Chelsfield Advisers LLP v Qatari Diar Real Estate Investment Company & Anor

This is an application for summary judgment in respect of an agreement relating to the proposed redevelopment of the site of the embassy of the United States of America in Grosvenor Square (“the Property”), which is due to be relocated in 2018 as part of the major development of the south side of the River Thames in the vicinity of Battersea Power Station. It raises the question of whether and in what circumstances a contract may be subject to an implied term or condition that it will only continue in existence for so long as a relationship of mutual trust and confidence subsists between the parties.

John McGhee QC appeared for the Claimant (“Chelsfield”) and Alain Choo-Choy QC for the First Defendant (“QDREIC”) and the Second Defendant (“QDDC”). I am grateful to both Counsel for their clear and helpful submissions (which occupied, in all, 60 pages of written argument, and, with full pre-reading, over one day of court time).

Chelsfield is one of a number of affiliated entities (“the Chelsfield group”) which are engaged in the acquisition, management, financial structuring and development of major real estate assets in London and Paris. QDREIC is a company incorporated under the laws of Qatar and is one of a group of companies established by that country’s sovereign wealth fund to co-ordinate the fund’s real estate development priorities. QDDC was established to manage that group’s projects in the United Kingdom.

In 2008 the Chelsfield group and an entity which is unrelated to the parties to the present dispute, namely Qinvest LLP, were accepted by the US government as preferred joint bidders for the purchase and development of the Property. However, QDREIC subsequently bought out the interest of Qinvest LLP in that arrangement.

QDREIC and the Chelsfield group then agreed that they would not purchase and develop the Property together as a joint venture. Instead: (a) QDREIC would buy out Chelsfield’s interest, and (b) once the Property had been purchased by a QDREIC group company, QDDC would provide development management services to that QDREIC group company in relation to the subsequent development, and Chelsfield or a member of the Chelsfield group would, in turn, provide such services to QDDC.

On 1 November 2009, Chelsfield, QDREIC and QDDC entered into an agreement in writing styled “Development Fees Agreement” (“DFA”). The DFA (a) refers to the events summarised above, (b) provides that Chelsfield and QDDC will enter into a “Development Management Agreement” (“DMA”) for the provision of development management services in relation to the Property and the development of the same, (c) records that the “Buyout Fee” payable to Chelsfield for agreeing to withdraw from the acquisition and development of the Property, and instead enter into the DMA with QDDC, was £15,000,000, and (d) provides that in the event that Chelsfield and QDDC (acting reasonably and with all due expediency and in good faith) have not agreed the terms of the DMA within 5 months they are to be determined by an expert.

On the same day, QDDC entered into a contract with the US government for the purchase of the Property (and its leaseback pending relocation of the embassy in 2018).

In addition to the “Buyout Fee”, the DFA provided (by Clause 2 and Schedule 1) that QDDC would pay Chelsfield (a) an “Arrangement Fee” of £5,000,000 for the services which Chelsfield had performed in connection with the acquisition and development of the Property, and (b) a “Costs Contribution” of up to £1,500,000 in reimbursement of the costs that it had incurred. These payments were all duly made by QDDC.

Clause 3 of the DFA provided that QDDC would appoint Chelsfield as development manager pursuant to a DMA in consideration of (a) “Development Management Fees” of £100,000 per month for the first three years of the period until planning permission was obtained and (b) “Planning Incentive Fees”, which were capped at £20,000,000 and were to be calculated by reference to the amount of permitted floorspace authorised by the planning permission obtained for the development of the Property.

Clause 4 of the DFA provided that, on completion of the sale and leaseback of the Property pursuant to the contract made between the US government and QDREIC (“Completion”), QDDC would pay Chelsfield an “Advance Planning Payment” of £10,000,000. This was an advance on the Planning Incentive Fees to which Chelsfield would be entitled under the DMA, and there was provision for refunding the whole or part of that sum if the Planning Incentive Fees turned out to be less than that sum.

Clause 4.2 of the DFA provided that if Chelsfield was of materially weaker covenant strength at Completion than it was at the date of the DFA, it would provide QDDC with reasonable security for the potential repayment of the Advance Planning Payment.

Clause 13 of the DFA set out various circumstances in which QDDC was entitled to determine the DFA. These were all, in essence, insolvency events, and it was not in dispute at the hearing before me that none of these circumstances applied.

QDREIC was referred to in the DFA as “Guarantor”, and, by Clause 14 of the DFA, it guaranteed the performance by QDDC of its obligations under the DFA.

The parties began negotiations over the form of the DMA in 2010. QDDC’s solicitors (“Hogan Lovells”) prepared a draft which was sent to Chelsfield on or about 5 August 2010. Chelsfield’s then solicitors (“Herbert Smith”) sent it back to Hogan Lovells with their amendments on 1 September 2010, and Hogan Lovells returned it to Herbert Smith with further amendments 8 October 2010. The parties met to discuss the matter, following which, on 10 November 2010, a schedule was prepared identifying 7 key points that remained in dispute.

There was then a substantial pause, of the order of 2.5 years. The explanation for this may be that, at that stage, Completion was not due to take place for some time. Completion in fact took place on 28 August 2013.

On 30 July 2013, in the run up to Completion, the group chief operating officer of QDREIC, Naaman Atallah, sent an email to the chairman and chief executive of Chelsfield, Robert Burrow, asking Mr Burrow to provide (a) a proposed scope of services for the DMA (b) details of Chelsfield’s staff and resources and (c) proposals for security for the £10,000,000 Advance Planning Payment.

Between 29 August 2013 and 23 September 2013 there was correspondence between Mr Burrow for Chelsfield and the group chief executive officer of QDREIC, Khaled Al Sayed, regarding those three points. Mr Burrow’s position was that (a) it was premature in advance of the DMA being entered into to prepare a detailed scope of services (b) Chelsfield was entitled to delegate the provision of services under the DMA to other members of the Chelsfield group and (c) security was not required for the Advance Planning Payment which, following Completion, was now due.

Mr Al Sayed took, in short, a diametrically opposed position on all three points.

On 27 September 2013 QDDC provided Chelsfield with a draft DMA (which included a proposed scope of services) which differed in a number of respects from the form of DMA discussed between the parties in 2010 and indicated that, if the terms of the DMA could not be agreed, the matter would need to be referred for expert determination as provided for under the DFA. Without prejudice negotiations followed, but they failed to achieve a resolution. Chelsfield then responded on 27 February 2014.

A schedule of terms in dispute was prepared and the parties met in order to seek to reach agreement. However, no agreement was reached. Accordingly, pursuant to the DFA, QDDC applied to the RICS for the appointment of an expert. This resulted in the appointment of Mr Tony Bingham MRICS FASI (“the Expert”) on 6 May 2014.

The Expert gave directions, and the parties exchanged submissions on 26 June 2014 and counter submissions on 21 July 2014. The submissions covered (among other things) (a) the scope of the services to be provided by Chelsfield under the DMA (b) whether Chelsfield was to be entitled to delegate the provision of services to others and (c) whether QDDC was entitled to require Sir Stuart Lipton (who had a major role at Chelsfield at the time the DFA was entered into) to be a “Key Person” under the DMA.

The Expert raised the question of his suitability as an expert to determine the matter. However, on 25 July 2014 Hogan Lovells indicated that QDDC was happy that he should continue with his determination, and on 31 July 2014 they agreed with his request that he should have an extension of time to make his award.

Hogan Lovells for QDDC and Chelsfield’s new solicitors (“Mishcon de Reya”) sought to agree a list of issues which was submitted to the Expert in almost agreed form on 1 September 2014. At the Expert’s suggestion, a meeting was due to take place between him and the parties on 2 October 2014 in advance of his determination. On 15 September 2014, Hogan Lovells suggested that a telephone conversation take place with the Expert in advance of that meeting to discuss the precise purpose of the proposed meeting. The telephone conversation took place on 17 September 2014. On 19 September 2014, Hogan Lovells confirmed the arrangements for the meeting to take place on 2 October 2014 (although asking to move the time of the meeting on that day).

While all this was going on, discussions had been continuing between the parties regarding the payment of the Advance Planning Payment and QDDC’s contention that Chelsfield was required to provide security for its possible repayment if it exceeded the amount of the Planning Incentive Fees earned by Chelsfield under the DMA. On 27 February 2014 Chelsfield wrote formally to QDREIC setting out its claim to the Advance Planning Payment, and enclosing an expert accountant’s report in support of its contention that its covenant strength had not deteriorated between the date of the DFA and Completion so that it was not required to provide security for repayment. Because this dispute was not covered by the provision for determination by the Expert that was contained in the DFA, Chelsfield indicated that court proceedings would be commenced for determination of this dispute if agreement could not be reached.

Between 14 April 2014 and 7 August 2014, there was correspondence between Hogan Lovells and Mishcon de Reya. In sum: (a) Hogan Lovells repeated the demand for security, (b) Mishcon de Reya offered a bank guarantee without prejudice to its contention that none was required, (c) Hogan Lovells asserted that the guarantee was unsatisfactory because it was limited in time, and (d) Mishcon de Reya suggested that this concern could be dealt with by offering to extend the guarantee for a further period.

This was not acceptable to QDDC. In the result, Chelsfield started separate proceedings (“the Advance Planning Payment Claim”) on 18 August 2014, seeking (1) payment of the Advance Planning Payment of £10,000,000, (2) a declaration that Chelsfield was not required to provide security for repayment, and (3) in the alternative, a declaration that the bank guarantee which Chelsfield had provided was sufficient security.

On 23 September 2014, and on Chelsfield’s case without any prior warning to Chelsfield, QDDC wrote to Chelsfield indicating that QDDC had lost trust and confidence in Chelsfield’s ability to deliver under the DFA and DMA and that accordingly QDDC was treating the DFA as at an end. On the same day, QDDC served its Defence in the Advance Planning Payment Claim contending (among other things) that because of the termination of the DFA it was not liable to make this payment.

On the following day, Hogan Lovells wrote to the Expert cancelling the meeting with him that had been due to take place on 2 October 2014. Since that time, QDDC has refused to agree that the Expert can proceed with his determination.

Chelsfield did not accept that QDDC had determined the DFA, and, on 14 October 2014, it began the present proceedings, seeking (1) a declaration that the DFA remains in existence and has not been determined; (2) an order requiring QDDC to instruct the Expert to complete his determination of the terms of the DMA; (3) an order requiring QDDC to execute the DMA once the Expert has determined its terms; and (4) damages.

On 12 November 2014, Chelsfield issued the application which came before me, seeking summary judgment on all but item (4) of those heads of relief.

Chelsfield relied on the witness statements of Daniel Joseph Levy, a partner in Mishcon de Reya, dated 12 November 2014, and Mr Burrow dated 18 February 2015. QDREIC and QDDC relied on two witness statements of Mr Al Sayed, dated 19 January 2015 and 11 March 2015, and a witness statement of Jassim bin Hamad N Al Thani dated 23 March 2015. As appears from these dates, some of this evidence was served in response to other evidence, and the witness statement of Mr Al Thani was served after the hearing began and, at least in signed form, only on the second day of the hearing.

The issues are:

If QDDC fails on the first issue, the second issue does not arise. If the case gets as far as the third issue, and Chelsfield fails on the third issue, the fourth issue does not arise.

As the above distillation suggests, Mr Choo-Choy’s submissions concentrated on whether his clients have a “real prospect of successfully defending the claim or issue” (CPR 24.2(a)(ii)) rather than on whether there is some “other compelling reason why the case or issue should be disposed of at a trial” (CPR 24.2(b)).

In particular, although disclosure and exchange of witness statements for trial have not yet taken place, Mr Choo-Choy did not submit that further evidence would or might emerge if these proceedings progress to trial which would be likely to have a material bearing on the merits of his clients’ case concerning the first issue. He said: “There is no suggestion that there is not enough factual matrix before the court [on that issue]”.

Mr Choo-Choy submitted, without demur from Mr McGhee, that, in the context of a summary judgment application by the claimant, “a real prospect of success” means a prospect which is more than fanciful or imaginary and which is better than merely arguable, but which does not need to equate to a probability of success at trial. To resist such an application successfully, the defendant only has to show that his defence carries some degree of conviction, even if it appears on the available evidence that the defence will probably fail at trial. The test is absence of reality in the defence, rather than probability of a successful defence at trial. Moreover, in this context, the Court deprecates the conduct of mini-trials on the facts. Mr Choo-Choy submitted that the relevant principles are adequately summarised at note 24.2.3 of Volume 1 of the White Book 2014, but in addition he referred to Three Rivers District Council v Bank of England (No. 3) [2001] 2 All ER 513 at [87]-[97] (Lord Hope) and [158]-[160] (Lord Hobhouse) and ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 at [2]-[10] (Potter LJ).

The judgment in Hughmans (A Firm) v Dunhill [2015] EWHC 716 (Ch) was handed down on 20 March 2015, between the first and second days of the hearing in the present case. In that case Arnold J said at [176] that the relevant principles are “conveniently summarised” (in the context of defendants’ applications) by Lewison J in Easyair Ltd v Opal Telecom Ltd[2009] EWHC 339 (Ch) at [15]:

“As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a ‘realistic’ as opposed to a ‘fanciful’ prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii)

A ‘realistic’ claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel[2003] EWCA Civ 472 at [8].

iii)

In reaching its conclusion the court must not conduct a ‘mini-trial’: Swain v Hillman.

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10].

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)[2001] EWCA Civ 550.

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd[2007] EWCA Civ 725.”

At [177], Arnold J stated: “This summary was cited with approval by Etherton LJ (as he then was, with whom Sullivan LJ and Wilson LJ, as he then was, agreed) in AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098, [2010] Lloyds Rep IR 301 at [24].”

Calland v Financial Conduct Authority [2015] EWCA Civ 192 is another recent decision, in which judgment was handed down on 13 March 2015 (the first day of the hearing before me). In that case, the Court of Appeal had occasion to emphasise some of the above principles. The defendant’s application for summary judgment failed before the Deputy District Judge, but succeeded on appeal before a Recorder. The Court of Appeal dismissed a second appeal by the claimant, observing that the only defect in the Recorder’s judgment related to the delay in delivering it. Lewison LJ (with whom Laws LJ and Bean LJ agreed) said at [28]-[29]:

“28.

… The fact that some factual or legal questions may be disputed does not absolve the judge from her duty to make an assessment of the claimant's prospects of success. As Lord Hobhouse put in Three Rivers District Council v Governor and Company of the Bank of England (No 3)[2003] 2 AC 1 at [158]:

“The important words are “no real prospect of succeeding”. It requires the judge to undertake an exercise of judgment. He must decide whether to exercise the power to decide the case without a trial and give a summary judgment. It is a “discretionary” power, i.e. one where the choice whether to exercise the power lies within the jurisdiction of the judge. Secondly, he must carry out the necessary exercise of assessing the prospects of success of the relevant party. If he concludes that there is “no real prospect”, he may decide the case accordingly. …Whilst it must be remembered that the wood is composed of trees some of which may need to be looked at individually, it is the assessment of the whole that is called for. A measure of analysis may be necessary but the “bottom line” is what ultimately matters.” (Emphasis added)

I was not referred to these cases by either side. However, I mentioned them at the hearing.

In any event, as they contain up to date statements of principle endorsed by the Court of Appeal, which, moreover, do not conflict with the broad and uncontentious propositions to which I was referred by Mr Choo-Choy, I consider that I must be guided by them.

Before discussing the issues it is convenient to set out those parts of the DFA which I have not already paraphrased above and which are of greatest relevance to the way the parties argued the case before me:

“1 DEFINITIONS AND INTERPRETATION

In this Agreement:

1.7

“Development” means the carrying out of any substantial works to the whole or any substantial part or parts of the Property for which Planning Permission for the whole or relevant part or parts of the Property is required and all related and ancillary works;

1.8

“Development Management Agreement” means the agreement for the provision of development management services in relation to the Property and the Development, which shall be agreed between QDDC and Chelsfield in accordance with clause 3;

1.9

“Development Management Fees” shall have the meaning set out in Schedule 2;

1.14

“Planning Incentive Fees” shall have the meaning set out in Schedule 2;

1.16

“Planning Period” means the period for working up designs, submitting applications and seeking to achieve Planning Permission for the Development, commencing on a date to be specified by QDDC (and notified to Chelsfield in writing) such date to fall between the date of this Agreement and the date one month following Completion and ending on the earlier of

1.16.1

the obtaining of Planning Permission; and

1.16.2

the date 5 years from the date of commencement of the Planning Period,

or such later date as may be agreed between the Parties;

1.17

“Planning Permission” means detailed planning permission in respect of the whole or any substantial part or parts of the Property granted pursuant to an application submitted by or on behalf of QDDC or the Guarantor or the Purchaser or their respective successors in title and assigns to the Contract or the Property and in relation to which the period for Judicial Review or any other Statutory Challenge has expired without such Judicial Review or Statutory Challenge being instigated or, if instigated, that the relevant court proceedings have been finally determined resulting in the validity of such planning permission being upheld (and references to the seeking and obtaining of Planning Permission shall be construed accordingly);

2

…

3

DEVELOPMENT MANAGEMENT

3.1

QDDC shall appoint Chelsfield (or a member of its Group approved by QDDC acting reasonably) as development manager pursuant to the Development Management Agreement to provide development management services in relation to the Development, in consideration for inter alia the Development Management Fees and the Planning Incentive Fees.

3.2

QDDC and Chelsfield shall acting reasonably and with all due expediency negotiate with one another in good faith to agree the form of the Development Management Agreement as soon as reasonably possible following the date of this Agreement, but for the avoidance of doubt both Parties confirm that the following terms are agreed:

3.2.1

The fees payable under the Development Management Agreement shall be the Development Management Fees and the Planning Incentive Fees; and

3.2.2

The term of the Development Management Agreement shall be for the entire duration of the Development, but with an option for QDDC to terminate the Development Management Agreement at the end of the Planning Period without, subject to clause 3.2.1, any further payment by QDDC.

3.3

In the event that the terms of the Development Management Agreement have not been agreed between QDDC and Chelsfield by the date 5 months following the date of this Agreement, either of them shall be entitled to refer the matter to the Expert for determination and the following provisions shall apply …

4

ADVANCE PLANNING PAYMENT

4.1

On Completion, QDDC shall pay to Chelsfield the Advance Planning Payment.

4.2

If at the time of Completion, Chelsfield is of materially weaker covenant strength than as at the date of this Agreement, Chelsfield shall, on reasonable prior request by QDDC, arrange for QDDC to be provided with reasonable security for the potential repayment of the Advance Planning Payment.

4.3

In the event that the Planning Incentive Fees are less than £10,000,000 (ten million pounds) in total, Chelsfield shall refund to QDDC the amount by which the Advance Planning Payment exceeds the total achieved Planning Incentive Fees on the date 10 Working Days following the Planning Incentive Fees Calculation Date.

4.4

QDDC and the Guarantor agree that they (and the Purchaser) will act in good faith in relation to the seeking of the Planning Permission in the Planning Period and the Planning Incentive Fees, and that they will not (and will procure that the Purchaser will not) take any deliberate steps the purpose of which is to avoid, delay or depress the triggering, calculation and payment, or amount of any Planning Incentive Fees (and will (and will procure that the Purchaser will) use all reasonable endeavours to procure that their (and the Purchaser’s) successors in title and assigns to the Contract or the Property do the same).

5

CONTRACT

5.1

The Guarantor (in consideration of Chelsfield entering into this agreement) shall in good faith use all reasonable endeavours to achieve or procure achievement of Completion of the Contract in accordance with the terms of the Contract, and in particular agrees as follows …

11

ASSIGNMENT

None of the Guarantor, QDDC or Chelsfield shall assign, sub-contract or sub-licence all or any part of any of its benefits, rights or obligations, interests or licences under this Agreement without the prior written consent of the other Parties.

13

DETERMINATION

13.1

QDDC may determine this Agreement by written notice to Chelsfield to that effect in the event that any of the following events occur in relation to Chelsfield which shall not have been set aside or rectified within 20 Working Days:

(a)

Chelsfield shall have an order made or resolution passed for its winding-up;

(b)

Chelsfield enters into voluntary winding-up other than for the purpose of re-organisation whilst solvent;

(c)

the appointment of a provisional liquidator to Chelsfield;

(d)

presentation of a petition in respect of Chelsfield (which is not contested within the 20 Working Day period referred to above following presentation) or a meeting is convened for the purpose of considering a resolution for winding up;

(e)

dissolution of Chelsfield (whether or not after winding up);

(f)

if a resolution is passed or any other step is taken by Chelsfield for the appointment of an administrator, or an administrator is appointed, or a petition or application for an administration order is presented in relation to Chelsfield;

(g)

if a receiver (which expression shall without prejudice to the generality thereof include an administrative receiver) is appointed over all or any of the assets or of the income arising from all or any of the assets of Chelsfield;

(h)

Chelsfield is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986; or

(i)

if any meeting of Chelsfield is convened pursuant to section 123 of the Insolvency Act 1986 to consider a proposal for a voluntary arrangement under Part I of such Act,

and in such event (subject to clause 13.2) this Agreement shall immediately cease and determine.

13.2

The determination of this Agreement shall be without prejudice to any other rights or remedies of either Party against the other for the breach non-observance or non-performance of any of their obligations under this Agreement.

15.

ENTIRE AGREEMENT AND SEVERANCE

15.1

The Guarantor, QDDC and Chelsfield confirm that this Agreement represents the entire understanding, and constitutes the whole agreement, between them with respect thereto and, without prejudice to the generality of the foregoing, excludes any warranty, condition or other undertaking implied at law or by custom.

16.

RELATIONSHIP OF PARTIES

Nothing in this Agreement and no act or conduct by the Guarantor, QDDC and Chelsfield pursuant to this Agreement or otherwise in accordance with the Arrangement shall constitute or be deemed to constitute a partnership or joint venture between the Parties or shall give any Party the power to bind the other Parties.

Parties’ submissions

Mr McGhee made the following principal submissions with regard to the term pleaded in paragraph 10 of the Defence and Counterclaim (“the implied term”):

Mr Choo-Choy submitted, in summary:

Before developing these submissions, Mr Choo-Choy made a number of submissions concerning the provisions of the DFA and the inter-action of those provisions with the intended terms of the DMA:

In support of the submissions summarised in paragraph 44(1)-(2) above, Mr Choo-Choy began with the proposition that the process of contractual implication is merely one aspect of the process of construction of the relevant contract as a whole: Attorney-General of Belize v Belize Telecom [2009] 1 WLR 1988, especially at [16]-[27]. At [26], Lord Hoffmann referred to the conditions which have to be satisfied before a term is to be implied, as set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (Lord Simon of Glaisdale at 282-283): “(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’ (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” At [27] Lord Hoffmann said:

“The Board considers that this list is best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so. The Board has already discussed the significance of “necessary to give business efficacy” and “goes without saying”. As for the other formulations, the fact that the proposed implied term would be inequitable or unreasonable, or contradict what the parties have expressly said, or is incapable of clear expression, are all good reasons for saying that a reasonable man would not have understood that to be what the instrument meant.”

In Mediterranean Salvage & Towage Limited v Seamar Trading & Commerce Inc (“The Reborn”) [2009] 2 Lloyd’s Law Rep 639, Lord Clarke MR referred with approval to this approach at [8]-[14]. Lord Clarke MR observed at [10] that, at [17] of his judgment, “Lord Hoffmann made the important point that the question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed.” Having quoted much of [21]-[27] of Lord Hoffmann’s judgment, Lord Clarke MR said at [15] that Lord Hoffmann “is not in any way resiling from the often stated proposition that it must be necessary to imply the proposed term. It is never sufficient that it should be reasonable”. Lord Clarke MR then considered (among other authorities) the decision of the House of Lords in Liverpool City Council v Irwin [1977] AC 239 and the decision of the Court of Appeal in Philips Electronique Grand Public SA v British Sky Broadcasting Limited [1995] EMLR 472, before concluding at [18]: “The significance of both [these cases] is that they both stress the importance of the test of necessity. Is the proposed implied term necessary to make the contract work?”

Mr Choo-Choy suggested that the objective intention of the parties in the present case could be tested by asking whether, in circumstances where a breakdown of trust and confidence between the parties produced the result that Chelsfield no longer felt able to co-operate and work closely with QDDC: (a) Could it be that Chelsfield would still then be compelled to continue to work with QDDC pursuant to the DFA and/or DMA? (b) Would Chelsfield then not be able to terminate its appointment at all until the expiry of the term of the DMA as described in Clause 3.2.2?

Mr Choo-Choy argued that, in that situation: “It would be wholly unrealistic, if not absurd, to suppose that the parties’ intention would have been that Chelsfield would remain obliged to continue working for QDDC even when the relationship of trust and confidence between them had broken down. The parties’ presumed intention must have been that, if the relationship broke down, either party should be able to walk away from the relationship without thereby being in breach of contract”.

In offering up this answer, Mr Choo-Choy accepted that there would have to be a genuine breakdown in the relationship of trust and confidence, and “A mere assertion by Chelsfield that such breakdown had occurred could not be presumed to accord with the parties’ objective intention”. He submitted, however, that if there was proof of a genuine breakdown in the relationship, it is hard to suppose that the parties would still have intended that Chelsfield should be obliged to continue working with QDDC until the expiry of the full term of the DFA/DMA.

With regard to the duration of the DFA, Mr Choo-Choy acknowledged that there is no express term governing the duration of the DFA: Clause 13 deals with the circumstances in which it might be terminated early but does not otherwise indicate how long the DFA would last. He submitted, however, that, given the subject-matter of the DFA and in particular its provisions for the appointment of the development manager and the Advance Planning Payment (which was made on account of Planning Incentive Fees payable under the DMA) (a) “it is reasonably clear that the DFA was impliedly intended to last at least until the expiry of the DMA” and (b) accordingly, the duration of the DFA is “inextricably bound up with the duration of the DMA as provided for in Clause 3.2.2.”

Building on the above foundation, Mr Choo-Choy further submitted as follows:

In support of his arguments, Mr Choo-Choy relied on the following authorities: Malik v Bank of Credit and Commerce International SA [1998] AC 20; Brogden v Investec Bank Plc [2014] EWHC 2785 (Comm) at [92]-[93]; J H Milner & Son v Percy Bilton Ltd [1966] 1 WLR 1582; and on Cordery on Solicitors at page E/402, paragraph [653].

Discussion

In my judgment, these authorities do not support Mr Choo-Choy’s arguments.

Malik v Bank of Credit and Commerce International SA [1998] AC 20 concerned the extent to which former employees of a dishonest or corrupt bank could prove in the liquidation of the bank for compensation for financial losses sustained by them allegedly due to the stigma attaching to them by reason of having been employed by such an employer. The House of Lords held that the claimants had an arguable cause of action.

The leading speeches were given by Lord Nicholls and Lord Steyn. Lord Goff and Lord Mackay agreed with both of those speeches. Lord Mustill agreed with that of Lord Steyn.

It was common ground between the parties in that case that the material contracts of employment each contained an implied term to the effect that the bank would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between employer and employee (see Lord Nicholls at pages 33-34). Lord Nicholls referred to this (at page 35) as part of “the portmanteau, general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages”. The material part of the argument before the House of Lords revolved around three suggested limitations to this implied obligation (summarised by Lord Steyn at page 46 as: (1) that the conduct complained of must be conduct involving the treatment of the employee in question; (2) that the employee must be aware of such conduct while he is an employee; (3) that such conduct must be calculated to destroy or seriously damage the trust between the employer and employee).

Lord Nicholls made clear (also at page 35) that the question of whether conduct constitutes a breach of this implied obligation is to be judged objectively: “The conduct must, of course, impinge on the relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer. That requires one to look at all the circumstances … A breach occurs when the proscribed conduct takes place: here, operating a dishonest and corrupt business. Proof of a subjective loss of confidence in the employer is not an essential element of the breach ..”

Lord Steyn’s speech was to the same effect. He rejected the first two limitations to the implied obligation of trust and confidence that were suggested by the bank, and said that the third suggested limitation was already part and parcel of that implied obligation. In the course of doing this, Lord Steyn (at page 47) approved the following formulation by Mr Douglas Brodie of Edinburgh University “In assessing whether there has been a breach, it seems clear that what is significant is the impact of the employer’s behaviour on the employee rather than what the employer intended. Moreover, the impact will be assessed objectively”. Lord Steyn said that “Both limbs of Mr. Brodie’s observations seem to me to reflect classic contract law principles and I would gratefully adopt his statement”.

Lord Steyn had earlier discussed the implied term of mutual trust and confidence, stating as follows (at pages 45-46):

“The applicants do not rely on a term implied in fact. They do not therefore rely on an individualised term to be implied from the particular provisions of their employment contracts considered against their specific contextual setting. Instead they rely on a standardised term implied by law, that is, on a term which is said to be an incident of all contracts of employment: Scally v Southern Health and Social Services Board [1992] 1 AC 294, 307B. Such implied terms operate as default rules. The parties are free to exclude or modify them …

… The evolution of the term is a comparatively recent development. The obligation probably has its origin in the general duty of co-operation between contracting parties: Hepple & O'Higgins, Employment Law, 4th ed. (1981), pp. 134-135, paras. 291-292. The reason for this development is part of the history of the development of employment law in this century. The notion of a ‘master and servant’ relationship became obsolete. Lord Slynn of Hadley recently noted ‘the changes which have taken place in the employer-employee relationship, with far greater duties imposed on the employer than in the past, whether by statute or by judicial decision, to care for the physical, financial and even psychological welfare of the employee’: Spring v Guardian Assurance Plc [1995] 2 AC 296, 335B. A striking illustration of this change is Scally’s case [1992] 1 AC 294 , to which I have already referred, where the House of Lords implied a term that all employees in a certain category had to be notified by an employer of their entitlement to certain benefits. It was the change in legal culture which made possible the evolution of the implied term of trust and confidence.

There was some debate at the hearing about the possible interaction of the implied obligation of confidence and trust with other more specific terms implied by law. It is true that the implied term adds little to the employee’s implied obligations to serve his employer loyally and not to act contrary to his employer's interests. The major importance of the implied duty of trust and confidence lies in its impact on the obligations of the employer: Douglas Brodie, ‘Recent cases, Commentary, The Heart of the Matter: Mutual Trust and Confidence’ (1996) 25 ILJ 121. And the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be struck between an employer’s interest in managing his business as he sees fit and the employee’s interest in not being unfairly and improperly exploited.”

Accordingly, Malik v Bank of Credit and Commerce International SA [1998] AC 20 is authority for the proposition that there may be implied by law as an incident of all contracts of a certain description (in that case, contracts of employment) mutual obligations that each party will not conduct itself in such a way as, assessed objectively, is likely to destroy or seriously damage the trust and confidence that is required if their relationship is to continue in the manner that the contract implicitly envisages.

In my judgment, that is a far cry from the implied term for which Mr Choo-Choy contends in the present case, which (a) does not relate to a class of contract in respect of which any such implication has previously been recognised in any decided case to which I have been referred, (b) does not depend upon one party conducting itself in breach of an implied promissory obligation, and (c) would give rise to a right to terminate the contract not on the basis of any objective criteria but instead on the subjective basis that the other party genuinely considers that trust and confidence has broken down. In this regard, in argument Mr Choo-Choy made clear that the test for which he contended was that loss of trust and confidence had to be genuine or honest, but did not have to be reasonable.

It is, perhaps, unsurprising that Mr Choo-Choy put the test as he did. The letter of 23 September 2014, by which Mr Al Thani gave notice that QDREIC and QDDC intended to treat the DFA at an end together with their relationship with Chelsfield pursuant to the terms of the DFA, and that they would not enter into the DMA, stated that they had lost all trust and confidence in Chelsfield’s “ability to deliver what is contemplated of [Chelsfield] under the DFA and the DMA” on the following grounds: (1) “[We] have become increasingly concerned about your capability to deliver the development management services on the terms contemplated by the DFA or at all”, (2) “Our attempts to agree the terms of the DMA with you have been frustrated such that we had to refer the determination of the terms to an independent expert”, and (3) “Your financial position is poor and you also have not been able to satisfy us that your organisation currently has the capability to manage the development of this world renowned listed building”.

Applying an objective as opposed to a subjective test to these grounds, they seem to me to provide a most unpromising basis for asserting that there has been such a breakdown of trust and confidence as would justify QDREIC and QDDC treating the relationship between the parties or the DFA as being at an end, or refusing to enter into the DMA.

Ground (2) is covered by the express terms of the DFA. Pursuant to Clause 3.2, both QDDC and Chelsfield are obliged to negotiate reasonably, with all due expediency and in good faith; and, in the event that such negotiations do not enable them to agree all the outstanding terms of the DMA within 5 months, each of them is entitled to refer the matter to the Expert for him to determine. It is difficult to see how a failure on the part of Chelsfield to agree terms, which is not said to be unreasonable, tardy, or lacking good faith, and which results in the agreed contractual mechanism for resolving the matter having to be invoked, could reasonably be regarded as giving rise to such a breakdown.

The like considerations apply to the first part of Ground (3). The financial position of Chelsfield is expressly addressed in the DFA. If Chelsfield’s covenant strength deteriorates materially, it is obliged to provide QDDC with reasonable security for the potential repayment of the Advance Planning Payment (Clause 4.2); and QDDC is entitled to terminate the DFA on the basis of various insolvency events concerning Chelsfield (Clause 13). Also, requirements concerning Chelsfield’s ongoing financial strength are, on the face of it, among the matters that the parties could seek to address in the terms of the DMA, and, in default of agreement, put to the Expert for him to determine (Clause 3.3). Where the parties have delineated these protections, and no breach of any term of the DFA is alleged, it is difficult to see how Chelsfield’s allegedly poor financial position could reasonably be regarded as giving rise to such a breakdown.

It is unclear whether the second part of Ground (3) adds anything to Ground (1), or (at least from the letter) what the grounds of concern as to Chelsfield’s capabilities may be. On the face of it, however, and viewed objectively, any such concerns could be met by the terms of the DMA, either as resolved by agreement between QDDC and Chelsfield, or, failing such agreement, as determined by the Expert. Having agreed to a mechanism by which any protections that Chelsfield was unwilling to agree should be determined by the Expert, it seems to me that it is difficult for QDDC (or QDREIC as Guarantor) to be heard to say that there is an entitlement to terminate the relationship because, in spite of all the protections that are agreed or determined by the Expert, there has been a breakdown of trust and confidence. I consider the points made by Mr Choo-Choy as to the provisions of the proposed DMA that had already been agreed between QDDC and Chelsfield (as instanced by the draft produced on Chelsfield’s behalf on 27 February 2014) merely serve to underline that conclusion: they demonstrate the large potential for conferring protections on QDDC vis-à-vis Chelsfield’s capabilities in the terms of the DMA, such that (a) objectively, trust and confidence should not be lacking; and (b) all reasonable grounds on which they might break down can be catered for by those terms.

Returning to the authorities, Brogden v Investec Bank Plc [2014] EWHC 2785 (Comm) was an employment case concerning bonus payments. At [92], Leggatt J referred to Malik v Bank of Credit and Commerce International SA [1998] AC 20 as authority for “the overarching obligation implied by law as an incident of the employment contract that an employer will not without reasonable and proper cause conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”. At [93], Leggatt J said “The obligation of trust and confidence has been described as “undoubtedly the most powerful engine of movement in the modern law of employment contracts”: Freedland, The Personal Employment Contract (OUP, 2003), p.166”. In my view, those passages do no more than emphasise the importance of the obligation of trust and confidence in employment contracts.

In J H Milner & Son v Percy Bilton Ltd [1966] 1 WLR 1582 the claimants were solicitors who alleged that the defendants in failing to employ them were in breach of contract and claimed damages. The defendants denied liability on two grounds: (a) that there was no agreement with the solicitors, and (b) if there was any agreement it was an implied term of the same that it could be determined by notice, and that it had been so determined. Fenton Atkinson J ruled in favour of the defendants on both grounds. On the second ground, he held: if there was any agreement of retainer at all, it was not an entire contract; the defendants were entitled to terminate on reasonable notice; and they had done so.

Mr Choo-Choy submitted that the underlying rationale of this decision (on the second ground) is that the defendants were at liberty no longer to carry on the contract because a client’s retainer of a solicitor is an example of a case where, upon the breakdown in the fundamental relationship of trust and confidence between the solicitor and client, either party must have been intended to have a right to bring the relationship to an end on notice without thereby being in breach of contract.

Mr McGhee countered that the case provides no support for the proposition that a contract may be conditional on the continuation of a relationship of trust and confidence between the parties, and indeed the judgment makes no reference to trust and confidence at all.

Mr Choo-Choy’s riposte was to say that Fenton Atkinson J referred (at p1587) to the relevant learning in Cordery on Solicitors and the distinction between an entire contract and a non-entire contract. This prompted Mr Choo-Choy to rely, as further support for the proposition set out in paragraph 70 above, on the following statement concerning “Termination of an entire contract” in Cordery on Solicitors at page E/402 paragraph [653]:

“A solicitor must not terminate his retainer with his client, except for good cause and on reasonable notice. Wrongful termination by the solicitor is a breach of contract. Examples of good reason for termination include …

(d)

where there is a serious breakdown in confidence between the solicitor and the client, for example, where the solicitor having properly and correctly advised the client, the clients refuses to follow that advice…”

I consider that Mr McGhee’s submissions concerning this case are correct.

As to the above statement in Cordery on Solicitors, this concerns (a) the relationship between a solicitor and a client, and (b) circumstances in which a breakdown in confidence has in fact occurred due to the conduct of one party (the client) which is unreasonable (in refusing to follow proper and correct advice) and, moreover, which goes to the very heart of the contract of retainer. In my judgment, that statement is of no assistance to QDREIC and QDDC in the present case, in which the relationship between the parties is not one of solicitor and client (or, in my view, analogous to it) and where the implied term for which they contend (i) does not depend upon one party conducting itself in a manner which is unreasonable, let alone inimical to the whole purpose of the DFA, and (ii) would, if correct, give rise to a right to terminate based on subjective criteria.

The dearth of authority in support of Mr Choo-Choy’s arguments casts serious doubt upon the suggestion that it is realistic to contend that the implied term applies to the DMA. In my judgment, however, the position with regard to the DFA is clearer still. In substance, the purpose of the DFA is (a) to record the revised contractual arrangements between the parties (including the obligation on QDDC to appoint Chelsfield or a member of the Chelsfield group to provide development management services pursuant to Clause 3.1), (b) to set out the sums which Chelsfield has been paid and is to be paid, and the basis on which such payments are to be made (including, if appropriate, the provision of security by Chelsfield), (c) to record the terms of the DMA which the parties have agreed, and (d) to provide a mechanism for determining any terms of the DMA which the parties are unable to agree. I consider that there is no basis for asserting that performance of these (or any other) obligations in the DFA should be subject to the implied term.

Many of Mr Choo-Choy’s arguments about the implied term related to the DMA. However, he argued that it would be artificial to distinguish between the DFA and the DMA: the two agreements are extensions of one another, and vital terms of the DFA continue to regulate the relationship of the parties under the DMA. He submitted that if there is an argument that has a real prospect of success that the DMA could be terminated in reliance on the implied term the same applied to the DFA: if it is permissible to walk away from the relationship under the DMA, it is permissible to do so under the DFA.

I do not consider that it is right to regard the DFA as an extension of the DMA, or as having no life that is separate from the DMA (which is another way that Mr Choo-Choy expressed the position), whether on the basis that the DFA records that certain terms of the DMA have already been agreed in the DFA or on any other basis. The DFA is not so much an extension of the DMA as a precursor to the DMA. Further, the DFA does not only operate as a precursor to the DMA but also sets out QDDC’s payment obligations to Chelsfield in respect of matters other than performance of the DMA.

Moreover, there are at least the following differences between the DFA and the DMA: (a) under the DFA, the parties have, at least potentially, different and opposing interests so far as concerns the negotiation of the terms of the DMA, whereas once the DMA is signed it is to be expected that they are, broadly speaking, engaged in a collaboration in which Chelsfield may be expected to act in the best interests of QDDC; (b) the nature of the parties’ obligations under the DFA differ markedly from what may be expected to be their obligations under the DMA; (c) to the extent that parts of the DFA (such as Clause 4.3) continue in force after the DMA is made, those provisions do not involve the working relationship between the parties, which will instead be governed by the DMA; (d) those provisions aside, the DFA is likely to be of much shorter duration than the DMA (although this point should not be exaggerated, because, in accordance with Clause 3.2.2 of the DFA, QDDC has an option to terminate the DMA at the end of the Planning Period); and (e) the DFA contains a number of express obligations of good faith and the like which seem to me to cover much of the ground that would be covered by the implied term suggested by QDREIC and QDDC and to undermine the case for implication on the basis of spelling out what the DFA actually means (and, in particular, on the basis that the implied term is necessary to make the DFA work), and unless and until the terms of the DMA have been finalised it is not possible to say that this also applies to the DMA.

Accordingly, I consider that the distinction between the DFA and the DMA is real and not artificial. Furthermore, I am not persuaded that even if QDREIC and QDDC have a real prospect of succeeding on the argument that the implied term applies to the DMA (which is a point that I do not have to decide) that the same applies to the DFA.

I am in any event very sceptical about the suggested implication. It seems to me that arguments to like effect as many of the submissions made by Mr Choo-Choy could be made with regard to the implication of a duty of good faith. However, although a duty of good faith is implied by law as an incident of certain categories of contract (including contracts of employment), the general rule in commercial contracts is that “If the parties wish to impose such a duty they must do so expressly” (see Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (t/a Medirest) [2013] EWCA Civ 200, Jackson LJ at [105]). I consider that the case is stronger still for saying that if the parties wish to produce the result that each of them has the right to terminate the contract in the event that it loses trust and confidence in the other, even when the other party is not in breach of contract and if that may be unreasonable, then they should do expressly.

Although I attach less weight to them than to the points discussed above, I also consider that Mr McGhee’s arguments about Clauses 13 and 15 of the DFA are more convincing than Mr Choo-Choy’s arguments about the express provisions of the DFA.

For all these reasons, in my judgment QDDC has no real prospect of establishing that the DFA is subject to the implied term, and, on the facts, it follows that Chelsfield is entitled to a declaration that the CFA remains in existence and has not been determined.

In light of my ruling on the first issue, this issue does not arise. However, in deference to the arguments which were addressed to me, I will deal with it as briefly as I can.

Mr McGhee submitted that even if the DFA or the DMA was subject to the implied term, QDDC has no real prospect of succeeding on the contention that the relationship of trust and confidence between it and Chelsfield had broken down. In particular, contemporary correspondence and events are entirely inconsistent with any such conclusion:

Mr Choo-Choy submitted that (a) (assuming that QDDC has at least a real prospect of establishing that the implied term exists) whether the implied term is engaged on the facts of this case is a deeply fact sensitive question which is not suitable for summary determination without a trial, and (b) “there is an abundance of evidence” that the relationship of trust and confidence has in fact broken down between the parties. He argued that the true picture, borne out by the contemporary documents, is as follows:

I consider that there is force in the points made by Mr McGhee about the inconsistency between the contemporary documents and events and the alleged breakdown of trust and confidence. I also consider that a number of the points made by Mr Choo-Choy do not really go to a breakdown of trust and confidence (or, if they do, they simply serve to illustrate how subjective that concept is as interpreted by his clients, who appear to me to be complaining about Chelsfield exercising rights that it had under the DFA or at common law); and others are based on only part of the story (for example, Chelsfield contends that the delay between 27 September 2013 and 27 February 2014 is explicable, at least in part, because without prejudice negotiations were being conducted during that time). The allegation of a breakdown seems to me to have emerged from the shadows late in the day, and so, in the language of days gone by, to suggest a defence that is shadowy.

In my judgment, however, there is no real answer to Mr Choo-Choy’s central point that his clients’ case is supported by witness statements which are verified by statements of truth. If that evidence is true, his clients would succeed at trial on the second issue. Unless it can be said to be of no real substance, they have a real prospect of success on that issue.

Mr McGhee is right that the court does not have to take that evidence at face value without analysis, particularly if it is contradicted by contemporary documents. However, I consider that it would involve conducting a mini-trial to bottom out all the points made by both sides on the documents. I also consider that even if I could be satisfied on a paper trial that all Mr McGhee’s points on the documents are right, it would not properly be open to me to reject that witness evidence as, in effect, comprising deliberate untruths.

The factual assertions here relate to states of mind. In my view, those are matters for trial.

For these reasons, if I had been in favour of QDREIC and QDDC on the first issue, I would have declined to grant summary judgment to Chelsfield on the second issue.

Parties’ submissions

Mr McGhee’s starting point was attractively simple. He submitted that if the court makes the declaration sought by Chelsfield under the first issue, then the court should also make an order requiring QDDC to instruct the Expert to complete his determination of the terms of the DFA. In particular, he submitted that:

Mr McGhee’s submissions then moved on to addressing QDDC’s arguments to the effect that the Expert ought not to be encouraged to complete his determination since the court should not and would not order QDDC to enter into the DMA once its terms have been so determined. Mr McGhee’s central contention was that QDDC has no real prospect of success in defending either (a) Chelsfield’s claim for an order requiring QDDC to instruct the Expert to complete his determination of the terms of the DMA or (b) Chelsfield’s claim for an order requiring QDDC to enter into the DMA once its terms have been determined. His arguments contained the following steps:

In response to other points made on behalf of QDDC, Mr McGhee submitted:

Mr Choo-Choy submitted that even if, contrary to its primary case, QDDC has no real prospect of justifying its purported termination of the DFA (and its consequent refusal to enter into or perform the DMA), the court should in any event refuse at this stage to make the requested orders for specific performance for the following principal reasons.

As regards completion of the expert determination process:

With regard to compelling QDDC to sign the DMA once its terms have been determined by the Expert, Mr Choo-Choy submitted that the court should refuse to make such an order because:

Mr Choo-Choy developed his submissions as to why, as a matter of discretion, the court should refuse to secure completion of the expert determination process, at least at the stage of the present application for summary judgment, as follows:

Mr Choo-Choy referred to British Shipbuilders v VSEL Consortium Plc [1997] 1 Lloyd’s Rep. 106, at 109. In that case, Lightman J summarised the legal principles governing the status of decisions of an expert in 5 numbered propositions, stating under item 5:

“[the] Court has jurisdiction ahead of a determination by the expert to determine a question as to the limits of his remit or the condition which the expert must comply with in making his determination, but (as a rule of procedural convenience) will (save in exceptional circumstances) decline to do so. This is because the question is ordinarily merely hypothetical, only proving live if, after seeing the decision of the expert, one party considers that the expert got it wrong. To apply to the Court in anticipation of his decision (and before it is clear that he has got it wrong) is likely to prove wasteful of time and costs – the saving of which may be presumed to have been the, or at least one of the, objectives of the parties in agreeing to the determination by the expert.”

Finally, Mr Choo-Choy submitted that:

Discussion

That the question of the scope of the Expert’s remit was not raised by QDREIC and QDDC until a very late stage is borne out by the fact that it was the subject of an application before me for permission to amend the Defence and Counterclaim, which was not opposed by Chelsfield subject to the usual terms as to costs. The amendment takes the form of adding (among others) paragraphs in the following terms:

“13.2A Yet further or alternatively, there should be no expert determination of the terms of the DMA unless and until the full extent of the terms of the DMA already agreed, either expressly or impliedly pursuant to the terms of the DFA (including Recital D and clauses 1.7, 1.8, 1.9, 1.14, 3.1, 3.2, and Schedule 2 thereof), has been established herein, in particular with regard to:

13.2A.1. whether as contended by QDDC the only fees that should be payable under the DMA are the Development Management Fees and the Planning Incentive Fees as defined in clauses 1.9 and 1.14 and Schedule 2 of the DFA, or whether as contended by Chelsfield it should be entitled to be paid additional fees in respect of the post-Planning Period;

13.2A.2. whether having regard to the provisions of clause 3.2.2 of the DFA the term of the DMA should end on the date of the Final Certificate (as QDDC contends) or the date of the Certificate of Practical Completion (as Chelsfield contends) relating to the construction and related and ancillary works to the Property; and

13.2A.3. whether, having regard to the terms of the DFA (including but not limited to clauses 3.1 and 3.2.2 thereof), the scope of development management services under the DMA should extend to the entire duration of the Development (i.e. including the construction stage) and comprise development management services in respect of the carrying out of the construction and related ancillary works to the Property (as contended by QDDC), or whether the development management services to be provided by Chelsfield should be limited to services related to planning only (as contended by Chelsfield).

For the avoidance of doubt, the Defendants’ case is that the above issues are the subject of existing agreement between the parties pursuant to the terms of the DFA (properly construed) and are therefore outside Mr Bingham’s remit as expert under clause 3.3 of the DFA …

17.

In light of the matters set out in paragraph 13.2A above, the Defendants hereby counterclaim for declarations that:

17.1.

on the proper construction of the terms of the DFA (including Recital D and clauses 1.7, 1.8, 1.9, 1.14, 3.1, 3.2, and Schedule 2 thereof), the following terms of the DMA have already been agreed pursuant to the terms of the DMA, namely:

17.1.1.

that the only fees that should be payable to Chelsfield under the DMA in consideration of Chelsfield’s provision of development management services are the Development Management Fees and the Planning Incentive Fees as defined in clauses 1.9 and 1.14 and Schedule 2 of the DFA;

17.1.2.

that the duration of the DMA should be until the date of issue of the Final Certificate relating to the construction and related and ancillary works to the Property; and

17.1.3.

that the scope of development management services to be provided by Chelsfield under the DMA should extend to the entire duration of the Development (i.e. including the construction stage), and should therefore comprise development management services in respect of the carrying out of the construction and related ancillary works to the Property and not be limited to services related to planning only;

17.2.

on the proper construction of clause 3.3 of the DFA:

17.2.1.

the jurisdiction or remit of any expert appointed thereunder to determine the terms of the DMA does not extend to determination of the matters set out in paragraph 17.1 above; and

17.2.2.

any purported determination by any such expert of any of the said matters would be neither conclusive between nor binding on either of Chelsfield or the Defendants under clause 3.3.8 of the DFA.”

However, the fact that these contentions have made a late arrival on the scene does not mean that they have no real prospect of success. On the contrary, for the purposes of the present application, Mr McGhee accepted that they are arguable; and that is consistent with Chelsfield not opposing the application for permission to amend the Defence and Counterclaim (instead of resisting that application on the grounds that the amendments seek to introduce a pleaded case that has no realistic prospect of success at trial).

Once that point is reached, I do not consider that it is a satisfactory answer to Mr Choo-Choy’s submissions that it would be wrong for the court to order QDDC to instruct the Expert to complete a determination of the terms of the DMA which includes three important issues which are at least arguably outside the remit which QDDC agreed that he should have for Chelsfield to say (a) that these are only 3 out of 34 issues which (at least hitherto) the parties have agreed to ask the Expert to determine or (b) that asking the Expert to determine these issues may not matter to QDDC, either because the Expert agrees with QDDC about them, or because, as it transpires, his determination is not material to the net profits that Chelsfield would earn if the DMA was entered into.

If, on the true construction of the DFA (which I am not asked to determine on this summary judgment application), and as is accepted for present purposes to be at least realistically arguable, the parties have expressly agreed that certain matters should not be referred to the Expert, I consider that it would be surprising for it to be a proper exercise of the court’s discretion to make a mandatory order at the behest of one party which requires the other party to instruct the Expert to determine those very matters. I was not referred to any authority which supports such a result. That conclusion is not affected by the consideration that, until they fell out, both parties may have been proceeding on the basis that their agreement did not exclude these matters from being referred to the Expert for determination. What counts is whether the point is sound, and not when it emerges.

Conversely, if there is a genuine dispute about the limits of the remit of an expert, and he is in a position to proceed and wants to proceed with his determination, it may be that the court would, or should, be slow to restrain him from continuing with his determination, for the reasons given by Lightman J in his fifth principle discussed above. However, that is not the present case. To my mind, it is very different from this case.

In my judgment, that is sufficient to determine the third issue against Chelsfield.

In addition, however, I consider that Mr Choo-Choy was right to question the utility of making the order sought by Chelsfield in the present case. I am in no position to decide – and I do not believe that Mr McGhee suggested that I could or should decide – that the Expert’s determination of other issues would not, or might not, be affected by his determination of one or more of the above important issues which may, on the proper construction of the DFA, fall outside the ambit of his remit. In those circumstances, it seems to me that making an order that has the effect of getting the Expert to proceed with his determination (a) is not likely to assist the court with resolving the terms of the DMA that the parties would have entered into if the DFA had continued to be performed, and (b) on the contrary, is likely to be a recipe for disaster, and to provide fertile ground for further issues between these parties, which are already plentiful enough. I am also unpersuaded that this would assist with the quantification of Chelsfield’s damages or save costs in the long run: on these points, I prefer the arguments of Mr Choo-Choy.

In these circumstances, the remainder of the points made by Mr McGhee do not, in my judgment, assist Chelsfield. Further, I do not need to resolve the argument about whether it was an implied term of the DFA that the parties should not be required to complete the expert determination process in circumstances where, whatever its final terms, the DMA was not going to be performed by both parties and could not be specifically enforced.

For these reasons, Chelsfield is not entitled to summary judgment for an order requiring QDDC to instruct the Expert to complete his determination of the DMA.

In light of my ruling on the third issue, the fourth issue does not arise. However, for the like reasons as apply in respect of the second issue, I will deal with it as briefly as I can.

As Mr McGhee’s submissions on the third issue overlapped with his submissions under this head, I have already summarised some of the latter submissions above. Mr McGhee further submitted with regard to the fourth issue:

Mr Choo-Choy submitted (a) that QDDC has a real prospect of successfully resisting an order that it sign the DMA at trial, further or alternatively (b) that pending the respective determinations of the court and Expert as described in his submissions summarised below, there is in any event a compelling reason for disposing of the claim for the requested order at trial, or, at least, for disposing of it only after the Expert’s determination of the terms of the DMA and subject to any challenge that may be made to that determination by reference to the true scope of the Expert’s remit under Clause 3.3.

Mr Choo-Choy accepted that it impliedly follows from QDDC’s obligation under Clause 3.1 of the DFA to appoint Chelsfield as development manager pursuant to the DMA that QDDC is under an implied obligation to sign the DMA once the disputed terms have been determined by the Expert. Nevertheless, even if the court was to hold summarily (a) that the DFA remains in existence and (b) that QDDC is now obliged to instruct the Expert to complete his determination of the terms of the DMA under Clause 3.3 of the DFA, it does not follow that the Court should also order QDDC to sign the DMA forthwith once its terms have been determined by the Expert, effectively by way of specific performance of that implied obligation.

Mr Choo-Choy submitted:

Mr Choo-Choy accepted that in C H Giles & Co Ltd v Morris [1972] 1 WLR 307, especially at 316B-319B, Megarry J held that there is a distinction between an order to perform a contract for services and an order to procure the signature of such a contract, and that the mere fact that the contract to be made was one of which the court would not decree specific performance was not a ground for refusing to decree that the contract be entered into. He submitted, however, that this case was very much a decision on its own particular facts:

In light of Mr Choo-Choy’s submissions and the evidence to which I have referred above, I regret that I am unable to accept any of Mr McGhee’s submissions.

On the material at present available, I consider that there is no real prospect that, if QDDC was ordered to enter into the DMA, it would decide voluntarily to perform its obligations under the DMA. Nor am I persuaded that there is any real prospect that the court would order specific performance of those obligations. The fact that the terms of the DMA have not been finalised do not prevent me from accepting the force of Mr Choo-Choy’s submissions that (a) damages for non-signature, and hence non-performance, of the DMA would be an adequate remedy; (b) even if the DMA was signed, Chelsfield would not be entitled to an order for specific performance of the DMA; and (c) no other useful or justifiable purpose would be served by making the order sought by Chelsfield that QDDC should sign the DMA. The lapse of time since QDDC’s purported termination of the DFA and the fact that QDDC has pressed ahead with plans to engage others in place of Chelsfield by themselves militate against any such order being made.

So far as concerns the adequacy of damages, I am unable to accept that Chelsfield would gain anything of unique or special value by reason of such an order. Requiring QDDC to sign the DMA (when finalised) would not prolong Chelsfield’s involvement in the development, and it is that involvement which might legitimately reflect well on Chelsfield’s reputation. In the real world, the existence of a signed contract which is not going to be performed would have no beneficial impact on that reputation. Further, any public claim by Chelsfield that it still had a connection to the development by reason of a signed contract alone would be potentially misleading and, more likely than not, would lead to a public relations war which would be destructive and of no lasting benefit to anyone.

I accept that, in one sense, it is premature to consider whether the court would order specific performance of the DMA, not least because Chelsfield might decide to seek damages under it rather than an order for specific performance. However, I am not persuaded that getting QDDC to sign the DMA will help Chelsfield on the damages front either: this is where all the arguments about the Expert’s remit, and whether, if he is asked to determine a DMA beyond his remit the terms of it will be tainted, come in again.

Nor am I attracted to the notion that issues about the proper extent of the Expert’s remit should be dealt with not by refusing an order for specific performance but by giving QDDC liberty to apply if the Expert decides any of the issues in question against QDDC and it then seeks to contend that in doing so he decided that issue contrary to the terms of the DFA and in a manner which exceeded his remit. I have some sympathy with Chelsfield in respect of the way in which the defence to its claims has unfolded. However, this is an application for summary judgment. The summary judgment jurisdiction is designed to enable issues to be determined summarily in appropriate cases; it should not be converted into a regime of making orders subject to liberty to apply, which is likely to complicate matters, run up costs, and take up the time of the parties and the court.

I also do not consider that the decision of Megarry J in C H Giles & Co Ltd v Morris [1972] 1 WLR 307 assists Chelsfield’s case. I accept the submissions made by Mr Choo-Choy that I have summarised at paragraph 114, and especially 114(4)-(6), above.

For these reasons, if I had decided the third issue in favour of Chelsfield, I would nevertheless have held that (a) QDDC has arguments that have a real prospect of success to the effect that when it is finalised the DMA may contain terms to which it has legitimate objections, (b) although understandable in light of QDDC’s changing defence arguments, Chelsfield’s suggested answer to that problem, namely that the order sought should be made subject to granting QDDC liberty to apply, is not in keeping with the principles which underpin the present application for summary judgment, (c) in any event, QDDC has a real prospect of successfully resisting an order that it sign the DMA at trial, and (d) no purpose would be served by making an order requiring QDDC to sign the DMA once its terms have been determined such as would justify the making of such an order. Accordingly, I would have declined to grant summary judgment to Chelsfield on the fourth issue.

In summary, Chelsfield succeeds in its application for summary judgment in respect of its claim for a declaration that the DFA remains in existence and has not been determined, but Chelsfield fails in its application for summary judgment in respect of its claims for orders requiring QDDC (a) to instruct the Expert to complete his determination of the terms of the DMA and (b) to execute the DMA once the Expert has determined its terms.

In these circumstances, the sensible course may be for the outstanding issues in the present claim to be consolidated with, or tried together with, the Advance Planning Payment Claim. In addition, bearing in mind that both sides have succeeded in part on the present application, that there is some connection between the issues in the Advance Planning Claim and the remaining issues in the present claim, and that the overall winner may not emerge until after the trial of all those issues, it may be just and reasonable to order that the costs of the present application should follow the event in that trial. I emphasise, however, that I have not heard any submissions on these matters, and that I am not to be taken as making any rulings on them. If I am asked to do so, I will decide them on the basis of such further submissions as the parties may choose to make.

I invite Counsel to agree a form of order. If and to the extent that they are unable to do so, I will resolve any points that remain outstanding on the basis of written submissions, unless the parties want to make oral submissions, which I will be prepared to hear.