CPC Group Ltd v Qatari Diar Real Estate Co

Joint venture – Redevelopment of site – Deferred consideration payable to claimant linked to success of planning application – Defendant withdrawing application – Whether defendant in breach of contract – Whether claimant in breach – Whether any breach repudiatory – Available remedies – Claim allowed in partThe claimant entered into a joint venture with the defendant, a subsidiary of a Qatari sovereign wealth fund, to acquire and develop the Chelsea Barracks site. To that end, in April 2007, a company in which the claimant held a 20% interest, PBGL, acquired the site from the Ministry of Defence for £959m. In April 2008, PBGL applied to Westminster City Council for detailed planning permission to redevelop the site using a design by Rogers Stirk Harbour & Partners. The scheme was to comprise 638 residential units, consisting of 329 market and 319 affordable housing units, a luxury hotel, a restaurant, a community hall, a sports centre, flexible retail space and a landscaped park with a café.By a sale and purchase agreement of November 2008, the defendant purchased the claimant’s interest in PBGL for an initial sum of £37,917806, plus a deferred consideration of up to £81m that was linked to the progress in obtaining planning permission. Under clause 7, the defendant agreed to use all reasonable but commercially prudent endeavours to bring about the situation where the deferred consideration was payable and not to do anything designed or intended to avoid or reduce the payment of that consideration. Moreover, the parties undertook to act towards each other with the utmost good faith. By para 5(f) of schedule 4 to the agreement, the planning application was not be withdrawn unless: (i) the mayor of London had indicated that he intended to exercise his power to direct the city council to refuse the application; and (ii) the planning consultant appointed under the agreement recommended that a revised planning application stood a better chance of being approved than the pursuit of an appeal in respect of the original application. Para 5(aa) of that schedule provided that the defendant could elect at any time to pay £68.5m to the claimant, whereupon the other obligations in that schedule would fall away.In March 2009, the Prince of Wales wrote to the defendant’s chairman, the Emir of Qatar, expressing his dislike of the proposed design. In May 2009, the Emir and the Prince of Wales met to discuss the proposals. In June 2009, the planning consultant e-mailed the defendant, stating that officers of the Greater London Authority had informed him that the mayor of London was unhappy with the scheme and would be inclined to refuse his permission. On the same day, the defendant withdrew the planning application for the site.The claimant brought proceedings against the defendant. It contended that: (i) the para 5(f) conditions for withdrawal of the application had not been met; (ii) the defendant had breached clauses 5(f) and 7; and (iii) those breaches were repudiatory in nature. The defendant argued that the claimant had breached the utmost good faith obligation by its actions between March and June 2009 because it had deliberately sought to manoeuvre the defendant into a position where it would become obliged to pay the deferred consideration more quickly; the defendant purported to accept that breach as repudiatory.Held: The claim was allowed in part; declarations were granted accordingly.(1) On all the evidence, the mayor of London had not indicated by June 2009 that he intended to exercise his power to direct that the planning application should be refused. The word “indicated” in the agreement, read in context, meant that the mayor had done something that suggested that he intended to direct a refusal or had given a clear sign or hint that that was his intention. Whether the mayor had given an “indication” within the meaning of the agreement was not governed by when he could lawfully exercise his power or indicate that he would be exercising it under the relevant planning legislation and orders made thereunder. Likewise, an indication given by the mayor through his officers and agents, rather than personally, could not be excluded. However, the indication given to the planning consultant was not that the mayor intended to direct a refusal of permission, but that he wanted the scheme to be changed. Accordingly, although the planning consultant’s e-mail of June 2009 amounted to a joint recommendation that a revised planning application stood a better chance of being approved, within para 5(f)(ii), limb (i) of that paragraph had not been met and the conditions for withdrawing the application had were not fulfilled. The withdrawal had therefore breached para 5(f). However, the defendant had not breached its clause 7 obligations by seeking to procure a para 5(f)(i) indication; nor did the withdrawal of the application breach those obligations in all the circumstances.(2) Although the claimant had attempted to produce a situation in which it would be paid the deferred consideration or a payment under para 5(aa), its conduct had not, in all the circumstances, breached its obligation of utmost good faith. The claimant had been in repudiatory breach of contract.(3) By treating the claimant as being in breach of contract and purporting, unjustifiably, to accept those breaches as a repudiation terminating the agreement, the defendant had evinced an intention no longer to be bound by the agreement. Accordingly, it had repudiated the contract. However, since the claimant had not accepted that repudiation, the agreement remained in full force.(4) The payment of £68.5m under para 5(aa) of the agreement was not the only remaining available mode of contractual performance open by the defendant. Nor was the defendant obliged to make that payment in the events that had occurred. Para 5(aa) gave it a free election, which it could exercise or not as and when it chose, to pay that sum to the claimant in return for the falling away of the obligations in schedule 4. It had not made such an election. The claimant was, in principle, entitled to damages for the defendant’s breach of para 5(f), to be determined by reference to the sum of money that would put the claimant in the position that it would have been in had the planning application not been withdrawn; if the claimant chose to apply for such damages, an assessment hearing would be held at which evidence on that matter could be adduced.Lord Grabiner QC, Neil Kitchener QC and Alexander Polley (instructed by Wragg & Co LLP, of London and Birmingham) appeared for the claimant; Joe Smouha QC and Andrew Twigger (nstructed by Herbert Smith LLP) appeared for the defendant.Sally Dobson, barrister