England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18 January 2008

Mr Stuart Isaacs QC:

Introduction

1. The Defendant is a long-established family company. Until 2001, its main business was milk processing and delivery. Thereafter, its business became the management of property holdings. It is the owner of freehold property on the site of Heatherside House, Park Street, Camberley, Surrey which was no longer needed once the milk business ceased and was ripe for development. The property is registered at the Land Registry under title numbers SY 432900 and SY 609313. The southern boundary of the property abuts land owned by Network Rail which consists of an embankment on which runs a railway line.
2. In November 2001, the Defendant instructed Chancellor & Sons, a firm of chartered valuation surveyors and estate agents, to advise it with regard to the exploitation of the property. In 2002, the Defendant was introduced by Chancellor & Sons to a Mr Keith Conner, then a director of Lypar Country Properties Limited ("Lypar"). During the negotiations which followed, Lypar offered to build for the Defendant on part of the property a 12,000 square foot office block let to a tenant provided by Lypar by no later than about the end of 2004 at an annual rent in the region of £300,000, in return for the other part of the property being transferred to Lypar at no cost to enable it to build a residential development of 24 flats.
3. On 26 February 2003, the Defendant and Lypar entered into a written Project Coordination Agreement ("the PCA") and an agreement relating to the transfer of part of the Defendant's land to Lypar. The arrangement was that Lypar would build an office building on the Defendant's land and that, on completion, the Defendant would transfer to Lypar other freehold land owned by it on which Lypar would, for its own benefit, undertake a residential development.
4. The Claimant is a developer which, unbeknown at the time to the Defendant, had been aware of the possibility of developing the property from late 2002. There had always been an expectation on the Claimant's and Lypar's part that the Claimant would step into Lypar's shoes and itself proceed with the development, which Lypar lacked the financial resources to do.
5. On 15 May 2003 a planning application was made for a development of 24 flats and a three storey office building ("scheme 1"). Scheme 1 had been worked up between the Defendant and Lypar, with the Claimant's concurrence, and was adopted by the Claimant.
6. On 17 June 2003, the Claimant took an assignment from Lypar of the benefit of the PCA and of the transfer agreement. Notice of the assignment was given to the Defendant by a letter dated 24 June 2003. It was only at about this time that the Defendant first became aware of the Claimant. The consideration for the assignment was stated to be £1. However, it emerged in the oral evidence of Mr Gavin Thomas, a director of the Claimant and a chartered surveyor, that in return for the assignment the Claimant also made a £600,000 payment to a company called International Trading Agency Ltd owned by Mr Conner. According to Mr Thomas, the payment took the form of a loan conditional on planning permission being granted but it was paid by the Claimant prior to that permission being obtained in the somewhat surprising expectation that it would be repaid if permission was refused, even though Lypar itself was insolvent. It appears that both Lypar and International Trading Agency Ltd have now been dissolved.
7. Planning permission for scheme 1 was granted on 23 December 2003. However, the Claimant determined not to proceed with scheme 1 but instead to seek planning permission for a more ambitious scheme ("scheme 2"). According to Mr Thomas, scheme 2 was necessary because it had become apparent by about August 2004 that scheme 1 was not financially viable. A planning application for scheme 2 was made on 22 November 2004 and an appeal for non-determination lodged on 21 February 2005. The principal difference between scheme 2 and its predecessor was that scheme 2 was some £500,000 less expensive due to a reduction in the amount of curtain walling required for the office building. Thereafter, the Claimant determined to seek further planning permission in respect of the development of the office building, with the intention of retaining the residential accommodation as approved under scheme 1 and of developing the office building in accordance with this new application ("scheme 3"). A planning application was therefore made on 26 April 2005 and granted on 25 September 2005, whereupon the appeal in relation to scheme 2 was withdrawn.
8. On 28 September 2005, the Claimant's solicitors wrote to the Defendant's solicitors giving formal notice that the planning permission was in a form satisfactory to the Claimant for the purposes of clause 2 of the PCA. By clause 2.1, the PCA was expressed to be conditional on the Developer (that is, the Claimant), obtaining Planning Permission in a form satisfactory to it within two years of the date of the PCA. However, that period was extended to 1 October 2005 pursuant to clause 2.3 of the PCA. "Planning Permission" was defined by clause 1.1 of the PCA to mean "planning permission for the construction of the Building on the Office Site and a residential development consisting of not less than 16,000 square feet of gross internal floor area and not less than 24 units on the Residential Site". The Claimant's solicitors' letter stated that the PCA was therefore unconditional and that the Claimant was taking the necessary steps to start development in accordance with the PCA's requirements.
9. The response from the Defendant's solicitors was a letter dated 4 October 2005 giving formal notice to rescind the PCA under clause 6.5 thereof for failure to obtain all "Requisite Consents" in accordance with those provisions. It is common ground that the word "rescind" in clause 6.5 is used in the sense of "terminate" rather than to connote the avoidance of the PCA from the outset. In the letter, the complaint related to the alleged failure to submit an application for building regulation consent. The alleged failure to submit an application for building regulation consent is no longer relied on by the Defendant but a number of other matters are. The Claimant correctly accepts that it is open to the Defendant to invoke any other relevant matter which existed at the time even though not relied on in the letter as the basis for the claim to terminate.
10. By a Part 8 claim form issued towards the end of 2005, the Claimant began proceedings for declarations that the Defendant's purported termination of the PCA is of no effect and that it is bound by the PCA.
11. Evidence was given on the Claimant's behalf by Mr Thomas; Mr David Trench, an expert on project management; Mr Paul Carter, a chartered surveyor and planning expert; and Mr Andrew Lee, an expert structural engineer. Evidence was given on the Defendant's behalf by Mr Michael Stokes, a director; Mr Gordon Hignell of Chancellor & Sons; and Mr Ian Shrubsall, a chartered surveyor and planning expert.
12. At the close of the Claimant's opening, I heard and dismissed, for reasons which I gave at the time, an application by the Defendant under CPR Part 33.4 for permission to call a Mr Gary Harthill, an engineer employed by Network Rail, to be cross-examined on the hearsay evidence in relation to discussions with him contained in Mr Lee's witness statement.

The Project Coordination Agreement

13. In construing the PCA, the Defendant drew attention to Lord Hoffmann's well-known summary in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912G-913E of the principles applicable to the construction of written contracts. In particular, it referred to Lord Hoffmann's statement to the effect that the meaning of a document is what the parties using the words in question against the relevant background would reasonably have been understood to mean.
14. An important part of the Defendant's submissions was that the background to the PCA showed that the parties contemplated that the Defendant would be in receipt of an income stream from an approved tenant of the office building by about the end of 2004 or early 2005 and that this timescale was not consistent with the Claimant's construction of the PCA, which would result in a lengthy and undefined timescale before the Defendant would be in receipt of rental income from the office tenant. The Defendant pointed in particular to the Heads of Terms prepared by Chancellor & Sons on 23 August 2002 in respect of the deal between the Defendant and Lypar and to a report dated 9 July 2004 prepared by Mr Conner for Mr Hignell which expressed Lypar's commitment to starting on site that year and to meetings having been held with the prospective tenant.
15. In my judgment, those matters do not form part of the relevant background. The Heads of Terms are excluded as being part of the negotiations of the parties; Mr Conner's report is subsequent to the conclusion of the PCA. However, even if those matters were relevant, I am not satisfied that the Defendant has established that the parties' contemplation was as it alleged, either by reference to those matters or to the evidence of Mr Hignell and Mr Stokes. When Mr Hignell sought some reassurance from Mr Conner on 11 February 2003 of his negotiations with the apparently blue-chip prospective tenant, none was forthcoming. The PCA itself made no provision for the office building to be let to an approved tenant by any particular time and the time by which, according to the Defendant, it was contemplated that an income-producing tenant would be in place in fact ante-dated the last date by which the PCA might become unconditional under clause 2 thereof. I am also not satisfied that the Defendant's submission is supported by the provisions of clauses 1.1 and 13.1 of the PCA which relate to the letting of the office building to an approved tenant.
16. It was common ground between the parties that the applicable planning law formed part of the relevant background to the PCA.
17. It is convenient at this point to identify certain of the definitions in clause 1.1 of the PCA:

"Building: an office building consisting of not less than 12,000 square feet of net lettable floor area …."

"Building Contractor: such reputable contractor as may be appointed by the Developer"

"Development: the construction of the Building on part of the Property by the carrying out of the Works pursuant to the Planning Permission"

"Office Site: the part of the Property shown edged in red on the plan annexed hereto subject to such adjustment of the boundaries as may be required to comply with the requirements of the Planning Permission"

"Planning Permission: planning permission for the construction of the Building on the Office Site and a residential development consisting of not less than 16,000 square feet of gross internal floor area and not less than 24 units on the Residential Site"

"Property: the freehold property known as Heatherside House, Park Street, Camberley, Surrey and registered at HM Land Registry with title absolute under title numbers SY432900 and SY609313"

"Residential Site: the part of the Property shown edged in blue on the Plan annexed hereto subject to such adjustment of the boundaries as may be required to comply with the requirements of the Planning Permission"

"Works: the works described in the Building Contract and the Planning Permission for the construction of the Building".

The Issues

18. The issues which arise for determination are:
19. Planning conditions

(a) Are various conditions attached to the planning permission dated 27 September 2005 "Requisite Consents" as defined in clause 1.1 of the PCA?

(b) If so, is the fulfilment of the planning conditions "necessary for the commencement of the construction of the Development" within the meaning of clause 6.5 of the PCA?

20. Network Rail approval

(a) Is the requirement to obtain the approval of Network Rail (as successor to the British Railways Board) to plans for the carrying out of works under a restrictive covenant contained in a conveyance dated 31 December 1970 between the Board and Frimley and Camberley UDC as purchaser a "Requisite Consent" as defined in clause 1.1 of the PCA?

(b) If so, is the obtaining of it "necessary for the commencement of the construction of the Development" within the meaning of clause 6.5 of the PCA?

Issue 1: Planning conditions

21. The planning permission dated 27 September 2005 for the erection of the office building was, as is usual, subject to various conditions set out in a schedule. The Defendant submitted that the conditions on which it relied were "Requisite Consents necessary for the commencement of the construction of the Development" within the meaning of clause 6.5 of the PCA . The Claimant submitted that the conditions were not "Requisite Consents"; and that if any of them was a "Requisite Consent", it was not "necessary for the commencement of the construction of the Development". It was common ground that if the conditions were "Requisite Consents necessary for the commencement of the construction of the Development", then they had not been satisfied by 1 October 2005 as required.

Issue 1(a): Are the various conditions attached to the planning permission dated 27 September 2005 "Requisite Consents" as defined in clause 1.1 of the PCA?

22. Clause 1.1 of the PCA defines "Requisite Consents" to mean:

" planning permission, building regulation consents, by-law approvals, and other consents, licences and authorisations required from any competent authority, statutory undertaker, or person either for the carrying out of the Development or its intended use."

23. The Defendant submitted that there were nine conditions scheduled to the 27 September 2005 planning permission which were Requisite Consents within the meaning of clause 1.1, namely conditions 2, 3, 5, 8, 9, 13, 14, 17 and 21. Of those, the most important one is condition 14, which provided that no development should take place until details of locations for parking for site vehicles and loading, unloading and storage of plant and materials to be used in constructing the development had been approved by the planning and highway authorities.
24. In R (on the application of Hart Aggregates Ltd) v Hartlepool Borough Council [2005] EWHC 840 (Admin) [2005] JPL 1603, Sullivan J, at para. 67, drew a distinction between those cases where there is only a permission in principle because no details whatsoever had been submitted and those cases where the failure was limited to a failure to obtain approval for one particular aspect of a development. In the former case, Sullivan J stated that common sense suggested that the planning permission has not been implemented at all whereas in the latter case it suggested that the planning permission has been implemented but that there had been a breach of condition which could be enforced against.
25. That decision appears to have moved the law away from the so-called Whitley principle derived from Woolf LJ's judgment in Whitley & Sons v Secretary of State for Wales and Clwyd County Council [1992] 3 PLR 72, at page 80, where it was stated:

" As I understand the effect of the authorities to which I am about to refer, it is only necessary to ask a single question: are the operations (in other situations the question would refer to the development) permitted by the planning permission read together with its conditions? The permission is controlled by and subject to the conditions. If the operations contravene the conditions they cannot be properly described as commencing the development authorised by the permission. If they do not comply with the permission they constitute a breach of planning control and for planning purposes will be unauthorised and thus unlawful. This is the principle which has now been clearly established by the authorities."

26. In Hart Aggregates, Sullivan J identified certain disadvantages to such an approach in terms of development control despite the existence of certain exceptions to the Whitley principle. While Whitley remains good law, the effect of Hart Aggregates is to suggest a more flexible approach which requires consideration on a case-by-case basis whether a condition is in truth a condition precedent and if so, whether a failure to comply with it does indeed have the effect of engaging the Whitley principle.
27. Condition 14 is important because of the opinion expressed by Mr Carter in a letter from him dated 19 December 2007 to the Defendant's solicitors that, of the conditions attached to the 27 September 2005 permission relied on by the Defendant, only condition 14 fell within the first category identified by Sullivan J in Hart Aggregates. The Defendant submitted that the admitted non-compliance with condition 14 was fatal to the Claimant's case because the consequence of that non-compliance was that the 27 September 2005 permission has not been implemented at all. While the Defendant accepted that it need only rely on condition 14, it was careful to make clear that it did not abandon its reliance on the other conditions.
28. The Defendant relied on clause 8.4 of the PCA, which provides so far as is material:

" The Developer will use all reasonable endeavours pursuant to its obligation under clause 14 of this Agreement to procure that the Development is carried out:

…

(b) in accordance with this agreement, the Planning Permission and the Requisite Consents;

(c) in accordance with all statutory or other legal requirements and the recommendations or requirements of the local authority or statutory undertakings;

…"

29. Clause 14.1 of the PCA contains a warranty by the Developer to the Defendant that it has used and will continue to use reasonable skill and care in the performance of its obligations as project coordinator in relation to the Development.
30. The Defendant submitted that, in the light of clause 8.4, it would have been a breach of the PCA for the Claimant to start construction of the development on 1 October 2005 or at any time thereafter without the planning conditions having been satisfied; that this prospective breach of planning control could have been restrained by injunction, at the suit of either the planning authority or the Defendant; that the Defendant was entitled to have the PCA implemented in a manner which did not expose it to any risk of litigation in respect of a breach of planning control; and that the PCA should be construed accordingly. If, as was the case, the Development could not lawfully take place without the fulfilment of the conditions, they were "Requisite Consents".
31. The Claimant submitted that the planning conditions were outside the definition of "Requisite Consent". It was the grant of the full planning permission dated 27 September 2005 which constituted the "Requisite Consent", without the need for the conditions attached to it to have been fulfilled and the Defendant's construction did not make commercial sense. In its skeleton argument, the Claimant advanced a number of reasons in support of its submission, which it elaborated and amplified in its closing submissions, on the hypothesis that the fulfilment of the conditions were "Requisite Consents" as submitted by the Defendant:

(1) it would render the satisfaction of clause 2.1 of the PCA nugatory;

(2) the two year period given to the Developer under clause 2 to obtain a planning permission satisfactory to him would effectively be truncated since he would, within that period, have not only to obtain the grant of planning permission but would also have to satisfy the planning conditions; and there is nothing to stop the Developer making successive planning applications;

(3) it would mean that the Professional Team contemplated by clause 5.2 of the PCA had to be appointed only after their fulfilment, despite the fact that the appointment of the Professional Team was necessary in order for those conditions to be fulfilled;

(4) similarly, the building contract provided for in clause 4.2 could not be entered into until after their fulfilment;

(5) substantial work would have been undertaken which would not be covered by the Collateral Warranty in the Defendant's favour which the Developer was required to procure under clause 5.3 of the PCA – a matter of some importance in the event that the Developer were to become insolvent;

(6) if a condition related to both the Residential Site and the Development, all aspects of it would have to be satisfied in order to avoid rescission under clause 6.5.

32. The Claimant also submitted that the Defendant was not without remedy if the conditions were not "Requisite Consents" since there was the ability in an appropriate case to bring a claim for damages for breach of clause 8.4 of the PCA.

Conclusion

33. In my judgment, the fulfilment of the planning conditions are not "Requisite Consents" within the meaning of clause 1.1 of the PCA. I accept, as did the Claimant, that the Development has to be carried out lawfully and that the intended use of the Development has to be lawful. However, it does not follow in my judgment that, on the proper construction of the PCA, the conditions are within the definition of "Requisite Consents". What is required by the PCA for the lawful carrying out of the Development and its intended use is a full planning permission, in this case the permission granted on 27 September 2005. The Defendant's reliance on clause 8.4 of the PCA seems to me to be misplaced. In the first place, those provisions do not assist in determining the meaning of "Requisite Consents". In the second place, they assist the Claimant by dispelling the suggestion made by the Defendant that unless the conditions are "Requisite Consents", the Defendant is left without a remedy for the Developer's failure to fulfil them. In regard to the commercial sense of how "Requisite Consents" is to be construed, I prefer the Claimant's submissions.
34. In arriving at that conclusion, I have not had regard to Mr Trench's evidence dealing essentially with the background against which the PCA was to be construed. He described in great detail the stage to which, in his opinion, the Development would need to be progressed for the commencement of construction by reference to what he called the "old" RIBA plan of work. It did not appear to me that his evidence was particularly apt to relate to what was in fact intended for the Development, namely the appointment of a construction manager and of a large number of specialist contractors, rather than one building contractor and a number of subcontractors. Nor did it appear to me that his conclusion that the conditions would not have prevented the Developer commencing construction was of any assistance in arriving at the proper construction of the PCA.

Issue1(b): Is the fulfilment of the planning conditions "necessary for the commencement of the construction of the Development" within the meaning of clause 6.5 of the PCA?

35. In the light of my conclusion on Issue 1(a), this Issue does not arise. However, in case I am wrong on Issue 1(a), it is right that I should express my views on it. For this purpose, it is of course assumed, contrary to the conclusion which I have reached on Issue 1(a), that the planning conditions or at least condition 14 are "Requisite Consents".
36. Clause 6.5 of the PCA provides:

" If all Requisite Consents necessary for the commencement of the construction of the Development have not been obtained by two years from the date of this Agreement or such longer period as may be provided for by Recital (D) of this Agreement, then either party may rescind the Agreement by service of notice in writing to that effect upon the other whereupon this Agreement will cease and determine but without prejudice to the rights of any party in relation to any antecedent claim or breach of covenant."

(It is common ground that the reference to recital (D) is erroneous and should refer to clause 2.3 of the PCA).

37. The Defendant submitted that the fulfilment of the conditions or at least condition 14 was "necessary for the commencement of the construction of the Development". The starting point was again clause 8.4: the Claimant was not entitled to commence the work without having obtained the satisfaction of the conditions and it would be a breach of planning law and a breach of contract for them to do so. Without compliance with condition 14 in particular, it was not possible lawfully to commence the Development in implementation of the planning permission – any works carried out would just be building works. Both Mr Shrubsall and Mr Carter were of the opinion that at least Condition 14 was required to be fulfilled in order for any works commenced to be in implementation of the planning permission.
38. The Claimant submitted that the fulfilment of condition 14 – the only condition of substance – was not "necessary for the commencement of the construction of the Development". It submitted that, in considering whether or not the failure to satisfy condition 14 fell within clause 6.5, it was necessary to ask whether, as a matter of the proper construction of the PCA, the parties were contemplating an entitlement to terminate the PCA if it was not fulfilled and that the answer to that question was no. It may be that, as a matter of planning law, it was unlawful because the Developer started work without approval but that did not fall within clause 6.5. The Defendant had his remedy in a claim for damages for breach of clause 8.4. It might be that, as at 1 October 2005, the Claimant had not fulfilled all of the conditions and it would not be lawful for planning purposes but there would be time to obtain the fulfilment of the conditions before it started construction of the works.
39. The Claimant went on to submit that, in the case of a breach of a condition notice under section 187A of the Town and Country Planning Act 1990, the Defendant would not be at risk because, in view of clause 8.1 of the PCA whereby the Defendant granted the Developer a licence to enter upon the property, the Defendant was not "a person having control of the land" and so could not be served with such a notice. It also submitted that in the case of an enforcement notice, although the Defendant could be served with such a notice, the risk to it was in practice not great, in particular in view of the provisions of section 73A of that Act which gives a power for a planning permission to be granted for development carried out before the date of the application.
40. The Defendant's primary position was that whatever risk there might be to it where the conditions were not fulfilled was irrelevant. What mattered was that it was clear that the fulfilment of at least condition 14 was, on any view, "necessary for the commencement of the construction of the Development". The Defendant, correctly in my judgment, also disputed that it was not liable to be served with a breach of condition notice since clause 8.1 of the PCA did not have the effect contended for the Claimant.

Conclusion

41. In my judgment, if the planning conditions are "Requisite Consents" within the meaning of clause 1.1, then the fulfilment at least of condition 14 is "necessary for the commencement of the construction of the Development". I prefer the Defendant's submissions. The Claimant's argument to the contrary, based on what might be the risk to the Defendant flowing from a failure to fulfil the conditions, is unattractive and Mr Clark fairly acknowledged that he had an uphill task on this point.

Issue 2 : Network Rail approval

42. Under a restrictive covenant contained in a conveyance dated 31 December 1970 between the British Railways Board (the predecessor of Network Rail) and Frimley and Camberley UDC as purchaser, there was a requirement to obtain the Board's approval to plans for the carrying out of works. The conveyance itself was not before the court but certain of its provisions, including the restrictive covenant in question, were contained in the Land Registry charges register for both titles under which the land was held.
43. The restrictive covenant was in terms that:

" FOR the benefit and protection of such part of the adjoining or neighbouring property of the Board as is capable of being benefited or protected and with intent to bind so far as legally may be itself and its successors in title owners for the time being of the property or any part thereof in whosesoever hands the same may come the Purchase covenants with the Board as follows:-

(1) Not at any time -

(a) without previously submitting detailed plans and sections thereof to the Board and obtaining their approval thereto and

(b) without complying with such reasonable conditions as to foundations or otherwise as the Board shall deem it necessary to impose

to erect or add to any building or structure or to execute any works on any part of the property adjacent to the railway of the Board."

44. The charges register for both titles also set out various rights reserved under the conveyance to the Board, its successors in title and others authorised by the Board.
45. In addition to the issues which now arise for decision, there were originally two further issues, namely (1) whether, if it was not possible for the Claimant to start some work to the burdened land without infringing the restrictive covenant, Network Rail's approval was subject to an implied term that it should not be unreasonably withheld or delayed; and (2) if so, whether that approval was in fact unreasonably withheld or delayed such that it was not required. However, in the light of the oral evidence, the Claimant conceded that it could not establish that Network Rail implicitly gave the approval required under the restrictive covenant or unreasonably withheld or delayed giving that approval. In my view, that concession was rightly made, in particular in the light of Mr Thomas' evidence. It is therefore no longer necessary to decide whether Network Rail's approval was subject to an implied term that it should not be unreasonably withheld or delayed. The Claimant made it clear, however, that it maintains its position that such an implied term exists.

Issue 2(a): Is the requirement to obtain the approval of Network Rail to plans for the carrying out of works under the restrictive covenant a "Requisite Consent" as defined in clause 1.1 of the PCA?

46. The Claimant submitted that the Network Rail approval is not a "Requisite Consent". The definition of "Requisite Consents" in clause 1.1 of the PCA is not apt to cover restrictive covenants. Otherwise, it would mean that where a restriction was absolute or the covenantee could not be found, the Requisite Consent" could never be obtained. Restrictive covenants are dealt with in clause 6.6 of the PCA, which is not confined to restrictive covenants but also includes easements and "any … interest in or over the Property". The existence of clauses 6.6 and 6.7 informs and confines the meaning of "Requisite Consents". Clause 6.6 relates to the both the Office Site and the Residential Site and it would be an odd result if some but not all of the matters dealt with in those provisions were "Requisite Consents".
47. Clause 6.6 of the PCA provides:

" If any third party has the benefit of any easement, covenant, right or interest in or over the Property that may:

(a) prevent or hinder the progress of the Development, or

(b) adversely affect the use or enjoyment of the Property as contemplated by the terms of the Planning Permission,

then the Developer will negotiate with the third party for its release. The Owner at the cost of the Developer will enter into any requisite deed or agreement with the relevant third party subject to the Owner approving its terms such approval not to be unreasonably withheld or delayed."

48. Clause 6.7 of the PCA provides:

" If it is desirable or necessary to obtain the grant of any easement or right for the benefit of the Property from any third party:

(a) for the carrying out of the Development, or

(b) for the use or enjoyment of the Property as contemplated by the terms of the Planning Permission,

the Developer will negotiate with the third party for its grant. The Owner will at the cost of the Developer enter into any requisite deed or agreement with the relevant third party subject to the Owner approving its terms such approval not to be unreasonably withheld or delayed."

49. Clause 6.6 refers to the Developer's obligation to seek a release. The Claimant submitted that the parties must have contemplated the possibility of an application to the Lands Tribunal under section 84 of the Law of Property Act 1925 for such a release, which application could not have been expected to have been determined within the two year timeframe provided for by the PCA. While there would be no realistic prospect on such an application of a discharge of the restriction, there might well be a modification by for example the implication of a term requiring approval not to be unreasonably withheld or delayed, see Cryer v Scott (1986) 55 P&CR 183.
50. The Defendant submitted that the Claimant's construction was wrong, both as a matter of language and in terms of not making commercial sense. In the first place, it submitted that the definition of "Requisite Consents" is unlimited and that nothing in clauses 6.6 or 6.7 has the effect of cutting down that definition so as to exclude from it the Network Rail approval. The definition draws no distinction between proprietary and non-proprietary rights.
51. In the second place, the Defendant submitted that unless its construction were correct, there would be a gap in the protection afforded to it since it would have no ability to terminate the PCA if Network Rail's approval was not given.

Conclusion

52. In my judgment, the Network Rail approval is not a "Requisite Consent". As a matter of the language of the definition of "Requisite Consents", I prefer the Claimant's submissions. The restrictive covenant which requires Network Rail's approval is a proprietary right akin to the other matters covered by clause 6.6, namely easements and other rights or interests in or over the Property. For example, the release of an easement is not the subject-matter of the dominant owner's consent and is in my view plainly not within the definition of "Requisite Consents". The approval of the covenantee required under a restricted covenant cannot be detached from clause 6.6 so as to bring it, but not the other matters which are within clause 6.6, within the ambit of the definition of "Requisite Consents".
53. In regard to the Defendant's submission that there is, on this view, a gap in the protection afforded to it, there are in my view two answers. First, there is no gap. The PCA may not provide an entitlement to terminate under clause 6.5 where Network Rail's approval is not forthcoming but it does provide a remedy in terms of a potential claim for damages under clause 8.4. Second, if there is a gap, that is a possibly unforeseen consequence of what the parties have agreed and it is not possible to construe the definition of "Requisite Consents" in the way contended for by the Defendant simply in order to fill it. Also, as the Claimant submitted in its closing submissions, the existence of a gap is in any event not clear-cut. In reaching my conclusion, I have not been influenced by the Claimant's submission in relation to section 84 of the Law of Property Act 1925. The ability to obtain a modification of the restrictive covenant appears to me too speculative to be of any great weight.

Issue 2(b): Is the obtaining of Network Rail's approval "necessary for the commencement of the construction of the Development" within the meaning of clause 6.5 of the PCA?

54. In the light of my conclusion on Issue 2(a), this Issue does not arise. However, in case I am wrong on Issue 2(a), it is right that I should express my views on it. For this purpose, it is assumed, contrary to the conclusion which I have reached on Issue 2(a), that the Network Rail approval is a "Requisite Consent".
55. For the reasons set out below, whether or not the obtaining of the Network Rail approval was "necessary for the commencement of the construction of the Development" in the end turns on the meaning of the phrase "part of the property adjacent to the railway of the Board" in the last two lines of the restrictive covenant.
56. The Claimant submitted, in reliance on the last two lines of the restrictive covenant, that it only applied to that "part of the property adjacent to the railway of the Board", with the consequence that construction could begin on any other part of the property without the restrictive covenant being infringed. If this was not the case, the restrictive covenant could simply have provided that the purchaser was not to erect or add to any building or structure or to execute any works on any part of the property, with the omission of the additional words " adjacent to the railway of the Board". The Claimant also relied on the fact that, in distinction to the restrictive covenant, the rights reserved to Network Rail by the conveyance dated 31 December 1970 referred to "the property" as a whole.
57. The Defendant, however, submitted that the phrase "adjacent to the railway" was merely descriptive of the property conveyed and did not therefore limit the restriction to part only of that land. There was no way of defining what part of the land might or might not be "adjacent to the railway" and construction some distance from the railway might well affect it. Commercial certainty required the Defendant's construction to be adopted.
58. Much evidence was given on this issue. Mr Trench accepted in cross-examination that he had no experience of dealing with Network Rail, although he did have experience of dealing with London Underground. He would have been prepared to enter into a building contract and start mobilisation on the site without Network Rail's approval having been obtained. The Claimant relied on Mr Lee's evidence to the effect that in general Network Rail adopts a 10m strip buffer and that work outside that buffer would not be considered work adjacent to the railway. He accepted in cross-examination that the extent of the buffer would depend on the nature of the property and of the works. His view was that the risk in relation to work being carried out without approval lay more in losing Network Rail's goodwill than in the likelihood of Network Rail withholding approval. In contrast, Mr Shrubsall's opinion was that no reputable professional would want to recommend to a client the commencement of a building contract for this office without having obtained Network Rail's approval.
59. Mr Lee relied heavily in his report on a conversation which he had with Mr Harthill on 25 May 2007. Regrettably, the report made no reference to a letter which Mr Harthill wrote to Mr Lee on 30 March 2007 setting out the procedure for gaining Network Rail's approval, nor to other conversations which Mr Lee said in cross-examination that he had had with Mr Harthill after receipt of that letter. Mr Lee had also not troubled to inform the Defendant of a curious email exchange between the two gentlemen on 18 and 19 June 2007, after Mr Lee had signed his report, in which Mr Lee, at the request of the Claimant's solicitors, requested Mr Harthill to confirm that his understanding of the 25 May 2007 conversation between them was correct. Mr Lee's email to Mr Harthill on 18 June 2007 did not completely reflect the contents of his report and Mr Harthill's response the next day was ambiguous as to whether approval had to be sought from Network Rail in respect of works even outside the buffer zone. These matters have caused me to approach Mr Lee's evidence with a degree of caution.
60. In the end, however, the meaning of the phrase "any part of the property adjacent to the railway of the Board" is a matter of construction and the evidence as to what may or may not have been Network Rail's approach does not assist. By the time of its closing submissions, the Claimant's position on the expert evidence was no more than that the practical position as to the existence of a buffer zone, the extent of which would vary from case to case, corroborated the reason for the covenant not extending to the entirety of the property.

Conclusion

61. As a matter of construction, I am unable to accept the Defendant's submissions that that the phrase "adjacent to the railway" is merely descriptive of the property conveyed. In my judgment, the Claimant's construction is to be preferred. It follows that the obtaining of Network Rail's approval is not "necessary for the commencement of the construction of the Development" within the meaning of clause 6.5 of the PCA.

Conclusion

62. In the result, the Defendant was not entitled by its solicitors' letter dated 4 October 2005 to terminate the PCA. I shall grant the Claimant a declaration to that effect.