CPC Group Ltd v Qatari Diar Real Estate Investment Company

A contractual condition restricting withdrawal of a planning application must be construed objectively in its commercial and statutory context. An indication that a public decision-maker intends to refuse an application may be informal, may precede the statutory decision period, and may be communicated through authorised officers. It must nevertheless be a clear sign of the decision-maker’s present intention, rather than evidence of dislike, concern, inclination or possible future action. A recommendation comparing a revised application with an appeal need not relate to a fully developed scheme, provided the alternative approach is discernible and commercially consistent with the agreement. A breach of the restriction may give rise to damages without automatically requiring an agreed payment election or termination of the contract.

CPC sold its interest in a Chelsea Barracks development vehicle to Qatari Diar under a sale and purchase agreement containing deferred consideration provisions. The agreement required Qatari Diar to obtain planning permission using commercially prudent endeavours and prohibited withdrawal of the planning application unless specified conditions were met.

After opposition from the Prince of Wales and concerns expressed by the Mayor of London and his officers, Qatari Diar withdrew the application on 12 June 2009. CPC alleged breach of the withdrawal condition, the express utmost-good-faith obligation and the obligations concerning deferred consideration. Qatari Diar counterclaimed that CPC had acted in bad faith and purported to terminate the agreement. The central issues concerned the meaning and timing of a Mayoral indication, the validity of the planning consultant’s recommendation, the effect of the withdrawal, and the parties’ remedies.

1. Withdrawal condition. Paragraph 5(f) of Schedule 4 required both the Mayoral indication and the planning consultant’s recommendation to exist before withdrawal was notified to Westminster City Council. The word “indicated” meant a clear sign or suggestion of the Mayor’s present intention to direct refusal. It did not require a formal or irrevocable decision. An indication could be given before the statutory 14-day period and through authorised officers, but it had to reflect the Mayor’s own intention.
2. The six matters relied on by Qatari Diar, cumulatively and individually, showed concern, pressure for changes and possible refusal, but did not amount to the required indication. The final statement was the Deputy Mayor’s confidential view of what the Mayor might do in future, not a communication of an existing Mayoral intention. There was therefore no Deemed Refusal under paragraph 5(f)(i).
3. The planning consultant’s email was nevertheless a valid recommendation under paragraph 5(f)(ii). “Jointly” meant that the recommendation had to be made to CPC and Qatari Diar together; it did not require a joint instruction. A replacement application need not have been fully designed or documented. It was sufficient that a discernible alternative approach could sensibly be prepared and had a better prospect of achieving the contractual planning objective.
4. Qatari Diar’s withdrawal therefore breached paragraph 5(f), although its conduct did not breach the separate obligations in clauses 7.1 or 7.3. The contractual utmost-good-faith obligation required adherence to the spirit of the agreement, reasonable commercial standards of fair dealing, fidelity to the common purpose and consistency with justified expectations. The obligation to use “all reasonable but commercially prudent endeavours” did not require Qatari Diar to sacrifice its commercial interests, and its political interests could not independently justify commercially imprudent conduct.
5. Paragraph 5(aa) gave Qatari Diar a free election to pay £68.5 million. The agreement did not deem that election to have occurred merely because Qatari Diar withdrew in breach of paragraph 5(f). CPC’s remedy was a claim for damages, assessed by comparing the position had the application continued with the position resulting from the withdrawal.
6. CPC had not breached the agreement. Qatari Diar’s purported acceptance of CPC’s alleged repudiation was unjustified and itself repudiatory, but CPC had not accepted it. The agreement remained in force. Declarations were made accordingly; CPC’s claims based on clauses 7.1 and 7.3 and Qatari Diar’s claims based on CPC’s alleged breaches were dismissed.

First-instance decision of the High Court (Chancery Division). No appellate history was stated in the judgment.