Anglo Continental Educational Group (Gb) Ltd v ASN Capital Investments Ltd

Where a contractual purchase price is calculated by reference to the cost of releasing restrictive covenants, the relevant development proposal and reasonably required release price must be assessed objectively at the contractual completion date. The proposal must be reasonably formulated on appropriate professional advice and have a reasonable prospect of acceptance. A quoted asking price is evidence but need not be accepted if effective negotiation would reasonably produce a lower figure.

In a late-completion clause, “default” ordinarily means breach of contract. Compensation nevertheless requires a causative link between the breach and the delay, assessed against the contractual wording and equitable principles. A buyer who fails to tender the price due under the contract may therefore be liable for contractual compensation.

The claimant agreed to sell two properties to the defendant for a price of £862,000 less the amount required to obtain release or variation of restrictive covenants so that a residential development could proceed. The contract was conditional on satisfactory planning permission, but the defendant waived that condition after planning appeals failed.

The parties disputed the number of units comprising the relevant development, the reasonable price required for release of the covenants, and whether the defendant’s failure to complete constituted default attracting compensation. Earlier proceedings and an appeal had established that the discount remained applicable, but the parties could not agree its application to the facts.

1. Purchase price. The discount remained applicable despite waiver of the planning condition. The relevant development was the buyer’s proposal at the contractual completion date, not necessarily the development ultimately authorised by planning permission.
2. The proposal had to be reasonably formulated on appropriate professional advice and discussions with planning officers. The court assessed the hypothetical reasonable proposal objectively, without hindsight, and held that it comprised 10 units. The outline sketch for a larger scheme was only a tactic to test the planning officer’s limits and was not the relevant reasonable proposal.
3. The amount “required” to obtain release of the covenants was not automatically the figure quoted by the covenantees’ solicitors. It was the amount reasonably expected to be required after effective negotiations, assessed at the contractual completion date. On the expert evidence, that amount was £6,000 per unit, plus agreed costs of £1,500 and VAT. The purchase price was therefore £800,237.50.
4. The defendant had never tendered that amount. It was therefore in breach and could not establish a claim for damages based on the claimant’s failure to complete.
5. “Default” in the late-completion provision had no meaning different from breach of contract. However, compensation required a causative link between the default and the delay. The defendant’s failure to tender the purchase price would have delayed completion in any event. The claimant was accordingly entitled to compensation at the contractual rate under clauses 7.3.1 and 7.3.2. The precise declaration was left for agreement or further determination.

The deputy High Court judge rejected both parties’ competing interpretations but did not determine the correct alternative formulation. The Court of Appeal dismissed the appeal and cross-appeal and stated the meaning of the contractual provision. This judgment determined the resulting factual application of that interpretation.