Anglo Continental Educational Group (GB) Ltd v Capital Homes (Southern) Ltd

Where a contract provides for a price reduced by the cost of releasing restrictive covenants, the deduction remains required even if planning permission has not been obtained or the release cost has not yet been agreed. The relevant question is how the deduction is to be ascertained at completion.

A term requiring an estimate at completion, with later adjustment, should not be implied merely because it would provide a practical solution. The term must be obvious and consistent with the express contractual machinery. A term dependent on a future agreement may conflict with a requirement that the price be determined and paid at completion.

The claimant agreed to sell a property to the defendant for redevelopment, subject to planning permission and the release of restrictive covenants. The contract defined the purchase price as £862,000 less the amount required to obtain a deed releasing or varying the covenants.

The defendant waived the planning condition, but the parties had not agreed the covenant-release cost by the contractual completion date. The claimant sought a declaration that the full price was payable. The defendant sought a declaration permitting deduction of an estimated cost, subject to later adjustment. The central issues were the construction of the price term and whether the defendant’s proposed term could be implied.

1. Construction of the express term. The contract required a deduction from £862,000 for the cost of clearing the restrictive covenants. That obligation did not depend on planning permission having been obtained, the number of units ultimately permitted, or the covenantees having agreed a figure by completion. Those matters concerned the buyer’s ability to exploit the release, not the allocation of the title-clearing cost between the parties.
2. Commercial meaning. The claimant’s construction would make the buyer pay more because planning permission had not been obtained or because fewer units might be developed. That made no commercial sense and was inconsistent with the contractual allocation of the risk.
3. No implied term. The defendant’s proposed term, requiring an estimate at completion followed by adjustment when the covenant-release cost was later agreed, was not implied. It was not obvious that the parties would have adopted it. Its complexity and uncertainty as to the method of estimation weighed against implication.
4. The contract required the purchase price to be determined and paid at completion. A later adjustment could require payment exceeding the purchase price at completion or postpone part of that price, contrary to the express terms. The proposed term therefore could not properly be implied.
5. The court refused both declarations. The claimant’s claim was dismissed and the declaration sought by the defendant in its counterclaim was refused.