Morris & Anor v Glendore Investments Ltd. [2003] EWHC 3091 (Ch) (18 December 2003)

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England and Wales High Court (Chancery Division) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Morris & Anor v Glendore Investments Ltd. [2003] EWHC 3091 (Ch) (18 December 2003)
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Cite as: [2003] EWHC 3091 (Ch)

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		Neutral Citation Number: [2003] EWHC 3091 (Ch)
		HC 03 C 00347

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand
London WC2A 2LL

December 18 2003

B e f o r e :

MR JUSTICE LAWRENCE COLLINS
____________________

Between:

	(1) RAYMOND ANTHONY MORRIS
	(2) CHARLES ALAN MORRIS Claimants
	and
	GLENDORE INVESTMENTS LTD Defendants

____________________

Mr Jeremy Cousins QC and Mr Philip Kremen (instructed by Robert Brand & Co)
for the Claimants
Mr Michael Douglas QC (instructed by Shranks)
for the Defendants
____________________

HTML VERSION OF JUDGMENT
____________________

Mr Justice Lawrence Collins:

I Introduction

The claimants ("the Morris brothers") are the freehold owners of 1, 2 and 3 Northfield Avenue, West Ealing, London W13 ("the Property"), which was originally built as a cinema. At the outset of the transaction which is the subject of this case, part of the Property was used as a snooker club by the Morris brothers, and part as a cinema on a lease by them to the cinema operators. The defendants ("Glendore") were, until a change of name in September 2001, Albion Glendore Investments Ltd. On February 16, 2001 the Morris brothers entered into an agreement with Glendore ("the Agreement") pursuant to which Glendore was granted an option to purchase the Property ("the Option") for £1.32 million ("the Option Price") in consideration of the payment of a £15,000 option fee.

The dispute in this case centres upon whether Glendore has lost the right to exercise the Option, or whether the Option has been validly exercised and should (as Glendore counterclaims) be made the subject of an order for specific performance or damages in lieu. The Morris brothers maintain that upon the true construction of the Agreement, alternatively having regard to its implied terms, Glendore can derive no assistance from any provisions of the Agreement providing for the extension of the period in which the option could be exercised. If the Option has been validly exercised, then there is no dispute that an order for specific performance must follow.

Glendore also counterclaims for the recovery of £142,250, which was advanced to the Morris brothers by Glendore to facilitate their purchase of a leasehold interest to which part of the Property was subject at the time of the Agreement. There is no dispute that this money is recoverable.

II Pre-agreement

Through the introduction of a friend of the Morris brothers, Mr Cragg (who was subsequently paid a fee by Glendore), Mr Freeborn of Glendore entered into discussions with the Morris brothers for an option to buy the Property, with a view to developing and selling it. Mr Freeborn's evidence was that he explained to them that the purchase price would be directly related to the costs of redeveloping the Property and the potential profit he could make on a further sale. He told them that the land value at the time of purchase was usually 25% to 35% (and in the witness box Mr Alan Morris confirmed that there had been talk of 33%) of the sale value depending on site conditions and the planning consent that could be obtained.

Mr Freeborn's evidence was that he told the Morris brothers about the time periods involved and the delays which might occur; that the period for determining a planning application was supposed to be 8 weeks but that there could be a significant amount of additional time taken in negotiating between the parties in order to try to meet any comments or objections to the proposed scheme; that if a planning application was refused there were a number of ways of appealing including written representations, informal hearing or public enquiry; that it was possible to put in further applications; that he could not really say how long an appeal would take but that in his experience if the appeal was by way of written representations or informal hearing it could take between six to eight months. At no time did he give any commitment as to how long the whole process would actually take. He did explain that if all went to plan, he would hope to have a planning consent within the year but that it was impossible to be sure exactly how long it would take to secure a satisfactory planning permission. Mr Alan Morris' evidence was that he did not recall any talk of appeal and that Mr Freeborn gave him a rough estimate of 3 months for the process.

On November 29, 1999 Mr Freeborn wrote on behalf of Glendore to the Morris brothers confirming the terms, subject to contract, which would be offered for an option to acquire the freehold incorporating the snooker club and cinema. The option fee was to be £15,000 which would be deducted from the purchase price when the Option was exercised, and the purchase price would be £1.3 million. The Option Period would be the time necessary to negotiate with the planners, submit an application(s) for planning permission and receive a planning consent satisfactory to Glendore plus such time as was necessary for an appeal to be finally determined should the planning application be refused and should Glendore consider that there was a reasonable chance of success. The offer was accepted, subject to contract and without prejudice, on December 9, 1999. Mr Alan Morris' evidence was that he took no independent advice about the development value of the Property.

From late 1999 or early 2000 the Morris brothers negotiated with the tenants of the cinema for a surrender of their lease. By May 2000 a surrender had been agreed in principle, and by November 2000 the agreement for surrender had been approved by the court. Glendore agreed to advance £142,250 to the Morris brothers to fund the surrender, on the terms that it was secured on the Property, and was to be interest-free for 12 months from the date of drawdown but was to attract interest thereafter. After some further delays the surrender was completed in June 2001, and the loan was drawn down on June 6, 2001.

III The Agreement

The Option Price agreed in 1999 was £1,300,000. Subsequently (either because of the delay, or because the Morris brothers found that they would have to pay more for the surrender of the cinema lease than they expected) it was agreed that it should be increased to £1,320,000.

The Agreement was executed on February 16, 2001. The Option was granted by clause 2 of the Agreement, which provided that:

"In consideration of the Option Fee paid by the Grantee to the Grantor (the receipt of which the Grantor hereby acknowledges) the Grantor grants to the Grantee the option of purchasing the Property at the Purchase Price and subject to the provisions of this Agreement."

Clause 3 of the Agreement provided:

"3.1 The Grantee will at its own expense apply to the local planning authority for Planning Permission for the Development

….

The exercise of the Option was governed by clause 4:

"If the Grantee wishes to exercise the Option and at any time during the Option Period serves notice on the Grantor by means of a notice…. and makes payment to the Grantor of the Deposit [of £100] on or before the date of service of the Option Notice, such valid service of the Option Notice and payment of the Deposit shall create a binding sale and purchase agreement whereby the Grantor shall sell and the Grantee shall purchase the Property at the Purchase Price on the terms of, and subject to the matters mentioned in, this Agreement"

The Definitions and Interpretation clause of the Agreement (Clause 1) defined: (a) "The Option Period" as "the period commencing on the date of this Agreement and expiring at 5:00 p.m. on the Termination Date", and (b) "The Termination Date" as "the 16^th November 2001 which date shall be extended (if any of the circumstances set out in the Third Schedule hereto apply) until the relevant date set out in the Third Schedule."

The Third Schedule (entitled "Circumstances extending the Termination Date") provided:

"1. If prior to the Termination Date an application for Planning Permission has been made but the written decision of the local planning authority shall not have been received by the Grantee prior to the Termination Date then the Termination Date shall in such circumstances be extended to a date being ninety eight days after receipt in writing by the Grantee of the decision upon such application.

….

(a) being 98 days after receipt in writing of the decision upon such application or appeal;

(b) being the date of withdrawal of such appeal Provided that if an application for Judicial Review is made within such 98 day period the Termination Date shall be further extended until fourteen days after the written decision of the Judicial Review has been received by the Grantee."

The following relevant terms in the Third Schedule were defined by Clause 1 of the Agreement:

(a) "Planning Permission" was defined as:

"the written grant of detailed planning permission for the Development either by the local planning authority or the Secretary of State which is pursuant to an application submitted in accordance with Clause 3 which is unconditional or free from any Onerous Condition" [where the Development meant "the proposed redevelopment of the Property by the Grantee"]

(b) "Planning Refusal" was defined as:

"a refusal of the Planning Permission applied for under the provisions of Clause 3 (including a deemed refusal arising under Section [78](2) of the Town and Country Planning Act 1990 unless the statutory period for the giving of notice of decision has been extended by the Grantee) or the grant of such Planning Permission subject to an Onerous Condition." [It is common ground between the parties that the reference in this definition to Section 79(2) of the 1990 Act is an error and should be read as Section 78(2).]

Section 78 of the Town and Country Planning Act 1990 (as amended by the Planning and Compensation Act 1991) ("the 1990 Act") provides as follows:

"(1) Where a local planning authority-

(a) refuse an application for planning permission or grant it subject to conditions;

(b) refuse an application for any consent, agreement or approval of that authority required by a condition imposed on a grant of planning permission or grant it subject to conditions; or

(c) refuse an application for any approval of that authority required under a development order or grant it subject to conditions,

the applicant may by notice appeal to the Secretary of State.

(2) A person who has made such an application may also appeal to the Secretary of State if the local planning authority have done none of the following-

(a) given notice to the applicant of their decision on the application;

(aa) given notice to the applicant that they have exercised their power under section 70A to decline to determine the application;

(b) given notice to him that the application has been referred to the Secretary of State in accordance with directions given under section 77,

within such period as may be prescribed by the development order or within such extended period as may at any time be agreed upon in writing between the applicant and the authority.

(3) Any appeal under this section shall be made by notice served within such time and in such manner as may be prescribed by a development order.

(4) The time prescribed for the service of such a notice must not be less than-

(a) 28 days from the date of notification of the decision; or

(b) in the case of an appeal under subsection (2), 28 days from the end of the period prescribed as mentioned in subsection (2) or, as the case may be, the extended period mentioned in that subsection.

(5) For the purposes of the application of sections 79(1), 253(2)(c), 266(1)(b) and 288(10)(b) in relation to an appeal under subsection (2), it shall be assumed that the authority decided to refuse the application in question."

The Town and Country Planning (General Development Procedure) Order 1995 (SI 1995 No. 419) ("the GDP Order") provides by Article 20:

"(1) Subject to paragraph (5), where a valid application under article 4 or regulation 3 of the 1988 Regulations (applications for planning permission) has been received by a local planning authority, they shall within the period specified in paragraph (2) give the applicant notice of their decision or determination or notice that the application has been referred to the Secretary of State.

(2) The period specified in this paragraph is –

a) a period of eight weeks beginning with the date when the application was received by a local planning authority;

(b) except where the applicant has already given notice of appeal to the Secretary of State, such extended period as may be agreed in writing between the applicant and the local planning authority by whom the application falls to be determined; or

(c) where a fee due in respect of an application has been paid by a cheque which is subsequently dishonoured, the appropriate period specified in (a) or (b) above calculated without regard to any time between the date when the authority sent the applicant written notice of the dishonouring of the cheque and the date when the authority are satisfied that they have received the full amount of the fee."

By Article 23(2) a time limit of 6 months is prescribed for appeals, and that period runs from the date of the notice of the decision or determination, or the expiry of the 8 week period referred to in Article 20.

IV The first application

Glendore appointed Messrs Derrick Wade Waters ("DWW") as project managers, and PRP Architects ("PRP") as the project architects. The persons principally concerned were Mr Bryan Engwell of DWW, and Mr Richard Rhodes (later replaced by Clive Smith, when Mr Rhodes left the firm) and Ms Sheila Cooper of PRP. The main person concerned on the planning side at the London Borough of Ealing ("Ealing") was Mr Neil Button.

From the outset Mr Engwell and Mr Rhodes recognised that Ealing might seek to restrict the amount of private housing balancing this with a percentage of affordable housing possibly combined with some social/recreational use. Discussions with West London Health Estates in June 2001 showed that there was a need in West Ealing for GP surgeries, and that West London Health Estates could provide a two GP practice for the development.

Mr Rhodes produced plans for a development including a medical practice, and later that month Ms Cooper of PRP was told by the Ealing planning department that the requirement for affordable housing could be waived, and that health use was encouraged by the new policy for the strategic centre in which the development site was situated.

Early in July 2001 Mr Rhodes sent to Ealing a set of preliminary drawings, in anticipation of a pre-planning application meeting, which took place on July 27, 2001. Mr Engwell, Mr Rhodes and Ms Cooper attended on behalf of Glendore. At the meeting Ealing indicated that it would not approve proposals which were purely residential, and would require mixed use with community facilities. They said that the Ealing Voluntary Service Council ("EVSC") had a requirement for office space in the area and recommended that Glendore should contact them. Ealing also indicated that they were seeking 50% affordable housing in developments of 25 units or more, although there might be scope for negotiation on the percentage of affordable housing if the total number of dwellings was only just over the threshold. Mr Freeborn's evidence was that following the initial pre-application meeting on July 27, 2001 he was informed by Mr Engwell and Mr Rhodes that the planning officers were very supportive of any acceptable planning application for a development which replaced the ugly and run down former cinema building.

Glendore's advisers had discussions in August with EVSC on their needs, and also with housing associations, including the possibility of pre-selling the whole or part of the Property. By early September 2001 Mr Engwell was able to report to Mr Freeborn that Acton Housing Association ("Acton") were very keen to be involved on the site.

On September 10, 2001 Mr Rhodes wrote to Mr Button to say that following the preplanning application meeting on July 27, 2001 they had amended their proposals for the site to include community use, in addition to residential accommodation, and indicating that Glendore wished to make a planning application on this basis by the end of the month. He indicated that they would like to hold a further meeting so that any concerns might be addressed before submission of the application. There was a further pre-application meeting on September 24, 2001.

The planning application was submitted on October 11, 2001. It comprised 24 private dwellings, a doctor's surgery and 6 units of key worker accommodation above the surgery, and a semi-underground car park.

It is clear from the correspondence that by this time Mr Freeborn was actively considering, as his preferred option, selling the Property in a back to back transaction with the exercise of the Option.

On October 29, 2001 Mr Button told Mr Rhodes that Ealing would require further information before the application could be considered. Mr Rhodes emphasised to Mr Button that he needed confirmation that the application was "in the system" and asked Mr Button to avoid any suggestion that the present application was invalid because of the need for further information. Nevertheless on October 30, 2001 Mr Button wrote to PRP to say that the application had been received, but it could not be accepted as legally valid, without compliance with certain requirements, including plans of the elevations of the existing buildings, and proposed elevations. On November 15, 2001 Mr Rhodes wrote to Mr Button with the additional information, and on November 16, 2001 Mr Button acknowledged receipt, and indicated that Ealing would try to decide the application by January 10, 2002.

On November 30, 2001 Mr Engwell sent an e-mail to Mr Rhodes as follows:

"David is a little concerned that ou[r] application could go sailing through Ealing council without them discussing it with us.

The last thing we want is a quick refusal or consent in early January (however unlikely this might be)

Could we please make it clear to Ealing that we are in no rush for a decision within the statutory period and that we would like to take the opportunity of discussing the merits of this scheme (or any other suggestions Ealing may make) before it goes to committee with either their early support or resistance.

May I suggest that we fix a meeting with them to discuss our application – say the week after next."

On December 3, 2001 Mr Rhodes asked Mr Button for a meeting to discuss any issues on the application, and reported to Mr Engwell:

"Thank you for your message. I agree entirely with your sentiments (although I doubt whether, in reality, the application's progress through the system will be such that it could be described as 'sailing'!); I have attempted unsuccessfully on several occasions to contact the planning officer, Neil Button…

I will let you know as soon as I receive a response."

On December 4, 2001 Mr Engwell asked Mr Rhodes to keep chasing Mr Button, and emphasised that they should see him before Christmas.

On December 4, 2001 Mr Lynch, the development manager of Acton, faxed to Mr Engwell to say that having met with the planners regarding the redevelopment of the site, Acton had now arrived at a scheme which they believed to be supportable, consisting of 24 one-bedroom flats and 9 two-bedroom flats and offices for EVSC. On that basis Acton made an offer to Glendore to purchase the Property for £2.35 million subject to planning permission.

On December 6, 2001 Mr Button telephoned Mr Rhodes to say that he would like to arrange a meeting for Ealing to make formal comments on the application, and confirmed that Ealing was in principle in favour of a development of that scale on the site and the issues that he wished to discuss were parking; design issues; overshadowing/sunlight issues; proportion of affordable housing proposed with health use; and section 106 contributions that Ealing would be seeking, including education, amenity space, and transport infrastructure.

At a meeting on December 19, 2001 at the Ealing planning department, Mr Engwell told Ealing that there was a possibility of Glendore selling the site to Acton, who would develop the site jointly with EVSC, but it had not been determined whether this would proceed and at present they were concentrating on the current application on the basis that that would be the scheme which proceeded. The minutes record that Mr Button noted that whilst theoretically it would be possible for Ealing to refuse the application under delegated powers, there was no intention to do this and it was inconceivable that the application would proceed rapidly to committee with a recommendation for refusal in order to minimise the timescale of determining the application.

The advice which Mr Freeborn received from PRP following the meeting of December 19, 2001 was that if the first application was refused, the prospects of a successful appeal were good, and he asked Mr Engwell and PRP to continue to pursue Ealing in order to obtain a decision on the first application. Glendore decided to put in a parallel application so that Ealing had before it: (i) the application in its original form (in respect of which Glendore was prepared to make amendments to enhance its prospects of success) and (ii) the joint application by Glendore with Acton comprising, in broad terms, affordable residential accommodation and office accommodation for EVSC.

Mr Freeborn's evidence was that dual applications carried out in this manner are widely used and are a very well known negotiating technique in the planning world. His evidence was that the agreement with Acton provided Glendore with certainty that it would ultimately make a profit as opposed to the risk (albeit with the opportunity of obtaining a higher profit) of appealing/amending the first planning application and still not meeting Ealing's objective. The making of a parallel application placed more pressure on Ealing to grant a consent for one of the applications and thereby avoid the need for an appeal. He was convinced that making a parallel application would give Glendore a better prospect of success and would deliver a planning permission quicker than if it were to wait for an adverse decision on the first application and proceed to a lengthy appeal. In January 2002, having taken the decision that parallel applications presented the most probable way of achieving a viable permission, it was clearly undesirable for the first application to be forced to a conclusion until Ealing had seen and considered the proposed parallel application. Accordingly, to assist this process, he thought that it would be appropriate to extend the period for notification of Ealing's decision on the first application. He asked Mr Engwell and Mr Rhodes to continue to correspond with Ealing to ensure that Ealing had all of the information that it required in order to make a decision on the first application in the event that the parallel application was refused. Glendore agreed an extension for notification of the decision on the first application while simultaneously making a parallel application through or in conjunction with Acton. He considered that the end result would be the same, a decision on the first application would be delayed until the outcome of the second application was known. An amended version of the first application would have produced no quicker result. Mr Alan Morris' evidence was that shortly before Christmas 2001, Mr Freeborn told him that it was likely that Ealing would turn down the first application.

Mr Engwell's evidence was that while plans for the second application were being prepared he was instructed by Glendore to liaise with Mr Rhodes to ascertain the further information required by Ealing so that it was in a position to make a decision on the first application. He accepted that by December 2001 Mr Freeborn's preferred route was to sell to Acton and get a £1 million profit. Glendore did not want to receive a refusal on the first application before Ealing had considered the second application. Glendore ultimately hoped to achieve a negotiated settlement, but it also wanted to have the opportunity to appeal if it could not reach such a settlement because it considered that Ealing was being unreasonable in its demands. It was considered that, by Glendore pursuing the first application, Ealing would be placed under more pressure to accept the second application once it had been submitted.

V The second application

On January 11, 2002 Messrs Shranks, Glendore's solicitors, wrote to Messrs Robert Brand & Co, the Morris brothers' solicitors:

"We are writing to bring you up to date with the current position relating to our clients planning application.

Despite having received assurances before the application was made that it would be viewed favourably, it now appears from discussions that our clients have been holding with the Local Authority that this is not the case. Indeed as matters stand, it appears that were a decision to be made on our clients planning application it would be refused which would result in our client going to appeal.

It does appear however that an application from a Housing Authority or similar body for the development of the property into affordable housing would meet with the approval of the planning authority. Accordingly, it is my clients intention to allow the statutory period for dealing with my clients application to be extended under Clause 3.3 of the Agreement dated 16^th February 2001 so that a parallel planning application may now be made on the lines mentioned above. Our clients feel that this procedure will lead to a much speedier grant of planning permission which would lead to our clients exercising the option. The Termination Date is of course extended appropriately under Part 1 of the Third Schedule to the Agreement.

It is quite likely therefore that your clients will receive notice of a parallel planning application in the near future and no doubt you will inform your clients accordingly."

On January 12, 2002 Mr Freeborn e-mailed to Mr Shrank to confirm that he had spoken to Mr Alan Morris and had explained to him that they would be making a parallel application and gave him the reasons, and told him to expect a letter from his solicitors. Mr Freeborn said:

"He seemed OK although I do not think that he fully understood it. We are unlikely to receive any response from his solicitor because Alan is now skiing for one week."

On January 14, 2002 Robert Brand & Co replied as follows:

"Perhaps, in order that we may advise our clients more clearly in respect of your client's proposed new application, you could let us have further details of the application, the nature of the development and the anticipated timescale for putting in any further planning application. Your letter appears to indicate that your clients are in discussions with a Housing Association. Again, if that is the case, perhaps you could let us have further details."

On January 17, 2002 Shranks replied:

"We thank you for your letter of 14^th January although we are not quite sure why you have headed this 'without prejudice'.

Our clients proposed application should be ready quite soon but we can confirm that as discussed between our clients and your clients, it will be for one and two bedroom flats which would all be affordable housing plus a small office element.

Our clients are in discussion with several Housing Associations and it is anticipated that the application will be supported by one of these.

We shall let you know as and when further information is available."

On February 12, 2002 Mr Engwell e-mailed to Mr Rhodes asking what was the latest position so far as the first planning application was concerned. He asked whether a meeting ought to be arranged with Ealing. Mr Rhodes replied on February 13, 2002 to say that he had spoken to Mr Button and had been told that he was still awaiting the highways' engineer's response. He said that he would try to get an update and get back to Mr Engwell.

On February 20, 2002 Mr Engwell reported to his partner Mr Wade that Mr Rhodes had had a meeting with Ealing that afternoon to discuss Acton's planning application proposals and was hoping that there should not be too many problems. Mr Rhodes confirmed that they should be in a position to make an application by March 15, 2002 as required. EVSC had to have firm proposals for their new offices committed by the end of March and it was understood that this probably meant having a planning consent in place. It was therefore almost certain that the second application would overtake the first application, and the Ealing planners wanted to know if this was OK. Mr Engwell went on:

"I have told Richard that this is not a problem, in fact quite the opposite. We are more than happy for their application to come first provided we do not get a refusal or permission in the meantime. I have relayed all of the above to David ….

Finally, Richard seems to thinks that Ealing should get a planning resolution by the end of June 2002 subject to meeting dates which have yet to be agreed due to a forthcoming election in April/May."

On March 1, 2002 Glendore entered into an agreement with Acton under which Acton agreed, conditional upon planning permission being obtained, to purchase the property for £2.4 million.

The second application was made jointly by Acton and Glendore on March 15, 2002. It was for 38 units of affordable residential accommodation with office accommodation for EVSC. Under cover of a letter of the same date, Mr Rhodes wrote to the Morris brothers stating that they had applied to Ealing on behalf of Glendore with Acton for planning permission to redevelop the site, and enclosing the notice which they were obliged to served.

On April 18, 2002 Mr Freeborn sent to the Morris brothers a set of the latest planning drawings for the second application, and said that he was reliably informed that the scheme would achieve a consent.

On April 22, 2002 Mr Rhodes had a telephone conversation with Mr Button about the first application, and Mr Rhodes' note records that Mr Button confirmed that no action was being taken at present, but if it went to the planning committee it would have to be with a recommendation for refusal. Mr Button would check with his superior if it was "OK to leave in abeyance at present." On the same day Mr Rhodes confirmed his conversation in an e-mail to Mr Button as follows:

"Further to our telephone conversation this afternoon, I confirm that our client, Glendore Investments Ltd, is happy for you not to progress the original application for the site, submitted [last] autumn, pending determination of the subsequent application for Acton Housing Association and Ealing Voluntary Services Council.

As discussed, I must [emphasize] that it is important that the application does not go forward with a recommendation for refusal. Should you wish to determine the application at this stage, it is imperative that we are advised accordingly, in order to be given the opportunity to make any modifications that may be required."

On April 23, 2002 Mr Rhodes e-mailed to Mr Wade:

"Bryan discussed this with David Freeborn, who is happy for the original application to be effectively held in abeyance pending determination of the Acton Housing Association application. The most important thing is that it is not sent to committee now with a recommendation for refusal – which would be the most likely scenario without substantial design changes."

In evidence, Mr Engwell did not accept that after February 2002 everything was done for the purposes of the second application, although he did accept that from March 2002 everything was geared to the second and third applications. He accepted that the requests to Ealing to keep the first application in abeyance were made to avoid Glendore having to choose between purchasing the Property without funding or letting the option go.

Mr Rhodes' evidence was that he was never instructed from November 2001 to avoid a decision on the first application. The whole of the emphasis in his evidence was that the danger was a consent with conditions, not the consent in itself. He knew Mr Freeborn did not want a consent without discussing it with them, since there was a danger of onerous conditions. The first application was entirely dependent on EVSC getting a Home Office grant. His brief was to do everything to facilitate planning permission. They concentrated on the second application, because it was inconceivable they could have obtained a consent on the first application, because it was clear that significant changes would be required. The planners were responsible for putting it on ice, because once there was a proposal for affordable housing, the planners became enthusiastic and were no longer interested in the first application. The primary concern of Glendore and its advisers was that they should not refuse it.

On May 27, 2002 Mr Freeborn e-mailed to Mr Alan Morris as follows:

"I am conscious that we have not spoken for a while and you must be wondering what is going on and when there will be a decision. I have as you know now lodged two planning applications. The first was for a scheme that met every planning criteria and would I am sure ultimately have gained a consent, albeit that I might have had to go to Appeal. During the discussions with the planners they clearly wanted part of the scheme to be for offices for Ealing Voluntary Services, a complete no no for me on a commercial basis because they would not pay a rent that justified building the space and they are an organisation with no financial track record. This requirement is purely [political] and has nothing to do with planning as in any other circumstance a consent for office use would be refused and there would be absolutely no grounds for appeal, even if offices made commercial sense which they do not. As a result of this I decided to join forces with Acton [Housing] Association and jointly submitted an application with them for a scheme incorporating the offices for Ealing Voluntary Services and increasing the density of the residential element. The increase in density pays for the offices and enables all of the units to be affordable. Again this is nothing to do with planning and all to do with politics. I understand that Ealing Council are now in favour of the Acton/Glendore revised scheme and therefore we should receive a consent in due course without the need to go to Appeal. Ealing are notoriously slow in dealing with Planning Applications but even they should arrive at a decision by July/August, this year I hope!! If they give a refusal then I will be into the Appeal process.

I am sorry that it is all taking so long but I am afraid that it was never going to be easy. If there is anything you do not understand or you would like to discuss any aspect please do not hesitate to give me a ring either on the mobile (07860 789540) or at the office (0207 422 5928). Hope all is well with you and look forward to seeing you soon."

On June 25, 2002 Mr Freeborn e-mailed to Mr Engwell to say that he had met the Morris brothers and they were not "happy bunnies". They did not know what the deal was with Acton, but what they did know was that the snooker club was losing money because of the uncertainty of whether it was going to close and therefore members not renewing their membership. They had not expected the process to go on for so long and they had re-read the contract to see how much longer they might have to wait and had decided that it was open-ended and that if Mr Freeborn wanted to, he could extend the contract for ever which would of course cause them very great financial difficulty. He had agreed to consider their position and revert to them fairly quickly with an indication of his intent. For the present he said that it was his intention to pursue planning until he got a viable consent.

Mr Engwell replied on the same day to say that he was not surprised that the snooker club was going downhill in the light of the applications, but he supposed that it was inevitable that any consent would be a long drawn out affair, and that the Morris brothers would of course not necessarily been aware of that.

On July 4, 2002 Mr Rhodes had a meeting with Mr Button, and in an e-mail of July 15, 2002 he reported to Mr Freeborn that the meeting had been very positive, and that Mr Button had advised that all issues had now been accepted with the exception of a few relatively minor design points. But he had just received an e-mail from Mr Button requiring further information on overshadowing issues.

On July 8, 2002 Mr Freeborn wrote to the Morris brothers to say that the current position was that they had now been told that their latest application would be put before the planning committee on July 31, 2002 and they were very optimistic that the scheme would receive consent. On July 26, 2002 Mr Freeborn sent an e-mail to Mr Alan Morris:

"Following our telephone conversation the other evening I would confirm that our latest application will be put before the Planning Committee Meeting on 31st July 2002 with an officer's recommendation for approval. Not there yet but getting close !! If we do get a consent then I would like to know when you would be able to give vacant possession. The contract states that I should exercise the option within 98 days from when permission is granted with completion being 20 days thereafter. I may not want to exercise for 3 months from the grant of consent so as to make sure that there is no application for judicial review, i.e. I would not want to find that although I thought I had consent it turns out that I do not and consent is revoked by virtue of the review and as a consequence I do not have a site that can be developed.

All this seems to arrive at a date towards the end of November but it could be earlier. What are your views ?"

But, despite the planning officers' recommendation for approval, the application was refused, and the decision was formally notified on August 19, 2002.

VI The third application

There was a meeting with Ealing on August 12, 2002 to agree how best to move the project forward following refusal. The minutes record that Mr Engwell queried whether Ealing would be prepared to keep the original planning application for a private housing scheme in abeyance pending determination of a new application. Mr Button was to write setting out the position, to which PRP or DWW could respond. Mr Freeborn's evidence was that his intention, following the refusal of the second application, was to press Ealing to expedite the determination of the first planning application and if refused to appeal it. At the same time he was concerned that an appeal would be viewed by Ealing as an aggressive step, and considered that making a third application that met all of the objections raised by Ealing at the hearing of the second application might be more appropriate.

On August 16, 2002 Mr Rhodes, who was about to leave PRP, wrote to Mr Freeborn to say that he was disappointed that they did not have the planning approval but the indications were that there was a good chance of obtaining consent when the proposals went back to the planning committee later in the year.

On September 24, 2002 Mr Freeborn wrote to the Morris brothers:

"Further to my letter dated 8^th July 2002 I would advise that the parallel application that we ran with Acton was refused. We continue to press the Local Authority to expedite the determination of the original Planning Application that was submitted prior to 16^th November 2001 and will if necessary take that Application through to an Appeal if it is refused. At the same time we will negotiate with the Local Authority to try and obtain a consent for the affordable housing scheme and we expect that a new Planning Application will be submitted within the next two weeks which will attempt to force the Planners to negotiate a consent. By adopting this approach we should achieve a quicker consent than waiting for the appeal process to reach its conclusion.

If you have any queries please do not hesitate to give me a ring."

Mr Alan Morris' account of what happened after September 24, 2002, when he received the letter from Mr Freeborn, was as follows. He decided he should go to Ealing to inspect the planning file and speak to the planners. When he inspected the file he came across e-mails and notes of meetings which showed that Glendore had sought and actively encouraged Ealing not to progress the first planning application and to hold it in abeyance. This was ostensibly done to enable the second planning application to progress, but it became clear to him that in reality the first application was being maintained only for the purpose of keeping the Agreement alive. There was no real intention to proceed with it since, as Mr Button told Mr Morris, Glendore had been told that there was no chance whatsoever of the first planning application being granted.

The third application was made on September 25, 2002, and a copy of the notice of application was sent by Mr Smith of PRP to Mr Alan Morris.

On November 1, 2002 Mr Smith e-mailed to Mr Button to confirm discussions a few days previously, saying that Mr Button had informed Mr Smith that Mr Button had now been directed to make a decision on the first application rather than leave it in abeyance. He asked Mr Button to confirm that, prior to making a decision, Mr Button would give Glendore an opportunity to respond to any criticisms of the proposals and make appropriate amendments to the application.

On November 6, 2002 Mr Button confirmed to Mr Smith that they had made previous attempts at negotiation on the first application, and that from various meetings at which he attended it was clear that a resolution was not likely to be achieved as the proposals were a long way from being considered acceptable. Mr Button confirmed that he had been asked to refuse the application and therefore advised Mr Smith that the current application should be withdrawn or (within 14 days) Glendore should come back with substantial revisions that took into account the problems raised (which included under-provision of affordable housing; quality of design; unacceptable impact upon neighbouring properties; noise mitigation; justification of health centre; amenity space provision) and also the issues they had discussed at subsequent meetings relating to the Acton/EVSC application.

On November 14, 2002 there was a meeting with Mr Button, and Mr Smith reported to Mr Engwell that Ealing was still aiming for the planning committee meeting on December 4, 2002 for Acton's application, and that the committee appeared in favour of the application; and that some issues had been raised on Glendore's application. On the same day Mr Smith wrote to Mr Button with drawings which were designed to deal with Ealing's concerns about the first application.

On December 4, 2002 planning permission was recommended for the third application subject to a section 106 Agreement, and Mr Freeborn informed Mr Alan Morris on the following day.

On December 13, 2002 Shranks wrote to Robert Brand & Co to say that the planning committee had indicated that Ealing was likely to grant planning consent subject to a section 106 Agreement. They said that Glendore would like to complete the matter without the necessity for planning consent being obtained and would like to proceed to completion. They suggested a completion date of January 14, 2003.

On December 20, 2002 Shranks wrote to Robert Brand & Co saying that they understood that the Morris brothers had agreed to vacate the property on March 7, 2003, and enclosed a form of option notice that they intended to serve.

On the same day, Robert Brand & Co wrote to say that the option was no longer capable of being exercised because the Option Period had expired. They were aware that Glendore had kept its original planning application alive by asking Ealing to place the application "in abeyance". In their letter of January 9, 2003 they suggested that the time scale envisaged was 3 months to make the application and 6 to 9 months to deal with the appeal, in effect a one year agreement.

The first application was refused on January 10, 2003, and the third application was approved (subject to the completion of a section 106 Agreement) on January 21, 2003.

On January 30, 2003 notice of exercise of the Option was served.

VII Issues

The central question is whether Glendore was entitled to exercise the Option, and the main live issues which relate to the central question are these:

(1) Whether (as the Morris brothers contend) the powers, discretion and rights conferred upon Glendore by clauses 3.2, 3.3, 3.5, and 3.6 (to negotiate with Ealing, to agree an extension of time under section 78(2) of the 1990 Act, and to appeal any Planning Refusal), were to be exercised only for the purposes of the Agreement, and not for any contrary or ulterior purpose;

(2) whether (as the Morris brothers contend) Ealing's non-determination of a planning application within an 8 week period of its submission, in the absence of any agreement under section 78(2) of the 1990 Act, constituted a refusal for the purposes of (a) triggering Glendore's right to pursue an appeal and/or (b) paragraph 1 of the Third Schedule;

(3) whether (as Glendore contends) the dealings between Ealing and Glendore amounted to an agreement for the purposes of section 78(2) of the 1990 Act;

(4) whether (as the Morris brothers contend) there were there implied terms of the Agreement which:

(a) limited the exercise of the powers, discretion and rights conferred by the Agreement upon Glendore to what was necessary or desirable for the purpose of obtaining planning permission in respect of the first application

(b) imposed an obligation on Glendore to act in good faith

(c) imposed an obligation on Glendore not to exercise its rights etc. to delay receipt of a written decision from Ealing, save for such purposes as were necessary or desirable to obtain planning permission for the first application

(d) required a deemed refusal in the absence of any agreement under section 78(2) of the 1990 Act, to constitute a refusal for the purposes of (i) obliging Glendore to pursue an appeal, if so advised, and/or (ii) paragraph 1 of the Third Schedule;

(5) whether (as the Morris brothers contend) Glendore acted contrary to the Agreement, and in breach of its terms, and whether Glendore's conduct caused delay (and if so to what extent) in Ealing's notification of its decision in respect of the first application, and the legal consequences of any such breach; and

(6) whether (as Glendore contends) the Morris brothers are estopped from relying upon Glendore's conduct of which they complain.

VIII Witnesses

I heard oral evidence from Mr Freeborn, Mr Engwell, Mr Rhodes, and Mr Alan Morris. Mr Charles Morris gave evidence only to confirm what his brother had said. I have already mentioned some of their evidence and I shall revert to it in my conclusions.

Mr David Henry, who is a director of FPD Savills, gave expert evidence for Glendore. Mr Henry's evidence was that Glendore adopted an established process of preparing alternative proposals that might better satisfy the aspirations of the local planning authority. This process, often referred to as "twin tracking," is a well-known and established planning tactic. Lodging an appeal against the non-determination of the first application would have taken the determination of the application out of the hands of Ealing. Applicants often prefer to continue to negotiate with local planning authorities, if they consider that this is more likely to lead to a rapid and certain conclusion that pursuing an appeal. The method was, therefore, an appropriate one. The assessment by an applicant whether an appeal would have resulted in a consent any sooner than continuing to negotiate is a matter of judgment for the applicant. It is not uncommon for applicants to allow a planning authority to consider an application beyond the eight week statutory period. Very few local authorities require an extension of the period in writing, and many applicants do not initiate discussions on an agreement for an extension of time, preferring to retain the right to trigger an appeal after the eight week period, depending on the progress of their negotiations. In the present case, none of the time periods involved were unreasonable, and the planning processes undertaken by Glendore were efficiently applied.

IX The Morris brothers' case

The Morris brothers' case is as follows. The reluctance of Glendore to have the first application determined was dictated by the negotiations that it was conducting for the sale of the Property to Acton. There never was any question of the first application being actively pursued. But "the Development" as defined by the Agreement was "the proposed redevelopment" by Glendore, whilst the second and third applications related to developments that were to be undertaken by Acton.

Glendore persuaded Ealing not to determine the first application solely in an attempt to keep the Option alive. This explains the e-mails emanating from Glendore's professional advisers, in which they said that Glendore's position was that it was "in no rush for a decision within the statutory period" (November 30, 2001), "happy for you [Ealing] not to progress the original application" (Aril 22, 2002), "happy for the original application to be effectively held in abeyance" (April 23, 2002), and asked whether Ealing would be prepared to keep Glendore's original planning application for a private housing scheme in abeyance (August 12, 2002).

As regards the issues of construction, the relevant background was that the parties were creating an option, which was intended to be for a short initial period of about 9 months duration. The parties expected the Option Period to be relatively short, though the possibility of an extension under section 78(2) of the 1990 Act or an appeal made exact computation impossible. The parties contemplated no other delaying mechanism, let alone a calculated attempt to delay by one party, or an encouragement to Ealing to breach its statutory duty.

The only qualifying application for the purposes of the Third Schedule is one which was submitted prior to November 16, 2001, namely the first application. The second and third applications are not relevant: first, they were submitted after November 16, 2001 and second, the combined effect of the definitions of "development" and "planning permission" in clause 1 was that unless planning permission was sought in respect of a proposed redevelopment by Glendore, an application for permission could never be relevant for the purposes of the Third Schedule, or the other provisions of the Agreement. Both the second and third applications were seen and treated by Glendore as an Acton application, and were to be at Acton's expense.

Following the submission of the first application, it was open to Glendore to enter into negotiations and discussions with Ealing under clause 3.2 of the Agreement, but only if those negotiations and discussions were aimed at securing an approval of the first application; this is supported by the express wording of the clause which permitted negotiation (not the extending of time), but only if "requisite or desirable in order to obtain" planning permission. The negotiations that took place with Ealing that led to, and were consequential upon the making of, the second and third applications did not qualify in this respect.

The powers, discretion, and rights conferred upon Glendore under clauses 3.2, 3.3, and 3.5 of the Agreement (to negotiate with Ealing, extend time under section 78(2), and appeal) were conferred for a purpose, namely to further a relevant planning application, and only for that purpose.

It was contrary to the purposes of the Agreement for Glendore to use its powers to delay the outcome of the application for reasons unconnected with the application itself. As a matter of construction "no legal discretion, however widely worded…, can be exercised for purposes contrary to those of the instrument by which it is conferred": Lord Cooke in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, at 460, with whom Lords Slynn, Hoffmann and Hobhouse agreed.

The power to pursue an appeal related to any Planning Refusal (clause 3.5), including a deemed refusal arising under section 78(2) of the 1990 Act under the definition in clause 1. Any appeal was to be prosecuted with all due diligence, and in a good and efficient manner (clause 3.6). Had Glendore appealed a planning refusal, it is difficult to see how a period of more than 1 month in delaying the commencement of an appeal could be consistent with such diligence and efficiency. There was no such appeal against any refusal. The Agreement contemplated expressly that Glendore could agree an extension of time under section 78(2) of the 1990 Act: clause 3.3.

The parties could not have contemplated that after an 8 week period there should be a deemed refusal, obliging Glendore to prosecute an appeal diligently if there was to be an appeal at all, whilst envisaging that the Termination Date could be put back indefinitely because of an uninvited delay by Ealing. Still less could they have contemplated that an indefinite period of delay could be created by Glendore's invitation in a manner which fell short of section 78(2). If a deemed refusal was not intended to put Glendore to an election as to whether to appeal and, if it did not, to bring the Option to an end 98 days thereafter, there was no purpose whatsoever in including a deemed refusal within the definition of a planning refusal.

For Glendore to gain an extended time to exercise the Option, by virtue of improper or inadmissible conduct, would infringe the rule of construction to the effect that it is presumed that one party should not by his own wrong, or breach, benefit at the expense of the other: Alghussein Establishment v Eton College [1988] 1 WLR 587, HL.

Section 78(2) of the 1990 Act requires any extension to be agreed (a) for an "extended period" and (b) "in writing." There was neither a written agreement for time to be extended, nor was there an agreed period of time for any extension.

The Agreement contained a comprehensive code for defining a time frame within which the Option had to be exercised. The Termination Date could be postponed if there was, as of November 16, 2001, an extant planning application. Dealing with that application could extend time further, but the delay could only result from defined circumstances – waiting for a decision on an extant application; awaiting the expiration of an agreed extension under section 78(2); and appeal, to be diligently pursued. No other extension was contemplated. It was not contemplated that delay to the planning process should be caused by inviting Ealing not to comply with its statutory duty to deliver a decision within 8 weeks.

If the case on construction is not made out, then necessity and business efficacy require an equivalent result by way of an implied term: the Equitable Life case at 459.

In particular, there were implied terms that the only qualifying applications were those (a) which were submitted before November 16, 2001; and (b) which were by Glendore. There were also implied terms that (1) the powers, discretion and rights conferred by the Agreement upon Glendore were limited to what was necessary or desirable for the purpose of obtaining planning permission in respect of a qualifying application; (2) Glendore was to act in good faith; (3) Glendore should not exercise its rights etc. to delay receipt of a written decision from Ealing, save for such purposes as were necessary or desirable to obtain planning permission for a qualifying application; (4) a deemed refusal in the absence of any agreement under section 78(2) of the 1990 Act, would constitute a refusal for the purposes of (i) obliging Glendore to pursue an appeal, if so advised, and/or (ii) paragraph 1 of the Third Schedule.

Glendore's conduct was in breach of the Agreement; it was calculated to cause delay in an attempt to take advantage of a supposedly extended Termination Date, not for the purpose of enhancing the prospects of success of the first application (which Glendore did not want to succeed in January 2002), but as an end in itself so that the later applications could succeed. Glendore then would sell on the Property to Acton at a profit, and seek to take advantage of the delayed Termination Date. Such conduct was never contemplated or intended by the parties.

As regards the allegation by Glendore that, even if the Morris brothers are correct in their primary contention, they are estopped from denying the continued subsistence of the Option, the Morris brothers do not accept that any of the matters that Glendore relies on evidences any agreement, understanding, promise or representations on their part to depart from the terms of the Agreement. Nor is there anything to support the suggestion that Glendore changed its position in any way as a result of anything done by the Morris brothers.

As regards Glendore's reliance in particular on the letter of the Morris brothers' solicitor, Robert Brand, dated January 14, 2002 as showing that the Morris brothers positively acquiesced in Glendore's delaying conduct, (1) Mr Brand's letter was written in response to Shranks' letter which intimated proceeding under section 78(2), and this procedure was never in fact followed; (2) the letter from Mr Brand was headed "Without Prejudice," which meant that it was written on the basis that the request for information therein contained should not be construed as an assent to the course proposed.

There were no common assumptions between the parties which would render it inequitable for the Morris brothers to complain of Glendore's conduct, and certainly none that "crossed the line" between the parties, as is required for there to be an effective estoppel by convention: The Vistafjord [1988] 2 Lloyd's Rep. 343, 350-351 (CA).

X Glendore's case

Glendore's case is that from October 2001 to December 2002, Glendore sought to achieve planning permission in respect of the Property by means which they honestly believed were the most appropriate and likely to succeed. They achieved their aim. They did not pursue their own interests at the expense of the Morris brothers. It was also in the Morris brothers' interests that planning permission should be obtained. Glendore made an application which it believed would succeed. When it discovered that there were obstacles which might necessitate an appeal, it decided to adopt a consensual approach which it hoped and believed would achieve the result desired by both parties in a more swift and certain manner. The broad nature of the scheme (mixed residential and community use) did not alter.

Glendore never lost its intention to pursue, if advisable or necessary, the original application for planning permission. Because of considerations which were raised by Ealing during the pursuit of that bona fide application, Glendore decided that there might be other consensual means which might more swiftly and certainly result in a planning permission without ever abandoning their intention of pursuing the original permission. Such a decision was not "contrary" to or "ulterior" to the "purpose" of the Agreement but consistent with it.

Glendore submitted an application for planning permission prior to the Termination Date of November 16, 2001. By virtue of the Third Schedule to the Agreement, the Termination Date was extended until "a date being ninety-eight days after receipt in writing by the Grantee of the decision upon such application". On January 10, 2003 Glendore received notice in writing of Ealing's decision upon that application. On January 30, 2003, Glendore exercised the Option. The exercise of the Option occurred during the Option Period and was accordingly valid.

The provisions of the Agreement upon which the Morris brothers rely have no bearing upon its purposes. They are only concerned with the length of the Option Period. The provisions of the Agreement do not make the exercise of the Option conditional upon a planning permission being obtained.

The Agreement neither expressly nor impliedly prohibited Glendore from, for example (a) making more than one planning application; (b) amending an application made before November 16, 2001; (c) making a separate planning application at any time during the Option Period; or (d) basing its decision to exercise the Option on the outcome of a separate application. Provided only that the Option Notice was served in time, there was no constraint upon Glendore's exercise of the Option or the means by which it arrived at its decision to do so.

The Agreement did not purport to constrain the way in which Glendore might tactically seek to optimise its prospects of success in obtaining planning permission. The Agreement did not purport to and could not reasonably constrain decisions whether to amend an application, or submit a parallel application, or to press for a decision likely to be adverse and then to appeal it whilst simultaneously pursing a parallel application, or to keep the first application alive whilst pursuing a parallel application; or whether to appeal against a non-determination (and when to do so) or to allow the application to be expressly decided and (in either case) to pursue other avenues in the meantime of persuading the Planning Authority to grant a permission in accordance with the views that it had propounded in the course of meetings and negotiations.

The aim of the Agreement, on its objective and commercial interpretation, was to give Glendore the maximum reasonable flexibility in securing a planning permission within a reasonable time. That is why the Agreement recognised Glendore's right to negotiate with the Planning Authority, to extend the statutory period for determining the application, to appeal any refusal and even to apply for judicial review.

The period prescribed by the GDP Order is directory and not mandatory, and a decision granting or refusing permission after the expiry of the period is valid and effective. The Planning Authority is under a continuing statutory duty to consider the application after the period has expired. It is very common for authorities not to reach a decision within the 8 week period as the expert evidence of Mr Henry demonstrates.

Under section 78(2) of the 1990 Act the period prescribed by the GDO can be extended. It refers to an agreement in writing but does not require a formal contractual document. If it is necessary for the statutory period to be extended then Glendore relies upon the e-mail from Mr Rhodes to Ealing dated April 22, 2002. This constituted and/or evidenced, in writing, an agreement to extend the statutory period and fell within the 1990 Act. In the present context, the requirement of writing refers to a document which evidences an agreement that time has been enlarged. If any signature is necessary, then the relevant signature is that of the applicant. The word "period" merely describes a continuous stretch of time. In its normal meaning it does not describe a precise, measured length of time (even though it may do so).

The only way in which the Agreement impacts on Glendore's timetable is not by altering the normal effect of any rule of law but by limiting the extension of the Option Period to 98 days after the date of the Planning Authority's decision in writing rather than making it co-extensive with the statutory 6 month time limit for appealing. In order to take advantage of an extension to the Option Period, Glendore must appeal within 98 days.

As regards estoppel and acquiescence, Glendore relies on the correspondence between the solicitors in January 2002; the service on the Morris brothers on March 15, 2002 of notice of the second application for planning permission being made by Glendore and Acton Housing Association; Mr Freeborn's e-mail to Mr Alan Morris of May 27, 2002; the meeting on June 25, 2002, when (according to Glendore) Alan Morris accepted that he had not done anything outside the terms of the Agreement; the letter of July 8, 2002 and the e-mail of July 26, 2002 from Glendore about the progress of the second application; Mr Freeborn's letter of September 24, 2002; the service of notice of the third application on September 25, 2002; and the communications from Glendore and its solicitors in December 2002 informing them that the third application had been successful.

By the time the Morris brothers took the points that they now seek to advance, it was too late for Glendore (if the Morris brothers are right) to cure the matters of which complaint is made. Glendore had, with the full knowledge of the Morris brothers, incurred expenditure, time and effort in procuring planning permission for the property, which was a valuable asset accruing for the benefit of the property. The sole purpose of incurring the expenditure, time and effort, as the Morris brothers well knew, was in order to promote the exercise of the Option. Glendore would not have acted as they did had they known that, in the Morris brothers' view, the Option was defunct.

Glendore could and would, if the Morris brothers had made their position clear, have taken steps to formally extend time under section 78(2) and then appealed if there had been a refusal of the first application. By doing so, they would have preserved the Option and would have been able to exercise the Option once planning permission was achieved in relation to the second or third applications. The Morris brothers derived a significant benefit, enhancing the value of their property, by allowing Glendore to act as they did. Indeed the Morris brothers are in a better position as a result of their conduct than they would have been in if they had made their position clear. Had they done so, either (a) they would be compelled to transfer the property to Glendore at the Option Price; or (b) if Glendore had walked away from the project (as on one view of the Morris brothers' arguments they should have done) the Morris brothers would have been left with no planning permission, an immediate obligation to repay the loan, and (if the original application had been refused) and an element of planning blight.

It is inequitable and unconscionable that the Morris brothers should now be entitled to assert (to Glendore's detriment and the Morris brothers' benefit) that the Option has expired by reason of Glendore's actions, when the Morris brothers have knowingly and consciously (a) acquiesced in Glendore's actions; (b) co-operated with the various applications (by permitting Acton to view the property and placing the various notices on the property); (c) encouraged Glendore to believe that the Morris brothers agreed with and/or had and would take no objection to Glendore's actions (by their conduct in taking no objection after having, through their solicitors, made specific inquiry designed to generate an objection if there was one; and by their conversation with Mr Freeborn in June 2002).

XI Conclusions

There are some findings of fact on certain matters on which there was a conflict of evidence which I must make before I state my conclusions. The first is whether (irrespective of whether there is a contractual duty to act in good or to exercise contractual powers for the purpose for which it is claimed they were given) Glendore acted in good faith, and for a proper purpose, in keeping the first application alive, while the second and third applications were being pursued. Having heard Mr Freeborn, and particularly Mr Engwell and Mr Rhodes, and also having taken account of Mr Henry's evidence as to planning practice, I am satisfied that the first application was kept on foot in good faith, and with the genuine intention of ensuring that planning permission would be obtained for one of the schemes, and not for the purpose of keeping the Option alive. This is so notwithstanding that from February or March 2002 all of Glendore's efforts were directed to obtaining consent for the second and third applications, because its preferred commercial route was a sale to Acton, and because the Acton scheme was preferred by Ealing.

I accept the evidence for Glendore that dual applications carried out in this manner are widely used and are a very well known negotiating technique in the planning world, and that the making of a parallel application placed more pressure on Ealing to grant a consent for one of the applications and thereby avoid the need for an appeal. Although by December 2001 Mr Freeborn's preferred route was to sell to Acton (because he did not have funding for the first scheme, and because there was concern that a doctor's surgery would not be forthcoming), Mr Freeborn and his advisers genuinely considered that it was for political reasons that Ealing preferred a scheme along the lines of the second application, and (with some justification) that there would have been good grounds for an appeal from the refusal of the first application.

I also accept the evidence of Mr Engwell and Mr Rhodes that their instructions were that Glendore wanted to have the opportunity to appeal if it could not reach a settlement because it considered that Ealing was being unreasonable in its demands. Neither of them was aware of the details of the Agreement. They knew that Mr Freeborn would have preferred a favourable decision on the second application, because he did not have funding for the first scheme, and there was no longer any certainty with regard to obtain a medical practice on the site. They were both anxious to avoid a decision on the first application, since even a favourable decision might have unacceptable conditions.

The second factual matter is the reason why the Morris brothers were not "happy bunnies" by the time they met Mr Freeborn on June 25, 2002. Having heard Mr Freeborn and Mr Alan Morris, I am satisfied that Mr Morris was unhappy with the prospect that he and his brother might not be able to sell the Property to Glendore and that they might be left with a snooker club, many of whose members had left because of the continuing uncertainty. I do not accept Mr Morris' evidence that he wanted Mr Freeborn to stop the process.

From January 12, 2002 Mr Morris had known of the second application, and he received details on about March 15, 2002 of the joint Glendore/Acton application, and the drawings on April 18, 2002. On May 27 and July 26, 2002 Mr Freeborn told him about the progress of the second application, and expressed confidence that it would succeed. Mr Freeborn also then made it clear that the Option would be exercised by about the end of November 2002 (after allowance for the time for applications for judicial review) if permission were granted. I am satisfied that Mr Morris well understood the second application, and that it was being given priority, and approved Glendore's course because he was keen for the Option to be exercised.

The third factual aspect relates to events after the second application was refused. Mr Freeborn falsely told Mr Alan Morris in his letter of September 24, 2002 that Glendore was continuing to press the first application (as well as pursuing the third application), when in fact Glendore's advisers had asked Ealing to put it into abeyance pending the second application and also the third application. I consider that he did this because he had become alive to the possibility that the Option depended on the first application. A week or two later Mr Morris inspected the file, and found that the first application was not being pressed, but he did not complain to Mr Freeborn. I do not accept his evidence that he did nothing because he hoped that the application would fail and the Option would lapse. I consider that he did nothing because it did not then matter to him that the first application was in abeyance if there was a chance that the third application would succeed and that he and his brother would receive more than £1 million net from a sale of the Property. It was probably only later that it occurred to him, or he was advised, that he could obtain for himself the benefit of the profit on the site if he could argue that the Option had lapsed, and so obtain more than £2 million.

Against the background of these factual findings I turn to consider the issues.

On construction, I was referred to the principles stated by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912, but there was no dispute as to the principles to be applied. I do not consider that the relevant matrix of fact consists of more than that the Agreement concerned an Option for the purchase of a run down snooker club/cinema site for redevelopment, and that the Agreement envisaged (but did not require) that the Option would not be exercised until planning consent was obtained. Although there may have been discussions about the intended length of the planning process, I do not consider that they are relevant or admissible in interpreting the Agreement. The purpose of the Agreement was to give Glendore an option to buy the Property for development purposes, and to give it an option which was sufficiently long to enable it to complete the planning process, and at the same time give the Morris brothers the comfort that Glendore would take such steps as were necessary to enable it to exercise the Option, so that Glendore would have an incentive to exercise the Option.

The express terms of the Agreement were as follows:

(1) The Morris brothers granted the Option subject to the provisions of the Agreement (clause 2);

(2) the Option was to be exercised by notice in writing at any time during the Option Period (clause 4.1);

(3) the Option Period meant the period commencing on the date of the Agreement (February 16, 2001) and expiring at 5 pm on the Termination Date (clause 1);

(4) the Termination Date was November 16, 2001, which date was to be extended (if any of the circumstances set out in the Third Schedule apply) until the relevant date set out in the Third Schedule (clause 1);

(5) if prior to the Termination Date (which for this purpose must mean November 16, 2001) an application for Planning Permission had been made but no written decision had been received by that date, the Termination Date was to be extended to a date 14 weeks after the receipt in writing of the decision (Third Sched, para 1); Planning Permission meant the written grant of unconditional planning permission for the Development (which meant the proposed redevelopment of the Property by Glendore: clause 1) by the local planning authority or the Secretary of State pursuant to an application submitted in accordance with clause 3: clause 1;

(6) by clause 3, Glendore was to apply for planning permission, and was to, if requisite or desirable in order to obtain Planning Permission, enter into discussion with the local planning authority, and could (1) agree with the local planning authority the extension of the statutory period for the giving of notice of its decision under section 78(2) of the 1990 Act and (2) appeal against any Planning Refusal (which included a deemed refusal under section 78(2) unless the statutory period had been extended by Glendore: clause 1), which appeal was to be prosecuted with all due diligence: clauses 3.1, 3.2, 3.3, 3.5, 3.6;

(7) if prior to the extended Termination Date, permission was granted subject to a section 106 Agreement, then the Termination Date was to be extended until 14 weeks after the decision after completion of the section 106 Agreement (Third Sched, para 2);

(8) if prior to the extended Termination Date, the application was referred to or called in by the Secretary of State, or notice of appeal had been given to the Secretary of State in respect of a Planning Refusal, the Termination Date was to be extended to 14 weeks after the decision by the Secretary of State, but if there was an application for judicial review, until 14 days after the decision on the judicial review (Third Sched, para 3).

The starting point is that Glendore submitted an application for planning permission prior to the Termination Date of November 16, 2001. By virtue of the Third Schedule to the Option Agreement, the Termination Date was extended until "a date being ninety-eight days after receipt in writing by the Grantee of the decision upon such application". On January 10, 2003 Glendore received notice in writing of the planning authority's decision upon that application. On January 30, 2003, Glendore exercised the Option. It is not now suggested by Glendore (if it ever was) that the second and third applications are applications for the purpose of the Third Schedule.

Unless, therefore, there are express or implied terms in the Agreement to the contrary, or unless Glendore's conduct requires a different result, the exercise of the Option occurred during the Option Period and was accordingly valid.

There is no express term which is directly relevant. It is not arguable (and was not argued) that the effect of section 78(5) of the 1990 Act is that there was a written decision on the first application for the purposes of the Third Schedule, para 1, eight weeks after receipt by Ealing of the first application.

The only questions are whether any of the express terms of the Agreement points to a construction of the Agreement which would have the effect of negating what appears to be the effect of paragraph 1 of the Third Schedule, whether there is any basis for implying terms which would have that effect, and whether Glendore has been in breach of any of the terms of the Agreement, and (if so) the effect of any such breach.

In my judgment there are no terms, express or implied, which have the effect of negating the clear words of paragraph 1 of the Third Schedule, and Glendore has not been in breach of any term of the Agreement.

I do not consider that clause 3.2 limits Glendore to discussions with Ealing which are "requisite or desirable" to obtain planning permission for the first application. Clause 3.2 is plainly one of those provisions which is designed to give the Morris brothers the comfort that Glendore would take such steps as were necessary to enable it to exercise the Option. It is a positive obligation to take those steps. It is not a limiting provision. If clause 3.2 were central to this case, there would undoubtedly have been a question (which was not raised before me) whether the condition ("if requisite or desirable") or the obligation (to "enter into discussion or negotiation") are sufficiently precise to give rise to an enforceable obligation. In any event, I am satisfied, in the light of the evidence of Mr Engwell and Mr Rhodes, that nothing which Glendore did in relation to the first application was not requisite or desirable in the interests of obtaining permission on the first application.

Clause 3.3 is a provision which enables Glendore to extend the time in which the Option may be exercised (and it is to be noted that a long extension could have granted pursuant to section 78(2) and the GDP Order). But I do not consider that it has the effect of expressly or impliedly requiring Glendore to appeal under section 78(2) within 28 days after the period of eight weeks following the application. Nor do I consider that the power given by clause 3.3 to agree an extension under section 78(2) of the 1990 Act excludes any other normal method of extending the decision-making process to enable permission to be obtained. Nor, in my judgment, has clause 3.3 the effect that if there is a non-determination Glendore, in order to preserve its Option rights, had to appeal it, and not simply avail themselves of its legal right to await a decision on the application and if necessary appeal it. The Morris brothers accept that Ealing went along with Glendore's requests to keep the first application in abeyance. The expert evidence of Mr Henry (supported by the facts of this case) demonstrates that it is common for planning authorities not to reach a decision within the 8 week period. The letters from the local planning authority in this case bear that out. Thus on November 16, 2001 Ealing wrote: "We will try to decide your application by 10/01/2002. If we do not succeed, you may, if you wish, make an appeal to The Secretary of State against the Council's failure to issue a decision. Before you do so, I recommend you contact me first to find out progress, as an appeal is rarely necessary."

The period prescribed by the GDP Order is directory and not mandatory: the planning authority is under a continuing statutory duty to consider the application after the period has expired, and a decision granting or refusing permission after the expiry of the period is valid and effective: cf James v Secretary of State for Wales [1968] AC 409; London & Clydeside Estates Ltd v Aberdeen District Council, 1980 SLT 81 (HL). The words in the GDP Order "at any time" mean that the period can be extended at any time, even after its expiry: London & Clydeside Estates Ltd v Aberdeen District Council, 1980 SLT 81 (HL).at 90, per Lord Fraser, 93, per Lord Keith; Bovis Homes (Scotland) Ltd v Inverclyde District Council, 1982 SLT 473, 477. Consequently clause 3.3 cannot be regarded as imposing an express or implied time limit.

If the question whether there had been a section 78(2) agreement had been directly relevant, I would have decided that on the facts there had been no such agreement, because there was no agreement in writing: there is no document which records Ealing's agreement to an extension of time. If I were wrong in that conclusion, then I would have held that expression "extended period" was satisfied: the extended period discussed was a period "pending determination" (Mr Rhodes' e-mail of April 22, 2002) and it seems to me that that would be a sufficiently certain period to qualify.

Nor do I consider that the power of Glendore to appeal a "Planning Refusal" under clause 3.5 affects the conclusion that the conditions for the exercise of the Option have been met. Clause 1 of the Agreement does define Planning Refusal to include what is described as a deemed refusal under section 78(2) of the 1990 Act (although that expression is not used in section 78(2)), and Glendore could have appealed after the eight week period. But it is not suggested by the Morris brothers that Glendore was under an obligation to do so, and the sole purpose of clause 3.5 is to extend the time frame for the exercise of the Option to include an appeal (which must be prosecuted with diligence: clause 3.6) for the purposes of the extension provisions in the Third Schedule, para 3.2.

I do not consider that individually or taken together these provisions show that (a) there was an express term or implied term of the Agreement that Glendore should not request Ealing to put the first application into abeyance; or (b) there was an express or implied term that the planning process would be completed within any specified time; or (c) there was an express or implied term that Glendore would not make any parallel applications either in its sole name or jointly with Acton. Nor do I consider that they show that the Agreement contained a comprehensive code for defining the time frame within which the Option had to be exercised, at least in the sense for which the Morris brothers contend, i.e. that the extension of time operated only if there had been a section 78(2) agreement, or an appeal.

On the contrary, to read the Agreement (as the Morris brothers now contend) to mean that (in the absence of discussions or negotiations with Ealing following a section 78(2) agreement in writing) Glendore would lose the benefit of the Option if it did not appeal within a month after the eight week period had expired would be uncommercial and contrary to the commercial purpose of the Agreement, where obtaining planning permission was in the interests of all parties.

It is plain from the provisions relating to appeal and judicial review in the Third Schedule that the Agreement contemplated that the Option might not be exercised for a considerable period (whatever the Morris brothers now say they contemplated). It would appear that, even if Glendore had extended the statutory period for a sufficient time to enable it to make the best possible case, a written decision would not have been forthcoming until April 2002 at the earliest; if the application had been refused, Glendore would have had 98 days (14 weeks) in which to lodge an appeal, say the end of July 2002, and the appeal process would then have taken an average of 7 months, after which Glendore would have had a further 98 days in which to exercise the Option. Even if Glendore had decided to appeal within 98 days of the non-determination (January 10, 2002), the last day for lodging an appeal would have been April 18, 2002; by reference to the target times for such appeals (7 months), the expected completion date for the appeal would have been November 18, 2002; 98 days from that date would have been February 24, 2003. These dates would have been extended by a further lengthy period if there had been proceedings for judicial review. Mr Henry's evidence was that if the matter had been referred to the Secretary of State, the time frame would have been almost two years.

Consequently, none of these provisions was a condition precedent to the exercise of the Option. They related only to the time within which it could be exercised (and indeed the Agreement contemplated that the Option could be exercised before the grant of permission or after its refusal), and they did not preclude the exercise of the Option on the ground that it was being exercised after the grant of permission for a planning application made after November 16, 2001.

The Agreement could have provided for a long-stop date by which the Option had to be exercised, but it did not. Glendore accepts that some limitation of its freedom of action must be implied in terms of reasonableness, but I do not consider that anything it did was unreasonable in terms of the nature and purposes of the Agreement.

Accordingly, I reject the contention that the Option lapsed on March 14 (as pleaded) or April 17, 2002 (as argued) (98 days after the eight week period from the making of the application on October 11 or November 15, 2001 expired). In my judgment, the terms of paragraph 1 of the Third Schedule are clear, and there is nothing in the express terms of the Agreement or in any term to be implied as a matter of business efficacy to contradict them, and the consequence is that the Option was validly exercised.

It follows that none of the other issues requires elaboration. I do not consider that Glendore was in breach of any term of the Agreement in allowing the first application to remain on foot while the second and third applications were made. Consequently, no question arises as to whether Glendore can take advantage of its breach of contract.

In the light of my conclusion that Glendore acted in good faith and for a proper purpose, I do not have to consider the difficult questions of the extent to which an obligation of good faith (and its extent and nature) should be implied in a contract (on which there are many authorities in many different contexts) or of the extent to which (as a matter of construction of express terms, or of the implication of terms as a matter of business efficacy, or to give to the reasonable expectations of the parties) contractual powers in private law contracts have to be exercised for a particular purpose: Equitable Life Assurance Society v Hyman [2002] 1 AC 408.

It is also unnecessary to decide the question of whether the Morris brothers are estopped from denying the validity of the exercise of the Option by their conduct in acquiescing in, or agreeing to, the twin-track approach. If it were necessary to decide that question my conclusions are these: (a) from mid-January 2002 the Morris brothers knew that Glendore was adopting the twin-track approach, and was hoping to obtain planning consent for the second application and subsequently the third application; (b) from the same time they knew that the application was in respect of a development by a housing association, and from mid-March that it was a joint application by Glendore and Acton; (c) they were never concerned about the outcome of the first application, because their sole concern was that planning permission should be granted as soon as possible; (d) they were informed of the third application in September 2002, but were misled when Mr Freeborn gave them the impression that the first application was being pursued, but Mr Alan Morris found out the true position very shortly afterwards, and did nothing.

There was, from January (or at the latest March) 2002, a common assumption between the parties which "crossed the line" that concentration on the second application did not affect the continuance of the Option. In the circumstances of this case, I am satisfied that it would have been unconscionable for the Morris brothers now to say that the Option lapsed in March or April 2002. I would therefore have accepted the contention by Glendore that by the time the Morris brothers took the points that they now seek to advance, it was too late for Glendore (if the Morris brothers are right) to cure the matters of which complaint is made. Glendore had, with the full knowledge of the Morris brothers, incurred expenditure, time and effort in procuring planning permission for the property, which was a valuable asset accruing for the benefit of the property. The sole purpose of incurring the expenditure, time and effort, as the Morris brothers well knew, was in order to enable them to exercise the Option. Glendore would not have acted as they did had they known that, in the Morris brothers' view, the Option was defunct.

The claim therefore fails, and the counterclaims for specific performance and repayment of the loan succeed.

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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Morris & Anor v Glendore Investments Ltd. [2003] EWHC 3091 (Ch) (18 December 2003) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2003/3091.html Cite as: [2003] EWHC 3091 (Ch)

		Royal Courts of Justice Strand London WC2A 2LL
		December 18 2003