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Wednesday 16 December 2020

Court of Appeal interprets “development” to mean “the erection of new buildings for a different use”

The Court of Appeal has underlined the importance of the factual context and commercial common sense when interpreting the trigger for the exercise of an option over development land.

Fishbourne Developments Limited v Stephens [2020] EWCA Civ 1704 was an expedited appeal about the interpretation of an option agreement to acquire a 117-acre farm (“the Farm”) in the village of Fishbourne, near Chichester in West Sussex. The Farm comprised open fields with a cluster of farm buildings. The option was due to expire on 31 December 2020. It entitled the option holder to acquire the Farm at a 30% discount from its open market value. The trigger for the option was the obtaining of a “Planning Permission” which was defined to mean “a planning permission granted by the Local Planning Authority permitting any development of the Property”. In 2016, Fishbourne Developments Limited (“FDL”), the option holder, obtained planning permission to erect a new pitched roof on one of the existing farm buildings and in 2018 gave notice to trigger the option over the Farm on the basis that it had obtained a Planning Permission.

Argument focussed on the meaning of the words “any development of the Property”. The Judge below held that this meant the erection of new buildings involving a change of use from agricultural use of the whole, or substantially the whole, of the Farm. Accordingly he held that FDL had failed to trigger the option. FDL appealed arguing that “development” could only bear the meaning it is given in section 55 of the Town and Country Planning Act 1990, that the Judge had been wrong to construe the option consistently with a series of earlier option agreements relating to the Farm and that the Judge had also been wrong to hold that a Planning Permission had to relate to the whole or substantially the whole of the Farm: a Planning Permission over part only of the Property was sufficient, it was said.

The Court of Appeal dismissed FDL’s appeal and upheld the Judge’s interpretation. The CA interpreted the word “development” in the particular context of the Farm and of the option as a whole, and held that its meaning did not in that context encompass all of the wide range of activities within the scope of section 55 of the 1990 Act. They concluded that an interpretation that enabled the option holder to trigger the option with an inconsequential planning permission made little commercial sense in circumstances in which the option holder would be entitled to purchase the Farm at a discount of 30% from its open market value. And they held that “any development of the Property” meant that planning permission had to be obtained in relation to the whole or substantially the whole of the Property, not part only of the Property. This was consistent with the definition of “the Property” in the option and its deployment in the option as a whole, despite the fact that this required them to conclude that another term in the option must contain a mistake. The CA did not find it necessary to place reliance on the previous option agreements.

Julian Greenhill QC acted for the Respondent, Mrs Stephens, instructed by Irwin Mitchell LLP. You can read and download the judgment here.

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