Rentokil Initial 1927 Plc v Goodman Derrick Llp

In this case the defendant firm of solicitors was retained by the claimant to act on its behalf in the sale of commercial office premises known as Rentokil House, Garland Road, East Grinstead (“the Property”) to Taylor Woodrow Developments Limited, which subsequently became Taylor Wimpey Developments Limited (“Taylor Wimpey”). Taylor Wimpey’s purchase of the Property was to be subject to the grant of planning consent for development for residential purposes. Taylor Wimpey intended to develop the Property by demolishing the buildings on the site save for 218 London Road and to construct a number of flats. Planning consent was to be sought after exchange of contracts. Completion was to be dependent on the grant of planning consent with acceptable conditions. The claimant asserts that in the course of the retainer the defendant firm was negligent and that the claimant is entitled to damages for breach of the retainer and/or for professional negligence at common law. In essence the claimant asserts, first, that the defendant negligently drafted (or approved or agreed with the purchaser’s solicitors) the terms of the contract for sale (“the Contract”) of the Property in such a way that it enabled the purchaser to avoid completing the Contract at a time when the property market was falling and, secondly, that the defendant also failed to advise the claimant as to the proper meaning and effect of the terms of the Contract with the result that it entered into a contract which it would not otherwise have entered into. At the heart of the allegations is an assertion that the defendant failed properly to draft and advise on the definition of what are referred to as "Unacceptable Planning Conditions". The claimant also asserts that the defendant was negligent in relation to the drafting of the definition of “Costs” purportedly payable in respect of obligations to be performed under what became known as a “Planning Agreement” between the purchaser and the local planning authority pursuant to section 106 of the Town and Country Planning Act 1990 with the result that the definition was capable of reducing the purchase price when it ought not to have been.

The claimant alleges that as a result of the definition of “Unacceptable Planning Conditions” in the Contract Taylor Wimpey was able to argue that the planning conditions that were ultimately imposed (between exchange of contracts and the date of intended completion) were unacceptable within the proper meaning of the Contract and that Taylor Wimpey were therefore entitled to treat the Contract as over. In reliance on this argument Taylor Wimpey refused to complete the purchase of the Property. The claimant disagreed with Taylor Wimpey and the parties started arbitration proceedings (a course which was provided for in the Contract) intending to resolve the question of whether the conditions were unacceptable within the true meaning of the Contract. The arbitration was ultimately compromised a few days before the substantive hearing was due to take place. The compromise provided for completion of the sale to Taylor Wimpey but at a lower price than had been agreed under the Contract. Steps had also been taken to determine the question of the s.106 agreement “Costs” and that dispute was also compromised. The claimant’s primary claim is for the difference in value between the original contract price and the renegotiated price, estimating its loss at approximately £1.88 million, alternatively for the loss of a chance of obtaining the original price. In addition it claims the wasted costs of the arbitration, some £600,000.

The defendant denies that it acted in breach of the terms of its retainer or was negligent and asserts that:

The claimant had at all material times been the owner of the Property which, due to a reorganisation of its business, it intended to dispose of. Title to the property was registered at HM Land Registry under three different Title numbers: SX132251, SX122935 and S X107270. Mr Gareth Brown, a solicitor admitted in 1983, was the group legal director of Rentokil Initial plc, a director of the subsidiary claimant company and was the UK company secretary. In addition he was responsible for the legal services of the group of companies worldwide. Due to the group reorganisation it had been decided that the companies would sell off surplus assets, which included the Property. The programme of disposals was intended to implement the advice given in a strategic review which had been prepared in February 2005 by a firm of surveyors known as Rapleys LLP ('Rapleys'), who described themselves in their letterhead as commercial property and planning consultants. Mr Brown instructed Rapleys to assist him in the disposal process. Mr Collin Steele was the agency partner and Mr Robert Clarke was the planning partner at that firm.

In early 2006 Rapleys arranged a tendering process for disposal of the Property which produced a series of offers from a number of interested parties, some of which were unconditional and some of which were conditional on the grant of planning consent for redevelopment of the Property for residential use. Not surprisingly the conditional offers were higher than the unconditional offers, the highest ultimately being that made by Taylor Wimpey at a price of £4.8 million, which Mr Brown recommended the board of directors of the claimant accept. The Taylor Wimpey offer was conditional on the grant of planning consent for residential development and use. There was a recognised risk that planning consent for residential use might not be granted by the local authority.

Heads of terms were agreed between Rapleys and the representatives of Taylor Wimpey and at the same time the purchase price was amended to £4.388 million.

In about July 2006 Mr Brown instructed the defendant to act as the claimant’s solicitors on the transaction. He had formerly worked with Mr Simon Catt, a partner in the defendant firm, but the matter was passed to Mr Mark Kendrick during Mr Catt's absence on holiday. There is no retainer letter, no letter of engagement and no client care letter.

Taylor Wimpey instructed CMS Cameron McKenna LLP (“Cameron McKenna”) to act on its behalf in the transaction. Various travelling drafts passed back and forth between the respective firms in the course of which the definition of the expression “Unacceptable Planning Conditions” was negotiated. Contracts were exchanged on 9 March 2007. On 27 July 2007 Taylor Wimpey's first application for planning consent was refused. On the 15 October 2007 the second planning application was submitted. It was refused on 27 December 2007. On 27 March 2008 Taylor Wimpey appealed against the refusal, Peter Village QC having advised Taylor Wimpey in consultation that the prospects of success on the planning appeal were better than 40%. On 24 June 2008 Mr Village revised his opinion and advised Taylor Wimpey that the prospects were better than 50%.

In July 2008 Taylor Wimpey announced the closure of its office in Crawley. Mr Brown and Mr Steele were both concerned that the market appeared to be softening and that Taylor Wimpey was in some type of financial difficulty.

On 28 July Taylor Wimpey's third application for planning consent was refused.

On 18 November 2008 the claimant (as owner) and Taylor Wimpey (as developer) entered into an agreement with Mid Sussex County Council, the local planning authority, under section 106 of the Town and Country Planning Act 1990 which imposed various obligations on the intended developer which were to be carried out during the course of the redevelopment of the Property.

On 19 November 2008 Taylor Wimpey and the local planning authority agreed what were referred to as suggested conditions which would be mutually acceptable to them on the grant of planning consent. Ultimately permission was granted by the planning inspector on appeal in a decision letter dated 8 December 2008. That permission was subject to a schedule of conditions, the relevant parts of which I set out below.

On 7 January 2009 CMS Cameron McKenna wrote to the defendant stating that the appeal decision contained “Unacceptable Planning Conditions” within the proper construction of the definition of that term in the Contract such that Taylor Wimpey was not obliged to complete the purchase of the Property.

It is apparent that the property market had by that stage entered into a period of historic decline.

Thereafter the claimant and Taylor Wimpey agreed to proceed to arbitration in accordance with the terms of the Contract in order to determine whether the schedule of conditions attached to the planning inspector’s decision did in fact contain unacceptable planning conditions within the true construction of that phrase. The two principal issues to be determined at arbitration were:

The hearing of the arbitration was due to take place on 27 July 2009 but following discussions between Mr Brown and various employees of Taylor Wimpey, including their in-house lawyer, Mr James Jordan, the dispute between vendor and purchaser was compromised and a settlement agreement was signed on 24 July 2009. That agreement provided for immediate exchange of contracts for sale of the Property to Taylor Wimpey unconditionally at a figure of £2.5 million with each party bearing its own costs of the arbitration and of the Costs determination.

The claimant asserts that if the defendant had advised it as to the true construction and effect of the Contract, and in particular the “Unacceptable Planning Conditions” it would never have entered into it. The claimant emphasises that at the time of exchange of the original contract the property market was buoyant and there were other buyers in the market who were interested in acquiring the Property. The claimant says that it has lost the difference between the original contract price of £4.388 million and the eventual sale price of £2.5 million on the basis that the transaction would have gone ahead, but for the defendant’s negligence, albeit on different terms. Alternatively it says that if the true analysis of the case is that damages are to be assessed on the basis of the lost chance then the court should assume that the Property could have been sold in a rising market for at least £3.5 million the loss in those circumstances being £1million. Additionally it says that it is entitled to recover the costs which it incurred in the course of the arbitration and the Costs determination which amounted to £602,997.

The Contract provided for the sale of the Property at a price of £4.388 million adjusted (in accordance with clause 15) by 80% of any amount by which what were referred to as the "Costs" were more or less than £590,000, subject to a proviso permitting either party to terminate the agreement if the adjusted price fell below £3.5 million. The “Costs” were the estimated amount which the purchaser would spend in complying with obligations to be imposed by a section 106 agreement to be entered into with the local planning authority. Clause 15 insofar as material read:

By clause 25 completion was to take place on the later of a number of dates, one of which was the “Effective Date” being “5 Working Days after the grant of “Satisfactory Planning Permission”, which was defined as “a Planning Permission permitting the carrying out of the Development which is unconditional or contains no Unacceptable Planning Conditions”, which were themselves set out in Schedule 1 to the Contract.

Clauses 6 and 7 contained the machinery for obtaining planning permission and imposed an obligation on Taylor Wimpey to pursue an application in the joint names of vendor and purchaser “and to use reasonable endeavours at its own expense to obtain a Satisfactory Planning Permission as soon as possible”. If planning permission was refused or not granted by 9 October 2007 there was a further obligation on Taylor Wimpey to appeal that decision unless leading planning counsel advised that there was a less than 40% chance of success. Taylor Wimpey was to be responsible for the claimant’s costs of the planning application and any appeal.

Clause 11 provided for automatic termination of the Contract if planning consent were refused on appeal or if the longstop date of 9 September 2009 were reached without completion having taken place. “Refusal” was defined to include not only an actual refusal but also “the grant of Planning Permission subject to any Unacceptable Planning Condition”.

By clause 33 the parties were to refer to arbitration any dispute or difference as to the construction of any provision of the agreement “or as to whether a Planning Permission…contains an Unacceptable Planning Condition”.

Clause 32 imposed an obligation on both parties to the contract to “act in good faith towards each other in connection with the obligations to be [per]formed hereunder and the documents to be agreed pursuant to the terms hereof”.

The provisions at the very centre of this dispute were to be found in Schedule 1 where the term "Unacceptable Planning Conditions” was defined. The parts of the definition relevant to the dispute before me are as follows:

“An Unacceptable Planning Condition is a condition or requirement in a Planning Permission or Planning Agreement which has the effect of:

….

2.

limiting the Planning Permission to a set period of time

...

10.

Imposing an obligation

10.1

which cannot be compiled with without the agreement of a competent Authority or third-party (including without limitation one requiring the construction of highway or drainage works) or

10.2

which prevents the commencement of the carrying out of and/or the use or occupation of the whole of any part of the Development unless and until a condition has been complied with which cannot be satisfied without the agreement of a competent Authority or third-party and which cannot in the reasonable opinion of a reasonable developer be obtained on terms or at a cost or within a timescale acceptable to a reasonable developer

11

in the reasonable opinion of a reasonable developer delaying commencement of the carrying out or completion of the whole or any part of the Development beyond the date on which such carrying out or completion would have occurred in the absence of such condition

12

any other condition in the reasonable opinion of the reasonable developer in any other way restricting the carrying out of and/or the use or occupation of the whole or any part of the Development or requires the incurring of expenditure which would be likely to have a materially detrimental effect on the financial viability or the investment value of the Development”

Prior to the grant of planning consent on appeal there had been very detailed discussions between the developer and the planning authority as to what conditions should be attached to the consent, if granted. The wording of the conditions which had been agreed in principle between Taylor Wimpey and the local planning authority, included the following:

“1

The development hereby permitted shall be begun before the expiration of three years from the date of this permission.

…

6

An archaeological investigation of the site shall be carried out at the expense of the developer in accordance with a specification to be submitted to and agreed by the Local Planning Authority in writing following the demolition of any existing buildings and before the commencement of building works.

…

11

The access from this site to the public highway shall be designed, laid out and constructed with kerb radii, visibility splays and sight lines in all respects in accordance with plans and details to be submitted to and approved by the Local Planning Authority prior to commencement of construction of the proposed buildings ...

…

19

Before the development hereby permitted is begun, details of the scheme are generating at least 10% of the predicted energy requirements of the development from on-site's renewable sources shall be submitted to and approved in writing by the Local Planning Authority. The approved scheme will be implemented before the development is first occupied and thereafter shall be maintained so that it provides the required level of generation."

The conditions attached to the planning consent granted on appeal by the Inspector included the following:

“1)

the development hereby permitted shall begin not later than three years from the date of this decision.

2)

notwithstanding the material shown in the Design and Access Statement accompanying the application, no development shall take place until samples of the materials and finishes to be used for the building is hereby permitted have been submitted to and approved in writing by the local planning authority. Development shall be carried out in accordance with the approved details.

3)

no development shall take place until samples of the materials to be used on the surface of the access road and internal roadways hereby permitted have been submitted to and approved in writing by the local planning authority. Development of the access road and internal roadways shall be carried out in accordance with the approved details to a staged timetable to be agreed with the local planning authority.

4)

development shall not begin until details of the proposed surface water and foul drainage and means of disposal have been submitted to and approved by the local planning authority in consultation with the Environment Agency and Southern Water and no building shall be occupied until all drainage works have been carried out in accordance with such details as approved by the local planning authority.

5)

no development shall take place until a Site Waste Management Plan, setting out details as to how demolition and construction waste will be recovered and used, has been submitted to and approved in writing by the local planning authority; all works which form part of the plan shall be completed in accordance with the timetable agreed in writing with the local planning authority.

6)

following the demolition of any existing buildings, no further building works shall take place until the applicant, or their agents or successors in title, has secured at their own expense the implementation of the programme of archaeological work in accordance with a written scheme of investigation which has been submitted by the applicant and approved in writing by the local planning authority.

7)

no development shall take place until a scheme for the implementation of the remediation works details in the Southern Testing Site Investigation Report dated 15 November 2006 together with post-remediation sampling and monitoring works has been submitted to and approved in writing by the local planning authority. The scheme shall include mechanisms to verify that the work has been undertaken and the required remediation properly achieved the scheme shall be carried out in accordance with the approved details to a timetable to be agreed with the local planning authority.

…

11)

no development shall take place until details of the vehicular access, ... have been submitted to and approved in writing by the local planning authority.

12)

no development shall take place until a scheme for the management of construction traffic, including traffic signing, temporary parking, loading and unloading arrangements, has been submitted to and approved in writing by the local planning authority. The scheme shall be carried out and maintained in accordance with the approved details to a timetable to be agreed with the local planning authority.

13)

no development shall take place until a scheme for the management of all temporary buildings used by contractors as well as plant and the storage of materials associated with the development has been submitted to and approved in writing by the local planning authority. The scheme shall be carried out and maintained in accordance with the approved details to a timetable to be agreed with the local planning authority.

14)

no development shall take place until details of the position and intensity of all external lighting works have been submitted to and approved in writing by the local planning authority. No residential building shall be occupied until the works have been completed in accordance with the approved details.

15)

no development shall take place until a scheme for safeguarding retained trees, including measures to replace any trees lost or damaged, has been submitted to and approved in writing by the local planning authority. The scheme shall be carried out in accordance with the approved details to a timetable to be agreed with local planning authority.

16)

no development shall take place until a scheme setting out details of the hard and soft landscaping ... has been submitted to and approved in writing by the local planning authority ...

17)

no development including demolition alteration to buildings is to take place until a scheme to safeguarding bats and bat habitats has been submitted to and approved in writing by the local planning authority ...

18)

no development shall take place until detailed drawings including typical elevations and sections ... have been submitted to and approved in writing by the local planning authority ...

19)

before the development hereby permitted is begun a scheme to generate at least 10% of the predicted energy requirements of the development from decentralised renewable and/or on low carbon sources ... shall be submitted to and approved in writing by the local planning authority ..."

Although I have not recited all the suggested conditions and all the actual conditions it is apparent when one compares them that there were no unusual conditions and no material difference between the suggested conditions and the actual conditions, a view which the relevant professionals agreed with, as I refer below. I find that neither the claimant nor Taylor Wimpey should have been nor in fact were surprised by the conditions which were imposed by the inspector.

Subsequently Cameron McKenna sought to argue that these were “Unacceptable Planning Conditions” and therefore a question arose as to the proper construction of the terms of Schedule 1 to the Contract, a question which would have been determined at the arbitration if it had not been compromised.

The claimant submits that the defendant was negligent in drafting the Schedule 1 conditions but does not put forward a positive case as to what they in fact mean and what their effect is. The claimant does not put forward an interpretation of these clauses “as being definitely right” but only one which it submits might have been adopted by the arbitrator. The defendant submits that it was not negligent because on a proper construction of the relevant provisions they have the same effect as those which might have been drafted in accordance with what has been referred to in the defendant’s written submissions as the “Optimum Drafting”, ie how the Contract ought to have been drafted. I accept the submission that in order to consider whether the defendant acted in breach of its duty to act with the skill and care of a reasonably competent practitioner in negotiating or drafting the Contract the Court needs to construe the relevant provisions before turning to the question of whether they were different in form or effect from what a reasonably competent practitioner in the defendant’s position in the relevant context would have negotiated or drafted. The true construction is also relevant to the issue of causation, including whether the claimant would have been successful in the arbitration.

I was reminded of the well-known passage in the speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 and the principles of interpretation of contracts which he refers to. I will not recite them here, although I have had regard to them. I was also referred to Lord Hoffman’s subsequent comments on those principles in Jumbo King Limited v Faithful Properties Limited (1999) HKCFAR 279, in which his Lordship sitting as a member of the Hong Kong Court of Final Appeal, emphasised the practical approach which should be taken to the interpretation of documents, saying that:

“The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant”.

I have also been referred to the more recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50 where in paragraph 21 of his speech, with which the other four Supreme Court Justices agreed, Lord Clarke said:

“The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.”

The principal factual context of Schedule 1 to the Contract was that the best use of the Property was for residential development but that a higher price would be paid for the Property if it were made conditional on planning consent than if the Contract were unconditional. The Contract therefore had to achieve a balance between the security which the defendant sought in ensuring that completion would take place and the risk that planning consent might not be granted (and therefore the development would not be possible) or the terms of such planning consent might have prevented the development from taking place or materially affected the commercial viability of the project. It seems to me that the key to balancing those competing aims was to build in an objective assessment of the reasonableness of planning consent and any conditions which accompanied it. In their written closing submissions the defendant argued that

“The terms which the [local planning authority] might impose were significant if and to the extent that they were unusual and unexpected and either effectively prevented the reasonable developer, acting in good faith, from taking up the permission or tipped the reasonable developer, acting in good faith, into regarding the development commercially unviable as a result of the imposition of that condition.”

I respectfully agree. The relevant provisions have to be construed in that context.

I should add that in my judgment the true meaning of the relevant clauses is not hard to discern. The issue is not a complicated one. The parties’ intentions, as I set out below, are, in my judgment, clear. My construction of the relevant clauses in Schedule 1 is as follows.

Clause 2: “limiting the planning permission to a set period of time”. Taylor Wimpey sought to argue that Condition 1 fell within this clause and was therefore unacceptable. Condition 1 was the usual condition that the permitted development must begin within three years of the date of the appeal decision. Mr Halpern submits that there are three possible constructions of clause 2 and that there was a real risk that the arbitrator might have adopted the first, which would not have been favourable to the claimant. He referred to the three constructions as (1) literal, (2) temporary and (3) “golden brick” being shorthand for the types of risk which clause 2 was intended to guard against, namely (1) any time limits on the implementation of the planning consent, (2) a temporary planning consent and (3) a time limit on completion of the development, this being the most likely construction. Because, he submitted, in reliance on Rainy Sky, each of (2) and (3) was arguable, there was a real risk that the arbitrator would conclude that he could not choose between them and would construe Clause 2 in the sense (1) or literal way such that any reference to a time limit in the actual planning conditions would be rendered “Unacceptable”. The defendant submits that this clause is plainly designed to catch a truly unexpected temporary permission and not the “perfectly predictable statutory requirement to [commence] works within three years. That would be silly.”

I do not agree that the words used in this clause could bear the literal meaning advanced by Mr Halpern. The literal meaning, in my judgment, is that advanced by Mr Seitler. That meaning also makes good sense in the statutory and factual context. Further, it would not make commercial sense for the clause to render unacceptable a planning condition which required the development to be commenced within a limited period of time, being the usual period of three years.

Clause 10: the first dispute between counsel in respect of this clause arises out of what is evidently a formatting error made by Mr Kendrick’s office, as I set out in more detail below. That dispute is whether the final words of clause 10 “and which cannot in the reasonable opinion of a reasonable developer be obtained on terms or at a cost or within a timescale acceptable to a reasonable developer” applies to each of clause 10’s two sub-parts or only the second sub-part. The claimant submits that it applies only to sub-clause 10.2 and not to sub-clause 10.1. The defendant submits that clause 10 should be construed as if the final disputed words applied to both sub-clauses and that, in the context, (1) there would be no logical reason for the qualification to apply to the consent required under 10.1 and not 10.2, (2) 10.2 is a subset of 10.1, (3) 10.2 would be otiose if 10.1 were not equally qualified, (4) insofar as may be necessary the clause could be rectified by construction because the mistake is clear and obvious. It is, in my judgment, irrelevant to the proper construction of this clause that Mr Kendrick did not notice the formatting error until a late stage. My immediate reaction on reading clause 10.1, without regard to the disputed final words, was that it cannot have reflected the intention of the parties, because it was so easily capable, if unqualified, of undermining the carefully negotiated transaction and did not accord with the intention or purpose behind these provisions in the Contract and would not have provided the intended balance. If truly unqualified it would, as submitted by the defendant, have rendered sub-clause 10.2 otiose. It is, in the circumstances, obvious therefore that both sub-clauses are intended to be qualified by the final disputed words and to do so would give effect to the proper principles of construction as explained by Lords Hoffman and Clarke in the cases to which I have referred. If it is necessary, which I doubt, to “rectify” this clause by construction then I would have no hesitation in doing so. I therefore turn to the two sub-clauses, but in reverse order.

Clause 10.2: imposing an obligation which prevents the development or use or occupation of the land until satisfaction of a condition which requires the consent of a third party “and which cannot in the reasonable opinion of a reasonable developer be obtained on terms or at a cost or within a timescale acceptable to a reasonable developer.” On the basis that the disputed final words applied to clause 10.2 the claimant accepts that it would have won the arbitration in relation to the issues raised by the construction of this sub-clause because the actual planning conditions were ones which any reasonable developer would have expected. I infer that if the claimant had accepted that clause 10.1 was equally subject to the disputed final words of clause 10 it would have accepted that it would have won the arbitration in relation to the issues raised by clause 10.1 as well as by clause 10.2.

Clause 10.1: imposing an obligation “which cannot be complied with without the agreement of a competent authority or third party”. The claimant submits that, if clause 10.1 is to be construed literally and without reference to the disputed final words, then its true effect would be to render “Unacceptable” any planning consent the implementation of which was dependent on the approval of any third party. Accordingly, it is said, clause 10.1 would render the majority of the actual planning conditions “Unacceptable”. That would, in my judgment, be correct if the sub-clause were not to be read subject to the disputed final words of clause 10, a further reason why it is necessary to do so, thereby giving effect to the true intentions of the parties, as conveyed by the words used by them in the context of the factual background which I have already referred to.

Clause 11: a condition which had the effect “in the reasonable opinion of a reasonable developer delaying commencement of the carrying out or completion of the whole or any part of the Development beyond the date on which such carrying out or completion would have occurred in the absence of such condition”. Mr Halpern submits that this renders the actual planning conditions “Unacceptable” because the reasonable developer need only form the reasonable opinion that commencement or completion of the development any part would be delayed beyond what would have been the date, if the condition had not be included. He submits that there is no room to construe the clause so that it would only render an actual condition “Unacceptable” if the delay caused by the actual condition was substantial or “unreasonable”. The basis of this submission is that the careful double use of the word “reasonable” in the opening phrase precludes the use of that word, or rather the word “unreasonable” in connection with the delay which the clause was intended to cater for. In other words so long as there was some delay caused by an actual condition, however minor, the clause would render the relevant actual condition “Unacceptable”. As I suggested to Mr Halpern in the course of his closing submissions the clause has to be construed sensibly so as to give effect to the clear (I would add commercial) intention, namely that the question of delay was to be viewed through the eyes of a reasonable developer who had to reach a reasonable opinion and that it would not be a reasonable opinion if the delay were not material, even if that word were not used in the clause. There was no risk, in my judgment, of the clause being interpreted as bearing the literal meaning advanced by the claimant.

Clause 12: “any other condition in the reasonable opinion of the reasonable developer in any other way restricting the carrying out of and/or the use or occupation of the whole or any part of the Development or requires the incurring of expenditure which would be likely to have a materially detrimental effect on the financial viability or the investment value of the Development”. Again there is a dispute as to whether the final words (“which would be likely…”) govern the whole of the clause or only the second part to which they are physically adjacent. Mr Halpern submits that it is at least arguable that they govern only the second part and that therefore so far as the first part is concerned an actual planning condition would be rendered “Unacceptable” if a reasonable developer could reach the reasonable opinion that it gave rise to some restriction, however minimal. As to the second part of the clause the claimant submits that it could be construed in such a way that the assessment of the financial viability or investment value could take place at any stage of the project rather than at the date of the planning consent and therefore might allow the developer to take into account in the assessment the possibility of a later fall in the market.

Mr Seitler submits that it is plain that the final words govern the whole of the clause because otherwise (1) a freestanding first provision would be capable of catching any condition and would render the previous 11 clauses otiose, (2) the second part of the clause would be freed from the “reasonable opinion of a reasonable developer” test. In my judgment the clause is to be read as having a single commercial purpose. That commercial purpose would be defeated if the final words were to be treated as qualifying the second part of the clause but not the first. Equally it would make little sense, given the structure of the rest of the Schedule, for the “reasonable opinion of a reasonable developer” test to apply to one part of the clause and not the other. Mr Halpern’s suggested construction is not the natural meaning of the clause. As to the date of assessment of the financial viability it seems to me obvious that it is to be at the date of the grant of planning consent because that is when the purchaser is intended to decide, in the light of an unacceptable planning condition, whether to proceed with the development or treat the Contract as over.

On my construction of the relevant clauses they did not expose the claimant to the risks which they assert as the foundation of their claim against the defendant. Further, on the construction issues I have formed the view that the claimant would have been successful at arbitration.

The claimant’s key witness at trial was Mr Brown. Mr Brown was admitted as a solicitor in 1983, having undertaken his articles with Crewe & Nantwich Borough Council before moving to one of the Rentokil group of companies. He remained with Rentokil until retirement in April 2013, moving though the ranks of the legal department until 1990 when he became General Manager UK Services, Company Secretary and was responsible for UK legal services. From 2005 he had worldwide responsibility for the group. His UK legal team was small, usually comprising about 6 people at various professional levels. In his witness statement he said that 70% of his time was devoted to the management of legal issues that were being dealt with by others but that he was the instructing client and “interface between external lawyers and the business”.

Mr Brown gave evidence, verifying his witness statements, and was subjected to very vigorous cross-examination by leading counsel. He accepted that in the course of his training he had, in the usual way, been involved in a number of property matters. That would not, in my judgment have given him sufficient experience to handle a transaction of the sort which lies at the centre of the dispute before me. However, he also accepted that between 1999 and 2005 he had responsibility for the claimant’s property department, along with a number of other portfolios, but he handled “a large number of acquisitions and disposals in [his] time at Rentokil”. Although his responsibilities were many the legal team which he supervised was small, and his close involvement in transactions must have been greater than in legal departments of other businesses with larger numbers of lawyers. As the evidence in this case shows, and I accordingly find, he took a “hands on” role, at least in respect of the disposal of the Property. In the early part of his evidence he sought to suggest that he did not read key documents in transactions which he was responsible for, but left the detail to external solicitors who were intended to brief him. It was submitted that he had no time to master the detail of this transaction. The evidence shows otherwise in respect of this transaction, as I find below.

Further, it seems to me highly probable that Mr Brown was relatively autonomous so far as the detail of this transaction was concerned, pausing only to get (in)formal approval from the “board” of the claimant as and when he thought appropriate. The precise structure of the decision making process within the claimant was opaque. As Mr Brown commented when asked about disclosure of the relevant minutes of the claimant’s board of directors relating to the strategic review leading to the disposal of the Property:

“The [claimant] is a captive company. The board – I am not sure I should be saying this – is largely a paper board. It isn’t a real board of directors. There weren’t discussions by the board of that company.”

In answer to the question “Would [the claimant] have considered the strategic review at its board level?” he replied, simply, “No”.

On 11 November 2004 Mr Brown instructed Rapleys to undertake a feasibility study "to consolidate all head office functions within the East Grinstead area” which included considering the disposal of the Property. In that latter respect Mr Brown specifically instructed Rapleys that "the disposal of the Felcourt and Garland Road site is clearly something else that we require advice on, including the obtaining of planning permission to change the use of Garland Road to residential/retail." The instructions included as an appendix an existing preliminary valuation of the Property dated 4 November 2004. Rapleys agreed to undertake their work on a two stage basis, first providing consultancy services advising on the strategy to be adopted by the claimant; and secondly, an agency phase dealing with disposals and acquisitions. Their initial advice dated 4 February 2005 showed clearly that the value of the Property would be substantially higher if planning consent could be obtained for residential use. They advised that:

Rapleys undertook some investigations and let it be known, albeit unofficially, to those whom they thought might be interested in the Property that it would in due course be offered for sale. As a result Stiles Harold Williams, acting for Taylor Wimpey indicated an interest in the Property before it had formally been placed on the market, and as early as 11 October 2005 made an offer, subject to contract, in excess of £3 million "which takes into account an estimate for social housing provisions and section106 costs". There was no response to that offer and therefore by a further letter dated 7 November 2005 Taylor Wimpey's agents chased Rapleys. Internal correspondence at this stage showed that Mr Brown was controlling the disposal programme: it was to him that advice and information was provided and from him that instructions concerning the intended disposal were obtained. From the beginning the correspondence also shows that the question of planning consent and the potentially enhanced price that would be generated if planning consent for residential use were to be granted were very important considerations which he was well aware of. He went further in cross-examination and accepted that “selling with a prospect of planning permission was the only realistic route”.

Mr Brown was less willing to accept that from the beginning the claimant was not particularly concerned about the risks inherent on entering into a contract which was conditional on the grant of planning consent, because that offered the route to the highest price. However, after being repeatedly pressed by Mr Seitler QC, and seeking to avoid answering the question directly, Mr Brown did accept that he was not “overly concerned about the principle of exchanging conditionally and waiting for completion upon the grant of planning consent”, but much depended on whether the price was right. I am satisfied from this evidence and from the contemporaneous documentation that from a relatively early stage the claimant was prepared to enter into a conditional contract, well aware of the inherent risks in doing so.

At the beginning of February 2006 Rapleys formally invited offers for acquisition of the Property: they required the offers to include details of whether they were conditional on planning consent being obtained and how the transactions were to be funded. A number of offers were made, which included the following:

On Monday 6 March 2006 at the offices of Rapley Mr Brown, together with others, interviewed representatives of a number of the companies. Mr Steele, who also gave evidence, did not recall being present at the interviews and believed that Rapleys had been represented by his partner, Mr Banks. Among those interviewed were representatives of Taylor Wimpey. Subsequently a number of the original parties made increased offers, including Taylor Wimpey who, in a letter dated 17 March 2006, increased their offer to £4.8 million, stating that in making their renewed offer they had made allowance for the costs of complying with a section 106 agreement. They expressly stated that their offer was subject to receipt of satisfactory planning consent and would be conditional on a number of points. They stated that they wished to exchange contracts within 6 to 8 weeks and copied their offer letter to their solicitors, Cameron McKenna. Mr Brown was closely involved in discussing the details of the offers which had been made and the possible structure of the conditions which might be necessary if the offer were to be subject to the grant of planning consent. It was for that reason that he sought increased unconditional offers, but such offers could not produce the level of prices which he wished to obtain on sale of the Property and therefore, I find, that he decided to pursue conditional offers, which would generate a higher price but carried a higher risk. In his witness statement he said that "prior to exchange of contracts I was never given any cause to consider that the condition might not be satisfied", but there is no analysis of this risk in his witness statement or in documentary form. The comment is disingenuous because, as I have already found, it is apparent from his stance from the beginning (and notwithstanding the assertions made in his second witness statement) that Mr Brown was well aware of the risks inherent in a conditional contract (however worded) as opposed to an unconditional contract. He took the strategic decision to seek to obtain a higher price for the Property in the knowledge of the inherent risks of doing so.

A number of others interested in the Property continued to make increased offers. In his letter dated 22 March 2006 Mr Steele advised Mr Brown in the following terms:

On 28 March 2006 Mr Brown e-mailed Mr Doug Flynn, the claimant’s Chief Executive between 2005 and March 2008, in which he expressly recognised that the conditional offers that had been made by various of the proposed purchasers were "less secure" than the unconditional offers. He advised Mr Flynn as follows:

Thereafter there is no documentary evidence from the files of the claimant or Rapleys to show that the Taylor Wimpey proposal was subjected to any particular scrutiny or due diligence and when called on to account for this in the course of cross-examination Mr Brown could not recall any having been undertaken. He accepted that there was a real risk that residential planning consent would not be granted but that

“…It was still worth exploring for the premium. [Although] I was not transfixed by it…Like lots of avenues in commercial negotiations, sometimes it can be tough and sometimes there are hurdles put in your way, but the end result might be worthwhile. And this was one where it seemed still to be worthwhile”.

The higher price was what his mind had fixed on.

In May and June 2006 there were discussions between Rapleys and Taylor Wimpey about the figure to be put into the Contract concerning the sum to be allowed in respect of the costs likely to be incurred in complying with any obligations to be imposed by any agreement which would have to be entered into between Taylor Wimpey and the local planning authority if planning consent were granted, the correspondence and attendance notes demonstrating Mr Brown's continued central involvement in the project. Mr Steele accepted that the costs were wider than those which would fall strictly within the heading “s106 costs” but that he and Mr Young-Wooton used that expression as shorthand for all the costs which might be incurred by Taylor Wimpey in complying with the planning consent. At the beginning of May 2006 Mr Christopher Young-Wooton of Taylor Wimpey suggested that the s.106 costs would be £178,000. This figure later rose.

By the end of May 2006 draft heads of terms were in circulation. There were detailed discussions between Mr Young-Wooton and Mr Steele about the wording of the individual terms, as their email exchanges at this time show. Mr Steele told me that he reported to Mr Brown on a regular basis. Mr Brown referred to the transaction as “Colin’s deal”. I find that Mr Steele was charged with negotiating the best heads of terms possible in the circumstances. Mr Steele confirmed that he regarded it as his role to put in place machinery to ensure that steps were taken to obtain planning permission. He also negotiated the inclusion of mechanisms which protected the commercial interests of his client, including providing a potential benefit to Taylor Wimpey in keeping the s.106 costs down but also a provision which could allow the claimant to release itself from the obligation to sell the Property if the effect of an increase in the s.106 costs was to reduce the purchase price below an acceptable minimum. The heads of term did not define what was meant by satisfactory planning consent, which was left to the parties’ respective lawyers to settle in the course of negotiating the sale contract. However, it is plain to me that they knew what satisfactory planning consent would look like, as is apparent from the suggested terms which I have referred to above.

By 4 July 2006 there was agreement, subject to contract, to sell the Property to Taylor Wimpey for £4.388m and on 5 July 2006 Mr Steele sent final draft heads of terms to Mr Brown and Mr Catt, which Mr Brown then approved. The Contract was to be “conditional only on the grant of satisfactory planning consent” for, among other things, 90 residential units including 30% affordable housing, which was to be pursued by Taylor Wimpey. The allowance made for the costs of complying with a proposed section 106 agreement in calculating the purchase price was stated to be £590,000. The heads of terms had a schedule attached to it which sets out how that figure had been arrived at. In his covering e-mail to Mr Brown, copied to Mr Catt and Mr Peace (the claimant’s building surveyor and environmental specialist), Mr Steele "flagged up" a number of the points in the heads of terms and explained the proposal as to how the planning application was to be progressed, monitored and taken over if not pursued appropriately by Taylor Wimpey.

Mr Brown approved the heads of terms and on 06 July 2006 reported to the finance director of the claimant, Mr Andrew McFarlane, attaching the draft heads of terms and seeking the agreement of the board to the proposal. They appear to have accepted his advice and approved them. Mr Brown was in reality driving the transaction.

There is no dispute that the defendant was instructed, although, as I have already mentioned the usual retainer documentation was not used and the original instructions appear to have been given and accepted in a rather informal way. Before the defendant solicitors had been instructed a very considerable amount of work had been done in perfecting the heads of terms and thereby structuring the proposed transaction. The evidence persuades me that the retainer was limited to drafting a contract to carry into effect the heads of terms and to provide advice on the terms. The defendant was not instructed to advise on the commercial aspects of the transaction nor on whether planning consent would be granted, both of which were the province of Rapleys and Mr Steele.

In its particulars of claim the claimant asserted that Mr Brown was "a generalist, not a property specialist, and was fully occupied on other legal business for the claimant. Accordingly he had neither the expertise, nor the time, to deal with this matter in any detail. Instead, he relied heavily on the defendant". The defendant denied that assertion and alleged that "Mr Brown was an experienced solicitor, well able to negotiate and understand complex provisions in commercial property contract documentation", later in their defence adding that he

In paragraphs 23 and 24 of his witness statement Mr Brown described the retainer of the defendant and the role of Mr Catt as follows:

In a webpage, albeit dated 11 January 2013, Rapleys describe their “Planning & Development Consultancy” in the following terms:

“Our Planning and Development Consultancy Service is an integrated team comprising developments surveyors, planning professionals and where appropriate, other disciplines within the Practice such as agency, investments and building surveying. We are regularly instructed to provide advice on a wide variety of property development opportunities.

We have a reputation with both landowners and developers being able to project manage complex development schemes from inception to completion in a proactive and cost-effective manner.

We are experienced in managing other consultants such as environmental, transportation, geotechnical and legal professionals in order to provide a comprehensive and co-ordinated service that optimises value and results."

Albeit written after the event, that passage, which was drawn to the attention of Mr Steele in cross-examination by Ms Stanley was an accurate statement of Rapley’s role in this transaction. At all material times Mr Brown regarded Mr Steele as a key advisor and relied heavily on him in respect of this transaction at each stage, even after the defendant had become involved. Mr Steele was kept informed of the progress on legal issues and the advice given in respect of them and it seems to me highly likely that he discussed such matters with Mr Brown on a regular basis.

Mr Kendrick gave evidence. He is a solicitor of the senior courts and has been a partner in the defendant firm since 1998, having been admitted as a solicitor in 1986. He has at all times practised in the area of transactional property (principally commercial). It was submitted that his evidence was carefully rehearsed, unimpressive, implausible, inconsistent and partial (and Mr Halpern QC referred me to various passages in the transcript of the evidence in support of that submission). It seems to me that it is inevitable that in a transaction such as this a professional man will have spent some time mulling over the issues and considering where his case is likely to be challenged. That comment applies equally to Mr Brown and Mr Kendrick. Both of them were vigorously cross-examined, both were, on occasion, obstinate, evasive and reluctant to answer a question where it was not clear where the answer might lead. I have carefully compared their evidence, looked at the internal consistency of such evidence, considered it against the documents in the case, and against the evidence of others and reminded myself of the burden and standard of proof and the principle that the more unlikely an assertion the better the quality of evidence that is needed to prove it, albeit on the balance of probabilities. Having undertaken that task, as I indicate throughout this judgment, I have come unhesitatingly to the conclusion that in the event of conflict between the evidence of Mr Brown and Mr Kendrick, where there is no documentary proof of a fact, it is the evidence of Mr Kendrick that is to be preferred.

He was asked questions as to the respect roles of those involved in the transaction and said that:

“…different clients have different, as you see, perceived abilities, strengths, intellects.

If, for example, one was selling land for residential development by a farmer, one would approach it completely differently to selling land for residential development by an international PLC where the team of representatives assisting me in the transaction included an intelligent in-house solicitor and a team of planning consultants and a team of experienced commercial agents.

There is a massive range between those.”

Of Mr Brown himself he said that he “knew full well what the risks were in a commercial conditional contract….” and that it was not the defendant’s role to assess the risk of the planning conditions not being fulfilled.” I agree with that proposition. As to his own role Mr Kendrick said:

“If I had a drafting problem, I would, as I did throughout…if issues of drafting arose I would liaise with two people on this transaction, and those were Mr Brown, in some instances, and Mr Steele on others.”

As to Rapleys, from the very beginning Mr Kendrick was aware that Rapleys were providing the planning expertise and that they were advising the claimant on the planning issues. Mr Steele reviewed the first draft of the Contract and on the following day a conversation took place between him and Mr Kendrick about the terms of that initial draft. I am satisfied from the evidence that he gave in the course of his cross-examination that Mr Steele had read the document quite carefully prior to his discussion with Mr Kendrick to ensure that it reflected the heads of terms and protected the claimant in the way that Mr Steele intended that it should. That Mr Steele was involved in discussions about the drafting of specific provisions in the agreement, is apparent from an e-mail of that morning to Mr Brown:

“…Mark and I had a lengthy discussion re this sale…and agreed various changes/expansions of provisions…”.

He also accepted in cross-examination that he was the “key mover” in the transaction whom everyone copied in when corresponding about it. Initially Mr Kendrick appears to have thought, because of the way in which Mr Steele had been held out, that he was the person to whom he should look for instructions.

Mr Catt had started the drafting process but on 20 July 2006, before leaving for a holiday, passed the file to Mr Kendrick who made contact with Mr Steele stating that work had been started on a form of contract based on a draft version of the heads of terms. Mr Kendrick produced the first draft of the contract based on the heads of terms and on 26 July 2006 sent it to his client under cover of a letter to Mr Peace (copied to Mr Steele, but not to Mr Brown) saying

“As discussed, I now attach my first draft of the purchase contract. This is prepared from before July 2006 draft heads of terms, and this may well need to be changed to reflect any development of those.

We agreed that it would be worthwhile for us, in conjunction with Colin to look through this. There are one or two items which may well require some further thought ...”.

In his witness statement Mr Kendrick said that his:

“detailed discussion with Mr Steele [on 26 July 2006] confirmed [his] impression that Rapleys would take the lead on or planning matters including attending to the appropriateness and efficacy of the Unacceptable Planning Conditions, including ensuring that the planning application ... catered for them."

He told me, and I accept, that specific changes were made to the draft as a result of an increased understanding of the transaction following the discussions between Mr Kendrick and Mr Steele.

At the conclusion of his attendance note made on the same date as the discussion with Mr Steele Mr Kendrick recorded "NB. Derek Brown is a prime mover at Rentokil on this site and not Steve [Peace]". In paragraph 15 of his witness statement Mr Kendrick said:

As a result of the conversation a further draft of the agreement was circulated, with, this time, Mr Brown being directly copied in, inviting "further commentary from [Colin Steele] and/or the Rentokil team." This was followed by a further letter of this same day, sent by e-mail, asking whether Mr Steele, Mr Brown or Mr Peace had any further thoughts before the draft was sent out. The defendant says that the claimant was "therefore entirely familiar with the format, purpose and context of such conditions." Mr Steele confirmed to Mr Kendrick that he was "content that [the defendant] dispatch [the draft] to [Taylor Woodrow's] solicitor". Mr Steele was playing a role in providing or communicating instructions to the defendant.

From his evidence it was apparent that Mr Kendrick had a good understanding of the difference between what might be perceived to be buyer friendly terms and seller friendly terms in relation to potential planning conditions. He was taken to the Encyclopaedia of Forms and Precedents and was cross-examined about the different standard terms proposed by the learned editors of Volume 38(2) entitled “Sale of Land (Commercial Property)”, copies of which were contained in volume 19 of the trial bundle. Mr Kendrick made the point, which I entirely accept, that such precedents, being drawn in a generic way, are only the starting point for the process which would take place between the two firms of solicitors instructed to draft the contract.

The relevant dispute between the two firms of solicitors was put by Mr Kendrick in this way:

“The ambit of the test [was] a matter for negotiation. And in this case the debate arose around the issue of whether the test should be in the reasonable opinion of the buyer, as posited by the Cameron McKenna drafting, or the reasonable opinion of a reasonable developer.”

On 28 July the defendant sent the draft contract (version 2) to Cameron McKenna and copied Mr Brown and Mr Peace and Mr Steele into his correspondence. Mr Kendrick’s proposed wording of the Unacceptable Planning Conditions was contained in schedule 1 of the draft contract, and read as follows:

At about this time Mr Kendrick asked Mr Brown to provide replies to enquiries before contract. By 4 August 2006 Mr Brown and Mr Peace had marked up and commented on the proposed replies to enquiries and returned the draft replies to Mr Kendrick. That is to my mind, further evidence of the fact that Mr Brown was fully engaged with the conveyancing transaction and I draw the inference that he had familiarised himself with the detail of the draft contract.

On 9 August Mr Steele commented in an email to Mr Catt on the provisions in the current travelling draft of the contract: his comments referred both to the commercial aspects of the document and, to an extent, the drafting of it. Plainly, Rapleys and the claimant considered that Rapleys’ role was not limited in the way that the claimant has subsequently suggested in this litigation. Moreover it seems to me that the claimant was content for Rapleys to continue to be held out to the claimant as having an extensive role in the project, which included advising as to the terms of the Contract.

On 11 August 2006 Cameron McKenna returned the travelling draft agreement (with amendments shown in red) to the defendant purportedly including a new Rider C, which was a re-draft of the first schedule, but that new rider was not in fact attached to the travelling draft. On 18 August 2006 Mr Kendrick, in an email which was copied to Mr Brown, Mr Peace and Mr Steele, returned the travelling draft (version 2) to Cameron McKenna with amendments shown in blue and noting (at point 8) that the new proposed rider had not formed part of the documentation sent to him. Mr Brown’s copy of that letter shows his manuscript comments. He was up to speed with and understood the terms which were in the course of being negotiated. A clean draft (version 3) was produced. On the same day Mr Kendrick wrote to Mr Brown, Mr Peace and Mr Steele. On 30 August 2006 a conversation took place between Mr Steele and Mr Kendrick about the letter of 18 August 2006.

That Mr Brown was (rightly) regarded as the principal decision maker both in respect of commercial and legal issues is further apparent from an email of 31 August from Mr Steele to Mr Peace as to who should go to a meeting at which vendor and purchaser and their respective professional advisors were to attend, which I consider in more detail below.

On 8 September 2006 Cameron McKenna e-mailed a copy of Rider C to Mr Kendrick. The claimant denies that this was passed on by Mr Kendrick. In his second witness statement Mr Brown goes only so far as saying "I do not believe that I ever received a copy of Rider C, and there is no copy of it, or of Mr Kendrick’s e-mail, on my file or e-mail system." In oral evidence he told me that he did not remember seeing Rider C “at any stage”. The terms of the draft of Rider C sent to Mr Kendrick were significantly different to those which he had proposed in his first draft, and much more extensive. They resembled, much more closely, the final version of Schedule 1 to the Agreement.

On 11 September 2006 a meeting, the significance of which is in dispute, took place at the claimant's Gatwick offices at which Mr Brown, Mr Steele and Mr Kendrick represented the claimant, with Mr Young-Wooton, Land Buyer, and Mark Heighton of Cameron McKenna representing Taylor Wimpey. Before the meeting Mr Steele had liaised with Taylor Wimpey. The claimant asserts that this was a high-level meeting which did not descend into drafting detail and did not look at the drafting of Rider C. On the other hand Mr Kendrick says that the meeting:

As to the “Unacceptable Planning Conditions”, Mr Kendrick said in his witness statement that Rider C was only provided to Mr Brown and Mr Steele at the meeting and was only discussed in general terms. In his evidence he clarified this by saying that he provided a copy of Rider C to Mr Brown and Mr Steele before the Taylor Wimpey team were admitted to the meeting. He was criticised in cross-examination for not chasing for Rider C earlier and for not disclosing it to his client earlier, but that does not alter my conclusions that it was given to Mr Brown and Mr Steele prior to the meeting and was discussed in sufficient detail during the course of the meeting. In paragraph 24 of his witness statement Mr Kendrick asserted that:

Mr Brown’s contrary recollection of events appears in paragraph 12 of his witness statement in which he said:

Mr Steele’s attendance note of the meeting has also generated some disagreement but, having looked at it and heard the evidence it seems to me that it reads as follows:

Under cover of a letter written after the meeting, dated 14 September 2006, and in accordance with what had plainly been the intended course recorded by Mr Steele in his manuscript note, Mr Kendrick sent Cameron McKenna (but did not copy to Mr Brown) his revisions to Rider C, deleting a number of the provisions which Cameron McKenna had added into Schedule 1, and in the covering letter stated:

Those proposed amendments, taken together, were not very radical. However, on the very next day, 15 September 2006, Cameron McKenna returned Rider C to Mr Kendrick. It contained further amendments but more pertinently it reinstated all the paragraphs which Mr Kendrick had formerly deleted. The covering letter read as follows:

Nevertheless as a result of Mr Kendrick’s efforts the draft agreement had been altered to the considerable benefit of the claimants in that the expression ‘in the reasonable opinion of the Buyer" had been replaced with reference to the view of a "reasonable developer". A substantially more objective test. As Mr Kendrick said

“I had got what I wanted, in truth, and what my client had instructed me to accept, which was the “reasonable developer” test, rather than the “reasonable opinion of the buyer” test, which I was not minded to accept, and so I was content on that basis.”

There is a further significant factual dispute about whether Rider C was discussed during a subsequent telephone conversation which took place between Mr Kendrick and Mr Brown on 18 September 2006. Mr Brown says that there was no mention of Rider C in that conversation. Further, in paragraph 4 of the particulars of claim the claimant asserts that Mr Brown had asked what would happen if the claimant sued for specific performance of the contract and Taylor Wimpey sought to rely on the provisions of Schedule 1 to the Agreement to which Mr Kendrick is alleged to have replied that the claimant would win. In paragraph 15.10 of the defence the defendant asserted that:

On 20 September 2006 Mr Kendrick returned the travelling draft to Cameron McKenna with amendments in blue to Rider C and in red to other parts of the document. This version of the travelling draft was sent to Mr Brown and Mr Steele with a copy of the covering letter and a copy of the previous version of the draft for comparison. In the second paragraph Mr Kendrick suggested that Cameron McKenna “will see that for the most part the principles are agreed in the light of the consensus achieved at our meeting”. Both Mr Brown and Mr Steele were updated by Mr Kendrick as to the progress of the drafting process and, with the benefit of the two draft documents, had the opportunity, which they were each well capable of taking, of analysing the differences between the drafts. It seems to me more likely than not that they did so and understood and accepted the changes.

On 27 September 2006 Cameron McKenna returned the travelling draft with further amendments in green removing a number of the amendments which Mr Kendrick had proposed, although there is no express reference in the covering letter to Rider C or Schedule 1. On 28 September 2006 Mr Steele asked Mr Kendrick what he saw "of any import being outstanding".

On 4 October 2006 Mr Kendrick returned the draft with his further amendments to Cameron McKenna and copied the letter and the draft to Mr Brown, Mr Steele and Mr Peace. There was no mention of Rider C or Schedule 1. In preparing a clean copy of version 5 of the draft agreement a formatting error had crept into clause 10 of Schedule 1 so that what had previously plainly been a qualification of sub-clauses 11.1 and 11.2 now appeared to relate solely to what had become sub-clause 10.2. Clause 11 had previously read as follows:

In the interim a concern arose about contamination of the land being sold and potential liability for environmental damage. As Mr Steele and Mr Kendrick pointed out to the claimant, this was a problem which they would face no matter who the proposed purchaser was. Consequently the progress of the transaction was delayed and some further amendments to the draft agreement were discussed between Mr Kendrick, Mr Brown and Mr Steele to deal with the issue of contamination, Mr Kendrick submitting further draft provisions to Mr Brown, Mr Peace and Mr Steele for comment. In an email dated 20 November Mr Brown said that he would leave the practicalities to Mr Steele and that he had “no comments on the wording”, an implicit confirmation that he had considered it. In respect of this issue it was put to Mr Kendrick, in essence, that he advised the claimant in more specific terms than he had in respect of the planning conditions and that he negotiated a provision to deal with this issue which was rather better than that which Taylor Wimpey had proposed. Mr Kendrick’s handling of this issue was contrasted with his handling of the negotiation of and his advice concerning the “Unacceptable Planning Conditions”.

On 4 December a conversation took place between Mr Kendrick and Mr Steele in which they shared a concern about what they viewed as a “Cameron McKenna go slow”. On 6 December Mr Kendrick sent them a revised version of the travelling draft. In the last days of January 2007 Mr Kendrick was in correspondence with Mr Brown and Mr Peace about the finalisation of the terms of the draft contract mainly to deal with the questions of drainage, contamination and overage. On 30 January Mr Brown informed his advisors by email that he was coming under “significant pressure” to exchange by the end of the first quarter. On 1 February Mr Kendrick sent his further amendments to Cameron McKenna, copying them to Mr Brown Mr Peace and Mr Steele. On 6 February Cameron McKenna further amended the travelling draft and on the following day Mr Kendrick further amended it in green saying in the covering letter: "I think we are substantially there". On 8 February he produced version 7 of the travelling draft, which on 15 February Cameron McKenna further amended. Email exchanges between Mr Catt and Mr Steele (copied to Mr Brown and Mr Peace) in the second half of February show that they were involved in detailed discussions about the wording of certain of the provisions in the draft agreement, albeit not relating to Schedule 1.

On 20 February Mr Catt went through the latest amendments with Mr Brown by telephone (as Mr Brown’s attendance note of that date evidences) and e-mailed Mr Steele asking him to consider some specific wording which Mr Catt had proposed. Both Mr Brown and Mr Steele were heavily involved in the drafting of the contract. By 23 February the claimant, in the form of Mr Brown, was again putting pressure on Mr Steele to exchange, because Mr Brown was, in turn, having pressure applied to him by his board of directors.

On 26 February 2007 Matthew Wright, a surveyor employed by the claimant, e-mailed Mr Catt:

An email dated 28 February from Cameron McKenna shows that Taylor Wimpey continued to resist changes proposed by the claimant, the provision in issue at that stage being clause 30 of the agreement which gave Taylor Wimpey the right to serve a notice within six weeks after exchange to determine the contract if the mains drainage appeared to be of insufficient capacity to service the proposed development.

By a letter dated 2 March 2007 sent to Cameron McKenna, copied to Mr Brown, Mr Peace and Mr Steele, Mr Kendrick enclosed what he hoped was the final version of the Contract. The defendant provided no formal report on title, the claimant being a vendor and not a purchaser, but in a separate letter of the same date which he sent to the claimant Mr Kendrick provided what is in effect a vendor’s report in which he advised as follows:

Mr Kendrick also told me that he expected Mr Brown, as a solicitor, to read the Contract, adding that he had invited him to do so. That was not, in judgment, in the context of this transaction, an unreasonable view nor an unrealistic expectation, particularly given the emphasis on the pivotal role of Mr Brown in the transaction and his clear understanding of it. Mr Kendrick was challenged in particular on his failure to explain in his report what circumstances would constitute unacceptable planning condition. Mr Kendrick said that he considered that he had:

“…discharged my duty to report on the key provisions of the contract that, in my mind at the time, presented severe risk of the transaction not completing...

At the time that this letter was written, I considered, particularly as regards schedule 1, that I’d got the best in terms of negotiation that I could achieve. And I felt it was time to hand…the issue of the progressing the planning application over to Rapleys, and I didn’t feel the need to elaborate beyond the structure around that in this letter.”

When pressed on this point Mr Kendrick accepted that the subsequent events were not unforeseeable but that in the circumstances he did not feel the need to elaborate in detailed terms on the content of what became Schedule 1 to the Contract.

Mr Brown, in his oral evidence, explained to me that he categorised risk as black or white or various shades of grey. He was asked to apply this analysis to the areas of risk which were identified in the letter from Mr Kendrick, although he says that did not undertake that analysis at the time that he received the letter. As to the most significant risks he categorised the rescission risk referred to in paragraph 5 as dark grey, the risk of satisfactory planning permission not being obtained as mid grey and the Costs and purchase price risk in paragraph 1 as light to mid grey. Mr Steele accepted that he would have read through both documents. I find that both men considered the risks at this stage in the light of the letter written by Mr Kendrick.

On 5 March Mr Kendrick sent Mr Brown a final version of the contract for signature noting a number of minor changes, including a specific reference to a small change to schedule 1 containing the Unacceptable Planning Conditions, a further opportunity for Mr Brown to review those provisions. On 6 March 2007 Mr Steele, in further evidence of the extensive role of Rapleys, wrote to the defendant and to the claimant saying: "just to confirm that I have been through the contract and I find everything in order". As Mr Brown said in cross-examination:

“…it gave me comfort. Colin was happy with it. Colin had been involved throughout, and it was his deal in terms of the commercial nature of the deal.”

In his oral evidence Mr Steele sought to step back from the confirmation given in his letter, saying that it was “…true insofar as it related to those parts of the contract I referred to yesterday, that I would have referred to specifically. I would not have read the whole contract. And that sentence, you know, with hindsight, should have been qualified to make that clear.” He added, nevertheless, that if he noticed problems he would have flagged them up. My conclusion, after reviewing carefully all the evidence on this issue, is that at all material times it was plainly to Rapleys and not to the defendant that Mr Brown looked for advice on the commercial aspects of the transaction and, in my judgment, the Contract but that both men had a proper understanding of the true meaning and effect of the Contract and the terms of Schedule 1 by this stage.

Contracts were exchanged on 9 March.

On 23 April Mr Steele informed the claimant and the defendants that Taylor Wimpey had asked (out of time) for an extension of six weeks within which they might exercise their right to terminate the contract if certain drainage issues arose. The defendant advised the claimant to consider the “politics” of refusing to accommodate such a request in the context of a conditional contract where there might be opportunities for Taylor Wimpey to suggest that the contract had come to an end. Mr Brown’s response was unequivocal:

“… I am not at all inclined to agree to any further extension. I know what Mark says regarding the fact that the contract in (sic) still conditional and they could try to weasel out of it in some other way if they really did want to but I don't see any advantage in simply conceding the point. What benefit do I obtain by doing so? Nothing as far as I can see

Colin, I suggest that you do nothing at the moment given that they are meeting with their experts to discuss the rainwater harvesting system on Wednesday. If chased, say you cannot get instructions as I am unavailable (always a good and credible lie) but explore in enthusiastic Lee the possibility of them going down the rainwater harvesting route. Later this week, and only in response to further query from them we will tell them that we are not giving them the easy get out. This contract has taken months to negotiate, they were happy when they signed it and now, like us, they will have to live with it."

Mr Brown was asked to explain what that email meant and he said:

“Well, they signed a contract. We signed a contract. And the terms of the contract were quite clear. They knew what they were signing, and we knew what we were signing, we thought, and they would – well, we would have to live with it. That is the deal that has been done.”

That e-mail and that answer, in the context of the other evidence that I have referred to, again demonstrates to me that Mr Brown had a full and proper understanding of the agreement, that he had read it, he understood what it meant, he understood the commercial risks and consequences involved in it, that he had negotiated and approved it in the light of that understanding and recognised that he like Taylor Wimpey would "have to live with it". It was in that context that he had authorised the exchange of contracts.

On the 27 July 2007 the claimant and Taylor Wimpey were notified of the refusal of the first planning application. Everyone realised that the grant of planning permission was crucial to the success of the transaction and that efforts had been made to bring about a successful conclusion, Mr Brown instructing Rapleys in September to "maintain the vigilance and pressure" and thereafter refusing to consent to requested extensions to the long stop date for completion. There was a further refusal of planning consent in December 2007. On 19 March 2008 an appeal was lodged against the refusal. Mr Brown was content for Ms Cash to take on the role of monitoring the appeal, attending consultations with leading counsel, suggesting amendments to the grounds of appeal and to advise on tactics. She also advised on other aspects.

Meanwhile it was plain that the concerns over market conditions had become a reality and that Taylor Wimpey appeared to have some financial problems. In his e-mail of 7 July 2008 to Ms Cash, Mr Wright, Mr Steele, Mr Clarke and Mr Kendrick, Mr Brown wrote:

On 28 July the problem had been compounded when the third application for planning consent was refused, but the appeal against the second refusal continued. In that regard Ms Cash had told Mr Kendrick on 31 July 2008 that, having reviewed the council’s proposed conditions to be attached to any consent that might ultimately be granted, and having compared them against Schedule 1 to the Contract “as relating to unacceptable planning conditions” there appeared to her to be no major cause for concern. On 1 August 2008 Mr Kendrick advised that none of the conditions suggested by the local planning authority was onerous within the meaning of the agreement.

It was at this stage that the schedule of intended or suggested conditions, which I mention above, were negotiated between Taylor Wimpey and the local planning authority, namely in the period before the Inquiry resumed. After the appeal had been allowed (the decision being dated 8 December 2008) Ms Cash compared the 19 conditions imposed by the Inspector with those which had been agreed by or with Taylor Wimpey and she reported that the conditions, albeit differently worded to those agreed between the council and Taylor Wimpey, were “in the spirit of the agreement reached between both parties at the Inquiry” and did not seem to be “unacceptable” within the meaning of the Contract. Mr Kendrick was of the same view writing in his letter of 10 December 2008:

He went on to warn that although there had been no previous suggestion that Taylor Wimpey had manipulated the planning process it would be important going forward to ensure that they had no grounds for doing so. Mr Kendrick plainly also now had concerns about the intentions of Taylor Wimpey along with Mr Steele and Mr Brown, whose principal concern at that stage was that Taylor Wimpey no longer had the ability to pay the purchase price on completion, as their various email exchanges demonstrate. No-one was really troubled by the possibility that Taylor Wimpey might then use the terms of the planning consent to get out of the Contract. As Mr Steele said in his email to Mr Kendrick of the same day:

“I am always a bit nervous of the unacceptable planning condition provisions in any contract but everything points towards there being very little “wriggle room” for TW on the basis of this consent”.

Mr Steele accepted in evidence that he had never, prior to that point, communicated his nervousness in respect of unacceptable planning conditions to Mr Kendrick. I find that he also was of the view that there were no problems with the way in which it had been dealt with in the Contract at the time that it had been drafted. Accordingly Mr Kendrick wrote to Cameron McKenna on 11 December for “express confirmation that it is accepted that as issued the planning consent constitutes a Satisfactory Planning Permission…”

In my judgement, the wording of the conditions imposed by the inspector following the Inquiry does not differ in any material respects from the wording which had previously been agreed between Taylor Wimpey and the local planning authority. Further, these conditions were, in my view, no more burdensome than those which had been agreed.

It was on 7 January 2009 that Cameron McKenna wrote to the defendant asserting that the appeal decision contained Unacceptable Planning Conditions identifying as unacceptable conditions 1, 6, 11 and 19 of the appeal decision and asserting “Accordingly the Agreement is at an end with effect from 8 December 2008”. Cameron McKenna later explained that condition 1 fell foul of paragraph 2 of Schedule 1 to the Contract, conditions 6 and 11 fell foul of paragraphs 10.2, 11 and 12 while condition 19 fell foul of paragraph 12. Mr Brown's reaction was that “he was not entirely surprised” and it was “Not entirely unexpected…”. His colleague, Tom Barr, one of the claimant’s in-house solicitors, whom Mr Brown had discussed the transaction with, wrote to Steve Peace saying that he had been “..wondering whether they would try to pull out”.

Ms Cash advised, also on 7 January 2009, as follows; in respect of the four particular conditions (1 – the development was to start within 3 years; 6- there was to be an archaeological investigation of the site after demolition of the buildings; 11- vehicular access details were to be agreed with the local authority; and 19 - a scheme was to be submitted for 10% decentralised or renewable energy):

“1 -- This is a standard condition, attached to every (full) planning permission. In addition, my recollection suggests that TW agreed this as acceptable at the Inquiry.

6 -- My understanding was that TW were seeking reference to the archaeological report submitted as part of the application within the wording of the condition, which is not specifically referred to. However, the wording would seem to allow for the submission of any written scheme compiled to date, under the terms of the condition.

11 -- At the Inquiry, TW suggested that access to this site should be constructed prior to occupation rather than development (as per the terms of the council's original wording). The final wording of the condition, which states that "... Access shall be constructed ... to a timetable agreed with the local planning authority" does not necessarily preclude this.

19 -- The condition relating to renewable energy was specifically agreed between the parties at the Inquiry ... the final wording would seem to concur with my recollection of discussions at the Inquiry proceedings, albeit I do not have a copy of any written agreement between the parties."

Having regard to the schedule subsequently attached to the subsequent instructions to Mr Ash QC to advise in consultation I accept that Miss Cash's comments were correct. There was nothing unusual or unexpected in the conditions which had been imposed and they did not take either the claimant or Taylor Wimpey by surprise.

A meeting took place on 12 January 2009 between Mr Kendrick, Mr Brown, Mr Clarke, Mr Barr, Mr Wright and Ms Cash at which they all reviewed the merits of the claimant's position and the strategy which the claimant should adopt. I accept Mr Kendrick’s evidence that they considered the relevant contractual provisions and carefully compared the planning conditions with the terms of the contract. It is plain, from, among other things, his notes of the meeting, that Mr Brown had a good understanding of the terms of the contract. Mr Brown plainly thought, as he said in his note, in his report to Mr Ransom of 13 January 2009 and in correspondence to others, that the “Market is knackered” and that Taylor Wimpey were seeking to get out of the contract rather than re-negotiate it because they then lacked the financial resources to continue. However, for the first time, Mr Brown also said in his e-mail of 13 January that:

“Infelicities in the wording of a schedule to the contract lead us to believe that this is what they are relying on to claim that the planning consent is unacceptable. On straightforward contractual interpretation, they may have a point".

There was, in my judgment, no proper basis for that comment.

On 16 January Mr Kendrick instructed Mr Ash QC to advise the claimant as to whether satisfactory planning permission had been granted. At a consultation with Mr Ash on 28 January 2009, attended by Mr Kendrick, a Mr Langton, Mr Brown and representatives of Rapleys, Mr Ash advised that the claimant had a "strong case, but not guaranteed" and estimated the chances of success as "greater than 50%". In an email of 28 January, after his attention had been drawn to the letter from Cameron McKenna’s dated 19 January summarising their contentions, Mr Ash advised that his:

“…immediate impression [was] that it raises far fewer points of construction or purely legal matters then we had assumed. The matters of waiver and good faith may still arise but, other than in relation to the silly three year time limit points, the main area of debate seems to be the more factually based issue as to what a reasonable developer might think as to extra costs and delays. In this context the extent of TW's acceptance of the conditions will be very relevant as to what a reasonable developer would expect ...

It also seems to me that the position disclosed by the CM letter makes it much more difficult for TW to argue that the agreement is ipso facto determined by their mere assertion that the conditions are unacceptable.”

It is apparent that everyone on the claimant’s side thought that Mr Ash’s advice was correct in viewing this as difference over factual rather than a legal or construction issues. However, Mr Brown’s view had changed by the time that he came to draft paragraph 91 of his witness statement in which he said:

“Exchange of evidence took place on 15 July and confirmed our view that the arbitration would turn on whether the arbitrator applied a literal or commercial construction of the agreement.”

That passage is not consistent with the other evidence (except his comment in the email of 13 January), added to my concerns about Mr Brown’s evidence and the conflict which it creates is not easily resolved without the claimant waiving its privilege in relation to the advice which it was given in respect of the arbitration. Consequently I reject Mr Brown’s recollection of events.

Towards the end of February 2009, despite the fact that Mr Kendrick had arranged a further consultation with Mr Ash, Mr Brown dis-instructed the defendant and instructed Mayer Brown in its place. The further consultation took place on 25 February at which Mr Ash gave further encouraging advice. An arbitrator was appointed and the hearing was set for 27 July 2009. The claimant's points of claim were prepared by Mr Robert Miles QC and Mr Timothy Morshead. Points of defence were settled by Mr Edwin Johnson QC. I have considered both in detail. At the arbitration each side intended to call a number of witnesses. At the trial before me I was referred to the various statements and reports which had been made by the intended witnesses on both sides (namely the claimant and Taylor Wimpey) but neither side called the witnesses themselves. It was agreed between solicitors and counsel in the present case and subsequently confirmed in an exchange of emails between counsel and orally before me that the witness statements and reports prepared for the arbitration would stand but that none of the makers would be called to give live evidence. It was agreed for the purposes of the trial before me that the statements and reports would be admissible, that the evidence was honestly given and the reports contained genuinely held views. There was no agreement as to the truth or weight of such statements or reports. It seems to me that Mr Seitler was correct in submitting that it would not be open in the course of this trial for the claimant to impugn the reliability of the evidence and opinions of the witnesses which it had intended to call at the arbitration. I draw the inference that the evidence and opinions which were advanced in the form of witness statements and reports (on behalf of the claimant) had all been approved by the claimant, that the factual evidence was honest and reflected the true position as the claimant saw it and that the expert evidence was genuinely expressed and reflected the genuinely held beliefs of the claimant and its advisors, even if it is the case (which I doubt), as Mr Brown asserted, that he never, in fact, read it.

Mr Ian Clarke, a planning partner at Rapleys and a consultant to the claimant, in a witness statement dated 15 July 2009 explained Rapleys’ role in the disposal of the property which included "commenting on the planning aspects of the draft heads of terms" and monitoring the progress of the planning applications. His view (expressed in paragraph 49 of his witness statement) was that the planning consent was “exactly the sort… (including conditions) which any reasonable developer would anticipate." He agreed with Ms Cash's earlier advice that there was in his view "no appreciable difference" between the conditions which had been agreed between Taylor Wimpey and the local authority and those which had been imposed by the inspector describing them as “of the kind which one would ordinarily expect in connection with development of this kind". In paragraph 52 of his witness statement he specifically volunteered the following:

I should mention that I have re-read, following conclusion of the trial, the expert and factual evidence which was intended to be relied on by Taylor Wimpey. My attention had been drawn, in particular, to the expert report of Mr Andrew Warner, a chartered surveyor, who was instructed to give his opinion as to whether planning conditions 6, 11 and 19 amounted to Unacceptable Planning Conditions within the meaning of Schedule 1 to the Agreement. His evidence put Taylor Wimpey’s case at its highest. His first point (paragraphs 3.4 and 3.5 of his report) was that whether those conditions fell within clauses 2 and/or or 10.1 of Schedule 1 was a matter of construction, rather than planning expertise. For the reasons given above it seems to me that Taylor Wimpey would have lost on the construction of those clauses. As to clauses 10.2, 11 and 12 his view was that construction was not in issue and the question to be determined in each case was the conclusion which would be reached “in the reasonable opinion of the reasonable developer” at the date of grant of planning consent, namely 8 December 2008. That suggests to me that there was no issue about the alleged drafting of those provisions which could have played on Mr Brown’s mind subsequently.

In paragraph 97 (a) of his first witness statement Mr Brown expressed his view of the prospects of success in the arbitration as follows:

The claimant has decided, as it is entitled, not to reveal the undoubtedly privileged advice that it was given by its new solicitors and counsel in relation to the merits and prospects of success in the arbitration. There was a team of lawyers working on the matter. This has been described by Mr Seitler as one of the two “black boxes” in this case. Thus Mr Brown, and I assume the claimant, formed the view that as the matter proceeded to arbitration the claimant’s chances of success improved, but I cannot be told the reason for that assessment. That has undoubtedly hampered me in my analysis of a number of issues.

Mr Brown has suggested that he considered that there was a risk that the sale price might be adjusted below the minimum threshold of £3.5 million as a result of the provision in the contract relating to the account to be taken of the costs of complying with the section 106 agreement. There was, in my judgment, no basis for that concern.

He said in paragraph 97(g) of his original witness statement that:

On 3 July 2009 Mr Brown approached Mr James Jordan, Taylor Wimpey's in-house lawyer, by email. There had not been any prior contact between them. The arbitration was due to take place on 27 July and Mr Brown was about to go away on holiday. This was an email which came out of the blue and must, to my mind, have surprised the recipient. In it Mr Brown said:

“Dear Mr Jordan

I head up the legal function at Rentokil Initial Plc. My company's primary operating subsidiary is in dispute with one of your companies, formerly known as Taylor Woodrow Developments Ltd concerning a conditional contract for the purchase of a site in East Grinstead, West Sussex. The matter has been referred to arbitration and the arbitration hearing is scheduled to start on 27 July, which is not far away.

So far, both parties have locked horns using expensive lawyers and we are getting to a point where legal and experts costs are racking up substantially on both sides as final preparations get underway. Whilst both sides no doubt feel that their cases meritorious, it seems to me that the responsible and proper thing to do at this juncture is to explore whether a commercial solution can be found.

I go on holiday this evening and will be away until 13 July. Perhaps we could talk upon my return. Please let me know if you are happy to do this.

I have one commitment on Wednesday during that week that I cannot avoid but otherwise it should be available."

Mr Brown's explanation for this approach was that he was concerned about the inherent risks of litigation, commenting in cross-examination that although “we thought we had a strong case…that didn’t mean it was a guaranteed slam dunk of a case”, and the risk that Taylor Wimpey might not have the funds to complete the purchase. In other words not based on an assessment or advice that the claimant would lose the arbitration because of the way in which the Unacceptable Planning Conditions were defined. Mr Jordan said that he would be happy to meet. On 13 July 2009 Mr Brown reported to his namesake Mr Alan Brown, the then chief executive of the claimant, and Mr Ransom saying that he was not "inclined to press them for a quick settlement yet" and that “the reason for trying to do a deal now is to minimise costs".

On 14 July 2009 Mr Brown wrote again to Mr Jordan indicating that he had already held some discussions with Mr Carr and Mr Moore of Taylor Wimpey who did not seem able or perhaps willing to deal with settlement discussions. In the second paragraph of his e-mail Mr Brown said:

The appearance is of somebody who was increasingly desperate to avoid the arbitration, but the reason for that is not, and has to my mind, not been made clear. I find that the real likelihood is, as put to Mr Brown in evidence, that he was not concerned about the risks of losing the litigation but that his primary concern was to ensure a sale of the property at a renegotiated price which both parties could live with. The absence of comprehensive disclosure in respect of the settlement negotiations, which Mr Seitler describes as the second black box, hinders me in making findings of fact about the process.

A without prejudice meeting took place on 16 July 2009 at which Taylor Wimpey offered £1.9 million in settlement whereupon Mr Brown counter-offered asking for £3.5 million. It is not clear why that figure rather than the contract price was chosen. Mr Brown’s view was that Taylor Wimpey were stubbornly sticking to their £1.9 million figure. Prior to attending the meeting Mr Moore had written to Mr Brown to say that the discussions would be "purely of a commercial nature. We anticipate there would be no discussions in respect of legal matters concerning this site or in relation to the arbitration.” In other words there was to be no discussion of the merits of the parties’ respective positions at the arbitration, merely a discussion of the figure for which each side was prepared to settle. There was, in fact, no discussion of the merits at that meeting; it was an exercise in horse-trading. Mr Brown sought to speak directly with Mr Jordan but in a firm e-mail dated 20 July 2009 Mr Jordan rebuffed Mr Brown's advances saying "our position was made very clear to you at the meeting and I confirmed that remains our position. I would however suggest that you maintain a dialogue with [them] and Chris Mort and I have no problem with you [continuing to do so directly]”. The appearance of that exchange is that Mr Brown was, again, chasing Mr Jordan.

Discussions continued between Mr Moore and Mr Brown and on 22 July 2009 they struck a deal to settle the dispute (and sell the Property to Taylor Wimpey) for £2.5 million, both sides being responsible for their own costs. The terms of the deal were recorded on 24 July 2009 in a deed. In the course of a week or so Taylor Wimpey had moved up by £600,000 and the claimant had moved down by £1m.

There was no evidence before me to show that the drafting of Schedule 1 had any role in the settlement negotiations and that makes it difficult, if not impossible in the circumstances, for the claimant to prove its case on causation in this respect. I reject the contention that the drafting of Schedule 1 was the cause of the settlement of the arbitration.

I infer that the settlement was on the basis that the Property would subsequently be redeveloped by Taylor Wimpey or another contractor on the basis of the planning consent which had been granted on appeal and subject to the conditions which had been imposed on the grant of that consent. As Mr Seitler pointed out to me in the course of his closing submissions, by the time that the planning decision had been announced Taylor Wimpey had worked out that the redevelopment project would be loss making. Their assertion that the planning conditions were unacceptable, their prosecution of the arbitration and their subsequent settlement of it on purely commercial terms were hardly surprising.

In paragraph 114 of his witness statements Mr Brown said:

The claimant asserts (in paragraph 18 of its particulars of claim) that the defendant owed a duty in contract and at common law to exercise reasonable care and skill in:

The defendant admits that it owed the claimant a duty to exercise reasonable care and skill but says that the scope of its retainer was to advise the claimant on legal issues arising or potentially arising from the agreement and not on planning or commercial issues, whether or not unusual or disadvantageous, because such matters fell within the scope of Rapleys retainer. The claimant accepts that it was not the defendant’s duty to advise on commercial risks.

The claimant asserts (in paragraph 19 of its particulars of claim) that the defendant acted in breach of the duties which it owed the claimant in:

In respect of the drafting of the definition of Planning Agreement and the advice in respect of it I have come to the conclusion that the defendant was not negligent for the following reasons: (1) the drafting reflected the parties’ intentions and the proper understanding of the heads of terms, (2) the wording and proper meaning of the definition is clear on its face, was not difficult to understand, and did not need specific separate explanation to Mr Brown or Mr Steele, each of whom knew that the scope of the “Costs” was wider than simply those which might be incurred pursuant to a section 106 agreement.

I turn next to the allegation of negligence in respect of the drafting of schedule 1 of the Contract, the Unacceptable Planning Conditions. The test is whether the unacceptable planning conditions were terms which no reasonably competent practitioner could, in the circumstances, have drafted or agreed to. The burden is on the claimant to prove that the Unacceptable Planning Conditions were drafted in a way that no reasonably competent practitioner would have drafted them. The claimant asserts that the effect of the drafting was that the claimant faced the risk that Taylor Wimpey might have been able to get out of the Contract, notwithstanding the grant of planning consent on reasonable terms. Mr Halpern, in reliance on Queen Elizabeth’s School Blackburn Ltd v Banks Wilson [2002] PNLR 14, submits that it is sufficient for the claimant to show that the drafting of Schedule 1 exposed the claimant to unnecessary risks. He says, as I have set out above, that the possible alternative interpretations of Schedule 1 left the claimant open unnecessarily to the risk that Taylor Wimpey could seek to argue that the schedule rendered the actual planning conditions “Unacceptable”. Mr Seitler submits that claimant has to show what the correct construction of Schedule 1 is in order to prove that the defendant, in the form of Mr Kendrick, ignored the obvious danger of a damaging alternative construction in drafting or approving the draft of the relevant terms. Demonstrating a mere risk is insufficient. He reminds me that the claimant has not advanced a positive construction of the relevant provisions and has thereby placed what he described as a black box around that issue and made the resolution of it difficult for me.

For the reasons which I have given above it seems to me that it was right to construe the relevant clauses to see what the effect of Mr Kendrick’s drafting was and to determine whether he fell below the standard of the reasonably competent professional in the circumstances.

During the course of submissions, and cross-examination, the claimant placed considerable weight on various precedents to be found in the Encyclopaedia of Forms and Precedents (Fifth Ed), but they were, with the greatest respect, only one factor in considering this issue. A much more important factor is to consider, as I have, what the true meaning and effect of the challenged clauses was.

Given what I consider to be the proper construction of Schedule 1 I have come to the conclusion that the defendant drafted or negotiated or approved terms which reflected the heads of terms and the commercial deal which had been struck and achieved the balance which the parties intended. They were not misdrafted in the way that Mr Halpern suggests. Nor do I accept that the drafting exposed the claimant to unnecessary risks. There was no obvious danger of a damaging alternative construction. That Taylor Wimpey chose to advance a different (incorrect and implausible) construction to the true construction is not good evidence, nor a good reason, for concluding that the drafting was defective. In my judgment the defendant did not act in breach of its retainer or negligently in this respect.

As to the advice given in respect of Schedule 1 I have been reminded of a number of principles to be derived from the relevant leading authorities. In County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1997] 1WLR 916 at 922EBingham LJ held:

“ If in the exercise of a reasonable professional judgement a solicitor is or should be alerted to risks which might elude even an intelligent layman, then plainly it is his duty to advise the client of these risks or explore the matter further.”

In Carradine properties Ltd V DJ Freeman and Co [1999] Lloyd’s Rep 48 the Court of Appeal held that the precise scope of the duty to advise depends upon, inter alia, the extent to which the client appeared to need advice, Lord Justice Donaldson commenting that:

“An inexperienced clients will need and will be entitled to expect the solicitor to take a much broader view of the scope of his retainer and of his duties then will be the case with an experienced client."

I have found as a matter of fact that at all material times, and in particular at the date when he instructed the defendant to exchange contract, Mr Brown had a proper understanding of the risks inherent in the transaction and the detail and effect of the terms of the Contract which were designed to achieve a balance between the buyer and seller’s respective interests. The absence of a formal vendor’s report and specific evidence of a line by line explanation of the contract does not detract from my finding about Mr Brown’s knowledge and understanding nor from my conclusion that the defendant did not fail in its duty to advise the claimant. As Oliver J, as he then was, held in Midland bank V Hett Stubbs and Kemp [1979] Ch 384 at 402:

“ ... the court must be aware of imposing upon solicitors ... duties which go beyond the scope of what they are requested and undertake to do ... the duty is directly related to the confines of the retainer."

The claimant was a highly sophisticated commercial client acting through highly experienced personnel, including Mr Brown, a solicitor of considerable commercial experience. It was not necessary for Mr Kendrick to undertake a line by line analysis of the contract. In my judgment the defendant properly discharged its duties to the claimant at all material times.

The practical effect of the various clauses was a matter for Mr Steele to advise on, not Mr Kendrick and it was entirely appropriate that the defendant should assume that Rapleys could provide such advice, as in my judgment they did.

The claimant says (in paragraph 22 of the particulars of claim) that if the Contract had been drafted competently or if it had been given appropriate advice it would not have agreed to the terms of Schedule 1 of the Contract, which contained the definition of Unacceptable Planning Condition, nor to the formatting error in paragraph 10 of that schedule and the subsequent losses would never have occurred. The defendant submits that the arbitration and the settlement of it would inevitably have occurred whether the defendant had acted in breach of its duties or not and that there is no causal link between the alleged failures of the defendant and the losses allegedly suffered by the claimant.

The burden is on the claimant to prove on the balance of probabilities what it would have done if non-negligent advice had been given: see Sykes v Midland Bank Executor Trustee Co Ltd [1971] 1 QB 113, but as, the claimant submits, the proper approach to causation when considering a lost chance involving third parties is that set out in Allied Maples Group Ltd v Simmons & Simmons [1995] 1WLR 1602, namely that where the result depends on what a third party would have done in a hypothetical situation, the claimant does not have to demonstrate what would have happened on the balance of probabilities but that that he had a substantial chance rather than a speculative one,. In that case Lord Justice Stuart-Smith held, insofar as material, as follows:

“…where the Plaintiffs' loss depends upon the actions of an independent third party, it is necessary to consider as a matter of law what it is necessary to establish as a matter of causation, and where causation ends and quantification of damage begins.

1.

What has to be proved to establish a causal link between the negligence of the Defendants and the loss sustained by the Plaintiffs depends in the first instance on whether the negligence consists on some positive act or misfeasance, or an omission or non feasance. In the former case, the question of causation is one of historical fact. The Court has to determine on the balance of probability whether the defendant's act, for example the careless driving, caused the plaintiff's loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury.

Questions of quantification of the plaintiff's loss, however, may depend upon future uncertain events. For example, whether and to what extent he will suffer osteoarthritis, whether he will continue to earn at the same rate until retirement, whether, but for the accident, he might have been promoted. It is trite law that these questions are not decided on a balance of probability, but rather on the court's assessment, often expressed in percentage terms, of the risk eventuating or the prospect of promotion, which it should be noted depends in part at least on the hypothetical acts of a third party, namely the plaintiff's employer.

2.

If the defendant's negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given. This can only be a matter of inference to be determined from all the circumstances. The plaintiff's own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it. But in many cases the risk is not obvious and the precaution may be tedious or uncomfortable, for example the need to use eardefenders in noisy surroundings or breathing apparatus in dusty ones. It is unfortunately not unknown for workmen persistently not to wear them even if they are available and known to be so. A striking example of this is the case of McWilliams v. Sir William Arrol & Co. Ltd. [1962] 1 WLR 295 HL; the employers failed in breach of their statutory duty to provide a safety belt for the deceased steel erector. But his widow failed in her claim under the Fatal Accidents Act, because there was compelling evidence that, even if it had been provided, he would not have worn it.

Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour. In the present case the Plaintiffs had to prove that, if they had been given the right advice, they would have sought to negotiate with Gillow to obtain protection. The Judge held that they would have done so. I accept Mr Jackson's submission that since this is a matter of inference, this Court will more readily interfere with a trial judge's findings than if it was one of primary fact. But even so, this finding depends to a considerable extent on the Judge's assessment of Mr Harker and Mr Moore, both of whom he saw and heard give evidence for a considerable time. Moreover, in my judgment there was ample evidence to support the Judge's conclusion. Mr Jackson's attack on this finding was, as I have explained, something of an afterthought and not, I think, undertaken with great enthusiasm. I am quite unable to accede to it.

3.

In many cases the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case does the plaintiff have to prove on balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson's submission is wrong and the second alternative is correct.”

The claimant’s case is that it was deprived of the chance of obtaining the consent of Taylor Wimpey to purchase on different terms and that if Taylor Wimpey had not been agreeable than it could have sold the Property elsewhere. Was there a substantial chance that Taylor Wimpey would have agreed to enter into a contract on different terms? For the reasons which I gave above in my findings of fact I came to the conclusion that Taylor Wimpey would not have agreed to purchase the Property on terms different to those which were ultimately agreed. It was relatively intransigent in the course of negotiation of the Contract. It appears to me to have taken an extremely tough stance, strategically and tactically, in challenging the actual planning conditions. It then continued in that stance when it seems to me that the odds were stacked against it in the arbitration. The inference to be drawn, in my view, is that Taylor Wimpey used the inherent risks associated with an arbitration as a lever to increase its negotiating power, in the event successfully. It compromised the arbitration purely on commercial terms, without regard to the merits of the parties’ respective cases, not having moved very far from its starting point in the settlement negotiations. That suggests to me that the drafting of the relevant provisions in the Contract were not a material issue in the settlement discussions. It reduced the purchase price by £1.88m, which was a significant figure even compared to the costs which were probably incurred and the exposure to a liability for the claimant’s costs. They were not flexible in any real sense at any stage of the transaction, however reasonable it might have been for them to act otherwise. I do not accept that Taylor Wimpey, in the depths of the recession, identified this particular Contract as one of the worst in its portfolio and chose to challenge it. Such a conclusion would involve speculation rather than a proper inference from the primary facts. The evidence leads me to conclude that Taylor Wimpey would not have agreed other terms and I find that there was no substantial chance (within the Allied Maples meaning of that phrase) that it would have done so.

The claimant submits that if other more reasonable terms had been agreed with Taylor Wimpey then there would have been no arbitration and that if there had been an arbitration the claimant would have succeeded. I accept the defendant’s submission that on the evidence the proper inference to draw is that even if other terms had been agreed Taylor Wimpey would still have asserted that the actual planning conditions were “Unacceptable” and that the Contract was over. In the circumstances the only way of resolving that dispute would have been to pursue an arbitration, which was, in the circumstances, inevitable. However, for the reasons given above in relation to the proper construction of Schedule 1 I find that it was probable that the claimant would have won the arbitration in any event.

The claimant submitted that if Taylor Wimpey had refused to agree to other terms it would have agreed to sell the Property to one of the other bidders either on reasonable conditional terms or unconditionally. The claimant asserts that it could have sold the Property to Parkridge for the sum of £3.505 million (including overage) or some other purchaser at about the same date as the exchange of contracts, namely 6 March 2007, but despite the series of offers which were put before me and in the absence of any expert evidence as to the market I am not prepared to assume that any of the offers would have come to fruition at any particular price.

As to the causation of loss associated with the alleged negligent drafting of the provisions relating to the costs of the section 106 agreement are concerned the defendant submits that no risks arose because the costs never rose and would never have been likely to rise sufficiently high as to risk termination of the contract. Further, the defendant is right to assert that no separate case has been advanced in the particulars of claim as to the loss and causation of such loss, arising from the alleged negligence drafting of the provisions relating to Costs. The claimant has failed to make out its case in this respect.

As to quantum the claimant's primary case is that it lost £1.88m being the difference between the contract price for the Property and the eventual sale price (ie £4.88m less £2.5m). Had it succeeded on all other issues it seems to me that this would have been the proper figure at which to assess its loss. The difference in value is not, in my judgment, attributable to a drop in the market and the authorities relied on by the defendant to show that such loss would be irrecoverable are not, in my judgment, relevant.

As to the claimant's alternative case, namely, that it lost the chance of obtaining the original contract price but that there would have been no serious risk of not selling for the proper price to another bidder and therefore there ought not to be any discount from the full damages figure to reflect the chance. If, in fact, there was a risk of not selling for the full price and there ought to be a discount the claimant says that the Property would have been sold at the lowest for £3.5m on an unconditional basis and that therefore for its loss is £1m. There was no valuation evidence adduced by the claimant at trial and I would have to speculate as to what the Property would have been worth on terms other than those which the Contract contained. I am afraid that I am not prepared to do so.

The third way in which it puts its case is that it was deprived of the chance that Taylor Wimpey would have agreed to alter the terms and continue with the agreement, the loss being (say) 70% of the damages calculated on the basis that the sale would have gone ahead (ie the difference between the original contract price and the ultimate sale price), and it is entitled to (say) 30% of the damages calculated on the basis that there would have been no sale to Taylor Wimpey but that there would have been a sale on an unconditional basis to a third party. That seems to me simply too complicated an approach to quantification. If a loss of a chance is to be compensated for then it seems to me that the sensible course is to assess the percentage risk of the loss of that chance and apply that percentage to the principal sum claimed.

In addition the claimant claims the cost which it spent in relation to the arbitration and expert determination in the sum of £602,997. Mr Brown also gave evidence of a second relevant bill in the order of £5,000. I accept those figures. If the claimant were to succeed on this head then it would be entitled to damages in the sum of £607,997. The defendant argues that if the claimant succeeds on this head of loss then the costs, which are claimed as damages, should be the subject of detailed assessment. I disagree. If, contrary to my findings above, I had held that these costs had been incurred as a result of the negligence of the defendant then it seems to me that it is a head of expenditure which is wholly attributable to the acts of the defendants and should be treated just like any other head of expenditure loss. The claimant would be entitled to recover the sum which is equal to the liability which it has incurred as a result of the default of the defendant without abatement. In my judgment there is no reason in principle why the damages should be further reduced by a detailed assessment which would not reduce the amount of the claimant’s liability for those costs but only the extent of the defendant’s obligation to pay compensation in respect of them.

The defendant says that the claimant has failed to provide sufficient evidence to prove on the balance of probabilities that the claimant acted reasonably in the way in which it compromised the dispute with Taylor Wimpey or that it acted reasonably in purportedly mitigating its loss. The claimant says (paragraph 26 of the particulars of claim) that it mitigated its loss by going to arbitration and by compromising those proceedings in the way that it did and relies on the factors identified in paragraph 97 of Mr Brown’s witness statement, as amended by his second statement, in support of its contention that it acted reasonably. The claimant submits that in asserting that the claimant acted unreasonably in the conduct and settlement of the arbitration thereby breaking the chain of causation it seeks to sidestep the rule that the burden of proving failure to mitigate it on the defendant for the reasons explained by Lord Macmillan in Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 at 506: --

“… it is often easy after an emergency is passed to criticise the steps which had been taken to meet it, but such criticism does not come world from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of the duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held to be distant title to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken."

The claimant submits that having analysed the risks involved in the arbitration "it was better to take the bird in the hand" than run the risk of failing to obtain the full contract price and being left with a property worth significantly less than that the date that the contract was entered into. It is submitted that this cannot be criticised as an unreasonable decision.

Again I am faced with the difficulty that the claimant has decided not to waive privilege in relation to the advice which it was given in respect of the arbitration (after the defendant was disinstructed) and during the course of the settlement negotiations. The claimant says that it need not waive privilege because the court can conclude that the course which it adopted was inherently not unreasonable. I am not persuaded that the claimant was placed in “a difficult situation” by reason of the defendant’s breach of duty. Further, not only is there is no evidence which can persuade me that the claimant analysed the risks of the arbitration and then decided to protect its interests by negotiating a settlement it seems to me, for the reasons that I have already given, that the reason for settlement was not connected to the alleged breach of duty. Ultimately I cannot undertake the task of analysing whether the claimant “has acted reasonably in the adoption of remedial measures” and, given my view that it would have succeeded in the arbitration, I have come to the conclusion that in settling the arbitration, when it need not have done so, it acted unreasonably.

I would therefore dismiss the claim.