Portsmouth City Football Club Ltd. v Sellar Properties (Portsmouth) Ltd. [2004] EWCA Civ 760

Case No A3/2003/2180

[2004] EWCA Civ 760

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(MR JUSTICE LAWRENCE COLLINS)

Venue Royal Courts of Justice

Date Friday 18 th June 2004

Strand,

London, WC2A 2LL

Before

THE RIGHT HONOURABLE LORD JUSTICE CHADWICK

THE RIGHT HONOURABLE LORD JUSTICE MAURICE KAY

MR JUSTICE BUCKLEY

Between

PORTSMOUTH CITY FOOTBALL CLUB LIMITEDClaimant/

SELLAR PROPERTIES (PORTSMOUTH) LIMITEDDefendant/

(Transcript of the Handed Down Judgment of

Smith Bernal Wordwave Limited, 190 Fleet Street

London EC4A 2AG

Tel No: 020 7421 4040, Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr Michael Barnes QC (instructed by Bircham Dyson Bell of 50 Broadway, Westminster, London SW1H 0BL) for Defendant/Appellant

Mr Michael Driscoll QC (instructed by Paris Smith & Randall of 1 London Road, Southampton, SO15 2AE) for Claimant/Respondent

Judgment

Lord Justice Chadwick :

[1]This is an appeal from an order made by Mr Justice Lawrence Collins on 17 September 2003 in proceedings brought by Portsmouth City Football Club Limited (“the Club”) to determine the price payable under an option agreement for the sale and purchase of land at Fratton. The appellant, Sellar Properties (Portsmouth) Limited, is the vendor of that land.

The underlying facts

[2]Sellar Property Group, of which the appellant is a member, is engaged in the business of property development. By the late 1990’s it had acquired (or had the right to acquire) a substantial area of land comprising the former Fratton Goods Yard and adjoining properties. The Club owned and occupied land, known as the Fratton Park Football Ground, immediately to the east of the land acquired or controlled by Sellar.

[3]From early 1999 discussions took place between Sellar and Portsmouth City Council, as the local planning authority and as the owner of other adjoining land, which were eventually to lead to the grant, on 7 March 2001, of outline planning consent for development of the whole site by “redevelopment for 35,000 all seater football stadium with supporting facilities; non-food retail; office/industry/warehousing (B1/B2/B8) uses; restaurant with drive-through facilities (A3); associated vehicle parking and associated new access roads”. The Council’s planning objectives included(i) the construction of a spine road over the proposed development site linking the existing Rodney Road (to the north) with Goldsmith Avenue (to the south) and

(ii) the provision of a new all seater stadium for use by the Club. It is clear that the Council saw the provision of a new stadium – to be built partly on land owned or controlled by Sellar – as an important planning gain.

[4]The proposed development site was crossed, from east to west, by a public footpath and cycle track known as Milton Lane. The land of which Sellar was (or was entitled to become) the freehold owner lay immediately to the south of Milton Lane. Between Milton Lane and Rodney Road there was a rectangular area of land (known as the Barwood land) owned by the Council but let on long leases, the interests under which had been acquired by Sellar. The new spine road, when constructed, would cross Milton Lane and the Barwood land to link with Rodney Road.

[5]It was obvious, from the outset of the discussions between Sellar and the Council, that Sellar would be unable to comply with an obligation to construct the new spine road – to be imposed by an agreement to be made under section 106 of the Town and Country Planning Act 1990 - unless it had or acquired rights which enabled the new road to cross both(i) Milton Lane and

(ii) the Barwood land. It was obvious, also, that if the new road were to cross Milton Lane something would have to be done to avoid what would otherwise be the inevitable obstruction of the existing public rights over the footpath. Prima facie, at least, whatever rights were required over the Barwood land would need to be acquired from the Council as the freehold owner; rights over the surface and subsoil of Milton Lane would need to be acquired from the Council – in whom the surface of the highway could be expected to be vested by virtue of section 263 of the Highways Act 1980 and who would be presumed owner of the sub-soil up to the via media; and whatever needed to be done to avoid obstruction of the existing footpath would require the exercise of powers by the Council, acting as local highway authority under the 1980 Act or as local planning authority under the Town and Country Planning Act 1990. And it is clear that the Council were alive to the potential “ransom” value of the Milton Lane crossing. A note of an early meeting between Sellar and Council officers records:

“There is a public foot path that requires to be crossed. PCC’s estimate of the value of this land is £1,000,000.”

The agreement of 21 October 1999

[6]As I have said, the Council saw the provision of a new all-seater stadium for use by the Club, to be built partly on land owned or controlled by Sellar, as an important feature of the proposed development. It was to meet this planning objective that Sellar and the Club negotiated and agreed the option agreement which (as subsequently varied or amended) gives rise to the issue in these proceedings. The agreement, as first made, was dated 21 October 1999. That agreement entitled the Club, by option notice given to Sellar within six months of the fulfilment of a planning condition, to purchase the land required for the new stadium. That land comprised, in part, the freehold interest in land (“the Red Land”) to the south of Milton Lane which was owned or controlled by Sellar and, in part, the leasehold interest in land (“the Yellow Land”) to the north of Milton Lane which was itself part of the Barwood land. The Red Land and the Yellow Land (together “the Property”) were bounded on the west by the line of the new spine road. To the east, the Red Land abutted the Club’s existing Fratton Park Football Ground.

[7]Clause 1.11 of the agreement of 21 October 1999 defined the purchase price to be payable by the Club in the event that the option was exercised. It is sufficient to note that it provided for there to be deducted from the purchase price “the Milton Lane Allowance”. The Milton Lane Allowance was defined, by clause 1.34 of the agreement, as “such sum (not to be less than nil) calculated according to the formula £1,100,000 – X”.

[8]The effect of clause 1.34 of the agreement, read with clause 1.11, was that the purchase price payable by the Club on the exercise of the option was reduced by the amount by which ‘X’ was less than £1,100,000. It is pertinent to have in mind that, following the discussions with Council earlier in the year 1999, £1,000,000 was the amount for which the Council was thought to be looking as the ransom value of the Milton Lane crossing; and the additional £100,000 took account of the need to acquire the Council’s freehold interest in the Barwood land. The definition of ‘X’, contained in clause 1.34 of the agreement of 21 October 1999, points to the conclusion that the intention of the parties to that agreement was that any saving in the amount which Sellar was, in fact, required to pay to the Council in connection with the Milton Lane crossing and the Barwood land should be passed on to the Club.

[9]‘X’ was defined in the agreement of 21 October 1999 as:

“. . . the aggregate of such capital sum and the value of any non-capital monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane and for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . .”

The interest of the Club in minimising the amount which Sellar would be required to pay to the Council in connection with the Milton Lane crossing and the Barwood land – and so reducing the amount which the Club would, itself, pay Sellar for the option land – is emphasised by the terms of clause 13 of the option agreement of 21 October 1999:

“THE Vendor and the Purchaser shall act jointly to negotiate X (as defined in Clause 1.34) . . . with Portsmouth City Council and shall use all reasonable endeavours to negotiate the lowest [sum] (or least other consideration) in respect thereof as it is possible to obtain . . .”

Sellar’s negotiations with the Council

[10]In a letter of 18 August 1999 Sellar’s agents had already identified the need to address two questions in relation to the Council’s perceived intention to extract a ransom value in respect of the Milton Lane crossing: (i) “whether a Local Authority has the right to impose a planning brief, which basically restricts the site owner’s ability to develop unless major infrastructure works are carried out but which, at the same time, shows that the only viable access route is across Local Authority land which, in effect gives them a ransom situation”; and (ii), if so, “if they do not take advantage of this ransom situation can they be accused by the District Auditor of not achieving ‘best value’ for their holding”. In November 1999 Sellar took advice from counsel on these questions.

[11]Counsel advised that the Council would not be entitled to resist, either on principle or by way of ransom payment, the cross-over at Milton Lane, but would be required to co-operate with Sellar as developer in settling the terms of an agreement under section 278 of the Highways Act 1980. At a meeting on 17 December 1999 the substance of that advice was passed on to the Council’s officers, who seem to have accepted that, as local highway authority, the Council could not refuse to enter into a section 278 agreement. They took the point, however, that different considerations might apply to the acquisition of land not forming part of the highway which was in the Council’s ownership.

[12]Following that meeting, Sellar sought advice from counsel on the question whether, once planning consent had been granted, the Council could exploit its rights as freeholder of land over which the spine road would cross to ransom the development. In a written advice, dated 19 January 2000, counsel advised that “in the unlikely event of the City Council proving unreasonable and/or obstructive either in the context of its leasehold responsibilities and or in the context of the sale of the freehold then application should be made without delay to the Secretary of State for an order [under section 98 of the Local Government and Land Act 1980] that the City Council dispose of its interest in the site”. On the basis of that advice Sellar offered the Council £100,000 for the Barwood land, but nothing for the Milton Lane crossing. That offer was refused on 9 March 2000.

[13]On 22 May 2000 Sellar reported to the Club that “it could take some time before we conclude negotiations for the purchase of(a) The Milton Lane crossover,

(b) The Barwood freehold . . .”. The note recorded an agreement “to release the Club from its option on the Barwood land” and to amend the option agreement of 29 October 1999 accordingly. But it was confirmed in that note that “the arrangement for PFC to benefit from 100% of the savings secured for the Milton Lane crossover below £1m will still persist through the length of the option agreement”. That reflects an understanding that, out of the £1,100,000 referred to in clause 1.34 of the option agreement, £100,000 was attributable to the Barwood land – which is, of course, consistent with the offer which Sellar had made to the Council earlier in the year.

[14]At or about the same time the Council learnt, or discovered, that it was the owner of the subsoil beneath the whole width of Milton Lane. It sought its own advice on the question whether its status as local planning authority seeking the development of the site should affect the amount that it could properly require as landowner both of the Barwood land and of the land under Milton Lane. The advice was that, as to the land in its ownership, it could demand a ransom value.

[15]Following receipt of that advice from counsel, the District Valuer wrote to Sellar’s agents on 20 June 2000 to “set out the terms which I am prepared to recommend to Portsmouth City Council”. Those terms included, so far as material, the following:

“2. The Irvine Sellar Group are to surrender their leasehold interests in the Barwood site. 3. The Council will convey the freehold of the Barwood site, excluding that part required for stadium purposes to the Irvine Sellar Group 4. The Council will convey the freehold of Milton Lane, between points A and B to the Irvine Sellar Group”

The price proposed in that letter was £5.95 million. Subsequently, by a letter dated 23 August 2000, that figure was reduced to £4.25 million. At a meeting on 5 September 2000 between Sellar’s agents and the Council’s Head of Property Services an offer on substantially those terms was agreed, subject to contract. It is pertinent to note what was to be transferred for the payment of £4.25 million:

“ 2. The payment outlined in 1 above is for the Council’s freehold interest in the land known as the Barwood Site. This is currently let on a long lease to the Sellar Property Group. The payment also includes the freehold interest in Milton Lane that falls outside the lease and that is shown, for identification purposes only, shaded red on the attached plan.”

The portion of Milton Lane to be transferred included, but was more extensive than, the portion over which the new spine road was to pass.

[16]Shortly after the meeting to which I have just referred, Sellar asked the District Valuer to apportion the agreed price of £4.25 million between the Barwood land and Milton Lane. By a letter dated 13 September 2000 the District Valuer refused to do so. He wrote:

“In arriving at my valuation I had regard to the overall benefits to your client of access over the land and the valuation was agreed on the basis of one disposal. In those circumstances, it is not appropriate or necessary for me to provide an apportionment”

The supplemental agreement of 28 September 2000

[17]On 28 September 2000 the option agreement of 21 October 1999 made between Sellar and the Club was varied by a supplemental agreement to which Singer and Friedlander Properties Plc joined as surety for the obligations of Sellar. Clause 1 of the supplemental agreement provided that words and expressions in that agreement should (unless otherwise provided) bear the same meaning as in the principal agreement. The Yellow Land was redefined, so as to restrict it to a triangular parcel of the Barwood land immediately to the north of Milton Lane. Clauses 6 and 7 of the supplemental agreement imposed on Sellar the obligation to use reasonable endeavours to acquire the freehold interest in the Yellow Land (as redefined) and, if that interest was acquired, to include the freehold of that Yellow Land in the Property to be transferred on the exercise of the option. Clauses 12 and 13 of the supplemental agreement are of importance:

“12. Clause 1.11 of the Main Agreement shall be deleted and replaced by the following: 1.11 “The Purchase Price means £2,000,000 (Two million pounds) PROVIDED THAT (a) the amount payable in respect of the Purchase Price shall be subject to variation in accordance with paragraph 8 of the second schedule and (b) there shall be deducted from the Purchase Price the Milton Lane Allowance and the Velder Avenue Allowance. 13. Clause 1.34 of the Main Agreement shall be amended and shall henceforth be read as follows: “the Milton Lane Allowance” means such sum (not to be less than nil) calculated according to the formula £1,100,000 - x where x is the aggregate of such capital sum and the value of any non-monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane.”

Clause 15 imposed an obligation on Sellar to use its best endeavours at its own cost to procure “that the existing cycleway/footpath which traverses the Stadium Site is diverted in a manner reasonably acceptable to [the Club] as soon as reasonable practicable . . .”. In that context “the Stadium Site” means the Property and the existing Fratton Park Football Ground; and the reference to “the existing cycleway/pathway” is to the relevant portion of Milton Lane. 1.11 “The Purchase Price means £2,000,000 (Two million pounds) PROVIDED THAT (a) the amount payable in respect of the Purchase Price shall be subject to variation in accordance with paragraph 8 of the second schedule and (b) there shall be deducted from the Purchase Price the Milton Lane Allowance and the Velder Avenue Allowance. “the Milton Lane Allowance” means such sum (not to be less than nil) calculated according to the formula £1,100,000 - x £1,100,000 - x where x is the aggregate of such capital sum and the value of any non-monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane.”

Implementation of the Council’s planning objectives

[18]As I have said, outline planning consent for the development was granted by the Council on 7 March 2001. Condition 14 of that consent required that the link road from Rodney Road to Goldsmith Avenue should be completed in its entirety before any of the buildings permitted by the consent were first occupied for the permitted use.

[19]On the day before the formal grant of planning consent Sellar had entered into three agreements with the Council. First, an agreement for the sale and purchase of the Barwood land (subject to the existing leases held by Sellar) and the adjoining section of Milton Lane. The purchase price as stated in the agreement was £4,255,000. Completion of that sale and purchase has since taken place. Second, an agreement (expressed as a deed) under section 106 of the Town and Country Planning Act 1990. Paragraph 7 of schedule 1 to that agreement required that none of the floor space on the development site should be occupied for trade unless Sellar had first entered into an option agreement for the transfer to the Club of the land on which the new stadium was to be built. That had, of course, already taken place. Third, an agreement under section 278 of the Highways Act 1980 for the construction (amongst other works) of the new spine road. The spine road has now been constructed in accordance with that agreement.

[20]By an order made on 28 March 2001 under section 257 of the Town and Country Planning Act 1990 and confirmed on 22 May 2001 the Council diverted the public footpath over a section of Milton Lane (including the section to be transferred by the Council to Sellar under the sale agreement of 6 March 2001) so that it would pass to the north of the new stadium. One effect of that diversion was that the new footpath would cross the spine road some distance to the north of the former Milton Lane and in conformity with works to be carried out under the section 278 agreement to which I have just referred.

[21]On 18 September 2002 the Club exercised the option conferred by the agreement of 29 October 1999, as amended by the supplemental agreement of 28 October 2000. As I have said, the District Valuer had refused, by letter dated 13 September 2000, to apportion the consideration payable by Sellar under the agreement made (subject to contract) on 5 September 2000 between the Barwood land and the section of Milton Lane. In July 2003 Sellar again requested the Council to do so; but that request was again refused. The position, therefore, is that no capital sum or non-monetary consideration has been “specifically identified by Portsmouth City Council as required from [Sellar] for and in consideration for the Spine Road to cross the roadway known as Milton Lane”.

These proceedings

[22]These proceedings were commenced by the issue, on 18 June 2003, of a claim form under CPR Part 8. By its claim the Club sought a declaration that, in the events which had happened, the Milton Lane Allowance for the purposes of the option agreement of 21 October 1999, as varied by the supplemental agreement of 28 September 2000, was £1,100,000; with the consequence that the purchase price payable by the Club to Sellar under that agreement was £900,000. The basis for those contentions, of course, was that (in the events which had happened) the only value that can be given to ‘X’ in the formula for which the option agreement, as varied, provides is nil. In the alternative, the Club sought declarations as to the respective amounts of the Milton Lane Allowance and the purchase price. Singer and Friedlander Properties Plc was joined, with the appellant, as a defendant to those proceedings, but has taken no part in them.

[23]The proceedings came before Mr Justice Lawrence Collins for trial in September 2003. By his order, made on 17 September 2003 but dated 18 September 2003, he made a declaration in the terms sought by the Club. For the reasons set out in a written judgment handed down on that day he held that “consent”, in the context of the expression “consent for the Spine Road to cross the roadway known as Milton Lane”, meant, and meant only, consent from the Council as highway authority. In the circumstances that it was accepted that the Council could not in law, and did not in fact, seek consideration for any consent given as highway authority, the figure for ‘X’ in the formula for which the option agreement provides had to be nil. So the Milton Lane Allowance was £1,100,000; and it followed that the purchase price payable by the Club was £900,000 (£2,000,000 - £1,100,000). The judge gave permission to appeal to this Court from his order on the ground that the option agreement raised arguable points of construction.

[24]The judge’s conclusion that “consent” in the context of clause 1.34 of the option agreement meant, and meant only, consent from the Council as highway authority made it unnecessary for him to consider how the consideration of £4,255,000 paid by Sellar to the Council for the acquisition of its interests as landowner should be apportioned between the Barwood land and the Milton Lane crossing. But, in the circumstances that he had heard evidence from valuers on that question and in case he were wrong as to the true construction of clause 1.34, he thought it right to address it. On that question he preferred the result for which Sellar had contended. As he put it:

“common sense suggests that where two pieces of land without any inherent value are needed for the purpose required in this case, the price may reasonably be apportioned in substantially equal shares”

. Apportionment of the total consideration of £4,255,000 between the Barwood land and the Milton Lane crossing “in substantially equal shares” would lead to the result that ‘X’ was well in excess of £1,100,000; that, accordingly, the Milton Lane Allowance was nil; and that the price payable by the Club under the option agreement was £2,000,000. That is the result for which Sellar contends on this appeal. The judge’s reasoning

[25]The judge appreciated that, at the time when option agreement was amended by the supplemental agreement in October 2000, both parties must have realised that the figure required by the Council as highway authority for consent for the Spine road to cross Milton Lane would be nil. He appreciated, also, that it would make little or no sense for parties to include a formula for the quantification of the Milton Lane Allowance by reference to ‘X’ – in the form contained in the supplemental agreement – in circumstances in which they must each have contemplated that, because ‘X’ would be nil, the formula was bound to produce a predicted result. As he put it, at paragraph 133 of his judgment, that factor would support an extended meaning of the concept of consent to cross over Milton Lane “since the court will not easily find that a provision has no commercial effect”. Nevertheless, he directed himself that, in construing the words in clause 1.34 of the option agreement as amended, he should not have regard to events which had occurred after the date, 21 October 1999, on which the option agreement was first made. He had recorded, at paragraph 125 of his judgment, that:

“It has not been suggested by either side that it was intended that the relevant words should bear a different meaning in the Supplemental Option Agreement to that in the 1999 Option Agreement, or that matters occurring after the 1999 Option Agreement are relevant to the interpretation of clause 1.34 as amended, though they are plainly relevant to its application”

. And he observed, at paragraph 133, that:

“. . . the parties accept that the words have the same meaning in the Supplemental Agreement as they do in the 1999 Option Agreement, and the continued inclusion of the same formula is equally consistent with neither party having spotted the point, or with each of them being content to leave the matter as it stood and not raise an issue which might require renegotiation.”

[26]Whether or not that was the correct approach to the task of construing the words in clause 1.34, following substitution of the original clause by the new clause introduced by the supplemental agreement, is a question to which it may be necessary to return. But it is essential to an understanding of the judge’s reasoning to appreciate that that was the approach which, as he thought, he was invited to adopt. Consistent with that approach, the judge identified the relevant surrounding circumstances at the time of the execution of the 1999 option agreement in these terms (at paragraph 127 of his judgment):

“1. The Club and the Developer knew that the Council owned the freehold reversion in the Barwood Land and that the Developer had entered into an option to purchase the long leasehold interests in the Barwood Land but had not entered into a contract with the Council to buy the freehold. 2. The Club and the Developer knew that Milton Lane was a public footpath and that the Council was the highway authority but did not know the extent of the Council’s freehold interest in the land over which Milton Lane passed or whether it had any freehold in it, but their advisers knew that the Council had title to the soil under half its width as owner of the Barwood Land. 3. The Club and the Developer considered that the Developer would, in order to build the Spine Road, need to acquire consent to cross Milton Lane and the right to build a Spine Road on the Barwood Land through variation of leases or the purchase of the freehold of the Barwood land. 4. Both parties had reason to believe that the Council might seek to extract a ransom payment for its consent for the Spine Road to cross Milton Lane and the Barwood Land. The Developer had budgeted for a figure of £1 million for the consent (and for any variation of the leases and for the freehold of the Barwood land) as the Club must have known.”

[27]The Judge expressed his conclusion and the reasons which – having regard to the extrinsic circumstances which he had identified as relevant to the construction of the October 1999 agreement – had led him to that conclusion in paragraphs 130 and 131 of his judgment:

“130. I consider that the expression “consent for the Spine Road to cross the roadway known as Milton Lane” means and clearly contemplates consent from the Council as highway authority. The natural and ordinary meaning of “consent” is no more than permission. Both parties knew that the Council was a highway authority and that Milton Lane was a public highway (footpath and cycleway), and they did not know when they entered into the 1999 Option Agreement or the Supplemental Option that the Council owned the whole width of the roadway. Consent was used as the word in relation to the crossing of Milton Lane but in relation to the Barwood Land the parties had specifically contemplated and referred to the “acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land. 131. Accordingly I do not accept that the expression “consent” includes all possible rights ultimately acquired by the Developer in connection with crossing of Milton Lane by the Spine Road and to secure the dedication of the Spine Road as highway. A formidable difficulty would arise in determining the content of the extended meaning for which the developer contends. . . . In particular I do not accept that the natural meaning of the words could result in the acquisition of the freehold being regarded as a consent, nor that it is intended to include all steps necessary to allow the Spine Road to be dedicated as a public highway. Nor do I accept the characterisation of the Club’s argument by the Developer as the kind of “detailed semantic and syntactical analysis of words” deprecated by Lord Diplock in The Antaios [1985] AC 191. On the contrary, in the light of circumstances at the time of the 1999 Option Agreement, when the parties expected the Council to extract a ransom payment for the right to cross Milton Lane and to build the Spine Road over the Barwood Land, the natural and ordinary meaning is strongly confirmed by the factual matrix.”

[28]There are, I think, four elements in that reasoning. First, in its “natural and ordinary meaning” the word “consent” means no more than “permission”. Second, both parties knew, in October 1999, that Milton Lane was a public highway; and so must have thought that “permission” from the Council as highway authority would be required if the new road was to cross the existing highway. Third, the parties did not know, in October 1999, that the Council owned the whole width of the land beneath the surface of the Milton Lane highway; and so (it seems) are not to be taken to have thought that it was necessary for Sellar to acquire from the Council such part of that land (extending up to the middle of the highway) which, as they thought, the council did own. Fourth, the correct “semantic and syntactical analysis” of the words used in clause 1.34 as originally drawn led to the conclusion that the parties intended to distinguish between consideration required by the Council(a) for its consent for the spine road to cross Milton Lane and

(b) for the acquisition of the freehold of the Barwood land. Those elements, taken together, led the judge to conclude that “consent” - in the context of the expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” – was not intended to include the Council’s agreement to the acquisition by Sellar of whatever rights were needed to enable the new road to cross the existing Milton Lane.

[29]For my part, I do not find that reasoning persuasive. It is important to have in mind that the sale under the option agreement was “subject to fulfilment of the Conditions Precedent” (clause 2.3) and that those conditions included “the Spine Road Condition” (clauses 1.1 and 1.13). The sale to the Club of the land subject to the option was not to proceed unless and until Sellar had constructed the new road. As I have said, it was obvious that Sellar would be unable to fulfil that condition unless(i) something had been done to avoid obstruction of the existing public rights over the footpath and

(ii) it had or acquired rights over the surface and subsoil of Milton Lane which enabled the new road to cross Milton Lane. Whatever needed to be done to avoid obstruction of the existing footpath would require the exercise of powers by the Council, acting as local highway authority or as local planning authority. The exercise of powers under the Highways Act 1980 may loosely - but, as I shall explain, inaccurately - be described as the grant of “permission” by the Council as highway authority. But the exercise of the Council’s powers as highway authority would not, of itself, be enough to enable Sellar to construct the new road. The Council was concerned, also, as landowner. Whether or not the Council owned the whole width of Milton Lane – a fact which, as the judge found, was unknown to Sellar and the Club in October 1999 – it was the freehold owner of the adjoining Barwood land and so had to be regarded as presumed owner of the sub-soil up to the middle of Milton Lane. Far from providing support for an interpretation of “consent” which excludes the acquisition of rights over the surface and subsoil of Milton Lane – as the judge thought – the factual matrix points strongly to an interpretation of “consent” which includes the acquisition of those rights. Given the obvious purpose of the “Milton Lane Allowance” in relation to the purchase price payable under the option agreement, it would be very surprising if the parties had intended to include (i) the cost of acquiring the freehold of the Barwood land, if necessary, (or, in the alternative, the cost of obtaining any variation to the leases under which that land was held or any consents required under those leases) and (ii) the supposed or anticipated cost (if any) of persuading the Council to exercise powers as highway authority, but to exclude

(iii) the cost of acquiring from the Council, as landowner, whatever rights were required to enable the new road to be constructed over the Milton Lane crossing.

[30]Nevertheless, if that is what the words of the formula require, those words must be given effect. It is necessary, therefore, to examine the syntactical analysis which formed the fourth element in the judge’s reasoning. I have set out the clause, as originally drawn, earlier in this judgment; but it is convenient to do so again. The material words are:

“. . . the aggregate of such capital sum and the value of any non-capital monetary consideration attributable to and specifically identified by Portsmouth City Council as required from the Vendor for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane and for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . .”

[31]It is reasonably clear that the clause is intended to identify and aggregate(a) consideration – “such capital sum and the value of any non-monetary consideration” – required from Sellar “for the Spine Road to cross the roadway known as Milton Lane” and

(b) consideration – again “such capital sum and the value of any non-monetary consideration” – required from Sellar “to enable the Spine Road to cross the Barwood Land”. It is also reasonably clear that consideration required from Sellar “for the Spine Road to cross the Barwood Land” is to include (i) consideration “for any variation to the Leases under which the Barwood Land is held”, (ii) consideration “for any consents required thereunder” – that is to say, consents under the leases – and (iii) consideration “for the acquisition of the freehold thereof – that is to say, the freehold of the Barwood land. What is less clear is how the words “for and in consideration of its consent” fit into that scheme.

[32]There are, I think, two possible syntactical analyses, neither wholly satisfactory: [A] “. . . the aggregate of such capital sum . . . [etc] . . . as required from the Vendor [a]for and in consideration of itsconsentfor the Spine Road to cross the roadway known as Milton Lane and [b] for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . .” [B] . . . the aggregate of such capital sum . . . [etc] . . . as required from the Vendor for and in consideration of its consent [a] for the Spine Road to cross the roadway known as Milton Lane and [b] for any variation to the Leases under which the Barwood Land is held and for any consents required thereunder and for the acquisition of the freehold thereof (if required) to enable the Spine Road to cross the Barwood Land . . .”

[33]The first of those – analysis [A] – gives no role to the words “and in consideration of” at the beginning of the first limb. The clause would have the same meaning and effect if those words were not included. If that is the correct syntactical analysis of the clause, those words are superfluous. The second – analysis [B] – gives effect to those words, and enables them to be read with the first and third of the three elements in the second limb – “for and in consideration of its consent . . . for any variation of the leases . . . and for the acquisition of the freehold thereof” – but it does not sit easily with the second of those three elements – “for and in consideration of its consent . . . for any consents required thereunder”.

[34]As I have said, neither [A] nor [B] can be regarded as wholly satisfactory. But it is not, I think, necessary to choose between them. It is enough that either is possible. To attempt to resolve the question of construction in this case by a choice between syntactical analyses – each possible, but neither wholly satisfactory – would, I think, be to ignore the observation of Lord Diplock in Antaios Compania Naviera SA v Salen Rederierna AB

[1985] AC 191

, 201E, that:

“. . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”

Lord Hoffmann made the same point in Investors Compensation Scheme Ltd v West Bromwich Building Society

[1998] 1 WLR 896

, 913D-E, when he said: The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.” As I have said, commercial or business common sense seems to me to point strongly in favour of a construction of clause 1.34 of the option agreement of 21 October 1999 which includes the cost of acquiring from the Council, as landowner, whatever rights were required to enable the new road to be constructed over the Milton Lane crossing. To exclude that cost, while including the cost of acquiring the freehold of the Barwood land, the cost of obtaining any variation to the leases under which that land was held, the cost of any consents required under those leases and the supposed or anticipated cost of persuading the Council to exercise powers as highway authority, does seem to me to flout commercial common sense.

The submissions on this appeal

[35]The appellant points out that, at the date of the 1999 option agreement, it was known to the Club, as well as to Sellar, that the developer was obliged to construct the new spine road for use as a public highway before any of the development could be occupied. The only way in which that obligation could be fulfilled, having regard to the need for users of the footpath and cycle track to cross the new road in safety, was for the existing footpath and cycle track to be diverted. Diversion of the existing footpath and cycle way was necessary, also, to enable the Club to build a new stadium on the site then proposed.

[36]In those circumstances, Sellar submits that the judge misunderstood the position when he held that “consent”, in the context of the Milton Lane Allowance, meant consent from the Council as highway authority. He should have appreciated that, while the relevant part of Milton Lane remained a public footpath, the Council as highway authority could not in practice or in law consent to the construction of the new road across it. The only course the Council could properly take was to divert the footpath by the exercise of statutory powers. But, once the Council had diverted the footpath, Milton Lane ceased, as regards the relevant part, to be a public highway and the Council ceased to be the highway authority in relation to it. Thereafter the Council could not give consent as highway authority. The point is made at paragraph 16 of the skeleton argument filed on behalf of the appellant:

“In other words that which the Judge contemplated as being the giving of consent by the Council was a practical and legal impossibility. All of this was known to or was in the reasonable contemplation of the parties when they entered into the option agreement.”

[37]It is said, also, that at the date of the 1999 option agreement the parties knew, or (at the least) contemplated, that the developer would have to acquire from the Council the ownership of the relevant length of Milton Lane in order to be able to dedicate the new road under section 38 of the Highways Act 1980. The grant of any right less than ownership of the relevant length of Milton Lane would not have enabled Sellar to fulfil its planning obligations as developer. Those obligations required the developer to construct the spine road with its associated drainage and services and to dedicate the road as a public highway maintainable at the public expense. That was possible only if the developer had the power to dedicate the road as a highway. A person with no more than an easement over land owned by another cannot dedicate as a public highway the road over which the easement exists. It is said that the judge’s reasoning leads, necessarily, to the conclusion that, by acting in the only way in which it could if it were to fulfil its planning obligations (that is to say, by acquiring ownership of the relevant length of Milton Lane), the developer would ensure that it was shut out from bringing into account (by way of reduction of the Milton Lane Allowance) the cost associated with the Milton Lane crossing. In those circumstances the judge was wrong to hold that “consent”, in the context of the Milton Lane Allowance, did not include the acquisition by the developer of the freehold of the short length of Milton Lane at the crossing. He should have held that that “consent”, in that context, could and should be construed as including the Council’s agreement to the transfer of ownership of the relevant strip of Milton Lane (whether extending to the full width or to the middle of the roadway) which, in order to fulfil its planning obligations, the developer would, inevitably, have to acquire.

[38]The Club submits that the judge was correct for the reasons which he gave. But, in particular and in response (I think) to the first of the principal points made by the appellant, it is said that the expression “the roadway known as Milton Lane” – in relation to which “consent” to cross is to be obtained from the Council – means “the public highway known as Milton Lane wherever it might be, before and after diversion”. If that were correct, it would meet the point that, after diversion of the footpath, the Council was no longer the highway authority in relation to the former roadway known as Milton Lane – because the former roadway had ceased to be part of any highway – but it would leave open the further point that the Council, as highway authority, could not, in any event, give consent to the obstruction of an existing footpath (in its new, diverted, location) by allowing it to be crossed by a busy roadway open to all traffic.

The powers of the Council as highway and planning authority

[39]It is, I think, pertinent to have in mind Lord Hoffmann’s summary, in Investors Compensation Scheme Ltd v West Bromwich Building Society

[1998] 1 WLR 896

, 912H-913F, of the principles applicable to the interpretation of documents. In the present context, the principles enumerated under paragraphs (1) and (2) are of particular relevance:

“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) . . . Subject to the requirement that it should have been reasonably available to the parties . . . [the background] includes absolutely anything which could have affected the way in which the language of the document would have been understood by a reasonable man.”

If proper effect is to be given to those principles the background knowledge, in the light of which the 1999 option agreement must be construed, must include knowledge of the powers exercisable by a local authority in relation to the obstruction and diversion of an existing highway; and knowledge of the courses open to a local authority in pursuit of a planning objective which required that a new roadway open to all traffic should cross an existing public footpath. The relevant powers are contained in statute. It seems to me unarguable that a reasonable man, in the position of the parties to the option agreement, would not take steps to inform himself of those powers and of the courses open to the local authority.

[40]Part IX of the Highways Act 1980 contains provisions relating to the lawful and unlawful interference with highways. Section 130(1) - the first of those provisions – sets out the underlying obligation on a highway authority:

“ It is the duty of the highway authority to assert and protect the rights of the public to the use and enjoyment of any highway for which they are the highway authority . . .”

That obligation is re-emphasised by section 130(3):

“. . . it is the duty of a council who are a highway authority to prevent, as far as possible, the stopping up or obstruction of (a) the highways for which they are the highway authority . . .”

It is not, I think, in dispute that the passage of motor vehicles along a new roadway constructed across an existing footpath would interfere with the use and enjoyment by the public of the footpath.

[41]Part IX of the 1980 Act confers no general power, exercisable by the highway authority, to permit permanent obstruction of a highway; although there are specific powers to permit temporary obstruction conferred by the provisions contained in that Part. Those powers had no application in the present case. The powers of a local highway authority to stop up or divert footpaths (which, for this purpose, include cycle tracks – see section 3 of the Cycle Tracks Act 1984) were conferred by Part VIII of that Act – see, in particular, section 118 (footpath not needed for public use), section 118A (footpath crossing a railway), and section 119 (diversion expedient in the interests of the landowner or occupier, or the public). It has not been suggested that any of those powers would have been apposite in the present case.

[42]Further relevant powers were conferred by Part X of the Town and Country Planning Act 1990. Section 257(1) of that Act empowered a competent authority – which, it may be noted, is the local planning authority not the local highway authority (see section 257(4)) – to authorise, by order “the stopping up or diversion of any footpath . . . if they are satisfied that it is necessary to do so in order to enable development to be carried out (a) in accordance with planning permission granted under Part III [of that Act]”. An order made under section 257 may, if the competent authority are satisfied that it should do so, provide for the creation of an alternative highway for use as replacement for the one authorised by the order to be stopped up or diverted – section 257(2). It was under that section that the diversion order was made by the Council on 28 March 2001 and confirmed on 22 May 2001. It must, I think, have been obvious from the outset that that was the section which conferred the power to divert which – as each of the parties knew – would need to be exercised in the present case if the development was to proceed.

[43]I have already explained that, on 6 March 2001 - before the diversion order under section 257 of the Town and Country Planning Act 1990 had been made - Sellar and the Council had entered into three agreements:(i) an agreement for the purchase of the freehold of the Barwood land and the Milton Lane strip,

(ii) an agreement (expressed as a deed) under section 106 of the Town and Country Planning Act 1990 and

(iii) an agreement under section 278 of the Highways Act 1980. Each of those three agreements contains reference (direct or indirect) to the Milton Road crossing. The purchase agreement includes, as a condition precedent, “the obtaining by the Purchaser of all consents necessary for the carrying out and construction of the Spine Road”. The section 106 agreement requires that Sellar is not to implement the planning consent (to be granted the following day) without first having entered into an agreement under section 38 of the Highways Act 1980 in relation to the “On-Site Highway Works”. The section 278 agreement requires Sellar to agree with the Council a timetable for carrying out the On-Site Works. The On-Site Highway Works (and the On-Site Works, as the case may be) include (at paragraph 6 of schedule 4 to the section 106 agreement and at paragraph 6 of schedule 2 to the section 278 agreement):

“The provision of a new toucan crossing facility on the new link road between the new Rodney Road roundabout and the link road/Portsmouth Football Club roundabout where it is crossed by the new cycleway, generally in the location marked T 3 on Plan 01”

. To complete the pattern, the route of the diverted footpath – shown on the plan to the order made under section 257 of the 1990 Act – provides for a toucan crossing by re-aligning the diverted path at the point of crossing. The new crossing point is some distance to the north of the point at which the new road would have crossed Milton Lane.

[44]There was no evidence that either Sellar or the Club knew, in October 1999, the terms in which the agreements of 6 March 2001 or the orders of 28 March and 22 May 2001 would be made. But it would have been obvious to “a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract” – to adopt Lord Hoffmann’s formulation in Investors Compensation Scheme Ltd v West Bromwich Building Society – that there would have to be agreements and orders of that nature if the contemplated development was to proceed in accordance with the Council’s planning objectives. In particular it would have been obvious to such a person(i) that there would need to be an order diverting the existing footpath and

(ii) that that order would need to provide for a safe crossing facility (in the nature of a toucan crossing) at the point where the diverted path crossed the new spine road. The need for an order diverting the existing footpath was imposed by two distinct factors: first, the need for the footpath to circumvent the northern boundary of the proposed new stadium (rather than to follow the existing route which took the footpath through the proposed new stadium) and, second, to re-align the footpath at the point at which it did cross the new spine road so as to accommodate a safe crossing facility.

The meaning of clause 1.34 in the original (1999) form

[45]I will assume (for the moment) that the judge was correct to take the view that he was required to construe clause 1.34 of the option agreement in the form in which it was when that agreement was executed in October 1999. On that basis the task of the Court is to ascertain the meaning which the words used by the parties in October 1999 would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were on 21 October 1999. That approach, as it seems to me, requires the Court to have in mind the following matters. First, it would have been obvious to such a person that there would need to be an order diverting the existing footpath and (as I would hold) that that order would be made by the Council, as local planning authority, under section 257 of the 1990 Act. Second, it would have been obvious that the Council as planning authority (or, so far as relevant, as local highway authority) could not properly demand a ransom payment for the exercise of a statutory power. That point has never (as it seems to me) been in serious dispute; I find it surprising that it was ever thought to be in doubt. Third, it would have been obvious that the effect of diverting the existing footpath (having regard both to the need to circumvent the northern boundary of the proposed new stadium and to the need to re-align the footpath at the point at which it did cross the new spine road so as to accommodate a safe crossing facility) would be that the short stretch of land comprising that part of the existing Milton Lane which would be crossed by the new road would cease to be highway. Fourth, it would have been obvious that the Council, as the freehold owner of the land immediately to the north of the existing Milton Lane, would be likely to have some interest, as landowner, in that short stretch of land. Fifth, it would have been obvious that Sellar would have to reach some agreement with the Council (or invoke some statutory power) which would enable it to construct the new road over that short stretch of land. Sixth, given the Council’s view that it should exploit the full commercial value of its interest in that land, it would have been obvious that the probability was that Sellar would have to purchase that interest from the Council if it were to be in a position to proceed with the development.

[46]With these matters in mind, it seems to me that the meaning to be given to the expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” in clause 1.34, in the form in which it was in October 1999, is not open to any real doubt. The parties must be taken to have intended that that expression required there to be brought into account, for the purpose of ascertaining the Milton Lane Allowance in accordance with the formula for which clause 1.34 provides, the cost to Sellar of acquiring from the Council whatever interest the Council had, as landowner, in the short stretch of land comprising that part of the existing Milton Lane which would be crossed by the new road (and which, following the diversion order, would cease to be highway); provided, of course, that the acquisition of that interest was necessary in order to enable the new road to be constructed and dedicated in accordance with the Council’s known planning objective. To attribute to the parties an intention to bring into account, for the purpose of ascertaining the Milton Lane Allowance, a payment (for the exercise of a statutory power) which could not properly be demanded or paid, but to omit from that account a payment which Sellar could (and probably would) properly be required to make for an interest in land which it needed to acquire if the development were to proceed, would be to attribute to them an intention which flouts business or commercial common sense. For the reasons which I have given earlier in this judgment, the language of the clause does not require that the parties must be taken to have intended to make an irrational bargain.

The meaning of clause 1.34 after amendment by the supplemental agreement

[47]Thus far I have approached the construction of clause 1.34 on the basis (adopted by the judge at the invitation of the parties) that expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” must be given the same meaning after the amendment in September 2000 as before that amendment. To put the point another way, the clause must be construed in the light of the background knowledge reasonably available in October 1999; and without taking account of any additional matters known to the parties in September 2000. In my view, that is the wrong approach to the construction of a clause which has been introduced (in substitution for an earlier clause) by later amendment. The correct approach, as it seems to me, is to construe the amended clause in the light of the background knowledge reasonably available at the time when the amendment is agreed; but to recognise, of course, that that background knowledge includes the knowledge that the new clause is to take the place of an existing clause.

[48]Where the new clause incorporates an expression which is the same as an expression used in the existing clause it may be right to infer that the parties did not intend any change in the meaning of that expression. But that inference or conclusion is as consistent with the view that the meaning which the parties intended the expression to bear in the context of the new clause (construed in the light of the background knowledge reasonably available at the time of the amendment) is the meaning which they thought it bore in the existing clause as it is with the view that the parties intended the expression to bear, in the context of the new clause, the meaning which it bore in the existing clause (construed in the light of the background knowledge reasonably available at the time of the original agreement) whether or not it would bear that meaning if construed in the light of the background knowledge reasonably available at the time of the amendment. All that can be said is that the parties are likely to have thought that the expression had the same meaning in both the existing and the amended clause. If, adopting the correct approach to the construction of the amended clause, the court reaches the conclusion that the expression must be given a meaning which differs from the meaning that it would have been given if the court had been construing the existing clause without amendment, then the proper inference may be that the parties were mistaken as to the true meaning of the expression in the context of the existing clause. But that provides no compelling reason why the expression should be given a meaning in the context of the amended clause which it cannot properly bear. The parties having reached agreement in the terms of the amended clause, the task of the court is to construe, and give effect to, that agreement.

[49]In the present case there is no conflict between the meaning to be given to the expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” in the context of the September 2000 amendment and the meaning to be given to that expression in the context of clause 1.34 as it was in the October 1999 agreement. The matters which, as I have held, must have been obvious to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were on 21 October 1999 had, if anything, become even more obvious by September 2000. In particular, it had become known that the existing footpath had to be diverted (see clause 15 of the supplemental agreement); it had become known that the Council would not seek to demand payment for the exercise of its statutory powers in relation to the diversion of the existing footpath; it had become known that the Council owned the full width of the land beneath the surface of Milton Lane; and it had become known that the Council would require Sellar to purchase its interest in that land for a substantial sum. Further, the removal of any reference in the definition of the Milton Road Allowance to the Barwood land had two important consequences. First, the argument based on a semantic and syntactical analysis of clause 1.34 was no longer available – because there was no longer a distinction between “consent” and “acquisition” to be drawn. Second, if the expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” did not require there to be brought into account the cost to Sellar of acquiring from the Council the interest the Council had, as landowner, in the short stretch of land comprising that part of the existing Milton Lane which would be crossed by the new road, it was inevitable that the Milton Lane Allowance would be £1,100,000. There was nothing else which could be brought into the formula under ‘X’.

[50]It follows, therefore, that this is a case in which it is correct to conclude that the parties did intend that the expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” should have the same meaning in the context of the September 2000 amendment as it had had in the context of the October 1999 agreement. But that is a conclusion properly reached after construing the expression in each context; it is not a premise for the construction of the expression in the new clause introduced by the amendment made by the supplemental agreement.

The amount of the Milton Lane Allowance

[51]It is not enough, for the disposition of this appeal, to hold that the meaning to be given to the expression “for and in consideration of its consent for the Spine Road to cross the roadway known as Milton Lane” in the context of the September 2000 amendment requires there to be brought into account, in the ascertainment of ‘X’ for the purposes of identifying the Milton Lane Allowance, an amount “attributable to and specifically identified by” the Council as the cost to Sellar of acquiring from the Council the interest the Council had, as landowner, in the short stretch of land comprising that part of the existing Milton Lane which would be crossed by the new road. It is necessary, also, to ask how ‘X’ is to be ascertained (and in what amount) in the circumstances that the Council has refused to make any apportionment of the sum (£4,225,000) paid by Sellar under the purchase agreement of 6 March 2001 between the freehold interest in the Barwood land and the relevant part of the former Milton Lane.

[52]It is said on behalf of Sellar that, in the circumstances that it is plain that some part of the sum payable under the purchase agreement of 6 March 2001 was paid for the acquisition of the relevant part of the former Milton Lane, the court cannot allow the obvious commercial objective of the parties in relation to the Milton Lane Allowance to fail by reason of the Council’s refusal, or failure, to attribute out of the whole sum payable under that agreement a specific amount to that part of the land acquired. The court must, itself, make the necessary attribution. The judge rejected that submission. He held that it was not open to Sellar to invoke the court’s assistance in circumstances where (as he also held) it had been in breach of its obligations under clause 13 of the option agreement. As he put it, at paragraph 140 of his judgment:

“In these circumstances I do not think it is open to the [Developer] to rely on the Council’s failure to identify a sum referable to Milton Lane. Were it not for clause 13, I consider that it would be an uncommercial interpretation to rule out any deduction simply because the Council (and the Developer) had failed to identify the sum at the time of their contract. But X was not identified because the Developer decided not to seek a sum from the Council for the consent but to negotiate a wider deal which included the purchase of Milton Lane as part of a single purchase of the Barwood Land in breach by the developer of clause 13, and it cannot rely on the consequences of its breach: Alghussein Establishment v Eton College [1988] 1 WLR 587, HL. Cf. Cia Barca de Panama SA v George Wimpey & Co Ltd [1980] 1 Lloyd’s Rep 598 (CA).”

[53]Clause 13 of the option agreement of 21 October 1999 required the Vendor (Sellar) and the Purchaser (the Club) to act jointly “to negotiate X (as defined in Clause 1.34) and the cost of the Velder Avenue Works with [the Council]” and to use all reasonable endeavours “to negotiate the lowest sums (or least other consideration) in respect thereof as it is possible to obtain”. The judge took the view (at paragraph 139 of his judgment) that “The Club probably waived its right to negotiate after Vail Williams ceased to act, and Montagu Evans (who acted exclusively for the Developer) negotiated with the Council”. On the judge’s findings (at paragraph 24) that occurred in July 2000. So the breach did not lie in the failure, thereafter, to act jointly in negotiations. It lay (as the judge held in the passage of his judgment which I have set out) in Sellar’s decision “not to seek a sum from the Council for the consent but to negotiate a wider deal which included the purchase of Milton Lane as part of a single purchase of the Barwood Land”.

[54]It is not clear what the judge had in mind when he referred to “a sum from the Council for the consent”. But it is clear that he took the view that it was a breach of clause 13 for Sellar to agree a single sum for the purchase of Milton Lane and the Barwood land, without apportionment. But, as it seems to me, the judge overlooked the fact that, at the time when the terms upon which Sellar was to acquire Milton Lane and the Barwood land were agreed (August 2000), ‘X’ was defined as the consideration required for consent for the new road to cross Milton Lane and for the acquisition of the freehold of the Barwood land (if required). So, at that time, clause 13 required, or (at the least) contemplated, that there would be a single sum for the purchase of Milton Lane and the Barwood land, without apportionment.

[55]The position altered when clause 1.34 of the option agreement was amended by the supplemental agreement of 28 September 2000. That removed from the definition of ‘X’ any mention of the Barwood land. But, by 28 September 2000, the terms upon which Sellar was to acquire Milton Lane and the Barwood land had already been agreed with the Council and it was known that the Council was unwilling to apportion the single price. That appears from the evidence given by Mr Barry Ostle, the property director of Sellar, at the trial – transcript, 10 September 2003, page 9C-F. By 28 September 2000 the obligation in clause 13 was spent – at least in relation to the negotiation of ‘X’ – and the parties must be taken to have appreciated that.

[56]It follows that I think that the judge was wrong to hold that Sellar was not entitled to invoke the court’s assistance on the grounds that, in doing so, it had to rely on the consequences of its own breach of clause 13 of the 1999 agreement. He should have given effect to his initial view that it would be an uncommercial interpretation of clause 1.34 to rule out any deduction in respect of the Milton Lane crossing simply because the Council had failed to identify a specific sum for that part of the land at the time of that terms were agreed with Sellar, or thereafter.

[57]The judge heard valuation evidence on the question “what part of the total consideration of £4,255,000 was fairly and reasonably attributable to the acquisition of the Milton Lane strip”. But he did not find much assistance in that evidence. He said this, at paragraph 144 of his judgment:

“ . . . if it had been appropriate to carry out the apportionment exercise, I would have preferred the result (if not necessarily the reasoning) for which Mr Newsom contended. Apportionment on the basis of acreage (for which Mr Heller contended) has nothing to commend it, but I also find the concept of the hypothetical bargaining for which Mr Newsom contended very artificial in this context (and not really supported by any practical experience of similar exercises). But common sense suggests that where two pieces of land without any inherent value are needed for the purpose required in this case, the price may reasonably be apportioned in substantially equal shares.”

[58]In my view the judge’s approach to apportionment or attribution cannot be criticised. There were two distinct pieces of land to be valued – the Barwood land, in which the Council’s interest as freeholder was subject to long leases held by Sellar, and the strip of Milton Lane formerly subject to public rights. The evidence was to the effect that neither of those pieces of land had any intrinsic value. The value of each lay in the need for Sellar to acquire the Council’s interests if the development was to proceed. And, in that context, neither had value without the other and it was impossible to say that either was more valuable than the other. As the judge observed, in those circumstances, common sense suggests that the price payable for the whole may reasonably be apportioned between the two parts in substantially equal shares.

[59]We were invited to remit to the judge the task of determining a figure for ‘X’. I am not persuaded that that would be an appropriate use of the courts’ resources. It is not necessary, in the present case, to determine a precise figure for ‘X’. It is enough that the figure for ‘X’ is equal to or in excess of £1,100,000. The Milton Lane Allowance cannot be less than nil. In my view, even when allowance is made for the fact that the length of Milton Lane purchased from the Council was more extensive than that needed to enable the new road to cross the land purchased, it is not open to serious doubt that the price properly attributable to the Milton Lane crossing was in excess of £1,100,000. I would hold the Milton Lane Allowance to be nil.

Conclusion

[60]I would allow this appeal. I would set aside the order of 18 September 2003. In place of the declaration made by the judge, I would declare that the Milton Lane Allowance is nil and that the Purchase Price payable by the Club to Sellar under the option agreement is £2,000,000.

Lord Justice Maurice Kay:

[61]I agree. Mr

Justice Buckley:

[62]I also agree.