Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd

An obligation to use reasonable endeavours is a positive contractual obligation. Its content depends on the language of the contract and the facts. The court must assess whether a proposed step was feasible and, objectively, whether it was reasonable to take it, balancing adverse consequences against the contractual obligation.

A party cannot rely on difficulties which it has created itself to avoid performing an obligation by the time required. Where performance is required as soon as reasonably practicable, the obligation is not satisfied by acting when convenient or when best suited to the party’s funding arrangements.

Gaia Ventures Limited claimed £1.4 million from Abbeygate Helical (Leisure Plaza) Limited under an overage covenant relating to the redevelopment of an ice-rink and leisure site.

Payment depended on an acceptable planning permission and the assembly or variation of specified property interests before a ten-year longstop date. Planning permission was granted in February 2013, but the relevant agreements and property arrangements were completed only in July 2013, after the longstop date.

The central issues were the meaning of the contractual conditions, the scope and timing of Abbeygate’s obligations to use reasonable endeavours, whether Abbeygate had delayed performance to protect its financing arrangements, and the loss caused by any breach.

1. The February 2013 planning permission was an Acceptable Planning Permission. The relevant contractual opinion concerned the terms and conditions of the permission itself, not other impediments to development. A usual condition requiring compliance with plans submitted by the developer could not reasonably be regarded as unacceptable. Commercial viability meant a sufficient prospect of profit to justify the investment risk; it did not require the absence of development risks.

2. The Assembly Condition was not satisfied when the planning permission became acceptable. “Registered leases” included the Rink Leaseback and Transformer Leases. “Merger” was not confined to strict technical merger and could include surrender or merger in equity. The condition was satisfied once Abbeygate had become the equitable owner of the necessary interests, enabling it to secure the requisite legal alterations without depending on Land Registry administrative processes.

3. “Reasonable endeavours” required positive action. The court had to ask whether a proposed step was feasible and whether, in all the circumstances, it was reasonable to take it, balancing objectively unreasonable or impractical consequences against the obligation undertaken. A party promising reasonable endeavours also implicitly promised not to make achievement of the contractual objective more difficult by its own conduct. The court treated the guidance in Rhodia International Holdings Ltd v Huntsman [2007] EWHC 292 as assisting that analysis.

4. “As soon as reasonably practicable” did not mean when convenient or when best suited to Abbeygate’s funding arrangements. Abbeygate had deliberately delayed exchange of the Rink agreement and negotiations concerning the Transformer Leases and Zurich easements so that its building commitments would align with the release of funding and the expiry of the overage obligation. That self-created difficulty could not justify the delay. The court also applied the principle identified in Alghussein Establishment v Eton College (CA) The Times 16 February 1987 that a mere effect on a developer’s profit margin would not ordinarily determine reasonable practicability.

5. Had Abbeygate taken reasonable steps as soon as reasonably practicable, the necessary interests would have been in hand before 20 June 2013. Gaia was therefore entitled to damages of £1.4 million, with compound interest at 2 per cent per annum with annual rests. The provisional view on costs was that they should follow the event.

First-instance judgment. No prior or appellate decision was stated in the judgment.