Retirement Villages Developments Ltd v Punch Partnerships (PTL) Ltd [2022] EWHC 65 (Ch)
This High Court decision considered the construction of an option agreement granted in 2013 for an initial 30-month term which was subject to an extension in defined circumstances. The issue that arose was whether the extension applied meaning the option could still be exercised.
In 2013 the option was granted by the Defendant to the Claimant's predecessor, Hamlin Estates Ltd (Hamlin). It was then assigned to the Claimant in September 2019. It entitled the Claimant to acquire land for the sum of £2.61 million once a qualifying planning approval had been obtained.
The Claimant sought a declaration that the option continued in existence. The Defendant counterclaimed the application and, unsuccessfully, sought rectification of the option agreement on the basis of common mistake.
Findings
The court rejected the Defendant's counterclaim and found that the option had not expired. On the questions of interpretation, it held:
- Construction of the Option
It was argued by the Defendant that the End Date, defined in the option as the latest date of three separate events, had occurred and the option could not be exercised. The Defendant argued that to find otherwise would lead to a commercially absurd result i.e. that the property could remain subject to, and restricted by, the obligations in the option in perpetuity. The Judge found the opposite and held that the End Date had not occurred (as none of the conditions to trigger the End Date had arisen) and reached the conclusion by relying on the natural meaning of the words the parties had used in the agreement. Given they were not ambiguous, there was no reason to depart from them (even if the words lead to a commercially absurd result).
- Implied Terms
The Defendant sought to imply wording into the option agreement which would have the effect of bringing the option to an end at an earlier date. The Defendant said that doing so was reasonable, equitable and necessary to give the option business efficacy. The Judge disagreed and found that implying the terms sought was neither reasonable nor equitable and ran contrary to the background factual matrix. It was said that 'the true construction of the option is to allow it to continue until after the Property is allocated for development in the future and for the developer to have a meaningful chance to apply for planning permission. The effect of the implied terms is to the opposite…'. The tests for implication were not considered to have been met and so the argument for implying words into the option was rejected.
The judgment is a helpful reminder of the Court's approach to the interpretation of documents and the limited basis on which terms will be implied.