Persimmon Homes (South Coast) Ltd v Hall Aggregates (South Coast) Ltd & Anor

INTRODUCTION

Pursuant to the terms of a Sale Agreement dated 22.12.99, the defendants (whom I shall call RMC) agreed to sell to the claimant (whom I shall call Persimmon) a large development site known as Cherque Farm, Lee-On Solent, in Hampshire (“the site”). The purchase price was £29,892,380. This figure was capable of being adjusted pursuant to clause 7A of the Sale Agreement, whilst clause 14A of the Sale Agreement provided a mechanism for the further payment of costs thereafter in certain limited circumstances. In these proceedings, Persimmon have identified 28 Claim Items which, they say, either triggered the price adjustment mechanism so as to decrease the purchase price for the site payable by them (clause 7A), or entitled them to a cash payment from RMC (clause 14A). They seek declarations to that effect.

In addition, clauses 12.2 and 12.3 of the Sale Agreement obliged RMC to carry out certain remediation works at the site. It is common ground that Persimmon did not expressly require RMC to carry out these works and that, moreover, they performed the works themselves. Persimmon now claim the costs of carrying out this work as damages for breach of contract. They also claim the costs of carrying out diversion works to a road within the site known as Sandhills Lane, which works, they say, were required to ensure that RMC could continue to use their land adjacent to the site for commercial purposes.

The principal issues at the trial were therefore:

I propose to deal with the issues between the parties at this trial in this way. In Section B I set out a description of the site. In Section C I set out the applicable principles of law and relevant background to the Sale Agreement. In Section D I set out the express terms of the Sale Agreement which are relevant to the resolution of the issues. At Section E I set out my analysis of the proper construction of the Sale Agreement. In Section F I then set out the background to the Settlement Agreement of June 2001 and, under Section G I identify the terms and the proper construction of that Settlement Agreement. At Section H I set out the relevant background to the further Settlement Agreement of December 2003 and, at Section I, I deal with the nature and effect of that further Agreement. At Section J below I deal briefly with the events after December 2003.

The principal disputes between the parties concern the 28 Claim Items, in respect of each of which Persimmon seek a declaration that the purchase price be reduced or that the costs associated with the item be paid by RMC. I deal with those individual claims, from 1-28, at Section K below. There is, I regret, a certain amount of unavoidable duplication within that lengthy section of the Judgment. I then address the other area of dispute between the parties, namely the claims for damages and the claim for an indemnity. I set out the background to those claims at Section L below and at Section M I analyse the issues between the parties and set out my conclusions as to the validity of the claims for damages. I do the same exercise for the claim in respect of the work at Sandhills Lane at Section N below. Finally, at Section O , I briefly summarise my conclusions.

Before embarking on these exercises, I should express my thanks to counsel for the efficient way in which the oral evidence, both factual and expert, was condensed into two days of hearing, and for the lucidity of their opening and closing submissions. It was, however, much less satisfactory that, in a dispute where just about everything turned on the construction of the various Agreements, both counsel and the court had to grapple with 15 witness statements, many running to 30 pages or more, and 23 full lever arch files of contemporaneous documents. The vast majority of the statements, and the paper mountain that went with them, were wholly irrelevant to the issues at trial or their resolution.

THE SITE

The site was some 2 kilometres in length and about 300metres wide, lying between Broom Way to the north and Portsmouth Road to the south. To the west of the site were residential houses. To the east was a quarry owned by RMC. That quarry was served by Sandhills Lane, which connected with Broom Way.

The site had been used for sand and gravel extraction since about 1950. Following the completion of the sand and gravel extraction, the site was used for landfill and, in some areas that landfill included putrescible waste. This gave rise to a problem with methane gas which, as we shall see, had to be dealt with by Persimmon as part of their development of their site, but the costs of which were expressly taken into account in the calculation of the purchase price.

Although the site was largely flat, the southern area of the site, which was to become phases 6 and 7 of the development carried out by Persimmon, had not been filled in to the same extent. Thus, at the southern end of the site, further landfill works were required in order to bring the level up to the level of the remainder of the site. It is this work which gives rise to the damages claim.

RELEVANT BACKGROUND TO THE SALE AGREEMENT

It has always been the law that a commercial contract must be construed in the light of the surrounding circumstances: what Lord Wilberforce described in Reardon- Smith Line Ltd v Hansen-Tangen [1976] 1WLR 989 at 995-996 as “the genesis of the transaction, the background, the context, the market in which the parties are operating.” Of course, this requirement was explained and expanded by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 in which he identified the following five key principles concerning the interpretation of contracts:

One of the unhappy consequences of these passages is that parties to commercial disputes, in which the interpretation of the contract is in issue, can be tempted to put in a large amount of evidence and documentation by way of ‘background’. There has been more than a suggestion of that in this case. This is despite the fact that, in BCC v Ali [2001] 1AC 251, Lord Hoffmann qualified his phrase ‘absolutely anything’ by saying that this could only mean ‘anything which a reasonable man would have considered relevant’ and he made plain that his speech in Investors Compensation Scheme was not designed to “encourage a trawl through ‘background’ which could not have made a reasonable person think that the parties must have departed from conventional usage”.

Accordingly, it is always necessary for the court to consider the factual background to a commercial contract even if the wording of that contract might be regarded as unambiguous or sensible; see, for example, Westminster CC v National Asylum Support Services [2002] UKHL 38; [2002] 1 WLR 2956. However, it is necessary to retain a proper balance between the factual background on the one hand and the actual words used in the contract, on the other. In Wayne Martin v David Wilson Homes limited [2004] EWCA Civ 1027; [2004] EGLR 77, Buxton LJ said:

“One has to remember, when looking at issues about the factual matrix, that although reference for that matrix is not limited to cases where the words are clearly ambiguous, the first place where one expects to find the meaning of the words and the intention of the draftsmen is in the words themselves. If they yield a fairly clear conclusion…then one has to pause long before concluding that at that point the draftsman has used words with a meaning do not fit in with the objective he was seeking to attain.”

Regrettably, it is not uncommon in disputes like this for witness statements to deal extensively with factual background, whether or not the matters which they address could ever be relevant to the meaning of the words used, and then slip further into error by purporting to give evidence as to what the intent of the parties really was. As I made plain before and at the trial, such evidence is palpably inadmissible. As Lord Steyn put it in Mannai Investments Co Ltd v Eagle Star Life Assurance Co Limited [1997] A.C. 749 at 778, “the inquiry is objective; the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind.” Thus evidence of factual background should never be used as some sort of Trojan horse in order to usher in what would otherwise be inadmissible evidence as to subjective intent.

With those principles in mind, I turn to identify, from the morass of documents and witness statements, what I consider to be the relevant factual background to the Sale Agreement of 22.12.99.

On the 23 March 1998, Persimmon and RMC reached an agreement whereby, for a fixed period, RMC would not seek to sell the site to anyone else. Thereafter, RMC continued to do what they could to obtain the necessary permissions and approvals to allow this large site to be developed for residential housing.

The relevant local planning authority was Gosport Borough Council. In August 1999 they issued their Development Brief based on ‘lengthy discussions with the owners of the site and close consultation with community groups’. The Brief document was very detailed. One of the particular matters raised in it was the construction of a Link Road which would run along the eastern edge of the new development. At paragraph 6.2 the Brief said;

“Construction of a section of the Gosport-Fareham Link Road (see below) is an essential element of the comprehensive development of this site. A legal agreement will be required to deal with its implementation and funding prior to the issue of outline planning permission.”

On the 17 August 1999, that legal agreement was reached, when RMC entered into an agreement with Gosport Borough Council and Hampshire County Council. This is sometimes referred to as the section 106 Agreement (indeed, that is what it is called in the Sale Agreement) although, as clause 2 of the s.106 Agreement itself made plain, it was actually made under a number of different statutory provisions. For ease of reference, I will refer to it as the section 106 Agreement.

The recitals of the section 106 Agreement were in the following terms:

“(1)The Borough Council is the local planning authority under the Act for the area in which the Site is situated and is the planning authority by which the obligations which are contained in this Agreement may be enforced.

(2)The County Council is the highway authority for the area for which the Site is situated.

(3)The County Borough Council is the freehold owner of that part of the Site shown for identification purposes edged brown on the plan (and hereinafter defined as the Borough Council Land) and RMC is the freehold owner of the remainder of the Site.

(4)Aggregates have submitted an Application to the Borough Council.

(5)The Borough Council and the County Council are each satisfied that the Planning Permission may properly be granted for the Development subject to the parties entering into this Agreement and that this Agreement will be of benefit to the public”.

It is unnecessary for present purposes to set out very many of the complex and inter-related rights and obligations set out in the section 106 Agreement. Clause 5.8 was concerned with ensuring that RMC carried out the works set out in the Methane Gas Specification; pursuant to clause 5.8.2, RMC were not permitted to carry out a less onerous specification of those important works without prior approval. Clause 6 of the section 106 Agreement contained RMC’s covenants to Hampshire County Council in respect of the highway works: it is relevant to note that these covenants were owed to Hampshire County Council only; Gosport, who were not the Highways Authority, were not a party to this element of the s.106 Agreement.

Paragraph 2 of the first schedule to the section 106 Agreement described the Highway Works to be carried out by RMC pursuant to clause 6 in the following terms:

“ 2. The Highway Works are described as follows;

(a)

the construction of a signal control junction at the junction of the Link Road with Broom Way [referred to in the documents as the Northern Junction]

(b)

the construction of the Link Road and;

(c)

the construction of a roundabout junction on the northern section of the Link Road as the northern access to the Site and a major/minor priority junction on the southern section of the Link Road at the southern access to the Site;

(d)

the construction of a signal control junction at the junction of the Link Road with Portsmouth Road [referred to in the documents as the Southern Junction].”

Paragraph 3 of the first schedule identified various elements of construction that the Highways Works would include. These included:

The second schedule set out in detail the terms and conditions for the execution of the Highway Works by RMC. Their covenants included:

It was, I think, common ground at the trial that:

On the 18 August 1999, Gosport granted outline planning permission for the development of the site. This was subject to a number of conditions. Condition 1 identified a whole series of reserved matters including the layout of the development; the positions and widths of roads and footpaths; landscaping; and the layout of the foul sewers and surface water drains. Condition 2 related to details of the Link Road “including the layout, construction and the site lines” which had to be submitted to and approved in writing by Gosport before the development of the 151^st dwelling on the site. Condition 3 provided that the development would not commence “until drainage works had been carried out in accordance with details to be submitted to and approved in writing” by Gosport.

In relation to highways approvals, following the section of 106 Agreement, RMC sought to obtain design approval from Hampshire under the Highways Act. RMC’s consultants, Denis Wilson Partnership (“DWP”) undertook a detailed design, which was subsequently revised to take into account Hampshire’s comments. The revised design was resubmitted to Hampshire under cover of a letter dated 15 October 1999. There was a meeting to discuss the design on 21 October. By 3 December 1999, the contemporaneous documents suggest that technical approval from Hampshire was “imminent”. DWP chased Hampshire again for this approval on 17 December 1999.

During this process, DWP drew up a Bill of Quantities, dated October 1999, which was based on the specification that had been sent to Hampshire for approval. The quantities in those bills were subsequently checked by Davis Langdon and Everest (“DLE”), consultants engaged by Persimmon.

In addition to those conditions of outline planning permission referred to at paragraph 24 above, the sewers and surface water drainage had to be adopted by Southern Water pursuant to section 104 of the Water Industry Act. Following discussions between RMC’s consultants and Southern Water, by early December 1999 the contemporaneous documents note that a drainage agreement with Southern Water was “virtually there”.

Although the section 106 Agreement was entered into by RMC, that was because, at that point, they were still the owners of the site. A few months later, in December 1999, the negotiations were well advanced between the parties whereby the site would be sold to Persimmon, who would thereafter take on RMC’s obligations under the section 106 Agreement.

It is common ground that the purchase price of the site would be based on the value of that site as ‘clean, serviced land’; see, (amongst others), the witness statements of David Bryant and Allen Smith of Persimmon and Simon Barrett of RMC. But this was easier said than done because, as noted above, the site had, for years, been used by RMC for both abstraction and landfill. Accordingly, it was agreed that the purchase price would be calculated by taking the notional value of the site as it stood and then deducting from that value the cost of the work necessary to return the site to a clean and serviced condition. I shall call such works “the necessary rehabilitation works”. The calculation of the appropriate deduction would therefore take into account potentially expensive works, such as the resolution of the methane gas problem, and the provision of public utilities for the site (as opposed to the individual properties), including foul and surface water drainage. The calculation of the deduction would also include the costs of the Link Road.

Of course the difficulty was that many of these costs could not be accurately ascertained in December 1999, because the precise scope of the necessary rehabilitation works had not been defined. It appears that the parties decided that the best way of dealing with this problem was to calculate the initial purchase price by taking the notional value as the starting point, and deducting from it an estimated figure for the costs of the necessary rehabilitation works. These were referred to as “benchmark costs”, and they were designed to represent the parties’ best estimate of the costs of those works at the time that the Sale Agreement was entered into. However, those benchmark costs would be capable of adjustment, when greater certainty was possible, and that adjustment would, in turn, lead to an adjustment in the purchase price. That is the genesis of the clause 7A mechanism.

In order to calculate the benchmark costs, it was necessary to identify with as much precision as possible the scope of the necessary rehabilitation works. As noted above, one way in which this was done was the preparation of the Bill of Quantities by Denis Wilson Partnership, the Quantity Surveyors engaged by RMC. Volume 4 of those Bills related to the Link Road. There is some suggestion that the Bill was not entirely comprehensive; as noted above, at the end of November 1999, a document, apparently produced by Davis Langdon Everest, quantity surveyors engaged by Persimmon, and entitled ‘Calculation of Abnormal Deductions’, included a variety of figures for the costs of the Link Road, and the other rehabilitation works. This document may have included some items which were not in the DWP Bill.

On 20 December 1999, Mr Barrett (of the second defendant) sent a memo to Mr Aitken (of the first defendant) summarising the discussions with Persimmon. The important parts of this memo read as follows:

“The purchase price for the sale is £29,892,372. This is to paid in 7 instalments. It is based on a Gross Land Price of £45,830,872, which equates to £587,500 per net acre (78.01 net acres)…

The Purchaser’s costs are to be deducted from the Gross Land Price. These are to be calculated within 6 months of the sale agreement. An estimation has been made of these in Schedule 5 of the Agreement of £15,938,500 to give the purchase price. If the costs are different after 6 months then there will be an adjustment of price. The schedule 5 costs are deliberately low so as to focus everyone’s minds to keeping them low. However I do anticipate them increasing to near the Persimmon’s figures of £19.7m, which would reduce the price by about £3.8m i.e. the purchase price will be approximately £26 million. The majority of the costs will be calculated by either going out to tender to contractors or they will be figures supplied by statutory undertakers providing services and so will be the lowest achievable. The remaining costs will be calculated with the assistance of Quantity Surveyors….

The above summarises the sale contract with Persimmon. I believe that it is a very good deal for RMC and I would recommend progressing. I should be grateful to receive your approval…”

THE TERMS OF THE SALE AGREEMENT

I set out below the clauses of the Sale Agreement relevant to the present issues between the parties.

The following definitions are important:

Clause 2 provided for the sale by RMC to Persimmon of the site in consideration of the purchase price. Clause 3.4 made plain that the site was sold:

“…. together with and subject to the rights covenants obligations conditions and other matters contained or referred to in the 106 Agreement and in the transfer of each Parcel…..the Purchaser will covenant to observe and perform the covenants obligations conditions and other matters therein contained and will fully and effectively indemnify the Vendors against all actions proceedings damages, claims and expenses which maybe suffered or incurred by the Vendors or their successors entitled in respect of any breach or non-performance or non-observant thereof”

As noted above, the site was divided up into a number of parcels, 1-7, and other areas such as the Link Road. The total sum to be paid in relation for these parcels was £29,892,380, as set out in clause 7. At that time, the purchase price was to be paid in instalments, when each of the seven parcels was released. The release dates in clause 7 ran from 7.1.2000 to 7.1.06; in other words, one of the seven parcels was to released at the start of each year for a total period of seven years.

Clause 7A then dealt with the potential adjustment to the purchase price as follows:

“7A.1. Within 6 months of the date hereof the parties shall endeavour to agree final figures for the Costs (the figures in the table of Costs being provisional estimated figures) and the parties shall have regard to any projected increase in the Costs due to the time period for the incurring of Costs in any such agreement and if such figures are not agreed by the end of such period of 6 months then the determination of the outstanding Costs (any projected increase thereof as above) shall be referred to an Independent Engineer…”

Clauses 7A.2-7A.5 were all concerned with the procedure and consequences of the determination by the independent engineer. Any such engineer’s determination was said to be “final and binding on the parties”. The clause continued:

“7A.6. Following the agreement or determination of the Costs the Price for the Property shall be adjusted by a sum equal to the difference between the total of the Costs so agreed or determined and the total of the Costs set out in the table under the column “benchmark costs” (to the effect that if the final figure for Costs is more than the figure for the benchmark costs the Price shall be reduced by the amount of the difference and if the final figure for Costs is less than the figure for the benchmark Costs the Price shall be increased by the amount of the difference.

7A.7. The Price adjustment shall be proportioned equally between the various Parcels and (in respect of a Price adjustment of any Parcel the transfer for which has been completed) the Purchasers shall pay to the Vendors such sums as is due to the Vendors for that Parcel if the Price has been adjusted upwards and vice versa if the Price for that Parcel has been adjusted downwards but in either case without interest.

7A.8. The parties shall use all reasonable endeavours to keep the Costs to a minimum which is commensurate with and in accordance with all necessary approvals for the Development.

7A.9. In the event of the Costs being determined by an Independent Engineer pursuant to the provisions of this clause the Independent Engineer shall not have regard to the sums of money referred to in the Fifth Schedule as benchmark costs”.

Clause 12 was entitled ‘Post Exchange Works’ and was designed to allow certain remediation works to be carried out by RMC. Clauses 12.2 and 12.3 were in these terms:

“12.2

The Vendors shall make available at no cost to the Purchaser such void space located within the Extraction Area for the deposit of surplus remediation materials arising from such parts of the Property as are remediated by the Purchaser and the Vendors shall provide the haulage for such surplus remediation materials at no cost to the Purchaser and the Vendors shall remediate the void space all in accordance with the Purchaser’s reasonable requirements subject to there being sufficient capacity within the void space and provided such deposit and remediation is in accordance with any licence consent or permission that is necessary to permit such activity.

12.3.

In so far as there is an excess of such surplus remediation materials over the capacity of the void space the Vendors shall haul away and dispose of such surplus remediation materials at its own expense”.

Clause 13 was entitled ‘Compliance with Planning Permission’. The relevant parts were as follows:

“13.1.

The Purchaser agrees with the Vendors to carry out the development in accordance with the Planning Permission and the 106 Agreement subject to the variations agreed with the Vendors (acting reasonably).

13.2.

The Purchasers shall keep their Vendors fully informed in connection with its applications for approval by the appropriate authority of any reserved matters required by the Planning Permission or the 106 Agreement.”

The other provision which has loomed large in this trial is clause 14A, headed ‘Approvals’. It is necessary to set out the clause in full:

“14A.1. In this clause ‘Approvals’ means:

a)

Any drainage agreement which is required from Southern Water Services Limited relating to provisions of foul and surface waters sewers and main water supply forming part of the Development.

b)

Any Approval which is required from Hampshire County Council or Gosport Borough Council as the Highways authority relating to the construction and dedication of the Link Road and other highway works forming part of the Development.

c)

Any drainage discharge approval which is required for the Development being secured from the Environment Agency.

14A.2. The Vendors [i.e. RMC] shall use all reasonable endeavours to procure the Approvals within 5 months of the date of this agreement.

14A.3. The Purchaser [i.e. Persimmon] shall be entitled to assume responsibility for negotiations as necessary to procure any Approvals that have not been procured by the Vendors under 14 A.2.

14A.4. The Vendors shall bear the Purchasers reasonable and proper costs (including the costs of consultants employed by the Purchaser) incurred as a result of the Purchaser taking over negotiations and procuring any Approvals pursuant to clause 14A.3.

14A.5. The Vendors shall bear any additional or reasonable proper costs of works required by any Approval to the extent that such work has not been taken into account in the calculation of the Price (or vice versa if the reasonable and proper costs of such works is less than any allowance in respect of such works made in the calculation of the Price) with any dispute to be referred to and any Independent Engineer on the same basis as set out in clause 7A”.

Clause 16 was entitled ‘Completion of Mineral Workings’. Clause 16.2 provided:

“The Vendors shall indemnify the Purchaser from and against all matters actions proceedings damages costs claims expenses and liabilities whatsoever and howsoever arising from the Vendors’ continuing operations at the property as from the date of this agreement.”

Clause 35 was entitled ‘Co-Operation’. It provided:

“The Vendors and the Purchaser acknowledge that this agreement is entered into inter alia to facilitate the Development by the Purchaser and to enable the Vendors to complete their existing operations on the Property. The Vendors and the Purchaser agree to co-operate with each other to achieve these objectives and will in particular (but without limitation):

35.1.

respond promptly to requests properly made by the other party for approvals information or assistance under this agreement;

35.2.

grant and accept promptly such additional rights and undertakings as are reasonably required by the other party;

unless by doing so either the Purchasers Development of the Vendors existing operations shall be adversely affected”.

Finally, it is necessary to refer to the Fifth Schedule, which is the ‘table of Costs’ referred to in Clause 7A (paragraph 37 above). This set out eleven numbered items of work, each of which had a benchmark cost figure. These were the necessary rehabilitation works. The total of the benchmark costs was £15,938,500. Item 1 of the Fifth Schedule, with a benchmark cost of £3,200,000, was described as “the Link Road constructed to a specification which accords with any approval which is required by the highways authority”. Another item related to the Link Road was item 8 (“acoustic barriers and noise insulation outside the development site arising from the construction and use of the Link Road)” in the sum of £3,500.

Item 2 of the Fifth Schedule was in the sum of £1,250,000 and was described as follows:

“Provision of public utilities for the Development to the Development site boundary at point x as shown on the Plan. Provision of foul and surface water connections (including any pumping stations and balancing facilities) connected to all points on the boundary to the Development west of the Link Road to service the Development the positions to be in accordance with drawings approved by Southern Water. Public Utilities are water, electricity, gas, telecom, cable and service diversions as provided by any statutory undertaking where appropriate”.

In addition, item 6 of the Fifth Schedule was described as “balancing ponds for surface waters drainage and connection from the Development boundary” and item 11 was identified as “sewer easement release”.

Although the bulk of the issues in the present case arise out of the Link Road and the provision of drainage facilities, it is worth noting that over £9m of the total figure for the benchmark costs was made up of items 3, 4 and 5 of the Fifth Schedule, which compromised the works necessary to address the problem of the methane gas. The direct costs of the methane gas remediation work itself were estimated at a benchmark figure of £8,200,000.

There appeared to be little between the parties as to the principles of construction of commercial contracts relevant to this dispute. In my judgment, those which are most applicable to the present dispute are the following:

This mechanism is set out at paragraph 37 above. In my judgment, it is important, first, to consider the context of this mechanism and then to identify some of its particular features.

The context of the price adjustment mechanism at Clause 7A of the Sale Agreement was this. Most contracts for the sale of land have a purchase price which is paid on the date that the land is conveyed to the purchaser. For the reasons set out above, this was not possible here, because the price depended on the deduction of the actual or estimated costs of the work necessary to render the site as clean, serviced land, and the precise scope of some of those items of work was uncertain as at December 1999. For example, although it appeared that the approval of the Link Road by Hampshire was imminent, it had not yet been granted. Thus, as at the 19 December 1999, the parties could not agree a finalised costs figure to be deducted from the gross value of the land, and they could not therefore agree a fixed purchase price.

However, it is plain to me that clause 7A operated on the basis that both parties intended that the figure for costs would be finalised within 6 months of the sale, so that an agreed purchase price could be fixed as quickly as possible. That explains the reference to the 6 months in clause 7A.1, and the prompt timetable required of the independent Engineer (who had to deal with any disputed items) set out in clauses 7A.3 and 7A.4. Therefore, whilst the costs figure for the necessary rehabilitation works, and thus the price, remained uncertain as at the date of the Sale Agreement, the parties were operating on the basis that both the costs, and therefore the price, would be fixed within 6 months or so of the date of the Sale Agreement.

This is important when considered against the background of the proposed development. As noted above, the proposed development was going to last in excess of 7 years; at the time it was entered into, the parcel of land relevant to phase 7 would only be provided to Persimmon on the 7 January 2006. Accordingly, on the proper construction of clause 7A, I conclude that the parties intended to agree the costs, and therefore the purchase price, long before the works at the site had been completed by Persimmon.

How could they do that in circumstances where the costs of those works would not be known (at least with complete precision) for years? The answer can again be found in clause 7A.1. The clause envisaged that the parties would agree “final figures for the Costs” within 6 months of the Sale Agreement. They were therefore agreeing that the final figures would be based upon their best estimate of the likely future costs. That estimation and agreement of future costs is what 7A.1 envisaged: it expressly referred to the parties having regard to “any projected increase in the Costs due to the time period for the incurring of Costs”. Moreover, if such an agreement was not possible between the parties, then clause 7A.1 expressly envisaged that the binding determination of the outstanding costs by the independent engineer would also include “any projected increase” in those outstanding costs.

Accordingly, it is clear that clause 7A envisaged a situation in which the parties would either agree (or have determined by an independent engineer), long before the works had been completed, a figure for the costs of the necessary rehabilitation works, and therefore a final purchase price. As we shall see, subject to two particular areas of work (which were the subject of express exceptions), this necessary agreement was precisely what the parties went on to achieve in 2001, rather longer than the six months envisaged in clause 7A.

Furthermore, I am in no doubt that this mechanism was designed to fix figures for the costs, and therefore the price, which were both final and binding. There were two options open to the parties: either the costs would be agreed, or they would be determined by the independent engineer. Clause 7A.5 made plain that the independent engineer’s determination “shall be final and binding on the parties”. In those circumstances, it seems to me that, once the costs of the necessary rehabilitation works, and therefore the price, had been fixed, either by agreement or by a determination of the independent engineer, those costs and that price could not be opened up. Subject to any other part of the Sale Agreement which might provide to the contrary, they would be final and binding.

The other area of contention in relation to clause 7A concerned the precise definition of the works included within some of the eleven items in the Fifth Schedule. On behalf of RMC, Mr Keith argued that the scope of the work within those items in the Fifth Schedule was to be construed by reference to a variety of non-contractual documents. The best example of this part of his submissions is, perhaps, item 1 in the Fifth Schedule, namely the Link Road. RMC’s submission was that the works that were included within this item were those works which were set out in the First Schedule of the section 106A agreement, and/or the DWP Bill of Quantities and/or the DLE Schedule entitled ‘Calculation of Abnormal Deductions’. Mr Wilmot-Smith QC, on the other had, contended that the words in item 1 meant what they said and that the works included within that item were those works in the specification approved by Hampshire County Councils acting as Highways Authority.

I consider that Mr Wilmot-Smith QC’s submission on this point must be right. The words in item 1 of the Fifth Schedule cannot be read as referring to anything other than the works contained within the specification (which had not yet been but was about to be) approved by Hampshire County Council as the Highways Authority. That is what the words say. I consider that it would be quite wrong in principle to construe the workscope encompassed within item 1 of the Fifth Schedule, or any of the other items within that schedule, by reference to documents which were not part of the Sale Agreement and were not even referred to anywhere within the Sale Agreement itself. I quite accept that those documents may provide a guide as to what the parties envisaged would be contained within the works at item 1, and which were the subject of the benchmark cost of £3,200,000, but, so it seems to me, the definitive guide to the scope of works included within the item must be the approved specification.

Of course, at the time of the Sale Agreement, it was envisaged that the specification would be approved promptly by Hampshire County Council. That would therefore have meant that, following the approval, pursuant to clause 7A, the parties would then endeavour to agree a figure for those works, and failing agreement, that figure would have to be determined by the independent engineer. All of that seems to me to be entirely sensible and in accordance with commercial reality.

Accordingly, by way of summary, I make the following findings about clause 7A:

For the avoidance of doubt, I reject Mr Keith’s submission that there was, in some way, a contractual differentiation between “normal costs” and “abnormal costs”. The words “abnormal” can only be found in the calculation document prepared by DLE which was not a contractual document. They do not appear anywhere in the Sale Agreement. In any event, I consider that all the author intended to convey, by his use of that word, was that these were costs which were abnormal, in the sense that they were costs required to get the land back to a ‘normal’ condition (i.e. to a clean and serviced state).

Relationship with Clause 7A

The principal issue between the parties arising out of the construction of the Sale Agreement concerned clause 14A and, in particular its inter-relationship with clause 7A. On behalf of Persimmon, Mr Wilmot-Smith QC maintained that clause 14A was a separate, stand-alone provision which entitled Persimmon to claim additional monies as a result of carrying out work required by any of the approvals identified in clause 14A.1, regardless of any final agreement or determination under clause 7A. He said that, provided that it could be shown that the actual cost of carrying out that work (ie work required by any of the approvals) was less than had been calculated for the purposes of ascertaining the purchase price, Persimmon were entitled to make a claim, whatever the position under clause 7A. This was a construction of clause 14A which, as we shall see, occurred belatedly to Persimmon long after it appeared that almost all the financial disagreements between the parties had been settled.

It is worth examining the consequences of this argument in a little more detail. If it were right, it would have this effect. Persimmon could agree with RMC the final cost of carrying out, say, the Link Road, or that figure could have been the subject of a determination under clause 7A by the independent engineer. That agreed or determined figure would have included the best estimate of what the actual costs were likely to be if, as was overwhelmingly likely, the works had not been completed at the time that the figure was agreed/determined. Any such agreement or determination in accordance with clause 7A, including any element of projected (ie future) costs, would be final and binding. Yet, on Persimmon’s construction of clause 14A, the entire figure could be opened up by a subsequent claim for further monies much later on, every time Persimmon maintained that the actual cost of doing the work was in fact greater than the figure they had earlier agreed, or which had been determined by the engineer, under clause 7A. Thus, although the figure would somehow be final and binding for the purposes of clause 7A, it would not actually be final and binding at all. As Mr Wilmot-Smith QC candidly accepted, on his construction of clause 14A, any agreement or determination under clause 7A was thereby rendered “irrelevant”.

I have concluded that this construction of the Sale Agreement is incorrect. There are two principal reasons for that conclusion.

First, I consider that a sum would only be paid pursuant to clause 14A.5 if the relevant costs “have not been taken into account in the calculation of the Price”. It seems to me plain that, if the parties had agreed an amount for a particular element of the works under clause 7A, or that figure had been determined by the independent engineer under clause 7A, then such figures had been “taken into account” in the calculation of the purchase price. It could not subsequently be re-opened in the general way contended for by Mr Wilmot-Smith QC.

In other words, the reference in clause 14A.5 to ‘the calculation of the Price’ was an express link back to clause 7A. Thus, if a figure had been agreed or determined under clause 7A for a particular element of the works (such as, say, the Link Road), then those works had been taken into account in the calculation (and the fixing) of the purchase price. In those circumstances, subject to the limited exception identified below, no further claim could be made under clause 14A.5.

Secondly, I consider that this is the only sensible and commercial way in which clause 7A and clause 14A can be made to work together. It seems to me that it is a nonsense to suggest that the parties could spend months negotiating and agreeing the costs of the necessary rehabilitation works, and therefore the fixed price under clause 7A, (which negotiations would take into account the projected future costs of the works), only for the entirety of those negotiations and any agreement reached to be set aside years later, when a claim was made by Persimmon under clause 14A. Indeed, any other interpretation would render clause 7A of little or no purpose, because on this analysis any agreement reached pursuant to clause 7A, or any determination by the independent engineer, would not fix the parties’ respective financial positions. Any agreement/determination would ultimately be of no consequence if the whole process could be effectively opened up under clause 14A. I cannot accept that is what the parties intended and I cannot agree that that is the natural meaning of clause 14A. In accordance with the principle of construction outlined in paragraph 46a) above, it is important to construe clause 14A in the context of the contract as a whole.

The impracticality of Persimmon’s interpretation can be demonstrated by way of an example, the detail of which is relevant to Claim Item 22 dealt with at Section K24 below. In the present claim, Persimmon pursue a declaration that they are entitled to additional sums under clause 14A.5 by way of inflation costs. The evidence demonstrates that, in June 2001, the parties agreed a figure under clause 7A (subject to two exceptions which are immaterial for present purposes), in the sum of £19,400,000. That sum was expressly said to include an “allowance for inflation, increase costs etc”. That allowance was in the (large) figure of £4,204,586. In addition to that, there was a contingency amount of £803,315. These were added to the costs figures and therefore reduced the purchase price payable by Persimmon. They were therefore figures in respect of which Persimmon have had the (considerable) benefit.

If Persimmon’s construction were right, then it would be necessary for the new claim for inflation costs (first made in February 2006) to be considered under clause 14A.5, even though it had, on the face of it, been settled years before. The first thing that Persimmon would need to do is to demonstrate that any claim for further sums under this head had not been allowed for and included in the figures that I have set out above. But that would be impossible to do, because there is nothing to indicate how these global figures were made up. Why? Because I find that the parties did not contemplate for a minute that these global figures, which they had agreed to be final and binding, would ever be opened up or be reconsidered. I am confident on the evidence that the parties operated clause 7A, (and thus clause 14A), in the way which I have indicated. Any other conclusion would produce a manifestly unfair result for which there are no clear words in clause 14A, contrary to the principle of construction outlined at paragraph 46c) above.

The Purpose of Clause 14A

In my judgment, Mr Keith was right to submit that clause 14A was designed to deal with a very limited financial adjustment process, which might only come into play once the purchase price had been fixed. It was designed to accommodate any extra items of work that could not have been envisaged at the time of either the Sale Agreement, or any subsequent agreement/determination under clause 7A, because the item of work in question was a previously unheralded requirement of Southern Water (clause 14A.1(a)) or Hampshire County Council (clause 14A.1(b)). It was designed to ensure that, when a relevant approval was granted after the Sale Agreement, or after any final agreement or determination under clause 7A, if that approval required some particular element of work that nobody had ever thought would be necessary, and which was not therefore included in the agreed/determined figure for the costs of that particular element of the necessary rehabilitation works (and therefore the fixed purchase price), Persimmon would be able to go back to RMC and claim that that unforeseeable item of cost should be reflected in a further financial adjustment between the parties. In those limited circumstances, it would be appropriate to make the adjustment, regardless of any agreement or determination under clause 7A, because the item of work which triggered the claim was something which was unforeseen by both parties and had not, therefore, been taken into account at the time that the purchase price was fixed.

It seems to me that this is the natural meaning of the words used by the parties in clause 14A. It also makes commercial sense. As I have indicated, the impetus behind Clause 7A was speed: the prompt fixing of the costs and therefore the price. That impetus can also be found in clause 14A; for example, at clause 14A.2, Persimmon were obliged to use all reasonable endeavours to procure any outstanding approvals “within 5 months of the date of this agreement”. It seems to me that that was an attempt to dovetail in with the six month period under clause 7A. In other words, the intention was that, if at all possible, any financial adjustment required by clause 14A was identified and taken into account when the costs (and therefore the price) were fixed under clause 7A. That again provides a further link between the two clauses and demonstrates that they must be taken to operate together in the way that I have indicated.

As I have said, clause 14A was wide enough to cover the situation where, contrary to the 5 month intention, relevant approvals were granted after the price had been fixed following an agreement or a determination, which approvals required some element of unforeseen work. In those limited circumstances, depending on whether or not the other provisions of clause 14A were triggered, Persimmon would be entitled to go back to RMC for additional monies. And I should say that, if the relevant approval rendered an element of the rehabilitation works unnecessary, even though it had already been allowed for under clause 7A, it would allow RMC to seek repayment of the relevant sums from Persimmon: in my judgment, that is the only significance of the passage in brackets in clause 14A.5 (see paragraph 40 above). For all the reasons which I have given, I consider this to be a reasonable and commercially sensible result. Again, the evidence demonstrates that that is how the contract was operated by the parties at the time.

Which Approvals?

There was a major dispute as to which approvals were or might be caught by the words of clause 14A. That debate broke down into two parts; first whether it related to all approvals, even those that were already in existence at the time of the Sale Agreement; and secondly, which approvals were the relevant approvals under clause 14A.1 (a) (in respect of drainage) and clause 14A.1 (b) (in respect of the Link Road).

I am in no doubt that the approvals identified in clause 14A, which triggered an entitlement to make a claim for further sums, were approvals which did not exist at the time of the Sale Agreement. I say that for a variety of reasons. First, the approvals which are the subject of clause 14A were approvals in respect of which RMC had to use all reasonable endeavours to procure within 5 months of the Sale Agreement. That presupposed that the approvals had not yet been procured; that they did not exist at the time of the Sale Agreement itself. I consider that that view is confirmed by clauses 14A.3 and 14A.4, which allowed Persimmon to assume responsibility for the negotiations to procure those approvals if, after 5 months, they had not been procured by RMC. In addition, clause 14.A.4 allowed Persimmon to make a claim for the costs incurred in relation to those negotiations. That entire mechanism only makes sense if the approvals which were the subject of the clause had yet to be obtained.

Secondly, I consider that that is the appropriate reading of the words “is required” in clause 14A.1. Those are not the obvious words to use if it was intended that the clause would also cover approvals that already existed. Indeed, it would appear that that much was originally accepted by Persimmon, who pleaded at paragraph 6 of their Particulars of Claim that clause 14A related to approvals “not yet obtained”. Still further, for the reasons which I have explored above, I do not consider that it would make commercial sense for clause 14A to relate to approvals which already existed. If an approval already existed, then the works required by that approval were known and had to be agreed/determined for the purposes of clause 7A, with a proper allowance for the estimated future costs. It would be absurd if an approval which predated the Sale Agreement, and which required the carrying out of an item of work of which Persimmon were aware, but which they had wholly failed to include either within the Fifth Schedule or within any subsequent agreement/determination under clause 7A, could allow them to come along years later and make a claim under clause 14A. In my view, that is not what the clause was designed to provide.

As to clause 14A.1(b), there was a considerable amount of debate as to whether this clause was intended to refer to approvals from Hampshire County Council acting as the Highways Authority, as opposed to approvals which emanated from Gosport’s planning requirements. I take the view that clause 14A.1(b) was designed to refer to approvals emanating from Hampshire in their role as the Highways Authority: that is what the words in clause 14A.1(b) say. The clause was not intended to cover any permissions, approvals or consents emanating from Hampshire acting, not as the Highways Authority, but as Gosport’s consultee in the planning process, a distinction which Mr Edgley of Persimmon accepted in his evidence. Indeed, I accept Mr Keith’s submission that the approvals which are identified as triggering a claim under clause 14A.1 deliberately omitted any reference to planning approvals. He rightly contrasted the definition of approvals in clause 14A.1 with the equivalent definition in the original Lock-Out Agreement (see paragraphs 17-22 above), where approvals were defined in a broader way, which included all planning approvals.

Of course, by the time of the Sale Agreement, outline planning permission, subject to detailed conditions, had been granted by Gosport. I think, therefore, that, on any fair reading of clause 14A, the parties did not intend it to allow further claims in relation to planning matters, because, by the time of the Sale Agreement, the wider planning implications were understood by all and could have been the subject of agreement/determination under clause 7A. This explains why planning approvals, which had been included in the earlier definition of ‘approvals’ in the Lock-Out Agreement, were excluded from the subsequent Sale Agreement, and why Highways approval, which had not yet been given, was retained in clause 14 A. It is also another reason, of course, why I consider that the approvals relevant under clause 14A were only those approvals which were not in existence at the time of the Sale Agreement.

Persimmon sought to get round the clear omission of any reference to planning approvals in clause 14A.1 by an ingenious argument to the effect that, pursuant to clause 1.5 of the second schedule of the s.106 Agreement (see paragraph 22 above), RMC (and therefore subsequently Persimmon) covenanted with Hampshire to obtain all necessary ‘permissions’, and were therefore obliged (by Hampshire) to comply with Gosport’s planning requirements. Thus it was said that a clause 14A.1(b) approval indirectly included all of Gosport’s planning requirements. I consider that argument to be a blatant attempt to avoid the consequences of the clear omission of such planning requirements from clause 14A.1 and an untenable construction of both the s.106 Agreement and the Sale Agreement. An approval under 14A.1(b) was an Highways approval from Hampshire, not a planning permission from Gosport. In any event, clause 1.5 of the second schedule of the s.106 Agreement was concerned only with obtaining ‘statutory consents or permissions’ and was not concerned with any work carried out in compliance therewith.

Finally on this point, it is important that the construction of clause 14A.1 is not carried to artificial, and therefore uncommercial, lengths. Take clause 14A.1(b) as an example. As I have indicated, approvals under clause 14A.1(b) were approvals from Hampshire acting as the Highways Authority. Obviously, there were times when that approval will have encompassed a particular element of the proposed works which had been required by Gosport as planners, or which had always been intended by Persimmon. If Hampshire’s approval document contained or referred to items of work that could be traced back to the original planning permission, or the original scope of works intended by Persimmon, then it could not sensibly be argued that the works were required by Hampshire as the Highways Authority at all, much less required by reference to an approval which post-dated the Sale Agreement. Conversely, there may be examples where the approval from Hampshire encompassed a planning requirement which was new, and which post-dated the Sale Agreement. It would then be an issue of fact as to whether the works triggered by that approval were required by an approval from Hampshire as the Highways Authority (which would be covered by Clause 14A.1(b))or whether the work was required, as a matter of fact, by a planning requirement from Gosport (which would not obviously be within clause 14A.1(b)).

‘Required’

I have, in the preceding paragraphs, touched upon the final issue of construction that arises out of clause 14A. The work, the cost of which is the subject matter of any claim pursuant to clause 14A, must be required by one of the clause 14A.1 approvals; in other words, as a constituent part of their claim, Persimmon must demonstrate that, but for the approval in question, this item of work would not have been carried out. One of RMC’s repeated complaints, which I consider to be well-founded, is that Persimmon have made claims for extra money under clause 14A whenever the work in question is referred to within a drainage agreement with Southern Water, or an approval by Hampshire County Council, regardless of how it was that the item in question came to be there. In other words, Persimmon have assumed that, merely because a reference to a particular element of work can be found in an approval from Hampshire or an agreement with Southern Water, that element of work was somehow required by that approval or agreement.

In my judgment, Persimmon’s case on this aspect of the dispute completely misses the point of clause 14A. It was designed to allow claims for extra costs when a particular approval or drainage agreement required a specific element of work which was unforeseen (and therefore not included within the calculation and fixing of the purchase price). It was not designed to allow a claim every time a particular element of the work was included within an approval or a drainage agreement: the work had to be required by the approval or drainage agreement, not simply referenced within it. Indeed, on Persimmon’s case, since all important elements of the Link Road would be the subject of Hampshire’s formal approval as Highways Authority, they might all trigger claims for extra cost, merely because they were included in the drainage agreement or approval, which is not what clause 14A said and is not a sensible interpretation of these provisions.

Take, by way of example, the design and construction of the balancing pond, just to the east of the site. This was an integral part of the surface water drainage scheme. The requirement for this work was known about from the outset, and the balancing pond was a separate, stand-alone item within the Fifth Schedule. Even if (which is in fact disputed) the existence and use of the pond was later reflected in a drainage agreement with Southern Water, that does not mean that the drainage agreement required the balancing pond: on the contrary, the pond was always an integral element of these works from the outset. Thus, contrary to Persimmon’s case, clause 14A did not provide a route whereby they could make a second claim in respect of all the major elements of the necessary rehabilitation works, which were already the subject of the clause 7A mechanism.

On 24 July 2000, the parties reached a Variation Agreement relating to the site. Clause 1 made clear that the parties were “endeavouring to agree final figures for the Costs as provided in clause 7A.1” and they agreed to extend their time for doing that to 1 August 2000. If they did not reach agreement by then, they agreed that they would extend time “on a rolling monthly basis to the First day of each succeeding month PROVIDED both parties agree that the period in which both parties shall endeavour to agree final figures for the Costs shall be extended”.

It therefore seems to me clear that, in the months after the Sale Agreement, the parties were endeavouring to reach finality as to the costs of the necessary rehabilitation works, and therefore the purchase price, all in accordance with my interpretation of clause 7A set out above.

The consultants advising Hampshire County Council issued one of a number of Detailed Design Check Reports on 8 September 2000. This indicated that, following meetings on 9 and 21 August 2000, and the provision of revised drawings, “all outstanding issues have been resolved and the [Link Road] scheme can now be given detailed design approval”.

Hampshire County Council’s approval in relation to the Link Road was confirmed on 24 November 2000 when, in a letter to Denis Wilson Partnership, they said that “detailed design approval has been given for the submitted Link Road scheme”. It should be noted that, at this stage, the approval was limited to the northern section, because of the planning difficulties with the southern section which were not resolved with Gosport for some time. But there was no evidence that, when technical approval for that latter section was granted by Hampshire in July 2005, there was any significant difference in the specification of the Link Road itself.

The principal purpose of the Supplemental Agreement of 22.12.00 was to do away with the staged completion in relation to the seven separate parcels of land. Under this Supplemental Agreement, the completion date for parcels 1-7 inclusive was made 7 January 2001. Thus, the majority of the site was conveyed to Persimmon on that date.

In this way, the phasing, which had been such a big part of the Sale Agreement, was therefore done away with by the Supplemental Agreement. However, it appears that Persimmon continued to pay the purchase price in instalments.

The Supplemental Agreement made reference to clause 7A (as varied by the Variation Agreement) but only to say that this provision continued to apply. However, in the light of the changes to the conveyancing of the site, and the imminent payment of the outstanding instalments of the purchase price, the parties continued to endeavour to reach agreement as to the costs, so that the purchase price might be fixed.

It is plain that there were detailed negotiations in late 2000/early 2001 in order for the parties to agree the costs of the items set out in the Fifth Schedule. There is a schedule, dated 21 December 2000, which goes through a breakdown of each of the outstanding items and arrives at a figure for costs of £14,392,099. To that is added a contingency of £803,315and a further sum of £4,204,586, to reflect “an allowance for inflation and increased costs”. That made a total for the Fifth Schedule items of £19,400,000. This is to be compared to the figure of £15,938,500 in the Fifth Schedule of the Sale Agreement. It is also worth noting that that figure is very similar to the figure of £19.7 million, which was Persimmon’s original estimate and which was acknowledged as realistic by Mr Barrett in his memo of 20.12.99, identified in paragraph 32 above.

In addition to the Highways Approval (paragraph 82-83 above), a number of other approvals were provided in the latter part of 2000/early 2001. These were the subject of Mr Keith’s detailed cross-examination of Mr Allen Smith, Persimmon’s Managing Director, on the second day of the hearing, and it is unnecessary for me to set out all the relevant references in this Judgment.

There was evidence at the trial that, by mid 2001, the important approvals had all been provided. I refer again to the evidence of Mr Allen Smith, who expressly confirmed that, save for matters relating to the two exceptions, with which I deal in some detail below, there were no outstanding approvals.

On 11 June 2001, the parties signed a Settlement Agreement. The terms were recorded in a letter from RMC to Persimmon and stated as follows:

“We confirm that in accordance with clause 7A of the Agreement the figure of the Costs (as defined in the Agreement but excluding those in relation to the Link Road (as also defined in the Agreement) and the siting of the balancing ponds and the foul pumping station) has been agreed at £19,4000,000 and that for the purposes of clause 7A.6 of the Agreement the Price has been reduced by £3,461,500 provided that a further adjustment shall remain to be agreed or determined pursuant to clause 7A of the Agreement in relation to;

i)

the siting and specification of the balancing ponds and the foul pumping station; and

ii)

any re-siting of or amendment to the specification for the Link Road arsing from the grant of technical approval/planning permission for the Link Road”

It is clear that, with the exception of the two numbered items referred to in the letter, (which I shall call “the first exception” and “the second exception” respectively) the effect of this Settlement Agreement was to arrive at a fixed figure for the costs of the necessary rehabilitation works, namely £3,461,500, and therefore a fixed purchase price. The agreed sum reflected precisely the schedule referred to in paragraph 87 above.

Mr Wilmot-Smith QC submitted that, although (save for the two exceptions) this Agreement provided a fixed figure for the costs and therefore for the purchase price, this had no effect on Persimmon’s ability to make later claims under clause 14A, because clause 14A was not expressly mentioned in the Agreement. That submission was, of course, based in large part upon his submission, which I have already rejected as a matter of construction, that there was no real link or connection between clause 7A and clause 14A, and that they operated separately from each other. I have already said that, in my judgment, it is contrary to both the words of clause 14A and to the commercial sense of the Sale Agreement to suggest that the parties had reached an agreement under clause 7A in respect of the cost of an element of the necessary rehabilitation work, only to have that agreement unpicked by a subsequent claim, for precisely the same element of work, under clause 14A.

Mr Wilmot-Smith QC is right to point out that there is no reference to clause 14A in the Settlement Agreement. However, in my judgment, there was no need for such a reference. First, as I have already explained, clause 14A was only triggered at all if the cost of the work in question had not been taken into account in the calculation of the price under clause 7A. Since, save for the two exceptions, the Settlement Agreement was doing just that, it meant that any relevant claims under clause 14A were settled at the same time. Furthermore, I again consider that that was not only entirely in accordance with contractual common sense, it was also consistent with what actually happened. The conduct of the parties in reaching this Settlement Agreement, with no hint or suggestion that, apart from the two exceptions, it was not final and binding, can only be explained on the basis that (save in relation to the two exceptions) they thought they were reaching a final and binding agreement as to all outstanding financial matters between the parties. Furthermore, their conduct thereafter, in addressing the two exceptions and not even attempting to open up the payment agreed for the remaining elements of the necessary rehabilitation works, is only consistent with that conclusion.

The first exception to the overall settlement related to the costs of “the siting and specification of the balancing ponds and the foul pumping station”. Persimmon claimed that this wording was erroneous and that the reference to balancing ponds should have been in the singular, whilst the reference to the foul pumping station should have been in the plural. This latter point at least was important because there were a number of foul pumping stations that had to be built as part of the development of the site. No explanation was provided as to how this alleged error arose.

It is apparent that, at least at one time, it was envisaged that there might be more than one balancing pond. However, by the Settlement Agreement of June 2001, it appears clear that there was just one such pond, on the eastern boundary of the site. I am in no doubt at all that that is the balancing pond to which reference is being made in the first exception.

I reject the submission that the reference to “the foul pumping station” was in some way in error and that this should have referred to all of the foul pumping stations. It is clear from the documents that the work referred to in the second exception was the main foul pumping station, which was referred to in other documents as pumping station number 1. I am also in no doubt that that is how the parties understood it. Indeed I note that when, in December 2003, the parties were endeavouring to agree figures for these two exceptions, they both operated on the basis that this first exception referred only to pumping station number 1 (see in particular the documents attached to the letter of the 5 December 2003 from Mr Allen Smith of Persimmon to Mr Barrett of RMC).

Accordingly, I conclude that the first exception left out of the Settlement Agreement the final costs for the balancing pond and the main foul pumping station number 1. All of the other foul pumping stations located on the western part of the site were included within the Settlement Agreement.

It seems to me that, on a true construction of the wording of the second exception, what is left out of account were the costs of any work:

That again accords with commercial reality and, indeed, the parties’ conduct. I note, for example, from the schedule dated the 21 December 2000 (which arrived at the total figure of £19.4million) that the parties were able to identify precise costs for much of the work, and that the agreement of these final figures also included contingencies against a number of the items. Accordingly, it was again only the costs of unforeseen changes, arising from subsequent approvals or planning, which had not been compromised.

From June 2001 onwards, the development continued. On 11 October 2001, Gosport Borough Council gave planning permission for the Link Road, but limited it to the northern section only. Of course, because the development was starting at the northern end of the site, the granting of planning permission for the northern end of the Link Road was sufficient for Persimmon’s purposes at that time. It appears that the planning permission was not granted for the southern section of the site because of various planning concerns which Gosport had (some of which were generated by local residents) about the nature of the junction at the southern end of the Link Road. Indeed, that planning consent was not provided until 16 August 2004.

During 2003 there were regular discussions between the parties’ respective quantity surveyors in order to try and reach agreement in respect of the two exceptions under the Settlement Agreement. As I have previously noted, it appears that the parties were trying to settle what they regarded as their outstanding financial rights and liabilities, with no thought that clause 14A somehow provided a legitimate way of reopening the final financial position under the Sale Agreement. No separate mention of, or reliance upon, clause 14A was indicated by Persimmon in the run-up to the December 2003 agreement.

The subsequent agreement in December 2003 is reflected in a letter from Allen Smith of Persimmon to Mr Barrett of RMC dated 5 December 2003. The relevant parts of the letter said this:

“During 1999 there were numerous meetings between our two company’s regarding the calculation of abnormal deductions at the Cherque Farm Development. In December 1999 costs as estimated by Persimmon Homes amounted to £19,893,080. This figure included a contingency of 5%. It is my recollection that as a number of the items costed on the Persimmon Homes schedule were still the subject of negotiation and a number of major items still needed technical approval. It was agreed that the total figure for the costs deductibles to be included in the purchase contract would amount to £15,938,500. The contract allowed for an adjustment to the deductible costs in relation to the balancing pond, the Link Road and the main pumping station and associated off-site drainage.

It has taken a considerable amount of time to gain technical approval of these three major infrastructure items and indeed we are still waiting for full technical approval of the southern section of the Link Road.

During the course of 2003 Mark Cooper has been in regular contact with Andrew Tate of Courdrouys, your appointed surveyors. As a result of these discussions, it has been our understanding that Andrew Tate had agreed figures for the additional costs in relation to the balance of the pond and the pumping station and sewers which he was prepared to submit to you for your approval. The agreed settlement figure in relation to these two items was £657,617 and we therefore submitted an invoice to you for the sum of £650,000 on basis that the balance could be settled at a later date when we have reached agreement over the Link Road.

I enclose schedules which explain the thought process behind the agreement reached with Andrew Tate. You will note that within the schedules are exclusions which were made following an agreement with Andrew that such items could be dealt with when the final figure for the Link Road is agreed.

I understand that you have expressed an interest in agreeing a figure for the Link Road this year. However, I am reluctant to do this as we are still awaiting final technical approval on the southern section and achieving this technical approval could result in considerable and additional costs.

Whilst we have not reached agreement with Andrew over the final cost for the Link Road it has been subject to a considerable discussion with him and I enclose a schedule of costings that have been accepted in principal but I must stress do not form the basis of a final settlement….”

The schedule which was attached to the Settlement Agreement of December 2003 was divided into three parts: pumping station number 1; the balancing ponds; and the Link Road (called, in this schedule, the ‘Distributor Road’). In relation to pumping station number 1, it was said that there was an extra over cost of £443,391. That was in addition to the figure at the time of the June 2001 settlement. This additional amount excluded five maintenance/usage items, which were denoted with an asterisk.

Similarly, in relation to the balancing pond, the schedule made plain that there was a figure in excess of the sum in the June 2001 Settlement Agreement of £214,226. Again this was said to exclude four asterisked items, two of which were maintenance items.

As to the Link Road, the schedule demonstrated that the most up-to-date forecast costs were almost exactly the same as the sum that had been originally allowed in the Settlement Agreement of June 2001. The original allowance figure was identified at £3,952,679 and the forecast cost was £3,989,694, a difference of just over £37,000. It must of course be remembered that, by this stage, the Link Road claims had been settled by the terms of the Settlement Agreement of June 2001, save for any re-siting of or changes to the specification of the Link Road required by the relevant approval.

The evidence is that, in consequence of this letter, the relevant sum was credited to Persimmon (see paragraph 38 of the statement of Mr Andrew Smith). This was, of course, because by this stage the purchase price had been fixed and was being paid by Persimmon to RMC in instalments (which were called overage payments). That therefore meant that, to allow for the adjustment necessitated by the December 2003 Agreement, a sum had to be credited by RMC to Persimmon. That was, of course, in accordance with the payment procedure envisaged by clause 14A, although the Settlement Agreement of December 2003 made no express reference to this clause, further confirming my view that the parties were not over-particular about what clauses of the Sale Agreement they referred to in their subsequent agreements; what mattered was the agreement of the money itself.

Other evidence relating to the December 2003 Agreement included paragraphs 72 and 73 of the statement of Simon Barrett and paragraph 17 of Mr Bryant’s supplemental statement.

Having regard to all the relevant evidence, it seems to me plain that in December 2003, with the exception of the (minor) asterisked items, the parties had settled the claims in relation to pumping station number 1 and the balancing pond, those being the two exceptions identified in the Settlement Agreement of June 2001. In addition, whilst it is clear from the face of the letter of December 2003 that the parties reached no final agreement in relation to the Link Road, they had already settled everything except changes caused by the re-siting of or amendments to the specification of the Link Road required by a relevant approval (see paragraph 98 above). The documents show that they were operating on the basis that, at that time, there were few, if any, further sums to be paid by RMC to Persimmon, because the out-turn figures were estimated to be almost exactly as those original forecasted.

As noted above, permission for the southern section of the Link Road was delayed whilst Gosport sorted out their various planning objections. Permission was eventually granted on the 16 August 2004. Hampshire provided technical approval for the southern section on 22 July 2005.

However, it does not appear that the grant of the planning permission had any significant effect on the estimated costs and therefore any final adjustment in the financial position between the parties. This is apparent from a letter from Persimmon to RMC from Persimmon’s company solicitor dated the 18 January 2005. The relevant part of the letter reads as follows:

“On the question of costs, the final figure for the Link Road cannot be determined until the southern junction has been constructed, but as a ball-part figure the current estimated bill cost is approximately £3.1million.

In addition, whilst certain costs in respect of the balancing pond and the pumping station/foul sewer network had been taken into account and paid, these figures do not represent the final costs as was acknowledged by your surveyor. There could be additional costs of approximately £50,000, in respect of the balancing pond, and of £30,000 in respect of the pumping stations/foul sewer network.”

Thereafter, and for no reason which can be linked to any events on site, Persimmon’s position changed radically. On 7 February 2006, over 6 years after the Sale Agreement, and without any prior warning, Persimmon provided RMC with a document at a meeting which indicated new claims for additional sums that, in total, came to just under £4 million. Although, even then, there was no reference to clause 14A in the document, it is these new claims which have given rise directly to these proceedings and this trial. Mr Barrett’s statement, at paragraphs 77-82 deals with his surprise at what he called this ‘ambush’.

For completeness I should also refer to a deed of rectification, made as recently as the 13 February 2007 which varied the wording of schedule 5, item 1 so that it read as follows:

“The Link Road as defined and set out in the 106 Agreement (for the avoidance of doubt the Link Road between Broom Way (B3385) and Privett Road (B3333)) constructed to a specification which accords with any approval which is required by the Highways Authority.”

No submissions were addressed to me relating to this deed of variation. I do no know why it was necessary. However, given that there was a dispute about what the wording of schedule 5, item 1 actually referred to, it is curious that the parties have rectified that wording without either making an express reference back to the Bill of Quantities or the Schedule of Abnormal Costs (RMC’s case); or the actual approval from Hampshire County Council (Persimmon’s case).

There are 28 separate claims for declarations. Claim Items 1-4 deal with various aspects of the drainage system. Claim Items 5-27 deal with numerous aspects of the construction of the Link Road. Claim Item 28 is a separate and stand-alone claim under clause 14A.3 in relation to negotiation costs.

I propose to deal with each Claim Item in turn, identifying the work that is the subject of the claim; when the claim was first made; whether the item fell within clause 7A; whether the item was settled; and, whether the item now creates a financial liability on the part of RMC either pursuant to clause 7A or clause 14A of the Sale Agreement.

Work Carried Out

Persimmon accept that the design and installation of surface water and foul sewer drains in order to serve the residential development of the site was part of their construction work, and was therefore entirely their responsibility. Such work was not required to render the site clean, serviced land. However they submit that the installation of the collector surface water drain, and the collector foul drain, both running along the eastern boundary of the Link Road, was work for which RMC were obliged to pay under item 2 of the Fifth Schedule of the Sale Agreement (paragraph 44 above). It should also be noted that these collector drains were intended originally to run to the west of the Link Road, but their final position was just to the east of (and at one location underneath) the Link Road. Be that as it may, both the drains in their eventual location ran underneath the site (i.e. within the land sold by RMC to Persimmon.)

When was this claim first made?

It appears that the claim for additional costs in respect of this item was first made on 7 February 2006. Since the need for the collector drains had been identified at the outset (see below), this is therefore a claim which was made much later than it ought reasonably to have been.

Is this an item within clause 7A?

It is Persimmon’s case that this item was within item 2 of the Fifth Schedule. They point to these words:

“Provision of foul and surface water connections (including any pumping stations and balancing facilities) connected all points on the boundaries to the Development west of the Link Road to service the Development, the positions to be in accordance with the drawings approved by Southern Water...”

Persimmon submit that this is a reference to the two collector drains which are the subject of this item of claim. They therefore maintain that the cost of this item fell to be adjusted under clause 7A.

RMC do not accept that contention. They say that this work was part of the network of drains which Persimmon were obliged to provide as part of the housing development itself. They say that the item in the Fifth Schedule set out above was concerned with “connections” off-site and therefore did not extend to these lengthy drain runs, which are all part of the drainage system under the site. In addition, RMC submit that the fact that the drains now run closer to the eastern boundary of the site than was originally envisaged is a design matter and should not mean that, somehow, these drains are within the wording of the second sentence of item 2 when, in their original location, they would not have been.

I have concluded that Mr Keith’s submissions on behalf of RMC are to be preferred. The principal reason is that, so it seems to me, these collector drains were clearly and obviously part of the housing development itself. They took the surface water and the foul sewage from the individual drains beneath the streets and took the surface water/sewage, respectively, to the balancing pond off the site and the main foul sewer pumping station number 1. They were not therefore part of the necessary rehabilitation works.

In addition, it seems to me that these collector drains and sewers were not “connections”, which was the work that was covered in the second item of the Fifth Schedule. They were a part of the drainage and sewer system within the curtilage of the site. The “connections” envisaged in the second item of the Fifth Schedule were connections between the drainage system under the site, and the drainage systems off-site. These long runs of drains were not therefore connections at all.

Further, so it seems to me, the fact that the location of these collector drains was moved, so that it ran closer to the boundary on the eastern side, was pure happenstance, and did not somehow render these drains within the words of item 2 of the Fifth Schedule. Item 2 was referring to the connection between these connector drains and the runs that would go off-site leading, respectively, to the balancing pond and the main pumping station. Any such connections were within item 2, but the collector drains themselves, from which the connections would be made at the boundary, were not. For all these reasons therefore, it seems to me that this Claim Item, which relates to the drain runs themselves and not the connections, was not within item 2 of the Fifth Schedule and no adjustment fell to be made under clause 7A in any event.

Was it settled?

Of course, if I am right that this item did not fall within clause 7A, because it was an item of development cost which was and remained the responsibility of Persimmon, then that is the end of the claim under that provision. But if I am wrong about that, and this was an element of the work within item 2 of the Fifth Schedule, and therefore covered by clause 7A, then it seems to me plain that it was settled by operation of the Settlement Agreement of June 2001. The collector drains did not fall within the wording of the first exception to the June 2001 Settlement Agreement, and they were nothing to do with the Link Road. Therefore, if this work was within item 2 of the Fifth Schedule, and therefore within the mechanism of clause 7A, any claim for additional monies was settled by that Agreement. I should add that, in his evidence in cross-examination, Mr Allen Smith of Persimmon expressly accepted that, at least by December 2003, any claim in respect of these drains had indeed been settled and was included in the agreed figures. That is a further reason why no further claim can now be permitted.

Is this an Item within Clause 14A?

As a result of my construction of clauses 7A and 14A, set out at paragraphs 47-79 above, I reject the suggestion that a claim can now be made under clause 14A, in circumstances where the need for these drains was always known; where there was no ability to make a claim under clause 7A; and/or any such claim had been settled under the Settlement Agreement. That settlement would, for the reasons explained in those paragraphs, have also settled any claim under clause 14A. In addition, as noted in paragraphs 88-89 above, Mr Allen Smith expressly said that there were no relevant drainage approvals outstanding at the time of the Settlement Agreement of June 2001. He also indicated that this item had been settled by the time of the Settlement Agreement of December 2003. Either way, it seems to me that no subsequent claim under clause 14A can arise in any event.

If I am wrong about that, I am in no doubt at all that, as a matter of fact, this work was not required by an approval of the type defined in clause 14A.1. This work was required by the outline planning permission of 1999, which pre-dated the Sale Agreement; it was encompassed within the conditions attached to that permission. These collector drains were always required; all that happened subsequently was that their position was moved. They were not required as a result of a post-Sale Agreement approval or agreement which caught everyone by surprise, and the costs of which were somehow forgotten at the time of the Settlement Agreements. This work was always necessary, and was known from 1999 onwards by Persimmon to be necessary. No claim therefore arises under clause 14A on the facts; the absence of any claim for this work until 2006 is, in my judgment, an eloquent confirmation of the lack of merit of this item of claim.

These drains, as Persimmon have demonstrated, were later included on drawings which were subsequently approved by Southern Water as part of agreements under s.104 of the Water Industries Act, the earliest of which was dated 28 January 2003. But for the reasons that I have given, that did not mean that Southern Water required those works in accordance with clause 14A; they were always necessary, and had been required by Gosport all along. The five s.104 Agreements with Southern Water were simply recording work which had already been designed on behalf of Persimmon, and in some cases already carried out. The agreements themselves required nothing new.

Summary/ Claim Item 1

For all these reasons, I conclude that Persimmon are not entitled to the declaration sought in respect of this item of claim. They are not entitled to any additional costs in respect of the collector surface water and foul sewer drains.

Work carried out

This item related to the provision of a balancing pond to the east of the site. It was required for the purposes of the surface water drainage system.

When was the claim first made?

As we have seen, the balancing pond item was carved out of the Settlement Agreement of June 2001, by way of the first exception. A considerable measure of agreement was reached thereafter on 15 December 2003 and further sums were paid by RMC in relation to this item. The material which forms the basis of the much larger claim now made was not provided until 7 February 2006.

Is this an item within Clause 7A?

There can be no doubt that this was an item caught fairly and squarely by the Fifth Schedule. Item 6 was described as “balancing ponds for surface water drainage and connection from the Development boundary which related to the Development as required by any statutory undertaking”.

Was it settled?

It seems to me that any claim which was not in relation to “the siting or specification for the balancing pond” was settled by the June 2001 Settlement Agreement. That is because the first exception only related to the siting and specification of the balancing pond. Thus, to the extent that this item of the claim is for anything else, it was excluded by the June 2001 Settlement Agreement. But that caveat aside, this item was carved out of the Settlement Agreement and therefore not settled in June 2001.

However, it seems to me that the claims in relation to the siting and specification for the balancing pond were, with a few minor exceptions, subsequently settled by the December 2003 Settlement Agreement. I have set that Agreement out in full at paragraph 102 above.

In those circumstances, I conclude that the only items in relation to the balancing pond that have not been settled are those four asterisked items on the schedule entitled ‘Balancing Pond’ that went with the letter of the 5 December 2003. It is common ground that those items were not settled at that stage. On behalf of RMC, Mr Keith argues that those outstanding items cannot now form the basis of a claim because, although the parties indicated in December 2003 that they were outstanding, the items could not survive the Settlement Agreement of June 2001. I think it is said that they fall outside the words of the first exception. However, I do not accept that. It seems to me that those four asterisked items could be said to relate to the specification for the balancing pond, and therefore were not settled in June 2001. Moreover, I have endeavoured to construe the Sale Agreement and the Settlement Agreements in a way that I consider is commercially sensible, and which has, in turn, largely reflected the way in which the parties chose to operate them at the time. The parties were of the view that they had not settled the asterisked items in December 2003, and I consider that any contrary case has not been made out.

Accordingly, I conclude that the claim in relation to the balancing pond works has been settled, with the exception of the four minor asterisked items identified in December 2003.

Is this an item within Clause 14A?

For the reasons that I have set out above the answer is No. Save for the asterisked items, this item has been settled by agreement and cannot now be opened up. In my judgment, that is the inevitable result of both the true construction of the Sale and Settlement Agreements, and the findings of fact that I have made. In addition, no evidence has been identified to suggest that this work was somehow required by a drainage agreement of the type referred to at clause 14A.1(a). The balancing pond was always going to be provided; that is why it was within the Fifth Schedule of the Sale Agreement. It is therefore nonsense to suggest that the balancing pond was required by a particular drainage agreement, much less a drainage agreement that post-dated the Sale Agreement. In fact, no such drainage agreement has been identified; it appears to be common ground that the works were adopted by Gosport, not Southern Water. In any event, as with Claim Item 1, the subsequent inclusion of the balancing pond on drawings approved by Southern Water did not mean that they were required as a result of that subsequent approval: the pond was always necessary.

Summary/ Claim Item 2

For the reasons set out above, I consider that Persimmon are entitled to a declaration in respect of this item of claim (Claim Item 2), but that such a declaration would be limited to those four elements identified with an asterisk on the December 2003 schedule entitled ‘Balancing Pond’. For the avoidance of doubt, the four elements were: “extra over costs for footpaths; maintenance of Heras Fencing (2004 plus); landscaping maintenance (2004 plus); and commuted sum for balancing pond transfer”. All other claims in relation to the balancing pond, whether under clause 7A or clause 14A, have been settled. For the avoidance of doubt, my primary view on the facts is that there was never any claim for this item under clause 14A in any event.

Work carried out

This work involved three pumping stations, numbers 2, 3 and 4, which were on the western side of the site. The foul sewage fell in drains across to the western boundary of the site where these three pumping stations then pumped it back across to the eastern part of the site, to the collector drain which then ran out to the main foul pumping station number 1. These three pumping stations were thus an integral part of the original design of the foul sewage system for the site.

When was the claim first made?

The present claim was first made on 7 February 2006. It is therefore worth noting that, although these foul pumping stations had always been required, no claim in relation to them was made until more than 6 years after the Sale Agreement was signed.

Is this an item within Clause 7A?

It is not immediately apparent that this work was within the Fifth Schedule of the Sale Agreement. As already noted, these pumping stations were part of the drainage arrangements necessitated by the development of the site, and were therefore prima facie Persimmon’s responsibility in any event. However, Mr Keith’s written closing submissions concede that this was work that fell within the Fifth Schedule and I ought therefore to deal with this Claim Item on that basis.

Was it settled?

It seems to me plain that, on the assumption that it was included within the Fifth Schedule, Claim Item 3 was settled by the June 2001 Settlement Agreement. It was not within the first exception because, for the reasons which I have given, that related solely to the main foul pumping station located just off site, as plainly evidenced (inter alia) by the documents prepared by Persimmon themselves in December 2003. This item did not, therefore, fall within that express exception and, since the second exception was concerned with the Link Road (and not drainage at all), I conclude that it was compromised by the Settlement Agreement.

Furthermore, it seems to me that no argument could possibly exist to the contrary, given that the item “pumping stations-foul water on site (4)” was expressly included within the costs schedule of the 21 December 2000 (paragraph 87 above), which explained how the settlement figure of £19.4 million was arrived at. Accordingly, I am in no doubt at all that the claim in relation to these foul pumping stations was indeed settled in June 2001.

Is this an item within Clause 14A?

For the reasons previously noted, this was not an item within clause 14A. It was settled as part of the parties’ attempt to fix the costs, and therefore the purchase price. It was taken into account in the calculation of the price and, both as a matter of construction and as a matter of fact, no further claim under clause 14A can now arise.

In addition, it seems to me that, as a matter of fact, no claim has been made out to the effect that this work was required by a clause 14A.1 drainage agreement in any event. The need for these pumping stations was identified in the original documents which long pre-dated the Sale Agreement, let alone the Settlement Agreement of June 2001. This was not work that was unexpectedly required by Southern Water at some later date. No drainage agreement has been identified which required this work; nor can it be said that, but for that drainage agreement, this work would not have been carried out. The subsequent inclusion of this work on drawings which formed part of the drainage agreements with Southern Water amounted to no more than an acceptance of the design, for the purposes of their subsequent adoption, by Southern Water. There is therefore no claim under clause 14A anyway.

Summary/ Claim Item 3

For all these reasons, I reject this item of claim. Persimmon are not entitled to the declaration sought in relation to the foul pumping stations 2-4.

Work carried out

This related to the main pumping station number 1, located just off-site.

When was the claim first made?

As noted above, this item of work was always required. It was expressly made part of the first exception to the Settlement Agreement of June 2001. However the claim for the specific costs now sought was not made until 7 February 2006.

Is this an item within Clause 7A?

There can be no doubt that this element of work was within the second item in the Fifth Schedule and was therefore an item to which the adjustment mechanism in clause 7A applied. This is a good example of the sort of rehabilitation work that was required, not for the purposes of the development of the site, but in order to ensure that the site itself was clean, serviced land.

Was it settled?

The first exception to the Settlement Agreement was the “siting and specification for the foul pumping station”. Therefore, just as with Claim Item 2 above, it seems to me that the cost of any work in respect of this pumping station that fell outside the siting and specification of the station must be within the Settlement Agreement of June 2001. However, in reality, it is hard to see what would not be within the exception, given the width of the word ‘specification’.

The vast bulk of the outstanding claims in relation to foul pumping station number 1 were settled in December 2003. Again, as with Claim Item 2 (paragraphs 128-136 above), the only matters that were said to survive that settlement were the items indicated with an asterisk on the schedule prepared by RMC and attached to the Settlement Agreement of December 2003. Again, therefore, it seems to me that the claim in relation to pumping station number 1 was settled under clause 7A, with the exception of the five items in the schedule which are the subject of the asterisk. For completeness, I repeat my rejection of RMC’s case that these items should not lead to a claim because, although they did not take the point at the time, they had somehow been settled by the June 2001 Agreement (see paragraph 133 above).

Is this an item within Clause 14A?

For the reasons set out above, this is not an item that can be the subject of a claim under clause 14A. First, with the exception of the asterisked items identified above, this item of claim has already been settled. As a matter of construction, therefore, and as a matter of fact, the claim cannot be opened up again under clause 14A. Secondly, foul pumping station number 1 was always required and was known about long before the Sale Agreement was signed. It was not required by any subsequent approval from or drainage agreement with Southern Water: it was always necessary. The point as to approval for adoption purposes, set out at paragraph 143 above, applies again. No claim under clause 14A can therefore arise on the facts in any event.

Summary/Claim Item 4

For the reasons set out above, it seems to me that Persimmon are entitled to a declaration in relation to Claim Item 4, but only in relation to the five asterisked items set out in the schedule of December 2003. For the avoidance of doubt they were: “more tankerage removal; electricity usage; water usage; BT usage; and E.O. maintenance to pump”. Subject to those express exceptions, I conclude that Persimmon are not now entitled to make any further claims in relation to foul pumping station number 1.

It was RMC’s case that the division of responsibility between Hampshire County Council and Gosport Borough Council in relation to the Link Road could be expressed in four propositions. They were:

Mr Edgley, Persimmon’s former technical manager, accepted these four propositions without qualification. Mr Allen Smith, Persimmon’s Managing Director, accepted b), c), and d). Although he did not accept a), that was because, as some of his other answers made plain, he ran together the requirements of Hampshire and the requirements of Gosport, without ever making any serious effort to differentiate between them. What is more, there was no evidence that, in relation to any specific element of the Link Road, Hampshire were slow in giving technical approval. Accordingly, as a matter of generality, I find that the documents bore out the truth of these four propositions. Whilst I do not consider that these propositions, of themselves, provide an answer to the claims which are presently made by Persimmon in relation to the Link Road, they are an important part of the background, against which it is then necessary to ask why a particular item of work was carried out, and whether it can be said that the costs of that item of work fall to be recovered under either clause 7A or clause 14A. That is therefore the exercise to which I now turn in relation to the Link Road Claim Items.

Work carried out

The construction of the Link Road involved the diversion of ducts containing electricity cables and telecom cables. This is the claim for the cost of those diversion works.

When was the claim first made?

This claim was not made until 7 February 2006. It is to be noted that, at least for the northern section of the Link Road, the diversion work had been carried out some time before that date. Moreover, the need for these diversion works was set out in the section 106 agreement of August 1999, where it appears in the first schedule to that agreement at item 3(i) (see paragraph 21 above).

Is this an item within Clause 7A?

On behalf of RMC, Mr Keith submitted that this was not an item within clause 7A because it was not identified in the DWP Bill of Quantities, or the Calculation of Abnormal Costs. For the reasons noted above, I consider that he is wrong to try and construe the Link Road works by reference to documents that did not form any part of the Sale Agreement. In any event, the diversions were referred to in schedule 1 to the section 106 Agreement. I have said that, in my judgment, Persimmon are right to say that the Link Road covered all of the works which were within the specification approved by Hampshire County Council as the Highways Authority. Furthermore, although the words within the Fifth Schedule have been rectified (in a way that, so it seems to me, does not add a great deal of clarity), the original words still refer to a specification ‘to be approved’. In my judgment, therefore, that must mean the specification approved by Hampshire County Council. That specification included the diversion works in question. For all these reasons, it seems to me that this item was within the Fifth Schedule and therefore within clause 7A.

Was it settled?

Any item that was within clause 7A was settled by the Settlement Agreement of June 2001, unless it was part of either of the two exceptions. The exception relevant to the Link Road was the second exception. I have already set out my conclusions as to the interpretation of that second exception at paragraphs 98-99 above.

In short, the question posed by Claim Item 5 is whether these statutory diversion works arose from any re-siting of or amendment to the specification to the Link Road, in circumstances where that re-siting or amendment was itself due to a technical approval or planning permission. If they did, the work would be the subject of the exception; if they did not, any claim for an adjustment to reflect any additional costs in respect of the diversion works would have been settled in June 2001. In my judgment, the statutory diversion works did not arise out of any re-siting of or any amendment to the specification. For the reasons which I have previously noted, this work was always necessary/required (hence its inclusion in documents pre-dating the Sale Agreement) and was therefore always part of the Link Road specification. Indeed, no amendment or alleged re-siting has been identified by Persimmon.

Accordingly, it seems to me that any claim in relation to this element of the works was compromised by the Settlement Agreement of June 2001. It is to be noted that the schedule of the 21 December 2000, referred to at paragraph 87 above, provides a detailed breakdown of the Link Road items and, in certain cases, a contingency allowance. I therefore conclude that the parties intended to settle all elements of the Link Road, other then those expressly excluded by operation of the second exception. What is more, I believe that the parties considered that they had done just that, until Persimmon’s very belated change of heart in February 2006.

Is this an item within Clause 14A?

For the reasons previously noted, I consider that, both as a matter of construction and a matter of fact, this claim has already been settled under clause 7A, and it is not possible to re-open it under clause 14A. Furthermore, no approval within the definition at clause 14A.1(b) has been identified as triggering this item of work. Of course Hampshire’s approvals of 2000 (southern section) and 2005 (northern section) covered the proposed Link Road works, and those works included the statutory undertaker’s diversion works. But that does not mean that the approvals required those works to be carried out; on the contrary, such works always had to be carried out. As previously noted, they were first identified in the s.106 Agreement of 1999. In my view, it is artificial to try and link the necessity for this work to Hampshire County Council’s subsequent approvals.

Furthermore, should it be relevant, it seems to me that this work, if required by any approval at all (which I reject), was required by the planning approvals of Gosport, rather than anything emanating from Hampshire County Council. I accept Mr Keith’s criticism of Persimmon’s pleaded case that it failed to differentiate between Hampshire’s approval (which might have been relevant) and Gosport’s planning approvals, and the numerous other consents which pre-dated the Sale Agreement, which were plainly irrelevant to a claim under clause 14A.

In truth, this criticism is applicable to the vast majority of the Link Road Claim Items. I consider that Persimmon have ignored the principles set out in paragraphs 73-78 above. Instead, what they have done is to work through the vast amount of documentation to find pieces of paper emanating from Gosport or Hampshire which endorsed a particular element of the Link Road works, and then sought to argue that the work in question was required by that document. This has led to two fundamental deficiencies in the claims as presented:

Summary/ Claim Item 5

For the reasons noted above, I consider that this item was settled by the June 2001 Settlement Agreement and did not form part of the second exception. I do not consider that any claim can arise as a matter of principle pursuant to clause 14A and in any event, no claim under 14A.1(b) has been made out on the facts. Persimmon are not entitled to the declaration that they seek.

Work carried out

These works consisted of the construction of the combined footpath and cycleway along the length of the Link Road.

When was the claim first made?

The claim was first made on 7 February 2006.

Is this an item within Clause 7A?

For the reasons noted above, and contrary to RMC’s case, I consider that the fact that this work was not in the DWP Bill of Quantities, or the other non-contractual documents, is irrelevant: this work was part of the specification which was approved by Hampshire County Council as the Highways Authority. It therefore seems to me it was within item 1 of the Fifth Schedule. I should note in passing that this work is different to the work at item 10 of the Fifth Schedule, which was in relation to a cycleway which was going to run through the development itself. That was not a reference to this cycleway, which runs parallel with the footpath of the Link Road.

Was it settled?

Again, the answer to this question turns on whether this item was within the second exception of the June 2001 Settlement Agreement. That in turn requires a consideration of whether it related to re-siting or an amendment to the specification: if it did not, it was not part of the second exception and was therefore settled. The specification was the one which Hampshire County Council had approved in September 2000.

In my view, there can be no doubt that these works did not arise out of any amendment to that specification or any re-siting of the Link Road. The original specification allowed for a cycleway; this may have been because Gosport, as the planning authority, required such a cycleway from the outset (a point expressly acknowledged in Persimmon’s opening at paragraph 4.28). Mr Allen Smith expressly accepted in cross-examination that, as he put it, “planning required cycleways”. Still further, in paragraph 33 of Appendix 1 to Persimmon’s closing submissions, it is accepted that Gosport first recommended this requirement on 26 January 1999. The cycleway was therefore included in the specification for which approval was subsequently given in 2000. It was therefore known about at the time of the Settlement Agreement in June 2001: if it was going to be said that this item was new, and thus fell outside Persimmon’s tender, then that would have been the time to make the claim. No such claim was made: I find that this was not due to inadvertence, but because it was not work in respect of which either side thought that there could be a claim. There was never any relevant amendment to the specification which added in the cycleway long after it had been approved; the cycleway was always included in the specification that was approved.

Accordingly, on that analysis, this Claim Item does not survive the Settlement Agreement of June 2001. It was not within the second exception.

Is this an item within Clause 14A?

For the reasons I have already given, as a matter of construction of the Sale and Settlement Agreements, and as a matter of fact, I find that the settlement of this Claim Item under clause 7A means that it cannot be resurrected under clause 14A. In addition, as a matter of fact, I find that these works were not required by an approval emanating from Hampshire County Council which post-dated the Sale Agreement, and which somehow came as a surprise to the parties because it required something which neither party anticipated. The letter from Hampshire dated 7.7.00 upon which Persimmon rely was not an approval, but a record of Hampshire’s agreement with Gosport’s planning position. There is therefore no claim under clause 14A in any event.

Summary/ Claim Item 6

For the reasons set out above, I consider that this item of claim was settled by the June 2001 Settlement Agreement and cannot now be opened up. Persimmon are not entitled to the declaration that they seek.

Works carried out

These works concerned the landscaping adjacent to the Link Road. Such landscaping works were expressly referred to within the conditions attached to the original outline planning approval of August 1999.

When was the claim first made?

The claim was first made on 7 February 2006, many years after much of the work (at least on the northern section of the Link Road) had been performed.

Is this an item within Clause 7A?

This was part of the specification for the Link Road; as demonstrated above, it was always required. It was therefore within item 1 of the Fifth Schedule. For reasons previously given, I reject RMC’s case that this item was outside the Fifth Schedule because it was not in the DWP Bill of Quantities and the other non-contractual documents on which they relied.

Was it settled?

Again the question is whether or not, in order to ‘survive’ the Settlement Agreement of June 2001, this item of work can be said to have arisen out of an amendment to the specification approved in September 2000 or any re-siting works. No such amendments or re-siting works are identified by Persimmon. Accordingly, I conclude that this item of claim has been settled for the same reasons as set out under the previous Claim Item.

Is this an item within Clause 14A?

This is not a claim that can now be pursued under clause 14A. Firstly, as a matter of construction and of fact, it has already been settled by the June 2001 Settlement Agreement. Secondly, the work was required by the original outline planning consent issued by Gosport, a point which I consider to be expressly conceded by Persimmon at paragraph 4.31 of their written opening, and paragraph 43 of Appendix 1 to their closing submissions. This was not an item with which Hampshire County Council appeared to be concerned at all, until a much later approval document dated 2005. It is simply unrealistic for Persimmon to claim as a matter of fact that work required by Gosport in their planning consent of 1999 was somehow required by Hampshire 6 years later.

Summary/ Claim Item 7

For the reasons set out above, this is not an item of claim now open to Persimmon. They are not entitled to the declaration that they seek.

Work carried out

These are works which had to be carried out by Persimmon to remedy defects in the Link Road. The suggestion is that the need for remedial work such as this was normal in the construction process, particularly given the five year period over which the works were performed. It is said that the remedial work was necessary so as to obtain the approval of the engineer.

When was the claim first made?

The claim was first made on the 7 February 2006.

Is this claim item within Clause 7A?

I do not see how it can be said that items of remedial work could ever come within item 1 of the Fifth Schedule. Persimmon submitted that that item should be construed as referring to the specification of works approved originally by Hampshire County Council in September 2000. I have accepted that proposition. There is nothing within that specification which deals with remedial works; for obvious reasons, if the original works were carried out in accordance with that specification, there would have been no need for remedial works at all.

If, because of the way in which the work was performed, remedial works were necessary (even accepting, for this purpose, Persimmon’s case that such remedial works are an everyday part of civil engineering), such works could not be said to be within the Fifth Schedule, and therefore subject to the costs adjustment mechanism. The risk that there might be such remedial works, and the liability for the costs associated with such works, must be borne by Persimmon, as the contractors doing the work itself. There is nothing in the Sale Agreement which suggests that the parties considered that such an item would, somehow, be the financial responsibility of RMC, who were not carrying out the work and had no basis on which they could control the carrying out of such work.

Accordingly, I reject the suggestion that this item fell within the Fifth Schedule, and therefore within the clause 7A adjustment mechanism.

Was it settled?

If I am right, and this item of work did not fall within the Fifth Schedule, then it was always an item for which Persimmon had to meet the costs. If, however, I am wrong, and this item was within clause 7A, then it was settled under the June 2001 Settlement Agreement. Such remedial work was not caused by any re-siting or any amendment to the specification, and therefore fell outside the second exception in the Settlement Agreement. Accordingly, if (contrary to my primary view) this was a valid claim at that time, it was settled in June 2001.

Is this an item within Clause 14A?

One reason for answering this question in the negative is the same as before, namely that, as a matter of construction and/or fact, any claim under clause 14A cannot survive the settlement under clause 7A. But assuming that my primary view is right, and there was never a claim under clause 7A then, if this work could be shown to have been required by an approval of Hampshire County Council under clause 14A.1 (b), then there might be a claim.

However, Persimmon have not been able to identify any such approval. The highest they put it in their closing submissions is to say that, because their own specification promised that they would “reinstate any areas of the highway utilised during the contract”, and because Hampshire subsequently approved this specification, that approval somehow required the remedial work. I consider that such a contention borders on the absurd: the remedial work was necessary because it was dictated by common sense and embodied in the specification; the approval of that specification was wholly irrelevant to the carrying out of any remediation. In reality, this reinstatement was required because the work should have been carried out in accordance with the specification in the first place, and it was therefore necessary in order to meet Persimmon’s general obligations. I also note that, at paragraph 4.34 of their opening, Persimmon themselves maintained that the relevant requirement emanated from Gosport, not Hampshire.

More generally, it seems to me to be unreal to suggest that clause 14A was designed to allow Persimmon to claim from RMC the additional cost of remediation work which they had failed to carry out in accordance with the specification first time around. Such an entitlement would need clear and express words, even in a building or civil engineering contract, let alone a relatively simple agreement for the sale of land such as the present contract. For all those reasons, therefore, I reject the suggestion that this could ever have been an item of claim under clause 14A.

Summary/ Claim Item 8

For the reasons set out above, this item of claim fails and Persimmon are not entitled to the declaration that they seek.

No claim for a declaration is now made in relation to the works at Sandhills Lane. However a separate claim is made for damages in consequence of this work. I deal with that in Section N below.

Work carried out

Plainly, the works to the Link Road always involved excavation works. Persimmon claim that there were additional excavation works (over and above those originally anticipated) because, when the excavation works started, it was discovered that the levels with which they had been provided were inaccurate. Persimmon appear to place significance on the fact that the levels were provided by a consultant retained by RMC, although no claim is made for breach of contract.

When was the claim first made?

It appears that Persimmon realised, early on, that the actual ground levels were different to those identified on the site. Notwithstanding that, this claim was not made until the 7 February 2006.

Is this an item within clause 7A?

The excavation works themselves were within item 1 of the Fifth Schedule, because they were an integral part of the Link Road. The so-called ‘additional’ excavations have not been separately identified; they were merely part of the excavations necessary to comply with the specification.

Was it settled?

The excavation, let alone the additional excavation, did not arise as a result of any re-siting of the Link Road or amendments to the specification. As noted above, this work was required by the original specification approved by Hampshire. Accordingly, this item was not within the second exception to the Settlement Agreement of June 2001 and must be deemed to have been settled under clause 7A.

Is this an item within Clause 14A?

I do not consider that clause 14A is open to Persimmon in relation to this item. First, the item has been settled under clause 7A, and therefore, as a matter of construction and/or fact, it cannot now be claimed under clause 14A. Secondly, no specific approval emanating from Hampshire under clause 14A.1(b) is identified as being relevant in relation to this item of claim: paragraphs 56-58 of Appendix 1 to Persimmon’s closing submissions fail to identify any such approval.

As I have noted, there was a reference during the trial to the fact that this claim arose out of Persimmon’s reliance on levels provided on behalf of RMC. That allegation is not pleaded and it is difficult to see how it could be made out. Persimmon bought this site and, subject to the express terms of the contract, the principle caveat emptor must apply. No other terms have been identified which could justify the claim in principle.

Summary/ Claim Item 10

For the reasons set out above, I reject this Claim Item. Persimmon are not entitled to the declaration sought.

Work carried out

Item 11 concerns drainage ducts which were buried under the Link Road and which connected pumping station number 1 to the main services. It is not wholly clear how and why this work arose under item 1 of the Fifth Schedule (Link Road) and I agree with Mr Keith’s submission that, on its face, this appears to be a drainage item rather than a Link Road item.

When was the claim first made?

The claim was first made on 7 February 2006. Again, although the suggestion is that the ducts were somehow necessitated because the original design, produced by RMC’s consultants, was inadequate, there is no separate allegation of breach. Accordingly, as with the previous Claim Item, this seems to me to be irrelevant to the issues which I have to decide.

Is this an item within Clause 7A?

Whilst this is not entirely clear, I conclude that, on the assumption that Persimmon are right to claim it as a Link Road matter, this item of work is probably within item 1 of the Fifth Schedule (the specification of the Link Road), and therefore part of the adjustment mechanism of clause 7A.

Was it settled?

On the assumption that this element of work was covered by clause 7A, then it seems to me that in June 2001, it was settled, because it was not part of the second exception in relation to the re-siting or amendments to the specification of the Link Road (the second exception). If, on the other hand, this is a drainage item, then it does not seem to me that it falls within the first exception either, and again the conclusion must be that any claim in respect of this element of the work was settled by the Settlement Agreement of June 2001.

Is this item within Clause 14A?

The settlement means that, for the reasons of construction and/or fact referred to above, the claim cannot be reactivated under clause 14A. In addition, no approval or drainage agreement has been identified by Persimmon to trigger a claim under clause 14A. No approval or agreement has been shown to require this element of work to be carried out, in circumstances where, without that approval or agreement, it would not have been done. For the reasons previously noted, subsequent ratification in a document emanating from Hampshire is irrelevant under clause 14A.

Summary/ Claim Item 11

For these reasons, this Claim Item must fail. Persimmon are not entitled to the declaration that they seek.

Works carried out

These were temporary works relating to traffic calming and management required as part of the construction of the Link Road. They apparently consisted of temporary traffic lights, temporary ramps down in the Link Road, and speed ramps.

When was the claim first made?

The claim was first made on 7 February 2006. Again, notwithstanding the late date of the claim, it is to be noted that the temporary traffic works themselves were expressly identified at item 3(h) of the first schedule of the section 106 Agreement, agreed as far back as August 1999. They would have been a necessary feature of the Link Road work.

Is this item within Clause 7A?

I find that temporary traffic measures were always required. As noted above, they were indicated as necessary in the schedule of August 1999. They were thus firmly within the workscope of item 1 of the Fifth Schedule to the Sale Agreement.

Was it settled?

Again, unless Persimmon can show that this element of work fell within the second exception referred to above, then this item was settled in June 2001. I conclude that the temporary traffic measures did not arise out of an amendment to the specification or any re-siting of the Link Road; on the contrary, for the reasons noted above these measures were always required.

Is this an item within Clause 14A?

This Claim Item was settled in June 2001, and therefore, as a matter of construction and/or fact, it cannot now be reopened. Further, this work was always required: the reliance on the subsequent approval of a promise made by Persimmon in their own specification is flawed for the same reason as set out in paragraph 185 above. There was no approval within the definition set out in clause 14A.1(b) which required this work. Accordingly, this could not be a separate claim under 14A.

Summary/ Claim Item 12

For the reasons set out above this item of claim must fail. Persimmon are not entitled to the declaration sought.

Work Carried Out

These works were the original clearance works for the purpose of the construction of the Link Road. They involved the removal of spoil and other rubble in the area where the Link Road was to be constructed.

When was this claim first made?

This claim was first made on 7 February 2006. Of course, these clearance works would have been the first works that were carried out on site in relation to the Link Road, at least in relation to the northern section, and were carried out many years before the claim was made.

Is this an item within Clause 7A?

Plainly this work was an integral part of the Link Road construction. It was therefore within the first item of the Fifth Schedule to the Sale Agreement. Again, I reject the suggestion made by Mr Keith that, because it was not referred to in the non-contractual documents, it was somehow outside the clause 7A mechanism altogether.

Was it settled?

Along with all the other claims in relation to the Link Road considered so far, I must conclude that this item of claim was settled by the June 2001 Settlement Agreement, unless it could be shown that the clearance works related to the re-siting of the Link Road or an amendment to its specification. I find that these works arose from neither of these possibilities; on the contrary, they were always required. Accordingly this item was not within the second exception and has therefore been settled.

Is this an item within Clause 14A?

This is not an item that can be claimed under clause 14A. First, it has been settled under clause 7A, and has therefore been taken into account in the calculation of the price. As a matter of construction and/or fact, I find that it cannot now be opened up. Secondly, there is no approval under clause 14A.1 (b) which has been identified by Persimmon and which required this work to be performed, and without which this work would not have been done. No such approval is set out in paragraphs 68-69 of Appendix 1 to Persimmon’s closing submissions. This item is, perhaps, a good example of the fallacy of Persimmon’s approach on the facts; it seeks to say that an ordinary and integral part of the works to the Link Road (the clearance of the site), which was always going to have to be carried out by Persimmon (and which was therefore never the subject of a contemporaneous claim), was somehow required by a subsequent approval from Hampshire and thus the proper subject matter of a claim made long after the event. I reject this, and the other similar items of claim, as being without any merit at all.

Summary/ Claim Item 13

This item of claim fails. Persimmon are not entitled to the declaration sought.

Work carried out

These works consisted of the installation of the acoustic fencing along the length of the Link Road adjacent to the development.

When was the claim first made?

The claim was first made on 7 February 2006.

Is this an item within Clause 7A?

Mr Keith correctly pointed out that this element of the works carried out by Persimmon was not the same as the work at item at 3(j) of schedule 1 of the Section 106 agreement, because that related to the protection of the existing dwellings, whereas this claim item related to the protection of the 1000 houses being built as part of the development of the site. He maintained that, because this element of the work was not in the non-contractual documents upon which RMC relied, this item was not within the Fifth Schedule and therefore not within the price adjustment mechanism set out in clause 7A.

For the reasons that I have previously outlined, I consider that the fact that the item was not referred to within various non-contractual documents is not a relevant consideration. What matters is whether it is in the specification approved by Hampshire County Council. As far as I can tell, these integral works were included within that specification. They were notified by Gosport as being required prior to the Sale Agreement; Mr Allen Smith’s statement, at paragraph 65, talked about this element of the work arising out of negotiations with ‘the local authority’ (i.e. Gosport).These works therefore fall within the first item in the Fifth Schedule and clause 7A applies.

Was it settled?

It seems to me that any claims in relation to this item of work were settled by the June 2001 Settlement Agreement. That is because it has not been said by Persimmon that this fencing arose out of the re-siting of or an amendment to the specification of the Link Road, and thus there is nothing to say that it was part of the second exception. Indeed, it seems to me that such a proposition could not even be suggested, given that the fencing in question was included within the original specification. Accordingly, I find that, either as a matter of construction, or as a matter of fact, this item of claim has been settled.

Is this an item within Clause 14A?

For the reasons noted above, if (as I have found) the claim has been settled under clause 7A, it cannot be reopened under clause 14A. More significantly, for this purpose, it seems to me plain on Persimmon’s documents that this was not an item that was ever required by Hampshire County Council under an approval within the meaning of clause 14A.1(b). Instead, the evidence makes clear that this work was required by Gosport as part of their planning requirements. It was therefore outside the approvals which triggered a claim under clause 14A. Persimmon’s written opening at the trial (paragraph 4.51) made clear that it was indeed Gosport (not Hampshire) who required this work, and made that requirement known to Persimmon on a date prior to the Sale Agreement. Hampshire’s design check for the southern section was not provided until July 2005. Moreover, that did not require work that was already going to be carried out. Accordingly, this element of work cannot, on the facts, give rise to a claim under clause 14A in any event.

Summary/ Claim Item 14

For the reasons set out above this Claim Item fails. Persimmon are not entitled to the declaration sought.

Work Carried Out

The works in question were those carried out to monitor the ground conditions along the length of the Link Road. The monitoring was designed to check the release of methane gas from the ground.

When was the claim first made?

The claim was first made on 7 February 2006. It appears that the work in question was carried out over a lengthy period from about 2001 onwards.

Is this an item within Clause 7A?

It is difficult to conclude that this element of the works was within item 1 of the Fifth Schedule to the Sale Agreement. It does not appear to have any real connection to the Link Road at all. It seems to me that it is more likely to be within item 3 of the Fifth Schedule, which covered the remediation costs arsing out of the methane gas specification. However, I should note that neither party adopted that position.

Was it settled?

If this item was within the Fifth Schedule then it was settled by the Settlement Agreement of June 2001. It was not within either of the exceptions noted above and was therefore (both as a matter of construction and of fact) the subject of the compromise.

Is this an item within Clause 14A?

I do not consider that this was an Item which can give rise to a claim under clause 14A. First I have concluded that, if it was within the Fifth Schedule, the claim has been settled under clause 7A and, for the reasons already noted, it cannot now be opened up. In any event, Persimmon have failed to identify any approval within clause 14A.1(b) which required this work to be carried out. Indeed, it again appears to be Persimmon’s case that this work (being concerned with methane gas, a problem which affected the whole of the site) was a planning matter required by Gosport, not anything required by Hampshire, and was not directly relevant to the Link Road in any event. That certainly appears to be the position adopted at paragraph 4.54 of Persimmon’s written opening and paragraph 74 of Appendix 1 to Persimmon’s closing submissions. Accordingly it seems to me that no claim under clause 14A has been made out on the facts.

Summary/ Claim Item 15

For the reasons set out above I conclude that this item must fail. Persimmon are not entitled to the declaration sought.

Work carried out

The perimeter bund was constructed at the northern end of the Link Road. It was designed to attenuate noise. It was the element of work expressly identified as the ‘noise bund’ at item 3(j) of the first schedule to the section 106 Agreement, set out at paragraph 21 above.

When was the claim first made?

Notwithstanding the fact that the work was identified in the section 106 Agreement, and was at the northern end of the Link Road (and therefore carried out early on in the development of the site), the claim was not made until 7 February 2006.

Is this an item within Clause 7A?

This was an element of work that was always required, and was within the specification approved by Hampshire County Council. It was therefore within item 1 of the Fifth Schedule of the Sale Agreement, and covered by the adjustment mechanism of clause 7A.

Was it settled?

This was not an element of work that related to the re-siting of the Link Road or an amendment to the specification of the Link Road. It was not therefore within the second exception to the Settlement Agreement of June 2001 and so was settled by the terms of that Agreement.

Is this an item within Clause 14A?

This cannot now give rise to a separate claim pursuant to clause 14A. First, for the reasons of construction and/or fact previously explained, I consider that any such claim has been settled. Secondly, no approval from Hampshire has been identified which required this work; indeed it is plain that this work was always necessary, because it was referred to in the section 106 Agreement of August 1999. If, as Persimmon now claim, it was ultimately abortive (because Gosport subsequently insisted on the acoustic fence), that change arose out of Gosport’s changed planning requirements, and did not trigger a claim under clause 14A in any event.

Summary/ Claim Item 16

For the reasons set out above this Claim Item must fail. Persimmon are not entitled to the declaration sought.

Work Carried Out

The original design of the layout of the southern junction was carried out by the Denis Wilson Partnership on behalf of RMC. It appears that their original design had to be changed because it encroached upon land which was owned by the Ministry of Defence. A change of lay-out was therefore required. The approval in relation to this change was not granted until June 2005.

When was the claim first made?

The claim was first made on 7 February 2006. This is one of the few items where, so it seems to me, there was a reasonable time between the carrying out of the works (or the knowledge that such works would need to be carried out) and the actual making of the claim.

Is this an item within Clause 7A?

RMC’s position in relation to this item was confused. Having originally said that they conceded that this item was within the Fifth Schedule, they subsequently said that it did not fall within clause 7A at all. I have concluded that it did fall within the Fifth Schedule. As I have said, item 1 of the Fifth Schedule related to the specification approved by Hampshire County Council. That specification involved the route of the Link Road at the southern junction.

Was it settled?

I consider that this Claim Item was not settled by the Settlement Agreement of June 2001. On the contrary, it was fairly and squarely within the second exception. The second exception involved, amongst other things, any works caused by the re-siting of the Link Road which, in this context, was precisely what happened at the southern junction.

Accordingly, this was a late change to the works which, so it seems to me, survives the Settlement Agreement of June 2001 (and the Settlement Agreement of December 2003) and therefore remains to be the subject of an adjustment in the purchase price.

Is this an item within Clause 14A?

It is probably unnecessary for me to answer this, given that I have concluded that this claim is open to Persimmon under clause 7A. But for the avoidance of doubt it does seem to me that this is precisely the sort of claim for which clause 14A was designed. Late on, it was discovered that the Link Road had to be rerouted and approval had to be obtained for that new route from Hampshire, acting as the Highways Authority. That was something which could not be foreseen at the time of the Sale Agreement. It was therefore covered by clause 14A.1(b).

Accordingly, for all these reasons it seems to me that this item of claim remains open to Persimmon under clause 14A as well as clause 7A.

Summary/ Claim Item 17

For the reasons set out above it seems to me that this is an item which Persimmon are entitled to pursue. I therefore grant a declaration to that effect. I should add that, in my judgment, the obvious merit of this Claim Item (and the consequential difficulties that RMC had in addressing it coherently in their final submissions) contrasts strongly with the vast bulk of the other Link Road Claim Items. This Claim Item represents the perfect example of why clause 7A and/or clause 14A were needed and, unlike so many of the other items of claim, its pursuit is not contrary to the way in which both parties conducted themselves after the conclusion of the Sale Agreement.

Work carried out

There were power cables running across the site and, as a result, safety measures were required to be put in place, involving the diversion and burial of those cables.

When was the claim first made?

It appears that the claim was first made on 7 February 2006. The evidence suggests that at least some of this work was done from 2001 onwards, early on in the construction of the Link Road.

Is this an item within Clause 7A?

It is again difficult to say that this item was within clause 7A. It did not fall obviously within any of the items within the Fifth Schedule. In particular, it is not part of the specification which was subsequently approved by Hampshire County Council.

Accordingly, my view is that this was an item of work which fell to be carried out as part of the ordinary day-to-day activities on site, rather like Claim Item 8 (the remedial works) dealt with at paragraphs 178-187 above. If that is right, then there would have been no reason why it would necessarily feature in the Fifth Schedule. It would not, therefore, be part of the adjustment mechanism.

Was it settled?

Of course, if I am right that this was not an item within the Fifth Schedule then it was never part of the adjustment mechanism and no claim under clause 7A can arise. Conversely, if the work was within the Fifth Schedule, then it was settled because it was not encompassed by the second exception. It certainly did not arise out of an amendment to the specification or the re-siting of the Link Road.

Is this an item within Clause 14A?

Because this item was not within the Fifth Schedule, and was not settled, this item could have triggered a separate claim under clause 14A. But, on the facts, the work was not required by an approval of Hampshire County Council under Clause 14A.1(b). As an item of day-to-day working, it would not have been a matter for Hampshire County Council at all. The work in question was carried out because it needed to be carried out for health and safety reasons. It had nothing to do with Hampshire or any approval which, as the Highways Authority, they might have given. No relevant approval has been pleaded. Accordingly, on the facts, no claim under clause 14A(a) can arise.

Summary/ Claim Item 18

For the reasons that I have set out above, I do not consider that this Claim Item gives rise to a claim. The declaration sought is refused.

I should add this. There is a suggestion in relation to this item that the power cables should have been removed by RMC pursuant to the terms of the Sale Agreement and that this work was necessitated because of that failure. No claim for damages of breach of contract has been pleaded in relation to this Claim Item, and it would therefore not be appropriate for me to deal with it on such a basis.

Work Carried Out

These works were carried out to remove surplus top soil found on the Link Road alignment as well as unsuitable foul material. The surplus and unsuitable material were removed and some suitable material was imported in its stead.

When was the claim first made?

It appears that the claim was first made on February 2006 although, again, at least some of this work was obviously carried out right at the start of the construction works relating to the Link Road. That was many years before the date of the claim.

Is this claim within Clause 7A?

The removal of the top soil to facilitate the Link Road was part of the specification of the Link Road works. It was therefore part of the first item in the Fifth Schedule to the Sale Agreement. It was therefore covered by the clause 7A adjustment mechanism.

Was it settled?

This item of work was not connected with the amendment to the specification or the re-siting of the Link Road. It was therefore settled by the June 2001 Settlement Agreement. It was not any part of the second exception set out there.

Is this an item within Clause 14A?

This item was settled under clause 7A and therefore, for the reasons of construction and/or fact explained above, cannot be reinstated under clause 14A. Moreover, as a matter of fact, no approval from Hampshire has been identified that required this work to be carried out. On the contrary, the evidence suggests that this work was required to be carried out because Persimmon’s own consultants deemed the top soil to be unsuitable. There is nothing to suggest that any approval by Hampshire County Council as Highways Authority, under clause 14A.1 (b), was ever given in relation to the removal of the top soil, let alone required that this work be performed. No such approval is identified in paragraph 80 of Appendix to Persimmon’s closing submissions. Still further, it would appear that, according to paragraph 4.65 of Persimmon’s written opening, any relevant approval emanated from Gosport, as the relevant planning authority.

Summary/ Claim Item 19

For the reasons that I have set out above, I do not consider that this Claim Item gives rise to a sustainable claim. The declaration sought is refused.

Work carried out

It was originally anticipated that the Link Road would be constructed in one continuous process. However, for the reasons noted above, and in particular because of Gosport’s changing planning requirements (paragraphs 152 and 153 above), the Link Road was carried out in two sections: the northern first, and the southern later, once the difficulties in respect of the route and the southern junction had been sorted out. For reasons which are not entirely clear on the facts, it is suggested that, in consequence, the site compound had to be re-located twice.

When was the claim first made?

The claim was first made on 7 February 2006. This is despite the fact that it became apparent early on that the Link Road would have to be built in two separate stages.

Is this an item within Clause 7A?

The specification, which is the relevant document for the purposes of Item 1 of the Fifth Schedule, makes no reference to the compound at all. But that is hardly surprising: the provision of a compound, and its location, is part of the contractor’s methodology in carrying out the works. As such, it was never going to be part of the Fifth Schedule or the adjustment mechanism under clause 7A.

Was it settled?

If I am right, and this work was not within the first item of the Fifth Schedule, then it was not settled (because it was never part of the negotiated adjustment at all). If I am wrong and it was covered by the clause 7A mechanism, then it was settled, because it did not fall within the second exception of the June 2001 Settlement Agreement.

Is this an item within Clause 14A?

In principle, because it fell outside the mechanism of clause 7A, a claim under clause 14A might be available. But it would be an extraordinary thing if an approval from Hampshire County Council, as the Highways Authority, required Persimmon (either directly or even indirectly) to move their compound, and that, but for such a requirement, the compound would not have been moved. No such approval was identified in the documents or at paragraph 81 of Appendix 1 to Persimmon’s closing submissions. Any documents emanating from Hampshire or Gosport simply acknowledged that, from a programming point of view, this was how the works were going to be carried out. It is impossible to link the moving of the compound to any requirement of Hampshire County Council acting as the Highways Authority. As already noted, the evidence is clear that the Link Road was constructed in two parts as a result of the Gosport planning conditions, which is not a relevant approval under clause 14A.

Summary/ Claim Item 20

Accordingly, for the reasons set out above, I refuse to grant a declaration in respect of this item of claim.

Work Carried Out

In the words of Persimmon’s own case, “these works are part of the normal sequence of building a road where the top surface is not initially placed on the road. On this case changes to the levels on the road required the manholes to be built flush with the road surface and subsequently raised when the final wearing course was laid”.

When was the claim first made?

The claim was first made on the 7 February 2006.

Is this an item within Clause 7A?

This work was, on Persimmon’s own case, part of the normal sequence of building a road. It was therefore part of Persimmon’s working methodology. It was nothing to do with the necessary rehabilitation works, or turning the site back into clean, serviced land. As such it was not within item 1 of the Fifth Schedule to the Sale Agreement, and therefore not part of the clause 7A adjustment mechanism.

Was it settled?

If this element of the work was not within item 1 of the Fifth Schedule then it was not settled (because it never formed part of any further claims being pursued by Persimmon under clause 7A). But if I am wrong about that, and it did arise under item 1, then it was settled because it was not within the second exception of the June 2001 Settlement Agreement.

Is this an item within Clause 14A?

This might, in principle, have given rise to a claim under clause 14A.1, because my primary view is that it was not a claim and/or was not settled under clause 7A. However, no approval by Hampshire County Council, acting as the Highway Authority, has been identified in relation to this item of claim. None is identified in paragraph 82 of Appendix 1 to Persimmon’s closing submissions. In addition, because I have concluded that this work was part of the day-to-day contractors’ methodology, such an omission is entirely unsurprising: it would never have been a matter for Hampshire. Accordingly I conclude that no claim under clause 14A can arise in relation to this item.

Summary/ Claim Item 21

For the reasons set out above this Claim Item must fail. Persimmon are not entitled to the declaration sought.

Work carried out

This item is not an element of the physical works carried out on site. It is said to be the estimated allowance for the inflation in the costs of the works which will be carried out in future to complete the Link Road

When was the claim first made?

The claim was first made on 7 February 2006.

Is this an item within clause 7A?

On my construction of the Sale Agreement, the only way in which Persimmon would be entitled to recover inflation costs would be if, in seeking an agreement for projected costs under the rubric of clause 7A, the parties agreed that an allowance should be made for inflation costs.

Was it settled?

Of course, for the reasons set out at paragraph 87 above, the parties did reach such an agreement. The schedule of December 2000 makes plain that a large sum, in excess of £4 million, was agreed to reflect, amongst other things, future allowances for inflation. Accordingly, it seems to me that any claim by Persimmon for inflation was expressly settled by the June 2001 Settlement Agreement. Furthermore, Persimmon have had the full benefit of that arrangement, because the purchase price was reduced by almost £4 million to reflect the terms of the Settlement Agreement. There can be no ground for a further claim for inflation costs now.

Is this an item within Clause 14A?

There can be no claim under clause 14A for the reasons of construction and/or fact set out above. In any event, I consider that it is absurd to suggest that there was some sort of approval from Hampshire under clause 14A.1(b) which required Persimmon to incur inflation costs. Neither can such inflation costs be demonstrated to arise in consequence of any relevant approvals emanating from Hampshire which would give rise to a claim under clause 14A.1(b). Perhaps unsurprisingly, no relevant approval has been identified by Persimmon.

Summary/ Claim Item 22

For the reasons set out above, the declaration sought in respect of this Claim Item is refused.

These works were carried out to clear trees from the route of the Link Road. To that extent, they are in precisely the same category as Claim Item 13 above (site clearance) and all of the same reasoning set out at paragraphs 208-213 applies again. In those circumstances, Persimmon’s claim for a declaration is refused.

As I understand it, this claim is in respect of possible future variations which might arise as the southern junction of the Link Road is completed. Persimmon seeks a declaration that they are entitled to be paid all costs arising out of such variations.

I consider that such a claim is misconceived in principle. For the reasons set out at length above, whether or not Persimmon are entitled to make a claim depends entirely upon the nature of the variation, whether it was settled, whether it could be said to arise out of an approval under clause 14A.1 and so on. Since these variations have not even occurred yet, it is impossible to answer any of those questions. It is therefore impossible to say that Persimmon are entitled to the declaration sought.

Work carried out

These were works which were carried out during a safety audit by Hampshire as Highways Authority prior to their adoption of the Link Road.

When was the claim first made?

Although the works were apparently carried out in 2004, the claim was not made until the 7 February 2006.

Is this an item within Clause 7A?

My view is that this item of work was simply part and parcel of the carrying out and completion of the Link Road. It was therefore outside item 1 of the Fifth Schedule. Again, it related to Persimmon’s day-to-day methodology, and did not trigger any liability on the part of RMC.

Was it settled?

If this work was outside the Fifth Schedule then it was not settled by the June 2001 Agreement (because it could not form part of the adjustment process). However, if I am wrong about that, then it clearly was settled by the June 2001 agreement, because it formed no part of the second exception.

Is this an item within Clause 14A?

It seemed to me that, given that this was not an item within the Fifth Schedule, it was possible in principle for this Claim Item to trigger a claim under clause 14A. However a specific approval by Hampshire in accordance with clause 14A.1 (b) would have to be demonstrated. No such approval is pleaded or has been made out in the evidence: none is referred to at paragraphs 88-89 of Appendix 1 of Persimmon’s closing submissions. Persimmon’s claim therefore fails on the facts. Moreover, I consider this to be an unsurprising result, since, as with Claim Item 18 (paragraphs 241-248 above), this was an element of Persimmon’s day-to-day working, and was therefore always their responsibility under the Sale Agreement.

Summary/ Claim Item 25

For the reasons set out above, I have concluded that Persimmon are not entitled to the declaration sought.

I consider that this item of claim is no different in principle or on the facts to claim item 22 (inflation costs) I therefore reject this item of claim for the same reasons as set out in paragraphs 267-272 above.

I reject this item as a matter of principle. The fees that Persimmon incurred in relation to the Link Road, and indeed the fees incurred in respect of any other items within the Fifth Schedule, were a matter for them. There was no express entitlement under clause 7A pursuant to which they could recover those costs. Furthermore, if I am wrong about that, then any such claim for additional fees would have been part of the Settlement in June 2001, unless they were incurred in relation to works that fell within the second exception. No such fees have been identified. In those circumstances, any entitlement to fees (which I reject) would have been settled by the June 2001 Agreement.

As far as the claim under clause 14A is concerned, since there was no clause 14A.1 approval in relation to fees either pleaded, or available on the facts, I conclude that no claim under clause 14A can get off the ground. Furthermore, the point should also be made that the problems with the Link Road were almost exclusively caused by Gosport, and their changing planning requirements (paragraphs 152 and 153 above), which would not trigger a claim under clause 14A.1 anyway.

For all these reasons, I reject the claim for a declaration in respect of Claim Item 27.

This last claim item for a declaration is different to all of the others. It alone arises out of the express terms of clause 14A.3 of the Sale Agreement, which entitled Persimmon to assume responsibility for the negotiations to procure any of the clause 14A.1 approvals that had not been procured by RMC. Clause 14A.4 entitled Persimmon to the reasonable and proper costs of the negotiations for which they had assumed responsibility.

Of course, their entitlement to the reasonable and proper costs of the negotiations can only refer back to those approvals identified in clause 14A.1. In other words, if fees were incurred, for example, in obtaining a particular planning consent from Gosport Borough Council, then that would fall outside clause 14A.1, because that is not one of the types of approval listed there. But to the extent that costs were incurred by Persimmon in relation to the obtaining of any approvals within those three sub-clauses, then it seems to me that Persimmon are entitled to recover their reasonable costs of so doing.

For the reasons set out above, I conclude that Persimmon are entitled to a declaration that they are entitled to their reasonable costs (including the costs of the consultants that they employed) incurred in the negotiations to obtain approvals under clause 14A.1.

The terms of the Sale Agreement relevant to the claims for damages are set out at paragraph 38 above. Clause 12.2 provided an arrangement whereby, when Persimmon removed the top layer of the site for remediation purposes, that material, called “surplus remediation materials”, would be taken to phases 6 and 7, where it would then be used to build up the ground level in those areas (which, it will be remembered, was lower in that part of the site). Clause 12.2 provided that the haulage by which the surplus remediation materials were transported to the southern part of the site, and the placing of the materials into that void space, would be RMC’s responsibility, but that the works would be performed “all in accordance with [Persimmon’s] reasonable requirements”.

The term of the Sale Agreement relevant to the claim for an indemnity was clause 16.2 (the provision by RMC of an indemnity in respect of costs arising from their “continuing operations” at the site). The clause is set out in full at paragraph 41 above.

It is common ground that:

Accordingly, on the face of it, RMC had an obligation to Persimmon which they did not perform and which Persimmon performed instead. Persimmon therefore claim the costs of carrying out that work as damages for breach of contract. RMC maintain that, because they were never asked to do the work, they were not in breach of contract and/or any such breach had been waived by Persimmon and/or Persimmon are now estopped from making the claim. If a claim for damages is made out, it appears to be common ground that the damages must be measured by reference to what it would have cost RMC to perform these works, rather than (if different) the actual costs incurred by Persimmon. That is a matter to which I return below.

There is no dispute that Sandhills Lane provided an important means of access for RMC in their continuing use of the adjoining land. It was also used by Persimmon for site access, particularly in the early days of the development, following the completion of the Sale Agreement.

It is common ground that Persimmon had to carry out various diversion works to Sandhills Lane in order to keep it operating. Persimmon claim that this work was carried out for the benefit of RMC and they therefore make a claim for the cost of such works pursuant to clause 16.2. RMC say that Sandhills Lane was kept running for the benefit of both RMC and Persimmon, and therefore no claim is made out. I refer to the relevant evidence at Section N below.

The first point raised by RMC was to the effect that they were not in breach of clause 12.2 because they were never asked by Persimmon to provide the haulage or the labour for the remediation work. RMC’s argument was that the words “all in accordance with the Purchaser’s reasonable requirements” meant that there had to be some initial request or notice from Persimmon in order to trigger this obligation on the part of Persimmon; that the reasonable requirements had to be expressly notified to RMC before this obligation was activated. Indeed, as I understood it, RMC maintained that, until such requirements had been notified, they had no relevant obligation and could not therefore be in breach of clause 12.2.

I reject that submission. In my judgment, the words “all in accordance with the Purchaser’s reasonable requirements” referred to the way in which the works were to be carried out. The provision of the haulage and the remediation of the void space was to be carried out by RMC, but at a time and in a way that was convenient for Persimmon, subject to the proviso, of course, that Persimmon’s requirements had to be reasonable.

In my view, those words did not amount to some form of condition precedent: it did not mean that, without the provision by Persimmon to RMC of something which could be described as “a requirement”, RMC had no relevant obligation at all. The clause is not worded in that way. Instead the clause makes plain that RMC “shall provide the haulage” and “shall remediate the void space” (emphasis supplied). These were mandatory requirements. They set out clear and unambiguous obligations on the part of RMC. As I have indicated, if they were in any doubt as to how and when to perform these obligations then that plainly necessitated a certain amount of liaison with Persimmon, but it would stretch these provisions beyond breaking point to contend that they were somehow designed only to bite following a request or notification from Persimmon.

It is trite law that, if one party’s obligation to do something under a contract is contingent upon the happening of a particular event, the circumstances of that event must be identified unambiguously in the contract. It must be clear beyond doubt how and in what circumstances the relevant obligation has been triggered. No such provisions were contained in clause 12.2. RMC’s obligations were straightforward and mandatory. Since RMC failed to perform these obligations, I find that they were in breach of contract.

I should add, for completeness, that there can be no unfairness to RMC in this conclusion. Mr Barrett, RMC’s Estates and Development Director at the relevant time, told me frankly in evidence that he was well aware that RMC were required by the Sale Agreement to carry out this work, and that he also knew that Persimmon were doing it themselves. He did not point out their apparent error. I was left with the impression that he hoped, by staying silent, to avoid this potentially onerous obligation altogether.

The next point taken by RMC is to maintain that any relevant breach had been waived by Persimmon. They contend that waiver can be inferred from conduct: see Bremer Handelsgesellschaft v Vanden Avenne-Izegem [1978] 2 Lloyds Rep 109. Further, they submit that these provisions were inserted solely for the benefit of Persimmon and that Persimmon could therefore, without the assent of RMC, waive compliance with such a provision and enforce the contract as if that provision had been omitted: see Morrell v Studd and Millington [1913] 2 Ch 648.

I consider that there is little difference between a waiver of the sort alleged here by RMC and their alternative argument based upon promissory estoppel. In cases of promissory estoppel, although consideration need not be proved, certain other requirements must be satisfied for such an estoppel to be effective: in particular, the promise must be clear and unequivocal (see The Shackleford [1978] 2 Lloyds’ Rep 155) and, in addition, the promise must have been relied on or acted upon in some way by the other party: see Lark v Outhwaite [1991] 2 Lloyds’ Rep132.

There was force in Mr Wilmot-Smith QC’s description of the two specific cases relied on by RMC for their waiver argument as “odd”. In Toepfer v Warinco AG [1978] Lloyds Rep 569, Brandon J (as he then was) was dealing with a case in which the buyer’s representatives had failed to see that the cargo in question was coarse-ground meal rather than fine-ground meal. The seller’s defence of waiver, based on this omission, failed but, on the facts of that case, because the buyer’s supervisor had failed to spot the discrepancy, the omission was held to amount to a failure to mitigate such that the buyers were only entitled to nominal damages. It was not therefore a case that was of very much assistance on waiver at all.

The other case relied on by RMC was the The Bunga Saga Lima [2005] 2 Lloyds Rep 1. That was a case in which Gloster J was concerned with an application for permission to appeal against the decision of an arbitral tribunal and, in particular, a finding that, because the charterers had not insisted on cleaning being done at the first load port, they had lost the right to claim for the loss of time and expense in carrying out that work at the second load port. Mr Wilmot-Smith QC submitted that this case is authority for no proposition at all save that, in certain sale of goods cases, a failure to act by the representee may be sufficient to give rise to a waiver. I accept that submission. Because of the very limited right of appeal in arbitration, a case in which a judge has concluded that the applicant has not made out sufficient grounds to warrant an appeal against an arbitration award under the Arbitration Act 1996 cannot, without more, be taken as an unqualified judicial endorsement for every conclusion that the arbitrator may have set out in his award.

The very specific nature of the authorities relied on by RMC on the waiver point highlights, to my mind, the essential difficulty that the waiver point faces. As I have indicated, a waiver of this kind is very similar to a promissory estoppel. Once that comparison is made, the difficulties with RMC’s case become manifold. There was no clear and unequivocal promise here; indeed there was never any indication by Persimmon that they no longer relied on this provision. Further, there was no obvious reliance on any such waiver by RMC, and certainly no discernible detriment arising from any such reliance. The position was that Persimmon carried out this work themselves and, albeit sometime later, made a claim for so doing. RMC were aware that Persimmon were doing this work themselves and did not at any time point out to Persimmon that, pursuant to the Sale Agreement, this was RMC’s obligation. It may be that RMC believed that this was an onerous obligation which, if they kept quiet, they might be able to avoid. I would be most uncomfortable about finding waiver or promissory estoppel in such circumstances: it would not, in my view, be an equitable or just result.

I have addressed estoppel in the preceding paragraphs. I consider that there was no clear representation; no reliance by RMC; and no detriment to RMC if, (as I believe to be appropriate for the reasons set out below), this claim is measured by reference to what this work would otherwise have cost them. In those circumstances, the estoppel argument must fail.

In reliance on Toepfer it is alleged by RMC that Persimmon’s failure to require RMC to do this work pursuant to clause 12.2, and the decision to carry out these works themselves, amounted to a failure to mitigate which meant that Persimmon were only entitled to nominal damages.

I do not accept that proposition for two reasons. First, Toepfer was a particular case on its particular facts, and concerned the sale of goods. Secondly, in my judgment, the relevant authorities on this aspect of the dispute are those arising out of construction contracts where an employer sought damages against a contractor for the cost of rectification of defects, which defects had not been notified to the contractor under the defects liability provisions of the contract, and in respect of which the contractor had therefore been deprived of the opportunity to rectify himself.

The best known of these cases is Pearce and High v Baxter and Anr [1999] 66 Con LR 110.There the Court of Appeal referred to a number of earlier judgments on similar topics, including the very useful judgment of His Honour Judge Stannard in William Tompkinson and Sons Ltd v St Michaels Parochial Church Council [1990] CLJ 319. They concluded that, in circumstances where an employer had not notified the contractor of the work to be performed, the employer was still entitled to claim damages against the contractor, but the measure of that loss was the notional cost of carrying out the work to the contractor (which opportunity he had been denied) rather than the actual costs incurred by the employer.

Accordingly, put another way, in Pearce and High, and the other cases referred to in the judgment of the Court of Appeal, the mitigation point was proved, but only to the extent that the carrying out of the works cost the employer more that it would have cost the contractor, if he had been given the opportunity to carry out the remedial works. In my judgment, to the extent that there has been a failure to mitigate in the present case, precisely the same reasoning applies. For these purposes it makes no difference as to whether the clause was of benefit just to Persimmon (as RMC allege here) or as a benefit to both the parties (as in Pearce and High ). If Persimmon’s failure to notify RMC was a failure to mitigate, then the loss caused by that failure was the additional cost in them carrying out the works rather than RMC.

RMC have an alternative argument, which suggests that:

Dealing with that argument in short stages, I first reject the case for an implied term. There was an express obligation to co-operate pursuant to clause 35 of the Sale Agreement, so there is no room for the implied term relied on (see the principle of construction outlined at paragraph 46c) above). It is not clear that Persimmon were in breach of clause 35 by failing to ensure that RMC carried out the haulage and restoration works: indeed, on one view, it was RMC who were in breach for failing to point out that this was work that they should have been doing. However, even assuming for this purpose that Persimmon were in breach of clause 35, in my judgment, the consequences of such a breach would not be to deprive Persimmon of substantive damages: the loss that would flow from such a breach would be limited to any extra-over cost caused by the fact that Persimmon carried out the work, not RMC.

Therefore, assuming Persimmon were in breach of clause 35, that would deprive them of any additional costs incurred because they did the work, rather than RMC, but it would not prevent Persimmon from recovering as damages the notional cost of the work to RMC. The argument as to breach of the co-operation provision therefore makes no difference to the outcome of this head of claim.

It is apparent from what I have already said that, in my judgment, the correct measure of loss in the present case would be the notional cost to RMC of carrying out this work. As things presently stand, Persimmon claim £1,527,019.62 in respect of infilling voids and £503,918 in respect of haulage. For reasons which were explained at the outset of the trial, RMC are not in a position to challenge these figures as being the costs incurred by Persimmon, but they have not yet been able to calculate what it might have cost them had they been given the opportunity to do this work. For those reasons, the calculation of this head of loss will have to be agreed by the parties or, failing that, referred either to the independent engineer or back to the court for determination.

However, there is one important matter which was in dispute at the trial and with which I should deal in this judgment. The remediation works at the southern corner of the site were carried out by Persimmon using a form of dynamic compaction, known as Landpac. RMC complain about the cost of this method of remediation, and maintain that this methodology should not have been adopted. Accordingly, it seems to me that, whilst I cannot finally determine what the remediation works would have cost RMC, I can decide whether or not the notional costs to RMC should be calculated by reference to the costs of the dynamic compaction works in accordance with the Landpac method.

There are two strands to this aspect of the case: the technical suitability of the work and the cost. As to the technical suitability, there were a number of different techniques that might have been possible. However, the parties are agreed that vibro techniques would have been unsuitable and that pre-inundation was also unsuitable in view of the highly variable and cohesive soils at the site. Whilst there was some debate about the viability of piled foundations, I consider that piling may well have been prohibitively expensive and, in any event, would not have been a suitable technical option because of the inherent risks posed by the landfill gas migrating through the gaps in the capping layer in the location of the piles. In addition, it seemed to be common ground that excavation and re-compaction in layers as engineered fill would also have been too slow and too expensive.

Accordingly, it came down to a straight fight between the dynamic compaction which was actually carried out, and the pre-loading that Dr Clinton advocated on the part of RMC. The difficulty with the pre-loading is that it would have taken a long time to achieve a reasonably acceptable level of compaction; something between 5 and 10 years. Furthermore, because the sub-soil was landfill, I accept Persimmon’s contention that pre-loading was unlikely to yield consistent level of compaction over the site. Accordingly, I would incline to the view that, from a technical standpoint, the Landpac dynamic compaction methodology was to be preferred.

The evidence also suggests that, not only was the dynamic compaction a better alternative technically, but it was also cheaper. I consider that this was the effect of the RMC memoranda of 25.9.02, 7.10.02 and 17.12.02, which were looked at during Mr Barrett’s cross-examination. That was also the only fair inference to be drawn from the Landpac quotation. Most importantly of all, that was the evidence of Mr De Silva, Persimmon’s engineering expert, whose evidence I found to be of considerable assistance. He considered that Landpac was less expensive than pre-loading, and his conclusion was not challenged.

There is one qualification which I should add. On phase 7 (not phase 6) the fill was placed and compacted in 1m layers. This additional exercise was described by Mr De Silva as “worthwhile” but he frankly accepted in cross-examination that “it was not strictly necessary”. In all the circumstances, it seems to me that I should not allow Persimmon to recover any extra-over costs referable to that particular methodology.

Accordingly, I have concluded that, in respect of phases 6 and 7, the calculation of the notional costs to RMC of carrying out this work should include for the Landpac dynamic compaction system. However, in relation to phase 7, based on Mr DeSilva’s concession, it seems to me that the costs should not include the cost of the placing and compacting of the layers in 1m layers. A less onerous methodology must be agreed by the experts for the purposes of calculating the notional costs to RMC on phase 7.

Essentially, the dispute in relation to the Sandhills claim works comes down to an issue of fact: for whose benefit were these diversion works carried out? The best evidence came from Mr English, Persimmon’s project manager/contracts manager. He explained in his oral evidence that, whilst initially Persimmon made use of Sandhills Lane alongside RMC, the construction of the first section of the Link Road, and an access road to the west of the development, meant that Persimmon no longer needed the access provided by Sandhills Lane. He calculated that around 95% of the utilisation of Sandhills Lane was by RMC for their ongoing use of the adjoining site. That figure was not challenged.

In those circumstances, it seems to me that, pursuant to clause 16 of the Sale Agreement, Persimmon have established a liability to be reimbursed by RMC in respect of these diversion works. The total amount of the diversion works was £.49, 389.58. I consider that, based on the evidence from Mr English, it is appropriate to make RMC pay 95% of those costs. 95% of £49,389.58 is £46,920.10.

For those reasons, I conclude that RMC should pay Persimmon the sum of £46,920.10 in relation to this item of claim.

For the reasons set out in Section K above, I reject all of Persimmon’s claims for declarations save for the following:

I conclude that, for the reasons set out in Sections L and M above, Persimmon’s claims for damages are made out and that, whilst those damages must be calculated at the level of the notional costs of those works to RMC, those notional costs must be calculated on the basis of the dynamic compaction method actually used by Persimmon, save that the costs should not include any additional costs incurred in the placing and compaction in 1m layers on Phase 7. For the reasons set out in Section N above, I also award Persimmon the sum of £46,920.10 in relation to the Sandhills Lane claim.

I invite the parties to agree the wording of the order consequential upon this Judgment.