Brook Homes (Bicester) Limited v Portfolio Property Partners Limited and Others [2021] EWHC 3015 (Ch)
Summary
The High Court awarded damages of £13.4 million to a property development company after negotiations to develop an eco-town in Bicester broke down.
The award was made as a result of a breach of contractual obligations, including to use all reasonable endeavours, with damages award on the basis of loss of chance.
The facts
The Defendants benefited from various options over development land near Bicester and entered into agreements with the Claimant which included obligations on the parties to, among other things, ‘use all reasonable endeavours’ and ‘act in good faith’ concerning entering into a conditional sale agreement under which some of the development land was to be sold to the Claimant. The obligations also extended to structuring the overall transaction to the parties’ mutual commercial and financial benefit.
The parties failed to reach an agreement and the Claimant brought a claim seeking more than £500 million by way of damages and other various proprietary remedies.
Categories of endeavours
The various categories of endeavours are:
- Reasonable endeavours. This obligation can be discharged if one reasonable path is taken.
- All reasonable endeavours. This requires all reasonable paths or actions to be exhausted to discharge the obligation. Depending on the wording or context, this might require some subordination of commercial interests, although less likely than if there is an obligation to use best endeavours.
- Best endeavours. This might require, depending on their context, the sacrifice of some commercial interests on the part of the party. An obligation to use all reasonable endeavours is less likely to do so.
The decision
The Court further fleshed out what is expected from an obligation to use all reasonable endeavours, stating that:
- active endeavours are required on the part of the parties where all reasonable endeavours are required;
- passivity or inactivity is likely to be construed as a potential breach; and
- if a reasonable course of action is identified by one party, then the other party can be required to explain why it was not required to do so.
By applying this to these facts, the Court held that various incidents including failing to advance negotiations and refusing to provide a red line plan of part of the land to be sold. Consequentially, the Court made an order for damages of £13.4 million to be payable to the Claimant for loss of chance.
Our comment
Landowners and developers should pay close attention before agreeing to obligations to use all reasonable (or best) endeavours, particularly where this is fortified by additional obligations such as to act in good faith.
This case confirms that an obligation to use all reasonable endeavours certainly has teeth and is closer to that of best endeavours, depending on the context.
