Grosvenor Developments v Peter Parsons & Anor

What is the proper approach to construction when language in different parts of the same legal instrument appears to deal with the same subject matter in different ways?

The legal instrument here is an agreement for lease dated 20 December 2011 (“theAgreement for Lease”) under which Mr Peter Parsons agreed to acquire a long lease of a flat (“the Flat”) in Parkside Place, Cambridge once Grosvenor Estates Ltd (“Grosvenor”) had finished building it.

This appeal is concerned with the service charge arrangements relating to the Flat. Attached to the Agreement for Lease were two documents, forming part of it, which have a bearing on that question. The first was a draft lease (“the Draft Lease”). The second was a document headed “Rider” (“the Rider”). It is the tension between these two documents which is at the heart of this appeal.

A final version of the proposed lease in more or less the same form (“the Lease”) was later executed in July 2013. By then Mr Parsons had assigned the benefit of the Agreement for Lease to his wife, Ms von Rabenau. Thus she became “Tenant” under the Lease, and Grosvenor the “Landlord”.

The Flat was part of a much larger development of land owned by the Cambridge and Peterborough Fire Authority, comprising both apartments and commercial units. Back in 2011, as part of the planning process, Grosvenor entered into a planning agreement with the local planning authority under s.106 of the Town and Country Planning Act 1990 (“the s.106 Agreement”). The s.106 Agreement imposed obligations on Grosvenor to make provision for affordable housing.

The parties’ dispute concerns the treatment of certain costs connected with such provision. The point is this: once the initial levels had been fixed, Grosvenor accepted a limit on its ability to increase the service charge imposed on affordable housing tenants. In summary, increases were capped at RPI plus 0.5%. This is referred to in the s.106 Agreement as the “RPI Variation”. The present issue is about who should be responsible for any service charge costs which cannot be passed on to the affordable housing tenants because of the limit imposed by the RPI Variation.

Ms von Rabenau, as assignee of the Agreement for Lease, says that Grosvenor agreed that it would be responsible for her share of any such excess, under the terms of what she says is a contractual indemnity agreed to by Grosvenor contained in the Rider, which she continues to benefit from.

Grosvenor meanwhile say that responsibility for her share of any such excess falls squarely on Ms von Rabenau, as the tenant of the Flat. They say that was always the intention. They say it was made clear by clauses 11.4 and 12.4 of the Draft Lease, the language of which (with immaterial amendments) was later replicated in the Lease of 2013. They say this language shows that any excess was to be shared among all the other tenants of the development (i.e., among the non-affordable housing tenants), in a manner which would leave Grosvenor with no liability of its own.

In her Judgment of 25 June 2025, HHJ Karen Walden-Smith (“the Judge”) held that the language of the Rider took precedence: she said that whatever was provided by the Draft Lease and the Lease, Grosvenor had undertaken as a matter of contract with Ms von Rabenau that it would be responsible for her share of any costs arising from the limit imposed by the RPI Variation. The Judge construed the Rider as an indemnity, so that on a showing by Ms von Rabenau that her own service charge had in fact been increased by an amount referable to the RPI Variation, she would be entitled to claim that amount back under her contract with Grosvenor.

Grosvenor now appeals that decision. Although in the proceedings before the Judge, Ms von Rabenau was not able to show that her service charge had in fact been increased by any costs of the relevant type, the parties are anxious to obtain a resolution of the point of principle. The issue may arise again. Not only that, but there are a number of other tenants who have the benefit of a similar Rider. Moreover, Grosvenor has now divested itself of its former interest in the development, by means of a transaction in 2015. It wishes to understand whether it has certain ongoing contractual obligations nonetheless.

Two Grounds of Appeal are relied on. The first is that the Judge was wrong to construe the language of the Rider as an indemnity. The argument has a number of strands, but the principal one is that construing the Rider in that way would directly cut across the terms of the Draft Lease which also formed part of the Agreement for Lease, and so it cannot have been intended. The second Ground of Appeal is that, even if the Rider is an indemnity, it operates only in respect of any “costs and expenses”, and the liability in question (arising because of the limit imposed by the RPI Variation) is not a cost or expense in the relevant sense.

In my opinion, the Judge was correct to construe the Rider as she did, and to characterise the liability arising from operation of the RPI Variation as a cost or expense. In summary, that is for the following reasons.

First, there is certainly a tension between the terms of the Draft Lease (and thus the Lease) on the one hand, and the terms of the Rider on the other. But that is not surprising. The proper way of construing the Rider is that it represents a contractual variation of the scheme for the treatment of service charges reflected in the Draft Lease, which Mr Parsons was evidently not happy with. Grosvenor were apparently content to agree to a different arrangement in order to persuade him to enter into the Agreement for Lease, but without amending the terms of the Draft Lease which were in a standard form. Ms von Rabenau, as assignee of the Agreement for Lease, now has the continuing benefit of that contractual arrangement.

Second, on the question of whether we are concerned with a cost or expense, I agree with the observation made by Mr Parsons in his submissions to the Court on this point. He said that in his understanding of things as a Chartered Accountant (now retired), Grosvenor’s inability to increase the service charge to affordable housing tenants beyond the RPI Variation created a cost which someone had to pay for, and the effect of the Rider was that as between Ms von Rabenau and Grosvenor, it would be Grosvenor. That seems to me to be entirely correct.

The result is that the Appeal will be dismissed. My more detailed reasons are set out below.

The s.106 Agreement imposed a large number of obligations. Among them were commitments as to the provision of public art (Sch. 5), travel plans (Sch. 7), affordable housing (Sch 8) and the “Public Realm” (i.e., upgrading of footpaths, kerbs and street furniture – Sch. 9).

Generally under the scheme of the s.106 Agreement, the obligations it imposed were enforceable against Grosvenor only; but that was not so as regards a number of the obligations in Schedules 5, 7, 8 and 9 which were also to be directly enforceable against the new tenants of the development under clause 2.7 of the s.106 Agreement. This provided as follows:

“This deed shall not be enforceable against the owners, occupiers or tenants of the Dwellings nor against those deriving title from them SAVE FOR the following provisions which shall be so enforceable:-paragraphs 4.4 to 4.10 inclusive of the Fifth Schedule, paragraph 4 of the Seventh Schedule, paragraphs 7 to 11 inclusive of the Eighth Schedule and the provisions of the Ninth Schedule.”

For present purposes, Sch. 8 is the most important. This required Grosvenor to provide not fewer than 39 of the 99 residential units approved under the relevant planning permission as affordable housing, “to be occupied by people who cannot afford to rent or buy on the open market in Cambridge” (para. 1).

The commitments given in paragraphs 10 and 11 of Sch. 8 were concerned with limitations on the costs of occupation of two categories of occupier – persons nominated from the City Council’s Low Cost Home Ownership register (“LCHO Qualifiers”) were dealt with in para. 10; and individuals in the employment of the Cambridge Fire Authority (referred to as “Intermediate Rent Qualifiers”) were dealt with in para. 11.

In each case, the scheme for limiting the cost to the occupier involved the same basic structure, namely (1) fixing a base annual cost not exceeding 30% of the gross household income of the occupier in the year prior to them coming into occupation, coupled with (2) a commitment that thereafter, there would be no annual increase in the total cost payable by an LCHO Qualifier or Intermediate Rent Qualifier for that occupation, “other than the RPI Variation”

The RPI Variation was then described in the definitions section of Sch. 8 as follows:

“‘RPI Variation’ means an annual increase to reflect any upward movements of the Retail Price Index for the relevant year to which in the case of any upward movement of the Retail Price Index in any one year there may be added for that year the further sum which is 0.5%.”

The Agreement for Lease dated 20 December 2011 contained detailed Particulars and Conditions of Sale. These referenced a “draft lease attached to this Agreement” – i.e., what we have called the Draft Lease. Mr Parsons as “Buyer” committed to deliver a signed counterpart of the final version of the lease two working days prior to eventual completion.

As to the Draft Lease, this made provision for the payment of various service charges by Mr Parsons as “Tenant”, to a body referred to as the “Manager”. The idea at the time was that there would be a separately incorporated body, owned by the tenants, to act as manager of the development from the “Handover Date” (defined as meaning a date 3 months after completion of sale of the last apartment or commercial unit). That part of the service charge structure changed in the final version of the Lease, although other aspects remained the same.

For present purposes, the relevant aspects of the service charge are the “Estate Service Charge” and the “Block Service Charge”. Apportionment was dealt with in Schedule 6 of the Draft Lease: the basic structure was that service charge costs would be divided up among all tenants and occupiers on a pro rata basis according to internal floor area. But other parts of the Draft Lease acknowledged the possible effect of the RPI Variation, and it is true to say that those provisions contemplated that any service charge costs not recoverable from occupiers of “Affordable Housing Units” (as defined) would be borne by Mr Parsons and all other owners of apartments and commercial units in the development.

Thus, clause 11.4 of the Draft Lease, dealing with the Estate Service Charge, provided as follows (emphasis added):

“It is expressly agreed that the intention of the Landlord the Manager and the Tenant in relation to the Estate Service Charge provisions is that all costs expenses and other liabilities which are incurred by the Manager shall be the subject of reimbursement recoupment or indemnity by the tenants of the Apartments and Commercial Units and Affordable Housing Units so that no residual liability for any such costs expenses or liabilities shall fall upon the Manager PROVIDED THAT for the avoidance of doubt the Tenant shall have no liability in respect of any unlet areas or where the Manager should recover costs from other tenants or occupiers, that the Estate Service Charge will be calculated in such a manner as to acknowledge any limitation on payment of the Affordable Housing Units shall be borne by the Apartments and Commercial Units and that the contribution to the Estate Service Charge from the Fire Authority will be on an equitable basis according to user.”

Clause 12.4, dealing with the Block Service Charge, reflected essentially the same structure.

The Rider is on a separate page, included at the end of the Conditions of Sale, but was plainly intended to form part of the overall package forming the Agreement for Lease. It is worth setting it out in full:

“The Seller [Grosvenor] confirms to the Buyer [Mr Parsons] that it will be responsible for all costs and expenses associated with performance of the obligations contained in the Section 106 Agreement dated 25 May 2011 and made between Cambridge City Council (1), Cambridgeshire County Council (2), Cambridgeshire and Peterborough Fire Authority (3) and Grosvenor Developments Ltd (4) save that:

(a)

the cost of the future maintenance (but not provision) of the entry gates (being part of the public art) will be a service charge item;

(b)

the cost of providing the public transport reports for the period of 5 years from practical completion will be a service charge item up to the maximum sum of £2,000 per annum

each such contribution for the avoidance of doubt being attributable in due proportion to all of the private units erected as part of the Development.”

The Lease of July 2013 deals with apportionment of service charge costs in a slightly different way in a revised Schedule 6: the mechanism provides for deduction of the contribution by the Affordable Housing Units as a first step, with the remainder of the costs then being apportioned pro rata according to internal floor area among all other tenants and occupiers.

Clauses 11.4 and 12.4 are to the same effect as clauses 11.4 and 12.4 of the Draft Lease, although they no longer refer to the concept of a “Manager”, the idea for which had been dropped by July 2013. The gist of the basic mechanism is the same however: any costs not capable of being passed on to tenants of the Affordable Housing Units are to be picked up by the other tenants, and are not to be for the account of the “Landlord” (i.e., Grosvenor). Thus, clause 11.4 of the Lease provides as follows:

“It is expressly agreed that the intention of the Landlord and the Tenant in relation to the Estate Service Charge provisions is that all costs expenses and other liabilities which are incurred by the Landlord shall be the subject of reimbursement recoupment or indemnity by the tenants of the Apartments and the Affordable Housing Units so that no residual liability for any such costs expenses or liabilities shall fall upon the Landlord PROVIDED THAT for the avoidance of doubt the Tenant shall have no liability in respect of any unlet areas or where the Landlord should recover costs from other tenants or occupiers, that the Estate Service Charge will be calculated in such a manner as to acknowledge any limitation on payment of the Affordable Housing Units shall be borne by the Apartments.”

At [35]-[37], the Judge set out in detail the guidance on principles of contractual construction given by the Supreme Court in Arnold v. Britton [2015] AC 1619 (at paras [15]-[23] per Lord Neuberger), and in Wood v. Capita Insurance Services Limited [2017] UKSC 24 (at paras [10]-[15] per Lord Hodge).

Having done so, the Judge’s first main point was to acknowledge there was an obvious difference between the terms of the Lease executed by Ms von Rabenau, and the terms of the Rider.

As to the Lease, the Judge expressed her conclusion at [26]:

“I am satisfied that the wording of the executed Lease clearly provides that the service charge obligations … are recoverable from the Apartments and Commercial Units including any shortfall created by reason of the provisions of the s.106 agreement”.

But she thought the position as between Ms von Rabenau and Grosvenor had been modified by the Rider. Thus at [43], in a key passage referencing the machinery in clauses 11.4 and 12.4 of the Draft Lease and the Lease, she said:

“Keeping the Manager and then the Landlord away from paying for the shortfall in the service charge from the affordable housing units was an express indication of what the parties intended within the confines of the Lease. It does not explain the intention of the parties who obtained the Rider from Grosvenor. The very reason the Rider was obtained was to protect Ms von Rabenau (and the other purchasers of apartments who used the same solicitors) from the impact of being burdened with the costs of fulfilling the s.106 Agreement that Grosvenor had entered into in order to obtain planning permission. The Lease and its terms is not unique to Ms von Rabenau. Those who entered into the Lease without the benefit of the Rider will be obliged to pay in accordance with the Lease. Indeed, the Lease requires Ms von Rabenau to pay the pro rata contribution towards the service charge. The Rider indemnifies her against the additional contribution. There is nothing contrary to business common sense or practicality for that to happen.”

Part of the Judge’s logic was that if the Rider were not read as containing an indemnity, it was quite hard to see what purpose it did have. She explained her reasoning at [53]-[54] of her Judgment. Her point was that the apparent focus of the Rider was to deal with those obligations under the s.106 Agreement which were enforceable both against the tenants and against Grosvenor. Those were the obligations described briefly at [16] above, dealing with the provision of public art (Sch. 5), travel plans (Sch. 7), affordable housing (Sch. 8) and the Public Realm (Sch. 9). However, the costs of a main item of public art, namely a set of ornamental gates, had already been incurred by Grosvenor as at the time of the Agreement for Lease; and moreover two other main items were the subject of carve-outs and so would be passed on to Mr Parsons/Ms von Rabenau in any event, namely the cost of future maintenance of the entry gates and the cost of providing public transport reports for a period of five years from practical completion. The parties knowing all that at the time of the Agreement for Lease must still have intended the Rider to have some purpose, and so surely that purpose included protection against one of the other main areas of exposure remaining, namely ongoing costs arising from the obligation to provide affordable housing in Sch. 8. As the Judge put it at [54] of her Judgment, if one excluded that form of protection, the Rider “ … would not be giving any protection to the apartment owner at all.”

The Judge then addressed the question whether any excess to be recovered from the remaining tenants, arising as a result of application of the RPI Variation to the affordable housing tenants, was properly classifiable as a cost or expense. On this her view was as follows at [46]:

“The difference between the amount Ms von Rabenau would have been paying for her own leasehold apartment and the amount that she is obliged to pay to cover the shortfall created by the inability to charge the occupiers of the affordable accommodation, is a cost associated with performance of the section 106 agreement.”

I find the Judge’s reasoning logical and compelling. She identified a way of reading the Rider and the Draft Lease (and thus the Lease) together in a manner which was coherent and made good sense.

As to the ordinary and natural meaning of the Rider, the Judge thought it was designed to make clear that as between Grosvenor on the one hand and Mr Parsons/Ms von Rabenau on the other, any costs associated with fulfilling the obligations in the s.106 Agreement, which Grosvenor had agreed to in order to obtain planning approval, would be for Grosvenor to bear. In my opinion the Judge was correct on this point. That is the natural and ordinary meaning of the words, “The Seller confirms to the Buyer that it will be responsible for all costs and expenses associated with performance of the obligations contained in the [s.106 Agreement]…”, which are the opening words of the Rider.

I think the Judge was also correct to view the Rider as containing an indemnity. As the Judge recognised at [40] of her Judgment, no special language is needed to create an indemnity, just a promise by one party to satisfy a defined category of losses of another party. An indemnity “… merely connotes the right of one party to look to another to satisfy his losses and may arise under a contract … or by operation of law” (Pitts v. Jones [2007] EWCA Civ. 1301 at [21]).

Here, the promise was by reference to a defined set of liabilities: “all costs and expenses associated with performance of the obligations contained in the [s.106 Agreement]… ”. The nature of the promise was that Grosvenor confirmed it would be “responsible for” all such costs and expenses. That language is wide enough to include a promise that if by paying their service charge in accordance with the mechanism under the Draft Lease (and therefore Lease), Mr Parsons/Ms von Rabenau in fact came to bear such costs, then they would be able to claim them back from Grosvenor.

In his submissions, Mr Bhose KC challenged these conclusions. His argument was that the word “confirm” in the main operative phrase (“The Seller confirms to the Buyer that it will be responsible for all costs and expenses …”) points to the status quo, and thus was not intended to give rise to any ongoing contractual obligation running into the future, but instead only to confirm that Grosvenor would in fact be responsible for the planning obligations it had already entered into, some of which, as a matter of law, could be enforced against the tenants. In effect it was a statement of comfort or reassurance. Mr Bhose said that in dealing with the natural and ordinary meaning of the key operative phrase in the Rider, the Judge had been wrong to place weight on the two “carve-outs”: he argued that was to put the cart before the horse, in the sense that the key operative words (“confirms” and “will be responsible”) do not suggest any intention to create an indemnity, and that intention could not be changed by the wording of the carve-outs.

Respectfully, I am not persuaded by these points. Grosvenor’s confirmation was that it would be responsible for “all costs and expenses”, save for those the subject of the carve-outs. It is artificial to read this as a one-off, static confirmation intended only to affirm a subsisting state of affairs. The scope of the confirmation encompassed “all costs and expenses”, not limited by any time period, and so on its face was intended to capture future costs. That makes good sense. Looked at objectively, what Mr Parsons and the other tenants were concerned about was exposure to the unknown. The purpose of the confirmation given was to reassure them that whatever the costs of compliance with the s.106 Agreement might turn out to be, and whenever and however they might arise, Grosvenor would be responsible for them, save as expressly agreed to the contrary by means of the carve-outs.

In my opinion, that view of things is reinforced by reference to the carve-outs themselves, both of which expressly concern future costs – of future maintenance of the entry gates, and of provision of public transport reports for a period of 5 years from practical completion. I do not think it is illegitimate to look to the language of the carve-outs in order to inject meaning into the general undertaking from which they are exceptions. Indeed, that seems to me to be an entirely proper thing to do. Moreover, it is natural to think that where specific matters are excluded from a general undertaking they have the same basic character as the general undertaking itself. That exercise of construction involves nothing more than seeking to identify the natural meaning of the words used in their context, in a manner entirely consistent with the guidance given in (for example) Wood v. Capita Insurance at [12], where Lord Hodge said that the exercise of construction begins with reading “… the language in dispute and the relevant parts of the contract that provide its context …”. I also think it significant that costs falling within the carve-outs were expressly characterised under the Rider as “service charge item[s]”, implying that other costs not falling within the carve-outs would not be charged to Mr Parsons/Ms von Rabenau, and instead would be borne by Grosvenor.

In my opinion, the Judge’s approach involves a coherent reading of the Rider and the Draft Lease taken together.

For Grosvenor, Mr Bhose KC argued that the Judge’s approach was flawed, because she did not consider that the terms of the Draft Lease were relevant to ascertaining the meaning of the Rider. He said that the proper approach required consideration of the parties’ arrangement as a whole in ascribing meaning to a particular part of it, and this the Judge had failed to do, because in construing the Rider she had made no allowance for the way the costs of the s.106 Agreement were dealt with in the provisions of the Draft Lease – in particular in clause 11.4 and clause 12.4.

I do not think this a correct point of criticism. It rests on the premise that the provisions of the Draft Lease and of the Rider cannot live together without the former somehow qualifying the natural and ordinary meaning of the latter. I disagree, and indeed accept the Judge’s logic that the opposite is true. It is much more plausible to think that the Rider, which by its nature was an addition to the standard form provisions otherwise proposed, was intended to modify the scheme for calculation of service charges set out in the Draft Lease. It reflected a special arrangement, binding as a matter of contract, which as between the parties to it was obviously intended to override any contrary provision in those standard terms, including clauses 11.4 and 12.4 of the Draft Lease.

I think this is what the Judge had in mind when at [43] of her Judgment she made a distinction between “what the parties intended within the confines of the Lease”, on the one hand, and on the other, “the intention of the parties who obtained the Rider from Grosvenor”. This was not an example of the Judge ignoring the language of the Draft Lease as part of her exercise of construction, but an example of her doing the opposite. Her reasoning accepts that the Draft Lease is part of the overall framework which needs to be considered, but proceeds on the footing that the terms of the Rider need to be looked at on their own terms against that background. She accepts there is an inconsistency, but resolves it by concluding that as between Grosvenor and Ms von Rabenau, the Rider was intended to supersede whatever was provided by the Draft Lease. That is what she says in the next sentence of para. [43]: “The very reason the Rider was obtained was to protect Ms von Rabenau (and the other purchasers of apartments who used the same solicitors) from the impact of being burdened with the costs of fulfilling the s.106 Agreement that Grosvenor had entered into in order to obtain planning permission.” I accept this logic, which in my opinion is entirely correct.

As noted above, the Judge dealt with the issue of whether her reading of the Rider made commercial common sense at the end of para. [43] of her Judgment. The application of commercial common sense is one of the tools of construction endorsed in Arnold v. Britton (see at [15]).

What the Judge thought made sense was the idea that Mr Parsons/Ms von Rabenau would have wanted some form of protection from the costs of implementing obligations Grosvenor had undertaken in order to obtain planning permission. That is the logic of her argument in para. [43] of her Judgment. I agree with it. Looking at the terms of the Rider and Draft Lease together, it makes perfect sense to think that the Rider represented the terms of a compromise which, after some negotiation, the parties were willing to live with: Mr Parsons and the other relevant tenants did not want to risk being burdened with the ongoing costs of an agreement (the s.106 Agreement) which they saw as really benefiting Grosvenor, and the compromise reached was that they would contribute to some of the costs (i.e., those falling within the carve-outs), but not the rest, which Grosvenor alone would be responsible for, as it confirmed.

Mr Bhose KC in his submissions argued that the Judge had considered the question of commercial common sense only as an afterthought, and said that had she considered the point properly, she would have concluded that it made no commercial sense from Grosvenor’s point of view to commit to an open-ended obligation to cover ongoing costs over which it had no control, especially since at the time of the Agreement for Lease the idea was that the service charge would be administered by a tenant-owned management company (i.e. the Manager), and since it was always a possibility that Grosvenor might wish to divest itself of its interest in the future. Mr Bhose also said it made little sense to have a system under which service charge payments would be made by Ms von Rabenau, but subject to a right of indemnification.

I disagree. To begin with, I do not think the Judge’s treatment of the commercial common sense issue relegates it to an afterthought. As I read her paragraph [43], she was using this well-known yardstick in order to cross-check her reading of the wording of the Rider, in the face of an argument from Grosvenor that it meant something different. I see nothing wrong with that. In Wood v. Capita Insurance, Lord Hodge described the process of construction as a “unitary exercise” (see at [11]), but one involving an “iterative process”. To my mind, that is just the sort of process the Judge adopted.

As to the question of Grosvenor being exposed to ongoing and unpredictable liabilities, the Judge’s response to this point at para. [52] of her Judgment was to say that Mr Parsons at the time would have had a similar concern. In fact, if anything it seems to me that Mr Parsons’ concern would have been more acute, because from his point of view the liabilities in question reflected the costs of compliance with an agreement Grosvenor had entered into for its own benefit.

In any event, the point is perhaps rather exaggerated, Grosvenor’s liability was not entirely open-ended. Although certainly the idea at the time was that the service charge arrangements would be administered by the Manager, the Rider was not concerned with service charge costs generally, but only with the costs of compliance with the s.106 Agreement. The scope of the indemnity it contained was thus defined by the scope of the obligations Grosvenor itself had willingly undertaken as part of the price of obtaining planning consent, and although the potential future costs of compliance were likely not capable of precise quantification at the time, they were at least a known quantity in the sense that the relevant categories were identifiable.

As to the duration of the obligation arising under the Rider, as Mr Parsons said in his submissions, this was and is a contractual obligation only. It does not attach to the Flat and the benefit will not pass to any purchaser. It is a personal undertaking, now binding as between Grosvenor and Ms von Rabenau, and will subsist only for as long as Ms von Rabenau is in occupation. I understood Grosvenor to accept this proposition.

As to the point that the structure required Ms von Rabenau to pay the service charge but subject to a right of indemnification, as I see it there is good sense in such an arrangement. That left intact the general mechanism for calculation of the service charge in the Draft Lease, which applied to all the tenants of the development; but as between Ms von Rabenau and Grosvenor, allowed for any rebalancing necessary to give effect to the special arrangement they had arrived at.

In my view, the question of commercial common sense is closely related to the question of the purpose of the Rider. The Judge thought that the purpose she had detected (see at [48] above) made good commercial sense. Given the background, she could not detect any other rival purpose to displace it.

In argument, Mr Bhose KC said that the Judge had too readily dismissed the idea of the Rider having an alternative purpose, and suggested two: first, that it might be looked at as containing a representation in relation to the parties’ intended lease, such that if under it Grosvenor failed to “be responsible” for the costs and expenses of the s.106 Agreement, Mr Parsons/Ms von Rabenau might then have a claim in misrepresentation; and second, that it might be looked at as a contractual commitment to the same effect.

Respectfully, I find these arguments quite unconvincing, given the point that Grosvenor itself relies on, namely that the terms of the Draft Lease, especially clauses 11.4 and 12.4, make entirely different provision than the Rider. It seems to me implausible to construe the Rider as containing a representation or contractual promise as to what the parties’ lease would provide, when the Draft Lease – which formed part of the same contract (i.e. the Agreement for Lease) - said something different. It is much more logical to think that the parties intended to leave the Draft Lease as it was (since it reflected a standard form applicable across a wider community of tenants), but as regards their own relationship, agreed by means of the Rider to a special arrangement, taking effect as a contract, reflecting the compromise they had agreed.

Grosvenor’s main challenge here is that an indemnity in respect of “all costs and expenses” is most naturally directed at out-of-pocket expenses – that is to say, at costs positively incurred in order to ensure compliance with the s.106 Agreement. Mr Bhose KC argued that such language does not naturally encompass the effects of a limitation operating on the landlord’s ability to recover service charges from certain of the tenants. Relatedly, Grosvenor pointed to the fact that the costs and expenses dealt with in the “carve-outs” are costs and expenses of just the type described – i.e. out of pocket expenses associated with the provision of public art and travel plans.

I disagree. Leaving aside the point that elsewhere in its submissions Grosvenor denied the relevance of the carve-outs as aids to construction (see above at [40]), the fact is that the scope of the indemnity provided by the Rider is very broad: it covers “all costs and expenses associated with the performance of the obligations contained in the [s.106 Agreement] …” (my emphasis added). Thus, all costs are covered, however arising; and all that it needed is that they are associated with performance of the obligations in the s.106 Agreement. One of those obligations was the obligation on Grosvenor under Sch. 8, paras 10 and 11 of the s.106 Agreement not to increase the service charge for affordable housing tenants beyond the limit imposed by the RPI Variation. I think Mr Parsons was correct to say that this inability to share service charge liabilities among all tenants in the same way created a cost which had to be absorbed by someone. Since it was a cost associated with performance of one of the obligations contained in the s.106 Agreement, as between Grosvenor and Ms von Rabenau, it was a cost to be borne by Grosvenor. That is the natural and ordinary meaning of the wording in the Rider, and it makes good sense to read it in that way, because the purpose of the Rider looked at objectively was to ensure that as between them, Grosvenor would bear the costs of the planning gain the s.106 Agreement required it to provide, not Mr Parsons or his assignees.

It follows that the appeal must be dismissed. There is already a direction that there be no order as to costs. I would ask the parties please to seek to agree a form of Order reflecting the outcome of this Judgment.