Chartbrook Ltd v Persimmon Homes Ltd & Anor, Court of Appeal - Chancery Division, March 02, 2007, [2007] EWHC 409 (Ch),[2007] 2 P & CR 9,[2007] 1 All ER (Comm) 1083

Resolution Date:March 02, 2007
Issuing Organization:Chancery Division
Actores:Chartbrook Ltd v Persimmon Homes Ltd & Anor
 
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Neutral Citation Number: [2007] EWHC 409 (Ch)

Case No: HC05C02402

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

2nd March 2007

Before :

MR JUSTICE BRIGGS

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Between :

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Robert Miles QC and Timothy Morshead (instructed by Herbert Smith LLP) for the Claimant and 2nd part 20 Defendant

Christopher Nugee QC and Julian Greenhill (instructed by Mayer, Brown, Rowe & Maw LLP) for the Defendants

Hearing dates: 6, 7, 8, 9, 13, 14, 15 and 19 February 2007

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JudgmentMr Justice Briggs:

  1. This is a claim for money alleged to be due under a development agreement relating to land in Hardwick's Way, Wandsworth (``the Agreement'') between the Claimant Chartbrook Limited (``Chartbrook'') as Owner, the First Defendant Persimmon Homes Limited (``Persimmon'') as Developer, the Second Part 20 Defendant Stephen Vantreen (``Mr Vantreen'') as Adjoining Owner and the Second Defendant Persimmon PLC (``PLC'') as Guarantor.

  2. The dispute as to the alleged debt arises from a disagreement as to the true construction of Schedule 6 to the Agreement which contains provisions as to the Price (as defined) to be paid by Persimmon to Chartbrook, and in particular as to the element of the price labelled as the ``Additional Residential Payment''. I shall refer to it as the ``ARP''. In outline, although this is complicated by a concession made by Persimmon at the start of the trial relating to Costs and Incentives (another defined term) and by a subsidiary dispute as to the proper treatment of car parking spaces in the calculation of the Price, Persimmon says that, properly construed, the ARP was slightly less than £900,000 and has been (largely) paid or accounted for, whereas Chartbrook says that the ARP was just over £4.6 million, of which £3.9 million odd remains unpaid.

  3. Persimmon does not rest its case purely on construction. Against the possibility that Chartbrook may be correct on the construction issue, Persimmon says that Schedule 6 if so construed should be rectified, either on the basis of common mistake, or unilateral mistake of which Chartbrook is alleged to have been aware before contract, but which it failed to bring to Persimmon's attention. This is not a case where the party claiming rectification says that it thought that the contract contained different words than those which it did in fact contain. Subject to the Costs and Incentives complication, Persimmon says ``we thought that the definition of ARP meant X, but if it means Y then it should be rectified so as to mean X''. It is not in issue that such a claim may properly be the subject of rectification: see Re Butlin's Settlement Trusts [1976] Ch 251.

  4. As Guarantor, PLC was a necessary or at least proper party to the money claim, but there is no issue as to whether Persimmon will as principal obligee pay whatever is due. As a party to the Agreement Mr Vantreen is a necessary or at least proper party to the rectification cross claim, but his interests as Adjoining Owner are not engaged in any real sense by any of the issues. The real dispute lies entirely between Chartbrook (of which Mr Vantreen is a 50% shareholder and a director) and Persimmon. I shall therefore make no further reference to PLC, and my references to Mr Vantreen will be to him in his capacity as a stakeholder in and witness for Chartbrook. It may be that Chartbrook held its interest in the land the subject matter of the Agreement as resulting trustee for Mr Vantreen and his fellow shareholder and director Mr Reeve, but that makes no difference to the determination of the issues.

  5. The conventional view is that combined construction/rectification disputes of this type give rise to the difficulty that whereas the parties' negotiations are inadmissible on the construction issue, they lie at the very centre of the court's focus on the rectification issue. When dealing with the logically prior issue of construction the court must put out of its mind its detailed appreciation of the negotiations, an appreciation gained only because the rectification issue is being tried at the same time. Mindful of this difficulty I invited counsel to make their submissions on construction during their opening, while my immersion in the evidence of the negotiations remained limited to agreed pre-reading.

  6. Mr Christopher Nugee QC, who appeared for Persimmon and PLC, dissuaded me from attempting any early conclusion as to construction, not because he desired to have the illicit benefit of inadmissible material, but because he challenged the conventional wisdom in limine. He submitted that the true rule is that evidence about the parties' negotiations is only inadmissible where and to the extent that they are not ad idem about the matter under discussion. Where during negotiations they are in agreement about a relevant matter, that he submits is as admissible as the rest of the relevant factual background, because such evidence is helpful as part of the material that sheds light on what the parties may reasonably have had in contemplation as the meaning of the words used.

  7. At the start of the trial Persimmon's pleaded case relied on no facts about the parties' negotiations in support of its case on construction. In face of the objection by Mr Robert Miles QC who appeared for Chartbrook that he and his client remained in the dark as to the extent and nature of the facts about the negotiations which Mr Nugee wished to have admitted on the construction issue, Persimmon attempted on Day 2 of the trial to rely on all those facts pleaded in support of its rectification case. I rejected that as going well beyond the ambit of Mr Nugee's submission on admissibility, and on Day 3 Persimmon formulated a narrower matrix of fact about the negotiations, namely two occasions upon which it was alleged in the rectification claim that the parties had reached agreement as to the nature and extent of the ARP. I permitted a re-amendment of Persimmon's Defence and Counterclaim to that effect.

  8. Separate and distinct from the issues as to the construction or rectification of the definition of the ARP, there is an issue as to the proper application of Schedule 6 to the manner in which Persimmon dealt with the sale of car parking spaces within the developed site. I shall refer to it as ``Car Parking Issue'', and deal with it at the end of this judgment.

    Construction

  9. Before addressing Mr Nugee's submission as to the admissibility of the parties' negotiations, I shall first describe the ARP definition, and set it in its context within Schedule 6, and within the Agreement as a whole. The subject matter of the Agreement was a freehold property know as 1, 3, 5, 7 and 9 Hardwick's Way, London SW18, registered under three separate titles. After definitions in clause 1, clause 2 required the Developer (Persimmon) to use its reasonable endeavours to obtain Planning Permission (as defined) as soon as practicable and in any event before the Longstop Date (defined as 15 months from the date of registration of the Planning Application, subject to extension under clause 2.5). The remaining provisions of the Agreement were to be conditional on ``Condition Fulfilment'' before the Longstop Date. Broadly speaking, Condition Fulfilment required there to be a planning permission with certain defined characteristics which was no longer vulnerable to being set aside by judicial review or other proceedings.

  10. By clause 3 the Owner (Chartbrook) granted a licence to the Developer to enter upon the property 10 working days after Condition Fulfilment, for the purpose of carrying out the development authorised by the Planning Permission. Clause 5 provided for the Developer to negotiate and contract for the sale of 125 year leases of the residential units, of the car parking spaces and of the freehold of the Property, in each case on behalf of the Owner, and for the Owner to complete such sales by the execution of the appropriate leases or transfers.

  11. The Property was throughout its development charged by way of first legal charge by the Owner to the Developer as security for the performance by the Owner of its obligations under the Agreement. Clause 11 provided that the Price should be calculated and paid in according with Schedule 6. By clause 19 the Owner appointed the Developer its attorney for the purpose of the negotiation, agreement for and completion of the sale for various parts of the developed property. Clause 26 provided for the grant of a 125 year lease at a peppercorn rent of the commercial premises to be constructed on the Property pursuant to the Planning Permission to a subsidiary of the Owner, at a premium equal to the Commercial Net Internal Area (as defined) multiplied by £110 per square foot plus VAT.

  12. Turning to Schedule 6, headed ``THE PRICE'', paragraph 2 provided for the Developer to be entitled to the whole of the proceeds of sale of the Residential Premises, the Commercial Premises and the Residential Car Parking Spaces, save for the Price to be paid to the Owner, as defined by Schedule 6, and save for a proportion of ground rents and other income receipts which are of no relevance for present purposes.

  13. The quantification of the Price is derived from a series of interlocking definitions in paragraph 1 of Schedule 6. They are set out there in alphabetical order, but for clarity I will recite or summarise them in an order which (I hope) clarifies the construction issues. They are as follows:

    ``Price'' means the aggregate of the Total Land Value and the Balancing Payment

    ``Total Land Value'' means the aggregate of the Total Residential Land Value the Total Commercial Land Value and the Total Residential Car Parking Land Value.

    ``Total Residential Land Value'' shall be £76.34 per square foot multiplied by the Residential...

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