Category Archives: Options

No prospects of planning so negligence did not cause application expense losses

Where a claim for breach of contract is successful, the first set of principles concerns the date of assessment of damages:

1. The overriding principle is that contractual damages are compensatory. The damages should represent the value of the contractual benefit the claimant has been deprived of by the breach of contract.

2. Prima facie damages are to be assessed as at the date of breach without regard to later events.

3. You can depart from that rule where it is necessary to ensure that the claimant is not over-compensated or under-compensated having regard to events which have occurred since the date of breach, in particular where matters which were contingencies at the date of breach have become faits accomplis later.

4. Where this is necessary, one way of departing from the rule is to assess the damages as at a later date. Another approach is to assess damages as at the date of breach, but in the light of later events.

In claims for professional negligence against solicitors and barristers where the lawyer’s negligence has resulted in their client losing the chance to bring a claim against a third party, a second set of principles apply to the quantification of damages. Here, the court must value the chance which has been lost. That means the court must assess the client’s prospects of success. If the underlying claim was certain to fail anyway, it will have had no value and the claimant will have no loss as a result of the lawyer’s negligence.

In Ridgewood Properties Group Ltd & Anor v Kilpatrick Stockton Llp & Ors [2014] the First Claimant (“RPG”) entered into a series of 9 contracts with Texaco Ltd (in its then and later names) (“Texaco”), known as the Airspace Agreements. Here RPG acquired conditional options to buy sites used by Texaco that were or included petrol filling station shops. RPG would apply for planning permission for redevelopment to become a shop with flats above. On planning permission, RPG would take a building lease of the site and carry out the development, and then, RPG would either acquire the freehold or a long lease of the site, subject to Texaco retaining the shop.

In apparent repudiatory breach of the options Texaco sold the 9 sites, to Somerfield Stores Ltd (“Somerfield”) and Azure Properties LLP (“Azure”), without reserving to RPG the power to compel Somerfield or Azure to perform Texaco’s obligations to RPG under the Airspace Agreements.

RPG claimed that their solicitors had negligently failed to advise RPG about their right to terminate the Airspace Agreements prior to March 2006. RPG said that, if the solicitors had advised that Texaco’s apparent repudiatory breach of the Airspace Agreements enabled RPG to terminate the Agreements and claim damages for loss of opportunity to perform them, RPG would have done so, and would not have continued to seek planning permissions.

The court concluded that irrespective of any repudiation of the Agreements by Texaco, RPG had never had a real prospect of successfully obtaining the planning permissions anyway, so any claim for wasted costs would fail. Going ahead with something which (independently of any Texaco breach or solicitor’s negligence) they had no chance of getting had broken the causal link between any Texaco breach of contract/solicitor’s negligence and their loss incurred in wasting expenditure on planning applications: as that loss was always bound to occur if they went ahead with applications which had no prospects of success – regardless of the status of the Airspace Agreements.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Court implies duty on Seller to cooperate in property sale conveyancing

In the scenario where a defaulting Buyer has its deposit at risk on a flat purchase and arrives at a settlement agreement, to what extent is the Seller impicitly obliged to cooperate in the normal conveyancing process to meet the deadlines laid down in the settlement for one of the Buyers to buy an alternative flat off the Seller?

In Gateway Plaza Ltd v White [2014] the Buyer concerned had been given till 28 March 2012 to “exchange contracts” for the purchase of the alternative flat.

However the Seller’s large Leeds conveyancing solicitors sent the Buyer’s solicitors documentation still wrongly in the joint names of the Buyer and the other original buyer (who had by now dropped out of the purchase and then died) and for whatever reason did not provide the CML disclosure of incentives form required by the Buyer’s Mortgagees under the Council of Mortgage Lenders’ Rules. In consequence the purchase had still not been completed in May and the Seller alleged that the Buyer had failed to take the alternative flat purchase available to him under the settlement and so must suffer the full financial consequences of not going along with the alternative flat offer compromise.

The High Court had no difficulty inferring terms that it had been incumbent on the Seller to comply with the normal conveyancing process and requirements of the Buyer’s solicitors and of its lender to meet the deadline and to have done all the things normal Sellers’ solicitors would do including produce correctly drawn documents and a CML Certificate.

So it was the Seller, rather than the Buyer, who had failed to comply with the obligations, which were impliedly imposed on the Seller under the settlement agreement as soon has the Buyer had decided to take up the opportunity the settlement offered of the alternative flat.

This is no “rocket science”.

Applying one of the standard tests for implying legal terms, if at the settlement hearing a “reasonable bystander” had asked whether the Seller would cooperate with the conveyancing process the Seller would hardly have said “no”. The parties would have both said “of course”.

Different rules apply to court settlements like this though. Under normal land contracts its not safe to rely on implying terms as Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires all terms to be express and contained in the contract and (where applicable) other documents whose terms are properly incorporated by reference into the contract.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Lease break clause conditions had to be complied with

Siemens Hearing Instruments Ltd v Friends Life Ltd (2013) was a High Court Decision that contradicted the orthodoxy that a Tenant’s break right in a lease is an option clause and (as such) must be adhered to strictly. The clause said the notice must be expressed to be given under Section 24(2) of the Landlord and Tenant Act 1954 and it wasn’t.

That requirement was an old one designed to stop tenants coupling a break with a statutory request for a new tenancy to secure a reduced rent for the same premises in a falling market.

Lease break clause conditions had to be complied with

The High Court ruled that the break clause’s draftsman should have spelt out the consequences of non compliance with the condition if they were intended to be fatal. Since he had not the Court felt it was left to it to decide the result of non compliance and it decided that it was not fatal to the Tenant’s break notice being effective.

The case offered hope to Tenants but the Court of Appeal has now dashed that hope. Finding against the Tenant, it said the break clause imposed a mandatory requirement that the notice must be expressed to be given under Section 24(2) of the Landlord and Tenant Act 1954 and it wasn’t. The fact that the draftsman had not spelt out the consequences of non compliance with the condition did not give the court latitude to spell them out in any other way. The notice had to comply with the requirements of the clause. There was no such thing as “substantial compliance”.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Miller Homes Case : Housing Development Pressures & Managing the Transition to Development Plan Documents

Many local authorities are still in transition between the old style local development plans (“LDDs”) and the development plan documents (“DPDs”) and supplementary planning (“SPDs”) intended to replace them.

However Government Policy, including the National Planning Policy Framework (“NPPF”) and other factors, such as sites being discovered to be at flood risk, may render LDDs out of date sooner.

The NPPF and emerging and adopted DPD’s SPD’s and (pending their emergence and adoption to a lesser and diminishing extent LDD’s) are all “material considerations” to be taken into account by local planning authorities on any planning application.

In Miller Homes Limited, R (On the Application Of) v Leeds City Council [2014] Leeds City Council (“LCC”) were not due to produce the draft DPD till Spring 2014.

In the meantime they acknowledged the need to release more sites for housing and had introduced an Interim Policy pending the adoption of the DPD.

Miller Homes Limited (“Miller”) had an option on, and were seeking to develop housing at, a site at Boston Spa. Under the LDD this had been covered by a policy that would only have allowed its development in very restricted circumstances. Miller were upset that the criteria in the Interim Policy prevented its getting residential planning permission as well.

Miller said the Interim Policy was unlawful because:

(i)The policies it contained fell within regulation 5 of the Town and Country Planning (Local Planning) (England) Regulation 2012 (“the Regulations”) and therefore could only be adopted (if at all) as a DPD or SPD. However LCC had failed to follow the prescribed procedure for either a DPD or an SPD.

(ii)(Even if LCC were correct in their contention that the Interim Policy was neither a DPD nor an SPD, but a “residual” LDD instead) LCC had failed to consult adequately or at all before adopting the Interim Policy and Miller had a legitimate expectation that LCC would consult it.

Miller argued that the Interim Policy was a document which includes a Site Allocation Policy (“SAP”) within Regulation 5(2)(b). Failing that, Miller contended that it contained statements regarding the allocation of sites for a particular type of development or use (Regulation 5(1)(a)(ii)) or regarding SAPs which are intended to guide the determination of applications for planning permission (Regulation5(i)(a)(iv)).

The central question, therefore, was whether the Interim Policy included an SAP, or contained statements regarding a SAP.

The Court rejected Miller’s submission. The Interim Policy did not include a SAP, or any statements regarding an SAP, because:

(i)The Interim Policy did not allocate a site or sites for a particular use or development. It set out criteria. It was therefore a criterion based policy against which applications for planning permission for development housing on “protected area” land would be measured.

(ii)Policy N34 was not an SAP. Therefore the Interim Policy did not contain statements regarding an SAP. N34 was a safeguarding policy. It did not allocate a site or sites for particular use or development. It restricted development within certain areas. In paragraph 5.4.9 of the UDP Strategy Document [which is the text preceding N34] the following was said “…it is not currently envisaged that there will be a need to use any such safeguarded land during the review period …meanwhile, it is intended that no development should be permitted on this land that would prejudice the possibility of longer term development …” Although the NPPF post dated N34, it contained in paragraph 85 requirements upon Local Planning Authorities to identify areas of “safeguarded land” and to make it clear “that the safeguarded land is not allocated for development at the present time.”

Nor did the Interim Policy fall within the Regulations as “containing statements regarding a Development Management Policy.” LDD Policy N34, which was referred to, did not regulate the development or use of land. It was a safeguarding policy.

This left Miller’s alternative ground that, if the Interim Policy was a residual LDD, the Defendant had a duty to consult. The Court could see that the Interim Policy may carry less weight as a “material consideration” for lack of consultation but rejected Miller’s claim on this Alternative Ground. There was no universal duty to consult in respect of LDDs nor could the Court find any duty to consult here based on any “legitimate expectation” of Miller to be consulted.

In this interim period the planning process is vulnerable to mayhem and this decision will be helpful to local planning authorities attempting to manage the transition whilst managing a controlled release of sites.

This blog is posted out of general interest. It is not intended to replace the need for proper legal advice in individual cases.

Directors diverted Property Opportunity to their Own Company and breached Fiduciary Duties

Where directors encounter an opportunity in their role as a director or that they might and should implement for the benefit of the company they must exploit it for the benefit of the company and not seek to divert it for their own benefit. This rule applies equally where the shares of the company to which the opportunity is diverted are beneficially owned by the directors concerned.

This was the situation in Pennyfeathers Ltd –v- Pennyfeathers Property Company Limited (2013). In that case the directors were brought in to assist a company set up to use a land option held by 2 individuals. But they set up their own company Pennyfeathers Jersey Limited which proceeded to take a conditional contract in respect of the land and to enter options to acquire surrounding land.

The court lifted the corporate veil on Pennyfeathers Jersey Limited saying that its contracts where impressed with implied trusts in favour of Pennyfeathers Limited by virtue of the directors’ ownership and control of the Jersey Company and held that they and the directors were accountable to Pennyfeathers Ltd for their profit.

This position could only have been avoided if the relevant directors had made full disclosure to Pennyfeather’s Limited and got that company’s full approval by written resolution. In practice that could only have occurred had the 2 directors taken over Pennyfeathers Limited as well.

As usual this blog is posted out of general interest. It does not replace the need for proper legal advice in individual cases.