WH Holding Ltd & Anor v E20 Stadium LLP, Court of Appeal - Chancery Division, October 05, 2018, [2018] EWHC 2578 (Ch)

Resolution Date:October 05, 2018
Issuing Organization:Chancery Division
Actores:WH Holding Ltd & Anor v E20 Stadium LLP
 
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Case No: HC-2017-000498

Neutral Citation Number: [2018] EWHC 2578 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES

BUSINESS LIST (CHD)

Royal Courts of Justice

7 Rolls Building

Fetter Lane, London

EC4A 1NL

Date: 5 October 2018

Before:

MR JUSTICE SNOWDEN

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Between:

(1) WH HOLDING LIMITED

(2) WEST HAM UNITED FOOTBALL CLUB LIMITED

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Paul Downes QC and Luka Krsljanin (instructed by Gateley PLC) for the Claimants

Thomas Plewman QC and Laura Newton (instructed by Gowling WLG) for the Defendant

Hearing dates: 16-17 August, 11 and 13 September 2018

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JudgmentMR JUSTICE SNOWDEN:

  1. This is a judgment giving my reasons for deciding to exercise my power under CPR 31.19(5) to review the original versions of a sample selection of documents which had been disclosed in these proceedings by the Defendant (``E20'') with parts of the documents redacted.

  2. My review took place as part of my consideration of an application brought by the Claimants (together ``West Ham'') which, among other things, sought information as to the basis for redaction, and ultimately specific disclosure of, a large number of documents which had been the subject of redaction by E20 on the grounds of (i) legal privilege and (ii) irrelevance and commercial sensitivity. I dealt solely with West Ham's challenge to the redactions for irrelevance and commercial sensitivity. It was agreed that the challenge to the redactions made on the ground of legal privilege should be adjourned to be heard by a judge who is not being considered as a possible trial judge.

    Background

  3. E20 is the owner of the stadium built for the London Olympics and Paralympics in 2012 (``the Stadium''), which is operated on its behalf (as its agent) by a management company, London Stadium 185 Limited ("LS185"). E20 was originally owned by the London Legacy Development Committee (``LLDC'') and Newham Legacy Investments Ltd (``NLI''), but NLI is no longer a member.

  4. In order to facilitate the use of the Stadium after the 2012 Olympics and Paralympics, an Invitation to Tender was published in December 2011 inviting bids for the future use of the Stadium. West Ham eventually emerged as the preferred bidder and negotiations took place between West Ham and E20's ultimate holding company, LLDC, over a long period.

  5. Following those negotiations, West Ham and E20 concluded a 99-year Concession Agreement on 22 March 2013 (``the Concession Agreement''), under which E20 granted certain concessionary rights to West Ham to use the Stadium during the football season.

  6. Regrettably, the relations between E20 and West Ham have broken down. In addition to the matters in issue in this case, a significant number of other disputes relating to the use of the Stadium have arisen between them.

    The pleaded case

  7. The claims and counterclaims in this case relate to a dispute over the number of seats in the Stadium which West Ham is entitled to use under the Concession Agreement in return for payment of an agreed ``Usage Fee''. West Ham asserts that in principle it is entitled to use all of the seats in the Stadium, subject only to obtaining the necessary permissions from appropriate bodies and authorities (``Grantor Consents''). E20 contends that West Ham is contractually entitled to use only 53,500 seats and that if it wishes to use more, it will have to agree to pay an increased Usage Fee.

  8. As part of its case, West Ham asserts, and E20 denies, that the Concession Agreement obliges E20 to take all reasonable steps to seek the necessary Grantor Consents to maximise the number of seats which West Ham can use, and to comply with West Ham's reasonable requests in this respect. E20 has applied for and obtained Grantor Consents permitting a maximum of 57,000 seats to be used. However, West Ham contends that from 21 July 2016 it made reasonable requests that E20 should seek Grantor Consents for an increased capacity of 60,000, but that E20 has breached the Concession Agreement by failing or refusing to seek such Grantor Consents from about February 2017.

  9. The basis originally advanced for West Ham's claim that the Concession Agreement requires E20 to make such applications for increased Grantor Consents was that there is an express or implied term of the agreement requiring it to do so in order to give commercial efficacy to the Concession Agreement or because a reasonable and prudent operator would do so. The latter contention is alleged to flow from a term of the Concession Agreement which requires E20 to carry out its duties at law and under the agreement in accordance with the ``Standards of a Reasonable and Prudent Operator'' (as that expression is defined in the agreement).

  10. In addition, and following an application to amend the Particulars of Claim which I heard in August, West Ham's pleaded case for trial now also includes an allegation that, either because of the reference to good faith in the definition of the Standards of a Reasonable and Prudent Operator, or because of the nature of the relationship envisaged by the Concession Agreement, E20 was obliged generally to act in good faith under the Concession Agreement.

  11. In this latter respect, West Ham's pleaded case of breach against E20 includes the following (the Concession Agreement being referred to as the ``CA''),

    56A. E20's consideration of WHUFC's requests for increased capacity and its refusal to apply for the necessary Grantor Consents on the grounds of cost and safety were in breach of the express and/or implied terms of the CA and in particular were not in good faith:

    a. E20 has failed to conduct any, or any adequately detailed, cost/benefit and/or safety analysis of the consequences of a successful application for Grantor Consents permitting 60,000 seats to be used for Events at the Stadium. In particular, E20 has failed in good faith, and to the Standards of a Reasonable and Prudent Operator, to assess whether or not the costs of an increased capacity of 60,000 would be greater than or lesser than the benefits outlined at paragraph 42a. above or whether there are any adverse safety implications of the said increase.

    b. E20's justification for its refusal at a meeting with WHUFC on 31st January 2017 was that it harboured concerns about safety issues. In making this assertion, without conducting the analysis referred to above, E20 wrongly advanced a justification for its breach of the CA without any genuine belief in its truth, or alternatively being reckless as to its truth. This was (and is) contrary to good faith and fell below the Standards of a Reasonable and Prudent Operator.

    c. E20 has further justified its refusal by reference to increased operating costs in communications and negotiations over the Interim Seating Agreement ... [in 2016] ... In making these assertions without conducting the analysis referred to above, E20 wrongly advanced a justification for its breach of the CA without any genuine belief in its truth, or alternatively being reckless as to its truth. This was (and is) contrary to good faith and fell below the Standards of a Reasonable and Prudent Operator.

    d. Further and alternatively, in the event that an increase to a capacity of 60,000 seats for Events at the Stadium would be commercially disadvantageous to E20, E20 has failed in good faith, and in accordance with the Standards of the Reasonable and Prudent Operator, to inform WHUFC of the quantum of the costs said to be associated with an increase in capacity to 60,000 or the revenue which E20 would derive from such an increase in capacity.

    e. In the premises, E20's statements to the effect that cost and/or safety are the reasons for its refusal to seek an increase in capacity are not truthful and/or are not made in good faith and/or are not reasonable statements in the light of E20's failure to conduct any analysis of these issues. E20's true reason for refusing to seek an increase in the capacity of the Stadium lay in a desire to extract an increased Usage Fee from the Claimants.

  12. The allegation of the existence of a separate duty of good faith is denied by E20, as are the allegations of breach of such alleged duty. In that latter respect, E20's pleaded case includes the following,

    ``As to paragraph 56A:

    (1) It is denied that E20's consideration of West Ham's requests for increased capacity and its refusal to apply for the necessary Grantor Consents on the grounds of cost and safety were in breach of any terms of the CA...

    (2) ...

    (3) E20 believed

    (i) that it was not required by the CA to agree to an increase in the capacity of the Stadium or to seek the Grantor Consents necessary for that purpose:

    (ii) that it was entitled to negotiate a commercial agreement at arm's length should West Ham wish for the available seating in the stadium to be increased: and

    (iii) at the time of West Ham's requests referred to in paragraph 54, that

    (a) there were safety issues affecting any increase in capacity, and

    (b) the costs to E20 should the capacity be increased without any further Usage Fee would be greater than the benefits.

    (4) E20 analysed at a high level the estimated operational costs and revenues of increased capacity prior to and at the time of negotiations in relation to the Interim Seating Agreement in the summer and autumn of 2016, by estimating match day operational costs and revenues per person and extrapolating from them on a rough and ready basis, and making some allowances for the fact that not all costs would be variable. These analyses informed its belief that the costs of...

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