Langage Energy Park Limited v EP Langage Limited

A contractual notice triggering substantial infrastructure works is not effective merely because it uses the words required by the contract. Where the notice depends on future demand by unidentified occupiers, the notifying party must make a reasonable evaluative decision, in the public-law sense, based on relevant considerations and without extraneous, capricious or irrational reasoning.

An identified or existing occupier is not required. Future demand may be established by the proposed development or infrastructure arrangements. The notice was nevertheless invalid because the claimant had not assessed demand for the particular services and had served it for development and marketing reasons.

The claimant and defendant entered into a cooperation agreement concerning adjoining developments. Part 5 of Schedule 3 required the defendant to install additional hot-water, high-pressure gas and electricity infrastructure after receiving notice that there was or would be demand from occupiers of qualifying buildings.

The claimant served notice in June 2018 although no qualifying buildings or occupiers existed. The defendant disputed the notice’s substantive validity. The central issues were whether an identified occupier was required and whether the claimant had an unfettered right to serve notice, or instead had to reach a rational decision about likely future demand.

1. Notice invalid. The claim for declarations that the notice was valid and triggered the defendant’s Phase 2 obligations was dismissed.
2. Construction of Part 5. The words requiring notice of existing or future demand did not require an identified occupier, or an occupier already in occupation. The contractual structure contemplated that Phase 2 works could be required before the claimant’s development works and before occupiers were identified. Future demand could arise from the claimant’s decision to install connecting infrastructure or from the likely type of future development.
3. Control on the notice power. Future demand was not necessarily a provable fact. It could involve an evaluative judgment affecting both parties’ interests. The claimant therefore had to decide, for each service, whether demand existed or would exist by a reasonable process in the public-law sense. It had to consider relevant matters, disregard irrelevant matters, avoid extraneous purposes, and reach a conclusion that was not capricious or irrational.
4. The contractual scheme was intended to prevent substantial and potentially wasteful infrastructure expenditure where the services were unlikely to be used. The nature of the services was material: high-pressure un-odorised gas was highly specialised and hazardous; hot water had particular district-heating uses; and electricity from the Energy Centre was intermittent and might require back-up supply.
5. On the evidence, the claimant had not considered the particular services, their limitations, likely demand, environmental implications or infrastructure requirements. It served the notice to start development and assist marketing. It neither believed that there was or would be demand for the particular services nor reached a rational decision on that issue.
6. Even if honest belief alone had been sufficient, the notice would have failed because the claimant did not hold the required belief. The court would also have refused the broad further declarations sought: detailed design required collaboration, and a declaration of breach would not have advanced matters.