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19th January 2021

Court of Appeal held grant of Inconsequential Planning Permission not sufficient to trigger Option

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Fishbourne Developments Ltd v Stephens [2020] EWCA Civ 1704

In this case the appellants were a development company who were granted an option to purchase a farm. The owner of the farm died in 2014 and her interest passed to her daughter the respondent.

Under the terms of the option agreement the exercise of the option was conditional upon the grantee obtaining “Planning Permission”. “Planning Permission” was defined in the agreement as “planning permission granted by the Local Planning authority permitting any development of the Property”.  The developer claimed that “development” had the meaning contained in section 55 of the Town and Country Planning Act 1990 and therefore could relate to the development of the whole or any part of the property. In 2016 the appellant obtained planning permission for a new roof on one of the farms agricultural buildings. The developer then sought to exercise the option on the basis that the permission for the new roof fell within the definition of planning permission in the agreement which would allow it to purchase the farm at a discount. The High Court held that “any development” of the Property in the definition of planning permission was limited to a planning permission of the development of the whole or substantially the whole of the property by the erection of new buildings or new buildings involving a change of use. The developer appealed.

The Court of Appeal dismissed the developer’s appeal.  They found the High Court judge was correct as it would make little commercial sense to allow the appellant to rely on an inconsequential planning permission to trigger a 30% discount in the price. This discount envisaged that the grantor had taken steps to enhance the land value in order to exercise the option. The word “development” in the option agreement had more than one possible meaning. The court has the discretion to weigh up the implications of different interpretations and apply “business common sense” to its decision.

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