The Court of Appeal has recently upheld Sainsbury’s right to walk away from an agreement to buy the ground of Bristol Rovers FC, the Memorial Stadium. This was despite Sainsbury’s contractual obligations to use ‘all reasonable endeavours’ and to act ‘in good faith’ to advance the deal.
In March 2011, Bristol Rovers and Sainsbury’s entered into an agreement for the sale/purchase of the Memorial Stadium for £30 million (the Agreement). The club intended to build a new home on the UWE campus. Sainsbury’s had plans to demolish the Memorial Stadium and to construct a mixed-use development, housing a superstore as well as residential units. However, in Floyd LJ’s words, “From mid-2013…Sainsbury’s realised that the economics of the deal had changed, and wished to terminate the Agreement if it lawfully could”.
The Agreement contained the usual conditions precedent. One of these conditions related to obtaining planning permission in acceptable terms for the proposed development of the Stadium’s site, prior to a stated deadline.
Bristol City Council gave planning consent in 2013, but the terms of the consent, restricting deliveries to the superstore at unsociable hours, were unacceptable. Sainsbury’s applied (under s 73 of the Town and Country Planning Act 1990) to vary these terms, but was unsuccessful.
As the CPs had not been fulfilled in the given timeframe, Sainsbury’s then purported to terminate the Agreement by serving notice. The parties negotiated. As an attempt to head off proceedings, Sainsbury’s agreed to take steps in accordance with Paragraph 2.11 of the Agreement.
This provided that Sainsbury’s would be obliged to appeal against a planning refusal if Counsel opined that such an appeal had a 60% chance of succeeding. Counsel was duly instructed. The received advice, however, was not bullish. In Counsel’s view, the chances of getting consent in acceptable terms was less than 60%. Sainsbury’s therefore refused to engage. Bristol Rovers contended that Sainsbury’s was in breach.
Bristol Rovers’ case
Under the Agreement:
- the parties were “to act in good faith in relation to their respective obligations…and to assist the other in achieving an Acceptable Store Planning Permission…” (Clause 31.1)
- Sainsbury’s were obliged to “use all reasonable endeavours to procure the grant of an Acceptable Store Planning Permission as soon as reasonably possible…” (Paragraph 2.8)
Bristol Rovers argued that Sainsbury’s was therefore obliged to continue to make a further s 73 application, or alternatively to lend its name to a planning application submitted by Bristol Rovers.
Either the Agreement was continuing; or Sainsbury’s had terminated in breach of contract. The fact that the CP relating to planning consents had not been delivered timeously was due to its own failure to progress matters. It was established law that a party could not take advantage of its own breach of contract.
The Court of Appeal held that Sainsbury’s were entitled to terminate the Agreement, upholding the High Court’s earlier decision: “…the all reasonable endeavours obligation is curtailed by paragraph 2.11…if Sainsbury’s was not itself required to submit a further section 73 application by the terms of paragraph 2.11…I have great difficulty in understanding on what principle it can be held that its reliance on that contractual provision can lack good faith” (Floyd LJ).
The Court recognised that there was a limit on the zeal with which Sainsbury’s was obliged to pursue the planning application. The parties had prescribed the required steps in the Agreement.
The decision indicates that express duties regarding good faith and the application of reasonable endeavours do not override the specific obligations set out in the Agreement.