Post by Finnish Gas on Jan 21, 2016 17:07:39 GMT
Sainsbury’s pulls out of contract with Bristol Rovers despite owing duty of good faith
By Jennifer Chappell
Sainsbury’s Supermarkets Limited v Bristol Rovers (1883) Limited [2015] EWHC 2002 (Ch)
Earlier this year, Bristol Rovers was dealt a cruel blow when Sainsbury’s was allowed to walk away from a £30 million stadium deal. A High Court judge held that an obligation in a sale contract between the parties to act in “good faith” did not prevent Sainsbury’s from relying on other terms of the contract allowing it to terminate the sale.
Sale and lease-back
Back in 2011, Sainsbury’s agreed to buy the Memorial Stadium from Bristol Rovers and lease it back to the club. At the same time, Bristol Rovers signed a contract with University of the West of England to build a new £40m stadium on other land. Sainsbury’s would lease the Memorial Stadium to Bristol Rovers for a peppercorn until the new stadium was ready and then redevelop the land into a supermarket.
The sale contract between Sainsbury’s and Bristol Rovers was conditional on several matters, including Sainsbury’s obtaining planning permission in an acceptable form to redevelop the stadium. Any planning permission would be “acceptable” if it was not made subject to “onerous conditions”, as listed in the agreement. Sainsbury’s was also contractually obliged to act in good faith and use reasonable endeavours to obtain an acceptable planning permission.
Planning subject to restrictions
Bristol City Council granted planning permission to Sainsbury’s but it was subject to an onerous condition restricting the hours when Sainsbury’s could make deliveries to the store. Sainsbury’s applied to vary the restrictions, but at the same time an application for judicial review of the grant of the planning application had been brought by disgruntled residents who didn’t want the new store. The timing was not great and the application to vary the restrictions was refused.
As a result, Sainsbury’s terminated the conditional sale agreement with Bristol Rovers and refused to appeal against the planning decision. Bristol Rovers brought proceedings against Sainsbury’s saying that the retailer was under a continuing obligation to act in good faith and use reasonable endeavours to obtain an acceptable planning permission, but had failed to do so for various reasons.
Sainsbury’s settled the proceedings by agreeing to appeal the refusal of the application but only if it could be shown that Counsel’s advice was that the prospects of success exceeded 60%. Sainsbury’s was, however, advised that the prospects of successfully appealing were less than 60% and it sought a declaration that it could lawfully end the contract.
High Court judgment
The High Court held that Sainsbury’s was entitled to terminate and rejected Bristol Rover’s argument that Sainsbury’s was required to appeal due to its duty of good faith. The Court held that Sainsbury’s was entitled to rely on the provisions of the contract allowing it to terminate due to onerous conditions.
The case shows that an express duty of good faith does not override the other terms of the contract and Sainsbury’s was not required to give up its commercial interests by pursuing an appeal of the planning. The result of the case was, of course, disappointing for Bristol Rovers but the club has now been granted leave to appeal the decision.
25 November 2015
- See more at: www.bdb-law.co.uk/blogs/real-estate/sainsburys-pulls-out-of-contract-with-bristol-rovers-despite-owing-duty-of-good-faith/
Bristol Rovers shown the limits of good faith
Posted by Claire Hitchman on 4 August 2015
On 13 July 2015, we finally learnt of the court's decision in the battle between Sainsbury's and Bristol Rovers concerning the Bristol Rovers Memorial Stadium (Sainsbury's Supermarkets Ltd v Bristol Rovers (1883) Ltd). It was bad news for Bristol Rovers.
The case raises important issues about parties' rights to rely on specific provisions in a contract despite any express duties of good faith that could be said to point in a different direction.
Background to the case
Sainsbury's had applied to the court for a declaration that it had lawfully terminated a conditional contract to buy the Memorial Stadium. The deal had been that Sainsbury's would buy the stadium and lease it back to Bristol Rovers for a peppercorn rent while Bristol Rovers built its new stadium.
There were a number of conditions which had to be satisfied before the purchase by Sainsbury's could go ahead. One such condition was that Sainsbury's had to secure planning permission acceptable to them in order to redevelop the stadium as a supermarket. Planning permission was granted, but it placed restrictions on delivery. The contract specifically stated that certain restrictions on delivery would be deemed to be "onerous" and therefore not acceptable. In the meantime Sainsbury's had decided internally that it wanted to withdraw from the development, but it was already bound to pursue the planning application 'in good faith'.
Sainsbury's therefore made an application to vary these restrictions. By this time, an application for a Judicial Review of the decision to grant planning permission had been brought by a group of disgruntled residents who were against the new Sainsbury's store. As a result, it was not a good time to make the application.
The application was refused and shortly thereafter Sainsbury's resolved to terminate the agreement. Despite Bristol Rovers' requests, they refused to appeal the decision, which led Bristol Rovers to start proceedings against Sainsbury's. These proceedings were settled on the basis that Sainsbury's would appeal the refusal of the application if Counsel's advice was that the prospects of success for doing so exceeded 60% as prescribed by the contract.
The advice to Sainsbury's was that prospects of success were lower than 60% and Sainsbury's sought a declaration that it could lawfully terminate the contract.
Outcome of the case
The Court held that Sainsbury's was entitled to terminate the contract.
Mrs Justice Proudman rejected Bristol Rovers' arguments that Sainsbury's relied too heavily on the black letter of the contract, made the application at the wrong time and that Sainsbury's was obliged to appeal the decision in accordance with the duty of good faith in the contract. The court held that, although it was clear that the duty to act in good faith applied, this did not mean that Sainsbury's could not rely on the specific provisions of the contract.
The main points leading to the court's decision were as follows:
1. Both Sainsbury's and Bristol Rovers agreed that the planning conditions were onerous and that the purchase of the stadium could not go ahead on the basis of the original permission.
2. Bristol Rovers agreed that Sainsbury's should make the application to remove the conditions attached to the planning permission "as soon as possible" despite the tricky climate brought about by the application for a Judicial Review. This undermined their later claim that Sainsbury's should have waited.
3. Both Sainsbury's and Bristol Rovers agreed it was not reasonable to proceed with the purchase with the conditions attached to the planning permission.
4. The contract ruled out a withdrawal and re-submission of the application.
5. Planning Counsel did not put chances of success higher than those required by the contract.
6. Sainsbury's failure to lobby local councillors and objectors did not impact on the outcome as the application was made at a "politically inexpedient time".
Points to take away from the case
An obligation of good faith does not override the other terms of the contract.
Unless and until the case is decided differently, the principles surrounding express duties of good faith established by cases such as TSG Building Services Plc v South Anglia Housing Limited [2013] EWHC 115 (good faith will not cut across contractual rights) and Gold Group Properties Limited v BDW Trading Limited [2010] EWHC 1631 (TCC) (a party is not required to give up its commercial interests) remain as strong as ever.
Bristol Rovers now have leave to appeal the decision.
www.blakemorgan.co.uk/news-events/blog/bristol-rovers-shown-limits-good-faith/
By Jennifer Chappell
Sainsbury’s Supermarkets Limited v Bristol Rovers (1883) Limited [2015] EWHC 2002 (Ch)
Earlier this year, Bristol Rovers was dealt a cruel blow when Sainsbury’s was allowed to walk away from a £30 million stadium deal. A High Court judge held that an obligation in a sale contract between the parties to act in “good faith” did not prevent Sainsbury’s from relying on other terms of the contract allowing it to terminate the sale.
Sale and lease-back
Back in 2011, Sainsbury’s agreed to buy the Memorial Stadium from Bristol Rovers and lease it back to the club. At the same time, Bristol Rovers signed a contract with University of the West of England to build a new £40m stadium on other land. Sainsbury’s would lease the Memorial Stadium to Bristol Rovers for a peppercorn until the new stadium was ready and then redevelop the land into a supermarket.
The sale contract between Sainsbury’s and Bristol Rovers was conditional on several matters, including Sainsbury’s obtaining planning permission in an acceptable form to redevelop the stadium. Any planning permission would be “acceptable” if it was not made subject to “onerous conditions”, as listed in the agreement. Sainsbury’s was also contractually obliged to act in good faith and use reasonable endeavours to obtain an acceptable planning permission.
Planning subject to restrictions
Bristol City Council granted planning permission to Sainsbury’s but it was subject to an onerous condition restricting the hours when Sainsbury’s could make deliveries to the store. Sainsbury’s applied to vary the restrictions, but at the same time an application for judicial review of the grant of the planning application had been brought by disgruntled residents who didn’t want the new store. The timing was not great and the application to vary the restrictions was refused.
As a result, Sainsbury’s terminated the conditional sale agreement with Bristol Rovers and refused to appeal against the planning decision. Bristol Rovers brought proceedings against Sainsbury’s saying that the retailer was under a continuing obligation to act in good faith and use reasonable endeavours to obtain an acceptable planning permission, but had failed to do so for various reasons.
Sainsbury’s settled the proceedings by agreeing to appeal the refusal of the application but only if it could be shown that Counsel’s advice was that the prospects of success exceeded 60%. Sainsbury’s was, however, advised that the prospects of successfully appealing were less than 60% and it sought a declaration that it could lawfully end the contract.
High Court judgment
The High Court held that Sainsbury’s was entitled to terminate and rejected Bristol Rover’s argument that Sainsbury’s was required to appeal due to its duty of good faith. The Court held that Sainsbury’s was entitled to rely on the provisions of the contract allowing it to terminate due to onerous conditions.
The case shows that an express duty of good faith does not override the other terms of the contract and Sainsbury’s was not required to give up its commercial interests by pursuing an appeal of the planning. The result of the case was, of course, disappointing for Bristol Rovers but the club has now been granted leave to appeal the decision.
25 November 2015
- See more at: www.bdb-law.co.uk/blogs/real-estate/sainsburys-pulls-out-of-contract-with-bristol-rovers-despite-owing-duty-of-good-faith/
Bristol Rovers shown the limits of good faith
Posted by Claire Hitchman on 4 August 2015
On 13 July 2015, we finally learnt of the court's decision in the battle between Sainsbury's and Bristol Rovers concerning the Bristol Rovers Memorial Stadium (Sainsbury's Supermarkets Ltd v Bristol Rovers (1883) Ltd). It was bad news for Bristol Rovers.
The case raises important issues about parties' rights to rely on specific provisions in a contract despite any express duties of good faith that could be said to point in a different direction.
Background to the case
Sainsbury's had applied to the court for a declaration that it had lawfully terminated a conditional contract to buy the Memorial Stadium. The deal had been that Sainsbury's would buy the stadium and lease it back to Bristol Rovers for a peppercorn rent while Bristol Rovers built its new stadium.
There were a number of conditions which had to be satisfied before the purchase by Sainsbury's could go ahead. One such condition was that Sainsbury's had to secure planning permission acceptable to them in order to redevelop the stadium as a supermarket. Planning permission was granted, but it placed restrictions on delivery. The contract specifically stated that certain restrictions on delivery would be deemed to be "onerous" and therefore not acceptable. In the meantime Sainsbury's had decided internally that it wanted to withdraw from the development, but it was already bound to pursue the planning application 'in good faith'.
Sainsbury's therefore made an application to vary these restrictions. By this time, an application for a Judicial Review of the decision to grant planning permission had been brought by a group of disgruntled residents who were against the new Sainsbury's store. As a result, it was not a good time to make the application.
The application was refused and shortly thereafter Sainsbury's resolved to terminate the agreement. Despite Bristol Rovers' requests, they refused to appeal the decision, which led Bristol Rovers to start proceedings against Sainsbury's. These proceedings were settled on the basis that Sainsbury's would appeal the refusal of the application if Counsel's advice was that the prospects of success for doing so exceeded 60% as prescribed by the contract.
The advice to Sainsbury's was that prospects of success were lower than 60% and Sainsbury's sought a declaration that it could lawfully terminate the contract.
Outcome of the case
The Court held that Sainsbury's was entitled to terminate the contract.
Mrs Justice Proudman rejected Bristol Rovers' arguments that Sainsbury's relied too heavily on the black letter of the contract, made the application at the wrong time and that Sainsbury's was obliged to appeal the decision in accordance with the duty of good faith in the contract. The court held that, although it was clear that the duty to act in good faith applied, this did not mean that Sainsbury's could not rely on the specific provisions of the contract.
The main points leading to the court's decision were as follows:
1. Both Sainsbury's and Bristol Rovers agreed that the planning conditions were onerous and that the purchase of the stadium could not go ahead on the basis of the original permission.
2. Bristol Rovers agreed that Sainsbury's should make the application to remove the conditions attached to the planning permission "as soon as possible" despite the tricky climate brought about by the application for a Judicial Review. This undermined their later claim that Sainsbury's should have waited.
3. Both Sainsbury's and Bristol Rovers agreed it was not reasonable to proceed with the purchase with the conditions attached to the planning permission.
4. The contract ruled out a withdrawal and re-submission of the application.
5. Planning Counsel did not put chances of success higher than those required by the contract.
6. Sainsbury's failure to lobby local councillors and objectors did not impact on the outcome as the application was made at a "politically inexpedient time".
Points to take away from the case
An obligation of good faith does not override the other terms of the contract.
Unless and until the case is decided differently, the principles surrounding express duties of good faith established by cases such as TSG Building Services Plc v South Anglia Housing Limited [2013] EWHC 115 (good faith will not cut across contractual rights) and Gold Group Properties Limited v BDW Trading Limited [2010] EWHC 1631 (TCC) (a party is not required to give up its commercial interests) remain as strong as ever.
Bristol Rovers now have leave to appeal the decision.
www.blakemorgan.co.uk/news-events/blog/bristol-rovers-shown-limits-good-faith/
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