Fishbourne Developments Ltd v Stephens [2020] EWCA Civ 1704, 2020
The Court of Appeal has recently dismissed an appeal by a developer on whether planning permission to erect a new pitched roof on a farm building constituted a planning permission to develop farmland under an option agreement.
The Court of Appeal took a pragmatic approach, holding that the factual and commercial context needed to be considered when interpreting the option agreement. If this caused conflicting outcomes then the construction of the wording which made the most commercial and business common sense would prevail.
Background
In 2002 the developer and farm owner entered into an option agreement for the purchase of 117 acres of farm land. The option agreement provided for a 30% discount on the purchase price if planning permission to develop the land was obtained. Planning permission was defined as:
"a planning permission granted by the Local Planning authority permitting any development of the Property" (clause 1.9)
In 2016, the developer obtained planning permission for a new roof of one of the farm buildings and notified the farm owner that this constituted planning permission to develop the land under the option agreement, entitling the developer to start the process of purchasing the land at the discounted price.
The question for the High Court was whether the granted planning permission to erect the new roof was a planning permission for the purposes of the option agreement. The High Court held that on proper interpretation, "any development" under clause 1.9 meant planning permission to develop the whole site and a change of use, not just a new roof, and therefore the option was not validly exercised.
The developer appealed on the basis that the judge:
- Had failed to take the natural ordinary meaning of the words and the meaning of "development" as in section 55 of the Town and Country Planning Act 1990; and
- The development in this context could relate to the whole or part of the farmland, not the whole or substantially the whole as the judge had decided.
Court of Appeal Decision
The appeal was dismissed. The Court of Appeal held that the word "development " was capable of having more than one meaning. It was the role of the court to weigh up the implications of rival meanings, taking into account the context and factual background and applying commercial sense.
The developer's interpretation failed to make business sense to the court; it would enable the developer to obtain minor planning permission to trigger the option to purchase at a significant discount. The discount indicated that the farm owner expected the developer to boost the value of the property in order to exercise the option. The roof planning permission did not do this and therefore this interpretation made no commercial sense to the farm owner. This is consistent with the fact that the option did not include any claw-back or overage provisions enabling the farm owner to benefit if the land was sold in the future at a substantial profit, despite being transferred at a 30% discount under the option.
The Court of Appeal held that the meaning of development in this context would not constitute all the activities set out in section 55 and the ordinary reader would approach the meaning of development in the context of the option of the farmland.
It was further held that based on the facts there was nothing to suggest that part of the property could not be developed and in the context of the option as a whole, the planning permission had to relate to the development of the whole or substantially the whole of the property.
Impact
This decision shows us the court's willingness to look at agreements realistically and take a commercial approach. It would have been unjust to allow the developer to purchase land at a discount when it had not taken any steps to enhance the value of the land.
Developers may need to be more precise when considering the trigger for the exercise of an option.
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