England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL ( CIVIL DIVISION )
ON APPEAL FROM THE CHANCERY DIVISION
MR JUSTICE MORGAN

		Royal Courts of Justice Strand, London, WC2A 2LL
		10th March 2010

Lord Justice Jacob:

1. This is an appeal from the judgment of Morgan J on 3 October 2008, [2008] EWHC 2458 (Ch). Permission to appeal was refused by the Judge and by Mummery LJ on the papers. It was subsequently granted by Moore-Bick LJ at a renewed application for permission which he heard on 29 February 2009. At that hearing the second appellant, Mrs Anderson, was represented by counsel and the first appellant was not. At this hearing it is the other way round.
2. Moore-Bick LJ gave permission to appeal confined to a single question, namely whether or not a certain term terms should be implied into the option agreement which he had to consider. It is quite clear that so far as that issue is concerned, the two appellants had and have a single common interest and a common enemy. There is no question of any conflict between them so far as that issue is concerned. Indeed in a note which we have just been shown, which we understand was prepared by an American lawyer over the weekend on behalf of the second appellant, it is said as follows:

"It is acknowledged this appeal hearing is focussed on one particular ground which Miss Yamaguchi [Mrs Anderson] does not have anything to say about in addition to anything already stated by her husband."

3. The second appellant sought a number of adjournments. Apart from at least one earlier, an application was made last week which I refused. A further application was made this week on Monday. I refused that too. I was concerned with the fact that further delay would be quite unfair on the respondents, who had already had the appeal pending for over a year since permission was given. On top of that it was quite clear that, so far as I can see, although the second appellant has lost her legal representation, all the points she was going to advance were going to be made on behalf of the legally represented first appellant, as indeed is now confirmed by the note which I have just read out. It is in those circumstances that we proceeded to hear this case. We were concerned why the solicitors for the second appellant had withdrawn so late. We have seen a note from the solicitors and as far as I am concerned I propose to say no more about it.
4. Having said that much about the representation, I can turn to the case itself. Morgan J gave summary judgment ordering specific performance of a contract for the sale of a property, 63 London Road, Camberley. The claimants, Chantry, said that the contract existed because they had validity exercised an option to purchase given to them by the two appellants in a written contract at 26 September 2006. Morgan J so held. The defendant appellants say that at the time when the option was purportedly exercised the time for doing so had expired and accordingly there was no binding contract for sale.
5. The case turns, as is common ground, on the agreement of 26 September 2006. I turn to the provisions relevant to this appeal. The agreement in clause 1 contains a number of definitions. The relevant ones are "Challenge Period" and "Option Period":

"'Challenge Period' Means 3 calendar months after the date of the written planning permission or appeal decision."

"'Option Period' the expiration of 6 months from the date hereof PROVIDED THAT if at that date the Local Planning Authority has resolved to issue a planning permission subject to completion of a Planning Agreement then the Option Period shall be extended until the expiry of the Challenge Period and PROVIDED FURTHER THAT if a written planning permission has been issued then the Challenge Period is subsequent to the expiry of the Option Period then the Option Period is extended until the expiry of the Challenge Period and PROVIDED FURTHER THAT in the event of the Intending Buyer having lodged an appeal or appeals against refusal of planning permission or on the grounds of non-determination of the grant of permission on terms which are unacceptable to the Intending Buyer then the Option Period shall be extended to the expiry of the Challenge Period in respect of the last appeal lodged immediately prior to the expiry of the Option Period PROVIDED FURTHER THAT if following the grant of planning permission on such appeal the Local Planning Authority or any other party shall lodge notice of appeal against the Appeal Decision at the High Court under the provisions of Section 288 of the Town and Country Planning Act 1990 or any statutory modification or reenactment thereof then the Option Period shall be further extended until 28 days after such appeal is determined or withdrawn.

Provided however that the Option Period shall not exceed the perpetuity period permitted by law."

6. Clause 12 sets out the intending seller's obligations. Mr Hutchings in his splendidly clear and concise argument invited us to get something out of Clause 12 (1) a clause requiring the seller to keep the property effectively in good order and not to make things more difficult if the option is exercised. He said this showed an onerous obligation and it would be therefore more unlikely that the option period during which the obligation on the intending seller would potentially run for a substantial period. I am not impressed with that – the clause requires no more than that the property be kept in the same condition as at the time of the option. It is not onerous to require an owner to keep his property in good condition.
7. Clauses 12.2, 12.3 and 12.4 read as follows:

"12.2 The Intending Seller hereby gives its consent to the Intending Buyer making one or more planning application and any appeal against any decision or lack of decision of the relevant Planning Authority at the sole expenses of the Intending Buyer and the Intending Seller shall so far as it is able without incurring any expense give whatever reasonable assistance and support the Intending Buyer requires in respect of such planning application and any appeal arising therefrom.

12.3 During the Option Period the Intending Seller shall not make any objection nor do anything which might prejudice the aforesaid planning applications or any appeals or negotiations pursuant thereto and shall not apply for any other planning permission.

12.4 The Intending Buyer is hereby expressly authorised by the Intending Seller to enter into negotiations with the appropriate Authority or Authorities for any Planning Agreement and the Intending Seller shall at the request of the Intending Buyer (with a suitable indemnity from the Intending Buyer in such form as the Intending Seller shall reasonably require) enter into and sign such agreement and as security for the observance of the obligations in this clause 12.4 the Intending Seller hereby irrevocably appoints the Intending Buyer his attorney in his own name and on his behalf to execute any such Planning Agreement which the Intending Seller fails to execute and return to the Intending Buyer within (14 days) of issue to the Intending Seller or the Intending Sellers Solicitors and which is necessary to procure the issue of planning permission."

8. Finally it is necessary to refer to Clause 19, headed "PURCHASE PRICE" but in fact dealing with other matters:

"The Intending Buyer shall as soon as reasonably practicable after the date hereof resubmit planning application reference 2004/1193 for the provisions of intra alia 20 apartments together with underground parking. In the event that such application is refused the Intending Buyer shall submit a further planning application for intra alia apartments with solely over ground parking ("the Development") and if such application generates a planning permission for the Development then the purchase price shall be increased to NINE HUNDRED AND TWENTY FIVE THOUSAND POUNDS (£925,000.00)"

The basic price as set out in the agreement was £875,000. And clause 19 provided therefore that the price could be increased if an overground parking planning permission could be obtainable after failure of the underground permission application.

9. Following the signing of the agreement the following events happened. On 9 March 2007 the planning permission referred to in Clause 19 was refused. On 21 March 2007 Chantry instituted an appeal. The basic six month period provided for in the agreement expired on 25 March 2007. On 4 April 2007 Chantry did that which is said to amount to a breach of the implied term of the agreement, that is to say, it asked for the appeal which it had made to be put into abeyance.
10. On 27 April, later in the same month, Chantry sought planning permission for a nursing home development. That in due course was granted. Chantry purported to exercise their option on 2 May 2008. Shortly thereafter Chantry withdrew the appeal which had been put into abeyance.
11. Mr Hutchings' submission is that the basic machinery set up by this agreement was to provide an essentially six month period which could be and would be extended only as a result of any events which were beyond Chantry's control. He took us to the various provisos and said they had all that in common. I confess I am not even convinced by that. There is no obligation on Chantry to act with expedition anywhere in the agreement except in one place; that is in Clause 19, which did require Chantry as soon as reasonably practicable to resubmit the earlier planning application referred to, namely for 20 apartments with underground parking.
12. The agreement contains and clearly contemplates that there may be other planning applications made by Chantry. The provisions which I have read out about the obligations of the intending seller to assist shows that Chantry are given a free hand to make lots of applications. Nor am I convinced that the agreement contemplates only a short period. There is after all the very odd back stop provision that the option period shall not exceed the perpetuity period. But more generally than that, this is a commercial contract in which the buyer would obviously be trying to maximise his profit and it contemplates that he will be making planning applications clearly with that object in mind.
13. The basis of Morgan J's judgment is that it simply was not necessary to imply any of the suggested terms. The suggested terms are: (1) that the claimant/respondent would pursue any appeal against the refusal of the grant of planning permission (within the meaning of the proviso to the definition of 'option period' contained in clause 1 of the option agreement) using reasonable efforts and with reasonable expedition; (2) that the claimant/respondent would not take any active steps to ensure that the determination of any appeal taken in extending the options period as defined remained in abeyance or was delayed. In the course of argument Mr Hutchings added, "was placed or remained in abeyance" and a further alternative was suggested, "not for the sole purpose of extending the option period".
14. We were referred essentially to one authority on the question of implied terms, that being the most recent, Belize Communications Limited v Belize Telecom Limited & Anr [2009] UKPC 11. The judgment of the Privy Council was delivered by Lord Hoffmann. He considered the question of what is meant by an implied term in perfectly general terms, making it clear that the question is one of construction and not one where the court adds to the contract something which is not there after one has gone through the process of construction. He said at paragraph 16:

"The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means."

15. He then went on to say that the meaning concerned is that which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed. He went on to say in paragraphs 17 and 18 as follows:

"17. The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.

18. In some cases, however, the reasonable addressee would understand the instrument to mean something else. He would consider that the only meaning consistent with the other provisions of the instrument, read against the relevant background, is that something is to happen. The event in question is to affect the rights of the parties. The instrument may not have expressly said so, but this is what it must mean. In such a case, it is said that the court implies a term as to what will happen if the event in question occurs. But the implication of the term is not an addition to the instrument. It only spells out what the instrument means."

16. It follows that what one is looking for as the reasonable addressee is whatever the agreement means in context. That may be something else from what at a first look it apparently means. But that will be so when the only meaning consistent with the other provisions of the instrument read against the relevant background is that something else. Lord HoffmannHe said in the same paragraph:

"The instrument may not have expressly said so, but this is what it must mean."

17. So when one approaches this option agreement one asks and is required to ask whether in its provisions as to the option period must mean what is contended for by the proposed implied terms. And I simply do not see why it must. It works perfectly well without it. Things might be different if it were possible to extend the option period indefinitely by simply applying successively for the appeal to be kept in abeyance but that is not the law. The planning inspector is not entitled and in practice does not keep appeals pending indefinitely. The agreement perfectly reasonably allows Chantry to make planning applications, to pursue planning applications to its best advantage solely to see whether it is worth exercising the option. The option can be exercised the day after the agreement or it can be exercised at the end of the option period, which includes a determination of the appeal if such happens, concerning the planning application identified in Clause 19.
18. There was some debate as to whether the option period runs even after the determination of that, because Clause 19 contemplates when that has failed that Chantry must make another application for the 20 flats with overground parking. As I see it that could string things out even further. Mr Morgan for the respondent did not go so far as to submit that "the written planning permission or appeal decision" referred to in the definition of "challenge period" means either the underground parking planning application or any subsequent application for overground parking, but he did say that the mere fact of this provision suggests that the underground parking permission did not on the face of the document contemplate the more urgent and therefore shorter time requirements suggested by the appellants. I accept that.
19. The plain fact is that on any reasonable view this agreement does not need to contain the suggested terms. One is not driven to the conclusion that it must mean. those terms. This may have been a bad deal, it may have been a good deal but it was the deal the parties entered into. I would dismiss this appeal.

Lord Justice Jackson:

20. I agree.

Lord Justice Sedley:

21. I also agree. The tragedy behind this dry issue of law is that the real purpose of the first defendant in trying to resist a summary order for specific performance of his obligation to convey the house was to try to extract more money for it than was due under the option. The defence he filed in person makes this perfectly plain. The only result, I fear, will have been the diversion of much of the proceeds into the pockets of lawyers.

Order: Appeal dismissed