Bellway Homes Ltd v Beazer Homes Ltd

Where shareholders agree to distribute development land in parcels of equal value, “equal value” ordinarily refers to objectively ascertainable open-market value at the date of disposal. A course of dealing involving unequal allocations may establish an arrangement under which the imbalance is corrected by later disposals. That arrangement is not necessarily confined to one development. Where an agreed allocation fails to deliver the intended balancing because land was not developable at the disposal date, the shortfall may be corrected through a later allocation from another development covered by the agreement.

Bellway and Beazer were equal shareholders in a joint venture company governed by a shareholders agreement covering the acquisition and disposal of development land in several areas. During the Cramlington development, land was allocated to the parties in unequal amounts, on the understanding that later allocations would correct the imbalance. The final allocation included land which was subsequently found to be incapable of development because of methane risks from former mine workings.

Bellway sought a declaration that Beazer was obliged to procure an allocation from the company’s Middle Warren site sufficient to rectify the resulting imbalance. The trial concerned the preliminary issue of Bellway’s entitlement to that declaration.

1. Declaration granted. Bellway was entitled to a declaration that Beazer must exercise its voting rights in the joint venture company so that Bellway received a disposal of Middle Warren land sufficient to rectify the imbalance in the value of land disposed of from Cramlington.
2. Clause 3.1(d) of the shareholders agreement required disposals to be made in parcels of equal value, unless the shareholders agreed otherwise. To make that provision workable, equal value meant the objectively ascertainable open-market value of the relevant land at the date of disposal.
3. The parties had in practice agreed to unequal allocations on the basis that the party receiving less land would catch up through a later disposal. The agreement was not confined to Cramlington and contained nothing preventing that balancing arrangement from continuing from one development to another.
4. The September 1999 allocation did not achieve its intended purpose. Area 3A was not developable at the date of disposal, since the former mine workings and the local authority’s position made planning permission uncertain and, in fact, it was refused shortly afterwards. Bellway was therefore entitled to have its shortfall corrected.
5. The declaration was not unworkable merely because valuation questions remained. Those questions could be addressed, if necessary, through a subsequent inquiry into the appropriate valuation and acreage.

Not stated in the judgment.