In this high-profi le dispute over the redevelopment of the Chelsea Barracks site in London, the High Court ruled that Qatari Diar Real Estate Inv Co was in breach of its sale and purchase contract with CPC Group Ltd when it withdrew the original planning application submitted to Westminster Council. This withdrawal was following the much-reported intervention from His Royal Highness, the Prince of Wales, who had expressed his dislike of the designs for the site which had been drawn up by Lord Richard Rogers.
The case is interesting for commercial lawyers because the court considered the contractual requirements to “act in utmost good faith” and to use “all reasonable endeavours” and concluded that:
- the contractual obligation to act “in the utmost good faith” must be looked at in a commercial context, including: adherence to the spirit of the contract; observance of reasonable commercial standards of fair dealing; being faithful to the agreed common purpose; and acting consistently with the justifi ed expectations of the parties. On the facts, the court decided that neither CDC nor Qatari had breached its mutual “good faith” obligation; and
- the obligation to use reasonable endeavours is less onerous than an obligation to use best endeavours, in that an obligation to use reasonable endeavours does not require the obligor to sacrifi ce his commercial interests (whereas a best endeavours obligation does). The court also said that the meaning of “all reasonable endeavours” (particularly when used with the caveat, as here, that those endeavours need not to extend beyond what is commercially prudent) lies somewhere in between the two, but didn’t clarify what that actually means. In this context, the strength of the obligation clearly did not equate to “best endeavours” and Vos J found that, on the facts, Qatari was not in breach.
For completeness, and on the facts, Vos J decided that Qatari was in breach of contract for another of its obligations: in withdrawing its planning application in a way that was not permitted by the agreement, and as such was still exposed to a claim in damages.