Smith & Anor v Royce Properties Ltd

Contractual descriptions must be construed in their commercial context. Where a verbal description conflicts with a plan, there is no automatic presumption that either prevails. The court must construe the particular instrument, considering the background and the commercial consequences. A plan may control where it gives effect to the parties’ sensible commercial intention.

An option referring to planning permission being granted “in respect of” land is not limited to permission that was legally necessary for the relevant use. Permission for operational works forming part of a sensible planning unit may trigger the option, provided there is no bad faith or extravagantly wide application.

The claimants, trustees of the Sambrooke Trust, appealed from a decision of Laddie J in the Chancery Division. They had granted the defendant’s predecessors an option to repurchase land if planning permission was granted in respect of specified land within 20 years.

The dispute concerned whether the option covered parcel 0052, which was omitted from the verbal description but shown on the filed plan, and whether planning permission for allotments, access and parking triggered the option. The High Court rejected both arguments.

1. Appeal allowed. The option covered parcel 0052. The verbal description referred only to parcel 0062, whereas the plan showed the whole field, including 0052.
2. Tuckey LJ held that the conflict created an ambiguity. There was no presumption that the verbal description prevailed over the plan. Construction depended on the particular conveyance and its commercial context. The filed plan was entitled to substantial weight, and the commercial purpose of the option made it unlikely that the parties intended to exclude a landlocked strip essential to the development of the field.
3. The proper construction was that the plan controlled the verbal description. That construction avoided a commercially nonsensical result and reflected the intention a reasonable person would attribute to the transaction. Arden LJ agreed, emphasising the approach stated by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896.
4. The planning permission triggered the option. The option referred, in unqualified terms, to planning permission being granted “in respect of” any part of the land. It was unnecessary to decide whether Crowborough Parish Council v Secretary of State for the Environment (1980) 43 C&PR 229 was correctly decided, because the permission covered a sensible planning unit and was required for access and parking works necessary to make the allotment use realistic.
5. The court accepted that different considerations might arise where an application was made in bad faith or over an extravagantly large area. Those circumstances were absent. The order declared the obligation to offer the land for sale valid and subsisting, required the defendant to make the offer, and provided for valuation by an independent surveyor if price was not agreed.

• Court of Appeal (Civil Division): appeal from the Chancery Division allowed. Declaration and consequential orders made.
• High Court, Chancery Division: Laddie J held that parcel 0052 was outside the option and that the planning permission did not trigger it.