Portsmouth City Football Club v Sellar Properties (Portsmouth) Ltd & Anor

In construing a contractual price-adjustment formula, the court must identify the meaning conveyed by the agreement against its admissible factual matrix. A reference to consent to construct a road across a public highway means permission from the highway authority, not every proprietary right later acquired to facilitate construction or dedication. A capital sum may be nil where no payment was required for that consent. A party cannot rely on the consequences of its own breach of an obligation to negotiate the relevant sum. Where contractual valuation machinery fails, the court may substitute machinery if there is an objective basis for valuation and the machinery is inessential to the contract.

The Club held an option to acquire land from the Developer for a proposed football stadium. The purchase price was £2 million, subject to deduction of a Milton Lane Allowance calculated by reference to any sum required by Portsmouth City Council for its consent to the Spine Road crossing Milton Lane.

The Council later sold the Developer a single parcel comprising interests in Milton Lane and the Barwood Land for £4.255 million, but refused to apportion the price. The Club claimed that the relevant sum was nil and that the purchase price was therefore £900,000. The Developer contended that the clause included the value of the acquired freehold and was alternatively frustrated or required court-apportioned valuation.

1. Construction. The words of the Milton Lane Allowance were construed in their contractual and commercial context, applying the principles stated in Investors’ Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 and Bank of Credit and Commerce International v Ali [2002] 1 AC 251.
2. “Consent for the Spine Road to cross” Milton Lane meant permission from the Council acting as highway authority. It did not include acquisition of the freehold, all rights connected with crossing the lane, or every step required to dedicate the Spine Road as a public highway.
3. The formula permitted the relevant capital sum to be nil. The evidence showed that the Council ultimately accepted that it could not charge for the highway-authority consent and attached no price to it. A nil sum was therefore attributable to, and identified by, the Council for the purposes of the formula.
4. Alternatively, the Developer could not rely on the absence of an apportionment because it had negotiated a wider global transaction instead of jointly negotiating the lowest possible sum as required by clause 13. The principle applied in Alghussein Establishment v Eton College [1988] 1 WLR 587 prevented reliance on the consequences of that breach.
5. The agreement was not frustrated. If valuation machinery had broken down, the principles in Sudbrook Trading Ltd v Eggleton [1983] 1 AC 444 and Re Malpass [1985] Ch 42 would have permitted substituted machinery where an objective valuation basis existed and the specified machinery was inessential. Neither limitation created difficulty here.
6. The Club was entitled to the declaration sought: the purchase price was £900,000.

Not stated in the judgment.