London & Ilford Ltd v Sovereign Property Holdings Ltd

Where a contractual overage trigger is expressly tied to receipt of prior approval under the planning regime, payment becomes due on that event unless the agreement clearly requires more. A court should not infer a further condition that approved residential units must also be capable of construction under building regulations where those regulations are neither mentioned nor supported by a contractual mechanism. Planning consent and building-regulation compliance are distinct regimes. References to units for residential use for sale or letting do not, without more, import that additional requirement. The agreement must be construed as a whole, including its plans and commercial context.

London & Ilford Limited purchased Arodene House from Sovereign Property Holdings Limited under an overage agreement. Clause 3.1 required payment of £750,000 if a First Trigger Event occurred. The amended definition referred to receipt of prior approval for at least 60 Residential Units shown on specified plans or under a similar scheme.

Sovereign obtained prior approval under the Town and Country Planning (General Permitted Development) Order 2015. L&I argued that the trigger also required the units to be lawfully capable of construction under the Building Regulations. Warren J entered summary judgment for Sovereign: [2017] EWHC 1773 (Ch). The appeal concerned the proper construction of the amended overage agreement.

The Court of Appeal, in a judgment delivered by Lord Justice David Richards with which Lady Justice Asplin agreed, unanimously dismissed the appeal and upheld summary judgment for £750,000 and interest.

1. Contractual trigger. Clause 3.1 made payment conditional on receipt by L&I of a Prior Approval, defined by reference to the Town and Country Planning (General Permitted Development) Order 2015. The approval was received within the Overage Period. No further contractual step or event was required before payment became due.
2. Statutory context. The planning and building-regulation regimes served separate purposes. The relevant permitted-development provisions concerned change of use from offices to dwellinghouses and prior approval on the specified transport, contamination, flooding and noise matters. They did not address compliance with Building Regulations.
3. Construction of Residential Units. The words referring to residential dwellings for residential use for sale or letting were insufficient to import an additional requirement that all 60 units be capable of construction under Building Regulations. The agreement mentioned neither those regulations nor any mechanism for determining compliance. The plans expressly referred to in the First Trigger Event also had to be given effect and could not be disregarded in favour of an unexpressed viability requirement.
4. Context and risk. The change from a commencement requirement to a completion requirement within three years, and the assumed knowledge of Sovereign about L&I’s reason for excluding storage-area units, did not alter the result. The parties were sophisticated developers, had professional advice, and L&I had acknowledged its opportunity to investigate the property and its suitability. Those matters supported the ordinary construction of the agreement.
5. Summary judgment. A factual dispute about whether Sovereign had been informed of L&I’s reason could not be resolved summarily. The court nevertheless proceeded on the assumption favourable to L&I and concluded that it made no difference to the contractual construction. The appeal was dismissed.

• Court of Appeal (Civil Division): Appeal dismissed and the order for summary judgment upheld.
• High Court of Justice, Chancery Division: Warren J granted summary judgment for £750,000 and interest: [2017] EWHC 1773 (Ch).