England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY

		Royal Courts of Justice Strand, London, WC2A 2LL
		23 June 2004

Mr Justice Lloyd:

1. This action arises from a so-called exclusivity agreement, by which the Claimant and the First Defendant, who had come to terms, subject to contract, for the sale of the First Defendant's headquarters in Rochdale to the Claimant, agreed that the First Defendant would deal only with the Claimant during a period of some seven weeks. The parties did not conclude a contract for the sale of the land by the end of the period, or thereafter. Instead, some few months later, the property was sold to a third party at a higher price. The Claimant alleges that this was the result of breaches of the Exclusivity Agreement, and claims damages for the loss of the chance of entering into the contract at the price originally agreed, and thereby of acquiring the property at a price such that it would have been able to make a profit. The Claimant also seeks an indemnity under a clause of the agreement for some of its abortive costs.
2. The Claimant has the benefit of a judgment given under Part 24 for liability under the indemnity and in respect of breach of the agreement in one respect. It seeks to establish liability on a wider basis, and there is no doubt that this is open to it. As it turns out, the issues on the indemnity claim are now very limited. The issues on the damages claim are substantial, the Claimant seeking to show that the Defendant was in breach in other respects, and also having to prove causation and quantum.
3. I have referred to the First Defendant, as it is named in the heading to the action. In fact it ceased to exist before the claim was brought, following a transfer of engagements to the Second Defendant under the Industrial and Provident Societies Acts. The Second Defendant was then called Co-operative Wholesale Society Limited, and has since changed its name. By the effect of the transfer of engagements it has succeeded to the rights and the liabilities of the First Defendant. The Second Defendant had a significant part to play in the relevant history, and claims were originally made against it separately from those asserted as the liability of the First Defendant, though these are not now pursued. For the sake of clarity I will refer to the First Defendant as CRS and to the Second Defendant as CWS, both in relation to events during the relevant period and as if they still existed as separate entities the subject of separate claims.
4. CRS was originally set up by CWS, many years ago. It became legally independent of CWS, but continued to have a relationship, including occupying as its headquarters premises in Greater Manchester which it rented from CWS. From time to time proposals for a merger between the two were mooted, but these did not succeed until 2000, due in each case, it seems, to friction at board level, both boards being non-executive. The last unsuccessful attempt was in 1994 or 1995. After that CRS decided to cut some of its remaining ties to CWS, and in particular to build its own headquarters, in Rochdale, which is regarded as the birthplace of the co-operative movement. This it did, to a high specification and at substantial expense, at Sandbrook Park. Soon after this the fortunes of CRS began to decline sharply. A new chief executive, Mr Meehan, was appointed in autumn 1998. One of the measures he implemented to reduce CRS' debts was to sell much of its property, including all its department stores and some superstores. In the light of the reduced scale of CRS' operations, it became clear that Sandbrook Park was too big for its needs. CRS did not need more than half the space.
5. By the second half of 1999 CRS' property team included two men relevant to the facts of this case: Rob Stenton, the accountant for the property division, and Andrew Freeth, a property adviser seconded by Andersen Consulting, as it was then called. Mr Meehan decided to commission a report on the options as regards Sandbrook Park before he made any recommendations to the board. This was to be treated with the utmost confidentiality because of the sensitivity from the point of view of current employees of any idea that CRS might move out of Sandbrook Park. FPD Savills were instructed to advise for this purpose.
6. Interest had already been expressed in half the building by J D Williams & Co Ltd, a subsidiary of N Brown Group plc, which was a substantial call centre operator in the home shopping business. In October 1999, J D Williams offered to buy the freehold of Sandbrook Park for £15.2 million, payable over 2 years. Savills advised that the property ought to be marketed in the hope of finding someone willing to pay a better price. CRS instructed Savills to proceed with this, but on a highly confidential basis. No general advertising would be permitted. Agents and potential buyers were approached individually, and on the basis that all information supplied was the subject of confidentiality letters.
7. One of the people approached was Mr Simon Kimble of the Claimant. He and his agents Canning O'Neill signed the necessary confidentiality letters. In December 1999 he put forward an offer, originally at £14.5 million, and then at £15 million. Eventually on 20 January 2000 the Claimant's offer was increased to £15.25 million. On the next day the board of CRS approved its acceptance subject to contract. Savills had reported on the results of the marketing, to the effect that the only offers received were those from the Claimant and from J D Williams.
8. In the meantime discussions had been proceeding between the boards of CRS and CWS, through a steering group set up for the purpose, about a possible merger. As it happens, the board of CRS approved the proposed merger at the same meeting on 21 January. This became public through the press during the following week.
9. The Claimant had asked for an exclusivity agreement so that it could move from the agreed heads of terms towards exchange of contracts free from the risk of competition from other purchasers. This was agreed in principle, though not for so long as the Claimant originally wanted. In summary, the period of exclusivity was at first from 31 January until 13 March, but this was then extended so as to expire on 22 March. The agreement was finalised on 9 February, but with retrospective effect, and the extension agreement was dated 13 March 2000. I will need to examine the Exclusivity Agreement in detail.
10. In outline what happened thereafter is this. On 14 February other agents, Matthews & Goodman, viewed Sandbrook Park by arrangement with Canning O'Neill and with a representative of a client of theirs, Airtours Ltd. Before this took place there had been contact between Mr Downey of Matthews & Goodman and Savills. It is said by the Claimant that this involved breaches of the Exclusivity Agreement. Matthews & Goodman and Airtours viewed the property again on 3 March. On 15 March Matthews & Goodman delivered a letter to Savills on behalf of Airtours offering to buy Sandbrook Park for £16 million. There were various communications between Matthews & Goodman and Savills arising from this between 15 and 20 March. These have been held to amount to a breach of one clause of the Exclusivity Agreement. The period of exclusivity expired without contracts being exchanged.
11. In the meantime, on 4 March members of CRS passed, by the necessary majority, a resolution in favour of the merger. A further resolution was necessary, but this required a lower majority, and it could therefore be foreseen as highly probable to be passed. It was in fact passed on 25 March. The result of the first resolution was that major decisions affecting CRS became, in effect, the responsibility of the board of CWS. The senior management of CWS immediately became involved in the process of negotiating and considering the Sandbrook Park transaction. In particular Mr Peter Hallsworth attended one of a series of joint progress meetings of both sides and their professionals on 9 March, and obtained views about the property both from Savills and from another agent. On 17 March Mr Hallsworth wrote a briefing note for Mr Galley, then Chief General Manager for CWS' property division, about Sandbrook Park. He recommended that the Claimant's offer should not be pursued to exchange, that the offer from Airtours should be followed up but not until after the exclusivity period, and that the property should be openly marketed. That is what happened, except that the preparations that were made for marketing were never completed because Airtours came up with an improved offer which CWS decided to accept without more, and contracts were exchanged and completed in early June, at a price of £17.8 million.
12. The essence of the Claimant's claim for damages is that CRS broke the Exclusivity Agreement in February, that this led to Airtours viewing the property and in due course to making their offer on 15 March, and that but for that offer having been made, CRS and CWS would have decided to proceed with the sale to the Claimant, even though contracts could not be exchanged by 22 March. It is said, therefore, that the breach in February led to the Claimant losing a substantial chance of becoming the purchaser of Sandbrook Park on the terms which had been negotiated, and thereby losing a significant profit which it could have made, for example by selling to Airtours itself at the price which Airtours eventually paid, or maybe even at a higher price.
13. For this purpose the Claimant has to establish a breach of contract in February, because if the offer in March arrived without being the result of any breach of contract, what happened after that would really make no difference. It has to establish the necessary causation, which involves a consideration of what other factors stood in the way of a sale to the Claimant, and whether it would have gone off even without the Airtours offer having arrived as it did. It then has to establish the value of the chance that it says it lost, which involves considering the value of the property.
14. Cases where the damages claimed are for the loss of a chance of a benefit start before Chaplin v. Hicks [1911] 2 KB 786, but that is as far as I need to go back. There has been a good deal of development of the cases recently, and Counsel cited to me Allied Maples Group Ltd v. Simmons & Simmons [1995] 1 WLR 1602 and also Coudert Brothers v. Normans Bay Ltd [2004] EWCA Civ 215. In most cases, including those two recent cases, a loss of chance case depends on assessing the likely hypothetical act of a third party. In the present case it depends on the hypothetical act of CRS or CWS. In that respect this case is like Chaplin v. Hicks rather than those recent cases, in that what the Claimant complains of is that it was deprived, by CRS' breach, of the chance of entering into an agreement with CRS itself (or its successor, CWS). Likewise, Miss Chaplin complained of being kept out, in breach of contract, of a competition among 50 people, to 12 of whom the Defendant was committed to offering a contract. It could not be said for certain that he would have offered her a contract, if she had been able to take part, but she lost the chance that he would have done so. That does not seem to me to alter the principle, namely that the Claimant must show that, as a result of the Defendant's breach, it has lost a real or substantial, not merely a speculative, chance of gaining the benefit in question. Here the benefit is said to be that of entering into a contract to buy Sandbrook Park at £15.25 million, being less than its market value, so that the Claimant would have been able to make a profit on it by resale.
15. The trial had been estimated for 6 days but took only 5. A substantial part of the first day was devoted to applications as regards amendments and late evidence which would have been unnecessary if a pre-trial review had been held. Moreover, if the question of amendment had been addressed in advance of the trial, I might have permitted one amendment which in fact I refused because it opened up issues of fact which it would have been unfair to expect the Defendant to deal with at such a late stage. As it was, one of the Defendant's witnesses made a supplemental witness statement to deal with matters arising from the amendments which I did allow.
16. I heard evidence for the Claimant from Mr Nigel Christian, the Claimant's finance director, from Mr John Hyde of DLA and from Mr Stan Purcell of the Irish Nationwide Building Society, and also from Mr Kenneth Bishop of DTZ Debenham Tie Leung, mostly as an expert on valuation. For the Defendant I heard evidence from Mr Peter Hallsworth of CWS, Mr Stephen Connah, formerly the secretary of CRS, Mr Stephen Downey of Matthews & Goodman, and from Savills Mr Oliver Foster, Mr Patrick Joynson and Mr Mark Ridley. The Defendant's expert was Mr Peter Skelton of Lambert Smith Hampton who, like Mr Bishop, had played a small part in the events at the time. I consider that all the witnesses were doing their best to tell the court what they really remembered of the relevant events. Not surprisingly some had a clearer and more reliable recollection than others. In some respects the details of the story became clearer in the course of cross-examination than it had been from the witness statements.

The Exclusivity Agreement

17. I will now set out the provisions of the Exclusivity Agreement, so far as necessary. Made between the Claimant and the First Defendant, it starts with definitions of the Lock-out Period, the Property and "Dispose". The first two do not matter. The third is as follows:

"'Dispose' means sell lease exchange or give away or otherwise dispose of any interest in or create an encumbrance or right over or affecting the Property (including, without limitation, the transfer of any shareholding in [CRS] other than by way of a transfer of engagements to [CWS]) and 'Disposal' shall be construed accordingly"

18. Clause 2 includes most of the provisions of which the Claimant alleges that CRS was in breach. I will set out clause 2.1, of which no breach is alleged, and then the clauses which are said to have been broken.

"2.1 not to Dispose or enter into any verbal or written agreement to Dispose of the Property or any part thereof to any third party nor to transfer the Property to any group company of [CRS] (as that term is defined by section 42 of the Landlord and Tenant Act 1954) without the prior consent of [the Claimant] (such consent not to be unreasonably withheld)"

"2.2 not to submit a draft Contract or other documentation in connection with a Disposal of the Property or any part thereof to any third party or persons acting on behalf of any third party"

"2.4 forthwith to instruct its agents to withdraw from any negotiations for any Disposal and to discontinue any marketing of the Property or any part thereof"

"2.5 not to advertise the Property or any part thereof for Disposal nor to enter into continue or revive any negotiations with any third party for any Disposal"

19. In return for these undertakings, the Claimant undertook to carry out what might be called a due diligence exercise, as soon as reasonably practicable and according to an agreed timetable. Part of the content of this is important because of the indemnity claim. It is as follows:

"3.1 to carry out all tests surveys and searches which would be carried out by a prudent purchaser including but not limited to

3.1.1 a full structural building survey of the buildings on the Property

3.1.2 a mechanical and electrical survey of the buildings on the Property

3.1.3 an environmental survey and

3.1.4 a soil test and

3.1.5 a survey of measurements and

3.1.6 investigation of title and

3.1.7 such other searches and enquiries as would be carried out by a prudent purchaser"

20. By clause 5, the parties acknowledged to each other a mutual duty of good faith. They also recorded that the agreement did not commit either party to the other or to any third party to conclude a binding contract for the sale and purchase of the property.
21. Clause 6 is headed Confidentiality. The Claimant says that CRS was in breach of this clause in February. It is as follows:

"Save as required by law, the Stock Exchange or the Panel on Take-overs and Mergers the terms of this Agreement are confidential to the parties and neither party shall make or permit or suffer the making of any announcement or publication of such terms (either in whole or in part) nor any comment or statement relating to such terms without the prior written consent of the other (which consent is not to be unreasonably withheld or delayed). However this is not to prevent either party from revealing such financial terms to its professional or financial advisers who are instructed in relation to the prospective Disposal. Furthermore the parties agree that [the Claimant] may disclose such information as it reasonably requires (excluding the financial terms referred to above) (including prospective rental levels for letting any parts of the Property or prospective prices for the sale of any part of the Property) so long as such disclosure is by specific negotiation with individual interested parties on a confidential basis and not by way of general announcement or publication"

22. Clause 7 provides for the costs indemnity. By it CRS agrees to indemnify the Claimant "against all costs (excluding VAT) properly and reasonably incurred by [the Claimant] in complying with its obligations under clause 3.1" in the event that CRS chooses not to proceed with the sale of the Property to the Claimant.
23. Nothing turns on the detail of the supplemental agreement by which the Lock-out Period was extended, other than the fact of the extension, as a result of which it would expire at 5.30 pm on Wednesday 22 March.
24. The damages claim turns, first, on deciding exactly what happened leading up to the viewing of Sandbrook Park by Airtours on 14 February and whether that amounted to a breach of any part of clause 2 or of clause 6. The question of causation requires an examination of what happened in March, and what would have happened if the Airtours offer had not been received on 15 March, but it also requires a more general review of the circumstances of the negotiations, and the events of February also need to be seen in the context of what had happened previously.

Sandbrook Park

25. First I should say something about Sandbrook Park itself. It is a very large building, with over 150,000 square feet of accommodation, including canteens and storage. It is built into the side of a hill, so that parts of it do not have natural lighting, which restricts their use. It was designed for single occupancy. It could be divided, but only into two units.
26. Another feature that needs to be mentioned arises not from the physical layout but from the arrangements that CRS had made for computer infrastructure and support. In June 1998 CRS entered into an outsourcing agreement with a company called Atos Limited under which Atos was to provide CRS with the computer services it needed at Sandbrook Park. At the same time CRS leased part of Sandbrook Park to Atos so that it could perform the services that it had contracted to do. It was envisaged, among other things, that Atos would be able to use spare capacity at Sandbrook Park to supply other customers with computer support services. The lease, which was excluded from the effect of Part II of the Landlord and Tenant Act 1954, was for 7 years from 30 June 1998, but was terminable in the meantime on the date for which a valid notice to terminate the outsourcing agreement was served by either party.
27. The outsourcing agreement could be terminated at the end of seven years, under clause 25.1. In the meantime it could be terminated by CRS giving at least 12 months notice to expire on 30 June 2001, in which event CRS would have to pay compensation: see clause 25.2(a). It also contained a provision, clause 25.2(b), recognising that, "under exceptional circumstances of CRS' business reconstruction or merger it may be necessary for CRS to terminate the agreement to take effect before" 30 June 2001. In that case the parties were to agree a mutually acceptable termination which recognises the effect on Atos' business and the inconvenience to it, with compensation being based on an extension to the formula agreed for termination in 2001. That provision was probably not enforceable as a matter of strict law. If invoked it would no doubt lead to negotiations, but Atos would have a strong hand in terms of bargaining for the size of the compensation payment.

Dandara

28. As part of the background I should also say something about the Claimant itself. It was and is owned by a Mr Dan Tynan. Its business is commercial property investment and development. Before 2000 it had not acquired any commercial property in England, though it had done so in the Channel Islands and possibly also in Ireland. For at least one acquisition it had received funding from the Irish Nationwide Building Society. Mr Tynan was based in the Isle of Man, as was Mr Christian, the finance director of the group. Mr Simon Kimble was one of two employees based in Manchester, having set up an office there in late 1999. At the same time as negotiating for the acquisition of Sandbrook Park it was also pursuing an acquisition of a property at Chester, in which it was successful.

The initial marketing of Sandbrook Park

29. Given the reduction in CRS' need for space at Sandbrook Park, and the fundamental review of CRS' property portfolio, Savills were retained to advise about the options open to CRS. On 23 September 1999 Mr Mark Ridley of Savills sent to Mr Stenton a report appraising the various options. By then J D Williams had already approached CRS with a view to taking a lease of half of the space. Savills considered the likely level of interest in the building either as a whole or divided into two, and on the basis of owner occupier demand or that of lessees, for different terms, and investment demand as well. They identified as the best prospect of an owner occupier a national organisation wishing to use the premises as a call centre. Without having tested the market they estimated there to be a 20-25% chance of finding an owner occupier who wanted the whole building.
30. In the light of that review of the options, Mr Stenton instructed Savills to start on a discreet investigation of potential occupier interest. Without identifying the property, Savills approached some agents who were known or believed to have clients who might be looking for the space which Sandbrook Park would provide. One of these was Matthews & Goodman, acting for BT Cellnet who had an unsatisfied need for up to 120,000 square feet for a call centre, within a geographical range which included Rochdale. Patrick Joynson of Savills spoke to Stephen Downey of Matthews & Goodman. He did not identify the building expressly, but Mr Downey knew which it was – it is well known to all agents in the Manchester area and it is the only building in North Manchester with 150,000 square feet of space. After a little time it became clear that Sandbrook Park was not of interest to BT Cellnet. However, Matthews & Goodman had another client, namely Airtours, who had a continuing need for accommodation. Although Mr Downey was not under current instructions to seek accommodation for them it occurred to him that they might be interested in the space. He did not pursue this with them until the New Year.
31. On 8 October Savills reported to Mr Stenton on their view of the value of the offer which had by then been received from J D Williams for the purchase of the whole site, at £16 million payable over 2 years. They put the present value of the offer at £14.9 million, and said that this was higher than the value of the property with vacant possession, having regard to the yield that an investor would require and the likely letting value. In a later report they said that the value to an owner occupier would be higher, at £16.4 million. At the end of October J D Williams revised their offer down to £15.2 million. Savills recommended a discreet marketing exercise in order to assess the level of interest, in particular from owner occupiers. CRS accepted this advice, Savills prepared the necessary materials (which were limited because of the need to avoid arousing suspicions on the part of staff at CRS) and started the marketing at the end of November 1999.
32. One of the parties identified by this process was the Claimant. Both they and their agents Canning O'Neill signed the required confidentiality undertakings and were sent the sales brochure. By 22 December the Claimant had put forward detailed terms of an offer at £15 million, which provided for CRS to remain in occupation of part of the site for a longer or shorter time. On 6 January Mr Kimble reported on the property to Mr Tynan. He saw the probable course for the Claimant as being to let the building as a whole or in two halves. At that time he envisaged exchange of contracts on about 1 May 2000. Canning O'Neill also advised the Claimant about the proposed acquisition.
33. On 20 January Mr Kimble sent to Mr Stenton a final version of the heads of terms for the Claimant's offer to buy Sandbrook Park. The price was given as £15.25 million, with a deposit of £500,000 on exchange. Solicitors were expected to be instructed by 28 January if board approval was given by CRS, and contracts were to be exchanged as soon as possible after that. The Claimant sought a three month exclusivity period. The terms provided for CRS to remain in occupation for up to 12 months. This was provided for on three possible bases. Completion would take place after 12 months, with vacant possession, unless either party brought it forward by notice. The Claimant might give CRS a month's notice to confine its continued occupation to the North Wing, to be occupied on a formal licence. Alternatively CRS might give the Claimant a month's notice, after 6 months from exchange, that vacant possession would be given.
34. Savills advised CRS that the Claimant's offer was worth between £13.85 million and £14.4 million depending on when completion took place, as compared with a value of £12.9 million for the J D Williams offer. With the benefit of this advice, on 21 January the board of CRS approved the sale to the Claimant on these terms.
35. As I have already mentioned, at the same board meeting the proposed merger with CWS was approved. Articles in the Manchester Evening News on Tuesday 25 January reported this approval, and forecast major job losses, including at Sandbrook Park, with the head office of CRS said to be expected to close as a result of the merger.
36. By 26 January the respective solicitors were in contact about the proposed agreement, including the exclusivity terms: Cobbetts (Miss Sonia Hopkinson) acted for CRS and Dibb Lupton Alsop (Mr John Hyde) for the Claimant.

Events during the exclusivity period

37. On 31 January it was agreed that the exclusivity period would be 6 weeks, and would run from that day. Mr Kimble reported this to Mr Tynan on that day, and commented about the use to be made of the next weeks, including preliminary marketing on the Claimant's behalf. It seems that the Claimant's agents, Canning O'Neill, started on marketing approaches quickly. Mr Downey's desk diary records an appointment at 8.30 am on 4 February with Canning O'Neill. The documents in evidence include some pages of notes emanating from Canning O'Neill, which have been marked (after the event) "4/2/2000 Meeting with Steve Downey". Mr Downey said that he had a meeting with Mr Canning at about this time, though he could not have been certain of the date without seeing Mr Canning's notes. Those notes show that the discussion was about the needs of Mr Downey's client Airtours, and that Rochdale was mentioned, by which Mr Downey understood Mr Canning to mean Sandbrook Park. The possibility of a viewing of Sandbrook Park was mentioned between them. Mr Canning's notes of this discussion appear to be the first of a series of notes by him about approaches to various agents or parties who might be interested in Sandbrook Park, another being BT Cellnet.
38. Mr Downey did not say how the meeting with Mr Canning came about. He knew of Sandbrook Park being, or having been, on the market, from his discussions in the autumn. He had identified it as being of possible interest to Airtours. Before 4 February he had spoken to someone at Airtours about it, and had established that they might be interested. He did not at that stage know that Canning O'Neill had any role in relation to the property. It seems to me likely that Canning O'Neill had approached him to see if he had any client who might be interested, and that this led to their meeting.
39. Between that day and 14 February Mr Downey spoke to Patrick Joynson of Savills. Both men gave evidence. Not surprisingly their recollection of the precise details of what was said between them was unclear. Mr Downey had received some details of the building in September 1999: floor plans, photographs, site and location plans and a basic specification. From letters from Savills to CRS of 9 and 29 November it seems likely that a somewhat more substantial sales brochure was prepared for the marketing which took place in December, though it no doubt included much of what had been sent out in September. No copy of this survives. Mr Downey had not received the later sales brochure. Mr Joynson's evidence is that Mr Downey rang him up and asked for a sales pack for Sandbrook Park, that he took one round to Matthews & Goodman's offices and had a discussion with Mr Downey, and that later Mr Downey rang him again, said that his client Airtours was interested, and asked if a viewing of the property could be arranged. He said this might not be possible because of the exclusivity, which he says he had already mentioned.
40. Mr Downey does not recall all of this, and in particular he does not recall asking for or receiving a further sales pack, but he does remember being told that Savills could not arrange a viewing, that this was because of the "tie-up" agreement, and that he should approach Canning O'Neill for that purpose.
41. I find that Mr Downey did ask for information about Sandbrook Park, and that Mr Joynson did take a sales brochure round to his office. I find that Mr Joynson did mention to Mr Downey that an exclusivity agreement existed, to explain why he himself could not arrange a viewing, and referred him to Canning O'Neill. Although in his witness statement Mr Joynson says that he told Mr Downey on the first occasion that there was an exclusivity agreement between CRS and the Claimant, in view of his oral evidence and the other evidence I do not accept that. I find that he did not identify either the Claimant or Canning O'Neill at that time. He mentioned Canning O'Neill later, when Mr Downey telephoned to ask if a viewing could be arranged. I find that he did not mention the Claimant to Mr Downey at any time. It was Mr Canning who identified his client to Mr Downey.
42. As a result of these contacts and of Mr Downey's conversations with Mr Canning, a viewing of the property was arranged and took place on 14 February, attended by Mr Canning, Mr Downey and a representative of Airtours. Mr Stenton of CRS knew about this because the arrangements for the viewing were made between Mr Canning and him. Two more viewings took place, one on 3 March, attended by another member of the firm of Matthews & Goodman, and by the finance director of Airtours, and the other on 17 March. I am satisfied that Canning O'Neill, not Savills, made the arrangements for all these viewings. There was no other relevant contact between Matthews & Goodman and Savills between 14 February and 15 March.
43. On 15 March Matthews & Goodman brought round to Savills' offices their letter of that date containing Airtours' offer of £16 million to buy Sandbrook Park. The terms proposed the payment of a full 10% deposit, exchange as soon as possible, and completion as soon as possible thereafter subject to accommodating CRS' need for partial occupation for a short time. Various detailed points were made, and a response was sought by close of business on "Wednesday 23 March" – in fact 23 March was a Thursday. I am satisfied that the date of 23 March (if the Thursday was intended) was given in ignorance of the date when the Exclusivity Agreement would expire. Mr Downey took the letter to Savills' offices, where he met Mr Foster and Mr Dean, Mr Joynson being away from the office that day.
44. Mr Foster passed the letter on to Mr Stenton, who on the next day made a number of points to be passed to Matthews & Goodman. He spoke to Mr Dean, who recorded the points in a note. Among these points were that Airtours would have to bear the whole stamp duty and that no capital allowances were available. He also said that Airtours should be asked to submit their best offer in the light of the points made, that no further discussion could take place, nor could any paperwork be issued, until the expiry of the Exclusivity Agreement on Wednesday the following week, and that a meeting should be arranged for the Thursday. Mr Foster passed these points on to Mr Downey on 16 March. On Monday 20 March Mr Downey responded with a memorandum on the detailed points. The main difficulty was perceived to arise from CRS' wish to remain in occupation of part of the site. In the meantime Airtours had inspected the property again. Evidently they had learned from the Claimant's representatives that additional land called the hotel site was available, in which they expressed an interest. He handed this memorandum over to Mr Foster and they had a discussion about it. According to Mr Downey's file note, Mr Foster said that CRS would wish to know by Wednesday 22 March more precisely the envisaged timetable for exchange of contracts. Mr Foster is noted as having said that it would assist Airtours' case greatly if they could confirm that they had board approval by Wednesday. This was confirmed on the following day.
45. The events which took place between 15 and 20 March have already been held to constitute a breach by CRS of clause 2.5 of the Exclusivity Agreement. This was at a hearing by District Judge Gosnell on 26 September 1991 of an application by the Claimant for summary judgment. He held that these events amounted to CRS entering into negotiations with a third party for a Disposal. I have no doubt that he was right. However, that does not achieve a great deal for the Claimant by itself. It needs to show that the Airtours offer was the result of a previous breach of the Exclusivity Agreement on the part of CRS.
46. A striking point which emerged in the course of the evidence is that, despite the provision in clause 2.4 binding CRS forthwith to instruct its agents to withdraw from any negotiations for any Disposal and to discontinue any marketing of the property, CRS did not in fact tell Savills what were the terms of the Exclusivity Agreement. Savills knew that there was an exclusivity agreement, but the witnesses from Savills all agreed that this exclusivity agreement was more elaborate than normal, and that they would not have assumed from the fact that there was an exclusivity agreement that the confidentiality provisions of clause 6 applied, nor would they have expected to find all the detail that is in clause 2. Mr Connah, who was at that time the secretary of CRS, said he gave instructions to Mr Freeth and Mr Stenton that the Exclusivity Agreement should be complied with strictly. He said he had assumed that Savills had been involved in the negotiation or preparation of the Exclusivity Agreement (which they were not), and would therefore be aware of its terms. He also said that he had been unaware of any negotiations with Airtours, but that he did not regard an enquiry as to whether it was a genuine offer backed by the board as being a breach of the Exclusivity Agreement.
47. Neither Mr Freeth nor Mr Stenton gave evidence, but it seems clear from the evidence which I did hear that no-one in CRS gave the instructions to Savills which clause 2.4 required to be given, nor was a copy of the Exclusivity Agreement supplied to Savills so that they could see quite what could and could not be done. Among other things this produced a misunderstanding, when Mr Ridley took the view that what Canning O'Neill were doing by way of marketing of the property was a breach of the original confidentiality terms, unaware that it was specifically covered by the proviso to clause 6 of the Exclusivity Agreement. Nothing turns on the failure to give the necessary instructions to Savills, in breach of clause 2.4, since, even though CRS did not instruct Savills to discontinue any marketing, it does not follow that they did market the property. However, Savills' ignorance of the terms of the Exclusivity Agreement may cast light on and explain what happened.

Breach of the Exclusivity Agreement

48. I have set out above my findings as to the relevant events in February. Mr Briggs Q.C. for the Claimant submits that these events involved breaches of clauses 2.2, 2.4, 2.5 and 6. I do not accept that the delivery of the sales brochure or sales pack to Matthews & Goodman in February is the sort of thing that clause 2.2 is aimed at. It prohibits submitting "a draft Contract or other documentation in connection with a Disposal" of the property to a third party. I dare say that this is not limited to conveyancing documentation, and it would extend to draft Heads of Terms or the like. But it does not seem to me that a sales pack or brochure is within the scope of the "documentation" of which clause 2.2 speaks. If that is prohibited it is by virtue of other provisions.
49. Clause 2.4 is more to the point in this respect. CRS' failure to instruct Savills to withdraw from any negotiations does not matter because there were no such negotiations at that time. The second part of the clause, "to discontinue any marketing of the Property", is relevant. Whether this is read as a direct obligation on CRS to discontinue marketing or an obligation on its part to instruct its agents to discontinue marketing, it comes to the same thing. If the provision of the sales brochure was marketing of the property, then this clause was broken. Mr Brock Q.C.'s argument against this being marketing was that it was too minimal. It was said that if that was all an agent had done he could not justify himself to his client as having undertaken marketing of the property. That may be a fair comment, as between the agent and the client, in relation to an obligation of the agent to undertake marketing. But as between the client and a third party in relation to an obligation not to undertake any marketing, it seems to me that anything which forms part of the process of marketing, aimed at third parties, is affected by the prohibition. For this reason I am satisfied that the delivery of the sales brochure did amount to a breach of clause 2.4. That by itself, however, is of minimal importance because Mr Downey had already had some information about the property, he knew of it from the earlier approaches by Savills, and he was going to arrange an inspection. I must therefore go on to consider whether other aspects of what was said and done in February amounted to breaches of the Exclusivity Agreement.
50. I cannot see that anything that I find happened in February amounted to a breach of clause 2.5. To supply the sales pack on request was not an advertisement of the property for Disposal. Because the Exclusivity Agreement was mentioned, it is plain that no negotiations were entered into with Airtours for any Disposal at that stage.
51. The real question is whether it was a breach of clause 6 to mention the existence of the Exclusivity Agreement at all. By that clause, the terms of the agreement are confidential to the parties. This is built upon, and in part detracted from, by what follows. Specifically, what is prohibited is the making of any announcement or publication of those terms and of any statement or comment relating to those terms. Curiously, the clause goes on to refer to "such financial terms" which suggests that financial terms have already been mentioned, which they have not, expressly, in this clause at any rate. It may be that this is a reference back to clause 4.4 and to the financial terms set out in the Heads of Terms. Mr Brock argues that to refer to the existence of an exclusivity agreement does not say anything about the terms of the agreement, apart from its general nature. Mr Briggs submits that to refer, under whatever label, to an exclusivity agreement discloses the principal term, namely that the owner of the land is constrained in some way as regards dealings with persons other than the counterparty to the agreement.
52. This is not a point capable of lengthy analysis. It seems to me that Mr Brock is right, and that simply to refer to the existence of a lock-out or tie-up agreement, or to an exclusivity agreement or period, is not an announcement or publication of the terms of the agreement, nor a comment or statement relating to those terms. If the clause had spoken of the existence of the agreement being confidential, then Mr Briggs' case would be clear. But short of that, it seems to me that confidentiality relating to the terms is directed at the detailed terms, not to the general nature of the agreement. An obligation not to reveal even the existence of the Exclusivity Agreement would have posed considerable difficulties for an owner or his agent if approached by a possible interested party. Must the agent deny that the property is on the market at all? Must he refer the enquirer to the counter-party's agent, with no explanation? It would be possible to have a contract that had this result, but it is hard to see why it should be seen as necessary, especially in the case (as here) where the counterparty is entitled to market the property, and was doing so, so that enquirers could fairly be referred to that agent, and the enquirer's client may just as well be interested in taking a lease as in buying the freehold, as Airtours was, so far as Mr Downey knew.
53. It may be (I doubt it but do not need to decide it) that to identify the other party would be a breach, but I have found that Savills did not do this, and to identify the other party's agents is quite different. It is then up to those agents what they wish to reveal. To disclose the length of the exclusivity period would be a breach, but this was not disclosed until the very last stages, on or about 20 March, by which time it made no difference. To disclose the financial terms set out in the Heads of Terms would certainly be a breach of the clause except as expressly permitted. However, my conclusion is that to tell Matthews & Goodman that there was an exclusivity agreement, and that the other party's agents were Canning O'Neill, did not amount to making an announcement or publication of any of the terms of the Exclusivity Agreement, nor a comment or statement relating to those terms.
54. Accordingly I reject the argument that there was a breach of clause 6 in February, though I accept that there was a breach of clause 2.4 by the provision of the sales brochure to Matthews & Goodman. It is already established that there was a breach of clause 2.5 in March. There was also a breach of clause 6 in March in the disclosure of the exclusivity period, but nothing turns on that. There was no other material breach.
55. Before leaving this subject I must mention two documents on which, understandably, the Claimant placed a good deal of reliance. Mr Ridley of Savills was the author of both. One is a letter to Mr Hallsworth dated 18 April 200 and the other is a Fact Sheet prepared in May. Each gives an account of what Savills had done pursuant to their instructions from CRS. In each case the account is inaccurate in some respects. They arose in a particular context.
56. CRS had retained a team in Savills led by Mr Ridley. Their instructions were as I have described above. Mr Ridley had not acted for CWS, though others at Savills had done. Mr Hallsworth was surprised and annoyed that Mr Ridley, to whom he had spoken on 14 March (as I will mention at paragraph 73), had not told him directly of the Airtours offer when it came in. He and Mr Galley took this amiss. They formed and expressed the view that Mr Ridley's team had nearly undersold Sandbrook Park. Mr Ridley's team's instructions were withdrawn, and a different team in Savills was instructed to act for CWS, led by Mr Mark Tucker. At a party in Glasgow held by Savills in May, Mr Galley met Mr Ridley, and expressed his sense of grievance in forceful terms. The Fact Sheet was Mr Ridley's attempt to put the record straight. He wrote it immediately after this encounter, and gave it to Mr Tucker to be passed on to Mr Galley or Mr Hallsworth. It is not for me to form a judgment as to the rights and wrongs of this disagreement. Mr Ridley and his team felt that Mr Galley and Mr Hallsworth did not appreciate the constraints under which Savills had been acting as a result of their instructions from CRS, and that they did not take on board fully the fact that Mr Ridley's team was answerable to CRS, not to CWS, even in mid March.
57. In the letter of 18 April, written in order to justify a claim to fees, Mr Ridley mentioned the Airtours offer and said that after receipt of this offer Savills had arranged a further viewing of Sandbrook Park by the Airtours board, so that formal board approval could be given. This is incorrect. That viewing, like the two previous ones, was arranged direct with Canning O'Neill. Otherwise the letter is substantially accurate, for present purposes.
58. The Fact Sheet contains a more serious error. Mr Ridley said that he prepared it in heat and under time pressure, relying on what he thought he knew, and with only limited opportunity to consult Mr Foster and Mr Joynson, neither of whom was in the office at the time. In particular he refers to Savills as having, despite the exclusivity agreement, "continued covert marketing" in February to all potential owners/occupiers, and referred to the meeting between Mr Joynson and Mr Downey. The sequence of events leading from Mr Downey's enquiry to Airtours' first inspection is misdescribed. In the summary at the end this is described, incorrectly, as Mr Joynson having identified Airtours' interest before Dandara "and had a direct agent meeting, presenting the building to Matthews & Goodman". I am satisfied that Savills did not undertake any covert marketing in February or March. Apart from the contact which Mr Joynson had with Mr Downey, they did nothing that could be called marketing between the beginning of February and the receipt of the Airtours offer. This inaccuracy is unfortunate but is accounted for by Mr Ridley's high emotional state when he prepared the Fact Sheet, and the speed with which he was working. As he said, it did not undergo the same due diligence as a witness statement.
59. I must therefore now consider the consequences of those breaches that I have found to have been committed, and I will also deal with the question of the consequences of the revelation of the existence of the Exclusivity Agreement, on the basis that, contrary to my finding, it was a breach of clause 6.

Causation

60. Mr Briggs submits that, but for what Savills did in February, Airtours would not have got to the stage of making their offer on 15 March, and that, although the Claimant could not have exchanged contracts with CRS by 22 March, matters were so far advanced as regards the sale to the Claimant by then that, if it had not been for the Airtours offer, CRS would in fact have continued dealing with the Claimant, and contracts would have been exchanged, by CWS, shortly after 2 April when the merger took effect. Mr Brock on the other hand argues that there were such obstacles to overcome that the Claimant would never have been able to exchange. For this he relies on issues arising in the course of the transaction, including the Atos aspect and the lack of warranties from the building contractor, and also on the lack of progress that had been made as regards the Claimant's funding of the transaction. He also says that CWS would have taken the decision to remarket even if the Airtours offer had not been received. Further he says that the Claimant in fact walked away from the transaction after 22 March. In order to see these various points in context, I need to describe in detail some of the history of the negotiations.
61. The parties recognised that the timetable was tight, and they planned and held a series of joint progress meetings in order to keep up the momentum. The first was held on 7 February. Cobbetts supplied a report on title on that day, and DLA sent standard preliminary enquiries. Among the issues discussed at the meeting was the significance of 2 April, already foreseen as the date of the merger if one took place. Eventually, the point was seen as being that contracts should not be exchanged until after that date, or not unconditionally, so that CWS could take advantage of tax losses accrued by CRS. The point had not been correctly identified on 7 February, but it was known that there was a point about that date. It was also known that there was an issue about Atos. At that meeting inaccurate information was given about the date when the arrangements with Atos could be terminated. Cobbetts had not acted for CRS on that transaction and did not have the documents. They promised to supply them to DLA when they had them.
62. On 17 February Cobbetts sent DLA the first version of the draft contract for sale. On 21 February another progress meeting took place. Cobbetts still did not have the Atos documentation. A meeting was to be set up between representatives of the Claimant and of Atos for the week beginning 28 February to see if the Atos facilities could be of use to the purchaser. Another issue which became important later was mentioned first on this occasion, namely the apparent absence of a warranty for the benefit of successors in title on the part of the building contractor.
63. On 21 February DLA gave the draft contract to Mr Kimble, and the next day he sent it to Mr Christian with his comments, and DLA also sent it to Mr Christian with detailed comments of their own. On 23 February DLA returned the draft contract to Cobbetts with amendments. On 29 February Cobbetts replied to DLA's preliminary enquiries. On 2 March Mr Christian sent his comments to Mr Kimble, including commenting on the issue about the absence of a warranty from the builder. Mr Kimble answered on 7 March, in terms which envisaged the possibility of Airtours as a lessee, with a need for the protection that a warranty would provide. In the meantime on 3 March Mr Kimble told Mr Christian that Mr Tynan had spoken to the chief executive of the Irish Nationwide Building Society (INBS) and that the draft contract was to be sent to INBS' solicitors, who were identified on 7 March as being Howard Kennedy.
64. On 8 March Denton Wilde Sapte sent to Cobbetts extracts from the Atos documentation. These were no doubt passed on to DLA at the progress meeting held the next day. The extracts did not show the start date of the Atos arrangements, which was critical for the termination provisions. The question of the warranty was also discussed. On the Claimant's behalf the position taken was that CRS must either provide the warranty or provide equivalent protection, for example by insurance. The Claimant also sought an indemnity for termination costs in relation to Atos. At this progress meeting not only representatives of CRS and its advisers were present but also for the first time a representative of CWS, Mr Peter Hallsworth, whose participation in the matter generally I will describe in due course.
65. On 10 March, following this meeting, Mr Kimble reported to Mr Tynan and Mr Christian, particularly on the questions of the warranty and of security for the balance of the price between contract and completion, which might be delayed for up to 12 months because of the provisions for CRS to remain in occupation of part for some time. As regards the warranty it was said that CRS was likely to offer to insure, and on the other point a bank guarantee was suggested as one possibility.
66. On 14 March Cobbetts sent the draft contract back to DLA amended. A day or so later they had a retyped version of the draft prepared, showing the then state of the travelling draft. In the meantime, on 13 March DLA had sent documents relating to the transaction to Howard Kennedy, and on the next day they wrote to Howard Kennedy at more length about the transaction. Mr Hyde mentioned in that letter that the intention was to exchange contracts on 20 March if possible, in the context of the exclusivity period expiring on 22 March. He described the question of the building contractor's warranty as "the major outstanding issue". Also on 14 March Mr Christian wrote to INBS about the basis on which Howard Kennedy were instructed. He was anxious that their task should not be unnecessarily large both because the Claimant would be paying the cost and so as to avoid unnecessary delay.
67. On 15 March Denton Wilde Sapte sent to Cobbetts the outsourcing agreement with Atos. I assume it was passed on to DLA as soon as it was received, and at the latest on 17 March at the progress meeting. On 16 March DLA wrote to Cobbetts with some queries concerning planning and highway agreements and the like. They said they were awaiting instructions on the question of a bank guarantee, and that the issue about the warranty needed to be resolved.
68. On 17 March another progress meeting was held, at which the warranty question was discussed, and also the Atos question and the Claimant's funding. CRS had sought a quotation for the insurance, and one was obtained from Aon on 20 March, showing a premium of £230,000. Also on 17 March DLA sent Howard Kennedy the latest drafts. On the following Monday, 20 March, DLA returned the new version of the draft contract to Cobbetts with amendments in blue. On 21 March Mr Kimble told Mr Tynan that DLA had suggested that INBS might use Zatman & Co, because Howard Kennedy were taking the view that they had to review the transaction and the documents extensively. Mr Tynan passed this recommendation on to Mr Fingleton, the chief executive of INBS, who seems to have accepted it at once. On the same day DLA had a meeting with Zatman & Co, and on the next day, 22 March, they sent the necessary papers over to Zatman & Co for them to review on behalf of INBS. Back on 21 March, Cobbetts wrote three letters to DLA, two about the details of the contract, and one, between different partners who were handling the construction warranty issue, arguing that, for particular reasons, insurance was not necessary and certainly that CRS should not be expected to pay for any insurance that the Claimant required.
69. On 22 March, the last day of the exclusivity period, Cobbetts sent the draft agreement back to DLA amended in green. DLA wrote to Cobbetts about various points on the contract. Mr Hyde recognised that it was unrealistic to hope to exchange on that day, and asked for proposals for a revised timetable, with a view to exchange by 28 or 29 March. Cobbetts responded to DLA the same day. Also on that day DLA wrote to Zatman & Co with further information which they needed. Soon after 3pm on that day INBS sent their first offer of funding facilities to the Claimant by fax.
70. On 23 March DLA returned the travelling draft contract to Cobbetts amended in red. Atos was still an issue, and the question of the builders' warranty had not been resolved. On 24 March Mr Hyde and Miss Hopkinson spoke on the telephone. Her file note records Mr Hyde as saying that "nobody knows whether there is still a deal". Miss Hopkinson drafted but (as I find) did not send a letter to Mr Hyde following that call, saying that the transaction was not to proceed. Cobbetts in fact did no more on the transaction, but DLA did not give up at once, and things proceeded as between the Claimant and INBS and their lawyers. Thus, on 27 March Zatman wrote to DLA about some of the construction aspects, and Mr Christian wrote to Mr Leonard of INBS about the terms of the offer. On the next day INBS issued a revised offer, and Zatman wrote again to DLA. On 29 March DLA responded to Zatman, and Mr Hyde (who was about to go away on holiday) wrote to and telephoned Miss Hopkinson. In his letter he said that he appreciated that she was without instructions, which she must have told him on the telephone, but he wished to record some points in case the transaction were later revived. On the same day Mr Christian wrote to Mr Stenton of CRS about capital allowances, which had been under discussion between them. On 30 March PR advisers wrote to Mr Kimble with a view to discussing an announcement concerning Sandbrook Park, which must have anticipated the conclusion of an agreement with CRS.
71. On 5 April Mr Christian wrote again to Mr Leonard of INBS about the terms of the revised offer. In that letter he mentioned that a meeting had been arranged for 11 April between Mr Tynan and Mr Fingleton, which he anticipated that he and Mr Leonard would also attend. Mr Christian was the only one of those four who gave evidence before me. He did not attend such a meeting and he did not know whether it took place. On 6 April Zatman wrote to DLA recording that, in the absence of responses from Cobbetts, there was little more that could be done. On 17 April Mr Hyde, who had no doubt recently returned to his office, telephoned Miss Hopkinson to ask if the deal was dead or alive. It must have been clear by then that it was dead, and on 8 May DLA sent some invoices to Cobbetts seeking payment of their amounts under the expenses indemnity provision of the Exclusivity Agreement.
72. In the meanwhile matters had developed between CRS and CWS, and I must record the principal stages in that sequence as well. On 18 February at a CRS board meeting it was noted merely that tax advice was being taken as regards the timing of the sale to the Claimant. On 4 March the members of CRS voted to approve the merger. Immediately after that the CWS property team, led by Mr Galley, with Mr Peter Hallsworth reporting to him on this particular property, became involved in what was going on. Mr Galley and Mr Hallsworth met Mr Freeth of CRS on 8 March. They discussed several current matters. In relation to Sandbrook Park, they agreed that Mr Hallsworth should attend the progress meeting due to take place the next day, and should meet Miss Hopkinson from Cobbetts and Mr Foster from Savills before the meeting. They also agreed that CRS should confirm the position as regards costs under the Exclusivity Agreement if the property was withdrawn from sale, and that CRS should seek to include provisions in the draft contract securing the payment of the balance of the price on completion. Mr Hallsworth did attend the meeting on 9 March and had by then met Miss Hopkinson and Mr Foster. Mr Foster told him that Sandbrook Park had not been exposed to the market because of the requirement of confidentiality imposed by CRS, and that only a limited number of potential investors and occupiers had been approached.
73. On 14 March Mr Hallsworth met Mr Mark Ridley of Savills. They discussed Sandbrook Park and the steps that had been taken to find a purchaser. Mr Ridley confirmed the limited marketing that had taken place, but advised that in his view the sale to the Claimant was the best deal to be had within the limits of the instructions given by CRS. On 16 March, for a second opinion, Mr Hallsworth went to see Mr Skelton of Lambert Smith Hampton. He knew of the building, but did not know it well. His off-the-cuff advice as to value was pessimistic, putting it at not more than £12 million.
74. On 17 March Mr Hallsworth wrote a briefing note for Mr Galley. He described the proposed terms of the contract with the Claimant. He said that, on the basis of a year's delay to completion, the net present value of the price payable by the Claimant was £12.65 million, which is less than Savills had advised. He referred to the possibility of finding an occupier for the building, and said that if that happened the value might increase to some £18 million, whereas if open marketing failed it might be necessary to go for a "fire sale" which might be at no more than £11 to £12 million. He referred to the Airtours offer of £16 million. He said that because of the tax point contracts could not be exchanged before 2 April in any event. He said that the contract provisions as regards Atos were at an early stage of negotiation, still unclear but probably related to the commercial supply agreement. Of this he said that "this risk is not fully understood". He also referred to the request for insurance to cover the absence of a warranty from the builder, which he said might cost £150,000. He reported that the fees indemnity under the Exclusivity Agreement might amount to £150,000. His recommendation was that nothing should be done about the Airtours offer until after 5.30 on 22 March, and that even seeking clarification might be a breach of the Exclusivity Agreement. He said that the Exclusivity Agreement should be allowed to expire without any contract being exchanged, that after 22 March negotiations should proceed with Matthews & Goodman if they had the necessary instructions, and that the property should be openly marketed, and so far as the Claimant is concerned, negotiations might be used to achieve an increase in their offer, but that they might withdraw as a result.
75. On the same day CRS had a board meeting. The board was brought up to date on the negotiations but was told that the decision would become a matter for the CWS board. At the meeting of the steering group on 20 March it was noted that, if the Exclusivity Agreement lapsed, CWS would seek to remarket the property. On 23 March Mr Freeth and Mr Galley spoke about Sandbrook Park, and Mr Freeth confirmed the position in a memorandum. Mr Galley wished to withhold any further progress until after the second meeting of CRS members, which was to take place on Saturday 25 March, and if the meeting approved the merger Mr Hallsworth would assume responsibility for decisions about Sandbrook Park. Mr Freeth said that they would advise the Claimant of the position. No doubt this led to Miss Hopkinson drafting her letter to that effect, though it was not sent, and the Claimant seems not to have been told, in any formal way, that this was the position that had been reached. On 27 March the steering group met again and recorded that the Exclusivity Agreement had lapsed and that CWS would remarket the building.
76. I do not accept Mr Brock's submission that, unless contracts had been exchanged by 22 March, the Claimant had no chance of entering into an agreement to buy Sandbrook Park. By itself, the expiry of the Exclusivity Agreement would not have had any effect on the deal unless CRS and CWS had taken the decision to remarket the property, or had received another offer with which they wished to proceed. I also do not accept his submission that the Claimant walked away from the transaction after 22 March. The history summarised already shows that people within the Claimant's own organisation, as well as its advisers, continued to work on the transaction after 22 March. It faded out not long afterwards, because no-one on the CRS / CWS side – in particular Cobbetts – had any instructions to continue with the transaction. It is true that I had no evidence directly from the decision-maker in the Claimant, namely Mr Tynan, but I do not consider that I need his evidence in order to be able to find, as I do, that the Claimant was pursuing the transaction as best it could for some time after 22 March.
77. Mr Brock's more substantial points are, first, that there were too many obstacles in the way of a contract on 22 March, both in the terms of the deal itself and in terns of getting funding from INBS, for it to be possible to say that the Claimant lost a real and substantial chance of becoming the purchaser, and secondly that even if it had not been for the Airtours offer, CWS would have decided not to proceed with the negotiations but to expose the property to the market.
78. So far as the terms of the transaction are concerned, there were two major points outstanding on 22 March: Atos and the absence of a warranty from the building contractor. The latter was a problem which had been identified and assessed, and at least one way of dealing with it which would have been satisfactory had been identified, namely defects liability insurance. It seems to me that, if this had been the only major issue on 22 March, the parties could and would have come to terms about it, with insurance to be used as cover and the financial burden to borne in a manner to be negotiated anywhere between the extremes of one side or the other bearing the whole premium, most probably with some contribution from each side to the cost.
79. The Atos issue was more difficult, not least because it required a negotiation with a third party, namely Atos. That negotiation did in fact take place, in May 2000, and was brought sufficiently close to finality by 31 May (in written form) for CWS to be able to contract with Airtours in early June. Mr Briggs says that this negotiation did not take very long once it had started, and that is no doubt right – it took less than a month. However, it does not follow that, if this had been the critical point at the end of March, it would have taken no more than the same time starting from then. Moreover, it turned out to be extremely expensive for CWS to buy Atos out of the agreement and lease – I understand that it cost some £8 million. That does not mean that it might not have been done, but it does mean that CWS would certainly have been careful about the negotiations. Atos had a strong bargaining position in any event, because it could not legally be turned out before June 2001 and even then it had a right to compensation. Mr Hallsworth said in evidence that he would certainly not have exchanged contracts with the Claimant without having secured the agreement of Atos to the early termination of its contract and lease. To do so would just have increased still further the strength of Atos' hand. I accept that evidence. It follows that, even if there had been no other intervening factor, the Claimant would not have been in a position to exchange contracts for a considerable time after 22 March, probably not until the end of May.
80. As for other aspects of the contractual negotiations, I accept that there were points outstanding that were by no means straightforward, but I do not think that any of them was a deal-breaker. If there had not been the Atos problem then, in terms of the negotiation of the contract itself, I find that the parties would have achieved an agreed contract ready to be exchanged without great difficulty and without taking more than, say, three weeks after 22 March, if CWS had not decided that the matter was not to proceed.
81. As regards the Claimant's funding, the dealings between the Claimant and INBS seem, with hindsight, somewhat leisurely. They need to be seen in context. I find that the Claimant had the money to pay the deposit without recourse to any lender, other than, at most, its own existing banking facilities. It would need help with the payment of the balance of the price and, once the point was taken, with the provision of a guarantee for that price. Because CRS required a guarantee at the time of exchange, the Claimant had to get INBS' agreement to provide the guarantee, in the agreed terms, by the date of exchange. That was not possible by 22 March, and it was never brought to the position at which it would be possible. I have described the course of the negotiations, from an offer on 22 March, to a revised offer on 28 March, which was due to be discussed at a meeting on 11 April which may or may not have happened. It seems to me that, if the contract negotiations had been proceeding at full tilt after 22 March as they had been earlier, INBS would have been able and willing to respond more urgently, and the Claimant would have pressed for a prompt response. There is a separate issue as to the terms on which they would have agreed to help, but in my judgment INBS and the Claimant would have come to terms so that INBS would provide a satisfactory guarantee by the time of exchange, even if it had taken place in mid April. Thus, I do not consider that the Claimant's need for help from a bank would have prevented the Claimant from exchanging contracts by mid-April if that had been possible otherwise.
82. The other question is whether CWS would have decided that the negotiations with the Claimant should not be continued even if the Airtours offer had not arrived before 22 March. This turns on the evidence of Mr Hallsworth. He did not know of the Airtours offer until Friday 17 March, when Mr Galley passed it on to him, having been told of it by Mr Meehan, the chief executive of CRS, to whom it had been copied by Matthews & Goodman. He referred to it in his briefing note that day to Mr Galley, which I have mentioned above. In cross-examination he said that he and Mr Galley had already spoken on this on 16 March, before knowing of the offer, and had decided that the property should be remarketed in any event. Mr Briggs challenged this in cross-examination, on the basis that it was influenced by hindsight. Mr Hallsworth agreed that the decision to stop the sale to the Claimant, which was well advanced and supported by advice from Savills and from Mr Skelton, was in some respects bold and certainly risky. The property had been the subject of only limited marketing, and the Claimant as a developer was a less attractive purchaser than an owner occupier, who would not be looking to make its own profit. On the other hand, there was no certainty that there would be an owner occupier out there in the market who wanted 150,000 square feet of space. In the absence of the Airtours offer which showed that there was such a buyer, there was a real risk that remarketing would not produce a new buyer and would put off the existing buyer. Savills had not advised remarketing despite the fact that the publicity for the merger and its consequences meant that the constraints which precluded open marketing in December no longer applied.
83. Mr Briggs put it to Mr Hallsworth that, in the absence of the Airtours offer, everything pointed to proceeding with the sale to the Claimant, but he did not accept that, on the basis of both the limited marketing that had taken place and also of a perceived turn in the market. Mr Hallsworth said in terms that he and Mr Galley had spoken by the end of 16 March about what they should do with Sandbrook Park, and that, as a result of that conversation, he had Mr Galley's support for a decision to remarket before either of them knew of the Airtours offer. Mr Briggs pointed out that the terms of his briefing note of 17 March did not indicate that they had had any prior discussion, and that his witness statement did not mention any discussion before the briefing note was prepared. He submitted that I should not accept that there had been prior discussion. Having seen Mr Hallsworth in the witness box and considered his evidence and the documents, I have no hesitation in accepting his evidence on this point as accurate and reliable. It does not seem to me surprising that the briefing note, which may have been written with a view to being seen by others besides Mr Galley, should not refer to prior discussions between the two men, but should be presented in a self-contained way on the basis of the information available at the time when it was written, including the Airtours offer. Nor do I find it particularly surprising that the witness statement did not deal in minute detail with the sequence of events on 16 and 17 March, and omitted reference to the discussion between the two men on 16 May of which Mr Hallsworth spoke in cross-examination. They must have had any number of conversations about Sandbrook Park at this time. I find that the two men had discussed what to do with Sandbrook Park in the light of the knowledge gained by Mr Hallsworth by 16 March, including the views of Savills and of Mr Skelton, and their view of the market generally, and had already decided that the property should be remarketed in the hope of finding an owner occupier who would pay a higher price than the Claimant. When they learned of the Airtours offer on the following day, this only confirmed the decision which they had already taken.
84. They were not themselves the decision-makers, but it seems to me that, considering the hypothetical situation of what would have happened if the Airtours offer had not arrived before 22 March, the strong probability is that CWS, with whom the decision lay, would have decided, as in fact it did, that the property should be remarketed and that the sale to the Claimant on the basis of the agreed Heads of Terms should not proceed.
85. Thus, considering the question of whether a breach of the Exclusivity Agreement caused the Claimant to lose a substantial chance of becoming the purchaser of Sandbrook Park, it seems to me clear that it did not. First, the breach of clause 2.4 committed when Savills supplied a sales brochure to Matthews & Goodman had no consequence at all. Matthews & Goodman already knew of the property, and knew enough about it to have formed the view that Airtours might be interested in it. To have a set of sales particulars about it made no difference to the prospect that they would persuade Airtours to have a look at it, nor, having once seen it, to pursue their interest in it.
86. I have held that there was no other relevant breach of the Exclusivity Agreement in February. But even if it was a breach of the Exclusivity Agreement for Savills to tell Matthews & Goodman that there was an exclusivity agreement, and that Canning O'Neill were acting for the other party to that agreement, failing which Airtours might not have been able to inspect the property during February and if so would not have got to the point of making an offer for the property in March, it was not this that caused the decision by CWS that the sale to the Claimant should not be pursued but that the property should be remarketed. That decision would have been taken even in the absence of the Airtours offer. The likelihood is that instructions for remarketing would have been given soon after 22 March, and implemented in due course, to which Airtours might well have responded.
87. Mr Briggs submitted that the disclosure of the fact of the Exclusivity Agreement, and telling Mr Downey that he should approach Canning O'Neill if he wanted to inspect, was a concurrent cause of the Claimant's loss, of equal efficacy with the intervention of CWS. He relied on cases such as Heskell v. Continental Express [1950] 1 All ER 1033. I do not agree. It seems to me that CWS' involvement and the attitude taken by Mr Galley and Mr Hallsworth changed the position fundamentally. Even if I had held that what Mr Joynson told Mr Downey in February about the Exclusivity Agreement had been a breach of clause 6 of the Exclusivity Agreement, I would not have held that it was an effective cause of the Claimant losing the chance to become the purchaser of Sandbrook Park.
88. There were breaches of the Exclusivity Agreement in March, but all of these came after the submission of the Airtours offer. None of them, therefore, contributed in any way to the Claimant's difficulties. If the Airtours offer arrived without being the result of any breach on the part of CRS, as I hold, the Claimant cannot point to anything that happened after 15 March which caused any loss.
89. For those reasons, although I find that there was one breach of the agreement in February, and there were various breaches in March, I hold that they did not cause any loss on the part of the Claimant. Moreover, even if there had been a more substantial breach in February it would not have caused the loss of which the Claimant complains. Even if there had been no breach of the Exclusivity Agreement in February, the Claimant did not have a real or substantial chance of becoming the purchaser of Sandbrook Park under a contract on terms such as were outlined in the Heads of Terms. On the contrary, even if there had been no Airtours offer in mid March, CWS would have walked away from the negotiations and would have given instructions for the property to be remarketed.

Damages

90. Before dealing briefly with the indemnity claim, I should say something about damages, on which a number of issues were debated, some giving rise to disputes on the evidence. In particular, CWS argued, on the basis of the terms of INBS' offer of finance, that the Claimant would have to have shared any profit equally with INBS, so that the Claimant's damages would have been at most half of what they would otherwise have been. I heard expert evidence as to the value of the property. This was unusual in that each expert had in fact been involved at the time: Mr Bishop, of DTZ Debenham Tie Leung, valued the property for INBS, and Mr Skelton, of Lambert Smith Hampton, gave an off the cuff view to Mr Hallsworth in March as I have mentioned.
91. On the question whether the Claimant's funding from INBS would have required it to share the profit equally with INBS, Mr Christian, the finance director of the Claimant's group, said that, although this was a term of the original offer, it was not acceptable to Mr Tynan, and therefore not to the Claimant. It is true that he negotiated on the terms of the offer with Mr Leonard, and not only did he not take exception to this term, but he relied on it for his objections to some other terms. However, he said that his brief from Mr Tynan was to stay away from this term which he himself would talk about with Mr Fingleton. In turn, Mr Purcell of INBS said that the decision would have been that of Mr Fingleton, but he believed they would not have held out for a half share of profit if Mr Tynan had objected. Other terms would have been rearranged, and they would have required an arrangement fee of, say, 5%. Mr Brock is entitled to say, as he does, that the evidence on this is rather unsatisfactory, with the decision-makers for each party staying away from the witness box. He also points to a reference in one document to an idea of a joint venture with another financial institution. On balance, however, it seems to me that I should accept Mr Christian's and Mr Leonard's evidence that, if the matter had been pursued to completion of the financing arrangements, INBS would not have been taking half of the eventual profits, but might well have insisted on an annual arrangement fee of 5% of the money lent, as well as 2% of money the subject of a guarantee.
92. The other main question is the value of the property, on which I must refer briefly to some of the points at issue on the expert evidence. The hypothesis on which this proceeds is that the Claimant would have become the purchaser of Sandbrook Park from CWS, on the basis of the Heads of Terms. Given the need to sort out the Atos problem, contracts would not have been exchanged until about the end of May, and completion would have been deferred as envisaged, for between 7 and 12 months. Thus on the one hand the Claimant would not have incurred the major part of the expenditure involved in the purchase until later, and it would have been able to spend the intervening time marketing the property, but on the other hand an owner occupier purchaser in the market in June 2000 (such as Airtours) might not have been willing to wait for up to a year to purchase the property. The experts agreed that there was no real change in the market between late March 2000 (which was the date by reference to which their valuations were given) and early June 2000. In these circumstances it seems to me that the valuation question would be what was the value of Sandbrook Park, as it would have been sold to the Claimant, on the basis of a contract exchanged at the end of May 2000, providing for completion on the relevant deferred basis. The Claimant relies on the Airtours transaction, but that was not on a deferred completion basis. It was also not for quite the same land as would have been bought by the Claimant. The experts agreed that the price paid by Airtours should be reduced to £17,462,500 so as to relate to the smaller amount of land which the Claimant would have bought.
93. One of the differences between the experts is whether the valuation should assume that the buyer would be an owner-occupier, who would be likely to offer the best price, or whether the property would have been let, and if so in one or two parts, and then sold as an investment. Mr Briggs points out that Airtours was an owner occupier in the market who did want the property. It remains uncertain, however, whether Airtours would have been willing to wait if they had been told that they could not move in, perhaps, until June 2001. It also seems clear that there were and would have been relatively few owner occupiers in the market interested in this property. It is very large, and while it was constructed to a very high specification, that in itself does not really add to its value. It has a high proportion of space of less usefulness and value, such as storage and other ancillary space. It is relatively inflexible. That may not matter directly to an owner occupier who is in a position to use the whole, but even an owner occupier may be concerned about that sort of question, if thinking on to what might happen if its need for space is reduced, or if it needs to move altogether. It seems to me that a valuation of the property needs to take into account at least a substantial likelihood that the site might have been let, and in two parts, and that therefore costs of subdivision would have been incurred, and the Claimant would have borne these costs. The local market in North Manchester was not large or active, so the property would be marketed to those interested on a regional and national basis. Such people would be in a position to consider alternatives in other areas. Owner-occupiers would also be able to consider the alternative of designing and building their own premises.
94. The sale included two areas of development land, known as site B and site C. The experts agreed a value of £612,500 for site C. In respect of site B they were a long way apart: Mr Skelton thought it would be worth £600,000 and Mr Bishop almost £1,400,000. Each of these figures was for immediate occupation. It seems to me that each would require to be reconsidered on the basis of deferred completion. Although these sites would not have been required by CRS or CWS for occupation for the same period as the rest of the building, it might not have made sense for completion on these parts of the site to be dealt with in advance of the rest, and there was no provision to that effect in the Heads of Terms or the draft contract. Leaving that aside, which I cannot assess on the evidence, there is very little in the evidence which enables me to prefer one expert to the other on this point. I would be likely to conclude that the starting point (subject to the question of deferral) was £1 million for site B.
95. In respect of the building which is the main part of the site, Mr Briggs made much of the offer from Airtours as representing a real price offered and paid by a real purchaser at the right time. That is fair as a start, but the Claimant would not have been able to offer Airtours the same deal, because of the deferred completion provisions. Mr Bishop thought that even the Airtours price was too low, because there had not been full marketing. Mr Skelton on the other hand thought the Airtours price was too high, because the likelihood was that the property would be let and then sold as an investment. He adopted different levels of rent for different parts of the building - £12 per square foot for the best office space, £10 for the canteen, £7.50 for the less good office space, and £5 for the storage space. He reached a figure of £12.5 million for the building, whereas Mr Bishop's figure is some £18 million.
96. It seems to me that Mr Skelton's valuation is convincing in a number of respects, but that it perhaps does not give enough force to the possibility of interest from Airtours as owner-occupier. Taking the development land as worth just over £1.6 million, it seems to me that the appropriate figure for a value at June 2000, from which to work out the effect of deferred completion, would be about £16 million for the whole site.
97. The Claimant would not have borne the cost of dealing with Atos, but it seems to me that, probably, the issue of the missing warranties would have been dealt with by agreement on the basis of insurance, and that the cost of the insurance would itself have been shared by the parties. For present purposes I would assume that the Claimant would have borne, say, £100,000 of the premium. A number of other items would have to be deducted from the hypothetical gross proceeds of sale, in particular the costs of sale, and the cost of financing the contract pending exchange. I do not propose to go into detail on that since, so far as I could gather, they are not in themselves controversial.
98. How the calculations would work out if this were a case of breach of a contract for the sale of the land, rather than of loss of a chance, I do not know. The main imponderable is the effect of deferral of completion. It seems to me that, on any basis, the profit to be made by the Claimant, after paying a price of £15.25 million and the associated costs of purchase (so far as not in fact incurred), might well be small or nil.
99. In addition to that, it would then be necessary to form a view as to the proportion represented by the chance which the Claimant had lost. I do not propose to express a view on that either. It seems to me that any hypothetical view I might express would be likely to be influenced by my actual view that the Claimant did not lose a chance at all, or in other words, in the events which happened (in particular with the intervention of CWS), they did not have a real or substantial chance of becoming the purchaser.

The indemnity claim

100. Finally I must deal with the Claimant's separate claim under clause 7 for an indemnity against expenses incurred under clause 3.1. Originally the claim was for some £53,000. Four items were abandoned at trial, including costs payable to INBS' advisers, Zatman & Co and DTZ. That leaves three items: £1,000 to Hoare Lee & Partners, £1,000 to WSP Environmental, and £29,902.77 payable to DLA (of which £500 is for a fee to Counsel). The two items of £1,000 are not in dispute.
101. The profit costs element in DLA's bill has been apportioned, in a document in evidence, under seven heads. Of those, three are not pursued, and two are conceded as due, including the largest item of £14,450. The disbursements are also conceded as due. Two items remain in dispute: £1,500 for planning advice and £1,000 for "negotiating proposed leaseback to CRS". All I need to decide, therefore, is whether these two heads of work are within the scope of what the Claimant had to do in order to comply with its obligations under clause 3.1.
102. I have no evidence as to what the subject of the planning advice was, under the first head in dispute. Planning matters might well be within the scope of the searches and enquiries which a diligent purchaser would undertake, but equally there could be questions about planning which a purchaser would raise arising from its plans for the property but which would be outside the scope of such usual searches and enquiries. The Claimant has not proved that this work is within the scope of clause 3.1.
103. As for negotiating the leaseback, I do not see that this can be brought within the scope of clause 3.1 at all. It is not a process of making searches or enquiries. It is a matter of negotiation with the vendor. In the timetable to which both parties agreed to work, annexed to the Exclusivity Agreement, it is reflected, I take it, by item 6 under the week of 14 February and item 3 for the following week: "initial negotiation of terms of CRS licence" and "finalise terms of CRS licence". It is quite distinct in that list from items to do with searches and enquiries and, in my judgment, rightly and necessarily so. I hold that this item is also not recoverable under clause 7.
104. The result is that the sum recoverable under clause 7 is £22,502.77. By his order made on 26 September 2002 District Judge Gosnell ordered the payment of £22,000 to the Claimant on account of the sums due under the indemnity. This turns out to have been a remarkably accurate forecast. There is therefore only a further £502.77 to be paid, apart from any interest, for which clause 7 makes express provision.