hear counsel on any consequential matters.