Redrow Homes Ltd v Martin Dawn (Leckhampton) Ltd [2016] EWHC 934 (Ch)

[2016] EWHC 934 (Ch)Case No C30MA390
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue MANCHESTER DISTRICT REGISTRY, Manchester Civil Justice Centre
1 Bridge Street West
Venue Manchester M60 9DJDate Wednesday 13 th April 2016
Before
HIS HONOUR JUDGE HODGE QC(Sitting as a Judge of the High Court)
Between
REDROW HOMES LIMITEDClaimantMARTIN DAWN (LECKHAMPTON) LIMITEDDefendant
Digital Transcription by Marten Walsh Cherer Ltd.,1 st Floor, Quality House, 6-9 Quality Court,Chancery Lane, London WC2A 1HP.Telephone: 020 7067 2900.email: info@martenwalshcherer.com
Mr Edward Bartley Jones QC (instructed by Redrow Homes Limited Legal Department) for Claimant.Mr David Holland QC (instructed by Taylor Wessing LLP) for Defendant.
JUDGMENTHis Honour Judge Hodge QC:
[1]This is my extemporary judgment on the hearing of an application for summary judgment by Redrow Homes Limited against Martin Dawn (Leckhampton) Limited (claim no. C30MA390).[2]On the hearing of this summary judgment application the claimant (and applicant) is represented by Mr Edward Bartley Jones QC. The defendant (and respondent) is represented by Mr David Holland QC. Both have submitted detailed written skeleton arguments which I have had the opportunity of pre-reading. Mr Bartley Jones addressed me in opening for about an hour. Mr Holland responded for about 45 minutes. Mr Bartley Jones then addressed me in reply for a little under 15 minutes. I adjourned just after 12.35 until 1.45 and I am now proceeding to deliver this extemporary judgment.[3]By a claim form issued in the Manchester District Registry of the Chancery Division on 31st March 2016, the claimant (to which I shall refer as “Redrow”) seeks an order for specific performance of the defendant’s contractual obligations under clause 15.9 of a legal charge dated 10th February 2014 and made between the defendant (as chargee) and the claimant (as chargor) to execute an agreement under section 106 of the Town and Country Planning Act 1990 to be entered into between Redrow and Tewkesbury Borough Council as the local planning authority for a development site at Leckhampton.[4]The application for summary judgment was issued at the same time. It is supported by a witness statement of Mr Iain Mason, a solicitor and the legal director of Redrow, dated 22nd March 2016. Mr Mason exhibits various documents to his witness statement as exhibits IM/1 through to IM/11.[5]The application for summary judgment and supporting documentation was received electronically from Redrow by the defendant during the course of Monday 4th April 2016. Hard copies of all of the documents were received on the following day, 5th April.[6]The defendant has filed evidence in opposition to the summary judgment application in the form of a witness statement from Mr Ronald Martin dated 11th April 2016 to which are exhibited various documents as exhibits RM/1 and RM/2.[7]The background to the application can be taken from the particulars of claim which are dated 22nd March 2016 and are verified by a statement of truth from Mr Mason. They were settled by Mr Bartley Jones. By a written contract dated 9th December 2013 and made between the defendant (as seller) and Redrow (as buyer), Redrow agreed to purchase from the defendant approximately 45 acres of freehold land on the west side of Farm Lane and the north side of Church Road, Leckhampton. That contract was completed by the transfer of the property from the defendant to Redrow on 10th February 2015. The contract required Redrow to enter into a first legal charge over the property and also required Redrow, on completion, to enter into an overage deed with the defendant. Those documents were duly entered into.[8]For the purposes of its terms, the contract divided the property into three parcels: the red land, the blue land and the green land. At the date of the contract, only the red land was allocated for residential development, and had been so allocated since at least the adoption, in March 2006, of the Tewkesbury Borough Local Plan. Subsequent to the date of the contract, the blue land also became allocated for residential development. It was this that led, on 30th September 2014, to Redrow and the defendant entering into a deed of variation of the contract, one of the effects of which was to subsume the blue land into the red land for the purposes of the terms of the contract. On completion of its purchase of the property on 10th February 2014, Redrow duly paid the defendant the basic purchase price payable under the terms of the contract of £3.6 million (plus VAT). Under the terms of the contract, there was also provided to be paid a further sum defined as the “TVG Deferred Instalment”. That was duly paid by Redrow to the defendant on 23rd June 2014 in the sum of £2.4 million. The sale contract also provides for the making of a deferred payment by Redrow to the defendant. That sum is to be calculated in accordance with the provisions of schedule 1 to the contract. That uplift in price is to be calculated only in respect of the red land by multiplying £831,640 by the “Net Developable Area” of the red land (as defined in the contract).[9]In addition to the deferred payment, there are also sums potentially payable under the original overage deed. Following the allocation of the blue land for residential development, on 30th September 2014 the defendant and Redrow entered into the deed of variation of the contract, replacing the original overage deed with a revised form of overage deed, and varying the provisions for instalment payment of the deferred payment so as to allow for the issue of an avalised promissory note in the sum of £5.475 million in favour of Mr Ronald Martin. That promissory note was issued to him on 30th September 2014.[10]The legal charge, as entered into by Redrow with the defendant on 10th February 2014, contains a provision (in clause 3) whereby Redrow, with full title guarantee, charged the property to the defendant by way of first legal mortgage as a continuing security for the payment or discharge of the “Secured Amounts”. It contained (in clause 1.1(cc)) a provision whereby the “Secured Amounts” were defined for the purposes of the legal charge as meaning(i) “all present and future monies owed” by Redrow to the defendant under the provisions of the contract or the legal charge itself including (without limitation) the Deferred Payment and the TVG Deferred Instalment; and(ii) each Planning Overage Payment (as earlier defined), and(iii) all VAT and interest in accordance with the provisions (as applicable) of the contract, the legal charge itself and the original overage deed.[11]Clause 15.9 of the legal charge is in the following terms:
“The Chargee will at the cost of the Chargor co-operate in the dedication or adoption of land contained within the Property and required for infrastructure or services and shall upon request by the Chargor consent to or join in the creation of any Planning Agreement [defined as including a section 106 agreement] with the Chargor and the relevant local planning or highway or utility authority and the grant of wayleaves or other easements required by the relevant highways authority, drainage authority and/or utility providers or as may be deemed necessary by the Chargor in order to procure the grant of any planning permission relating to the Property or to procure the construction, maintenance, dedication and (if applicable) the adoption of all roads, sewers, service media and ancillary infrastructure serving or intending to serve the Property Provided that in the case of documents to which the Chargee is requested to be joined as a party any such agreement or other document expressly provides that the Chargee is joined as a party only for the purposes of consenting to the arrangement and that the Chargee is not required by the terms of such agreement or document to enter into any covenants or other obligations until such time (if any) as the Chargee as mortgagor may be a mortgagor in possession.”
[12]It is said in the particulars of claim that Redrow has to date paid to the defendant under the contract (as varied) sums greatly in excess of the agricultural value of the land, that is to say, the true value of the land if planning permission for residential development were not to be granted.[13]The grant of planning permission for the residential development of the property is said to have been controversial and difficult. However, planning permission for residential development is now available if, but only if, agreements under section 106 of the Town and Country Planning Act 1990 are entered into with both Gloucestershire County Council and Tewkesbury Borough Council. Both of those authorities initially required the defendant, as mortgagee, to be a signatory to the section 106 agreements. However, Gloucester County Council has agreed to remove the defendant as a signatory, and the Gloucester section 106 agreement was executed on 2nd March 2016. Particulars of those allegations are then provided under paragraph 18 of the particulars of claim.[14]It is said that a further complexity arises from an inquiry into the Joint Core Strategy Area, for the purposes of which it is said to be vital for Redrow to show to the Joint Core Strategy Area inspector that the red (including the old blue) land is immediately deliverable for residential development. It is said that Redrow has negotiated and agreed to the terms of the section 106 agreement with Tewkesbury Borough Council, which has accepted those terms. On execution of that section 106 agreement by each of Redrow and the defendant, Tewkesbury Borough Council’s resolution of 29th September 2015 to grant full planning permission for the development of 377 dwellings on the land will be carried into effect by Tewkesbury Borough Council’s officers under and in accordance with the delegated authority given to them by the Council by its resolution of 29th September 2015. However, it is said that any delay in executing the agreement might, granted the existence of the Inquiry into the Joint Core Strategy Area, threaten and imperil the grant of planning permission under the 29th September 2015 resolution.[15]The Tewkesbury Borough Council’s section 106 agreement expressly provides that the defendant is joined therein as a party only for the purpose of consenting as mortgagee to the arrangements contained therein: see, in particular, recital 6 and clause 21. The Tewkesbury Council’s section 106 agreement does not require the defendant itself to enter into any covenants or any obligations with Tewkesbury Borough Council. Accordingly, it is said by Redrow that, under the terms of clause 15.9 of the legal charge, the defendant is required to execute the Tewkesbury Borough Council’s section 106 agreement.[16]However, the defendant has refused to do so. It is said to object:(1) to the net developable area total of 26.698 acres which will arise under the planning permission (to be granted if the agreements are executed), and(2) to the terms of the Tewkesbury Borough Council and the Gloucester County Council’s section 106 agreements.[17]Redrow asserts that the defendant only has a security interest in the property under the legal charge and that that security interest secures only the defendant’s entitlement to the deferred payment and the planning overage payment. The defendant is, in any event, said to be bound by the terms of clause 15.9 of the legal charge. Even if, therefore (which Redrow denies) the defendant had any valid grounds under the sale contract to complain about the NDA total and the terms of the two section 106 agreements, such complaints are said not to be secured by or under the legal charge. Further, it is said that the defendant has no entitlement under the terms of clause 15.9 of the legal charge to object to the terms of the Tewkesbury Borough Council’s section 106 agreement or, indeed, the earlier Gloucester County Council’s section 106 agreement.[18]It is therefore said that Redrow is entitled to specific performance of clause 15.9 of the legal charge by an order compelling the defendant to execute and deliver forthwith the Tewkesbury Borough Council section 106 agreement. It is specific performance of that obligation which is sought on this summary judgment application.[19]Mr Mason’s witness statement verifies those allegations in the particulars of claim. At paragraph 22 Mr Mason draws attention to the terms of clause 5 of the sale contract (as varied) and, in particular, to clause 5.7 thereof whereby Redrow was to use “all reasonable endeavours” to achieve a net developable area of not less than 27.26 acres (which was varied upwards by the deed of variation to 28.88 acres) and an affordable housing land requirement of no more than 22% of the actual net developable area total. In fact, under the intended planning permission the subject matter of the resolution of 29th September 2015, the net developable area is 26.698 acres; and whilst the affordable housing requirement is 40% of the dwellings, the affordable housing land requirement accounts for no more than 22.33% of the actual NDA total. Clause 5.6 also required Redrow to use all reasonable endeavours to maximise the development value in accordance with national and local planning policies and to minimise the development costs and the costs of complying with any planning agreement.[20]At paragraph 23, Mr Mason says that nothing in the contract gives the defendant (as the vendor who has sold the whole of the property to Redrow) any right or entitlement to veto or dictate the terms of any section 106 agreement which Redrow, as freehold landowner, may wish to enter into.[21]At paragraph 24 of his witness statement, Mr Mason recognises that the defendant’s complaints about the intended section 106 agreement appear to be:(1) that the net developable area is only 26.698 acres, and(2) that the terms of the section 106 agreements are disadvantageous, Redrow having “rolled over” to the demands of both the county and borough councils in order to obtain its planning permission. Mr Mason says, as a question of fact, that Redrow categorically rejects these complaints. He says that in a difficult situation, the planning permission and the section 106 agreements were the best which could be obtained; but Mr Mason says that that is not the true point for present purposes. Even if there were any merit in what the defendant now complains of, those complaints would sound only in unliquidated damages for breach of contract. Those complaints do not form part of the contractual price payable under the contract and they are not – he repeats “not” – secured by the legal charge. Were it not for the legal charge, there would be no necessity whatsoever for the defendant to be a party to either of the section 106 agreements. It is said to have no interest whatsoever in any part of the property other than its security interest (as conferred upon it by the legal charge). Mr Mason submits that it is crystal clear that unliquidated claims for damages for breach of the sale contract do not fall within the definition of “Secured Amounts” under the legal charge. For that reason alone, Mr Mason says, it would be entirely wrong in law for the defendant to seek to misuse its security interest as mortgagee under the legal charge by refusing to join in Tewkesbury Borough Council’s section 106 agreement so as to validate or support any claim it might perceive it has to unliqidated damages for breach of contract. Mr Mason submits that such would be the most naked attempt by the defendant to obtain an impermissible collateral benefit through misuse of its position as mortgagee. If there were any doubt, Mr Mason says that the matter is made crystal clear by clause 15.9 of the legal charge, which imposes on the defendant an obligation to enter into the section 106 agreements, provided that they expressly provide that the defendant is joined as a party only for the purpose of consenting to the arrangement, and that the defendant is not required by the terms of such agreement or document to enter into any covenants or other obligations. Mr Mason says that that is indeed the case.[22]Mr Mason says that since the proviso to clause 15.9 is satisfied, the defendant is required by that clause to join in and to execute the two section 106 agreements. At paragraph 32 of his witness statement, Mr Mason says that that is hardly a surprising conclusion for the following reasons:(1) the defendant has no proprietary interest in the property and was, therefore, to be a party to the two section 106 agreements only because it is a mortgagee under the legal charge;(2) the defendant has no contractual right to veto or dictate the terms of the section 106 agreements which Redrow, as land owner, wishes to enter into in order to obtain planning permission;(3) if the defendant believes that it has some form of claim for breach of the contract as against Redrow, granted the terms of the section 106 agreements, then the defendant can bring an action in the ordinary way against Redrow for damages for such breach. There can be no question of Redrow not being good for such damages. Such damages are said not to be secured by the legal charge. It is said that it would be astounding if the defendant were able to prevent Redrow obtaining the planning permission which it wishes to achieve, on the terms of section 106 agreements which with Redrow is content, by refusing (because of the defendant’s mere security interest in the property) to execute the relevant section 106 agreements.[23]Having referred to various exchanges of correspondence and emails between the parties and their solicitors, at paragraph 38 of his witness statement Mr Mason concludes that he and Redrow believe that the defendant has no real prospect of successfully defending Redrow’s claims in the action. Neither he nor Redrow know of any other reason (let alone any other compelling reason) why this action should be disposed of at trial as opposed to by way of summary judgment.[24]In his witness statement, Mr Martin explains the defendant’s position in relation to the dispute that has arisen with Redrow and why the defendant opposes Redrow’s application for summary judgment. Mr Martin sets out his experience at paragraphs 2.1 through to 2.6. At paragraph 3, Mr Martin explains, having taken advice, why Redrow’s application should not succeed. In summary, the reasons are said to be as follows:(1) There is a lengthy and complicated history to this matter, which is relevant to the issues in dispute, and which has been ignored by Redrow in its witness statement;(2) Redrow is said to have acted in breach of contract and also to have been guilty of conduct which, Mr Martin has been advised, disentitles Redrow to the remedy of specific performance;(3) Redrow has not properly explained the financial impact of its conduct, which Mr Martin says is in breach of the various agreements that the defendant has entered into;(4) Redrow is said not to have disclosed the effect that the planning permission would have on the green land referred to in the contract;(5) There are said to be disputes as to the facts which should properly be tested at trial; and(6) Redrow is said not to have properly explained the consequences of entering into the section 106 agreement without seeking to re-negotiate the unfavourable terms at the present stage. Mr Martin deals with each of those matters in turn.[25]Mr Martin addresses the background and the planning history at sub-paragraphs 4.1 through to 4.25. He denies that the current planning position is at risk, and he also denies that there is a real risk that planning could now be refused if there is any delay. That is said to be incorrect given the complex planning history, which he proceeds to relate.[26]At paragraph 4.22, Mr Martin says that he fails to see that there is a sustainable argument, as Redrow asserts, that the site could now be the subject of any further review. There is said to be nothing further to be reviewed.[27]At sub-paragraph 4.23, Mr Martin suggests - in a passage adopted by Mr Bartley Jones in his submissions - that the urgency from Redrow’s perspective surrounds their wish to deliver housing to meet their internal regional targets. Mr Martin says that the pressure to meet such targets is a common theme throughout the building industry, and one can see why this would lead to making compromises in order to deliver internal housing targets, particularly if there is already a financial investment, albeit one not reflective of the land’s value. Mr Martin says that an attempt to deliver Redrow’s internal regional housing targets should not be allowed to dilute the contractual obligations which in this instance have been carefully constructed for reasons of protecting the vendor’s and third-party (overage holder’s) interests. It is said by Mr Martin that to suggest that the merits of planning will be entirely lost whilst the parties re-examine the terms of the section 106 agreement and layouts is a gross exaggeration, unfounded and fundamentally contrary to the argument that Redrow has itself promoted, and now supported by the Government Office as recently as the letter of 29th February 2016. It is said that this has all been ignored by Redrow. The simple fact of the matter is, Mr Martin says, that delay will not derail the planning process. If that were really the case, he says he would be trying to push this through as, without a planning consent, the defendant will not receive any further payments pursuant to the contract.[28]Mr Martin addresses the claimant’s conduct and breach of contract at sub-paragraphs 5.1 through to 5.15. Essentially, he alleges that Redrow is in breach of its obligations under the contract. He refers to an alleged breach of clause 5.3 of the sale contract in that Redrow is said unilaterally to have varied the original planning application through a reduction in the number of units, thereby materially breaching the target level of the NDA in a way that has not been agreed by the defendant. Mr Martin also alleges breaches of clause 5.6 of the contract in failing to act in good faith and to use all reasonable endeavours to maximise the development value and to minimise the development costs and costs of compliance with any planning agreement. Mr Martin alleges breach of clause 5.7 of the sale contract under which Redrow was under an obligation to use all reasonable endeavours to achieve an NDA of not less than 28.88 acres. Without explanation, and without the defendant’s involvement, it is said that Redrow has ended up agreeing an NDA of 26.698 acres. Despite having asked Redrow to demonstrate by way of correspondence how it has reached that position, it is said that nothing has been forthcoming.[29]It is said that in breach of clause 5.11.3 of the contract Redrow has failed to ensure that the defendant was able to attend and participate in meetings with the council. It is said that Redrow has failed to involve the defendant in any discussions or negotiations relating to the section 106 agreement (which it is accepted is a “Planning Agreement” for the purposes of the contract and the legal charge).[30]At paragraph 5.15 of his witness statement, Mr Martin refers to Mr Mason’s acknowledgement that the claimant is under an obligation “to use all reasonable endeavours to maximise the development value … to minimise the development costs and the costs of compliance with any planning agreement.” Mr Martin says that in fact it appears that in breach of the contract, Redrow has simply accepted the reduced NDA and the section 106 costs, and has not advanced any evidence, despite all the requests from the defendant, to prove otherwise. It is said that this has a direct impact only on the defendant. Mr Martin asserts that it cannot be correct for the claimant to claim specific performance in such circumstances.[31]Mr Martin addresses the financial impact of Redrow’s breaches and conduct at sub-paragraphs 6.1 through to 6.4. It is said that there has been a reduction in the NDA, which results in a difference in price between the NDA agreed by Redrow and the NDA specified in the contract of some £1.8 million. It is also said that the section 106 costs agreed by Redrow at £11,579 for each of the 369 housing units equate to a loss to the defendant of some £1.69 million. Mr Martin states that it is worth noting that it is only the defendant which suffers as a result of the higher section 106 costs. In addition to those losses, Mr Martin asserts that the reduced NDA would result in a lower overage payment under the terms of the overage deed. Based on his estimation of current values, having discussed the matter with Lambert Smith Hampton, he says that the additional loss to the defendant would be in the region of some £649,000. There is also said to be an impact on the green land which Mr Martin identifies at sub-paragraphs 7.1 through to 7.3 of his witness statement. He assesses this to be approximately £416,600 based on current values.[32]At paragraph 8 Mr Martin states that it is clear from the above points that there are disputes as to:(1) whether planning permission would be refused if not granted immediately;(2) whether Redrow acted properly or improperly in their dealings with Gloucestershire;(3) whether Redrow used all reasonable endeavours in accordance with clause 5.6 of the contract; and(4) whether Redrow complied with clauses 5.3, 5.7 and 5.11 of the contract.[33]At paragraphs 9.1 through to 9.3, Mr Martin addresses the consequences of entering into the section 106 agreement without seeking to re-negotiate what are said to be the unfavourable terms at this stage. Mr Martin says that if he was forced to sign the section 106 agreement now on behalf of the defendant, the losses set out in his statement would be unavoidable. In the alternative, in being able to return to the planning authority with Redrow, for him to be involved in and consulted on the negotiations, as he says the contract entitles him to do, there is the real opportunity for those losses to be avoided and for an equitable outcome to be achieved.[34]Mr Martin asserts that there is still the opportunity now for Redrow to do what it should have done under the contract in the first place. Redrow’s suggestion that planning permission would be lost if the section 106 agreement were not signed immediately cannot be substantiated. A very considerable amount of work, over an extended period of time, is said to have resulted in the site being allocated in the local plan. The suggestion that the site could be lost or unallocated is an outcome that would, in itself, be completely contrary to Central Government policy on the need for new housing, including that within Tewkesbury Borough Council, as emphasised by Redrow itself in the document that accompanied the original planning application.[35]Mr Martin concludes by saying, just to be clear, that it is in his interests, as well as Redrow’s, for planning to be granted. He would accordingly be happy to sign a section 106 agreement which has been secured following compliance with Redrow’s obligations in the sale contract. That is a summary of the evidence in the case.[36]In his written skeleton argument in support of the summary judgment application, Mr Bartley Jones submits that however dissatisfied the defendant may be, rightly or wrongly, with the terms of the intended planning permission, or the section 106 agreement, nothing in the sale contract gives the defendant, as a vendor who has sold the whole of the property to Redrow, any right or entitlement to veto, or to dictate, the terms of any section 106 agreement which Redrow, as freehold landowner, may wish to enter into with Tewkesbury Borough Council. Mr Bartley Jones submits that any complaint by the defendant that Redrow may have breached its contractual obligations under clause 5 of the contract is an entire irrelevance for the purposes of the present application. He submits that the defendant cannot use its mere security interest under the charge simply in order to obtain some collateral benefit, or to use its position under the charge as a bargaining counter.[37]If the defendant says that the outstanding price secured by the legal charge should have been larger than will be the case under the section 106 agreement and the planning permission that will be released upon its entry, that is said to sound only in damages and not to be secured by the legal charge. If there be any doubt on the matter, the position is said to be made crystal clear by clause 15.9 of the charge, which is said to oblige the defendant, at Redrow’s request, to consent to or join in the creation of the section 106 agreement. Mr Bartley Jones submits that the defendant is contractually obliged to enter into the section 106 agreement with Tewkesbury Borough Council. It remains so contractually obliged even if the defendant says that it has a right to bring an action for damages for breach of the contract as against Redrow. Whilst the charge and the contract subsist, then it is said that the defendant must fulfil its contractual obligations thereunder, irrespective of whether or not it has a claim for damages for breach of contract against Redrow.[38]Accordingly, Mr Bartley Jones submits that Redrow is entitled to summary judgment in the form sought in the draft order. That is said to be hardly a surprising conclusion, for the reasons given by Mr Mason in his witness statement.[39]In the course of his oral submissions in support of his summary judgment application, Mr Bartley Jones accepted that it did not automatically follow that an order for specific performance would be made merely because the defendant was in breach of its contractual obligations. However, Mr Bartley Jones submitted that this was a paradigm case for an order for specific performance. He submitted that it was crystal clear that the defendant was in breach of its contractual obligations under clause 15.9 of the legal charge. Mr Bartley Jones indicated that at a recent hearing, on 6th April, of the Joint Core Strategy Inquiry that the inspector had reiterated a provisional view that the allocation of this land for residential development had been unsound, although she had accepted that that was not germane because planning permission had already been granted in principle under the September resolution by Tewkesbury Borough Council.[40]Mr Bartley Jones acknowledged that the court could not, on this summary judgment application, decide who was right or who was wrong on the existence of a threat to the grant of planning permission. However, he submitted that the court could take account of the fact that there were genuine concerns on this issue. He submitted that Redrow would like to see planning permission granted as quickly as possible, thereby starting the period for any challenge by way of judicial review running. Mr Bartley Jones made the point that the sooner any judicial review proceedings got under way, the better. He emphasised that the person bearing the risk of the loss of planning permission was Redrow, which had already paid over £11 million for the land in question. Mr Bartley Jones accepted that, on a summary judgment application, the court could not resolve disputed issues of fact as to whether there was any validity in the claim that the defendant had advanced that Redrow had failed to comply with its contractual obligations under clause 5 of the sale contract. Mr Bartley Jones did, however, make it clear that Redrow categorically rejected any suggestion that it had done so. Mr Bartley Jones accepted that the court had to proceed on the basis that the defendant contended that it had a potentially arguable case that Redrow had failed to maximise the terms of the NDA and/or to secure beneficial terms for the section 106 agreement, in each case in breach of the sale contract. That, however, it was said, would give the defendant a cause of action sounding only in damages. It would not operate to effect a change in the purchase price.[41]Mr Bartley Jones took me through the terms of the legal charge and, in particular, the various sub-clauses of clause 15. He submitted that clause 15.9 had to be seen in the context of a scheme for the release of development land from the charge or the grant of necessary easements. He submitted that the arguments advanced by the defendant in opposition to the claim for specific performance of clause 15.9 would apply equally to the phasing-release provisions of the earlier sub-clauses of clause 15. Mr Bartley Jones submitted that such a result would be commercially unworkable and would frustrate the whole scheme of clause 15 of the sale contract.[42]Mr Bartley Jones submitted that the purpose of clause 15.9 was crystal clear. It was to enable planning permission to be obtained, subject to the proviso that the defendant was not itself to be personally liable under any section 106 agreement. The obligation on the defendant under clause 15.9 was said to be unqualified. It was not to be subjected to or qualified by any outstanding claim for damages for breach of contract. Mr Bartley Jones submitted that it was inconceivable that any such qualification on the scope of clause 15.9 would have been accepted by any commercial developer. He submitted that the defendant was in the clearest breach of clause 15.9. Mr Bartley Jones accepted that, for the purposes of today’s hearing, the court should accept Mr Martin’s assessment of the financial impact on the price to be received by the defendant as further sale consideration under the sale contract and overage deed. But, he submitted, that was nothing to do the point. That sounded only in damages for breach of contract, and there was no suggestion that Redrow was not good for any relevant award of damages.[43]Mr Bartley Jones then turned to the law. He submitted that the leading, and governing, authority was the decision of the Court of Appeal in the case of National and Provincial Bank Society v. British Waterways Board (unreported), which was decided by Balcombe and Hirst LLJ on 26th November 1992. That case was said to have involved a successful appeal against a decision of His Honour Judge Maddocks, sitting as a Judge of the High Court, whereby he had granted summary judgment for specific performance in favour of the plaintiff, the National and Provincial Building Society, of a contract for the sale of certain land owned by British Waterways Board. However, the facts of that case were said to be fundamentally different from those of the instant case. There there had been provisions for overage and a phased transfer of the land in question. The original purchaser had defaulted in payments due under the contract. The effect of the order for specific performance granted at first instance would have been to leave the seller without its payments. Under the order for specific performance granted at first instance, the National and Provincial Building Society would have received the land without having had to pay the balance of the purchase price and the contracted overage. Mr Bartley Jones submitted that context was everything. In the present case, there was an undoubted breach of clause 15.9 of the legal charge and an alleged breach on the part of Redrow of the provisions of clause 5 of the sale contract. In the present case, the legal charge was said to secure only the outstanding purchase price. The whole purpose of clause 15.9 of the legal charge was to enable Redrow to obtain a grant of planning consent. It would not be inequitable, in the circumstances and the context of the present case, to oblige the defendant to comply with its obligations under clause 15.9, leaving the defendant to commence an action for damages for breach of contract.[44]The circumstances in the National and Provincial Building Society case were said to be very different from those in the present case. Here the claimant would pay the outstanding contract price, which is secured in favour of the defendant by the legal charge, and the claimant could then be sued for breach of its contractual obligations, if breach were established by the defendant. Mr Bartley Jones submitted that to refuse specific performance would allow the defendant to wreck the scheme for the phased release of land from the legal charge, and would frustrate the purpose of the contract and legal charge, which was the obtaining of a grant of residential planning permission.[45]In his written skeleton, Mr Holland, for the defendant, submitted that:(1) Redrow was not entitled to an order for specific performance as it had been, and was, in serious breach of its own obligations under the sale contract, which was to be treated as, effectively, the same contract as the legal charge;(2) in any event, Redrow was not, in the circumstances, entitled to summary judgment for specific performance; and (3), and in any event, Redrow did not require any order as urgently as it made out.[46]Mr Holland noted that Redrow sought specific performance, which was a discretionary equitable remedy. He submitted that specific performance would not be granted to a party to a contract which was itself in breach of its own obligations. He relied upon the approval by the Court of Appeal, in the National and Provincial Building Society case, of the statement at pages 50 to 51 of the then current edition of Jones & Goodhart on Specific Performance. He relied, in particular, upon the test formulated in that case, adopting the words of Jones & Goodhart, which was whether the obligation which the plaintiff had failed to perform was sufficiently important, having regard to its connection with the obligation which the plaintiff was seeking to enforce, to make it inequitable to grant specific performance. The National and Provincial Building Society case was said to bear some factual similarity to the instant case. There, the Court of Appeal was said to have declined to order specific performance on a summary basis of an obligation to transfer land because of an alleged breach of an obligation (effectively) by the party seeking specific performance which was treated as if it was an obligation free-standing from that to transfer the land.[47]Mr Holland relied on a statement as to the effect of the authorities that they did not establish the proposition that wherever it was possible formally to split up a single transaction into two separate contracts, specific performance of the one contract would always be granted, notwithstanding breaches of the obligations in the other contract which were highly material to the transaction considered as a whole. Mr. Holland submitted that the fact that the breaches committed by the party seeking the equitable relief of specific performance would sound in damages which that party would be able to pay did not, by itself (or at all) mean that the defaulting party was automatically entitled to specific performance no matter how serious those breaches might be. That might be a factor to be considered, but it could not be a decisive factor, otherwise a wealthy party would simply be able to buy its way out of its contractual obligations.[48]Mr Holland submitted that the contract and the legal charge, although technically different agreements, should here be treated as effectively one contract or one transaction. The obligation to enter into the section 106 agreement must be treated as one connected with Redrow’s obligations which had been breached. That was because:(1) the contract and the legal charge were part of a suite of agreements entered into as part of one transaction;(2) the legal charge was entered into pursuant to an express obligation in the sale contract;(3) the draft of the legal charge had been annexed to the sale contract;(4) the legal charge secured sums due to the defendant pursuant to the terms of the sale contract;(5) the legal charge specifically referred to the sale contract; and(6) the amount of the sums secured by the legal charge depended on the claimant’s fulfilment of the obligations which, according to the defendant, it had breached.[49]Thus, Mr Holland submitted, the obligation in clause 15.9 of the legal charge to enter into a section 106 agreement could not be looked at in isolation. If necessary, the defendant submitted that the obligation in the legal charge and the obligations of which the defendant asserted the claimant to be in breach were interdependent. The breaches were certainly said to be of sufficient importance (having regard to the connection with the obligation which Redrow was seeking to enforce) to make it inequitable to grant specific performance. Alternatively, the breaches were said to be highly material to the transaction considered as a whole.[50]Mr Holland proceeded to analyse Mr Martin’s account of Redrow’s breaches, as set out in his witness statement: see paragraph 9 of Mr Holland’s written skeleton. The cumulative effect of Redrow’s alleged breaches(1) to act in good faith,(2) to use all reasonable endeavours to maximise the development value,(3) to use all reasonable endeavours to minimise the development costs and the cost of compliance with any section 106 agreement,(4) to use all reasonable endeavours to achieve an NDA of not less than 28.88 acres, and(5) to use all reasonable endeavours to achieve an affordable housing land requirement of no more than 22%, was said to have been to reduce the deferred payment by some £3.5 million. In addition, they would also directly reduce the payments due under the overage deed and on any future development of the green land.[51]The defendant’s position was that Redrow could not be said to have used “all reasonable endeavours” to achieve the desired results. Mr Holland pointed out that an obligation to use “all reasonable endeavours” was to be equated with one to use “best endeavours”, which obligation, in its turn, obliged the covenantor “…to take all those steps which a prudent and determined man, acting in his own interests and anxious to obtain the relevant outcome, would have taken.” Reference was made to the authorities discussed at paragraph 16.07 of Lewison: The Interpretation of Contracts (6th edition) 2015. In particular, reliance was placed upon the decision of Mr Julian Flaux QC, then sitting as a Deputy High Court Judge, in the case of Rhodia International Holdings Limited v Huntsman International LLC [2007] EWHC 292 (Comm), reported at [2007] 1 CLC 59. Mr Holland emphasised that the level of effort required under an obligation to use “all reasonable endeavours” was quite a high one, and that the burden appeared to be on the claimant to prove that it had discharged that burden. The defendant submitted that the claimant had come nowhere near to establishing that it had used “all reasonable endeavours”. It was therefore in breach of the sale contract and, as a result of that breach, the sums secured by the legal charge would be much reduced. It was further said that its actions had materially diminished the value of the property, in breach of paragraph 2 of Schedule 2 to the legal charge. In those circumstances, the defendant submitted that this was a clear case in which Redrow should not be granted specific performance.[52]Mr Holland also disputed the validity of Redrow’s assertion that it required urgent relief. The planning history of the site was such that the fears expressed by Mr Mason as to the threat to the planning permission were completely groundless. On Mr Martin’s evidence, the defendant had already received advice from leading planning counsel that any suggestion made by the inspector hearing the Joint Core Strategy Inquiry in relation to the site being removed from an allocation for housing was unlawful. Mr Holland submitted that there was, in truth, no reason why Redrow should seek relief urgently. As Mr Martin had suggested, it was in the defendant’s best interests for planning permission to be obtained. It was simply the case that any such planning permission, and resulting planning agreement under section 106, should be on terms which resulted from Redrow’s compliance with its contractual obligations.[53]In the course of his oral submissions, Mr Holland accepted:(1) that the obligation in clause 15.9 of the legal charge was not expressly conditional;(2) that the defendant had not complied with that obligation; and(3) that a claim for damages was legally different from a claim for the outstanding balance of the purchase price and related payments under the sale agreement. However, he submitted that there was a direct correlation between a claim for damages for breach of contract and that purchase price because damages would be awarded in order to make up any diminution of the deferred payment and overage payment. Mr Holland submitted that that claim for damages was, contrary to the submission of Mr Bartley Jones, in fact secured by the legal charge. That was because, so Mr Holland submitted, the definition of “the Secured Amount” in clause 1.1(cc)(i) included “all present and future monies owed by the Chargor to the Chargee under the provisions of the Contract for Sale”. An obligation to pay damages for breach of the contract for sale, when quantified by a money judgment, would constitute future monies owed by the chargor to the chargee under the provisions of the contract for sale.[54]Mr Holland submitted that a claimant should not be awarded specific performance if it was in breach of its own obligations and that breach was sufficiently serious and sufficiently closely connected with the performance of the obligation of which specific performance was sought.[55]The one point on which Mr Holland was in agreement with Mr Bartley Jones was on the point that context is everything. Mr Holland submitted that in the present case the alleged breaches of the sale contract were important financially and were intimately connected with the security interest conferred by the legal charge. He submitted that it was not enough for Redrow simply to say that any liability for breach of contract on the part of Redrow was capable of sounding in an award of damages for breach of contract. The defendant did not want Redrow to enter into the section 106 agreement and receive the planning consent in the terms presently agreed and contemplated. The defendant wanted to compel Redrow to go back and comply with its own contractual obligations.[56]Mr Holland submitted that the arguments on the phasing-relief sub-clauses of clause 15.9 of the legal charge did not take the matter any further because they were all dependent upon the release of planning consent.[57]In his short reply, Mr Bartley Jones submitted that, on its true construction, the legal charge did not secure any award of damages for breach of contract because such an award of damages could not be described as “monies owed”. He emphasised again that the only reason why the defendant had any say in the matter of the section 106 agreement at all was because it had a security interest in the land by way of a legal charge. If that legal charge did not secure any award of damages for breach of contract, then why, Mr Bartley Jones asked, should the defendant be entitled to use that security interest to prevent Redrow securing its desired grant of planning consent? Mr Bartley Jones emphasised that damages payable for breach of contract under an order of the court were not the equivalent of a payment of the price payable under the sale contract. Mr Bartley Jones emphasised that Redrow wanted to enter into this section 106 agreement. It was Redrow’s land and not the defendant’s. It was Redrow’s right to decide whether or not to assume the risk of losing the contemplated residential planning consent. The defendant did not have the right to dictate the terms of, still less to veto, the section 106 agreement which Redrow was happy to enter into.[58]Those, essentially, were the submissions.[59]Procedurally, it does not seem to me that the present application properly falls within the terms of paragraph 7 of the Practice Direction under CPR Part 24. Paragraph 7 applies to claims for specific performance of an agreement for the sale, purchase, exchange, mortgage or charge of any property, or for the grant or assignment of a lease or tenancy of any property. It does not, in terms, apply to a claim for specific performance of an obligation in a legal charge to enter into a section 106 agreement. As a result, it does seem to me that the claimant has not given sufficient notice of its summary judgment application in accordance with the procedural requirements of CPR 24.4(3). Moreover, the application for summary judgment was issued before the defendant had filed any acknowledgement of service as required under CPR 24.4, sub-rule (1)(a). However, Mr Holland made it clear that the defendant was not seeking any adjournment of this application. The defendant has put in all of the evidence upon which it wishes to rely in opposition to the summary judgment application.[60]In accordance with the furtherance of the overriding objective in the Civil Procedure Rules, it seems to me that I should proceed to determine this application today rather than adjourning it for a week or so. In so far as is necessary therefore, I give permission, pursuant to CPR 24.4(1)(i) for this application to be made before the filing of the defendant’s acknowledgement of service. I also exercise my case management powers to abridge time for service of this application under CPR 3.1(2)(a). I am satisfied that giving such procedural directions is in accordance with the overriding objective of enabling the court to deal with this case justly and at proportionate cost. I am satisfied that the parties are on an equal footing: they have both put in evidence before me and are represented by leading counsel. Allowing the matter to proceed today will save expense and deal with the case in a proportionate way. It will ensure that it is dealt with expeditiously and fairly. It will result in ensuring that it has allotted to it an appropriate share of the court’s resources. It will avoid the need for court resources to be diverted from other case on some future adjourned hearing date.[61]I therefore give such procedural directions as are necessary to enable the matter to proceed today.[62]I remind myself that this is an application for summary judgment. It is not the trial of the matter or of any issue in the case. I should only give summary judgment against the defendant only if I consider that the defendant has no real prospect of successfully defending the claim for specific performance and there is no other compelling reason why the entitlement to specific performance should be disposed of at a trial.[63]As Mr Bartley Jones accepts, I must approach the present application on the footing that the court cannot decide who is right or wrong on the alleged threat to the presently envisaged grant of residential planning permission. I must also proceed on the footing that the defendant has raised an arguable case that the claimant is in breach of its contractual obligations under the sale contract and that that arguable breach may well sound in an award of damages.[64]The question is whether that arguable claim for damages for breach of contract, and the possible existence of breaches of contract on the part of the claimant, give rise to an arguable defence to the claim for specific performance. On that issue, I agree with Mr Holland that the applicable law is to be derived from the Court of Appeal’s decision in the National and Provincial Building Society v. British Waterways Board case (previously cited). I agree with Mr Bartley Jones that it is important to understand the basis of the Court of Appeal’s decision (delivered by Balcombe LJ) in that case. The appeal in that case was one by the first defendant, British Waterways Board, from an order made by Judge Maddocks whereby he had granted summary judgment for specific performance in favour of the plaintiff, National and Provincial Building Society, of a contract for the sale of certain land owned by British Waterways Board.[65]It is clear from the statement of the facts that BWB had never received the second instalment of an additional overage payment, nor any part of the further overage and interest, and was owed something in excess of £1 million in those respects. It was common ground before the Court of Appeal, as it had been before the judge, that the plaintiff building society, as an equitable assignee, could be in no better position than the original purchaser. The result of the judge’s orders was that the Society would become entitled to a transfer of the remainder of the site free from any obligation to pay to BWB the second instalment of the additional overage and the further overage and interest, leaving BWB with a worthless claim for damages against Assured Developments (Armagh) Limited as the original purchaser.[66]Further, it was clear that the building society would take the site free from any obligation to develop it in accordance with the scheme of development laid down by the lease, and to the possible detriment of BWB’s environmental concerns and its interest in adjoining property.[67]Despite an attempt to re-visit the decision of the judge of first instance on the true meaning and effect of the relevant contract, it is clear that the Court of Appeal proceeded on the assumption that the first instance judge had been right in holding that the relevant clause (clause 7) had created a free-standing contract for sale independent of the other obligations in the lease. However, that was said not of itself to be sufficient to require the court to decree specific performance of the contract in clause 7, leaving BWB to its worthless remedy in damages in respect of its rights under clauses 3 and 5.[68]The Court of Appeal did not agree with the view of the judge that his decision on the question of construction was conclusive of the question of specific performance. The Court of Appeal expressed itself to be in complete agreement with a citation from Jones & Goodharton Specific Performance at pages 50 to 51. That citation reads in full as follows, and I quote:
“Where the transaction between the parties on its true analysis involves two separate and collateral contracts, it has been held that a plaintiff may obtain specific performance on one contract despite the fact that he is in breach of his obligations under the other contract, even though the two contracts relate to the same subject matter… But specific performance will not be ordered where the obligation which the plaintiff has failed to perform is interdependent with the obligation which he is seeking to enforce. In practice, where a single transaction is involved, it must be doubtful whether the court would now concern itself with the question of whether it is possible formally to split up the transaction into two separate contracts; the question is whether the obligation which the plaintiff has failed to perform is sufficiently important (having regard to its connection with the obligation which the plaintiff is seeking to enforce) to make it inequitable to grant specific performance.”
The Court of Appeal expressed itself to be in complete agreement with the last sentence quoted. It seemed to the Court of Appeal to embody both good law and good sense. The Court of Appeal, therefore, turned to consider the authorities to see if they required it to reach a conclusion contrary to what the Court of Appeal believed that equity, in its broadest sense, required in the instant case.[69]The Court of Appeal proceeded to consider various authorities. They were said not to establish the proposition that wherever it was possible formally to split up a single transaction into two separate contracts, specific performance of the one contract would always be granted, notwithstanding breaches of the obligations in the other contract which were highly material to the transaction considered as a whole. The Court of Appeal proceeded to consider two further authorities, namely, Measures Brothers Ltd v. Measures and Chappell v. Times Newspapers Limited. They were said to be examples of cases where the court had refused to grant injunctions - another form of equitable relief to which considerations applied similar to those relevant to the grant or refusal of specific performance - in factual situations very different to those of the instant case, but where, in each case, the plaintiff was refusing to perform his obligations.[70]The Court of Appeal quoted from Lord Denning MR in Chappell v. Times Newspapers Limited. The citation included reference to a contract where each had to do his part concurrently with the other. The Court of Appeal also referred to a further statement of principle by Lord Radcliffe, speaking for the Privy Council, in Australian Hardwoods Proprietary Limited v. Commissioner for Railways. Reference was made to an agreement which involved continuing or future acts to be performed by the plaintiff. Lord Radcliffe’s citation concluded with a description of the plaintiffs in that case as people who were seeking equity when they were not ready to do it themselves. The Court of Appeal concluded that it appreciated that those remarks had been made in a context wholly different to that which the Court of Appeal had to consider. Nevertheless, they seemed to the Court of Appeal to state an approach which it should follow in the instant case. Whatever might turn out to be the position at the trial, the Court of Appeal was in no doubt that there were very strong arguments against the grant of specific performance of the contract contained in clause 7 of the lease without the building society being put on terms as to compliance with the original purchaser’s (Armagh’s) other obligations contained in clauses 3 and 5 of the lease. The Court of Appeal, therefore, allowed the appeal and gave BWB unconditional leave to defend the action.[71]It is important to bear in mind, as Mr Bartley Jones urged upon the court, that context is everything. In that case, the effect of the order for specific performance would have been to require the land to be conveyed to the building society without the owner of the land receiving additional sums due under the sale contract. It was a case where there were further obligations to be performed in the future on either side. Those obligations were closely interdependent. As with the injunction cases, it was held that each party to the litigation had to do his part concurrently with the other. The party seeking specific performance could not secure equity without being ready to do it itself.[72]In my judgment, that is not the position in the present case. I have to approach the present specific performance application on the basis that there is an arguable case that Redrow has not discharged its contractual obligations in connection with the obtaining of planning consent and the negotiation of the section 106 agreement. If the defendant’s case in those respects is successful at trial, then it will be entitled to an award of damages. But Redrow is satisfied with the terms of the planning consent which Tewkesbury Borough Council has resolved to grant. Redrow is satisfied with the terms of the section 106 agreement which Tewkesbury Borough Council is prepared to enter into with Redrow. There is nothing more by way of continuing or further acts to be done on the part of Redrow. The defendant will continue to enjoy its security for the further sums secured by its legal charge even if I compel it to enter into the section 106 agreement. It is unnecessary for me, on this present application, and it is inappropriate for me, to determine whether any sums awarded by way of damages for past breaches of contract on the part of Redrow will fall to be secured by the legal charge. I do not decide that issue of construction on this application because it is unnecessary for me to do so.[73]What is clear, however, is that for the future the defendant will be as well secured if it enters into the section 106 agreement as it is at present.[74]The obligations on the defendant, pursuant to clause 5.9 of the legal charge, are unqualified, save to the extent covered by the proviso to that clause. It would have been open to the parties to subject the terms of clause 5.9 to some further qualification. They chose not to do so.[75]In my judgment, it would not be inequitable to grant specific performance of the defendant’s obligations under clause 9 in the present case even if I accept the defendant’s arguable claim to damages for past breaches of contract on the part of Redrow. If I pose the question which, in accordance with the National and Provincial Building Society v. British Waterways Board case, I must, whether the obligation which Redrow has failed to perform is sufficiently important, having regard to its connection with the obligation which Redrow is seeking to enforce, to make it inequitable to grant specific performance of clause 5.9 of the legal charge, my answer to that question is no.[76]In my judgment, it is sufficiently equitable to leave the defendant to pursue a claim for damages, which may or may not be secured by its legal charge over the land, but as to which there is no suggestion that Redrow will be unable to satisfy any claim in damages. The position is very different from that in the National and Provincial Building Society case where it is clear that had specific performance been granted the respondent to the application (and appellant in the Court of Appeal), the British Waterways Board, would have been left only with a worthless claim for damages against the original contracting purchaser. That is not the position in the present case.[77]For those reasons, I am satisfied that the defendant has no real prospect of successfully defending the claim for specific performance of the defendant’s obligations under claims 5.9. Equally, I am satisfied that there is no other reason, still less any compelling reason, why the claimant’s entitlement to specific performance should be disposed of at a future trial rather than on the hearing of the present application. For those reasons, I uphold the application for specific performance. (For discussion after judgment, see main transcript)

Cited in 1 later judgment