Sparks v Biden [2017] EWHC 1994 (Ch)

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A term would be implied into an option agreement, requiring the purchaser/developer of a plot of land to sell the properties that he had newly constructed, within a reasonable period of time, so held the High Court.  The clause was necessary as a matter of business efficacy and without it the option agreement lacked commercial coherence.  The Court also deemed the clause to be so obvious that it went without saying. (Marks & Spencer PLC v BNP Paribas Securities Services [2015] UKSC 72; [2016] AC 742 considered).

The Claimant, Mr Sparks, granted an option to a company, Linkwood to purchase a plot of land.  Linkwood, subsequently assigned the option to the Defendant, Mr Biden (effectively Linkwood’s owner).  Mr Sparks had acquired the land over time as smaller parcels with a view to development, however, he did not have the expertise or funds to undertake the development himself.  Mr Biden was a developer with circa 35 years’ of experience.  The parties, both represented by reputable commercial conveyancing solicitors entered into an agreement.

The option agreement required the buyer, during a period of 3 years from its inception, to apply for planning permission and to use “all reasonable endeavours to obtain” the same.  The buyer’s option over the land could be exercised during the same 3 year period.  If the option was exercised and the sale completed, the buyer was required to “proceed as soon as practicable” to construct the development.  Upon sale of any of the newly developed properties (8 were envisaged), in broad terms (and subject to 2 further conditions), an overage payment was due.

Mr Biden moved into one of the properties once they were built and let out the others on ASTs.  None of the properties were sold.  Mr Biden asserted that the obligation to pay overage could be delayed indefinitely as there was no express term requiring him to sell.  Mr Sparks issued a claim under CPR Part 8.

The Court assessed that the key factor pointing towards the implication of a clause requiring the properties to be sold and for overage to become payable were the requirements that all reasonable endeavours be used to obtain planning permission, including the pursuit of an appeal against refusal of the same; and following exercise of the option, to proceed with construction of the development “as soon as practicable”.  The Court concluded that those obligations were “clearly premised on the basis that all reasonable efforts to carry out the development are carried out as soon as possible”; from the seller’s perspective, with a view to realisation of the overage payment.  The Court questioned what interest the seller would have in imposing the earlier obligations were that not the case.

Although the Court accepted that the “entire agreement clause” was a factor against implying the term, it was only a factor and not a very strong one in the circumstances.