Yewbelle Ltd v London Green Developments Ltd & Anor

A contractual obligation to use reasonable endeavours to obtain a planning obligation does not, without more, make the contract automatically terminate when the obligation is unmet. Where the buyer may waive a condition suspending its duty to complete, the seller must ordinarily give the buyer a real opportunity to make that election after the reasonable period for obtaining the condition has expired.

A planning agreement is substantially in the form of an agreed draft if its legal and commercial effect is substantially unchanged. A requirement making occupation of residential units conditional on agreeing and granting a lease of a library materially altered the parties’ bargaining positions and was not a permitted departure. The seller also had to continue using reasonable endeavours, including pursuing available negotiations, without sacrificing its commercial interests.

Knightbridge Green Limited contracted to sell a redevelopment site to London Green Developments Limited. The contract required the seller to use all reasonable endeavours to obtain a completed agreement under section 106 of the Town and Country Planning Act 1990, substantially in the form of an attached draft. The buyer’s obligation to complete was suspended until that agreement was obtained.

The property was transferred to Yewbelle Limited, which sought a declaration that the contract had been discharged after the local planning authority required additional provisions concerning a public library and other matters. The buyer denied that the contract had ended and counterclaimed for specific performance. The issues were the proper construction of the condition, the meaning of substantial conformity, and whether Yewbelle had used all reasonable endeavours.

1. Construction and waiver. The section 106 requirement operated for the buyer’s benefit. It suspended the buyer’s obligation to complete but did not suspend the seller’s obligation to sell. The buyer could therefore waive the requirement and compel completion. The contract did not provide for automatic termination merely because the desired agreement was not obtained.
2. Implied term. The proposed primary implied term, allowing the seller to determine unilaterally when reasonable efforts had ended and thereby terminate the contract without warning, was inconsistent with the agreement’s structure and failed both the necessity and obviousness tests. A narrower term was necessary: after using all reasonable endeavours for a reasonable time, the seller had to tell the buyer that the agreement had not been obtained and give the buyer an opportunity to elect whether to waive the condition. Such an election generally required knowledge, or the means of knowledge, of the relevant facts and a reasonable opportunity to consider the choice.
3. Substantial conformity. Whether a draft agreement was substantially in the form of the contractual draft was an objective question. Changes in parties and redistribution of the aggregate financial contribution could be permissible where the commercial effect remained substantially unchanged. The added requirement that a lease of the library be granted before residential occupation was materially different. It made occupation depend on agreement of rent, premium, fitting-out and other lease terms, placing the planning authority in a substantially stronger bargaining position.
4. Reasonable endeavours and result. Yewbelle was not required to sacrifice its commercial interests, but it had to pursue available and realistic steps. After receiving the revised draft, it did not seriously press the local authority to remove the library-lease requirement or pursue negotiations with sufficient determination. It therefore had not discharged its contractual obligation and could not rely on non-satisfaction of the condition.
5. Disposition. The claim was dismissed. London Green Developments Limited was entitled to specific performance. No damages were awarded because loss caused by delay was not proved.