Harris & Anor v Berkeley (Strategic Land) Ltd & Anor

This dispute arises out of the terms of a contract for the sale of land entered into on 25 September 2007. Under that contract the claimants, Mr and Mrs Harris, were the vendors and the defendants, two companies in the Berkeley group of companies, were the purchasers.

The contract was duly completed on 25 September 2007. The purchasers paid, in accordance with the terms of the contract, a total fixed price of £13 million. The contract also provided for the purchasers to pay a further sum described in the contract as overage on the happening of certain events. Some events have indeed occurred since the completion of the contract and a dispute has arisen as to the operation of the overage provisions in those events. Mr Small QC appears on behalf of the claimants and Mr Mould QC appears on behalf of the defendants.

The ultimate issue is a fairly narrow one but before I express my conclusions on that issue I need to refer in some detail to some of the provisions of the contract and I need to describe the relevant events which have happened.

The contract related to an area of land which was considered to have considerable development potential. The drafting of the contract is such that it begins with a large number of definitions followed by the operative provisions. I will refer to some of these definitions without reading them in their entirety. I will read out the entirety of others of these definitions.

The definitions refer to ‘acceptable planning permission’ which perhaps speaks for itself and I need not further summarise. The definitions also refer to ‘acceptable planning permission date’ which refers to a scheme area; the scheme area included land in addition to that the subject of this contract. That definition also refers to the development of all or part of the scheme area for residential and ancillary purposes.

The definitions also include reference to ‘affordable housing’ and ‘affordable/low cost housing’. I refer to those definitions because they make distinctions between some types of housing and other types of housing, some types of home and other types of home.

The contract also refers to a planning application lodged with the local planning authority Cotswold District Council, on 24^th November 2006, that is prior to the contract.

Continuing with the definitions, the term, ‘overage’ is defined to mean, ”The permitted units overage and/or the social units overage”. ‘Permitted units’ in turn is defined to mean:

The definitions then state that, ‘Permitted units overage’ means, ‘The sums to be calculated and paid pursuant to clause 13 of the agreement.’ There are then further definitions of ‘social rented housing’, ‘social units’ and ‘social units overage’, the first two of those definitions distinguish between certain types of housing. ‘Social units overage’ is another provision for an overage payment but it is not necessary to describe that further. ‘Subsequent planning agreement’ and ‘subsequent planning permission’ are also defined. The definition of ‘subsequent planning agreement’ refers to, ‘Development of all or part of the scheme area for residential and ancillary purposes.’ I have already indicated that there has been an event within the definition of ‘subsequent planning permission’ in this case.

I note that when ‘permitted units’ was defined the reference was to ‘Units of residential accommodation,’ whereas when ‘units’ is defined the reference is to, ‘Units of single dwellings of residential accommodation.’ Nothing seems to turn upon the difference in this case.

I go from there to clause 13 of the contract. Clause 13 provides for two forms of overage, one is the permitted units overage which is relevant in this case, the other is the social units overage which forms part of the background but which I need not further describe. The provisions as to permitted units overage are a little detailed but it is sufficient to say that the permitted units overage involves a calculation of the number of permitted units in excess of an aggregate of 290 units, plus any other units in respect of which permitted units overage has already been paid. The calculation requires one to multiply that number by a figure. The figure is £55,000 per unit, although provision is made for indexing the figure of £55,000 in relation to the period between the time when the contract is entered into and the later date when the calculation is done.

The relevant events which have happened in this case are essentially to do with the operation of the planning process. In particular there has been a planning application which has led to the grant of a planning permission. Although not strictly relevant to this outcome of this dispute, that planning permission has been implemented. The planning application was made on 19^th June 2009; it was made on behalf of the purchaser under the contract. My attention was drawn to three boxes in particular on the application form, boxes 3, 18 and 19. I will attempt to describe what is contained in those boxes.

Box 3 describes the proposal and is in these terms:

Box 18 has the heading, ‘Residential units.’ The form asks whether the proposal includes the gain or loss of residential units, to which the answer given was: ‘Yes’. Particulars of those units were then provided in the application form. The residential units were described as: ‘Proposed social rented housing.’ There were to be seven one-bedroomed flats or maisonettes, in fact they were flats, and eight two-bedroomed flats. It was then said that the proposed social rented housing total was 15, it was also said that there were 15 proposed residential units.

Box 19 has the heading, ‘All types of development: non-residential floor-space.’ This is a more elaborate part of the form which distinguishes between a range of uses, most of which are quite plainly non-residential although some might qualify as residential, at least in some senses of that word. The form was completed to show a proposed 51 square metres of shops. Under the ‘use class’ because that is what it was, C2, with the heading, ‘Residential institutions’, the total gross new internal floor-space proposed was approximately 6,770 square metres. Later in this box under a question enquiring as to hotels, residential institutions and hostels, the applicant has written that in relation to class C2, residential institutions: ‘There will be 60 rooms.’ Everyone agrees that 60 rooms was not the correct answer, it was 60 units, having rather more rooms.

I was also asked to consider a document which, as I understand it, the applicant for planning permission supplied to the local planning authority in support of the planning application. Mr Small drew my attention to one page which had this text:

Mr Mould retaliated by drawing my attention to another part of the document under the heading, ‘Nature of proposal’ where the text is:

The application for planning permission was successful. On 24^th November 2009 the local planning authority granted a planning permission which described the permitted development in these terms:

The last thing to take from the planning decision is a paragraph under the heading, ‘Informatives,’ and that paragraph reads: ‘This decision relates to drawing numbers 2142.400, 403, 404, 405, 406, 407, 408 and 409.’ I have commented on the fact that the planning conditions do not seek to regulate the detail of the user in the completed building permitted by the permission. I was told in the course of argument that alongside this planning permission there exists an agreement under Section 106 of the Town and Country Planning Act 1990. However that agreement was not put in evidence, neither side rely upon it. In particular Mr Mould, who appears for the purchasers, who addressed me in detail as to that which was permitted and that which was not permitted by the planning permission, did not suggest that my decision in this case would be influenced by a consideration of the Section 106 agreement.

I need to refer in a little detail to three of the plans which were submitted as part of the planning application and which are expressly referred to in the planning decision. I will refer to those three plans as plans 404, 405 and 406. Plan 404 shows the ground floor of the permitted development. Plan 405 shows the first floor and the second floor of the permitted development and plan 406 shows the third floor and roof plan of the permitted development.

I need to refer to what is shown on the plans as regards areas where it is intended occupiers would live. I will then refer to further facilities which were to be provided within the permitted development. I will begin by looking at what might be regarded as the space in which the occupiers would live. What one sees at an early stage is that the units are described in two ways, some of the units have the prefix ‘C’, I dare say for ‘care’ and other units have the prefix ‘S’, I dare say for ‘sheltered’.

I will begin with the S units. As I indicated earlier, there are 15 of those. There are none of those on the ground floor. They are to be found on the first and second floors and the third floor of the permitted building. The 15 units are in one corner of the building, namely the north-east corner. Those 15 units have a separate entrance. One proceeds from the ground floor up to the first floor where the units begin. There is then an internal staircase between the floors on which these units are to be found. The units are separated from the C units within the building. One cannot go from an S unit along the communal corridor and walk past a C unit. One other point of detail, there is no lift servicing the S units.

There are 60 C units; they are on the ground floor, first and second floors. The first comment I would make, a matter that was not really disputed, is that the physical layout of the C units and the S units is really much the same. One sees, taking any one at random whether it is a one-bedroom or a two-bedroom unit, one sees in addition to the bedroom accommodation the lounge, the kitchen, the bathroom, the hall, whether there is provision of storage and matters of that kind. Blinkering myself for the moment and simply looking at the layout of what is here, there is no obvious distinction to which my attention was drawn between a C unit and a S unit.

I need therefore to refer to what might be regarded as communal facilities or possibly care facilities. These are principally on the ground floor, although I note that on the higher floors there are areas which are said to be areas for sitting, and on one floor there is an area marked as, ‘assisted bath’ which I take to be a bathroom in which it will be possible for someone that needs assistance to be assisted. There is also an area for refuse on the second floor within the area devoted to the C units.

Turning to the ground floor, putting on one side the entrance to the S units which I have already described, the entrance to the block is described on the plan as being, ‘Extra Care home entrance.’ From the entrance one proceeds through a lobby and one passes an area marked as ‘reception’. The reception has back-up offices behind. The intention is that if one goes into the lobby and then proceeds to the reception, one will have a receptionist to speak to and deal with whatever the query may be., Indeed someone within the building who wants to see a receptionist can also go to the reception

To the right of the hallway, to the right of the reception, there are two areas one of which is marked, ‘Lounge’ and another is marked, ‘Café/dining’ and the plan shows a number of tables and chairs. To the left of the hallway and reception is a room marked, ‘Hair’ which is intended to be a hairdressing salon.

The next matter to which I was referred is a retail shop on the corner of the block near to the Extra Care home entrance and that shop has, as its only entrance, an entrance from the outside, not from within the building.

There are other uses identified on the ground floor plan. There is a kitchen, obviously to serve the café/dining. There is a laundry, a refuse area, a place for scooters and bikes. There is a staffroom beside a bedroom, presumably for a member of staff, and there is a small guest suite. Those I think are the principal features of the layout which is shown on the plans which are permitted by the development.

It will be remembered that the planning permission described the permitted development by reference to class C2 of the Use Classes Order, more accurately, the Town and Country Planning (Use Classes) Order 1987. I have been shown the terms of that order in the form in which they existed at the time relevant to this case. Article 2 of the order defines ‘care’ to mean: ‘Personal care for people in need of such care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder,’ and then class C2 also includes the personal care of children and medical care and treatment.

The classes are in the schedule to the order. The relevant classes are class C2 and class C3. Class C2 has the heading, ‘Residential institutions,’ and provides as follows referring to three sentences describing three groups or categories. The first category is, ‘Use for the provision of residential accommodation and care to people in need of care (other than a use within class C3 (dwelling houses).’

The second category in class C2 is, ‘Use as a hospital or nursing home.’ The third category in class C2 is, ‘Use as a residential school, college or training centre.’ Class C3 is headed, ‘Dwelling houses’ and it provides:

It is agreed that the 15 S flats in the permitted development are units of residential accommodation within the definition of ‘permitted units’ and that the number 15 can therefore be taken into account for the overage provisions in clause 13. What about the 60 C units? Are they units of residential accommodation within the definition of permitted units? Are they to be included in the operation of the overage provisions, or are they to be excluded?

The claimants say that the 60 C units are units of residential accommodation; the defendants say they are not. In particular, the defendants say that the correct characterisation or description of those 60 C units involves one looking at what is permitted, together with all of the facilities in the building giving the building the character of a care home or a residential institution. The defendants say that the definition of ‘permitted units’ takes one to that which is permitted by the planning permission which takes one to use class C2 and takes one into the world of planning classification and categorisation. In that world, and therefore also for the purposes of the contract, what one has is something which is not units of residential accommodation but instead is a residential institution or a care home, neither of which are within the definition of ‘permitted units’. As indicated, the defendants submit, and I agree, that the definition of ‘permitted units’ requires one to consider that which is permitted by the relevant planning permission. I have described the relevant planning permission and I have described its detailed terms and what is shown on the plans which are referred to in the planning permission.

It seems to me that there are two relevant matters which fall to be assessed. The first relates to the physical character of what is permitted by the planning permission. The second relates to the use which is permitted to be made of that physical thing. I start with the physical character of that which is permitted. I have described that in sufficient detail already. I am struck by the fact that the C units and the S units are physically indistinguishable, although I do not ignore the fact that in the part of the development described as ‘the care home’ there are physical things in addition to the C units.

Pausing there and not in any way determining the final outcome, there is no difficulty in describing the C units as units of residential accommodation. It may be that there are additional ways of describing them but none of those other descriptions make it inappropriate to describe the units as ‘units of residential accommodation.’ If necessary one could break down the phrase into its component parts. The C units are undoubtedly units, they have their own doors and can be separated in terms of occupation and use. They are not I think fairly to be regarded as only parts of a greater unit, although they may also be parts of a greater unit. As to whether they are residential accommodation, again it seems clear that they are areas of residential accommodation. They provide accommodation and its character is residential. Indeed the Use Classes Order does not suggest a different answer. Class C2 refers to the provision of residential accommodation. Of course it also refers to providing care in addition, but on the way it refers to providing residential accommodation. In looking at the physical makeup of that which is permitted by the planning permission, my preliminary or provisional view is that one is dealing with something which includes units of residential accommodation, although of course it includes other things such as the shop and the hairdresser and so on.

I next consider the use to which the physical thing may be put. The answer, based on the terms of the planning permission, is that this physical thing may be used for the use described within class C2 and may not be used for the use described within class C3. This distinction between C2 and C3 is a distinction made for planning purposes but when one considers the permitted use planning law is all important. The relevant part of class C2 is the first part of class C2 which refers to the physical thing being used for the provision of residential accommodation and care to people in need of care. The units therefore can be used for the provision of residential accommodation. They cannot be used for the provision of residential accommodation absent the provision of care. Residential accommodation must be provided as part of a composite. The composite provision has two elements: one is residential accommodation, the other is care.

Against that background one comes really to the ultimate question. Having appraised the physical thing permitted by the permission, having considered the range of permitted uses that may be made of the physical thing, one has to ask whether the relevant planning permission permits a number of units of residential accommodation. Are the C units units of residential accommodation within the contractual terms, or are they not?

The first point to address is: do these units which might otherwise qualify as units of residential accommodation cease to qualify because the building which is permitted has not only those units but it also has other facilities, the café, the lounge, the hairdresser and so on? I do not see that it matters for the purposes of the contract that the planning permission permitted additional facilities. No-one says that the additional facilities are units of residential accommodation, but I do not see why one has to withhold the description ‘units of residential accommodation’ to the C units on that account. Nor do I see that it matters for the purposes of the contract that the permitted use of the residential accommodation is controlled by use class C2 so that the occupier of the relevant planning unit, the entirety of the building, let us assume, must see to it that these units of residential accommodation are provided as part of a composite provision which includes care.

Mr Mould emphasised that in planning law the block comprising these 60 units and ancillary facilities is not within use class C3 but is within use class C2. He stressed that these two use classes are mutually exclusive. He stressed that the first category in class C2 is defined by the bracketed phrase which I have quoted, ‘(other than a use within class C3 dwelling houses)’. However the definition of permitted units in the contract does not adopt the classification of C2 or C3 and the word, ‘units’ is a general and wide word. ‘Residential accommodation’ is general and wide. I drew attention to the fact that the contract distinguished between some types of residential accommodation and other types of residential accommodation. What the contract does not do is distinguish between the type of residential accommodation (a phrase used in class C2 itself) which comes within class C2 and other types of residential accommodation. It seems to me the language of the contract is perfectly apt to include residential accommodation provided in accordance with class C2.

To succeed in his argument Mr Mould really has to say that there are other ways of describing the permitted use and those other descriptions mean that it is no longer possible to describe the units as units of residential accommodation. Mr Mould rightly says that one could describe the building as a care home, one could describe it as a residential institution, although some might quarrel with the word, ‘institution’. But even if the building can be described in either of those ways it simply does not follow, in my judgment, that one is precluded from describing what is permitted as involving units of residential accommodation.

In this judgment so far I have dealt with the ordinary meaning of the language used in the contract and I have addressed the arguments which have been put forward as to how I should react to that wording. Mr Small would contend that giving the words their ordinary English meaning produces a sensible commercial result and that is a reason, if he needs it, in his favour. Mr Mould when I asked him did not contend that giving the words their ordinary English meaning, as I see it, was in any way nonsensical or uncommercial, or that there was any reason here for the Court to look critically at the ordinary meaning of the words with a view to avoiding what must have been an unintended commercial result.

In those circumstances I do give the words what I regard as their ordinary English meaning. My conclusion is that the planning permission permitted altogether in aggregate 75 units of residential accommodation.