Yewbelle Ltd v London Green Developments Ltd & Anor, Court of Appeal - Civil Division, May 23, 2007, [2007] EWCA Civ 475

Resolution Date:May 23, 2007
Issuing Organization:Civil Division
Actores:Yewbelle Ltd v London Green Developments Ltd & Anor

Neutral Citation Number: [2007] EWCA Civ 475

Case No: 2006/2704






[2006] EWHC 3166 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

23 May 2007



Vice President of the Court of Appeal, Civil Division




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(Transcript of the Handed Down Judgment of

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Nicholas Dowding Q.C. and Mark Warwick (instructed by

Mishcon de Reya) for the Appellants

Edward Bannister Q.C. and Oliver Hilton (instructed by Segens) for the Respondent

Hearing dates: April 18-19 2007

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JudgmentLord Justice Lloyd:

  1. This appeal arises from a transaction relating to land in South London on which stands a tower block (the Tower) which has been said to be one of the ugliest buildings in London. The Appellant Knightsbridge Green Ltd (KGL) and the Respondent (LGD) came to an agreement under which the Respondent would buy the land from KGL, would develop it in accordance with a planning permission, and would then lease parts of it back to KGL. The planning permission was defined by reference to a draft resolution which the London Borough of Merton (Merton) had approved as planning authority, subject to a suitable agreement being entered into under section 106 of the Town and Country Planning Act 1990. KGL was obliged to use all reasonable endeavours to secure a completed agreement under section 106, substantially in the form of the draft then in existence, and LGD was under no obligation to complete in the absence of such an agreement. Soon after the agreement for sale had been entered into, Merton's requirements in respect of the section 106 agreement changed, affecting the transaction adversely. Moreover, it turned out that a small parcel of land at the south-east corner of the site, which was known not to belong to KGL, but had been assumed to belong to Merton, (which I will call the third party land) and which was needed for the development, belonged to an entirely independent company. During the course of the transaction KGL transferred the land to Yewbelle Ltd, but nothing turns on that. I will refer indifferently to KGL and Yewbelle, or both of them, as the Appellant or as the seller, unless it is necessary to distinguish the two for any reason. The question in these proceedings is whether the Appellant is still bound under the contract with the Respondent, or whether, having used all reasonable endeavours to overcome the two problems as regards the section 106 agreement, it is now able to regard the contract with the Respondent as at an end. In his judgment given on 8 December 2006, Mr Justice Lewison held that it was not, because it had not used all reasonable endeavours.

  2. The questions for the court turn on the terms of the agreement for sale, but I must put this into the appropriate factual context. I will draw extensively on the judge's admirably careful and full judgment in doing so.

  3. In April 2002 Merton produced a planning brief in order to encourage potential redevelopment of the site. This stated that as part of the development Merton would want to see a community use, such as a public library, on the ground floor of the Tower. On 30 January 2003 architects submitted a planning application for the development of the property. The planning application itself identified, in outline, the steps to be taken as part of the development. The key elements of the proposed development were: the conversion of the Tower into flats, the erection of two six storey extensions to the Tower (north and south), the demolition of a multi-storey car park on the site and its replacement by a ten storey building and the creation of a public park. Overall the development would consist of 226 residential units, 370 square metres of retail space, 629 square metres for ``a new public library facility'', a café/bar and 876 square metres of business and office space. The site covered by the planning application included not only the property owned by KGL, but also the third party land. Part of the library was to be constructed on that land. Merton's planning officers recommended the grant of the application subject to the completion of a section 106 agreement and various conditions. Merton was particularly keen on the library, which its officers later described as one of the Council's key aspirations. On 11 March 2004 Merton resolved to grant planning permission subject to the completion of a section 106 agreement and to various conditions. Heads of terms listed 16 items that were to appear in the section 106 agreement. None of those terms related specifically to the library.

  4. Once the resolution to grant planning permission had been passed, work started on a section 106 agreement. By September 2004 a draft section 106 agreement was in existence. At this stage the sellers put together a sales pack inviting buyers for the property. At the same time as looking for a buyer for the property, KGL's solicitors worked towards finalisation of the section 106 agreement. By December 2004 the section 106 agreement appeared to be close to its final form. Clause 15.2 of the draft section 106 agreement then read (so far as material):

    ``the Developer covenants not to cause or permit occupation of the Affordable Housing Units and the Market Residential Units until the Class B1 Business Units and the library are constructed to shell and core.''

  5. LGD offered £13.75 million for the property, which the Appellant accepted. A sale agreement was negotiated. The parties' solicitors met at the offices of KGL's solicitors, Philippsohn Crawford Berwald (PCB), on 23 May 2005 to exchange contracts. At this exchange meeting Mr Green of LGD and his solicitor, Mr Segen, explained that the section 106 agreement had to be in place in order to enable LGD to obtain funding for the purchase. They therefore required a term in the agreement which deferred LGD's obligation to complete the purchase until there was a completed section 106 agreement; otherwise exchange could not take place. Mr Lobetta, a partner in PCB, believed that the draft section 106 agreement was in final form. However he decided to check on this and telephoned Merton. He spoke to Sharon Lauder (Ms Lauder), the head of civic and legal services at Merton. He asked her whether the draft section 106 Agreement was in an agreed form. She said that if everything in the draft was agreed then she was in a position to engross the section 106 agreement for execution by the parties. A clause was inserted into the sale contract to deal with the section 106 agreement. It is that clause which is at the heart of the dispute. Exchange of contracts then took place. Both parties to the contract expected that the section 106 agreement would be completed within a relatively short period of time, and without substantial amendment. This was not to be.

  6. On 15 June 2005 Ms Lauder raised two new points, of which one remains important for present purposes, namely a requirement that the new library be transferred to the Council at a peppercorn rent and without a premium. Some provision for the library would have been necessary in any event, if Merton was to be sure of getting its new library, but nothing had been said about the proposed terms until then. Eventually this requirement was reflected in a later draft section 106 agreement, in December 2005, under which clause 15.2 imposed an obligation ``not to cause or permit occupation of the Affordable Housing Units and the Market Residential Units until the Class B1 Business Units and the library are constructed to shell and core and a lease of the library [had] been granted'' to the council. Discussions as to the terms of the transaction as regards the library continued between the Appellant and Merton during 2006, which were difficult for the Appellant.

  7. On 5 December 2005 Ms Lauder wrote to Mr Lobetta to tell him that the third party land belonged to a company called Pillar Retail Parks Ltd, a subsidiary of British Land. The Appellant considered for itself how this might be coped with, and concluded that it gave rise to serious problems. Mr Silk, the Appellant's planning consultant, advised that these could be overcome by putting forward a revised planning application with a reduced site and reduced floor space for the development. On 2 February 2006 Mr Lobetta wrote to Mr Segen. He explained that Yewbelle had been trying to resolve a number of problems, ``such as the library issue and additional contributions or works required by the Council'', and that the latest problem was that part of the proposed development encroached on land owned by a third party. The letter continued:

    ``I am therefore advised that it will not be possible for my clients to procure a Section 106 Agreement substantially in the form attached to the Sale Agreement between our respective clients. Would you please explain the position to [Mr Green] and see if he is willing to complete in the same terms and conditions contained in the Sale Agreement but without any Section 106 Agreement being in place. If [Mr Green] does not wish to complete or is not able to complete on this basis then I am instructed that my clients will have no option but to treat the Sale Agreement as at an end and return the deposit to your client.''

  8. Mr Segen contended that the Appellant had not done all it was obliged to by way of its reasonable endeavours to get the section 106 agreement into place. On 24 February, Mr Lobetta set out...

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