Centrica Langage Ltd v Langage Energy Park Ltd

A contractual licence to enter land for construction must be construed with the obligations governing that construction. Where the agreement requires specified approvals, contractual arrangements or warranties before works begin, compliance with those obligations may be a condition of the licence even if the licensing clause is not expressed in conditional terms.

Negotiations do not, without more, waive strict contractual rights. On an interlocutory application, the court should avoid resolving seriously arguable factual disputes on affidavit evidence. An injunction may be refused where the claimant’s loss is compensable in damages, while the injunction would deprive the defendant of substantial contractual protection.

The claimant and defendant had entered into a co-operation agreement governing adjoining power-station and business-park developments, including construction of a spine road across the defendant’s land. The agreement granted the claimant a licence to enter the land but also imposed prior obligations concerning approval of the building contract and contractor, agreement of the works specification, and provision of collateral warranties.

The claimant sought a mandatory injunction after the defendant erected gates and fences preventing access for construction of the southern section of the road. The claimant argued that the licence was standalone, or that the defendant had waived its contractual rights. The central issues were whether the licence was conditional on prior performance and whether interim relief should be granted pending trial.

1. Construction of the licence. Clause 14.10 granted a licence to enter the defendant’s land to “construct” the spine road. That word had to be read with clause 14.16 and Schedule 5, which governed how the road was to be constructed. The licence was therefore conditional on compliance with obligations expressly required before works commenced, including approval of the building contract and contractor, agreement of the detailed specification, and delivery of warranties. The defendant’s consent could not be unreasonably withheld or delayed where the agreement so provided. Until those obligations were met, the claimant had no available licence to enter.
2. Waiver. The claimant had an arguable case that the defendant waived or varied some requirements by permitting earlier access and engaging in discussions. However, negotiation did not itself waive existing contractual rights. Whether the defendant had waived its rights, or whether a variation had been agreed, depended on the evidence and was a matter for trial.
3. Interlocutory relief. The court applied the approach in American Cyanamid Co v Ethicon Ltd [1975] 2 WLR 316. The disputed factual and contractual issues could not safely be resolved on affidavit evidence. The claimant’s additional construction costs and inconvenience could be compensated by damages for the limited period before an early trial. By contrast, granting the injunction could deprive the defendant of contractual rights to obtain warranties and control the development, for which damages might be inadequate.
4. The case was not simply one of preserving an existing right pending trial. The injunction would in substance compel performance of the agreement despite a seriously arguable defence based on admitted breaches. The further injunction was refused. The claimant received the costs of the first application and the defendant the costs of the second, subject to detailed assessment at the end of the trial.

This was a first-instance interlocutory decision following an earlier hearing on 4 April 2007 at which limited relief had been granted. The present full inter partes application for further relief was refused. No appellate decision is stated in the judgment.