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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Stratford On Avon Council v David Wilson Homes Ltd.& Ors [2011] EWHC 3548 (Ch) (23 December 2011) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2011/3548.html Cite as: [2011] EWHC 3548 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Civil Justice Centre The Priory Courts 33 Bull Street Birmingham B4 6DS
		23rd December 2011.

HIS HONOUR JUDGE PURLE, QC:


 


1. This is a claim by Stratford on Avon district council ("the council") arising under a section 106 agreement dated 12^th of October 2001. The reference to section 106 is a reference to the Town and Country Planning Act 1990.
2. Section 106 agreements deal with planning obligations - in the present case, the need to provide community facilities. The agreement was made between the council in its capacity as the local planning authority, Warwickshire county council, who do not feature in these proceedings, and the then owners of a residential development site in Shipston-on-Stour, namely, Gallagher Estates Ltd ("Gallagher") and Pettifer Ltd ("Pettifer"). The legal owner was Pettifer. Gallagher appears to have had a beneficial interest under deeds of trust identified in a Schedule to the section 106 agreement.
3. Under the section 106 agreement a sum of money referred to as a "Community Hall Payment" was due, upon certain conditions being satisfied, as a planning obligation from the owners. Under section 106 of the 1990 Act, both the original parties and successors are liable, though an owner who parts with all his interest may be released, leaving the successor alone liable. The Defendants in these proceedings are David Wilson Homes Ltd ("David Wilson") and Peverel Freeholds N^o2 Ltd ("PF2"), the current owners between them of the larger part of the site affected by the planning obligation. The part owned by them is the part which has been developed.
4. PF2 also claims a contractual right to be indemnified by an associated company, Peverel Freeholds Ltd ("PF1"), a previous owner but no longer so. PF1 in turn claims a contractual indemnity from Stoneyfield Management Ltd ("Stoneyfield") which was for a while the owner of part of the site until transferred to PF1. The construction of the contractual indemnity between Stoneyfield and PF1 is in issue before me. There is thus a chain of indemnities which it is sought to enforce for the ultimate benefit of PF2 in the event, as the council alleges, that PF2 is liable to make the payment in question.
5. The sum of money claimed is £125,000 plus RPI indexation pursuant to the section 106 agreement. That sum was, under the section 106 agreement, payable no later than one month after service of what was referred to in the agreement as a "Community Hall Land Notice" upon the Owners of the site. The first and second Defendants (that is to say David Wilson and PF2) were served with a notice dated 19^th February 2009. The validity of that notice is in question before me. Notice was also served on Pettifer, which was by then in administration, but not on Gallagher.
6. I should turn to consider the terms of the section 106 agreement. It is dated 12^th October 2001. It starts with a series of definitions. The relevant ones are, firstly, "Commencement of the Development". That is said to mean:

"The date that a material operation as defined in section 56(4) of the Planning Act is undertaken pursuant to the Planning Permission but not including any operation relating to demolition site preparations site investigations surveys erection of fencing and hoardings diversion of any services or archaeological investigations."

7. The Planning Act, unsurprisingly, means the Town and Country Planning Act 1990 as amended from time to time.
8. There is then a definition of the "Community Hall" as meaning:

"either:

(a) a building for the recreational, educational or social use of the community of the town of Shipston-on-Stour that may be erected on the Community Hall Land by the District, or

(b) such other facility for such purposes as may be agreed by the Owners, such agreement not to be unreasonably withheld."

9. The next definition is "Community Hall Contract" which means "a written agreement with a contractor for construction of the Community Hall."
10. The next definition is "Community Hall Land", which means "the land of approximately 0.15 hectares forming part of registered title number WK376708 intended to be transferred to the District in accordance with the requirements of Schedule 9 and shown on plan 3 (Annex 5)."
11. There then follows a definition of "Community Hall Land Notice" as meaning:

"A written notice in the form found at Annex 7 served by the District on the Owners, giving notice that the Community Hall Contract is to be entered into (or has already been entered into) and:

(a) Requiring payment of the Community Hall Payment within one month of the date of the notice and

(b) either

(i) requiring the transfer of the Community Hall Land using the Community Land Form of Transfer or

(ii) informing the Owners that there will be no need for any transfer of the Community Hall Land."

12. Later on "Owners" is defined as meaning Pettifer and Gallagher. They owned the whole site at the date of the section 106 agreement.
13. Subsequently in clause 2 it is provided, amongst other things, in 2.1(a) that "words in the singular include the plural and vice versa", in 2.4 that covenants and obligations of more than one party are joint and several, and, in 2.5, that "unless this deed states otherwise references to any party shall include that party's successor in title and assigns."
14. Though the definition of Owners names only Pettifer and Gallagher, there is no statement or indication in that definition (or elsewhere in the Deed) that that reference does not include their successors in title and assigns. Nevertheless, it was argued before me by the Defendants that "Owners" meant exclusively Pettifer and Gallagher. It seems to me that that cannot be right, and would be a surprising construction anyway in the context of a section 106 agreement, where the burdens pass to new owners automatically and have the capacity to cease to apply to anyone who parts with all interest. That is confirmed here under clause 8.1 which provides:

"No person shall be liable for a breach of any covenant agreement or obligation created by this Deed after he shall have parted with all interest in the Development Site or the part in respect of which such breach occurs but without prejudice to liability for any subsisting breach prior to parting with such interest."

15. The core obligations are set out in clause 6. I shall read 6.1:

"The Owners covenant with the District … to the extent of their respective interests in the Development Site that the Development Site shall be subject to the planning obligations regulating the Development and use of it specified in Schedule 2 to schedule 9 inclusive to this Deed."

16. The Community Hall Land as defined was a relatively small part of the site, the remainder of which was to be developed for residential purposes. The Community Hall Land remains in the ownership not of PF1 or even PF2, but Pettifer. It appears that Gallagher may also still have a beneficial interest.
17. To find out more about the core obligations, one needs to look at Schedule 9, which is headed "Community Hall Land". It will be recalled that the primary obligation related to the building of a Community Hall on that land. However, there was an alternative written into the definition of "Community Hall", namely the provision of such other facility as might be agreed by the Owners.
18. Schedule 9 Part 1 reads as follows so far as material:

"1 The Owners shall pay the Community Hall Payment to the District in accordance with the requirements of the Community Hall Land Notice… unless: …

…1.3 the time limit set out in paragraph 7 of this schedule has expired."

19. Paragraph 7 of that schedule provides as follows:

"If the District do not serve the Community Hall Land Notice within 6 years of the date of the Commencement of the Development then the obligations in paragraph 1 and 2 of part 1 above to pay the Community Hall Payment and to transfer the Community Hall Land shall lapse."

20. I will also read paragraph 8 which provides:

"If construction of the Community Hall has not commenced on the Community Hall Land within 18 months of the date of transfer then the District or the Shipston Town Council as applies shall forthwith transfer the Community Hall Land back to the Owners…"

21. Thus, the Community Hall Payment might be made without the construction of any community hall commencing within a period of 18 months, and with no limitation on when provision of an alternative facility might be commenced.
22. This is subject to paragraph 6, which provides as follows:

"If the community hall payment is not fully spent within five years then the unexpended balance with interest will be returned to the persons who made the payment."

23. Thus, there was no obligation upon receipt of the Community Hall Payment to spend it straightaway. The Council had 5 years. That must mean 5 years from the date of receipt (rather than the date of the agreement) because paragraph 7 of Schedule 9 provides as already mentioned for the obligations to lapse after 6 years from the Commencement of the Development in the absence of a Community Hall Land Notice.
24. I should also read paragraph 5 of Schedule 9, which provides:

"The District will apply the Community Hall Payment and interest solely for either:

5.1 the provision of the Community Hall or

5.2 the provision or enhancement of community facilities elsewhere in Shipston."

25. In the events which happened, no community hall has been built or is proposed to be built. Instead the council proposed (and still propose) to make funds available for an existing Scout hut to be rebuilt, not on the Community Hall Land, but, in the words of 5.2, "elsewhere in Shipston." It was at one time suggested that the section 106 agreement did not extend to any facility that was not on the Community Hall Land. It was also suggested at one stage that, if a community hall was not provided, the other facility could not be a building. Correctly, neither of those points was, in the event, pursued.
26. The core obligations are, as I have said, to be found in schedule 9. They are quite simply the payment of the Community Hall Payment and its application to, as now proposed, the provision or enhancement of community facilities elsewhere in Shipston. The provision or enhancement of alternative facilities might or might not involve the council in any given case entering into a building agreement. It might simply acquire a pre-built facility or, as in this case, make funds available to a third party for the purpose of enhancing an existing facility. All of those are contemplated by the generality of the words in paragraph 5.2 of schedule 9. All of them must have been within the contemplation of the parties.
27. The difficulty arises from the definitions. It is argued that, because the "Community Hall Contract" is said to mean a written agreement with a contractor for construction of the Community Hall, it follows that only a building contract will do. I do not agree. The agreement must be read as a whole and the extension of the definition of Community Hall beyond a building of a hall as such and the provision of such other facility as might be agreed must, in my judgment, extend beyond a written agreement with a building contractor, whether for a hall or any other building.
28. Likewise, it is said that the expression "Community Hall Land Notice", by referring to annex 7, requires a building contract which is "about to be" entered into. The definition section itself uses the words "to be entered into" or "has already been entered into". Imminence is not a feature of the first limb of that definition. However, if one goes to annex 7, the word "about" appears and in fact the notice that was served in this case included the words "about to be entered into".
29. I do not regard annex 7 as controlling the construction of the agreement as a whole. The core provisions of the annex reflect the core obligations in schedule 9, namely the requirements (a) for the community hall payment to be made and (b) for the freehold interest in the community hall land to be transferred to the council, or (c) for confirmation that no transfer is required. Given that, even in the case of a community hall properly so called, commencement of development might be deferred for up to 18 months, and there were 5 years for the payment to be fully spent, the timing of any proposed contract cannot be regarded as having critical significance in the context of this agreement read as a whole. In my judgment, annex 7 is descriptive not prescriptive of the sort of notice that will do. There was no requirement that a building contract, or any other sort of contract, must be "about" to be entered into.
30. A number of points are taken in this case. The first I have already mentioned, namely, that the service of the notice was not on the Owners. It is said that that means Pettifer and Gallagher and no one else and that upon any footing no notice was served (as is common ground) on Gallagher. In my judgment, there is nothing in that point. As I have already indicated, this agreement must be construed in its context as an agreement giving rise to planning obligations under section 106 of the 1990 Act. One would expect the notice to be served upon the owners whom it was sought to be made liable. The council did not seek to make Gallagher liable. Despite their naming in the contract, the council was unsure whether Gallagher had any beneficial interest at all. The parties are jointly and severally liable under the agreement and the council can, under section 106, choose whomsoever it wishes to pursue for the payment in question amongst the several owners. It seems to me that the same approach is applicable to the construction of the section 106 agreement. That, it seems to me, gains some support by the provision in the agreement specifying that the singular includes the plural and vice versa.
31. An alternative argument is that, if "Owners" is not limited to Pettifer and Gallagher, it must include all persons meeting that description. Gallagher was one, and was not served. Again, it seems to me that it is not necessary or commercially sensible to construe this agreement as requiring service on a notice of all owners. Given the joint and several liability, it seems to me that the council can choose to limit service upon those they wish to hold liable. This argument also gains support from the plural including the singular.
32. Moreover, when the Community Hall Land notice was served, there were many residential owners, who were not under any obligation because of another clause, clause 8.2. I shall read that now:

"None of the covenants or obligations contained in this Deed shall bind or be enforceable against any owner, occupier or mortgagee of any dwelling houses to be constructed on the Development Site or service companies in respect of the usual service facilities or any person with an interest in the sub soil of any public highway on the Development Site or to be created on the Development Site."

33. If, on the alternative construction put forward to me, the reference to the service of a notice on the owners means all owners, and not simply such owners as the council may wish to pursue, then that would include a very large number of people who could not be liable at all, and upon whom it would be quite pointless to serve a notice. That seems to me to be absurd and is not a construction which should find favour with the court. In my judgment, it was sufficient for the council to serve, as they did, notice on David Wilson and PF2. They also served notice on Pettifer, but that was not necessary to make David Wilson and PF2 liable.
34. It is also said that the notice was ineffective because the council was not "about to" enter into a contract. As I have said, an alternative facility was proposed, namely, the renovation of the existing Scout hut. That was not to be renovated under any contract to be entered into by the council with a builder. What was contemplated was that the council would make funds available in return for which the Scout hut would be used not just for Scouts and Guides but for other community purposes. The evidence indicates that, at the time the Community Hall Land Notice was served, those plans were advanced and were considered, at least by the council, to be something which would come to fruition in the near future. Indeed the Scouts themselves had already obtained quotations and a start date but that start date had passed. There were no replacement quotations, but there is no reason to suppose that the previous quotation could not have been revived, possibly with some modifications. The council was in discussion with the Scouts to modify the terms upon which the Scout hall would be run, thus establishing the basis on which funding would be provided. I have no doubt on the evidence (including oral evidence from a solicitor involved at the time) that the general perception was that relevant agreements would soon be entered into. What made it important, from the council's perspective, not to wait any longer before serving the notices was the fear that the six-year period would elapse before any relevant agreement was entered into. Accordingly, the notices were served by post on February 19^th 2009.
35. As I have already indicated, I do not consider that the words "about to be entered into" though undoubtedly justified on one view of the facts from the council's perspective, were necessary for the purpose of a valid notice. It seems to me that the notice in question contained all of the proper elements in (a) requiring payment of the community land notice, and (b) confirming that a land transfer was not required. If there was some inaccuracy in saying that an agreement was "about" to be entered into that was not, in my judgment, fatal to the notice. It is hardly surprising that that wording was used because the draftsman of the notice no doubt thought it prudent to follow the form in annex 7. In my judgment, he need not have been so timorous. As I have said, annex 7 is descriptive in this respect, not prescriptive.
36. In addition, I have already held that I do not accept that the only form of contract which would qualify for triggering the right to serve a Community Hall Land Notice would be a building contract, whether for the construction of a community hall or for the construction of some other facility. As I have said, the facility might or might not involve construction. As it happens, the general perception at the time was that a funding agreement would shortly be entered into between the council and the Scouts and that a building agreement would shortly follow thereafter between the Scouts and a contractor. This finding is strictly unnecessary to my conclusion. It may be that when serving a Community Hall Land Notice the council must in good faith be intending to proceed within the foreseeable future with the provision of a relevant facility, be it a community hall or some other facility. There is no doubt upon the evidence that the council was acting in good faith with that intention in this case. I would not imply or read anything else into the section 106 agreement limiting the right to serve a notice.
37. The next point that is taken is that the six-year time limit had already expired by the time notice was served. When I say that is a point which is taken, I should emphasise that it is taken only by what may loosely be described as the Peverel interests; that is to say PF2 (the current owner of part of the site) and PF1 (the former owner and indemnifier of PF2). That is quite astonishing. The site was developed out and completed by the first Defendant, David Wilson, and this is a point which conspicuously and, in my judgment, significantly, David Wilson does not take. The indications, such as they are, are that building control work commenced on 26^th February 2003 at the latest. It is possible that some works commenced on 24^th February 2003 because it appears from site minutes that some works were proposed as from that date. On that footing, the notice was apparently served in time.
38. However, my attention is drawn by counsel for the Peverel interests to the definition of the "Commencement of the Development" which is the material date from which the six years runs. That means the date (as I have already read) upon which a material operation as defined in section 56(4) of the Planning Act is undertaken, excluding demolition, site preparations and the like.
39. I have had authorities urged upon me, demonstrating (as clearly they do) that very little is required to amount to a material operation. Thus, the argument goes, it is proper for me to infer that operations such as the pegging out of roadways or the digging of trenches would have been undertaken prior to 19^th February 2003, thus making the particular notice late in time. This submission seems a little ambitious, as when heads of agreement were advanced by Pettifer, in 2007, relating to the requirements for accepting the alternative facility of a Scout hut, those heads of agreement in terms required any notice to be given before 27^th February 2009. It must, therefore, have been Pettifer's understanding then, as was the council's understanding, that there had been no commencement of development until after 19^th February 2003. In any event, I am not prepared to make the inference which I am invited to make.
40. The site minutes do show that demolition and other preparatory works had taken place outside the six-year period, but those works are expressly excluded from the commencement of development definition. It appears that the demolition and preparatory works involved the removal of asbestos and underground concrete structures. It does not seem to me that that makes any difference. There is no suggestion of anything that went beyond demolition or site preparations. An underground structure may just as much need demolition as an overground structure and, if asbestos is revealed in the process of demolition or site preparations, it has to be removed. Given too the total absence of any evidence on this point from David Wilson, the developer, it seems to me that the council has demonstrated on a balance of probabilities that there was no material operation before 24^th or 26^th February 2003. This is so even assuming that the indications that they have now had from NHBC confirming 26^th February 2003 as the material date must be ignored, as NHBS was, at least initially, focussing upon the date when building control was triggered, which might be different from the commencement of development. Whilst that is sound theoretically, I find that on the facts of this case the 2 dates coincided, once site preparations and demolition are put to one side.
41. I should mention also that were it necessary to decide the point I would not accept the submission made by the Peverel interests that the burden of proof on this issue is upon the council. Schedule 9, paragraph 7 creates a limitation period having the effect of releasing the Owners. It is a condition of the release that 6 years has expired since the commencement of development. The Peverel interests assert that development commenced more than 6 years before the notice. I consider the burden of proof on that issue to be upon the Peverel interests, in accordance with the well-known maxim: he who asserts must prove. However, this case does not turn upon the burden of proof because, as I have said, even if there is a burden upon the council, that burden has been discharged.
42. The next point which is taken against the notice is that the consent of the Owners to the alternative facility of a renovation or renewal of the Scout hut was not obtained. It is said that Pettifer and Gallagher did not consent. Significantly, each of PF2 and David Wilson did consent in writing shortly before service of the notices, on 27^th January and 12^th February 2009 respectively. They were both Owners at that time
43. Given that I have construed "Owners" as meaning those whom it is sought to make liable, it was in my judgment sufficient for the purpose of these proceedings to obtain the consents of PF2 and David Wilson. I shall nevertheless consider the position on the alternative assumption that Pettifer's and Gallagher's consent was required.
44. There is no doubt that the letters seeking both those parties' consents were sent: in the case of Gallagher on 20^th June 2007 and in the case of Pettifer on 19^th July 2007. Gallagher replied on 13^th July 2007 to say that they were considering the matter with their partner and that the council would hear from Mr. McMullen (of Pettifer) in due course.
45. Matters were not resolved finally as between the council and Pettifer. By its letter of 25^th June 2008 Pettifer took the position firmly and incorrectly (as was conceded before me) that the only area available for any facility to be provided was on the Community Hall Land. It then set out various criteria, including a variation of the section 106 agreement, which were required before they would finally consent. Despite that, consent was given in principle. What Pettifer was effectively seeking to achieve was a commitment from the council to grant further residential planning permission in respect of the Community Hall Land. As Mr. Cairnes for the Claimant pointed out, no such commitment could be given. That would amount to an unlawful pre-determination of planning permission.
46. It is clear that there was no agreement by Pettifer and Gallagher in a contractual sense to the alternative facility, but that is not what the definition required. What Pettifer clearly indicated in the correspondence was that in principle there was no objection to such a facility. Pettifer raised 2 obstacles, neither of which was tenable, namely, the limitation (said to be contractual) of the location of the facility to the community hall land and the attempt to pre-determine any further application for planning permission. It seems to me that, stripped of those two points, Pettifer, by expressing its agreement in principle, gave the green light to the alternative facility as such, and that the two points, misconceived as they were, must be ignored. In my judgment, Pettifer agreed in those circumstances to the alternative facility within the meaning of the definition of Community Hall.
47. So far as Gallagher is concerned, Gallagher held Pettifer out as its partner and, even if the letter of 13^th July 2007 cannot properly be considered an appointment of Pettifer as Gallagher's agent, in my judgment the holding out of Pettifer as a partner bestows upon Pettifer at least ostensible (if not actual) authority to agree to an alternative facility on its behalf. The council clearly relied upon Pettifer's ostensible authority by thereafter dealing with Pettifer alone.
48. None of this may matter, because it seems to me to be perfectly clear that, if and to the extent that agreement has been withheld, and I am wrong in my conclusion that it was given, agreement has been unreasonably withheld. The only objections, if they were objections at all as opposed to bargaining postures, were untenable ones and, there being no reasonable grounds for withholding agreement, the council was entitled to proceed as if the alternative facility were agreed.
49. It is said that that way of the putting the case was not open to the council on the pleadings. However, the point was taken by the council's solicitor in an early witness statement, commented upon by Mr Sadler of David Wilson in a witness statement, and repeated by the council's solicitor in his second witness statement. The point does not require any evidence to be given, over and above that which I have read and heard. Accordingly, I would not the shut the council out from taking that point on a pleading technicality. It follows, on this alternative basis, that the Scouts facility is one to which the Owners must be taken to have agreed.
50. There is of course another point here, which is allied to the notice point: it was said on behalf of David Wilson that the reference to agreement to an alternative facility by "the Owners" must mean those referred to in the section 106 agreement, not successors. As it happens, Pettifer and Gallagher were original owners under the agreement, and remain the owners of the Community Hall Land. As I have found that they did consent, there is nothing in this point. I would not, however, regard "the Owners" as being limited to or even as referring to the persons who were owners under the original agreement, unless they were still owners as these two owners were.
51. Moreover, for the reasons I have given in relation to the similar point on service of the Notice, it was in my judgment sufficient to obtain the agreement of those whom the council wishes to recover the payment from.
52. The next point I have to consider arises out of clauses 8.1 and 8.2, both of which I have read. It will be recalled that a person who has ceased to be owner, having parted with all interest in the development site, is no longer under a continuing liability. Additionally, the obligations in the deed are not enforceable against, among other people, a person with any interest in the subsoil of any public highway on the development site or to be created on the development site.
53. This point relates to the position of the first Defendant, David Wilson. It will be noted that under clause 8.2 the person escaping liability is not just someone who has an interest (which I think must be an interest only) in the subsoil of any public highway. Included also is anyone having such an interest in a public highway "to be created" on the development site. It is pointed out to me that creation of a public highway involves dedication of the relevant land by the owner and must not be confused with adoption. Whether land is "to be created" as a highway depends therefore upon the owner having the intention of dedicating it as highway.
54. It is therefore said that as, at the time of service of the notice, David Wilson only had an interest in land which was intended to be dedicated as a public highway, it is not liable under the section 106 agreement. This proposition needs to be examined on the facts.
55. By 29^th June 2007 David Wilson had developed out the whole site and transferred its remaining interests to PF1. At that point David Wilson had no interest in the site and was within, at that stage, clause 8.1. David Wilson then acquired by 2 transfers in 2008 ownership of parts of the site which consisted of roads, footways and verges. It is evident from the terms of the first of those transfers that what was intended was that David Wilson would maintain the particular pieces of land until adopted as a public highway. An agreement for the adoption of roads under section 38 of the Highways Act 1980 was subsequently entered into with the Highway Authority on 3^rd June 2011.
56. However, part of the land transferred to David Wilson in 2008 was not included in the section 38 agreement: there is a short unadopted strip about one metre wide. It is not wholly clear how this came about. However, the explanation appears (as far as I could tell from the photographic evidence and the evidence of the plans) to be as follows. On the plans as originally laid out there were various proposed pavements. On the land as developed - and by 2008 the whole site had been developed out - the pavements were in a different place. In one place in particular, instead of there being a pavement which might be regarded as part of the public highway, the land in question had been grassed over along with adjoining grassed land and was self-evidently not then intended to be dedicated as a public highway. That land was, however, transferred to David Wilson. However, it must have been clear to anyone who thought about it, and in any event it was clear by 19^th February 2009, that the grassed over area, including the small part in David Wilson's ownership, was not to become part of the public highway. Therefore I cannot infer as of 19^th of February 2009 or indeed earlier an intention on the part of David Wilson to create a highway in respect of that small piece of land. It follows that clause 8.2 is of no help to David Wilson.
57. For all these reasons, the claim succeeds against both Defendants, namely David Wilson and PF2.
58. I now turn to consider the indemnity claims. There is no dispute that PF2 has the right to claim an indemnity from PF1 under a deed executed in September 2010 (after these proceedings were commenced) in an attempt to get around the following difficulty: Stoneyfield, which is in the same group of companies as David Wilson, transferred to PF1 its remaining interest in the site by a transfer of 29^th June 2007. Clause 4.4. of the transfer provided PF1 with an indemnity in the following terms:

"4.4 The Transferor personally covenants with the Transferee that it will indemnify the Transferee against all actions claims demands and liabilities including costs and expenses arising directly or indirectly in respect of:- …

4.4.2 any outstanding planning conditions obligations building regulation matters or any agreements made pursuant to the Town and Country Planning Act 1990."

59. PF1 relies upon that indemnity in its claim against Stoneyfield. Originally the claim under the indemnity was made by PF2. That however was struck out as having been brought by the wrong party, PF2, and as having been made against the wrong party, David Wilson. As neither of PF2 and David Wilson were parties to the contractual indemnity, one can see why it was struck out.
60. PF1 had transferred its interests to PF2 on 2^nd October 2007 for good consideration. Having transferred all of its interests in that way, PF1 was no longer under any outstanding obligations under the section 106 agreement. PF2 had become liable in its place. Although the transfer was for good and valuable consideration there was no requirement in that transfer for PF1 to indemnify PF2. Had it been the case that PF1 transferred the property to PF2 upon terms requiring it to give a mirror-image indemnity, then, in my judgment, there would be no difficulty in construing the indemnity previously given by Stoneyfield as extending to that continuing liability, as PF1's outstanding liability would never have ceased but would continue (at least indirectly, which is enough) by virtue of the further indemnity. That, however, was not the case here. The consideration (£1,240,280) that PF1 was recorded as having received upon its transfer to PF2 did not require an indemnity in return. Accordingly, following that transfer, PF1 was off the hook, so that there was no outstanding obligation of PF1 to which the Stoneyfield indemnity could apply, not even indirectly.
61. Subsequently, by the deed of indemnity dated 1^st September 2010, PF1 agreed to indemnify PF2 and it is, unsurprisingly, not disputed by PF1 that it is liable under that indemnity. The new indemnity was put in place to complete the chain of indemnities that may have been overlooked before. However, there is nothing in the evidence before me which suggests there was even an arguable case that PF1 (treating it as I must do as a separate legal entity) was legally obliged to give that indemnity. The giving of that indemnity was a voluntary act on its part.
62. How then does that impact upon the claim against Stoneyfield? It is said by counsel for the Peverel interests that the outstanding liability falls fairly and squarely within that indemnity and that I should give effect to it. However it is said by counsel for Stoneyfield (who appear by the same counsel and solicitors representing David Wilson) that the liability in respect of which PF1 claims an indemnity from Stoneyfield arose as a result of its own voluntary act of executing the deed of indemnity in September 2010, which it was not bound to do, and that this is not covered by the original indemnity. The outstanding planning obligation, so far as it affected PF1, disappeared with the earlier transfer to PF2 and the Stoneyfield indemnity therefore ceased to bite. The fact that PF1 has now assumed a new liability to PF2 does not make the newly assumed liability an outstanding obligation within the Stoneyfield indemnity. The fact that the 2 indemnities cover the same planning obligation is immaterial to this conclusion. That merely provides the context in which the indemnity claims arise but does not resolve the issue of what is within the Stoneyfield indemnity.
63. In my judgment that is the preferable argument. Were that not the case then the indemnity might be enlarged by the person having the benefit of the indemnity buying up the whole of the site, conscious in the knowledge that any planning obligation could be passed on. It seems to me that, once it is determined that PF1 had no obligation to enter into the September 2010 deed of indemnity and was therefore wholly unaffected in law by any outstanding planning obligation, then the position between those two companies, albeit associated, is no different from the example that I have posited. The position is the same as if a wholly unconnected purchaser subsequently bought from or was given an indemnity by PF1. That would create a new liability and not be within the Stoneyfield indemnity. It accordingly follows that the indemnity claim fails as against Stoneyfield.
64. I do not know to what extent any relief is now sought as between PF2 and PF1. The indemnity claim was only introduced as a leg up to the next indemnity in the chain, but the claim under the next indemnity has failed.
65. I will now hear counsel both upon the terms of the relief to be granted and as to any other consequences flowing from this judgment.

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