England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Peter Smith QC
(sitting as a deputy High Court judge))

		Royal Courts of Justice Strand London WC2 Friday 22nd June, 2001

1. LORD JUSTICE ALDOUS: I will ask Lord Justice Jonathan Parker to give the first judgment.
2. LORD JUSTICE JONATHAN PARKER: This is a renewed application by the claimant in the action, London & Regional Investments Ltd, for permission to appeal against an order made by Mr Peter Smith QC, sitting as a Deputy Judge of the High Court, on 9 March 2001 giving summary judgment against the claimant on the claim and giving summary judgment for the defendants, TBI Plc ("TBI") and Belfast International Airport Ltd ("BIA"), on their counterclaim. I refused permission to appeal on the papers on 11 April 2001.
3. In broadest summary, the background to the application is as follows. Both the applicant and TBI carry on business in the field of property development. The claim in the action arises out of a written Agreement dated 13 May 1999 whereby the applicant agreed to buy TBI's property portfolio for a price of £190 million, and out of the negotiations which led to that agreement ("the Sale Agreement"). The dispute, however, concerns not the portfolio itself but two other areas of land: first, a piece of land adjoining Belfast Airport owned by TBI through BIA, and second, a piece of land adjoining Cardiff Airport over which TBI had an option to purchase. During the period while the negotiations were taking place which led to the Sale Agreement, discussions took place between representatives of the applicant and of TBI about a joint venture between the applicant and TBI for the development of those two areas of land. The Sale Agreement itself refers to such a joint venture in 8.7, which is in the following terms:

"The Vendor and the Purchaser shall use reasonable endeavours to agree the terms of a joint venture regarding Cardiff and Belfast Airports having regard to the principles set out in the note in the agreed form, each party recognising that the Vendor's Agreement to the final terms of the joint venture will be subject to Government and regulatory approvals, shareholders' consent, if relevant, and to operational constraints."

4. The reference in that clause to "the note in the agreed form" is to a document annexed to the Sale Agreement, entitled Heads of Terms and containing various provisions relating to such a joint venture. The document is headed "Subject to Contract", but it is the applicant's case that the terms contained in that document were intended to be legally binding. Further, it is the applicant's case that because of the inclusion in the Sale Agreement of what it asserts to be an obligation on TBI to proceed with a joint venture it was prepared to pay book value for the property portfolio (£190 million), without insisting on a discount of some 10 to 15 per cent to reflect the fact that it was making, in effect, a bulk purchase. It is the applicant's case that the allowing of such a discount in such circumstances is normal practice in the industry. These are of course hotly contested issues. Completion of the Sale Agreement took place on 21 June 1999. Thereafter the applicant pressed TBI to proceed with the joint venture, but after further discussions TBI declined to do so and contended that it was under no obligation to do so either under the Sale Agreement or otherwise.
5. In the action, the applicant claimed relief against TBI on four alternative bases: misrepresentation, breach of contract, constructive trust, and estoppel; the latter two being in effect the same claim. The applicant does not appeal against the giving of summary judgment against it on the misrepresentation claim, and it is accordingly unnecessary to examine that claim any further.
6. As to the claim in breach of contract, the applicant alleges that TBI acted in breach of the Sale Agreement in failing to place its interests in the two pieces of land the subject of the joint venture in a joint venture company to be owned in equal shares by it and the applicant. Alternatively, it alleges that TBI has acted in breach of clause 8.7 of the Sale Agreement (which I quoted earlier) in failing to use reasonable endeavours to agree the terms of the joint venture in accordance with the principles set out in the Heads of Terms document. I will refer to those claims as "the breach of contract claims".
7. In the alternative, the applicant contends that equity should grant relief so as to enable the applicant to have a share in the relevant property interests ("the claim in equity").
8. In the further alternative, the applicant contends that the circumstances are such as to estop TBI from denying the existence of a beneficial interest in the relevant property interests on the part of the applicant. As I have said, that is, in effect, subsumed in the claim in equity.
9. In his judgment, the judge carefully analysed all these claims, and concluded that, in effect, there was nothing in them. This is not of course the occasion to set out the judge's conclusions in any detail, and the following reference to certain of his central conclusions will I think suffice for present purposes. As to the breach of contract claims, the judge concluded that the references to a joint venture in clause 8.7 of the Sale Agreement and in the Heads of Terms document were no more than "a last minute declaration of intent that was intended to be non-binding" (see paragraph 48 of the judgment). In reaching that conclusion he attached very considerable importance to the fact that the Heads of Terms document was headed "Subject to contract". He also concluded that the "principles" set out in that document were, as he put it, "hopelessly uncertain". He also said that he found no "convincing" or "credible" evidence of an industry practice of allowing the kind of discount which the applicant alleges it refrained from insisting upon when agreeing to pay the full book value for the property portfolio. Nor did he consider that it was arguable that clause 8.7 gave rise to any enforceable obligation, since it was no more than an agreement to agree.
10. As to the claim in equity, the judge referred to a number of authorities (including Pallant v Morgan [1953] Ch 53 and Banner Homes Group Plc v Luff Developments Ltd [2000] 2 WLR 772) and concluded that there was no realistic prospect of the applicant being able to persuade the court at trial that a constructive trust in the terms sought should be imposed or that equity should grant any relief. In this connection the judge once again placed reliance on the fact that the Heads of Terms document was headed "Subject to contract". In effect, he concluded that the applicant could not remedy the deficiencies in the contractual position through the imposition of a constructive trust.
11. In support of the application for permission to appeal Mr Mark Howard QC, in his oral submissions this morning, has put at the forefront of his submissions the claim in equity. He submits that, assuming the facts alleged to be true (an assumption which has to be made for present purposes) there is a real prospect that the applicant will be able to satisfy the court at trial that there has been unconscionable behaviour of a kind which justifies the intervention of equity by granting relief. His case (as I have already indicated) is that the applicant paid over the odds for the property portfolio in the belief, induced or known to the defendants, that it was expecting a joint venture to follow from the completion of the Sale Agreement, and its belief that the defendants had accepted an obligation to progress such a joint venture.
12. In those circumstances, submits Mr Howard, it is very far from inconceivable that the court, one it has established all the relevant facts, will be in a position to conclude that there has been unconscionable behaviour of a kind which justifies the intervention of equity. Mr Howard has placed less emphasis in his oral submissions than in his written skeleton argument on the breach of contract claims.
13. The judge's careful judgment does throw into sharp relief a number of difficulties and obstacles which the applicant will have to face and to surmount if it is to succeed at trial. But of course it does not follow that the existence of those difficulties and obstacles necessarily justifies the striking out of the claim (which is in substance the effect of the judge's order).
14. In the result, notwithstanding my initial refusal of permission to appeal on the papers, Mr Howard has succeeded in persuading me that there are arguable grounds for an appeal against the judge's judgment, and that the applicant may succeed in making out a case for relief at trial. That is in itself sufficient to justify the granting of permission, but I would make it clear that I go no further than saying that I am satisfied that the proposed appeal has a real prospect of success. I would only add that in the circumstances I would not for my part consider it appropriate, given the nature of the claims made and the common factual background to them, to limit the permission to a particular issue or issues. On that basis therefore I would, for my part, grant permission to appeal.
15. LORD JUSTICE ALDOUS: I agree.
ORDER: Permission to appeal granted; costs of the application to be costs in the appeal. (Order not part of approved judgment)