Development of sites HC and G — Local planning authority in favour of both developments — Authority owning interest in site G and representing existence of tenant mix agreement to minimise competition to site HC — Developer induced by representation to develop site HC — Secret agreements relaxing tenant mix agreement — Whether authority liable for deceit
In 1982 the plaintiff companies were
granted planning permission to develop a large shopping complex in the centre
of Welwyn Garden City (‘site HC’). In 1984 they became aware of a proposed
development by C on the A1 motorway some three miles away which included
200,000 sq ft of lettable space (‘site G’). The plaintiffs feared the
sustainability of two retail developments and discounted proposals to develop
site HC. The first defendant council, who were the local planning authority for
both sites and favoured both schemes, held a long leasehold interest in site G;
they were to be paid a premium of £11m by C, whom they appointed as the
developers. The lease to C incorporated a tenant mix agreement (‘TMA’) to allow
the council to limit for five years the classes of tenants at site G to reduce
the competition to site HC. The council represented to the plaintiffs that they
intended to enforce the TMA. In September 1988 the plaintiffs irrevocably
commenced the development of site HC in reliance of the representation made to
them. Following secret agreements between the council and C in 1987 and 1988
the TMA was relaxed. The plaintiffs alleged that the council knowingly and
dishonestly made secret agreements with C to relax the TMA and at the same time
led the plaintiffs to believe that the TMA was in being and would be enforced.
The plaintiffs contended that they relied on the council’s representations and
were induced to continue the development of site HC at a loss; they claimed
damages for deceit.
of £48.5m. The council made or continued to make representations concerning the
existence and enforcement of the TMA between August 1984 and February 1990. The
representations became false from 1987 when the council secretly resolved to
relax the TMA; their intention was to induce the plaintiffs to continue
developing site HC and there was a policy to tell lies about the TMA. There was
a continuing misrepresentation which was deliberate and which the council knew
was false. The plaintiffs were induced by the TMA representations to continue
with the development of the site at a loss. The plaintiffs were entitled to all
losses suffered, both income and capital, down to the date when they discovered
that they had been misled. They were entitled to their costs and expenses of
proceeding with and committing themselves to site HC less benefits which they
had received and a value for the capital asset which they had acquired and
built. Because the claim was for deceit, the defendants bore the whole risk of
the transaction, including the fall in property values. The damages were
£48.5m. £12.8m would have been payable if an alternative method of assessing
damages had been accepted. This represented the difference between the value of
site HC in September 1988 with the TMA in place and its value with the TMA
relaxed.
The following cases are referred to in
this report.
Atkins v Great Western Railway Co (1886)
2 TRL 400
Banque Bruxelles Lambert SA v Eagle Star Insurance Co
Ltd [1995] QB 375; [1995] 2 WLR 607; [1995] 1 EGLR 129; [1995] 12 EG 144,
CA
Bellairs v Tucker (1884) 13 QBD 562
Derry v Peek (1889) 14 App Cas 337
Downs v Chappell [1996] 3 All ER 344
Doyle v Olby (Ironmongers) Ltd [1969] 2
QB 158; [1969] 2 WLR 673; [1969] 2 All ER 119, CA
East v Maurer [1991] 1 WLR 461; [1991]
2 All ER 733, CA
Esso Petroleum Co Ltd v Mardon [1976] QB
801; [1976] 2 WLR 583; [1976] 2 All ER 5; [1976] 2 Lloyd’s Rep 305; [1977] 1
EGLR 57; (1976) 241 EG 82, CA
Hornal v Neuberger Products Ltd [1957] 1
QB 247; [1956] 3 WLR 1034; [1956] 3 All ER 970, CA
JEB Fasteners Ltd v Marks Bloom & Co
[1983] 1 All ER 583, CA
Linotype-Hell Finance Ltd v Baker [1993] 1 WLR
321; [1992] 4 All ER 887, CA
Marine & General Mutual Life
Assurance Society
v Feltwell Fen Second District Drainage Board [1945] 1 KB 394
O’Donnell v Reichard [1975] VR 916
R v Inland Revenue Commissioners, ex
parte Coombs (TC) & Co [1991] 2 AC 283; [1991] 2 WLR 682; [1991] 3 All
ER 623, HL
Rimgee v Shapwanee unreported
Royscott Trust Ltd v Rogerson [1991] 2 QB
297; [1991] 3 WLR 57; [1991] 3 All ER 294, CA
Saunders v Edwards [1987] 1 WLR 1116;
[1987] 2 All ER 651, CA
Shrewsbury v Blount (1841) 2 Man & G 475
South Australia Asset Management
Corporation v
York Montague Ltd [1996] 3 WLR 87; [1996] 3 All ER 365; [1996] 2 EGLR
93; [1996] 27 EG 125, HL
Toteff v Antonas (1952) 87 CLR 647
Winchester Cigarette Machinery v Payne (No 2) The
Times December 15 1993
Young v Bristol Aeroplane Co Ltd [1944]
2 All ER 293; [1944] KB 718
This was a hearing of claim in deceit for
damages by the plaintiffs, Slough Estates plc, Howard Centre Properties Ltd and
Slough Industrial Estates Ltd, against the defendants, Welwyn Hatfield District
Council, in proceedings originally commenced by an application for judicial
review in which Kennedy J quashed decisions of the defendants to relax the TMA
and adjourned all questions of damages to be dealt with as if the proceedings
had begun by writ.
Michael Lyndon Stanford QC, Amanda
Tipples and Anthony Trace (instructed by Lovell White Durrant) appeared for the
plaintiffs; Anthony Porten QC and Nicholas Huskinson (instructed by Sheridans)
appeared for the defendants, Welwyn Hatfield District Council.
Giving judgment, May J said: Slough Estates plc, the
first plaintiff, is a property company and the parent company of the second and
third plaintiffs. It is not necessary to distinguish between them and I shall
refer to them together as ‘Slough’. Their claim now proceeds only against the
first defendants, Welwyn Hatfield District Council (‘WHDC’). The claim concerns
a large shopping development in the centre of Welwyn Garden City called ‘the
Howard Centre’ built on a site which incorporates part of Welwyn Garden City
railway station. The freeholder of most of the site is British Rail. Another
small bit of land was to be purchased from the Commission of New Towns (‘CNT’).
At some time before the summer of 1984, British Rail were in exclusive negotiation
with Slough, who were then in partnership with a company which at some stage
changed its name to Charlecote Estates Ltd. Mr Cleaver is a director of this
and other Charlecote companies and of companies associated with the name
‘Boskalis-Keys’. I shall refer to Mr Cleaver’s companies compendiously as
‘Charlecote’. In 1988, Slough bought out Charlecote’s interest in the Howard
Centre development. I shall refer to the developers of the Howard Centre before
this buy out as ‘Slough’ where the context makes a distinction between Slough
and Charlecote immaterial.
Somewhat over a mile as the crow flies
away from the Howard Centre — about three miles by road — is another
development built on the tunnel of the A1(M) motorway. This is called ‘A1
Gallerias’, but was called ‘Park Plaza’. This was developed by the Carroll
Group, one of whose companies was the second defendant, now in insolvent
liquidation. WHDC are long leaseholders from the Ministry of Transport and the
developers’ landlords of the Park Plaza site. They are also the local planning
authority. A 1982 planning permission for this site had been for a relatively
modest amount of retail warehousing.
This is a claim in deceit by Slough
against WHDC. It is a claim for damages in proceedings which began in the Crown
Office as an application for judicial review in which Slough (and John Lewis
plc) were successful before Kennedy J (as he then was) in March 1991.
Howard Centre was planned as and in fact
built as a town centre shopping development with the main income producing
space let as retail shops. These included Marks & Spencer as ‘anchor’
tenants at one end, Boots and WH Smith at the other and numerous other retail
shops including fashion shops. In 1984 Slough learnt that WHDC were moving
towards a development agreement with Carroll, which was to include 200,000 sq
ft of lettable space at Park Plaza. They perceived this as potentially
unacceptable competition with their Howard Centre proposals. They reckoned that
the area could not sustain two large retail developments so close together.
WHDC were keen that both developments should proceed. They and Carroll said
that it was intended that Park Plaza should be what they called a speciality
leisure-based development. They drafted a ‘tenant mix agreement’ (‘TMA’) designed
to limit for five years the classes of tenants at Park Plaza so as to reduce or
eliminate competition with Howard Centre and other town centre traders. WHDC
undertook to include the TMA in their development agreement with Carroll and to
enforce it. Slough’s case is that WHDC represented to them that the TMA was in
place and that it was WHDC’s intention to enforce it; that they relied on these
representations and that WHDC knew this; that they were induced to continue
with their Howard Centre development in reliance on the representations and
that they would not have done so if they had known that the TMA was not in
place or that it would not be enforced; that, notwithstanding the
representations, WHDC knowingly and dishonestly made secret agreements with
Carroll to relax the TMA, but at the same time pretended to Slough that the TMA
was in place and being enforced. Slough therefore claim damages for deceit
which are essentially quantified as the costs which they have incurred upon the
Howard Centre after the date when they were deceived less the value of the
completed development.
The first secret agreement was in 1987
(although Slough contend for an earlier such agreement in 1984). Slough rely on
what they say was another extension agreement in 1988. In February 1990, WHDC
officially resolved to relax the TMA. It was this decision and the earlier 1987
secret decision (by then in part revealed) which Kennedy J quashed.
It is remarkable that no witness has been
called on behalf of WHDC to justify or explain their relevant conduct up to and
including the 1987 secret agreement. Mr Asquith, who was then WHDC’s clerk and
chief executive, has died. The evidence is that most of the other councillors
and officers who might have given evidence, including the six councillors to
whom I refer below, Mr Moore, the then chief planning officer, Mr Heys, the
chief financial officer and Mr Anderson, the chief legal officer, and many
others are alive and available.
Mr Riddle, who succeeded Mr Asquith in
January 1988 as chief executive of WHDC, did give evidence. He said that Mr
Moore was appointed director of planning and development in March 1988 with
responsibility to lead on behalf of the council on these matters. His
responsibility included all development matters with which the council were
involved including Park Plaza and the Howard Centre. This appointment was made
because Mr Riddle, as part of his assessment of WHDC as a whole upon his own
appointment, considered that his predecessor had been involved in planning and development
matters to an extent which he did not want to perpetuate. Mr Moore had
previously been chief planning officer reporting to the chief executive.
Case management
This case originally had a time estimate
for the hearing of six weeks or more. At the pretrial review, I gave directions
in accordance with the Practice Direction (Civil Litigation: Case Management)
[1995] 1 WLR 508. I indicated that, in my view, the parties should be thinking
in terms of a substantially shorter period than six weeks which they agreed was
possible and reasonable upon an assumption (which proved to be correct) that
most questions of detailed quantification of damages would be agreed. I ordered
that evidence in chief should be taken as read from witness statements and reports.
I required the parties to draw up a timetable for the hearing to include
pretrial skeleton submissions, limited opening statements by both parties and a
limited time (one day each) for final submissions. The programme was duly
prepared and (for practical purposes) adhered to. Since evidence in chief was
taken as read, the majority of the hearing was taken up with cross-examination
enabling the party cross-examining to put their case and in the course of doing
so to make it clear to the court. In the event WHDC’s cross-examination of
Slough’s witnesses occupied rather more time that Slough’s cross-examination of
WHDC’s witnesses. At the close of the evidence, there was a period for the
parties to prepare written closing submissions which I received and read before
the oral submissions were made.
I then gave certain indications of
factual findings which I was at that stage inclined (but had not decided) to
make and made some comments on authorities which I had been asked to read. This
was to enable parties to concentrate their limited oral submissions on the
points which mattered to their respective cases.
In the event many (but not all) of these
inclinations were adverse to WHDC, but WHDC had had (and had taken) full
opportunity to deploy their case in cross-examination and by written submission
and, in the event that WHDC had called no evidence, many (but not all) of the
factual inclinations were on points which were scarcely defended or defendable.
The parties duly concluded their submissions in the time allotted and the
hearing was concluded more or less within the timetable. It is to be observed
that this modern procedure puts considerable pressure on all parties
(including, if I may say so, the judge) by way of out of court preparation. I
suspect that the greatest pressure is on counsel and others involved in
preparation for what can be extended and uninterrupted periods of intensive
cross-examination. The case was, as I said in court, admirably prepared. It is
not a criticism in this case to say that the parties did not succeed in
reducing the volume of documents before the court to economic proportions. No
one has yet, so far as I am aware, devised a means of doing so for a case of
this magnitude.
Narrative
By April 27 1984, there was in being a
document (12/796) entitled Development Concept for Park Plaza for a
‘Proposed development by Carroll Group of Companies in partnership with
[WHDC]’. It recognised that the development might be seen as competing with the
Howard Centre proposals (12/806), but it was said that:
Having regard to the specialist nature
and leisure element of Park Plaza, we believe the two will exist harmoniously —
not in direct competition.
On June 5 1984, Mr Asquith first told the
Howard Centre working party of the Park Plaza proposals and Mr Adds (of British
Rail) recorded that the development team were appalled (13/871). There followed
letters of protest including that dated June 7 1984 from Mr Carey of Slough
(13/891), which included:
The disturbing news of the submissions on
the A1(M) site limit the prospects for our scheme and we feel that we would be
forced to withdraw if any one of the submission is accepted, as would any other
development company in such circumstances.
On June 12 1984, WHDC resolved to appoint
Carroll Group as the developer for the Park Plaza scheme ‘subject to the
adoption of the option given by that Company concerning the Council’s ability
to control the tenant mix within the retail element of the Scheme and to
completion of a suitable agreement’ (13/925). On June 14 1984, work stopped on
the Howard Centre scheme in the light of the WHDC decision and WHDC were so
informed by British Rail by letter dated June 15 1984 (13/934). Mr Cleaver said
in evidence that the Howard Centre could not go on unless either an alternative
scheme for the Howard Centre could be worked up quickly or the Carroll Group
scheme could be defeated or delayed. As a result of the Park Plaza proposals,
Waitrose withdrew their interest from the Howard Centre (13/949) and British
Rail and Slough wrote strong letters of protest. Mr Carey’s letter to Mr
Asquith of June 27 1984 (13/959) expressed ‘utter amazement’ and said:
I know that you feel that you have a
formula agreed with the prospective developer of the A1(M) site which will
protect the existing town centres of Welwyn Garden City and Hatfield, but I am
afraid that as professional property people we cannot envisage a means whereby
such a system could work to these centres’ advantage or even if they could, to
the A1(M) developers’ advantage who must surely experience funding difficulties
if all recognised town centre retailers are forbidden to enter their scheme.
I know you are accepting the Carroll
scheme as a leisure based complex, but it does include 200,000 sq ft of retail
accommodation which must far exceed the requirements of any leisure based
retailers, and we are saying that the Welwyn and Hatfield catchment area is
simply not big enough to accommodate this scheme and the Howard Centre. In the
light of your decision, we have as you know had to suspend all work on our
scheme which is a very unsatisfactory situation having regard to the effort
which has been put into it to date, not to mention the large sums of money that
have been committed in good faith and we all feel totally let down and misled
by your Authority.
Mr Adds’ evidence was that British Rail
hoped to defeat the Carroll application. He said that at a meeting on June 21
1984 Mr Asquith stated that there was no danger to the Howard Centre from what
was proposed at the Gallerias site which was to be leisure based. At this
stage, British Rail regarded this as vague and difficult to enforce. Park Plaza
was regarded as a threat. British Rail in the person among others of Mr Clarke
were not satisfied.
WHDC arranged a meeting with Carroll for
August 24 1984 (13/1011). Meanwhile on August 6 1984 WHDC issued a press
statement which included:
… the council is determined, and will
have powers of landlord as well as those of Local Planning Authority, to
prevent the kind of retailers who might have been prepared to go into the
Welwyn Garden City Station Redevelopment site (the Howard Centre) from taking
up tenancies in the Hatfield Park Plaza. With the full agreement of the Carroll
Group of Companies we have an absolute embargo on the choice of the main
tenants (anything over 30,000 sq ft gross) and all the other retail elements of
the Galleria will have to fit into the agreed concept of ‘leisure, pleasure
recreation and enjoyment’.
The meeting on August 24 1984 was chaired
by Councillor Gillen and the Howard Centre development team was introduced by
Mr Asquith. It was said that WHDC were close to agreement with Carroll on
control of tenants by means of a document defining the philosophy of leisure
shopping. High Street shopping meant the necessities of life — specialised
shopping meant ‘something different’. The Howard Centre team asked which
retailers would be permitted into the A1(M) scheme ‘since the development team
doubted whether control could be exercised on occupancy’. Mr Clarke of British
Rail asked what WHDC thought speciality shopping was. Mr Adds note of the
meeting (13/1090) records no reply. It is suggested that the formula remained
vague and undefined. Mr Carey is recorded as saying that the definition of
specialist goods would create grey areas in which control would be difficult.
Mr Carey said in evidence that it was all very flowery. They considered a
leisure based scheme to be ‘specious in the extreme’. Mr Cleaver did not
believe that there was such a concept as a ‘leisure retail’ scheme and he
thought that the scheme would be a shopping scheme in direct competition with
the Howard Centre. It was thus decided to oppose the grant to Carroll of
planning permission and to request the Secretary of State to call in the
application (13/1167), which he did despite opposition from WHDC. Slough
decided to make a planning application on their own account so that the
inspector could form a balanced view: see 16/2352. The intention was to
convince the Secretary of State that the A1(M) scheme would seriously damage
the prospects for the Howard Centre (l4/1451).
The TMA had come into being as a document
by September 1984 (13/1137). Slough first asked to see it at the meeting on
August 24 1984 and by letter dated September 12 1984 (13/1123) but first
received a copy at the time of the public inquiry into the Park Plaza Scheme in
1985. The document is headed Agreed Document and is subscribed in print
by WHDC and Carroll Group. The version in the court bundle is not signed. It
states that the leisure speciality centre is based around a theme which is ‘the
framework for the creation of an environment within which quality specialist
shopping can take place’. There was to be a gymnasium and work-out area, an ice
rink, exhibition areas and generous open air areas. There was to be:
· 30,000 sq ft gross as a
specialist food shopping area for which a full range supermarket was not
considered to be appropriate.
· 40,000 sq ft gross for
‘Leisure Oriented Durable Goods’.
· 85,000 sq ft gross for
‘Habitat Type Household Goods Store’
· 40,000 sq ft gross for
service units and travel agents.
In conclusion it was stated that:
Any goods outside the above categories …
must be sold only as minor ancillary merchandise within shops whose main trade
is one of the permitted uses unless otherwise agreed in writing by the Council.
There were then examples of types of shop
which did not fall into the permitted categories including fashion shops, full
range supermarkets, chemists, stationers, shoe shops and clothing and general
household goods stores. Specific examples of shops excluded were stated to be
Marks & Spencer, C&A, Littlewoods, British Home Stores, Boots, WH
Smith, Woolworths — ‘(this list is not considered as exhaustive)’.
In the judicial review proceedings,
Kennedy J construed the expression ‘unless otherwise agreed in writing by the
Council’ as ‘clearly intended to enable [WHDC] to sanction an occasional
departure from the strict terms of the [TMA], not the sort of wholesale
abandonment of it which now [by 1991] seems to have occurred (1/197)’.
A letter dated October 4 1984 written to
WHDC on behalf of Carroll in the context of tenant inquiries (13/1157) stated
that the wording of the TMA had been agreed and imagined that ‘this document
will be satisfactory for your purposes for the time being’.
On October 22 1984 WHDC appointed Carroll
as developer for Park Plaza and annexed the TMA to the letter of appointment
(13/1316). The letter stated that there were to be restrictions within the
first five years for lettings and assignments of anchor stores and that all
other lettings and assignments were to fall within the agreed tenant mix strategy
based upon the retail leisure theme. ‘The purpose of this term is to safeguard
specifically the development currently proposed for the redevelopment of the
Welwyn Garden City Station site …’. Carroll were to pay WHDC a premium of some
£11m thus giving WHDC a large financial interest in the scheme.
Healey & Baker were advising Slough
and Mr Paul Orchard-Lisle [frics], their present senior partner, gave evidence.
He said that when Carroll Group made their planning application in 1984 to
develop a full scale shopping centre at the A1(M) site, he and Mr Carey agreed
that if the Carroll Group’s proposals were to be implemented the Howard Centre
would not be commercially sensible. Mr Orchard-Lisle understood that published
local planning policy was to resist new out of town or urban fringe shopping
centres. His opinion about the Howard Centre was that no fund would have made a
commitment until the extent of the Carroll Group scheme was certain and would
not do so unless they were convinced that the A1(M) site would have no
significance as a major shopping attraction and that no major High Street
retailer would provide an alternative to a traditional centre. This view was
contained in his written evidence to the planning inquiry prepared before he
had seen the TMA. Having seen seen the TMA, he preferred the view that there
should have been no competition at all from Park Plaza. The TMA was a middle
course between what he wanted and a clearly unacceptable position.
WHDC and Carroll presented a joint case
to the planning inquiry. WHDC’s statement of issues (14/1604) included an
assertion that ‘[p]erhaps the most significant aspects of the Council’s
involvement is that it is in a position to control tenant mix within the retail
part of the scheme’ (14/1609); and that ‘[t]he Council has given assurances
regarding its control of tenant mix at Hatfield and is satisfied that there is
no conflict with potential anchor tenants for Howard Centre Scheme’ (14/1619);
and that ‘[t]he District Council will legally control tenant mix to ensure that
there is no detraction of tenants away from existing town centres and proposed
developments in those centres’ (14/1620).
At the planning inquiry, WHDC produced
the TMA and said that it would be incorporated into the lease to Carroll thus giving
means of control. The council and the Carroll Group gave evidence that their
proposed agreed scheme would be a leisure based speciality scheme and that the
TMA would ensure that the usual high street trader would not be allowed. It was
said to be quite clear from the terms of the TMA that ‘a conventional ‘town
centre’ is not being created’ (14/1681). These matters appear in the proofs of
Mr Hoffman and Mr Carter (WHDC’s chief assistant planner). Provisions
equivalent to those in the TMA were suggested as planning conditions. Mr
Carter’s proof included:
I can only refer to the suggested
planning conditions and to the tenant mix agreement which is already embodied
in the formal appointment of the Carroll Group. It will, when planning consent
is granted, be incorporated into an agreement for a lease and later for the
lease itself. On this the Council gives its undertaking … My Council however,
does require the assurance of the tenant mix control, essentially to reassure
others, and to assist the lettings of the new town centre developments.
(14/1687)
Mr Carter expressed confidence that ‘the
control of tenant mix contained in the letter of appointment, to be
incorporated into the lease agreement and eventual lease is enforceable’
(14/1688).
Slough, among others, opposed the grant
of planning permission and were not deterred from doing so by the production of
the TMA and WHDC’s undertaking. Mr Carey’s evidence to the inquiry was that
they had stopped work in June 1984 as they had no confidence in the local authority’s
assertion that they would limit the range of goods sold in the Park Plaza
scheme (15/1902). He could not understand how such a scheme could be funded. Mr
Carey said in evidence that in the early stages they had no confidence that
WHDC would or could enforce the TMA. They had had nothing but vague assertions.
They felt that the scheme proposed at the inquiry put the Howard scheme in
jeopardy. They continued to oppose the Carroll scheme. Their case before the
inspector was that if Carroll’s application as submitted was given planning
permission, it was extremely unlikely that the Howard Centre as then proposed
would go ahead (16/2688). It was suggested that the TMA would be unenforceable
in practice (16/2692) although Mr Cleaver said in evidence that he did not
consider that it would be entirely without value. He said that Park Plaza was
not nearly so unacceptable with the TMA as it would have been without it.
Mr Adds gave evidence at the inquiry
(15/1831) to the effect that there was mistrust at the council’s ability to
enforce restrictions and that it was difficult for the Howard Centre to proceed
in the face of this competition. Even with a sight of the TMA document at the
inquiry, British Rail had misgivings and maintained their objection. Mr Clarke
said that it was their objective to defeat the scheme.
Counsel appearing for Slough made a final
submission (15/2113) emphasising the size of the scheme and doubt about the
ability and willingness of WHDC to honour assurances (15/2128). It was
difficult to know what leisureware meant. Slough’s position at the inquiry was
that the TMA was worth little. There was no certainty that the agreement would
be concluded. Even if there was, there was unlimited opportunity for amendment.
The wording of the TMA was uncertain and ‘far from watertight’. There was power
to waive any or all of the restrictions. It was suggested that the Secretary of
State could not rely on the ‘guarantees’ offered. But Mr Carey said that, while
opposing the principle of the scheme, he received comfort from the insistence
of WHDC that they would put into place and enforce the TMA. With the benefit of
what they heard at the inquiry, he gradually became more comfortable by
considering the effect of what WHDC had said at the inquiry, which gave
considerable flesh to what the council’s intentions were. The threat from the
Carroll scheme was considerably diluted by what had been said.
Mr Cleaver’s evidence was that
notwithstanding the council’s assurances there still remained a concern. By the
end of the inquiry, he had come to the view that the TMA would be put in place.
Reliance was not relevant before the decision of the Secretary of State. The
council had said that the TMA would be strictly enforced. They continued to say
so in the future. This allayed his fears although he was not completely
convinced. He did think that the council would introduce the TMA into the
lease. He did not consider that a scheme with rigid enforcement of the TMA
could be funded or fully let.
The planning inquiry was held between
February and May 1985. The Secretary of State’s decision was given by letter
dated March 20 1986 (17/2874). In the period between the planning inquiry and
the decision, it appeared as if either Carroll’s application would be rejected
or that, if it were allowed, the development would be subject to TMA
restrictions. By her report of June 4 1985 (16/2647) the inspector recommended
that planning permission should not be granted (16/2696S). The parties were not
aware of this recommendation until the publication of the Secretary of State’s
decision. The inspector summarised the respective cases of those who had
appeared before her at length. Her account of the John Lewis Partnership’s case
included (at 16/2678):
In the face of financial and other pressures,
the suggested retail concept of the scheme is a myth and very unlikely to be
maintained. The subsequent extension and conversion into a traditional centre
is inevitable, based on experience elsewhere, and such a conversion would
strongly favour the financial advantage of the landlord, which would be the
District Council.
Although these were not in terms
submissions made by Slough, the evidence before me shows that they may be taken
as expressing part of the case which Slough also were presenting. The passage
was relied on by the respondents in the judicial review proceedings as
suggesting that Slough and John Lewis never did place any reliance on the TMA
(1/177). The inspector herself noted (16/2696L) that there was no precedent
indicating that a centre on the speciality/leisure theme would be likely to
succeed in this location if the specialist traders could be attracted. She
expressed the opinion that units at Park Plaza would sooner or later be let
largely to traders who normally occupy retail
years (16/2696M).
In June 1985 it was being said on behalf
of Slough that a scheme would go ahead at the Howard Centre but that the timing
and content would depend to some extent on the result of the Park Plaza inquiry
(16/2712). Mr Cleaver said in evidence that this was consistent with his views
that either the Carroll scheme would not get planning permission or that it
would not be built or that it would be subject to the TMA which the council
would enforce. He then thought that planning permission was likely to be
refused for Carroll’s scheme. He was always of the view that some scheme would
go ahead on the Howard site, but not necessarily the one that was eventually
built. Any major change in the scheme would have needed the agreement of
British Rail, who might have reopened the competition. If Park Plaza had been
permitted without restrictions (or unrestricted as to 85,000 sq ft which would
have been equally devastating), a major shopping scheme of the kind of the
Howard Centre would not have gone ahead. There would have been some development
at some time, but nothing like the Howard Centre which had to carry, and was
alone able to carry, a lot of infrastructure costs such as costs of the
distributor road and the relocation of the British Rail station. The Howard
Centre also had a large gross area in relation to the net area. Any alternative
development would have required to be shown to be viable. It would have been a
much smaller scheme. If there had been an office development, it would have
been likely to take two years to plan and perhaps 18 months to build. British
Rail would probably not have been content with a smaller scheme which did not
improve their station. They might well have withdrawn the site and put it out
to competition again.
By January 1986, Slough were telling
British Rail that they would still wish to participate in some development at
the Howard Centre even if the Secretary of State decided against their
objection and that they had had to suggest to the inquiry the possibility of
withdrawal to demonstrate their concern (17/2819, 2826, 2850). Mr Carey said
that these documents should be seen in the light of Slough’s commercial desire
to maintain their exclusive position with British Rail and the Commission for
New Towns in relation to the best site in Welwyn Garden City. The scheme might
have gone forward in a different form — see eg 13/986 — and there were other
possible developers ‘warming up beside the running track’ (17/2900). Mr Carey
agreed that there was a decision which Slough published to go ahead so far as
they were able to proceed with a scheme in some form before the Secretary of
State decision arrived. The climate was optimistic. Ultimately the decision
rested with British Rail. It was possible that if the Secretary of State’s
decision had been wholly adverse, Slough would have promoted an office scheme
which might have been completed earlier than the Howard Centre which was in
fact built.
Contrary to the recommendations of the
inspector, the Secretary of State granted conditional planning permission
(17/2879), but it was not conditional in terms which required the imposition of
the TMA. His decision stated:
… the Secretary of State does not
consider that the decision on Park Plaza should depend on commercial judgments
about the viability of proposed new retail floorspace elsewhere. While he
accepts that, following the grant of any planning permission for Park Plaza,
developers might decide to alter or abandon other schemes, he does not regard
that as sufficient reason to refuse the planning permission.
… He considers that planning conditions
which seek to limit sales to specialist or leisure goods, or to specify a Habitat
type store selling household goods would be inappropriate. He notes, however,
the local planning authority’s intention to use a ‘tenant mix’ agreement to
control the occupation of retail floorspace in the development, and considers
that this is a more appropriate way to control such matters than a planning
condition.
Mr Carey thought that the Secretary of
State’s decision was extraordinary in that it differed on virtually every point
from that of the inspector (17/2905). Mr Cleaver said that the decision was not
the worst possible decision from the viewpoint of Slough and Charlecote. The
Secretary of State’s reference to the TMA and the council’s assurance given at
the inquiry meant that a TMA was the way to control the tenants. By that time
he was inclined to accept this. He had been much more encouraged by the end of
the inquiry. Once he had read the Secretary of State’s decision, he was
satisfied that the council could not in all conscience fail to put TMA in
place. He thought that this would result in the Park Plaza not being built. He
felt that the council were intoxicated about the scheme.
Although the planning permission did not
impose restrictions equivalent to the TMA, it is quite clear on the evidence
that Slough and others loosely regarded WHDC’s undertaking at the inquiry and
the Secretary of State’s reference to the TMA which I have quoted as together
amounting to a requirement upon Park Plaza that the TMA would be imposed and
enforced. In my view, they were justified in so regarding it.
Immediately after the Secretary of
State’s decision was published, Mr Asquith wrote to Mr Carey on March 26 1986
offering assurance that ‘the full co-operation of all the Officers of the
[WHDC] will be available to enable a modified Station Redevelopment Scheme to
be put together and physical work started at the earliest possible date’
(17/2903). Mr Cleaver wrote to Mr Carey on March 27 1986 (17/2909) saying that
‘they were pressing ahead with their formal consideration of the redesign of
the Welwyn scheme’. It was thereafter changed in detail but it remained a town
centre shopping development. Mr Carey said that the only way in which the
intended Howard Centre scheme could be maintained unchanged was if there were
assurances about the TMA at the A1 Gallerias site.
At a meeting on April 11 1986 for which
Mr Adds made manuscript notes (17/2936), ‘Mr Cleaver stated that Park Plaza
would undermine retailer demand for Welwyn GC and wished to discuss two main
issues (a) the tenant mix Agmt and (b) the extent of any financial support from
WHDC/HCC in view of the particularly high infrastructure costs’. It was stated
on behalf of the council that WHDC proposed to enforce the TMA rigidly ‘using a
‘common sense’ approach’. They wanted to create a quality shopping centre in
Welwyn and would co-operate to achieve this aim. On April 11 1986, Mr Cleaver
wrote to Mr Carey (17/2940) reporting the meeting with WHDC held that day. He
reported that Mr Asquith confirmed that the council genuinely intended to
assist the successful development of the Howard Centre which his officers were
working hard to promote. The letter then stated:
The Local Authority intend to implement
the tenant mix agreement proposed at the Public Inquiry and it is their view
that this will be rigorously enforced … Asquith was adamant that no fashion
goods will be allowed and he proposed that this is an area where we should be
concentrating hard. Frankly I agree with that view.
Mr Carey said that this was vital. He
said that it was at this point that previous doubts about the reliability of
the council’s intention were dispelled. By this stage, Slough were heavily
committed and had no intention of withdrawing unless viability could not be
achieved (17/2942). Mr Carey said that the whole viability depended on the TMA
being in place. Had it not been, there would have been no case for advancing
the scheme at all because Welwyn/Hatfield was obviously not capable of
maintaining two unrestricted retail centres within a mile and a half of each
other. Mr Cleaver’s evidence was that he relied on Mr Asquith’s undertakings
and continued to do so. He always thought that Carroll would try to depart from
the TMA and would try to nibble round the agreement and make lettings which it
would be hard to overturn. But he came to the view that WHDC were on their side
and would support them. They had made the TMA into a worthwhile document and
had assured us that they would enforce it. It was a very important meeting.
In the judicial review proceedings,
Kennedy J said of this meeting upon the evidence before him (1/182):
I see no reason to doubt that Slough
Estates did, at least to some extent, rely upon the undertakings given by the
local authority in relation to the Tenant Mix Agreement when deciding to
proceed with the Howard Centre. However,
the question of reliance at a later stage.
The meeting was reported to the WHDC
members A1(M) working party on April 16 1986 (17/2945). It was recorded that
Slough and British Rail ‘now accepted that their development and the Park Plaza
development could be compatible subject to the agreement concerning the tenant
mix’ (17/2947). At the Park Plaza steering group (whose members were officers
of WHDC and representatives of Carroll Group) on April 24 1986, it was agreed
that a formal retail tenant mix agreement based upon the document presented to
the planning inquiry was to be prepared (17/2966). Every piece of
correspondence was to be channelled through Mr Murray of the Carroll Group and
the chief planning officer (Mr Moore) on the council’s side (17/2965).
On April 7 1986 Slough had instructed
Healey & Baker to prepare a report (17/2921) looking at the matter afresh.
The letter from Mr Cleaver referred to ‘the new climate of certainty’ which Mr
Parker read as referring to the situation with Park Plaza following the
Secretary of State’s decision. There was an encouraging response from
prospective retailers (17/2977, 2984). Healey & Baker’s June 1986 report
(17/3047) referred to the Park Plaza scheme and said that the Carroll Group
clearly indicated at the recent inquiry that they were not seeking to replace
the traditional town centre shopping. ‘They envisaged endeavouring to create a
leisure-orientated speciality retail development and, if this proves to be the
case, there may well not be any significant conflict between the Park Plaza and
Howard Centre proposals.’ Healey & Baker noted (17/3061) ‘the restrictions
placed on the Park Plaza planning permission to food and size of units …
Without exciting ‘anchors’ this scheme will be difficult to let and certainly
impossible to fund’.
A further Healey & Baker report in
July 1986 (17/3088, 3093), expanded in certain respects, contained
substantially the same material. It also said in its introduction (17/3095)
that:
The uncertainty surrounding the Park
Plaza proposals had now been removed and the knowledge of the shopping content
that the Howard Centre will compete against has been improved substantially.
In its conclusions, the report states:
We have had particular regard to the Park
Plaza proposals and as a consequence recommend careful formulation of a tenant
mix plan directly based upon requirements of the affluent population.
The author of the Healey & Baker
reports of 1986 was Mr Parker. He said of this last sentence that it was there
in the light of the TMA at Park Plaza. His evidence was that it was taken as
read that the Carroll Group scheme was subject to the TMA and that this was a
fundamental assumption underlying the reports and all his advice. There was
considerable scepticism that the Carroll Group’s proposals would be successful.
He understood that the TMA would be strictly enforced. Had it been known that
the TMA was not in place or was not being enforced, Healey & Baker would
have recommended the Howard Centre developers not to proceed. The existence of
the TMA was fundamental and not a matter of debate and hence did not get
referred to constantly in documents. He was extensively cross-examined by
reference to documents which were suggested to show that the TMA was not of
central importance. He said that the documents did not show the full picture
and that there was no doubt that the TMA was fundamental. The mere idea that
two large developments head to head at such a short distance was unthinkable at
the time just as now. I found Mr Parker a convincing witness.
Mr Orchard-Lisle, the partner at Healey
& Baker concerned with funding on behalf of Slough, read the Secretary of
State’s decision as confirming the statements of intention made by the council
and the Carroll Group at the inquiry. He concluded that there was no
significant conflict between the Carroll Group proposals and those for the
Howard Centre. He took it as read at all times thereafter that the TMA would be
enforced against the background that WHDC had said that they would honour the
intention that the Gallerias would be a leisure based centre. He regarded it as
Carroll’s problem if this led to a planning white elephant. Had he believed
that there would be the equivalent of 40 retail shops on the Galleria site, he
would have been considerably more cautious about the successful funding of the
Howard Centre. If the true eventual extent of the rivalry of the Galleria had
been known, he believes that Healey & Baker would have been asked for a
revised report. Healey & Baker would have advised the Howard Centre
developers not to proceed. I found Mr Orchard-Lisle convincing and
authoritative.
The defendants suggest that these reports
do not support the contention that the enforcement of the TMA was fundamental.
They point out for instance that the TMA is not referred to expressly in the
assumptions set out in each report (17/3059, 3113). They point to passages in
the reports and suggest that the terminology is not consistent with the
perceived importance of the TMA. Mr Orchard-Lisle was clear that what they
wrote did assume that Park Plaza would be subject to the TMA. They described
exactly what the Park Plaza would be and that was assumed. In any event, his
clients were highly experienced and the reports were not to be read in
isolation. Mr Parker reiterated that the existence of the TMA and its
enforcement was fundamental.
The evidence was that Slough proceeded
with the Howard Centre scheme assuming that the TMA was in place and with the
idea that the restrained Park Plaza scheme might well not proceed as it would
be seen as not viable. On August 14 1986, Mr Cleaver was saying to British Rail
(18/3201) that he could say with some confidence that they considered that the
Howard Centre scheme was viable and that it was their firm intention to
progress it vigorously to produce a worthwhile shopping centre with a sound
financial basis.
On September 8 1986, the WHDC members
A1(M) working party resolved that ‘the Park Plaza Development Agreement and
associated side letters with the [Carroll Group] … be approved by the Council’
and that WHDC’s officers be authorised to continue negotiations together with
the selection of tenants and other matters as necessary (18/3229). A confidential
report by Mr Asquith ‘not for public circulation’ to this meeting stated that
references in the TMA to named High Street stores could be disadvantageous to
Carroll and that it was agreed that such references should be omitted from the
development agreement but that ‘[a] side letter to the Agreement will indicate
that, in the event of any dispute under the tenant mix clause, resolution of
the dispute shall have regard to the strategy document deposited at the Public
Inquiry’ (18/3242). The minutes of a Park Plaza corporate/ financial working
party meeting on October 30 1986 attended by WHDC officers including Mr Moore
and representatives of Carroll including Mr Murray (18/3442) record agreement
of ‘side letters to the main Development Agreement’ including one about ‘tenant
mix’. An amended draft of such a letter as Mr Asquith described on September 8
1986 is at 18/3450A dated October 30 1986. The final version of this letter is
dated July 31 1987 (20/4095) — the very same day as a second (‘secret’) side
letter (20/4094 — see below). 20/4095 records:
… the agreement reached between us that
in the event of any dispute as to whether the intended business of a proposed
tenant within the Galleria is within the permitted range of retail activities
set out in Clause 12 of the Development Agreement, the parties shall have
regard when resolving such dispute to the ‘Tenant Mix Agreement’ annexed
hereto. It being recognised by the parties that the Tenant Mix Agreement
annexed hereto correctly records the trading practices intended by the parties
to be excluded from the Galleria by reference to the trading practices carried
on in September 1984 by those companies named in the Tenant Mix Agreement.
The annexed TMA was the September 1984
document which had been presented to the public inquiry.
Slough’s investment committee meeting on
September 25 1986 (18/3305) resolved to approve the commitment of further
financing up to £550,000 to undertake the design necessary for planning
permission for the Howard Centre. Further consideration was to be given to the
actual commitment to develop later. Mr Carey prepared a report (18/3315) for
the Slough Group board meeting on October 1 1986. He discussed its draft with
Mr Orchard-Lisle (18/3275). It does not
meeting on October 1 1986 (18/3313, 3415). It was decided to proceed with the
Howard Centre scheme, deferring decisions on funding until progress had been
made on other particular matters. Mr Carey said that Slough proceed with
schemes such as this by stages.
On October 19 1986, the planning division
of WHDC in association with Carroll Group held an exhibition about the Park
Plaza scheme (18/3425). A fact sheet prepared for the exhibition (18/3426)
explicitly stated what the TMA did and did not allow.
On December 2 1986, Mr Asquith wrote to
Mr Cleaver (18/3508). His letter included:
I made it clear that my Council would be
concerned with honouring the undertaking they gave at the Public Inquiry … The
Tenant mix agreement remains a very important document and basis for the
occupation of Park Plaza but of course things have moved on a great deal in the
retail field and we shall have to look at changing operations of some of the
organisations and firms who are embargoed so far as their activities measured
in June 1984 were known to us. To that extent I have no doubt that whichever
firm goes in will prove to be contentious to some degree; what matters is that
we fulfil our obligations.
Mr Cleaver understood this to mean that
Park Plaza would be restricted by the TMA.
On December 4 1986, Mr Asquith wrote what
now reads as a crafty letter to Mr Murray of Carroll Group (18/3514) discussing
how Marks & Spencer might be squeezed within retailers permitted by the TMA
(although they were explicitly excluded ‘in the context of their 1984 High
Street trading Practice’) and saying that:
I am sure that this incremental approach
is the correct one because not only have John Lewis expressed interest in who
the main anchor tenant might be following the assumption that Habitat will no
longer be involved, but the developers of the Howard Centre have also raised
exactly the same point.
Mr Cleaver wrote to Mr Asquith on
December 16 1986 (18/3540) saying that it was always his view that the TMA
might prove complex in its operation when a potential tenant came along but
that a responsible approach by all parties should avoid undue conflict. He sent
the correspondence to Mr Carey. Mr Carey read Mr Asquith’s letter (18/3508) as
indicating that, although there might be difficulties with grey areas, the TMA
was in place. The council were making essentially the same statement as they
had at the public inquiry. He wrote to Mr Cleaver on December 16 1986 (18/3550)
that he was not greatly encouraged by Mr Asquith’s letter: it was going to be
pretty difficult for him to maintain the TMA. Mr Carey said that there was no
question in his mind of the council not honouring the TMA. The letter concerned
the problem of grey areas. It was necessary to move quickly because the
restrictions on the TMA was limited to five years. It remained fundamentally
important to the Howard Centre scheme that the TMA remained in place. Nothing
the council said at any time led them to believe that the TMA was not in place
or would not be enforced. He implicitly relied on what the council wrote and
said. Mr Cleaver read Mr Asquith’s letter as raising the spectre of Mr Carroll,
indicating the possibility that Mr Carroll might try to get lettings through
the net by nibbling round the edges. He might try to get out of the TMA but Mr
Cleaver did not think that he would be able to do so. He was happy with what Mr
Asquith continued to say in line with his assurances in April 1986.
At and following a meeting with Mr
Asquith on January 28 1987, Mr Cleaver saw the council’s attitude as positive
and supporting the Howard Centre (19/3615). In his understanding this included
enforcing the TMA although it was not explicitly then mentioned. Enforcing the
TMA had always been a part of Mr Asquith’s support. Abandoning the TMA would
have killed the Howard Centre scheme because the developers would not have been
able to get tenants or, if they could, only at reduced rents.
On January 30 1987, Carroll Group made a
revised planning application for what was at first thought to be a larger
retail development (19/3604). At a WHDC officers working party meeting on
February 3 1987 it was noted that this might be acceptable in planning terms
but that the council would expect additional payment to reflect the increased
value of the Galleria (19/3613). British Rail saw this as a potential threat to
the Howard Centre and on February 20 1987 British Rail wrote to Mr Moore
expressing concern but without specific reference to the TMA (19/3651). Mr
Moore replied on February 27 1987 (19/3695) stating that the total amount of
retail floorspace remained in line with the outline planning permission at
200,000 sq ft. British Rail replied on March 5 1987 (19/3727) explaining a
concern that planning constraints imposed by the Secretary of State might be in
danger of being flouted and suggesting a meeting. On March 7 1987, Mr Moore
told Mr Clarke of British Rail that the retail content had not been altered and
that the TMA was still to stand. Mr Clarke confirmed this in a note dated March
9 1987 (19/3735). He said in evidence that he specifically recalled the
circumstances in which this was said. I accept this evidence. Mr Carey wrote
shortly on March 20 1987 (19/3773) making formal objection to the planning
application. Slough’s internal position was expressed in a letter by Mr
Woolhouse to Mr Cleaver dated April 21 1987 (19/3868) that they would be
willing to withdraw their objection provided that WHDC were willing to confirm
in writing that they would enforce strictly the restrictions placed upon the
development by the Secretary of State. Mr Woolhouse said in evidence that this
included the TMA.
There was a meeting on March 31 1987
(19/3802,3,4) at which British Rail expressed their concern. Mr Ball’s typed
note records that the council had assured the board that they would adhere to
the TMA. Mr Ball, who remembered the meeting and the room it was in, gave
evidence that this assurance was given in answer to Mr Clarke’s first question
at the meeting. Mr Clarke also gave evidence of this assurance being given. I
accept this evidence. I was not impressed with cross-examination aimed at
casting doubt on this evidence by linguistic analysis of Mr Ball’s manuscript
and subsequently typed material. British Rail reported this assurance to Mr
Cleaver on April 2 1987 (19/3809) following a telephone call on March 31 1987.
The council had stated at the meeting that ‘Gerald Carroll is extremely
concerned that the Council are applying the ‘Tenant Mix’ to the letter of the
law’ (19/3802). Mr Cleaver’s view, expressed in a letter dated April 3 1987 to
Mr Woolhouse (19/3811) was that the Park Plaza proposals ‘flies in the face of
the intention of the original planning consent’ but that it would be difficult
to overturn it completely on the ground of increased retail area. He considered
that they should withdraw their objection to the Park Plaza scheme subject to
receiving a letter from WHDC that they would maintain absolutely the terms of
the TMA. Mr Cleaver wrote in these terms to WHDC on April 14 1987 (19/3862). He
still thought that in those circumstances Carroll would be unable to go ahead.
On the same day that Mr Cleaver wrote, Mr
Asquith met Mr Carroll. The meeting is referred to in Mr Carroll’s letter to Mr
Asquith dated April 16 1987 (19/3863) marked ‘Strictly Private &
Confidential’. Mr Carroll wrote saying that:
The removal of the tenant mix agreement
is absolutely fundamental for us … the final occupational tenant mix of the
Galleria when the complex is up and running will be very much in line with our
original understandings reached some three years ago. The abolition of this
agreement underpins our conclusive arrangements reached with our financiers
concerning the funding and implication of the Galleria scheme …
I look forward to receiving your draft
letter confirming that the Council agreed (sic) to the removal of the tenant
mix agreement as well as the removal of our obligation to develop the hotel
which has not become obsolete following the Galleria detailed planning
permission.
On April 22 1987, Mr Asquith wrote in
reply (19/3872) saying:
As I mentioned on Tuesday of last week it
is vital that the development agreement is completed in its original form and
that we do not go on making alterations as we go along otherwise we will never
have it signed. What I promised was an additional letter, a copy of which I
have yet to draft for you to see before I go anywhere near my Members, and
which will explain in some detail that our intention, as with you, will be to
fulfil the original bargain struck, but in the process to take into account the
changed circumstances since
produce that letter for you around the end of the month. I cannot involve
Members at this stage prior to the District Elections on 7th May and my idea,
as you know, is that we can try and reach some agreed wording between us in the
draft form and then the matter can be put to the new hierarchy, whatever it may
be, at the end of May. The wording of it will not be nearly as forthright as
that which you have used in your letter concerning the Tenant Mix Agreement,
but the import will be exactly that.
This agreement was unknown to Slough. The
letters were not produced in the judicial review proceedings and only emerged
during later discovery in these proceedings. Mr Riddle said that he personally
found these documents later after judicial review proceedings in documents left
by his predecessor.
Also on April 22 1987, Mr Moore wrote
(19/3866) in reply to Mr Cleaver’s letter of April 14 1987 (19/3862). Mr Cleaver
had asked for confirmation that the council intended to adhere strictly to the
TMA. Mr Moore’s reply referred to the undertaking given at the public inquiry
and to the terms of the Secretary of State’s decision. There were a variety of
issues and
… attitudes both local and national, have
changed considerably since the Inquiry in 1985 and no doubt will continue to do
so. At this point in time however, I have no reason to believe that Park Plaza
will not proceed in any other way than previously agreed.
Mr Cleaver said that, although this was
not a completely unequivocal reply, he read the letter as in effect renewing
the previous undertakings given by Mr Asquith with Mr Moore present. He said
that if Park Plaza had become an unrestricted shopping development, that would
have stopped the Howard Centre dead. Mr Carey saw this letter at the time. It
maintained his belief that the TMA remained in place and he relied on it. There
remained problems with grey areas. Mr Carey knew that it was always going to be
difficult to apply the TMA for marginal lettings that were on the fringe of the
descriptive labels in the TMA.
Mr Moore’s letter was written on the very
same day as Mr Asquith wrote to Mr Carroll (19/3872). If Mr Moore knew what Mr
Asquith had agreed with Mr Carroll, the important final sentence of his letter
which I have quoted was untrue. There was reason to believe that Park
Plaza was going to proceed otherwise than in accordance with what had been
previously agreed because Mr Asquith had agreed to exactly that at his meeting
with Mr Carroll on April 14 1987 as recorded in his subsequent letter. Mr Moore
has not given evidence although he is available to do so. Mr Asquith is dead.
It is quite plain from the history of this matter not only that Mr Moore was
one of the main actors in this matter on behalf of WHDC but that in 1987 he was
hand in glove with Mr Asquith. I have no doubt that Mr Moore knew on April 22
1987 what Mr Asquith was doing and it follows that his letter of that date was
knowingly untrue.
Mr Cleaver wrote on April 28 1987
(19/3891) asking for a categorical statement that the council would seek to
enforce the tenant mix agreement for the full period. Mr Moore replied on May
28 1987 (19/3918) that he had made the council’s position abundantly clear
regarding their views on the enforcement of the TMA and did not feel he could
add anything. The effect of this was to restate the untruth. Mr Cleaver’s
evidence was that he took this as a further confirmation that the position had
not changed. He copied Mr Moore’s letter to Slough on June 4 1987 (19/3924)
saying that ‘the Local Authority are clearly hedging on this issue and
obviously expect further flak from us if they make any bold statements. I doubt
if there is anything further we can do’. Mr Carey read Mr Moore’s letter as
referring to the grey areas. So did Mr Woolhouse. Mr Cleaver was worried about
Mr Carroll slipping in tenants.
On June 29 1987, Mr Murray wrote to Mr
Moore (19/3961) enclosing a paper (19/3962) confirming Carroll’s proposals for
tenant mix at Park Plaza. The letter stated:
The theme will be leisure and speciality
shopping with the ‘anchor’ tenants being the collection of multiple retailers
to include an element of specialist fashion … It is important for the
specialist ‘clutch’ concept to include the widest range of retailers because
‘exclusions’ would detract from the total concept.
The enclosed paper stated that:
The major single difference from the
[TMA] will be that a Speciality Centre for the 90’s will need to include specialist
fashion shops …
The centre contains 200,000 sq ft of
retailing and, therefore, the specialist fashion shops would be limited to a
maximum of 70,000 sq ft of trading space.
It was said that this should not damage
the existing town centres. Annexed documents list retailing changes since 1984
and state blandly that ‘Retailing now perceived as ‘leisure activity”
(19/3966). There is a list (19/3967) of possible interested tenants who would
comply and would not comply with the TMA.
On July 10 1987, WHDC granted planning
permission for the Howard Centre.
Three days later on July 13 1987, a WHDC
principle officers’ management team meeting ‘were informed of the latest
discussions which had been held with the Carroll Group and of the
recommendations which would be made at the meeting of the A1(M) Working Party
to be held that evening’ (20/4022A). This matter was minuted as ‘Not for
Publication’ (20/4022). The A1(M) working party unanimously resolved to recommend
‘that the Chief Financial Officer [Mr Heys] and the Chief Planning Officer
finalise any matters outstanding with a view to all documentation being
complete and signed by the end of July, 1987’ (20/4021). Mr Heys prepared an
‘Aid [sic] Memoire’ for that meeting (20/4025) which was tabled as
exempt information (see also 20/4018C, 4297A, 4313A). This was marked ‘Private
& Confidential — Not to be released to the Press or Public’. It referred to
discussions between Mr Heys, Mr Moore and Mr Asquith on July 10 1987 and stated
that the recommendations had Mr Asquith’s total support. Under a heading
‘Tenant Mix Agreement’ there is stated:
Again considerable discussions have been
held with the Carroll Group to try and to [sic] firm up their views on
the extent of relaxation which they would find acceptable in view of their
significant current difficulties in letting the scheme. You will recall that
the general discussion at your last meeting was about a relaxation equal to
85,000 square feet and this would be as a result of various decisions made by
the Secretary of State since 1984.
In view of the very recent approval to
the Howard Centre and the sensitivity that those developers have always shown
to the Park Plaza Scheme and decision to relax the tenant mix agreement in the
way suggested above cannot be minuted at this stage. Nevertheless, such
a decision would need to be acted on at least behind the scenes and the Carroll
Group will require and will be happy with a letter either from the Chief
Planning Officer or myself indicating by reference to the relative clauses in
our agreement the extent of the relaxation in which you as members would be
prepared to give.
It is therefore recommended that you give
strong affirmation to the relaxation of the tenant mix agreement to a maximum
of 85,000 square feet. It will be a requirement that the Council approve any
letting in excess of 20,000 square feet under this relaxation.
It was also stated that:
… it would be wise for the Council to
resolve that the Chief Planning Officer and myself are also nominated to sign
letters etc, arising out of the agreement of the Carroll Group.
A decision not to minute was unlawful by
virtue of para 41 of Schedule 12 to Local Government Act 1972. I am satisfied
that elaborate steps were taken to ensure that what was proposed in this aide-memoire
was not made public.
This aide-memoire speaks for
itself. It implicitly recognised a clear understanding that Slough were relying
on the TMA being in place and enforced. It was a recommendation, in which Mr
Asquith, Mr Moore and Mr Heys were complicit, to agree with Carroll to relax
the TMA for as much as 85,000 sq ft, but to conceal this from Slough, among
others, deliberately. It shows that discussions had been taking place with
Carroll about the extent of relaxation of the TMA.
At a full council meeting on July 14 1987
attended by 39 councillors and 11 officials, including Mr Heys and Mr Moore
(20/4022B), it was resolved ‘that the report of the meetings of the Members’
A1(M) Working Party of 29 June and 13 July, 1987 containing exempt information
which was [considered] at the meeting be received and the recommendation be
approved and adopted’. Thus the full council adopted a scheme which was
intended to deceive. Mr Riddle attended this, his first, council meeting as the
designated successor to Mr Asquith.
On July 31 1987, WHDC entered into the
development agreement with a Carroll Group company (20/4099). It provided for
the developer to pay WHDC about £11.765m (20/4109). Clause 12 (20/4124) imposed
tenant mix restrictions substantially the same as those in the 1984 TMA for a
five-year period. The TMA itself is referred to in a side letter dated July 31
1987 (20/4095) to which I have already referred.
By a secret side letter also dated July
31 1987 (20/4094), it was said that in consideration of the developer entering
into the development agreement:
Notwithstanding the restriction upon user
imposed by Clause 12 of the Agreement, you shall be permitted to let shop units
(as defined in the Agreement otherwise than as permitted by Clause 12 of the
Agreement up to a maximum of 85,000 square feet. Provided that the approval of
the Council (such approval not to be unreasonably withheld) shall be obtained
by you to the initial letting of any such Shop Unit having a floor area in
excess of 20,000 square feet.
This letter remained secret until part
way through the judicial review proceedings in June 1990. Slough (and others)
were permitted to continue in ignorance of this major relaxation of the TMA.
Mr Riddle was the one witness to give
substantial factual evidence on behalf of WHDC. He is now their chief
executive. He was interviewed for the post in June 1987 and offered the post
about then. Mr Asquith was to leave in December 1987. Mr Riddle started work as
chief executive designate on September 7 1987. He attended the council meeting
on July 14 1987 as a guest (20/4023). His evidence was that he did not attend
the council’s A1(M) working party meeting on July 13 1987. He said that the
unminuted decision about the TMA was not disclosed to him. He did not have much
to do with the Park Plaza site until about the end of 1987. He knew that Mr
Moore and Mr Heys and others had dealt extensively with Park Plaza. He was
present on July 31 1987 when the development agreement was signed. He must have
been present when the side letter was handed over, but he did not read the
letter at the time.
Mr Riddle said that he first became aware
of the contents of the secret side letter in about December 1987 when he looked
at the development agreement in the context of discussions with Carroll about
housing matters. He first became aware of the July 13 1987 meeting in spring of
1988 when Carroll asked for planning permission for an extra 20,000 sq ft. He
thought that the question of relaxing the TMA for the 20,000 sq ft was not
considered until a meeting on June 20 1988. By then he knew about and had read
the September 1984 TMA document. He then learnt that the July 1987 decision had
been confidential. He said that in 1988 the members were acutely conscious of
the effect that relaxation would have on the town centre development. He then
understood from discussions with colleagues and members that the 1987 decision
had not been minuted because of commercial confidentiality with Carroll and
because it was a departure from the publicly promulgated TMA which made it
sensitive to a wide group of people, including Slough Estates, John Lewis,
other Hertfordshire local authorities and local traders, who had objected at
the public inquiry. Knowledge of the concealed decision could have led any one
of them to try to stop the Park Plaza development. He did not know about the
document relating to the July 13 1987 meetings until the judicial review
proceedings. He thought in 1988 that Slough would still be seeking to object
because they were promulgating a development of their own. He did not recognise
that Slough were in a special position. He knew they were carrying out in a
time of boom a shopping centre development of whose scale he was approximately
aware.
He thought that the decision not to
minute was quite improper, unconstitutional and quite remarkable. He did not
then do anything about it. It was known by members of the A1(M) working party
and some others and by the senior officers directly involved including Mr Moore
and Mr Heys.
He accepted that in broad terms the 1987
relaxation of the TMA for 85,000 sq ft was out of step with the 1984 TMA. He
accepted that statements made without revealing the side letter could be
misstatements to those for whom the subject was sensitive. He took no steps to
see that there were no misstatements in the future and with hindsight he
accepted the risk that there might be misstatements in the future. He realised
that the council had got themselves into a hole. The one thing that he did do
was to see that WHDC did not get into further difficulty with Carroll. He did
not decide to bring the matter into the open in 1988. It was an unprecedented
situation which he could not see how to resolve. He recognised that the issue
would have to be dealt with at some time.
Mr Riddle first learnt of the aide-memoire
dated July 13 1987 (20/4025) prepared by Mr Heys and produced to the meeting on
that date in 1990 during preparation for the judicial review proceedings.
On August 14 1987, Mr Carey wrote to WHDC
(20/4257) referring to a press report that Carroll Group had exchanged
contracts with WHDC and that a company such as Laskys would be acceptable under
the restricted use. The press report (20/4256A) said that:
The complex … has a heavily conditional
planning consent limiting the development to leisure-oriented uses. This,
according to a Welwyn Hatfield planner, is to protect existing shopping in the
borough. There is a tenant-mix agreement and Carroll has to prove that the tenants
it finds are leisure-oriented. The agreement, which lasts for five years, means
retailers like Marks & Spencer would be excluded but a Laskys or Habitat
would probably be acceptable
Mr Carey asked for clarification. Mr
Moore replied on August 17 1987 (20/4260) referring specifically to para 2 of
the TMA. He did not reject the article (which was materially inaccurate)
although he said that its contents were not based on recent information given
to the paper. He accepted that Laskys could be regarded as a traditional High
Street trader but they were not specifically excluded by the agreement. Mr
Cleaver replied on August 21 1987 (20/4261) saying that he was pleased that the
article did not reflect any new trend in the agreements with Carroll ‘and as
you know under the present circumstances we are living with the reality of the
Park Plaza Scheme including the tenant mix agreement’. There was no reply to
this letter and Mr Cleaver continued in the belief that the TMA was in place
and being enforced. Mr Carey understood these letters to make it clear that the
TMA was in place and that the council were still intending to enforce it. He
still doubted that the Carroll Group scheme would proceed at all due to the
presence of the TMA, but, if it did, he felt comforted that the TMA would
ensure it was not a rival scheme.
At a meeting on September 21 1987
(20/4311) which Mr Riddle attended as chief executive designate, the minutes of
the July 13 1987 meeting were approved. Mr Moore reported that Carroll Group
had agreed certain occupiers for the Galleria.
On September 30 1987, Welwyn Garden City
Chamber of Commerce wrote to Mr Moore (20/4328) asking if there had been
changes in the size of individual units and possible tenants at Park Plaza. Mr
Moore replied on October 5 1987 (20/4329) saying in terms that ‘the Tenant
Mixed [sic] Agreement is still in force’. This in its context was false
to Mr Moore’s knowledge. It was not a representation to Slough (although there
must have been a chance that it would come to their notice). It is a
manifestation of Mr Moore’s intention to deceive. Similarly on February 11
1988, Mr Moore wrote to the Hertfordshire County Planning Officer saying of
Park Plaza that:
The Tenant Mix Agreement between this
Council and the Developer, Carroll Group of Companies, is for five years from
the date of the first letting of the first shop unit.
The years 1987 and 1988 were part of a
boom period for property development when the market anticipated further rental
growth and before the property slump in about 1990. On July 13 1987, Healey
& Baker wrote in terms that there was a massive excess of demand over
supply for high quality shop schemes (20/4028). Mr Parker said that this was
true of high quality schemes, but did not apply generally. Mr Carey thought in
hindsight that there was equilibrium in the market relevant to Welwyn Garden
City and that Healey & Baker’s letter represented the optimism of the time.
Healey & Baker wrote on February 8 1988 (21/4697) that there were more
funds seeking to invest than schemes available, but Mr Carey said that this was
significantly qualified. The letter stated that the number of funds able to put
more than £20m on the table remained limited to 20 or so, some of whom were
happier to involve themselves than to purchase completed developments. Mr Carey
said that not all schemes were backed by funds. Mr Orchard-Lisle said that the
funding market was not as buoyant as it had been.
Slough were working towards secure
lettings and in August 1987 issued a brochure (20/4214). By December 11 1987,
Slough had already spent over £1m on the scheme (21/4483). In January 1988, it
was hoped that space would be let to Marks & Spencer (21/4552, 4643). In
the spring of 1988, the Howard Centre scheme was seen by Slough as particularly
attractive in the light of revised terms agreed with British Rail and a recent
Marks & Spencer approval (21/4737, 4758). Further expenditure was
authorised on March 2 1988. It was seen as an absolute requirement that the
Centre should open for trading by Christmas 1990 (22/4804, 5161). There
followed negotiations which resulted in Slough buying out their partner,
Charlecote Estates. In June 1988, Slough transferred the project to an
investment company. Mr Carey said that this was because it had been decided that,
if the scheme proceeded, it would be retained as an investment (see 23/5400),
where Mr Carey wrote that ‘to all intents and purposes the project is under
construction’. This, he said, referred to the preliminary works contract which
was in progress. Mr Cleaver said that work on a distributor road remote from
the site had started.
In the early summer of 1988, Carroll
applied for planning permission for an additional 30,000 sq ft gross (20,000 sq
ft net) of retail space at Park Plaza. They wanted this additional space also
to be free from the TMA. On May 26 1988, Mr Murray wrote to Mr Moore confirming
an intention to start work on August 1 1988 and ‘that the modification to the
retail space is fundamental to match viability and occupier interest’ (22/5197).
Mr Murray recorded that Gerald Carroll had spoken separately to David Riddle:
see also 22/5207.
Mr Garnham gave evidence on behalf of
WHDC. He had been with local authorities from 1973 concerned with planning
matters. He was assistant director of planning policy with WHDC from January 1
1988 to September 30 1991 as Mr Moore’s assistant. He had responsibility for
certain developments including the Howard Centre. On October 1 1991 he was
appointed assistant chief executive. He left WHDC on March 31 1994.
Mr Garnham attended one Park Plaza
meeting only — the working party meeting on January 18 1988 (21/4586A). There
was a report to that meeting on lettings. At about that time he knew that there
were restrictions on lettings at Park Plaza. In relation to another planning
inquiry, he was briefed about the TMA by Mrs Wilson, who was helping Mr Moore
as special projects officer for Park Plaza, and was given the September 1984
document but she did not mention the secret side letter (although she is
recorded as having been present at the meeting on July 13 1987 (20/4019)). He
had no idea why he was not told about the side letter. He agreed that it was an
important document and that she must have had a reason for not mentioning it to
him. Mr Garnham guessed that it was true that it must have been for the purpose
of concealment. He only became aware of the side letter after Slough applied
for judicial review.
Mr Garnham took over as chairman of the
Howard Centre working party in about March 1988. He knew that Slough were aware
of the TMA and that it was something that they had in their mind because of
their contribution to the Park Plaza planning inquiry. He regularly briefed Mr
Moore about what happened at Howard Centre meetings and generally in relation
to the progress of the Howard Centre. At meetings there was a committee clerk
who took minutes. Draft minutes were circulated.
At a Howard Centre working party meeting
on June 15 1988 (23/5263), Mr Garnham told the working party of the application
by Carroll Group for an extension of 20,000 sq ft net of the retailing area at
Park Plaza. Slough wrote a letter of objection dated June 21 1988 (23/5279)
saying that it appeared that the developer was seeking to increase their retail
floorspace despite ‘the planning conditions imposed by the Secretary of State’,
by which Mr Woolhouse, who wrote the letter, meant the TMA, although he did not
know much about the details of the planning application at the time. He said
that Park Plaza was only seen as a competitor if the TMA were not in place. Mr
Moore acknowledged the letter of objection on June 27 1988 (23/5298) upon which
Mr Woolhouse wrote a note to himself saying ‘nevertheless part of larger
inquiry which was approved subject to strict implementation of restrictions’ —
see also 23/5467. Mr Woolhouse’s reply to Mr Moore dated July 12 1988 (23/5352)
also referred to ‘the restrictions imposed by the Secretary of State’.
His evidence was that at all the times
when he was concerned with the Howard Centre Slough were proceeding with the
development relying on the TMA.
Mr Riddle said that Carroll’s suggestion
that they should be given planning permission for a further 30,000 sq ft gross
first arose in the spring of 1988. The proposal was for two blocks of
additional lightweight shops on the roof of the tunnel. There was a suggestion
by Carroll that this could be dealt with shortly on a rubber stamp basis.
Initially the council were unaware that Carroll wanted a further relaxation of
the TMA. His recollection was that it was a request at the meeting on June 20
1988. Members present included the leader and deputy leader of the council, a
previous leader, the chairman and deputy chairman of the planning committee and
the previous chairman of the A1(M) working party (‘the six councillors’). Mr
Riddle’s unaided recollection of the meeting was hazy, but he wrote two letters
to Carroll a week later (23/5297C). His evidence was that he prepared a draft
letter which he is now unable to locate and that the text of the draft was
split into two at Carroll’s request. (No notes of the meeting are available nor
are documents referred to in Mr Riddle’s letter nor in a memorandum to the six
councillors of the same date (23/5297E).) The memorandum refers to a request
from Carroll for two letters so that they could show one of them only to their
bankers. Carroll pressed the case for the further relaxation of the TMA very
hard, saying that they were unable to secure anchor tenants for the development
and needed to put more emphasis on costly design which required the relaxation
of the TMA. Members were reluctant to grant planning permission or the relaxation.
The council wanted the scheme to go ahead, although there was scepticism about
the likelihood of the scheme going ahead at all.
Mr Riddle’s first letter of June 27 1988
(23/5297A) included:
As regards the application of the tenant
mix agreement to the additional space, I have to say that we will not be
prepared to respond to your request (that extra space should be free from
restriction) until the contract has been let and work has started. This is
potentially the most sensitive handling. At this stage, all I can tell you is
that members present on the 20th will recommend that there should be a further
side letter indicating that the tenant mix agreement will not be applied to the
extra space but that there should be no amendment of the development agreement.
The letter referred to the need to
discuss Carroll’s estimate of the additional premium payable to the council as
a result of the extension of the Galleria.
Mr Riddle said that the driving
consideration, which made the matter sensitive, was concern about the effect on
Hatfield town centre and the whole context in which the TMA had to be handled.
It may well have been that there was an intention to keep this matter informal.
He said that this was a strong indication that Carroll had to start work and that,
if they did so, they would be likely to secure the further
themselves under irresistible pressure to agree’.
Mr Riddle’s second letter of June 27 1988
(23/5297D) included that:
The question of the tenant mix agreement
is one that we are not prepared to respond on formally, until construction work
has started. I have explained to Tony Clarke that in my view it is not in your
interests to take any action which might lead to the arrangements between the
Council and your Company becoming subject to critical examination.
Mr Riddle said that this last sentence
referred to the circumstances surrounding the first secret relaxation, the
problems with which Carroll knew. ‘Critical examination’ impliedly contemplated
those who had objected to the original planning permission including Slough and
other later local objectors who might take action to prevent or impede the Park
Plaza scheme.
At the Howard Centre working party
meeting on July 6 1988 (23/5338), Mr Garnham undertook to provide Mr Adds with
details of Carroll’s application. Mr Moore did this on the same day (23/5337).
At the WHDC planning and transportation
committee on July 28 1988 (23/5403) which four of the six councillors attended,
whose minute was the subject of late discovery, Carroll’s application was
considered. ‘It was noted that the changes would also necessitate a relaxation
of the development agreement between the Carroll Group and the Council.’ Mr
Moore promised a report to the strategy and resources committee on September 20
1988.
Mr Garnham was not present at the WHDC
planning and transportation committee on July 28 1988, which determined the
Carroll additional planning application. He returned from holiday on August 1
1988, worked through all the papers on his desk and discussed with assistants
developments, including the planning committee papers which included Mr Moore’s
report to the committee (23/5401). He knew what had happened at the meeting
from a resulting temporary action list — the minutes (23/5403) would have been
in the course of preparation. He concluded as an assumption that the TMA
restrictions would apply to the additional Park Plaza floorspace. The minutes
of the meeting recorded (23/5430A) that it was noted that ‘the changes would
also necessitate a relaxation of the development agreement between the Carroll
Group and the Council’. This was to go to the strategy and resources committee
on September 20 1988.
There was a meeting of the Howard Centre
working party on August 2 1988 at which Mr Garnham in answer to Mr Woolhouse
said that the Park Plaza additional floorspace would be subject to the same
restrictions as the other floorspace (23/5431). By this he was referring to the
TMA. Mr Garnham said that it was his then understanding from what he had read.
He did not recall whether he spoke with Mr Moore before this meeting although
he may have done. Mr Garnham’s statement was a misrepresentation both to the
effect that the TMA was in force and that it would apply to the additional
floorspace. When Mr Carey learnt what had been said at the meeting on August 2
1988, he was not unduly concerned that planning permission was granted for a
further 20,000 sq ft to be added to the existing scheme of 200,000 sq ft.
Mr Garnham’s evidence was that after the
meeting he discussed matters with Mr Moore and told him that the question had
been asked and the answer given. Mr Moore was not too happy. He said that the
answer was wrong and asked Mr Garnham to contact Mr Woolhouse as soon as
possible to say that the additional floorspace was going to be free from the
TMA. His evidence was that he tried to contact Mr Woolhouse on two or three
occasions but did not succeed. He did not write to him. He was not able to
explain why except to say that the working party operated informally. Mr
Woolhouse said that he had no recollection of any message being left for him to
contact Mr Garnham.
Mr Garnham’s evidence then was that at
the next Howard Centre meeting on August 26 1988 he explained to Mr Woolhouse
that his statement on August 2 1988 that the additional floorspace would be
subject to the TMA was wrong. Mr Woolhouse expressed concern but that was the
last Mr Garnham heard of the matter. As far as Mr Garnham was concerned that
20,000 sq ft was from this point free from the TMA. He thought that the matter
was settled. Mr Garnham would have expected Mr Woolhouse to have taken some
action had he been told this. He accepted the possibility that Mr Woolhouse may
have misunderstood what he said or been confused but he did not really think so
as he believed that he expressed himself clearly. He did not recall Mr Adds
saying anything about it. He and Mr Adds talked a lot but never had a
conversation about the TMA. He did not recall anyone from Slough raising the
subject of the TMA with him.
The correction which Mr Garnham said he
made was not minuted (23/5519). He would have expected what he said to have
been minuted. He did not know why it was not. Mr Garnham’s written evidence was
that he remembered ‘advising the Committee Clerk not to Minute the point as a
correction to the Minutes of 2nd August because those Minutes already clearly
reflected what I had said. I can only assume now that the Committee Clerk took
me to mean that the statement I made should not be minuted at all as there in
no Minute of my statement have been made [sic] at the 26th August
meeting.’ There was no correction to the minutes of August 26 1988 at the next
meeting on September 14 1988 (23/5572). Mr Garnham did not know why he had not
brought the matter up. Mr Woolhouse and Mr Adds were both at the September
meeting and neither of them raised the matter.
Mr Woolhouse’s written evidence was that
Mr Garnham did not tell him on August 26 1988 that the additional floorspace
would not be included in the TMA. He is sure that if he had he would have
objected most strongly. He would have requested that the matter be recorded in
the minutes of the next meeting. Mr Adds’ evidence was that he did not hear Mr
Garnham correct what he had said at the previous meeting. He also would have
objected most strongly and insisted that the matter was minuted. Mr King, whose
company was employed as project manager for the Howard Centre and who was on
the Howard Centre working party, did not recall Mr Garnham saying at the
meeting of August 26 1988 that the additional floor space referred to at the
meeting on August 2 1988 would not be included in the TMA. If he had done so he
is sure that considerable discussion would have ensued because he understood that
it was such a fundamental issue. He would have recalled such discussion and it
would have been minuted. Mr King was not concerned with Park Plaza but he was
aware of the TMA in general terms. He said that all those who attended working
party meetings did not necessarily stay for the whole meeting. Mr King did not
without reference to minutes recall that there had been references at previous
meetings to the Park Plaza additional planning application. It was suggested
that Mr King was not really concerned with matters concerning the Park Plaza
site. He said that he did not now have independent recollection of meetings at
this time.
Slough do not suggest that Mr Garnham
gave consciously untrue evidence about correcting what he had said on August 2
1988. But their case is either that he did not in fact correct what he had said
or that, if he tried to do so, he did not succeed in making himself understood
either because he spoke elliptically (which would have fitted with what Mr
Moore was doing elsewhere) or because he did not speak out. Mr Garnham was a
quiet and plausible witness. But his own evidence was that in August 1988 he
was uninformed about the 1987 relaxation of the TMA. This information had been
kept from him and the high probability is that Mr Moore did not explain the
true position with the 20,000 sq ft in unambiguous terms. Mr Garnham probably
did not then appreciate the significance of the topic as it now appears. It is,
in my judgment, inconceivable, if Mr Garnham really did say that the additional
floorspace would not be subject to the TMA, that Mr Woolhouse would not have
reacted strongly both at the meeting and afterwards by reporting it within
Slough and equally inconceivable that the subsequent statement would not have
appeared in minutes either of the August meeting or as a correction in the
September minutes. It was to Slough an important matter. (I appreciate and take
account of the submission that this very evidence is part of WHDC’s case that
the TMA was not an important matter to Slough, but, in my judgment, there is
ample evidence elsewhere to conclude, as I do, that it was.)
outside WHDC knew that it was intended that the TMA should not apply to the
additional 20,000 sq ft. I accordingly find that Mr Garnham did not succeed on
August 26 1988 in correcting the misstatement that he had made on August 2
1988.
A note made by Mr Anderson, the WHDC’s
legal officer (23/5454A), of a meeting on August 9 1988 attended by Messrs
Moore, Anderson, Heys and Riddle, has a note that:
Any future formal varn. T.Mix to be a
varn. (as well as present informal)
Mr Riddle was unable to explain this. It
is, in my view, pretty obvious that the sense of this note was that there was
at present an informally agreed variation of the TMA — which can only refer to
that relating to the 20,000 sq ft since that relating to the 85,000 sq ft had
been formally (if secretly) approved and recorded — and that future such
variations would have to be made by formal variation.
In a letter dated August 24 1988
(23/5492), Healey & Baker wrote to Slough at some length about marketing
and promotion. Park Plaza is referred to as a competing scheme. There is no
mention of the TMA. The defendants suggest that indicates that the TMA was not
of the consequence attributed to it by Slough. Mr Parker said that the
suggested marketing of the Howard Centre would have been quite different if
Park Plaza had been seen as unrestricted competition. He would have thought it
as extraordinary to hark back to this with a client for whom it had been a
fundamental assumption for so long.
The WHDC strategy and resources committee
met on September 20 1988 (23/5575A). Mr Riddle was present. He submitted an
exempt report on progress of negotiations with Carroll. Work had started on
Park Plaza and the committee expressed gratitude to the many council officers
involved. Mr Riddle did not remember reporting about the TMA. The exempt report
is 23/5575I. It referred to the grant of planning permission for the extra
30,000 sq ft. It stated:
Negotiations are now under way with the
Developers as to the terms upon which the Council’s formal consent to the
modified scheme should be granted pursuant to the development agreement.
Essentially, these negotiations are focused on two issues. First, the amendment
of the development agreement so as to restrict the right of the developer to
make further variations to the scheme, other than minor ones arising during
construction. Second, the application and modification of the development
agreement which entitle the Council to an additional payment by way of premium
in consequence of variation in the scheme.
Mr Riddle agreed that at this stage, work
having started, there was at the least an understanding with Carrolls that the
TMA would be relaxed for the additional 20,000 sq ft. Negotiations about the
premium proceeded on the assumption that the TMA would be relaxed further
subject to the terms of Mr Riddle’s two letters of June 27 1988.
It is Slough’s case that WHDC agreed in
the summer of 1988 to a further relaxation of the TMA for the additional 20,000
sq ft but suppressed that agreement in much the same way as they had suppressed
the 1987 relaxation. Mr Riddle insisted that, although there was an
understanding that a further relaxation would eventually be made, this was
never formally agreed. Mr Riddle said that he had a recollection of going to
Carrolls to say that the release from the TMA of the 20,000 sq ft had not been
formally sanctioned on behalf of WHDC. He said that the February 1990 decision
(see below) was intended to formalise the 1987 decision in relation to the
85,000 sq ft and to make the decision for the 20,000 sq ft. In the event only
the first was done.
Slough recorded (23/5313, 5583) that
approval to proceed with the Howard Centre construction was granted in
June/July 1988 and that category II approval was in August 1988. Mr Carey said
that at this stage he had doubts whether the Carroll Group scheme would be
built at all but that, if it was, it would be subject to the TMA. Had he known
that the TMA had already been removed so that the Galleria was to be a rival
out of town shopping centre then even at this stage, when approximately £2m had
been expended (in addition to the £1m to buy out Mr Cleaver) he had no doubt
that work would have been stopped on the Howard Centre scheme and Slough would
have withdrawn from the project. Slough went ahead with the Howard Centre
relying on assurances given by WHDC that the TMA would be strictly enforced. On
September 22 1988, a substantial internal profit from the scheme was
anticipated (23/5584, 5588) although Mr Carey described the assumptions as
marginal and the percentage profit (10.8%) as marginal. Mr Parker described
10.8% as one of the lowest he had come across. The net profit as a percentage
of net development cost was 14.23%. Category I approval was sought (23/5585).
Slough signed various development agreements
on September 23 1988. This was their point of no return. Shortly afterwards
they entered into a construction contract with Tarmac. Bulk excavation on the
Howard Centre started on September 26 1988.
By September 1988, Mr Woolhouse knew that
Carroll Group had been trying to attract Marks & Spencer to Park Plaza
(23/5602). He knew that they fell outside the TMA, but he said that Slough
never thought seriously that Marks & Spencer would go to Park Plaza. Marks
& Spencer had already agreed in principle to come to the Howard Centre and
Slough were never in doubt that Marks & Spencer would come to the Howard
Centre.
WHDC had negotiations with Carroll about
the premium to be paid for the additional 20,000 sq ft: see eg 23/5483. On
October 27 1988, Mr Holt of the council’s finance department wrote to Carroll
on the subject of the premium (23/5750). His letter includes:
The additional retail area is to be free
of the Tenant Mix Agreement.
He suggested a valuation of £632,500. Mr
Riddle agreed that the letter was written in terms that the only outstanding
matter was premium adjustments.
On November 18 1988, Carroll replied
(23/5831A) suggesting an amount of £465,000. The schedule added 10% for what Mr
Riddle accepted meant the relaxation of the TMA: see also 23/5897C where Mr
Holt also adds ‘10% tenant mix agreement’. Mr Riddle said that there were other
elements to the 10% but that it did include the TMA: see 23/5714.
On March 9 1989, Carroll wrote to Mr Holt
(24/6122A) saying that £300,000 net had been agreed (after allowing for
£300,000 to be deducted in accordance with the original agreement) and that
this was in consideration of, among other things, the additional square footage
being outside the tenant mix agreement. The council’s reply of March 17 1989
(24/6158A) confirmed the agreement of £300,000 saying of tenant mix, ‘the
position remains as set out in the Chief Executive’s letter to Gerald Carroll
dated 27 June 1988 in paragraph 4’: see ms note on 24/6123. Mr Riddle said that
he required this to be included in the letter because there had been no council
approval of the further relaxation by members competent to make a decision.
Carroll wrote on April 10 1989 (24/6259) asking for advice about ‘progress on
the question of adjustments to floor area and tenant mix in the sum of
£300,000’.
On April 13 1989 an article in the Welwyn
and Hatfield Review (24/6263), which Mr Riddle imagined that he had read,
reported furious Hatfield traders demanding that WHDC come clean over the Park
Plaza development. Mr Moore is reported as saying:
The Park Plaza is and always has been a
leisure-oriented development. We know there is to be some 300,000 sq ft of
retail floor space but the Council and the Carroll Group have had a tenant mix
agreement for five years. This means that there will not be shops in the
Gallerias which are already in the Hatfield town centre. The shops that will be
there will be specialist retail outlets to attract a different kind of shoppers
to those who use the Hatfield Town centre shops. The Plaza will not be a threat
to the shops in Hatfield …
Mr Riddle cannot remember discussing
this. He did not authorise it. He agreed that it was evasive on the position on
the 85,000 sq ft, which was known to Mr Moore. He stood by the position that
the council had not made a decision about the extra 20,000 sq ft.
Mr Riddle said that in 1989 he was
becoming acutely concerned at the council’s ability to deal with matters in
light of the concealed side letter. This, he said, derived from an
understanding that Carroll’s
council had intended under the development agreement. There was a marked move
away from the leisure concept. These concerns were expressed in his letter
dated April 20 1989 (24/6274). There was to be a presentation of Park Plaza at
the American Embassy.
By April 1989, Healey & Baker had
information of the identity of some of the tenants for Park Plaza for whom
Carroll apparently had commitments (24/6281), one at least of which might be
seen as breaching the TMA. Mr Parker said that experience showed that some of
Carroll’s publicity was not accurate. He did not think that the council would
ever approve such lettings in the light of the TMA. Slough’s reply to Healey
& Baker’s letter (24/6300) does not complain that there are indications
that the TMA was being breached. Mr Parker said that this correspondence was
part of a heated debate between Slough and Healey & Baker about the extent
of Healey & Baker’s marketing.
On May 5 1989, Mr Hampson of John Lewis
wrote to Mr Moore (24/6318) asking in relation to the report in the press
whether some other TMA was subsequently agreed that John Lewis had not been
told about. Mr Riddle saw this letter at the time. It concerned him from the
launch of the Galleria onward that Carroll’s departure from the TMA was
unanswerable by the council because of the continued secrecy over the secret
relaxation and because the council had no control. It was therefore necessary
to move towards putting the record straight so that the council could exercise
some control ‘albeit minimal’ over the project. He agreed that this was a
strong inquiry from John Lewis which had to be dealt with. The John Lewis store
in Welwyn Garden City was open and, according to Mr Riddle, booming. They may
also have been contemplating opening as Waitrose near the council offices.
There was to be a meeting between Carroll
and Mr Riddle on May 8 1989 (see 24/6302) to discuss tenants. Mr Riddle could
not remember it.
There was a presentation by Carroll to
leading members (including five of the six councillors) and officers on May 16
1989 (24/6302). They were handed a list of contracts exchanged by Carroll
(24/6341). Mr Murray of Carroll wrote on May 19 1989 (24/6351) referring to the
council’s ‘continuing enthusiasm’. Mr Riddle said that there was disenchantment
because Carroll were not attracting leisure tenants.
On June 7 1989, Mr Moore answered
(24/6404) Mr Hampson’s letter (24/6318) having taken a month to do so. The
letter confirmed that the TMA referred to in the press report (24/6263) was the
1984 document which was ‘prepared in order to give to other Town Centre Traders
particularly Hatfield Town Centre reassurance regarding competition’. Mr Riddle
agreed that it had historically been prepared to give assurance to Slough among
others. Mr Moore said that the document was becoming ‘dated’. He commented on
whether certain retailers might be within the TMA but said that he had no
knowledge of other organisations ‘as the Carroll Group has not approached us
regarding individual tenants’. He said that the detailed proposals for A1
Gallerias ‘… combined with a predominance of leisure orientated retailing will
ensure that the original concept has not been abandoned but merely updated to
the present time’.
In the judicial review proceedings,
Kennedy J said of this letter that:
… it was addressed, as Mr Moore knew, to
the representative of a company from which the decision of 1987 had been
deliberately concealed. The letter was framed in such a way as to suggest that
the 1984 Tenant Mix Agreement stood unimpaired, and that in general those
taking space as retailers in the Galleria probably fell within it. I am sorry
to say that as Mr Moore was personally a party to the 1987 decision in that he
was one of the persons consulted by the Chief Financial Officer, and as he was
in 1989 Director of Planning and Development, he must have known the truth; and
if he knew the truth, then his letter of 7th June 1989 was dishonest.
WHDC did not seek before me to dispel this
finding. Mr Moore did not give evidence. Mr Riddle agreed that this letter was
‘inaccurate’. He would not have sanctioned certain parts of the letter. He
could not remember whether he had seen it at the time. He said that he may have
spoken with Mr Moore before the letter was written to agree the line that would
be taken. He did not discuss the details of the reply. He did not recall that
he specifically blest the line, but he appreciated that Mr Moore had a limited
range of options. He could have told the truth but Mr Riddle appreciated that
he appreciated that the situation would be dealt with obscurely. That would
apply to answering anyone else who was sensitive until the council had made
public their decision. Mr Riddle said that he did have discussions with
officials (Mr Moore and one or two others) at the council and with members
about the problem of how to bring the matter into the open.
On June 15 1989, Mr Hampson replied
(24/6592) expressing concern and including:
I take it from what you say, however,
that we can assume your Council will be enforcing the Agreement’s provisions,
in spite of the fact that there is no reference to this in the letting
brochure.
A note (25/6883A) made by Mrs Jackson, a
senior planning officer, apparently of a Park Plaza working party meeting
probably in about September 1990 says:
Tenant mix — time right to change tenant
mix in devt agreement — want to bring into open side letter & agreement by
Members of 20,000 ft …
Worst situation — 120,000 sq ft
non-conforming. John Lewis could seek judicial review.
Want to take through Ctte before
Christmas — need something from Carrolls by mid Nov.
Carroll should apply relaxation of tenant
mix agreement — need good reasons why they want to abandon. Must keep leisure
oriented theme. WHDC will say no to general but suggest 105,000. WHDC to draft
letter most like to receive.
Within week — draft.
£300,000 for extra 200,000 ft &
exemption.
Mr Riddle accepted that it was a
reasonable inference that Mr Moore was at the meeting of which this appears to
be a note. Carroll may well have been. No formal minute of this meeting has
been produced. It is suggested that this note evidences the council setting up
a contrived application for complete relaxation which they would grant in the
part. Mr Riddle said that Carroll had already sought complete relaxation. He
saw this as part of the process of bringing the problem into the open. He
accepted that he may well have discussed the matter with Mr Moore before the
meeting. He did not remember attending the meeting. He did not accept that the
application was contrived — see in particular his written witness statement.
In August 1989 an updated Healey &
Baker ‘puff’ report (25/6841) lists some tenants believed to have been secured
at Park Plaza many of whom might be seen to breach the TMA. Mr Parker said that
this was probably written by someone in another department of Healey &
Baker who knew little about the background to the scheme.
Mr Parker of Healey & Baker said that
the marketing period for the smaller units at the Howard Centre was from about
September 1989: see 28/9216. At this stage Mr Parker had no idea that the TMA
had been relaxed. If he had known that there was opposition at Park Plaza,
there would have been no sense in an organised programme. They would have
simply rushed round grabbing all the tenants they could. Mr Rand did not
consider that knowing that the TMA was relaxed would have made a significant
difference to the way in which the Howard Centre was marketed. It would have
been a factor.
On October 2 1989, Mr Moore wrote to the
six councillors with copies to Mr Riddle and others (25/6885) suggesting that
the members who had previously been involved should attend a proposed meeting
with the planning and transportation committee.
At a meeting of the Howard Centre working
party on October 4 1989 (25/6889), it was recorded that:
Mr Rymell [Slough]; referred to the
recent publication by the Carroll Group of potential retail occupiers for [the
A1(M) Gallerias] and questioned whether this met the tenant mix criteria. Mr
Garnham stated that the Council had not approved these details.
Mr Carey’s evidence was that Mr Rymell
asked this question at his request as Healey & Baker had brought to his
attention the fact that Carrolls appeared to be trying to attract fashion shops
and non-specialist retailers.
On October 4 1989, Carroll wrote to Mr
Riddle a letter (25/6893) drafted by Mr Moore (see note at the top of
25/6892A), ie Mr Riddle received a letter from Carroll drafted by one of his
own senior officers. Mr Riddle said that he understood that this was a document
prepared in conjunction with Carroll. It was intended to be a document on which
the council would act. It referred to the 1984 TMA without reference to any
relaxation and stated that Carroll believed that a review of the need for the
agreement was now necessary. The letter concluded with a formal request that
the council agree to the rescission of the TMA in its entirety as it no longer
served any useful purpose. Mr Riddle said that this was Carroll applying for
relaxation. He did not wholly agree that it was written on the false basis that
the TMA was still in place unrelaxed. In my judgment, the terms of the letter
clearly justify the plaintiffs’ contention that it was written on the false
basis that the unrelaxed TMA was still in place. It is equally clear from the
fact that Mr Moore drafted it and from the terms of Mrs Jackson’s note of the
September meeting (25/6883A) that this was a contrived application generated by
WHDC in conjunction with Carroll seeking to formalise the already agreed
relaxations of the TMA for 85,000 sq ft and 20,000 sq ft, but to give the false
public appearance that these were decisions made for the first time.
On October 19 1989, Mr Moore wrote to Mr
Rymell (25/6921) a letter drafted by Mr Garnham upon information from Mrs
Jackson with reference to the question which Mr Rymell had raised on October 4
1989 (see above). Mr Moore said in the context of press speculation about
proposed Park Plaza tenancies that:
… at this moment the Developers have not
come forward with specific tenants for consideration in the context of the
Tenant Mix Agreement. The matter of whether any prospective tenant complies or
does not comply with the Tenant Mix agreement has not yet arisen.
These statements were untrue: see
24/6339. Mr Garnham said that Mr Moore was content with this letter and did not
seek to correct it. Mr Riddle agreed that the first sentence was not correct
and that the second sentence suggested that the original TMA was still in
force. Mr Carey saw this letter and understood it to confirm that the TMA was
still in existence and was being enforced.
In the minutes of a meeting of the Park
Plaza development and working party chaired by Mr Moore on October 26 1989
(25/6942), it was noted that:
The Carroll Group stated that they wished
to have formal discussions with the Council regarding the need for the
continued application of the tenant mix agreement. The Chairman agreed to
arrange a meeting between members of the Council and the Carroll Group.
Mr Riddle did not agree that this was
posturing.
On the same day, Slough wrote (25/6947)
asking if particular named tenants complied with the TMA.
On October 31 1989, Mr Riddle wrote a
memorandum (25/6949) to the six councillors and copied it to Mr Moore in
anticipation of a meeting with Carroll. It lists subjects for discussion
including ‘Tenant Mix Agreement — state of current and proposed lettings’. The
memorandum states:
I enclose a copy of a letter that we have
received from Carrolls formally requesting a relaxation of the Tenant Mix
Agreement. The letter is in a form that was substantially agreed with us in
advance and is intended to provide the basis upon which the Council may reach
decisions that will, in essence, confirm the relaxations already agreed through
the side letter and the concessions granted in the Summer of 1988 for the extra
20,000 sq ft. Carrolls understand that this is our intention, and the matter
will probably be dealt with by Strategy and Resources Committee close to
Christmas. There need not be much discussion on this item at the meeting other
than for both sides to acknowledge their mutual intention to set the record
absolutely straight on Tenant Mix.
Mr Riddle did not accept that the
reference to ‘concessions granted in the Summer of 1988’ was contrary to his
evidence that no concession had been formally granted for the 20,000 sq ft. He
again said that a relaxation for the 20,000 sq ft was never authorised or
agreed by those with authority to do so. He did not agree that the expressions
‘there need not be very much discussion’ and ‘mutual intention to set the
record absolutely straight’ showed that what was to be decided was all agreed
in advance and that this was not a bona fide application by Carroll. He said
that the council were considering a genuine application against the background
that it was the council’s intention not to go beyond 105,000 sq ft.
On November 10 1989, Mr Moore wrote to
Slough (25/6980) saying that:
Whilst it was true to tell you in my
letter of l9th October that the developers had not made any approach regarding
approval of tenants I can now inform you that the Carroll Group have asked for
discussions on the need for the continuing application of the Tenant Mix
Agreement … I do not propose to respond to your list of organisation and
comment as to whether they would comply with the Tenant Mix Agreement as I am
unaware of the activities of quite a number of them.
Mr Riddle came close to agreeing that
this whole correspondence was written on a false basis. Mr Carey took this
letter to be confirmation that the TMA was still in existence and being
enforced although open pressure for a removal was now being applied by the
Carroll Group.
On November 14 1989, Carroll sent with
two covering letters to Mr Riddle a further version of the agreed letter
(25/7009). The terms of the letter were not altered. There was a suggestion
that this second version had something to do with Carroll’s negotiations with
their financiers. One covering letter was innocuous (25/6990B). The other
(25/6990A), which was not disclosed until very soon before the hearing, said
that the letter was forwarded
… without prejudice to the release of
85,000 sq ft of retail space from the tenant mix agreement as set out in the
Council’s letter of 31st July 1987 and the informal agreement between us to
release a further 30,000 sq ft of retail space as discussed and agreed in
correspondence earlier this year.
Mr Riddle wrote to Mr Moore on November
17 1989 (25/7013) referring to discussions to the effect that Carroll’s letter
should go through the planning committee to the strategy and resources
committee which would consider representations. Mr Riddle agreed that the
council would have found it very difficult to be influenced against the request
by representations. The council had effectively tied their hands in relation to
85,000 sq ft. Those invited to make representations were not told of this.
Carroll’s letter and the reference to
committees was reported to the Howard Centre working party on November 30 1989
(25/7051) in terms which gave the appearance that Carroll’s request was at
arms’ length.
On December 4 1989, Mr Hampson of John
Lewis wrote to Mr Moore (25/7065) asking for reassurance that there had been no
shift in the council’s stance about the TMA. Mr Moore replied on December 12
1989 (25/7103) saying that the council had recently received a letter from
Carroll asking for relaxation and inviting comments by John Lewis. It is
suggested that this was on the false basis that the TMA still subsisted and
that the application was independent of the council. Mr Riddle said that the
letter was factually correct. Slough were also informed of Carroll’s
application and their comments were invited (25/7104). The letter is written on
the basis that the 1984 TMA is in place and does not disclose the 1987
relaxation. Mr Riddle said that representations from Slough might have had some
effect in relation to the excess over 105,000 sq ft.
On December 8 1989, there was a meeting,
chaired in the absence of Mr Riddle by Mr Moore, of the Hatfield town centre
working group — a group set up by WHDC advising the council on measures to
improve Hatfield town centre — at which it was agreed that Mr Moore would
prepare a draft letter setting out details of the views of the
previously agreed leisure theme concept of Park Plaza could have a detrimental
effect on retailers in Hatfield town centre. Mr Moore’s draft letter is at
25/7135A/B. The eventual letter is dated January 12 1990 (25/7253). It
expressed the ‘unanimous feeling’ of the working party that any relaxation of
the present TMA would be detrimental. Mr Riddle agreed that this was ‘bizarre
phraseology’ under Mr Moore’s signature. The letter is perhaps the most
extraordinary single feature of this whole sorry affair. For Mr Moore was
writing on behalf of the working group in opposition to an application by
Carroll, made in a letter which he himself had drafted, whose outcome was
predetermined as to 105,000 sq ft at least by decisions which had already been
made and in which Mr Moore had himself participated centrally.
The Carroll letter of November 14 1989 was
reported to the planning and transportation committee on December 7 1989
(25/7094).
On December 18 1989, Mr Moore wrote to
Slough’s solicitors (25/7120) saying that he had no knowledge of what attitude
the members would take to the suggestion of relaxing the TMA. Mr Riddle agreed
that this was ‘not accurate’.
On December 29 1989, the Welwyn and
Hatfield Times had an article about Park Plaza beginning with a statement
that ‘under a current agreement with Welwyn Hatfield Council the £150 million
leisure and stores complex is not supposed to compete with other shopping
centres’. The article reports angry complaints from town centre traders at
Carroll’s application for relaxation and refers to ‘names announced as moving
into the complex include fashion favourites Principles, Burtons, Laura Ashley
and Dorothy Perkins’. Mr Moore is reported as saying that these shops were not
of a specialist nature and he is quoted as saying that ‘they have been signed
up without our knowledge or blessing’. It is to be supposed that this article
came to Mr Moore’s attention and there is no evidence that he repudiated this
statement which was in substance untrue to Mr Moore’s knowledge. Mr Riddle
agreed that the statement was ‘not accurate’.
On January 12 1990, Slough’s solicitors
threatened judicial review proceedings if the TMA was relaxed (25/7205).
On January 12 1990, the borough of
Watford made representations about the proposed relaxation (25/7230).
Hertfordshire County Council wrote on January 15 1990 referring to the intended
effect of the TMA and making representations (25/7248 — see also 26/7354).
Welwyn Garden City chamber of commerce wrote on January 18 1990 urging WHDC not
to relax the TMA (25/7263). Mr Carey wrote to the members of the WHDC strategy
and resources committee on January 18 1990 (25/7274). Mr Riddle accepted that
this was on the assumption that the council would give proper consideration to
whether there should be any relaxation. Hatfield town council wrote on January
30 1990 (25/7337). Stevenage Borough Council wrote on January 31 1990
expressing concern (25/7350). Stevenage chamber of commerce and industry wrote
on February 2 1990 (26/7355). There were other representations opposing
relaxation. It is abundantly clear that it was the common perception of all
those concerned, including Slough, that the TMA was still in place.
There was a meeting on January 23 1990 of
which Mrs Jackson wrote a note (25/7296A). (An architect’s note (7296D) shows
that the meeting was a Park Plaza planning meeting attended by Mr Moore.) Mrs
Jackson’s note records ‘Will go ahead as suggested — Don’t speak to anyone’ by
reference to the TMA and its impending committee consideration.
Mr Carey met Mr Riddle and Mr Moore on
January 30 1990. Mr Riddle said that he was not intending to give any
impression but he accepted that he probably gave the impression that the TMA
was still in place. Mr Carey had no means of knowing that the 85,000 sq ft
relaxation had already been made. Mr Carey wrote in January 31 1990 (25/7344)
showing that he believed that the TMA was still in place although Carroll
intended to contravene it. He enclosed a Carroll marketing brochure asking that
it be put before the committee. Mr Riddle replied on February 5 1990 (26/7361)
in terms implying that the TMA was still in place and that the committee would
consider Carroll’s request on the basis that it was a bona fide request and
that it would receive fresh consideration. Mr Riddle accepted that he made no
reference to the 85,000 sq ft relaxation and that Mr Carey could form the
impression from the letter that the TMA was unrelaxed. He for practical
purposes agreed that he intended Mr Carey to get this impression. Mr Carey’s
evidence was that he did get this impression. Mr Riddle said that the 1984
document was still in place for a balance of 105,000 sq ft.
There was a strategy and resource
committee meeting on February 6 1990 (26/7386), which received a long joint
report from Mr Riddle and Mr Moore (26/7365). This refers (26/7372) to an
acknowledgement in 1987 by the A1(M) members working party — the full council
are not here mentioned — that Carroll should be permitted to let shop units up
to a maximum of 85,000 sq ft otherwise than as stipulated in the TMA. It also
refers to discussions in 1988 about additional floorspace — clearly the 20,000
sq ft — being free from any letting restriction, but this matter was not
‘conclusively disposed of at that time’. The committee meeting minutes
(26/7387) record that the committee was given written representations and a
petition. It was recorded that the main issue before the committee was whether
acceding to the Carroll Group’s request would secure or hinder the council’s
objective of a leisure speciality shopping centre.
After full discussion, the Committee
restated their commitment to securing a leisure speciality shopping centre and
concluded that rescinding the Tenant Mix Agreement would hinder that objective.
Accordingly, the request of the Carroll group to rescind the Tenant Mix
agreement should be refused. In the case of the 85,000 sq ft which was
originally to have been occupied by a Habitat-type household goods store, the
Committee accepted a case for relaxing the Tenant Mix Agreement because of the
change in circumstances which had taken place since September, 1984 but considered
that a proper scrutiny of all lettings should be undertaken by the Resources
Management Sub-Committee.
It was accordingly resolved to refuse to
rescind the TMA, but that the subcommittee might permit uses which would
otherwise be outside the four specified categories of the agreement ‘but that
the total so permitted should not exceed 85,000 sq ft without reference back to
the Strategy and Resources Committee’. This resolution was in substance what
Mrs Jackson recorded as being intended at the Park Plaza working party meeting
in about September 1990 (25/6883A — see above) except that the resolved
relaxation did not extend to the 20,000 sq ft. Mr Riddle did not accept that
this was a contrived decision although he agreed that it might appear so. He agreed
that there was no mention of the secret side letter. It is, in my view, quite
obvious from the way in which this came about and I accept that this was indeed
a contrived result which had been planned back in September 1989.
On February 7 1990, WHDC issued a press
release (26/7392A) headed ‘Council Refuse Carroll Group Request’ which quoted
Mr Riddle in terms which could be seen as suggesting that the TMA had until
February 6 1990 remained in place. A note to editors describes the TMA without
any reference to the July 1987 side letter. (Other bodies were informed of the
terms of the committee resolution without reference to the side letter.)
Mr Carey wrote on February 13 1990
(26/7445) in strong terms saying that it was inexplicable that a local
authority should respond positively to cynical abuse of the agreed TMA by
acceding to an eventual request for rescission or amendment. Mr Riddle wrote to
Mr Carey on February 22 1990 (26/7474) saying that the decision was a carefully
judged one in a very difficult context and taking all representations and
considerations into account. He maintained in evidence that this was so in
relation to the excess over 85,000 sq ft.
The committee decision was referred to
the full council for confirmation which the council gave on February 19 1990
(26/7469) upon resolution moved by two of the six councillors.
The council’s decision provoked something
of an uproar. On February 27 1990, Mr Carey wrote a letter to the deputy chief
executive of the Crown Estate (26/7483), who had written suggesting an
application for judicial review, in which he said that:
… it is really no surprise to us that
Welwyn Hatfield have weakened their stance on the user mix agreement for the
Gallerias but we feel that it is worthwhile making a ‘song and dance’ about it
and we have certainly achieved extensive coverage in the local and national
media.
WHDC say that this shows that Slough
never expected that the TMA would be enforced. Mr Carey said that WHDC’s
decision came as no surprise because Slough had had meetings with Mr Riddle in
January 1990 at which he gained the impression that WHDC had already decided
what they would do.
By March 1990, it was proposed that the
£300,000 net which was to be paid by Carroll for the additional 20,000 sq ft
should be paid by instalments over five years (26/7614A).
A note by Mrs Jackson of a WHDC Park
Plaza internal meeting on April 17 1990 (26/7654) refers to ‘relaxation of
tenant mix agreement — only what previously agreed’. It is suggested that this
must refer to the 20,000 sq ft as the 85,000 sq ft was already agreed in the
side letter. Mr Anderson’s manuscript note of the same meeting has (26/7653B)
the entry ‘T Mix agreet. Ratified nothg. needed. ‘30,000’ (10th. 20th)’. This
might be read as meaning that the 30,000 sq ft decision had already been
ratified. Mr Riddle said that it could not mean this as the February meetings
had specifically not given that relaxation: see also 26/7654A.
On April 19 1990, Mr Moore wrote a
memorandum (26/7660) in which he said of the additional 20,000 sq ft:
Planning consent has been granted for
these changes and the Development Agreement is currently being amended. The
financial arrangements have been agreed …
In the following paragraph he refers to
this as ‘the deal struck’.
An undated draft agreement in the bundle
around September 1990 (26/8124E) supplemental to the 1987 Carroll development
agreement provided for payment of the £300,000 plus interest by instalments.
A note dated July 31 1990 (26/7975A),
records that Carroll were thought to be in financial difficulties and that Mr
Riddle required that the premium instalment agreement and a £3,305,000 deferred
payment office agreement should not be completed until he issued further
instructions. Mr Riddle said that this was because the council had not yet
authorised the premium instalment agreement. He could not recall what stage the
deferred payment office agreement had reached with the council. By this time
the main structure of Park Plaza was well advanced. The building of the extra
lightweight shops went ahead with the main structure and were complete when the
development opened.
On September 18 1990, it was agreed at a
meeting between council officers and Carroll that it would be appropriate to
review the terms of the arrangement to release the 20,000 sq ft from the TMA
after the judicial review after which the documentation would be completed and
signed: 26/8138B — see also 26/8124B, 8137. Mr Riddle said that this was
because the issue was before the court and therefore up in the air.
By 1995, Howard Centre was 95% let after
much marketing effort and money. Vacancies were in part attributed to market
conditions and in part because there was a dearth of fashion tenants in
circumstances where the Gallerias were 90% let. By comparison, A1 Gallerias
failed and was sold in receivership in 1993. But Mr Carey said that the
Gallerias was 98% occupied in about 1990 when Howard Centre was not fully let.
Judicial review proceedings
On April 27 1990, Slough and John Lewis
applied for judicial review of the decisions of February 6 1990 and February 19
1990. The existence of the 1987 side letter was first revealed when Mr Riddle’s
evidence was exchanged in the judicial review proceedings on July 11 1990
(8/54). Upon its production, the judicial review proceedings were amended to
include the 1987 decision as one of the matters which the applicants sought to
set aside. The hearing of the judicial review proceedings was in February 1991.
Kennedy J (as he then was) gave judgment on March 27 1991 (1/163, 167). He
ordered that the WHDC decisions of July 13 1987, February 6 1990 and February
20 1990 be quashed and that Slough’s claim for damages against WHDC proceed as
if begun by writ. Hence these proceedings. The evidence before Kennedy J was on
affidavit and necessarily less extensive than that which I have heard given
orally. Mr Riddle was the only deponent on behalf of the council. His affidavit
said (8/42) that the council had approved 42 units totalling 69,572 sq ft
outside the TMA.
Kennedy J in summary held that the
concealed side letter of July 1987 fell foul of a legitimate expectation that
those concerned would be consulted before such a decision was made; that there
was in 1987 an abuse of power, although ‘I prefer not to describe it as bad
faith because that suggests a lack of integrity on the part of Councillors and
their officials. There is no evidence of that’; that in 1990 ‘the process of
consultation was flawed because, quite deliberately, those being consulted were
not told what had happened in 1987’; and that the 1990 decisions should not
have taken account of the flawed 1987 decision, but did so. Kennedy J quashed
all three decisions and adjourned all questions of damages to be dealt with as
if the proceedings had begun by writ.
Kennedy J in his judgment considered a
submission on behalf of Carroll that Slough always intended to go on with the
Howard Centre and that at the planning inquiry, for tactical reasons, they
showed lack of candour. Of this, Kennedy J said (1/196):
So far as Slough Estates were concerned,
there was, they say, and I accept, no lack of candour at the inquiry but a real
concern as to the impact of the Gallerias scheme, and serious doubts as to
whether it could or would be developed as envisaged in the Tenant Mix
Agreement. The current recession has aggravated matters, but it has not caused
in either of the present applicants a sudden change of heart.
Mr Michael Lyndon Stanford QC submitted
(and Mr Anthony Porten QC did not demur on this point) that findings of fact by
Kennedy J are open for review before me, since his findings were made on
comparatively limited affidavit evidence exhibiting a comparatively limited
number of documents, whereas I have heard oral evidence and considered many
more documents. That of course applies both ways.
The 20,000 sq ft issue was not before the
court in the judicial review proceedings as a decision subject to review
although there some reference to the historical subject-matter in Kennedy J’s
judgment. Mr Riddle said that this was because the council had never taken the
decision on that matter. He said that Carroll never paid for the 20,000 sq ft
extra space. In May 1992, WHDC, in consultation with Slough and John Lewis and
as a compromise, permitted Carroll to retain the tenants who breached the TMA
up to 85,000 sq ft and to let the 20,000 sq ft to tenants who did not comply
with the TMA if they could show that they were unable to let this space to
complying tenants (27/8997). By that time, Carroll were in serious financial
difficulties and derived no advantage from any relaxation of the TMA for the
20,000 sq ft. Mr Riddle did not accept that it was too embarrassing to pursue
payment for the 20,000 sq ft. There was not the slightest secrecy about this.
The letter has a list of 50 or so non-conforming tenants amounting to 83,400 sq
ft of mostly let space.
Documents
Slough make much of the fact that
numerous relevant documents were not produced by WHDC in the judicial review
proceedings and that many such documents were only produced at a late stage in
these proceedings. Those not originally produced importantly include the
critical April 1987 letters (19/3863, 3866, 3872), Mr Heys July 1987 aide-memoire
(20/4025) — the single most telling document in the whole case — and some of
the meeting minutes surrounding the meeting on July 13 1987 and numerous
documents relating to proposed relaxation for the 20,000 sq ft. Slough also
maintain that in certain respects full disclosure has still not been made.
Mr Riddle had no personal knowledge why
documents were not produced earlier. He said that he was convinced that there
was no wilful concealment of documents. For his part there had been no
obstruction and his instructions to staff and his expectation was that all
documents were to be disclosed. Slough’s solicitors spent a long time in the
council’s offices delving into discovery. Mr Riddle accepted that the council
had an obligation in the judicial review proceedings to place on record all facts
and matters relevant to the dispute: see 26/8155. He said that he pressed Mr
Heys for relevant documents and he was later for the first time given Mr Heys’ aide-memoire.
The number of documents not originally
produced and the nature of their content make a strong cumulative forensic case
that WHDC historically deliberately withheld embarrassing documents in the hope
that they might remain undisclosed. There is a possibility that this remains
the case to a limited extent. On the other hand, I suspect that many of the
documents disclosed late — but probably not the most damaging — were originally
withheld by oversight or because requests for documents to numerous individuals
within WHDC were responded to by people who did not fully understand what was required
of them. I accept Mr Riddle’s evidence that he was not personally concerned
with any attempted suppression. It is not, I think, necessary to say more on
this topic nor to make any more precise findings, since Slough’s factual case
in relation to WHDC’s own activities is scarcely defended and does not need
help from inferences drawn from any failure to disclose documents.
Slough’s case in deceit
Slough plead various causes of action,
but the hearing proceeded on the basis of their claim in deceit only. The other
causes of action were not investigated and each party has reserved their
position in relation to them. This judgment therefore deals only with the case
in deceit.
To succeed in a claim for deceit, a
plaintiff must prove that the defendant made a false material representation of
fact; that the defendant knew that the representation was false or did not
believe in its truth or was reckless as to its truth or falsity; that the
representation was made with the intention that it should be acted on by the
plaintiff, or persons including the plaintiff, in the manner which resulted in
damage to him; and that the misrepresentation induced the plaintiff to act to
his detriment: see eg Derry v Peek (1889) 14 App Cas 337; Downs
v Chappell [1996] 3 All ER 344. In Downs v Chappell
Hobhouse LJ said at p351C:
A representation is material when its
tendency, or its natural and probable result, it to induce the representee to
act on the faith of it in the kind of way in which he is proved to have in fact
acted. The test is objective.
The plaintiff has to prove that the
misrepresentation was a real and substantial inducement but does not have to
prove that it was the sole inducement: see JEB Fasteners Ltd v Marks
Bloom & Co [1983] 1 All ER 583 at p589. Inducement is not the same as
mere encouragement. The standard of proof which the plaintiff has to achieve in
an action for deceit is the civil standard, ie on the balance of probabilities,
but the degree of probability must in all cases be commensurate with the occasion
and proportionate to the subject-matter. ‘The more serious the allegation the
higher the degree of probability that is required’: Denning LJ in Hornal
v Neuberger Products Ltd [1957] 1 QB 247 at p258.
(a) Representations
Slough contend that WHDC in essence
represented to Slough that the TMA had been agreed with Carroll and was in
place and that it was WHDC’s intention to enforce it. (I shall refer to a
representation to this effect as ‘a TMA representation’.) Mr Porten accepted
that these are capable of being representations of present fact, although he
made submissions that what was important to Slough was in the nature of a
promise for the future.
WHDC’s case was that at the planning
inquiry WHDC stated that their intentions were: (a) that the grant of the lease
to Carroll would be subject to the TMA, the contents of which had been agreed
in draft; and (b) that it would be able by that means to control the retail
content of the Park Plaza development for five years. It is suggested that
representations in March and April of 1986 were representations of future
conduct and to similar effect as those made at the planning inquiry. Similarly
subsequent representations up to September 1988 were as to WHDC’s future
intention. In this period, however, WHDC did not reassert what had been said at
the planning inquiry, but rather drew attention to the way in which things had
changed in the field of retailing and to the difficulties of maintaining the
TMA. WHDC accept that on August 2 1988 it was represented that the additional
20,000 sq ft would be subject to the same restrictions as the rest of the
development. (I have rejected the factual case that Mr Garnham later corrected
that misrepresentation.) After September 1988, no representation can have been
a material inducement since Slough then reached and passed their point of no
return. I agree with Mr Porten that the material period for this case is
between the date when the representations became false to the knowledge of WHDC
and September 1988 when Slough reached their point of no return with the Howard
Centre. I also agree with him that what WHDC did after that date may be
relevant to a consideration of WHDC’s state of mind then and earlier and to
their intention. It may also be relevant to a consideration of when Slough
discovered the truth and what they then did.
WHDC submit that the nature of the
representations should be seen in the context in which and the purpose for
which they were originally made. They were made for a planning purpose to
satisfy the Secretary of State that any potential planning harm from Park Plaza
could be controlled by WHDC through the TMA. It was not a planning concern to
protect other retailers or developers from competition. There was never any
representation that the TMA would be strictly enforced. Things might change
(and in fact did change) and WHDC did not represent that they would never
reconsider at a later date what they had said in 1985 in the light of changed
circumstances.
The essence of this case is that WHDC
never made material representations of present fact. I have no hesitation in
rejecting this. WHDC represented the TMA at the planning inquiry as an agreed
document between themselves and Carroll. That was a representation of fact that
it was indeed an agreed document and this was in fact then so, as I find. They
further represented that they intended to enforce the TMA. That too was a
representation of fact as to their then intention. What was said in April 1986
included representations to essentially the same effect. Thereafter WHDC at no
time before 1990 informed Slough that these facts were no longer true. On the
contrary, they made further statements which in their context and in the light
of what had previously been said and written expressly or implicitly
represented that the facts continued to be true.
I have no difficulty therefore in
concluding (and I do) that WHDC made or continued TMA representations to Slough
or persons including Slough expressly or by implication on at least the
following occasions:
· August 6 1984 (13/1011).
· August 24 1984 (13/1090).
· At the planning inquiry in
1985 (especially 14/1687)
· April 11 1986 (17/2936).
· October 19 1986 (18/3426).
· December 2 1986 (18/3508).
· March 7 1987 (Mr Clarke’s
evidence)
· March 31 1987 (Mr Ball’s and
Mr Clarke’s evidence)
(Representations to British Rail are in
the context representation to Slough.)
· April 22 1987 (19/3866).
· May 28 1987 (19/3918).
· By not seeking public
representations in advance of July 13 and 14 1987 (20/4025) and by not publishing
the decision then made (20/4022B) nor the secret side letter of July 31 1987
(20/4094).
· Thereafter by keeping the
secret side letter secret until the judicial review proceedings.
· August 17 1987 (20/4260) — Mr
Moore about Laskys.
· (October 5 1987 (20/4329) —
Mr Moore to Welwyn Garden City Chamber of Commerce.)
· August 2 1988 (23/5431) — Mr
Garnham.
· April 13 1989 (24/6263) —
newspaper report not repudiated by WHDC.
· October 4 1989 (25/6889).
· October 19 1989 (25/6921).
· November 10 1989 (25/6980).
· December 18 1989 (25/7120).
· January 30 1990 (Mr Carey’s
and Mr Riddle’s evidence).
· February 5 1990 (26/7361).
The content of these representations
appears in the narrative which I have given. The first few of them were before
it was said that agreement of the TMA had been reached with Carroll but the
representation of intention was nevertheless made.
(b) Misrepresentation
WHDC accept that on July 13 and 14 1987
they departed from their earlier expressed intentions as to the TMA and it
follows from my findings that the representations became false (necessarily to
WHDC’s knowledge) from July 14 1987 when they secretly resolved to relax the
TMA. WHDC do not accept forensically that it was their intention to induce
Slough to continue with the Howard Centre knowing that it was probable that
they would not if they knew of the relaxation. But, in my view, this quite
obviously was their intention. I have already said that Mr Heys’ aide-memoire
of July 13 1987 (20/4025) speaks for itself and Mr Porten really had nothing to
say on the subject of WHDC’s intention when I asked him what I was to make of
the aide-memoire. The same might be said of other documents including Mr
Riddle’s second letter of June 27 1988 (23/5297D) and of WHDC’s whole contrived
scheme leading up to the decision of February 1990. WHDC’s whole purpose in
effecting and publishing the TMA had explicitly been to reassure others and
specifically Slough about the proposed nature of Park Plaza.
My summary findings on this aspect of the
case need to be spelt out. They are these. In July 1987 the full WHDC council
resolved upon specific advice from their most senior officers to agree to
Carroll’s request to relax the TMA as to 85,000 sq ft (which in the context was
an enormous area), but to keep this relaxation secret and to pretend to all
other interested parties, including particularly Slough, that the TMA was still
in place and that it was their intention to enforce it. It was obvious that if
the relaxation became public there would be an uproar. WHDC’s specific
intention so far as Slough were concerned was to induce them to continue with
the Howard Centre in the knowledge that, if they learnt of the relaxation, they
probably would not continue. WHDC wanted both Park Plaza and the Howard Centre
to be built. They had a strong financial interest in Park Plaza.
From July 1987 onwards WHDC were nursing
a lie and had set themselves a time bomb. Those involved included at least the
councillors and officers who were at the members A1(M) working party meeting on
July 13 1987 before whom Mr Heys’ aide-memoire was tabled, and also
those who attended the principal chief officers’ management team meeting held
on July 13 1987 — there were 10 of them excluding Mr Simmons who only attended
for an item about car parking — who were ‘informed of the latest discussions
which had been held with the Carroll Group and of the recommendations which
would be made at the meeting of the A1(M) members’ working party to be held
that evening’ (20/4022A). It is logical also to conclude that all those
councillors and officers who attended the council meeting on July 14 1987 also
knew what was going on, although in human terms it may be that some of those
who attended that meeting (along with Mr Riddle, whose evidence on this point I
accept) did not appreciate what it was that they were deciding to do. The
officers mainly involved appear to have been Mr Asquith, Mr Moore and Mr Heys.
It looks as if the six councillors were a nucleus who steered the rest. None of
those to whom I have alluded (except Mr Riddle) gave evidence although Mr
Lyndon Stanford made it abundantly clear that Slough were pointing the finger
at each of them.
Thereafter there was a policy to tell
lies about the TMA if it was necessary to do so. The lies were watered down
wherever possible, but they were conscious lies. The principal agent who
peddled the lies was Mr Moore because of his position, but I think that it
would be unfair to pile the whole responsibility on to him when he was acting
out the consequences of a decision taken by the full council on the
recommendation of three of their senior officers (of whom he was one) and
without demur from most of the rest of the senior officers.
Mr Riddle agreed that all the members of
A1(M) working party who were present at the meetings in 1987 knew about the
85,000 sq ft relaxation. He imagined that all members of the working party knew
of the side letter, but he did not know. Senior officers also knew. They also
knew of the 20,000 sq ft arrangement. He accepted that, in so far as the true
position was not made known to individuals, there was a risk of misinformation.
It was up to Mr Moore to brief people who might have to talk with Slough. Mr
Riddle did not know of steps which Mr Moore took to see that people under him
were properly informed.
Mr Riddle inherited the time bomb and did
not know what to do about it. He became aware of the secret side letter in
December 1987 and knew the full story by June 1988 at the latest when WHDC were
considering Carroll’s request for a further relaxation for the 20,000 sq ft.
That request was agreed to in substance (and Carroll proceeded to act
accordingly) although there was no final formalised agreement. The agreement in
substance was not published. Mr Riddle perceived the need to bring the whole
matter into the open, but did not take effective steps to try to do so until
the late summer of 1989. In about September 1989 a plan was hatched and put
into operation for Carroll to make a contrived application, as if for the first
time, for complete relaxation of the TMA which WHDC would in form refuse. But
they would appear to be persuaded to relax the TMA for the first time for
85,000 sq ft and also, as the plan was initially conceived, for the 20,000 sq
ft. This is what they did with the exception of the 20,000 sq ft, but the time
bomb went off during discovery in the judicial review proceedings.
Mr Riddle, although he may not have been
consciously dishonest personally, knew what he was doing and the effect of what
he was doing was to perpetuate the deception which he inherited. His objective
was to resolve this situation. He had many other things to deal with. Nothing
was done which achieved this between June 1988 when he became fully aware and
the summer of 1989 when the steps leading to the February 1990 decisions were
initiated. He said that the council’s position became untenable in the spring
of 1989 when Carroll were flaunting lettings which did not conform with the
TMA. I think that Mr Riddle was less than frank historically in correspondence
(eg with Mr Carey in January 1990 (26/7361) and also in his judicial review
affidavit). But he had the courage to give oral evidence in these proceedings
and to submit himself to cross-examination in what for him must have been most
uncomfortable circumstances. I judged his oral evidence to have been generally
as open and straightforward as loyalty to his council allowed.
There was thus a continuing
representation going back to 1984 to 1985 which was explicitly restated at
intervals through to 1990. The representation became false to WHDC’s knowledge
on July 14 1987 at the latest. WHDC’s case is that it did not become false
earlier than that. They say further that the occasions between July 1987 and
September 1988 when WHDC did anything which amounted to a material
representation were limited to what Mr Moore said about Laskys in August 1987
(20/4260) and what Mr Garnham said about the 20,000 sq ft on August 2 1988
(23/5431). Mr Porten points out that the same period occupies some 10 pages in
the chronology prepared by Slough for this case. In my view, Slough’s case
could stand on the basis of these two representations alone. (Mr Garnham did
not personally know that what he was saying was untrue. But on his evidence he
had been kept in ignorance — this must have been intentional — of the true
state of affairs such that this is to be taken as a representation by an agent
which WHDC, knowing that there was a risk of misinformation, permitted him to
make: see Bowstead and Reynolds on Agency 16th ed (1996) 8-183 (b). It
is accordingly to be taken as a misrepresentation by WHDC which they knew to be
untrue.) However, Mr Porten accepts, I think, that there may be circumstances
in which silence and failure to correct a previous
be something in the nature of a duty to speak out. WHDC’s case is that there
was no such duty here, although Mr Porten realistically accepted that it was
not an attractive case. It is suggested first that in the context of their
origins in the public inquiry the representations were not continuing
representations. I disagree. They were clearly in substance restated in April
1986 and thereafter. It is suggested that Slough had made clear at the public
inquiry that they regarded the TMA as worthless and that therefore there were
no continuing representations which WHDC were obliged to correct. I reject the
factual basis of this submission later in this judgment. In the present context
it is sufficient to say again that WHDC restated the representations in April
1986 and thereafter and to point out how difficult it is for WHDC to say with
any credibility that the representations were not continuing and material in
the light of Mr Heys’ aide-memoire and the steps they themselves took to
conceal their relaxation of the TMA. It is suggested that WHDC had already
indicated to Slough that strict adherence to the TMA was going to be difficult.
But, in my view, such difficulties as were alluded to never came near to saying
that there would be large scale consensual relaxation of the TMA. Finally, it
is suggested that Slough had already decided to proceed with the Howard Centre
and did not indicate to WHDC that their development was dependent on the truth
of earlier representations. I reject the factual basis of this submission later
in this judgment. As to WHDC’s own view of the matter, Mr Heys’ aide-memoire
speaks for itself.
In my judgment, there could scarcely be a
clearer case of a duty to tell Slough what was in the event secretly decided in
July 1987. Kennedy J found that there was a duty in public law to consult which
would of course have meant that any decision had also to be published. In my
judgment, there was a plain duty in private law as well. That duty becomes even
clearer in the light of the lie told by Mr Moore in his letter of April 22 1987
(19/3866): see below. I accordingly find that there was a continuing
misrepresentation by silence in addition to other misrepresentations. It was
deliberate. WHDC knew that it was false. It is suggested that there was no
intention to induce Slough to continue with the Howard Centre. Mr Heys’ aide-memoire
in the circumstances clearly shows that there was. It was clearly also Mr
Moore’s intention in saying what he did in his April 22 1987 letter.
(c) Date when representations
became false to WHDC’s knowledge
Slough’s case is that the representation
was already false to WHDC’s knowledge by April 11 1986 and that what was said
at the meeting on that date to the effect that WHDC proposed to enforce the TMA
rigidly (17/2936, 2940), by which they say that they were induced to continue
with the Howard Centre, completed their cause of action in deceit. They say
that the other ingredients of their cause of action in deceit existed then, ie
that what was then said on behalf of WHDC was untrue to the knowledge of Mr
Asquith among others. Slough invite me to find that WHDC and Carroll never
agreed or intended to enforce the TMA and that the pretence which it is
accepted went back to July 1987 in truth went back to 1984.
The issue of the date at which WHDC first
knowingly made representations which were untrue gives rise to a damages issue.
The parties agree that Slough cannot recover costs for any period earlier than
the time when their cause of action was complete. These have been referred to
as ‘sunk costs’.
Slough’s case that WHDC and Carroll never
intended that the TMA should apply to Park Plaza depends on inferences which I
am invited to draw from what Mr Lyndon Stanford referred to as mainly straws in
the wind. The case is that, cumulatively and in the absence of explanatory
evidence from WHDC, these establish pretence back to 1984.
It is convenient first to examine April
1987. Carroll had made a revised planning application for Park Plaza in January
1987 and in March 1987 Mr Carroll was reported by WHDC as having been extremely
concerned that the council were applying the TMA to the letter of the law. Mr
Asquith met Mr Carroll on April 14 1987 and Mr Carroll wrote his strictly
private and confidential letter to Mr Asquith on April 16 1987 saying that the
removal of the TMA was absolutely fundamental to Carroll and that its abolition
underpinned Carroll’s arrangements with financiers. Bearing in mind that this
was a confidential letter which did not need to be dressed up, it suggests that
up to this point the TMA was in place. Mr Carroll looked forward to receiving a
draft letter ‘confirming that the Council agreed (sic) to the removal of
the tenant mix agreement’. The tense of ‘agreed’ is one of the straws in the
wind and said to imply an earlier agreement. In my view, this is by itself
tenuous in the extreme. It is more likely a typing mistake or a minor
grammatical solecism, but it does indicate, as Mr Asquith’s letter in reply of
April 22 1987 makes perfectly clear, that Mr Asquith had agreed to steer Mr
Carroll’s request for relaxation of the TMA through the council after the May
elections. There was an agreement to this effect between Mr Asquith and Mr
Carroll and it is, in my view, obvious (and I infer) that Mr Asquith was quite
confident that he would be able to arrange matters with his council in
accordance with his agreement with Mr Carroll. As between Carroll and WHDC’s
most senior officer, therefore, there was a secret agreement in April 1987 that
the TMA would be removed (or at least relaxed). Slough suggest that the phrases
‘our original understandings reached some three years ago’ in Carroll’s letter
and ‘the original bargain struck’ and ‘in the Spring of 1984’ in Mr Asquith’s
letter imply a secret bargain to get rid of or avoid the TMA dating back to
dates in 1984 when there was no TMA. In my view, these phrases more naturally
in their context refer to the 1984 bargain including the TMA such that,
although the TMA was to be relaxed, the eventual tenant mix would be presented
as achieving the spirit of the original purpose including the TMA. I do not
think that ‘some three years ago’ written in April 1987 has to be read
literally as going back to April 1984, but rather as going back to some
time in 1984.
Mr Lyndon Stanford’s other straws in the
wind are as follows:
(a) Mr Moore’s reference in his letter of
September 21 1984 (13/1136) to the TMA as a document which ‘may now be shown to
those parties who require assurance’. It is suggested that this implies that
this was its only purpose. I think the expression is quite neutral. Mr Moore
was asking for Carroll’s agreement to the document and it obviously could not
be made public until it was agreed.
(b) A reference in a letter dated October
4 1984 (13/1157) from surveyors acting for Carroll to the TMA being
‘satisfactory for your purposes for the time being’, implying perhaps that the
TMA was a temporary expedient.
(c) The agreement on April 24 1986 that a
formal retail tenant mix agreement based upon the document presented to the
planning inquiry was to be prepared (17/2966), (suggesting that something
different from the TMA was intended); and that every piece of correspondence
was to be channelled through Mr Murray of the Carroll Group and the chief
planning officer (Mr Moore) on the council’s side (17/2965) (suggesting that Mr
Murray and Mr Moore were already in clandestine cahoots).
(d) 1986 references in 17/3172, 18/3229
and 18/3243 to intended ‘side letters’. I have indicated in the narrative part
of this judgment that there was a side letter drafted in 1986 which in its
amended version became 20/4095 and which is innocuous in the context of the
present analysis. Slough point out that the references to side letters are in
the plural and that no second candidate has been produced. They also point out
that the innocuous side letter was intended to enable the development agreement
to contain a watered down version of the TMA without the names of those
excluded. They suggest that this was to enable Carroll to show the watered down
version to financiers and infer from this that relaxation of the TMA was
already in hand. In my view, the 1986 draft of the innocuous side letter by
itself tends to confirm that the TMA was in place as between WHDC and Carroll
whatever Carroll may have intended with financiers. References to side letters
where only one is identified is a rather better point.
(e) The agreement on September 8 1986 to
omit reference to named High Street stores from the Park Plaza development
agreement as being disadvantageous to Carroll in securing lettings (18/3242). I
do
that the TMA would be relaxed or not enforced.
(f) The fact that WHDC and Carroll met
Marks & Spencer (who were specifically excluded by the TMA) on October 9
1986 and agreed that lines of communication should remain open (18/3418). The
succeeding words in the note are ‘WHDC would need to let Marks & Spencer
know the type of goods that we would not wish to see trading except as
ancillary to other main lines’. This and other passages in the note can be read
as implying that what was being looked at was a limited Marks & Spencer
store which did comply with the TMA.
(g) The fact that at the Park Plaza
steering group meeting on January 8 1987 Mr Moore is recorded as saying that
‘he would not need to know individual named occupiers for the retail units but
would need to know precise location of specific uses eg Cinema’ (19/3572). It
is suggested that under the TMA WHDC would need to know the identity of
individual retailers and that this indicates that the TMA was understood not to
apply. I think that the reference is neutral.
(h) The fact that in the period before
April 1987 (as afterwards) WHDC wrote what may perhaps be seen as guarded
letters, implying in hindsight that there were clandestine arrangements already
in place. Specifically Slough refers to letters containing the theme that
retailing practices had changed since 1984.
(i) The ease with which the arrangement
agreeing to relax the TMA for the additional 20,000 sq ft suggests that this
was simply implementing what had been agreed earlier.
(j) The fact that, as Slough’s own
evidence in particular suggests, no one experienced in property development
could have thought that Park Plaza could ever have been funded or let if it
were shackled with the restrictions of the TMA.
Slough rely (to my mind without
persuasion) on a presumption of continuance. They also say that it is open to
the court to draw inferences adverse to WHDC from the failure to call any of
numerous witnesses who could have explained the straws in the wind. They rely
on R v Inland Revenue Commissioners, ex parte TC Coombs & Co
[1991] 2 AC 283 at p300, where Lord Lowry said:
In our legal system generally, the
silence of one party in face of the other party’s evidence may convert that
evidence into proof in relation to matters which are, or are likely to be,
within the knowledge of the silent party and about which that party could be
expected to give evidence. Thus, depending on the circumstances, a prima
facie case may become a strong or even overwhelming case. But, if the silent
party’s failure to give evidence (or to give the necessary evidence) can be
credibly explained, even if not entirely justified, the effect of his silence
in favour of the other party, may be either reduced or nullified.
See also O’Donnell v Reichard
[1975] VR 916 at p929 for what the Supreme Court of Victoria said about the
contribution of a party’s unexplained failure to call a witness whom he might
reasonably be expected to call to the drawing of inferences from evidence which
has been given.
In my view, the straws in the wind are
insufficient to raise any real case to the effect that the TMA was a sham
agreement from when it was first agreed between WHDC and Carroll in 1984. The
whole sense of the evidence is that relaxation arose from Carroll’s difficulties
when they got down to the details of Park Plaza in early 1987. I have indicated
my view that some of the straws do not bear the inference for which Slough
contend. Some remain to constitute the beginnings of a possible case, but they
do not add up to much and do not, in my view, attract the very large help which
failure to explain would need to give. There are very obvious reasons relating
to the case as a whole why WHDC have not called a large number of possible
witnesses. The present particular part of the case is important, but may be
seen in the context as peripheral. In these particular circumstances, where
Slough do not do more than raise a suspicion, the failure to give evidence may
be explained as referable to the case as a whole and not as illuminating this
somewhat peripheral part.
Slough do not therefore establish a TMA
representation which was to WHDC’s knowledge false from as early as April 1986.
They do, however, in my judgment, succeed in pushing the date back somewhat
earlier than July 1987. In April 1987, Mr Asquith secretly agreed with Mr
Carroll that he would see to it that the TMA was abolished or relaxed. He
recorded this in his letter of April 22 1987 (19/3872). I have held that Mr
Moore knew on April 22 1987 what Mr Asquith was doing and that his letter of
that date (19/3866) was knowingly untrue. It was specifically untrue that Mr
Moore had ‘no reason to believe that Park Plaza will not proceed in any other
way than previously agreed’. This letter was in answer to Mr Cleaver’s letter
of April 14 1987 (19/3862) in which he had asked for confirmation of WHDC’s
intention to adhere strictly to the TMA. Mr Moore’s letter was a TMA
representation and he knew that it was untrue. Mr Porten submits that whatever
Mr Asquith and Mr Moore were doing in April did not then have the authoritative
blessing of the council. That may be, so far as it goes. But Mr Moore was
WHDC’s chief planning officer with apparent (if not actual) authority to write
letters on the subject of Park Plaza and of the kind which he wrote on April 22
1987. The letter was written on behalf of WHDC and it was knowingly untrue. Mr
Moore’s intention can scarcely be in doubt in the light of Mr Cleaver’s letter,
what Slough had been told in 1986, the events at the planning inquiry and the
fact that Slough had stopped work on the Howard Centre in 1984 when they first
heard on Carroll’s scheme for Park Plaza. It was the same as the full council’s
intention in July 1987, ie to induce them to continue with the Howard Centre in
the knowledge that, if they learnt of the relaxation, they probably would not
continue. The events of July 1987 were after all what the agreement of April
1987 was aiming at.
In my judgment, therefore, the date when
WHDC’s representations became misrepresentations which WHDC knew to be untrue
and by which they intended to induce Slough to continue is April 22 1987. In
any event, costs incurred before that date are sunk costs.
(d) Inducement
Slough’s case is that they called a halt
to the Howard Centre project in 1984 immediately they learnt that Park Plaza
appeared to represent serious close competition. They reactivated the scheme in
1986, being induced to do so by WHDC’s representations. They were induced to
continue the scheme by continuing representations and were induced to commit
themselves to it irrevocably in September 1988 when they signed the development
and building agreements. They could have called a halt at any time up till then
and would have done so had they known the truth.
Mr Carey’s evidence was that at no time
did the plaintiffs ever envisage that the tenant mix agreement would be removed
or materially relaxed. If the plaintiffs had so envisaged then the Howard
Centre would not have been built. Sequential decisions to go ahead proceeded
upon the assumption that the spirit of the TMA remained in place. The
importance of retail shop lettings could not be overstated. If there had been
any suggestion that the TMA would be changed to the extent that it was, it
would have thrown the viability of the scheme completely off the rails. There
was continuous contact with WHDC all along. The framework had been set in 1986
and the TMA was part of it.
Mr Carey said that Slough never
contemplated that there would be a wholesale abandonment of the TMA. After the
planning inquiry, there were continuing assurances from WHDC. It was Slough’s
view that a speciality centre would not be viable and Mr Carey was not then
surprised to hear that Carroll were trying to lease units to high street
multiples who would not be within the TMA (25/7174). But he did not expect WHDC
to accede to this. He regarded a letter dated January 11 1990 from Marks &
Spencer (25/7199) which indicated that they had some knowledge that ‘the nature
of retailing in Gallerias would change’ as extraordinary.
Mr Carey acknowledged the case that had
been made by and on behalf of Slough at the planning inquiry to the effect that
the TMA was not to be relied on. But he said that WHDC made very strenuous
efforts later to persuade Slough that the TMA could be relied on and they were
given clear assurances that it could be relied on. One benefit
TMA. Slough came to regard WHDC’s promises as reliable and that the TMA was a
reliable document. This was some time in 1986. The review began before the
Secretary of State’s decision during the long time before the decision arrived.
They knew that there would be grey areas of interpretation. The initial revival
of the Howard scheme was not prompted by anything then said by the council. The
Secretary of State’s decision took a long time and there was plenty of time to
reflect. Slough believed that planning permission for Park Plaza would be
refused. When the consent was given, they thought that they should proceed with
the Howard Centre in the light of the terms of the Secretary of State’s
decision. Mr Carey did not consider that it was the worst possible result for
Slough which would have been a permission with no suggestion that there should
be tenant restrictions.
It was suggested to Mr Carey that he and
Slough had doubts about the efficacy of TMA which had been expressed at the
time of the planning inquiry and that these remained throughout. Mr Carey
denied this. He said that there was substantial evidence that they were relying
on TMA. The first things they did after the planning decision was to meet WHDC
with a view to co-operation. The TMA was critical. They were unable to move
forward until after the decision. 85,000 sq ft almost matched the retail space
at the Howard Centre and was only a mile away. There would have been no
question of going ahead in the face of such competition.
Mr Cleaver’s evidence was that his view
at the time of the inquiry was that if Park Plaza were permitted unrestrained
that would have killed the Howard Centre project, but that as a property
developer he would have regrouped and considered other forms of development. He
hoped to be able to develop the site in some form whatever the outcome of the
planning inquiry. After the Secretary of State’s decision, they were able to
talk to WHDC in the light of what they had said at the inquiry and WHDC
confirmed what they had said. He said with some emphasis that on at least one
occasion he asked to see the development agreement between WHDC and Carroll. He
was not given it. He could not remember when this was. He said that the TMA in
unaltered form was vital. He was certain that the council were aware of this.
He had had a number of conversations with Mr Asquith and Mr Moore when he made
it very plain and they were stressing the importance of the TMA to him. They
knew that the developers needed the TMA in place to be able to proceed.
Mr Adds said that there was some mistrust
of the council at the inquiry because they had withheld the TMA document until
the day before. He said that he personally had some reservations throughout but
that, as a result of the council’s assurance at the inquiry, British Rail’s
attitude mellowed at and after it. Mr Clarke said that, once the planning
decision was received with its reference to the TMA, they had to rely on the
TMA and it was relied on. There was no alternative other than to abandon the scheme.
There was conflicting opinion evidence
given by Mr Creamer and Mr Rand respectively as to the likelihood of Slough
being influenced against continuing with the development if they knew that the
TMA had been relaxed. I summarise this evidence in the part of this judgment
dealing with damages.
It is obvious from the facts which I
found that in 1987 WHDC believed that their concealment of the relaxation of
the TMA was material in the sense that it was likely be an inducement to Slough
to continue with the Howard Centre. But that does not conclude the question
whether it did in fact induce Slough to continue.
WHDC’s case is that I should reject the
evidence called on behalf of Slough to the effect that Slough relied on the TMA
and were induced by a belief that it was in place and being enforced to
continue with the Howard Centre and to commit themselves to build it.
WHDC submit, and I accept, that it is
relevant to take into account Slough’s own competence and experience in
property development and the fact that they were advised by experienced
surveyors and valuers. Mr Porten referred to a number of authorities for this
essentially common-sense proposition including: Shrewsbury v Blount
(1841) 2 Man & G 475 at p504 and Bellairs v Tucker (1884) 13
QBD 562 at p577. Slough are very substantial developers of great experience and
it is suggested that they are to be seen as anything but gullible newcomers
likely to be taken in by a loose agreement which no one was ever likely to
enforce.
WHDC submitted, and I accept, that a
representation cannot properly be said to induce a course of action if the
other party has already firmly decided to embark on it before the
representation is made; likewise that there is no duty to inform the other
party that an originally true representation has become false if the other
party has already firmly decided to embark on the course of action to which the
representation is material. In this context, WHDC made some attempt to suggest
that there were stages in Slough’s development process earlier than September
1988 when they became irrevocably committed to the Howard Centre scheme. I am
satisfied on the evidence that this was not so. There was a series of decisions
to commit preparatory expenditure, but the project was not authorised as
category 1 until August 1988 and there was no irrevocable commitment before
September 1988. Up till then, Slough could have withdrawn, cut their losses on
the Howard Centre and, as Mr Cleaver said of an earlier stage when he was
involved, regrouped and considered other forms of development.
Mr Porten also submitted that, even if
contrary to his earlier submission there were misrepresentations of fact, any
relevant reliance by Slough should be seen as relying on a hope that WHDC would
in the future enforce the TMA rather than on any present intention. Slough were
thus, it is said, relying on a promise as to the future which, in the absence
of a contract, is no basis for a claim. This submission is, in my view,
specious once misrepresentations of fact are found. A statement that there is a
TMA in place and that WHDC intend to enforce it may not amount to an agreement
enforceable by Slough in contract, but in the mouth of a public authority such
a statement is a solid basis for taking a commercial decision.
WHDC say that Slough were going to
proceed with the Howard Centre anyway. They were induced to do so by the
prospect of profit from what was agreed to be the best development site in
Welwyn. They went ahead because they thought that they could not fail. Their
object in 1984 and 1985 at the time of the planning inquiry and thereafter was
to defeat Carroll or, if not, to minimise the competition that Park Plaza would
generate. Slough’s evidence and submissions to the planning inspector that the
TMA was a vague and worthless document which would not be enforced are to be
taken at face value as showing, not only Slough’s view of it in 1984–85, but
their continuing view thereafter. It was a document which Slough reckoned could
not be relied on and, it is submitted, Slough did not rely on it. Slough’s case
in these proceedings is to be seen as an incredibly miraculous conversion.
There was nothing which may be seen as having caused this conversion. On the
contrary, Slough had decided to go ahead with the Howard Centre before the
result of the planning inquiry was known. They never told WHDC that they were
relying on the TMA. Their internal documents do not evidence such reliance. Nor
do the contents of Healey & Baker’s reports nor their publicity documents.
The existence of the TMA would have been a good point to make to prospective
tenants and it is suggested that Mr Parker’s evidence, that it was a matter of
importance but not something he wanted to share with British Home Stores, is
unconvincing. There is no document after 1985 indicating thoughts of
abandonment. There was no question after July 1987 of Slough not building a
scheme. Their reaction to information that Carroll appeared to be ignoring the
TMA does not support their case that the TMA was vital to the Howard Centre.
Their reaction to learning that the TMA was to be relaxed was that it was no
surprise. They were proceeding with the Howard Centre during a period of
optimism, boom and increasing rents and would have proceeded anyway whether
there was an agreement restricting competition from Park Plaza or not. The loss
which they say that they have subsequently suffered resulted from the slump in
the property market, not from any relaxation of the TMA. WHDC point out that by
now the Howard Centre has largely succeeded whereas Park Plaza failed. The
credibility of individual Slough witnesses was
to documents. It is submitted that there was an element of drilling in their
evidence and that reiterated phrases such as ‘grey areas’ and ‘taken as read’
were to be seen as repetitions of the party line. The credibility of the case
generally is attacked with the suggestion that Slough should be seen as
chameleons, making the best case to meet the needs of the day, eg at the
planning inquiry when they wanted to defeat the Carroll scheme so as to
eliminate its competition; to British Rail, when they wanted to retain
commercial exclusivity; to people generally when they want to market their development
with ‘puff’ reports; and in these proceedings when they want to recover large
damages. It is submitted that it is not credible that Slough went from strong
disbelief about the efficacy of the TMA to total belief by a process of
reflection.
It is submitted that these points
cumulatively constitute a formidable rebuttal of Slough’s case on inducement.
There is, in my view, some force in some of these points individually. But
others, in my view, are not individually persuasive. Taking individual points
separately:
· 1987–88 was a period of
optimism, boom and increasing rents and the evidence was that this was the best
development site in Welwyn. Slough were not likely to let it go easily.
· The evidence does not,
however, support the contention that Slough were going ahead with the Howard
Centre as a town centre shopping development come what may. They were assessing
its viability at each stage. If they had thought that it was not viable, they
would have tried not to abandon the site, but they would not have developed it
as a shopping centre. It is speculative whether in these circumstances they
would have succeeded in retaining the site and, if they had, what different
kind of development they might have undertaken.
· I do not consider that it is
in substance correct that Slough never made it clear to WHDC that they were
relying on the TMA. WHDC had given a public assurance that it would be
incorporated into their lease with Carroll and that they required to be able to
exercise tenant mix control to reassure others, including obviously Slough. One
of two subjects which Mr Cleaver brought up on April 11 1986 was the TMA and Mr
Asquith said that it would be rigorously enforced. Thereafter the TMA appears
in correspondence or at meetings as a subject with which Slough were obviously
concerned: see, for example, 20/4261 — Mr Cleaver’s letter of August 21 1987 in
response to Mr Moore’s letter about Laskys.
· I do not read Healey &
Bakers’ reports as indicating by omission that the TMA was unimportant — see on
the contrary 17/2922 (‘the new climate of certainty’), 17/3053 (‘Carroll Group
… not seeking to replace the traditional Town Centre shopping’) and 17/3095
(‘shopping content that the Howard Centre will compete against has been
substantially improved’). Professional advisers do not ram the obvious down
their intelligent clients’ throats.
· There are letters (eg 18/3550
and 19/3924), which can be read as placing a diluted importance on the TMA or
the likelihood of its enforcement.
· Mr Carey’s letter of February
27 1990 expressing ‘no surprise’ that WHDC had weakened their stance is, I
think, credibly explained by the impression he had gained at his meeting on
January 31 1990.
· Some of Slough’s reactions to
apparent contraventions of the TMA by Carroll appear muted. This is
particularly so, for example, of Mr Woolhouse’s knowledge in September 1988
that Carroll Group had been trying to attract Marks & Spencer to Park Plaza
(23/5602) and Slough’s apparent reaction to Carroll’s news release in April
1989 and their brochure indicating breaches of the TMA (24/62277, 6279, 6281).
Others reactions are more forthright, eg 25/6892 and 6947.
· ‘Grey areas’ is an expression
which goes back to the meeting on August 24 1984. ‘Taken as read’ did not
strike me as an orchestrated expression.
The contrast between the stand taken by
Slough and others at the planning inquiry towards the TMA and the inducement
which they say in these proceedings that it later constituted is marked. On any
view, ‘miraculous conversion’ is an overstatement but there is a contrast
requiring explanation. Before the TMA was produced as a document, the Park
Plaza leisure proposals were vague. When it was produced, they were not vague —
just surprising. The TMA was not produced until the planning inquiry and it
does not seem to me at all surprising that the opponents of Park Plaza
continued immediately after its production to oppose. After the hearing, Slough
believed (with some justification in the light of the inspector’s views) that
planning permission would be refused. When it was surprisingly granted, Slough
considered their position in the light of it and were soon in April 1986 being
assured by Mr Asquith that the TMA would be rigidly enforced using a
common-sense approach. This seems to me to be a credible reason for Slough on
reflection to reach the state of mind to which their witnesses attest. As Mr
Cleaver said, WHDC had put themselves into a position at the planning inquiry
where they could not in all conscience fail to put TMA in place. That position
was reinforced by what they said in April 1986 and thereafter.
WHDC suggest that any reappraisal of the
viability of the Howard Centre in the light of the relaxation of the TMA would
have concluded that the effect was minimal so that Slough would have decided to
continue notwithstanding. Here the evidence of the expert valuers is in point.
Mr Rand, called on behalf of WHDC, considered that relaxation of the TMA for
85,000 sq ft would have made no significant difference to such an appraisal. Mr
Creamer, called on behalf of Slough, disagreed. They each gave their opinions
of the value of the Howard Centre as a development as at September 24 1988
immediately after Slough committed themselves to the construction contract (a)
with the TMA in place and (b) with the TMA relaxed for 85,000 sq ft. They
agreed that its value with the TMA in place was £1.8m. Mr Rand considered that
there should be no reduction in that value if the TMA was relaxed. Mr Creamer
considered that this latter value should be minus £11m giving a difference in
value of £12.8m. They both considered that Slough’s September 1988 development
appraisal (23/5586) was a reasonable assessment upon the assumption that the
TMA was in place. The £1.8m is the total of the costs to Slough of acquiring the
site and is taken as the value of the development on the basis that Slough’s
own appraisal was reasonable, ie they paid the market price for the
development. Mr Creamer as a check did his own residual development
calculation. Mr Rand was inclined to think that a cautious developer might have
made some small adjustments to Slough’s appraisal if the TMA were known to have
been relaxed for 85,000 sq ft. He might have put a contingency of perhaps 5%
into gross development value — it would have reduced the £44.724m (23/5586) by
about £2.23m which would reduce the net profit to Slough to about 5% (23/5588)
and the net profit as a percentage of development costs to below significantly
10%. In re-examination Mr Rand said that a cautious developer would not have made
such an adjustment in the climate of 1988. I deal with these valuations in
greater detail below when I consider damages. I there prefer Mr Creamer’s
evidence. In my view, on the evidence any developer knowing that the TMA had
been relaxed would have made some adjustment to the development appraisal. On
Mr Creamer’s figures, which I accept, the Slough’s Howard Centre scheme was
plainly not viable. Even if on the basis of Mr Rand’s cautious developer
contingency of 5%, the profit figures fall below 10% which on the evidence was
the lowest level of acceptable profitability. Since the inducement issue and
valuation issue may be seen as two facets of the same question, this evidence
contributes to and confirms the view which I reach that the existence of the TMA
was of material importance.
The oral evidence of Mr Carey, Mr
Cleaver, Mr Orchard-Lisle, Mr Clarke, Mr Parker, Mr Adds and Mr Woolhouse was
all to the same effect, ie that the existence of the TMA was vital to the
decision to proceed with a shopping centre development at Welwyn and that
Slough would not have proceeded with that development if they had known that it
was to be relaxed in the way in which it was in 1987. WHDC’s case has to invite
me to reject the evidence of all these witnesses as unreliable and incredible.
They do so generally by reference to documents and by submissions to which I
have referred. The credibility of individual witnesses is also attacked on
specific
the climate in the property world in the mid-1980s and about knowing that
Carroll had approached Marks & Spencer. It is suggested that Mr Cleaver
thought that WHDC were naive about Carroll and had fears about the TMA
throughout. (Mr Cleaver’s evidence was that he had fears that Carroll would try
to nibble around the edges of the TMA.)
I am not persuaded by these submissions
whose bases are, in my judgment, fragile when the evidence is seen as a whole
in its full context. The submissions are themselves nibbling at the edges of a
very strong case. The ‘miraculous conversion’ is neither miraculous nor
unexplained. I have seen each of the witnesses and am able to judge the
credibility of their evidence both individually and collectively. I found them
all credible and convincing. They did not impress me as chameleons. I have made
comments assessing the credibility of some of these witnesses in the course of
the narrative part of this judgment. I here say that, without detracting from
the others, I found both Mr Carey and Mr Cleaver credible and measured
witnesses. I accept their evidence on this central point.
For these reasons I find that Slough were
induced by TMA representations to continue with the Howard Centre and
specifically were induced to commit themselves in September 1988 to its
construction. Accordingly, Slough establish all the necessary liability
elements of their claim from April 22 1987.
Damages
(a) Generally
Slough advance two methods of assessing
their damages. The first method takes all costs incurred in relation to the
Howard Centre and deducts receipts and assets, including the present value of
the Howard Centre. In the main, the figures for this calculation are agreed as
figures. Accountants have agreed that the net costs incurred by Slough in
relation to the Howard Centre to June 4 1996 (after giving credit for receipts
such as, eg rents received) are £76,863,625. It is agreed that sunk costs have
to be deducted from this figure, but no calculation has yet been provided to me
for such costs to the particular date which I have found, viz April 22
1987. Valuers are agreed that the open market value of Slough’s interest in the
Howard Centre as at June 4 1996 is £27,400,000. This valuation ignores the cost
of any repair works, in particular repairs to the roof (to which I shall
return). It also makes no deduction for vendor’s realisation costs. It is
agreed that, when valuing a property it is not normal valuation practice to
deduct vendor’s realisation costs. Such costs would be incurred if and when
Slough decided to sell the property. But it is agreed that such costs would be
0.7%. Slough say that £1.4m should be deducted from the valuation for roof
repairs in accordance with the evidence of Mr Creamer and that 0.7% should be
deducted from the resulting £26m making £25,818,000. The damages on this first
method will work out a somewhat less than £50m and decisions are needed on roof
repair costs and vendor’s realisation costs. The main dispute is a matter of
principle, ie whether this calculation represents the correct measure of
damages on the facts of this case. WHDC submit that it does not, because it
includes irrecoverable ‘windfall’ damages resulting from the fall in property
values and because it does not attempt to measure any loss which would not have
been suffered if the representations had been true.
It is not in dispute that property values
fell sharply at a time starting in about 1990 and I have no doubt that this is
reflected both in the present value of the Howard Centre and in the agreed net
costs figure. The evidence is that by May 1992 there were 50 or so tenants at
Park Plaza who did not conform with the TMA. The evidence in my view, justifies
a very general factual conclusion (but no more) that breaches of the TMA
reduced Slough’s income at the Howard Centre either because Howard Centre
lettings were delayed or because rents achieved were lower than they would have
been if the TMA had been enforced or because greater incentives had to be
offered. Whether it is possible to assess this component of the loss or not,
such an assessment has not been attempted in the evidence and I would be unable
to make it.
Slough’s second method is to take what
they say was the difference in September 1988, when they passed the point of no
return, between the value of the development with the TMA in place and its
value with the TMA relaxed for 85,000 sq ft. To this they would add the extra
net costs incurred above the costs estimated in Slough’s September 1988
appraisal. Slough say on Mr Creamer’s evidence that the valuation difference
was £12.8m. Mr Rand’s opinion was that there was no difference. At one stage
during the hearing it was, I think, WHDC’s case (see Mr Porten’s document Damages:
Defendants’ Position) that the proper measure of damages was the difference
between ‘price paid’ and market value in accordance with Saunders v Edwards
[1987] 1 WLR 1116 (see below), ie Slough’s second method but without
consequential expenses, and that that difference was on the evidence
negligible. Their eventual case tended to revert to the first method but
subject to the Downs v Chappell qualification (again see below).
On either version, their case is that the consequential losses are not
recoverable because they were not related to the relaxation of the TMA but to
the collapse of the property market. For reasons which I give below, I do not
consider that the second method is the appropriate measure of damages in this
case. I am nevertheless asked to decide the factual issue between Mr Creamer
and Mr Rand.
In Doyle v Olby (Ironmongers)
Ltd [l969] 2 QB 158, Mr Doyle was tricked into buying a business by fraud.
He made losses and incurred expenses while he ran the business and later sold
the business at a loss. Lord Denning MR said at p167:
… in contract, the defendant has made a
promise and broken it. The object of damages is to put the plaintiff in as good
a position, as far as money can do it, as if the promise had been performed. In
fraud, the defendant has been guilty of a deliberate wrong by inducing the
plaintiff to act to his detriment. The object of damages is to compensate the
plaintiff for all the loss he has suffered, so far, again, as money can do it.
In contract, the damages are limited to what may reasonably be supposed to have
been in the contemplation of the parties. In fraud, they are not so limited.
The defendant is bound to make reparation for all the actual damages directly
flowing from the fraudulent inducement. The person who has been defrauded is
entitled to say:
‘I would not have entered into this
bargain at all but for your representation. Owing to your fraud, I have not
only lost all the money I paid you, but, what is more, I have been put to a
large amount of extra expense as well and suffered this or that extra damages.’
All such damages can be recovered: and it
does not lie in the mouth of the fraudulent person to say that they could not
reasonably have been foreseen. For instance, in this very case Mr Doyle has not
only lost the money which he paid for the business, which he would never have
done if there had been no fraud: he put all that money in and lost it; but also
he has been put to expense and loss in trying to run a business which has
turned out to be a disaster for him. He is entitled to damages for all his
loss, subject, of course to giving credit for any benefit that he has received.
There is nothing to be taken off in mitigation: for there is nothing more that
he could have done to reduce his loss. He did all that he could reasonably be
expected to do.
Winn LJ said at p168:
It appears to me that in a case where
there has been a breach of warranty of authority, and still more clearly where
there has been a tortious wrong consisting of a fraudulent inducement, the
proper starting-point for any court called upon to consider what damages are
recoverable by the defrauded person is to compare his position before the
representation was made to him with his position after it, brought about by
that representation, always bearing in mind that no element in the
consequential position can be regarded as attributable loss and damage if it be
too remote a consequence: it will be too remote not necessarily because it was
not contemplated by the representor, but in any case where the person deceived
has not himself behaved with reasonable prudence, reasonable common sense, or
can in any true sense be said to have been the author of his own misfortune.
The damage that he seeks to recover must have flowed directly from the fraud
perpetrated upon him.
Sachs LJ said at p171:
If the purchase is one of a business
which the plaintiff but for the fraud would not have acquired at all, the
objective of the court is to put the plaintiff, so far as is possible, into the
same position financially as if he had not entered into
having entered into the transaction and find out what was his loss over all …
The computation of the loss may in many cases not be easy. Thus, the court must
obviously take care not to include sums for consequences which may be due to
the plaintiff’s own unreasonable actions, and also not to include results which
are too remote — matters which often involve difficult questions of fact and
degree.
So a plaintiff claiming damages for
fraudulent misrepresentation is entitled to ‘all the actual damages directly
flowing from the fraudulent inducement’ comparing the plaintiff’s position
before and after the transaction fraudulently induced. The damages are not
‘limited to what may reasonably be supposed to have been in the contemplation
of the parties’ but should not include ‘consequences which may be due to the
plaintiff’s own unreasonable actions’ nor ‘result which are too remote’.
The actual quantification of the loss in Doyle
may be seen from the judgment of Winn LJ at p169. Essentially Mr Doyle was
awarded the amount he paid for the business less the amount he realised on its
sale, plus the net costs (after crediting benefits) of running the business
between its purchase and sale and other consequential expenses such as interest
on a loan taken out to enable him to meet the purchase price. On the facts of
that case the damages crystallised when Mr Doyle sold the business.
In Saunders v Edwards
[1987] 1 WLR 1116, the plaintiffs claimed damages for fraudulent
misrepresentation relating to the acquisition of a flat. The Court of Appeal
held that the correct date for quantification of loss was the date of
completion of the purchase, being the date of the actual loss, and that the
measure of damage on the facts of that case was the difference between the value
of what the plaintiffs paid for (ie the value of the flat upon the hypothesis
that the representation had been true) and what they received (ie the flat’s
value in the circumstance that the representation was untrue).
In East v Maurer [1991] 1
WLR 461, the plaintiffs bought a hairdressing salon upon a fraudulent
misrepresentation that the defendant seller would not be working at his other
salon in the area on a regular basis. The plaintiffs were unable to make their
salon profitable and tried to sell the lease of their premises but did not
succeed for three years. The Court of Appeal held that the damages for deceit
would include both actual losses incurred and loss of profit that could
reasonably have been anticipated while the plaintiffs waited for an opportunity
to mitigate their loss by realising to the best advantage the business they had
bought. The loss of profit was to be assessed, not on the basis that the
representation was a warranty that the defendant’s customers would patronise
the salon, but from the starting point of the expected profits of the business
run by the plaintiffs. Beldam LJ said at p464:
That the measure of damages for the tort
of deceit and for breach of contract are different, no longer needs support
from authority. Damages for deceit are not awarded on the basis that the
plaintiff is to be put in as good a position as if the statement had been true;
they are to be assessed on a basis which would compensate the plaintiff for all
the loss he has suffered, so far as money can do it.
Beldam LJ cited at length what Lord
Denning MR had said in Doyle and then referred for support to a judgment
of Dixon J in Toteff v Antonas (1952) 87 CLR 647 at p650, a
passage which included:
… the question is how much worse off is
the plaintiff than if he had not entered into the transaction … But what is
meant is the transaction into which the representation induced the plaintiff to
enter.
Mustill LJ said at p468:
In my judgment the best course in a case
of this kind is to begin by comparing the position of the plaintiff as it would
have been if the act complained of had not taken place with the position of the
plaintiff as it actually became. This establishes the actual loss which the
plaintiff has suffered and often helps to avoid the pitfalls of double
counting, omissions and impermissible awards of both a capital and an income
element in respect of the same loss.
In Royscott Trust Ltd v Rogerson
[l991] 2 QB 297, the Court of Appeal held that the measure of damages for
innocent misrepresentation under section 2(1) of the Misrepresentation Act 1967
was the same as for fraudulent misrepresentation, so that the plaintiff was
entitled to recover as damages all losses flowing from the misrepresentation,
including unforeseeable losses, provided that they were not otherwise too
remote. The judgments discuss this measure of damages on orthodox Doyle
lines. Gibson LJ considered that, if it were necessary to prove that the loss
was reasonably foreseeable, he would hold without hesitation that it was. At
p310A, he said:
The holding that the damage was
foreseeable, if right, is, in my judgment, a conclusive answer to any argument
on causation based on the notion of novus actus interveniens.
Downs v Chappell [1996] 3 All ER 344
also concerned the sale and purchase of a business, a booksellers shop. The
defendant seller was held to have made fraudulent misrepresentations about its
turnover and profit. The judge held that the plaintiffs relied on the
representations but that the plaintiffs had not discharged the burden of
demonstrating that they would not have completed the sale had the true figures
been disclosed to them. He had also held that they had not established a loss
attributable to the alleged tortious acts or omissions of the defendant whether
assessed as diminution in value or by reference to an alternative approach.
Hobhouse LJ, who gave the leading
judgment, said that the defendants accepted the judge’s finding on liability
and that the sole remaining issue was one of causation. He held that the judge
was in error in asking what would have happened if the plaintiffs had been
given truthful figures. In deceit, a plaintiff has to prove that the
represertation was fraudulent, that it was material and that it induced the
plaintiff to act to his detriment. Inducement is a question of fact and the
judge had found that the plaintiffs were induced by the representations to
enter into the relevant transaction. ‘The word ‘reliance’ used by the Judge has
a similar meaning but is not the correct criterion’. Hobhouse LJ continued at
p351e:
The plaintiffs have proved what they need
to prove by way of the commission of the tort of deceit and causation. They
have proved that they were induced to enter into the contract with Mr Chappell
by his fraudulent representations. The judge was wrong to ask how they would
have acted if they had been told the truth. They were never told the truth.
They were told lies in order to induce them to enter into the contract. The
lies were material and successful; they induced the plaintiffs to act to their
detriment and contract with Mr Chappell. The judge should have concluded that
the plaintiffs had proved their case on causation and that the only remaining
question was what loss the plaintiffs had suffered as a result of entering into
the contract with Mr Chappell to buy his business and shop.
Turning to damages, Hobhouse LJ said
that, if Mr Chappell had not been fraudulent, the plaintiffs would not have
entered into the transaction. He continued at p352b:
This is therefore, factually, a ‘no-transaction’
case. The plaintiffs’ damages have to be assessed by reference to what they
have lost as a result of entering into the transaction. As I will explain
later, this statement of the causative principle to be applied is subject to a
qualification. But it provides the only valid starting point and to take any
other starting point is unsound. The causal relevance of the defendants’ torts
was that they caused the plaintiffs to enter into the transaction. It follows
that the recoverable damages must have been caused by that consequence.
No question of remoteness of damage
arises … All parties must also have been aware that property values can go down
as well as up and that if the plaintiffs should have to sell they might have to
do so at a loss.
It was submitted on behalf of the
defendants that the plaintiffs’ lack of success was attributable to changing
market conditions and to their own lack of experience in running a bookshop.
The judge had substantially accepted this submission. Hobhouse LJ analysed the
evidence and said at p355c:
Accordingly, as a matter of factual
causation, the consequence of the plaintiffs having purchased the business and
the premises from Mr Chappell was that
premises with a reduced value and limited marketability.
It had been possible for the plaintiffs
to sell out in the spring of 1990, but they chosen not to do so. Hobhouse LJ
said that losses suffered after the spring of 1990 were not caused by the
defendants’ torts but by the plaintiffs’ decision not to sell. The plaintiffs
‘were no longer acting under the influence of the Defendants’ representations.
The causative effect of the Defendants’ faults was exhausted.’
Considering the law, Hobhouse LJ said
that causation is a question of fact. The feature which gave rise to difficulty
was the fact that the loss of value suffered by the plaintiffs between 1988 and
1990 primarily reflected the fall in the market value of commercial and residential
properties. At p356d he said:
Whilst such fluctuations are not
unforeseeable and there were other factors which contributed, the defendants
argue that whatever property the plaintiffs had bought they quite probably
would have suffered a similar loss.
Having cited from Doyle and Esso
Petroleum Co Ltd v Mardon [1976] QB 801, Hobhouse LJ then said at
p358a:
These cases show that where a plaintiff
has been induced to enter into a transaction by a misrepresentation, whether
fraudulent or negligent, he is entitled to recover as damages the amount of the
(consequential) loss which he has suffered by reason of entering into the
transaction. The principle is the same. Where the representation relates to the
profitability and, by necessary inference, the viability of the business, the
plaintiff can recover both his income and his capital losses in the business.
At p359c, he said:
In general, it is irrelevant to inquire
what the representee would have done if some different representation had been
made to him or what other transactions he might have entered into if he had not
entered into the transaction in question. Such matters are irrelevant
speculations. (See eg United Motor Finance Co v Addison Co Ltd
[1937] 1 All ER 425 at 429.)
He then said that:
where a party has been misled, it must
always be relevant to consider his position when he discovered the truth. Until
that time the misrepresentation will be continuing to affect him and he cannot
be expected to mitigate his loss.
After further citation, Hobhouse LJ
summarised the law thus at p361d:
Causation and the assessment of damages
is a matter of fact. In a misrepresentation case, where the plaintiff would not
have entered into the transaction, he is entitled to recover all the losses he
has suffered, both capital and income, down to the date that he discovers that
he had been misled and he has an opportunity to avoid further loss. The
diminution in value test will normally be inappropriate. Where what is bought
is a business, the losses made in the business are prima facie
recoverable, as is the reduction in the value of the business and its premises.
Foreseeable market fluctuations are not too remote and should be taken into
account either way in the relevant account. These cases do not, however,
discuss whether there is any question of causation beyond the no-transaction
test. In my judgment it may still be necessary to consider whether it can
fairly and properly be said that all the losses flowing from the entry into the
transaction in question were caused by the tort of the defendant. I turn now to
this qualification.
I pause there, before going to Hobhouse
LJ’s qualification, to note the following:
· Slough, having established
that they were induced to continue with and commit themselves to construct the
Howard Centre by WHDC’s fraudulent misrepresentation (and that they would not
have done so had they known the truth), are prima facie entitled to all
losses which they have suffered, both capital and income, down to the date when
they discovered that they had been misled and had an opportunity to avoid
further loss. Subject to investigating its detail, that is their first method.
· It is irrelevant to inquire
what Slough would have done if some different representation had been made to
them or what other transactions they might have entered into if they had not
entered into the transaction in question. Such matters are irrelevant
speculations. It is accordingly irrelevant to wonder whether Slough might have
proceeded with a lesser office development or whether British Rail might have
put the site out to competition.
· It is necessary to inquire if
losses claimed flow directly from the fraudulent inducement and are not too
remote. Whether losses were within the reasonable contemplation of the parties
is not a material consideration, since this is not a claim for breach of
contract. Rises and falls in the market value of commercial and residential
properties are not unforeseeable and foreseeable market fluctuations are not
too remote. A conclusion that a loss was foreseeable can be a conclusive answer
to any argument on causation based on the notion of novus actus interveniens.
· (In parenthesis, if the cases
which I have cited are taken as a whole, the difference at the fringes between
the concepts of foreseeability, remoteness and causation in relation to losses
which are or are not recoverable tend to become blurred.)
· Slough were not, as in many
of the cases, induced by the misrepresentations to enter into a transaction
with the misrepresentor (WHDC), but it is not suggested that that is a material
distinction. They did not simply acquire an existing trading business nor did
they simply acquire property. They proceeded with and committed themselves to a
commercial development which they expected to retain as an investment.
· When they discovered that
they had been misled, Slough did not set about disposing of what they had
acquired. It is not suggested that they acted unreasonably in failing to
mitigate their loss. What they actually did was to initiate judicial review
proceedings which succeeded in making the representations temporarily true.
This however proved impractical and there was a compromise. Slough retain the
development so there is no historic recovery from disposal to set against costs
and expenses.
· In my judgment, on the face
of the authorities to which I have so far referred, Slough would be entitled to
their costs and expenses of proceeding with and committing themselves to the
Howard Centre less: (a) benefits which they have received from the venture; and
(b) a value for the capital asset which they have acquired and built. In
principle, in my view, that value may be notionally equated with what they
would recover if they decided to dispose of the development, which is the more
usual circumstance in the reported cases. This is not a Saunders v Edwards
case concerned only with property values at a determinate date, so that the
diminution in value test (Slough’s second method) is not appropriate.
· The assessment defined in the
previous paragraph needs a date at which the calculation of net loss and the
valuation of the capital asset which they have acquired and built is to be
made. In my view, where Slough have retained the development and where it is
not suggested that they have failed to mitigate their loss, the correct date is
the date when the misrepresentation which induced Slough to proceed with and
commit themselves to the development ceased to occasion them loss. That date
may conveniently be taken as the date of the start of the trial since the
evidence was that by now the Howard Centre is more or less fully let. I shall
take that date, not because the date of the trial is the date to which losses
are to be calculated, but because on the evidence that was when the
misrepresentation ceased to occasion Slough loss.
I return to Hobhouse LJ’s qualification.
At p361g, he said:
In my judgment, having determined what
the plaintiffs have lost as a result of entering into the transaction … it is
still appropriate to ask the question whether that loss can properly be treated
as having been caused by the defendants’ torts, notwithstanding that the torts
caused the plaintiffs to enter into the transaction. If one does not ask this
additional question there is a risk that the plaintiff will be over compensated
or enjoy a windfall gain by avoiding a loss which they would probably have
suffered even if no tort had been committed. This would offend the principle
upon which damages are awarded: see Livingstone v Rawyards Coal Co
(1880) 5 App Cas 25 at 39 and Dodd Properties (Kent) Ltd v Canterbury
City Council [1980] 1 All ER 928, [1980] 1 WLR 433 at 451 per Megaw LJ.
In this context the defendants submitted
that all owners of property suffered a loss of value when the market fell. They
asked the hypothetical
bought the shop? If they are compensated for the fall in value of the shop, are
they not being compensated for a loss which they would have suffered even if
the defendants had not been at fault, and therefore being over-compensated?
I consider that the appropriate way to
give effect to these legitimate concerns is to compare the loss consequent upon
entering into the transaction with what would have been the position had the represented,
or supposed, state of affairs actually existed … This check does not have the
purpose of substituting some different (and erroneously contractual) criterion
for the assessment of damages. Its purpose is to test the acceptability of the
factual conclusion that the assessed consequential loss was truly consequential
upon the fault for which the other party is liable and to recognise the
fundamental principle of indemnity.
Hobhouse LJ proceeded to apply the
qualification to the facts of the case before him and concluded that plaintiffs
would not be over-compensated by an assessment made on a no-transaction basis.
The House of Lords decision in South
Australia Asset Management Corporation v York Montague Ltd* (and two
other appeals heard and decided together) was given and published as the
evidence in this case was coming to a close and barely a week before counsel’s
final submissions. Lord Hoffmann gave the one substantive opinion which all
other members of the House adopted. The appeal concerned the measure of damages
for negligent overvaluation of property by valuers. A feature of the cases
before the House was that a fall in the property market after the date of the
valuation greatly increased the loss which the lender eventually suffered. The
appellants challenged the ruling of the Court of Appeal in Banque Bruxelles
Lambert SA v Eagle Star Insurance Co Ltd [1995] QB 375† and that in
a case in which a lender would not otherwise have lent (a ‘no-transaction’
case), the lender is entitled to recover the difference between the sum which
he lent, together with a reasonable rate of interest, and the net sum which he
actually got back. Lord Hoffmann characterised this basis of assessment as the
valuer bearing ‘the whole risk of a transaction which, but for his negligence,
would not have happened’. The appellants submitted that it was unfair merely
because for one reason or other the lender would not otherwise have lent that
‘the valuer should be saddled with the whole risk of the transaction, including
a subsequent fall in the value of the property’.
*Editor’s note: Reported at [1996] 2 EGLR
93 ante
†Editor’s note: Reported at [1995] 1 EGLR
129
Lord Hoffman said that the correct
starting point was to decide for what kind of loss the plaintiff is entitled to
compensation. The lender sues on a contract under which the valuer undertakes
to provide him with certain information, whose purpose was to form part of the
material on which the lender would decide whether to lend. The valuer will not
usually be privy to other considerations which the lender may take into
account. The law implies that the valuer will exercise reasonable skill and
care and there is a concurrent duty in tort. The real question is the kind of
loss in respect of which the duty is owed. There is no reason in principle why
the law should not penalise wrongful conduct by shifting on to the wrongdoer
the whole risk of consequences which would not have happened but for the
wrongful act. But rules to that effect are exceptional.
Normally the law limits liability to
those consequences which are attributable to that which made the act wrongful.
In the case of liability in negligence for providing inaccurate information,
this would mean liability for the consequences of the information being
inaccurate.
I can illustrate the difference between
the ordinary principle and that adopted by the Court of Appeal by an example. A
mountaineer about to undertake a difficult climb is concerned about the fitness
of his knee. He goes to a doctor who negligently makes a superficial
examination and pronounces the knee fit. The climber goes on the expedition,
which he would not have undertaken if the doctor had told him the true state of
his knee. He suffers an injury which is an entirely foreseeable consequence of
mountaineering, but has nothing to do with his knee.
On the Court of Appeal’s principle, the
doctor is responsible for the injury suffered by the mountaineer because it is
damage which would not have occurred if he had been given correct information
about his knee. He would not have gone on the expedition and would have
suffered no injury. On what I have suggested is the more usual principle, the
doctor is not liable. The injury has not been caused by the doctor’s bad
advice, because it would have occurred even if the advice had been correct.
Lord Hoffmann said that there ‘seems no
reason of policy which requires that the negligence of the doctor should
require the transfer to him of all the foreseeable risks of the expedition’. It
is not fair or reasonable that the valuer should be responsible for losses more
extensive than those which are the consequence of the information being wrong.
There is a distinction between a duty to ‘provide information for the
purpose of enabling someone else to decide upon a course of action and a duty
to advise someone as to what course of action he should take’.
At p9 of the transcript Lord Hoffmann
said:
The measure of damages in an action for
breach of a duty to take care to provide accurate information must also be
distinguished from the measure of damages for breach of a warranty that the
information is accurate. In the case of breach of a duty of care, the measure of
damages is the loss attributable to the inaccuracy of the information which the
plaintiff has suffered by reason of having entered into the transaction on the
assumption that the information was correct. One therefore compares the loss he
has actually suffered, with what his position would have been if he had not
entered into the transaction and asks what element of this loss is attributable
to the inaccuracy of the information. In the case of a warranty, one compares
the plaintiff’s position as a result of entering into the transaction with what
it would have been if the information had been accurate. Both measures are
concerned with the consequences of the inaccuracy of the information, but the
tort measure is the extent to which the plaintiff is worse off because the
information was wrong, whereas the warranty measure is the extent to which he
would have been better off if the information had been right.
Lord Hoffmann said at p11 that the
distinction between ‘no-transaction’ and ‘successful transaction’ cases is not
based on principle and should be abandoned.
In either case, the valuer is responsible
for the loss suffered by the lender in consequence of having lent upon an
inaccurate valuation. When it comes to calculating the lender’s loss, however,
the distinction has a certain pragmatic truth … in principle there is no reason
why the valuer should not be entitled to prove that the lender has suffered no
loss, because he would have used his money in some altogether different, and
equally disastrous venture.
Accordingly, the law normally limits
liability for wrong doing to those consequences which are attributable to that
which made the act wrongful and does not saddle the wrongdoer with the whole
risk of the transaction, including a subsequent fall in the value of the
property. In the case of liability in negligence for providing inaccurate
information, this would mean liability for the consequences of the information
being inaccurate, ie the extent to which the plaintiff is worse off because the
information is wrong. This is to be distinguished from the measure of damages
for breach of warranty which is the extent to which the plaintiff would have
been better off if the information had been right. There is no distinction in
principle between no-transaction cases and successful transaction cases.
The South Australia cases did not
concern damages for deceit, but Lord Hoffmann said p8:
The principle that a person providing
information upon which another will rely in choosing a course of action is
responsible only for the consequences of the information being wrong is not
without exceptions. This is not the occasion upon which to attempt a list, but
fraud is commonly thought to be one. In Doyle v Olby (Ironmongers)
Ltd [1969] 2 QB 158 at p167, Lord Denning MR said:
The defendant is bound to make reparation
for all the actual damages directly flowing from the fraudulent inducement. The
person who has been defrauded is entitled to say: ‘I would not have entered
into this bargain at all but for your representation …’ Such an exception, by
which the whole risk of loss which would not have been suffered if the
plaintiff had not been fraudulently induced to enter into the transaction is
transferred to the defendant, would be justifiable both as a deterrent against
fraud and on the ground that damages for fraud are frequently a restitutionary
remedy.
The question of liability for fraud does
not arise in this case, and I therefore confine myself to two observations. The
first is that although I have said that fraud is commonly thought to be an
exception, Hobhouse LJ seems to have expressed a contrary view in the recent
case of Downs v Chappell … when he said that the damages
recoverable for fraudulent misrepresentation should not be greater than [*] the
loss which would have been suffered ‘had the represented, or supposed, state of
affairs actually existed’. In other words, the defendant should not be liable
for loss which would have been a consequence of the transaction even if the
representation had been true. This, as I have said, is what I conceive to be in
accordance with the normal principle of liability for wrongful acts. But
liability for fraud, or under s2(1) of the Misrepresentation Act 1967, for a
negligent misrepresentation inducing a contract with the representor, has
usually been thought to extend to all loss suffered in consequence of having
entered into the transaction. We have received written representations on Downs
v Chappell, which was decided after the conclusion of the oral argument,
but since the issue in that case is not before the House, I prefer not to
express any concluded view.
My second observation is that, even if
the maker of the fraudulent misrepresentation is liable for all the
consequences of the plaintiff having entered into the transaction, the
identification of those consequences may involve difficult questions of
causation. The defendant is clearly not liable for losses which the plaintiff
would have suffered even if he had not entered into the transaction or for
losses attributable to causes which negative the causal effect of the
misrepresentation.
(I think, with diffidence, that some
words are omitted at the point which I have marked [*] in this citation. I
think that the sentence may be intended to read ‘… should not be greater than
[the difference between the loss consequent upon entering into the transaction
and] the loss which would have been suffered …’. But the sense is clear from
the subsequent sentences.)
WHDC submit with reference to Downs
v Chappell and the South Australia cases that fraud is not in law
an exception to general rule on causation and remoteness. The defendant is not
liable in deceit for a loss which would have been the consequence of the
transaction even if the representation had been true. Lord Hoffman’s example of
the climber’s knee would give the same result had the doctor been dishonest
rather than negligent. The plaintiff is no more entitled to recover in deceit
losses due to the collapse of the market than they would be in negligence. It
is submitted that Slough’s first basis for calculating damages must be wrong
because it includes loss resulting from the fall in the market. A difference in
market values might be applicable but Mr Creamer’s evidence of such difference
is to be rejected and no present difference in value has been established. If
damages are not to be assessed as a difference in market value, Hobhouse LJ’s
qualification is to be applied so that the loss should not exceed that suffered
as a result of increased competition from Park Plaza which would have been
avoided had the representations been true. The Howard Centre is now virtually
fully let and the only loss which would have been avoided had the
representations been true would be reduced income from lettings at the Howard
Centre over some period when the competition was having an effect. Slough have
not called evidence to identify or quantify such losses. They should not be
permitted to do so now since they declined to particularise such losses but
have known for a long time that this was WHDC’s case. Any such claim would be
much smaller than the current claim since the full Howard Centre annual rent
roll is in the region of £2m and a maximum period for reduced rents would not
exceed five years. So the claim could not be more than five times the amount by
which rents fell below £2m by reason of the competition. In fact, Slough have
not attempted to quantify a loss on this basis and Mr Rand’s evidence was that
such a loss would be difficult, if not impossible to isolate but in his opinion
would be minimal. There was no evidence that current Howard Centre rents are
lower nor that its value is less as a result of competition from Park Plaza.
I have therefore to decide whether I am
bound by Downs v Chappell to apply Hobhouse LJ’s qualification.
It is a decision of the Court of Appeal and, if it stood alone, I should of
course be bound by it.
Mr Porten submits that I am bound by it
(or at any rate that should apply it) on the basis that the qualification is an
extension of previous authority and not inconsistent with it and that what Lord
Hoffmann said in South Australia is obiter. He submits that the
question of windfall recovery did not arise in Doyle and that the result
would have been the same if the qualification had been applied. He points to
passages in earlier cases to the effect that damages for deceit are limited to
those which are directly caused by entering into the transaction which the
misrepresentation induced and to those which are not too remote. He submits
that, if the qualification is not to be applied, Slough would get a windfall
quite unrelated to the tort. The claim, he submits, is grossly overstated. He
illustrates this by supposing that Carroll had taken no advantage of the
relaxed TMA. Upon that hypothesis, Slough’s claim would still be quantified at
around £50m and that, he submits, defies commonsense.
Mr Lyndon Stanford submits that the
qualification in Downs v Chappell cannot be reconciled with Doyle
and that, although what Lord Hoffmann said is obiter, it so clearly
expresses a unanimous view of five Law Lords which is contrary to Downs
v Chappell that I ought not to apply the Downs v Chappell
qualification.
In my judgment, Slough’s second method is
inappropriate. A historic diminution in value calculation was appropriate to
the facts of Saunders v Edwards where the damage was suffered at
the time of completion of the sale and where the loss flowing directly from the
fraudulent inducement was limited to a difference in property values upon two
hypotheses. But that does not apply here. In my view, Slough’s first method is,
on the facts of this case, an appropriate application of Doyle subject
to the question whether Hobhouse LJ’s qualification is to be applied as a
check.
At first blush Mr Porten’s submission,
that the doctor who negligently advised Lord Hoffmann’s mountaineer about his
knee would not have been liable if his advice had been fraudulent, seemed persuasive.
On reflection, I do not think that the submission does undermine an orthodox
application of Doyle. The submission appears to be persuasive at first
because the hypothesis of such advice being fraudulent is such an unlikely one.
But if an idiosyncratic doctor really did pronounce the mountaineer’s knee to
be fit, when he knew that it was not with the intention of inducing the
mountaineer to go climbing and the mountaineer was so induced, then on an
orthodox application of Doyle the doctor would be responsible for an
injury which was an entirely foreseeable consequence of mountaineering but had
nothing to do with the knee.
Lord Hoffmann’s passage in South
Australia is explicitly obiter. Subject to that, I read the passage
as clearly expressing the view that Hobhouse LJ’s qualification is out of line
with the law as it is commonly understood and as it has been stated in previous
Court of Appeal authority. (With diffidence and respect, I agree with that, but
I am not confident that authority would permit me to reach that conclusion
unaided by the House of Lords.) The principle applicable to the negligent
provision of information is not without exceptions. Fraud is commonly
understood to be one. The authority for that is the Court of Appeal decision in
Doyle and other Court of Appeal cases to which I have referred. The
effect of the exception is that ‘the whole risk of loss which would not have
been suffered if the plaintiff had not been fraudulently induced to enter into
the transaction is transferred to the defendant’. In its context, ‘the whole
risk’ includes a fall in property values since that was the very subject-matter
of the South Australia cases to which Lord Hoffman had earlier applied
the same expression. The exception is justified as a deterrent against fraud
and because damages for fraud may be restitutionary. ‘Hobhouse LJ seems to have
expressed a contrary view.’ I read this as in effect saying that Downs v
Chappell is in conflict with Doyle. Downs v Chappell
is in accordance with the normal principle of liability for wrongful acts, but
out of line with the usual understanding that liability for fraud extends
without qualification to all losses suffered in consequence of having entered
into the transaction.
What is a first instance judge to do in
these circumstances? In Young v Bristol Aeroplane Co Ltd [1944]
KB 718, the Court of Appeal
decisions, but, as an exception to that general rule, it is entitled and bound
to decide which of two conflicting decisions it will follow. A first instance
judge is, I think, bound to do what the Court of Appeal would do. If Downs v
Chappell stood alone, it would not, I think, be open to a first instance
judge to decide that it was in conflict with Doyle, especially since
Hobhouse LJ refers to Doyle and applies it subject to the qualification.
But I read the unanimous opinion of the House of Lords as saying that Downs
v Chappell is indeed in conflict with Doyle, so that I conceive
that I am entitled and bound to decide which to follow. The South Australia
cases then, in my view, clearly indicate the answer, ie that I should follow Doyle
without the Downs v Chappell qualification.
Accordingly, in my judgment, Slough’s
first method applies the proper measure of damages on the facts of this case.
That produces a very large figure. A windfall is an unexpected piece of good
fortune. The expression does not necessarily imply that it is undeserved.
Damages may be undeserved as a windfall if they amount to or include sums which
the injured plaintiff ought not in fairness to receive. If, as I conceive, the
policy of the law is to transfer the whole foreseeable risk of a transaction
induced by fraud to the fraudulent defendant, and if, as I conceive, the court
does not speculate what, if any, different transaction the plaintiff might have
done if the fraudulent representation had not been made, damages on this basis
are not to be regarded as a windfall, but the proper application of the policy
of the law.
(b) Roof repairs
The roof of the Howard Centre is
defective. The evidence was that between £0.5m and £0.75m has been spent trying
to repair it but without success. Mr Carey said that it was thought that the
only solution was to reroof. A contract for remedial works has recently been
placed. That is expected to cost around £1.4m. The trouble is a combination of
design errors and construction faults. Slough are being advised about the
possibility of making claims against those responsible. The detailed position
was not explored in evidence but it is obvious that, where the designer can
blame the constructor and the constructor can blame the designer, such claims
are likely to be troublesome.
I conceive that for the purpose of
assessing damages for deceit under Doyle v Olby, defects in the
completed building are foreseeable (just as Lord Hoffmann’s climber’s accident
was foreseeable). This means that roof repair costs already spent, agreed to be
£813,075 and which are included in the £76,863,625 are to be brought into
account.
Mr Creamer considered that a deduction in
the region of £1.4m should be made from the agreed valuation of £27.4m to
reflect the cost of the required repairs. He agreed that a seller would resist
such reduction and that he might offer to assign his rights against those
responsible. It would then be a matter of judgment whether the vendor would
pursue those responsible or not. (I observe that the problems inherent in such
an assignment might make it seem pretty unattractive, but it might not be
regarded as valueless.) Mr Rand did not agree that there should be a reduction
of £1.4m. He said that it would depend on the market. There might be no
reduction. There would probably be negotiations about who should bear the cost
and an investigation about the strength of the claims. Some reduction, he
thought, was probable.
I prefer Mr Rand’s approach here. It
seems to me that in the real world there would be a negotiated reduction with
an outcome which would probably favour the purchaser (a) because there would be
horse trading which would reduce the £1.4m and (b) because it is more likely
that Slough would be left to pursue claims against third parties. I assess the
reduction in the valuation at £500,000.
(c) Vendor’s realisation costs
Since these are not going to be incurred,
I consider that Slough should not have the benefit of them.
Damages — summary
On the findings which I have made, Slough
are entitled to £76,863,625 — (£27,400,000 — £500,000) = £49,963,625 less sunk
costs incurred before April 22 1987. Upon figures which have been provided for
different dates, it looks as if these costs will be between £1.5m and £2m in
total so that the eventual damages figure will be around £48m. Slough do not
pursue their claim for exemplary damages in deceit, although they reserve their
position should other causes of action become relevant.
Contingent finding of fact on damages
I have decided that Slough’s second
method of assessing damages is not appropriate, but I am asked to determine the
factual issue between Mr Creamer and Mr Rand.
Mr Creamer and Mr Rand disagree about
whether the value of the Howard Centre as at September 24 1988 would have been
less (and if so by how much) if the TMA was not in place for 85,000 sq ft at
Park Plaza than if it was. September 24 1988 is a date just after Slough
committed themselves to the Howard Centre development agreement and the
construction contract with Tarmac.
I shall refer to a valuation which
assumes that the TMA was in place as ‘valuation A’ and to the valuation which
assumes that the TMA was relaxed as ‘valuation B’.
Mr Creamer’s valuation A was the
aggregate of the costs to Slough of acquiring the site — £1.8m. The defendants
do not dispute this valuation. Mr Creamer checked this figure, which he
regarded as the best evidence, by doing a series of residual calculations —
these were not in his report. Mr Rand agreed that the figure was in the right
area, especially since Slough had historically bought out their partner,
Charlecote, a few months earlier for £1m. He carried out no independent
valuation. He looked at and checked Slough’s contemporary appraisal and
considered it reasonable. He had made no separate workings.
Mr Rand agreed with Mr Creamer that Slough
took a reasonable approach to the appraisal of the Howard Centre site in
September 1988 (23/5586). He agreed that the 10.8% developers’ profit was at
the lower end of the scale for developments of this kind. He agreed that, if an
additional factor put the same calculation below 10%, that would cross the line
of viability. He did not agree that in that event Slough would not have
proceeded. This was because there were other factors (eg prospects of rental
growth) which would have influenced Slough. He did agree that, if a reasonable
calculation fell below 10% for developers’ return, Healey & Baker would
have advised against proceeding with the scheme.
Mr Creamer’s valuation B was minus £11m.
This was based on a residual valuation. He was referred to cases decided in the
Lands Tribunal and agreed that such valuations require great care both because
small adjustments in some variables are enlarged by extension and because
different genuine judgments can produce large differences in the result. But
here Slough’s own development appraisal was itself a residual valuation. Mr
Creamer had at appendix 8 of his report his account of valuation theory and
methods. His section 5 says why the residual method is appropriate — there are
so many variables in shopping centres that a comparison method (often resulting
in a value per acre is very difficult and inappropriate. There are scarcely
ever any proper comparisons. Mr Rand agreed that there was no other practical
method of valuing the site or the development than a residual calculation. He
agreed with Mr Creamer ‘that in the case of shopping centre development sites
the residual method is usually more appropriate that the comparison method
because the individual circumstances connected to each site have a significant influence
on value’ (6/597). He agreed that a developer would have made a development
appraisal of the kind made by Slough. He agreed that Slough’s appraisal was
made upon the assumption that the TMA was in place but maintained that Slough
did not place much reliance on it. He considered that a developer would in
September 1988 have considered all factors affecting the property including the
total amount of competing floorspace both existing and proposed in the
surrounding
percentage of the proposed competing floorspace (7/933).
Appendix 1 to Mr Rand’s supplementary
report lists existing and proposed competing retail centres. He agreed that the
main competitors were those coming on stream at about the same time. In this
context, the Gallerias was a competitor with the Howard Centre. Slough suggest
that the only significant competition was at Watford and Hemel Hempstead. Mr
Rand agreed but said that a developer would also take account of Lakeside which
was 35 miles away but had influenced the shopping as far as the Welwyn area.
Distance, he said, is a factor but it depends on the strength of the magnet. He
agreed that relevant competition would tend to reduce rents. Some tenants would
only go to one scheme in an area. There may be delays in achieving the target
mix of tenants. There could, depending on national well being, be increased
letting incentives.
Mr Creamer’s valuation B is at his
appendix 15 (6/628A) and depends essentially on his assessments of rents and
yields. Slough’s development appraisal took a zone A rent of £70. Mr Creamer’s
valuation B assessed the zone A rent at £55 to £52.50 (see 6/626 where two
units are at £55 and quite a lot at £52.50). This adjustment reduced the rent roll
from c £2.8m to c £2.2m. He also measured the development agreement
floor plans which may have been slightly less than Healey & Baker’s
measurement which probably used earlier plans. He had a good look at evidence
in Welwyn for comparables. He found no evidence of rents at this high level.
The best rent was c £35 at rent review. He had not started from Slough’s £70
which took account of Marks & Spencer being effectively signed up. A third
party purchaser would not make that assumption, especially if the TMA was not
in place. He did nevertheless include the Marks & Spencer premium. He
therefore started at £65 and reduced this for the effect of the TMA being
relaxed. Slough’s appraisal was not made on the same basis as Mr Creamer’s
appraisal. Slough’s development appraisal was working out how profitable the
site was likely to be, not working out a value for a third party purchaser.
Slough did not value the site.
In the scale of retail towns, in 1988
Welwyn and Hatfield were significantly lower than Watford, St Albans,
Stevenage, Luton and Hemel Hempsted. Zone A rents were c £130 per sq ft in
Watford and around £100 per sq ft in the others. Welwyn had no town centre
shopping then and Mr Rand thought the existing zone A rent would have been up
to £45. There was no town centre at Welwyn at the time and historic rents in
Welwyn were not relevant. Statistics provided by Mr Rand indicated that Welwyn
and Hatfield are seen as one unit for catchment area purposes.
Mr Creamer increased the yield from
Slough’s 5.75% to 6.75%. It was suggested that reducing both rent and yield was
double counting. Mr Creamer said that they were entirely different points. Rent
is the amount of the rents payable at the start by tenants. Yields are for
anticipated performance, ie rental growth. He said that investors would be very
concerned about performance with competition from the Gallerias. Another factor
is a likely poorer covenant strength. Good tenants would go to one development
or the other not both, so you would dilute the good quality demand.
Mr Creamer agreed that this was the best
site in Welwyn Garden City upon which some development would take place. It was
not odd that his valuation B was negative, since the valuation assumes that
Slough were committed to carrying out the development. It did not follow that a
developer who was given £12.8m as a present would be in a position to proceed
with equanimity since in the real world the developer would not have completed
the scheme.
Mr Creamer assumed that a notional
purchaser would have looked at the TMA. It was suggested that no notional
developer would attach much importance to the TMA. Mr Creamer did not agree. He
had assumed that the notional purchaser would reckon that the TMA would be
enforced. There was a possibility that Park Plaza planning conditions might be
changed. He read that TMA as a document of importance to WHDC which was almost
set in stone. A purchaser has to take it at face value. He agreed that at the
time of the Park Plaza inquiry Slough and others had expressed scepticism. But
things had moved on. The notional purchaser would not be sceptical if he had
been through the endorsement process which Slough had. He did not agree with Mr
Rand’s opinion that a notional purchaser would have been sceptical of the
enforceability or permanence of the TMA. The TMA was a private agreement
between landlord and tenant which they could as between themselves agree to
alter. It expressly provided for the possibility of some consensual relaxation.
But Mr Creamer did not see this as a blank cheque. The notional purchaser would
not just look at the document. He would do a lot of research, for example by
talking to WHDC and Slough. Any document such as this would have grey areas. Mr
Creamer did not believe for one minute that Slough would have gone ahead with
the Howard Centre if things had got worse than their perception as expressed by
Mr Carey on December 16 1986 (18/3550) in reaction to Mr Asquith’s letter of
December 2 1986 (18/3508). It was to Mr Creamer perfectly obvious that, if there
was 85,000 sq ft competition close by, any notional purchaser would make
adjustments to his calculations.
Mr Rand considered that an experienced
surveyor or developer would have been aware of the possibility that the TMA
would be difficult to enforce both practically and in the event of changing
market conditions. He did not believe that the absence of a TMA would have
caused any experienced developer to reverse their decision to develop the
Howard Centre. He did not agree with what he described as a highly subjective
residual assessment made on behalf of Slough upon an assumption that the TMA
was relaxed.
Mr Rand accepted Mr Creamer’s general
approach but he did not think that it was possible to quantify accurately a
difference in value by calculating reductions in rents and yields. It would be
entirely subjective and he could put in any figure he liked. In general, he
agreed that increased competition would decrease rents. But the state of the
market in September 1988 was such that rents would not have been decreased.
There were sufficient overriding factors to give this result. In September
1988, there was no talk of rent free-periods or other incentives. A developer
would have expected that he could make up lost rent in the future. The
Gallerias would have competed, but no more than other surrounding developers.
There might have been an element of delay taken into the calculation. He did
not accept Mr Creamer’s reduction in rent. He thought that a cautious developer
might make some small adjustments in the light of a very strong market. He
might have put a contingency of perhaps 5% into gross development value — it
would have reduced the £44.724m. (6/619) by about £2.23m, which would reduce
the net profit to Slough to about 5% (6/621). Not all developers would have
made this adjustment. In re-examination he said that a cautious developer would
not have made such an adjustment in the climate of 1988.
In the last year, the Howard Centre has
become almost completely let. Mr Rand said that it was 60–65% let by floorspace
when it opened in 1990. This included the very large space let to Marks &
Spencer. He agreed that a developer often makes his money from the unit shops.
There were 42 unit shops at the Howard Centre. At the Gallerias, there were
about 70 comparable units. 85,000 sq ft equates to about 34 such shops. He
agreed that smaller lettings to good tenants could have a knock-on effect in
attracting other tenants. It is crucial to time opening to a time when enough
tenants are trading to make it viable. He did not consider that failing to get
enough tenants initially would permanently damage a scheme. If a shopping
centre is not adequately let, there is a danger that shoppers would not go back
but go to a rival scheme instead. If it is perceived that a scheme has not
taken off, that can discourage prospective tenants. Five years should be enough
to reach maturity. This has generally been so during the recession. 25-year
leases are regarded as desirable especially if you have an eye to selling to an
institution. Mr Creamer considered that it would have been difficult to change
the Gallerias from an established leisure directed scheme into an ordinary
shopping centre after five years. Mr Rand agreed that a developer would have
considered that five years was sufficient to establish the Howard Centre.
Mr Creamer gave details indicating that
on average capital contributions per square foot paid by Carroll as incentives
were
agreed that large incentives would tend to attract tenants away from competing
schemes and that the total of incentives at the Gallerias was great. Mr Creamer
also expressed the opinion that about 15 Park Plaza tenants listed as
non-conforming tenants would have been suitable tenants for the Howard Centre.
Mr Rand agreed that some could have come to Howard Centre, eg Principles,
Levis, Body Shop (who went there in due course) and Stylo Barratt. These were
the sort of traders which Howard Centre might well have approached. But it was
not possible to quantify financially the effect of any competition from the
Gallerias except to say that it would be minimal compared with market effects
and other competition.
Mr Rand said that the Gallerias was not
seen as greatly competitive with the Howard Centre. It was seen by many as a
leisure-based development. He agreed that after five years and the expiry of
the TMA there would be competition. He broadly agreed that with the TMA in
place the Gallerias would not have competed with town centre retailing. He said
that Howard Centre had not suffered permanent damage now that it is virtually
fully let. The initial round of letting in 1990 especially on the ground floor
was quite good. Later lettings slowed down and then damage was done. It was the
same with every single shopping centre. This was not caused by Gallerias, but
by the market.
WHDC attack Mr Creamer’s valuation B as
being based on a false premise in that he compared a situation where there was
no TMA with one where it was 100% watertight. Mr Creamer certainly agreed that
this is what he had done, but the essence of his evidence was that reductions
had to be made if the TMA was not in place. It is suggested that a residual
valuation is unreliable. Mr Creamer accepted that it needed great care, but Mr
Rand agreed that there was no alternative for this shopping centre. It is
suggested that Mr Creamer had no comparables for his rent figures. This is
correct, but the evidence was that there were no comparables for Welwyn. It is
suggested that Mr Creamer was not comparing like with like when he was
comparing a notional residual valuation with Slough’s development appraisal.
That was not, however, Mr Creamer’s evidence. He was comparing two valuations
of his own. His valuation A and Slough’s development appraisal produced the
same figure for the relevant element.
I judged Mr Creamer’s evidence to be
open, confident and convincing. He was completely unshaken in cross-examination.
Mr Rand was, I thought, less comfortable. The difference between them really
boiled down to the question whether an experienced developer would have
regarded enforcement of the TMA as important and would have seen unrestricted
competition from the Gallerias as sufficiently material to affect a valuation
or appraisal. I have held that Slough in fact regarded this as important. As a
separate and additional judgment, I agree with Mr Creamer and accept his
evidence that it is perfectly obvious that if there was 85,000 sq ft
competition close by, any notional purchaser would make adjustments to his
calculations. I reject the notion that even a cautious purchaser would have
sailed ahead regardless upon the heady tide of 1988. Slough in fact made a
detailed development appraisal and I prefer Mr Creamer’s opinion that an
equivalent valuation appraisal would have made some adjustment if the TMA were
known to have been relaxed. Mr Rand did not offer a competing intermediate
calculation, so that, upon my acceptance of Mr Creamer’s case for a reduction,
his calculation is the only one in the field. I do not consider that the
credibility of individual elements of his valuation B was undermined such that
I should assess them differently. I find therefore that the difference in value
on September 24 1988 between valuation A and valuation B was £12.8m.
[On July 30 1996 the following
judgment was delivered.]
May J: I am giving judgment as at
yesterday in this action between Slough Estates and Welwyn Hatfield District
Council for £48,551,191 plus discretionary interest of £484,528; a total of
£49,035,719.
That is a huge sum and I am satisfied
that its immediate payment would be beyond any reasonable view of the council’s
means. Judgment Act interest on that amount, if it is not paid, would be in the
order of £4m a year.
This is an application by the council for
a stay of judgment pending a proposed appeal to the Court of Appeal. If, as a
result of that appeal, the judgment is upheld in full, the council will, of
course, have to find ways and means of raising the money.
The jurisdiction to consider granting a
stay is in Ord 59, r 13, which provides that an appeal shall not operate as a
stay of execution except so far as the court below or the Court of Appeal or a
single judge of that court shall direct. There is thus a discretion and there
is guidance in cases about how the discretion should be exercised.
One ground, but not now the only ground,
upon which a stay might be granted, would be if the defendants satisfied the
court that if the damages were paid there would be no reasonable prospect of
recovering them if the appeal succeeded. This is not suggested in this case.
Indeed, it is not suggested that Slough should provide security for any such
repayment.
Mr Lyndon Stanford referred to
19th-century cases when the practice was more restricted than it is today. He
also referred to Marine & General Mutual Life Assurance Society v Feltwell
Fen Second District Drainage Board [1945] 1 KB 394 where a defendant
seeking a stay or a statutory body, and where Evershed J held the possible
prospect of bringing their drainage operations to a standstill was no ground
for depriving the plaintiff as the judgment creditor of his right to levy
execution.
The more modern law and practice may
conveniently start with the decision of Staughton LJ, sitting as a single judge
at the Court of Appeal in Linotype-Hell Finance Ltd v Baker
[1992] 4 All ER 887. In that case Staughton LJ said at p888:
In the Supreme Court Practice 1991 vol 1,
para 59 13 I there are a large number of nineteenth century cases cited as to
when there should be a stay of execution pending an appeal. At a brief glance
they do not seem to me to reflect the current practice in this court; and I
would have thought it was much to be desired that all the nineteenth century
cases should be put on one side and that one should concentrate on the current
practice.
It seems to me that if the defendant can
say without a stay of execution he will be ruined and that he has an appeal
which has some prospect of success, that is a legitimate ground for granting a
stay of execution. The passage quoted in the Supreme Court Practice from Atkins
v Great Western Railway Co (1886) 2 TLR 400: ‘As a general rule, the
only ground for a stay [of execution] was an affidavit showing that if the
damages and costs were paid there was no reasonable probability of getting them
back even if the appeal succeeded’ seems to be far too stringent a test today.
The lord justice then went on (at p888h) ‘It is my opinion, an arguable
appeal’.
I am not the best person to judge whether
the council have an appeal with some prospects of success, since every judge
will, naturally, consider that his own decision is correct. There is, however,
a transparent ground of appeal to be seen in the judgment itself on the measure
of damages in this case for deceit.
Mr Lyndon Stanford suggests that there is
no reasonable prospect of even a successful appeal resulting in anything other
than very substantial damages. Mr Porten submits, as he did at the trial, that
the application of the Downs v Chappell [1996] 3 All ER 344
qualification if the Court of Appeal were persuaded that it should be applied,
might result in a nil award because Slough have not established any loss on
that basis, or that any quantified loss on that basis is likely to be less than
£10m. Mr Lyndon Stanford submits that a middle position might be seen as
something over £20m.
Except to say that the indicated avenue
of appeal on this point might conceivably, if it were successful, go to the
whole of the judgment, but that it is perhaps more likely to go to part of it,
it is not appropriate or necessary for me to say more, nor in particular to
attempt to quantify even descriptively the council’s prospect of success.
In Winchester Cigarette Machinery
v Payne (No 2), a decision of a full Court of Appeal on December 10
1993, unreported in full, but of
said:
The prospect of success of the ground of
appeal appear to me to be not impressive, but it is not suggested that it is
unarguable.
He referred on the second page to a
submission that the approach should be as a matter of commonsense and the
balance of advantage. On p3 of the transcript, he said:
As Hobhouse LJ pointed out in the course
of the argument, the existence of the ground of appeal cannot by itself amount
to a sufficient reason to grant a stay because the rule provides otherwise. No
practice can properly take away the discretion to refuse or grant a stay if as
it appears to the court just to do so on the facts before it.
Then a little later on he referred to the
case of Linotype-Hell Finance Ltd v Baker, in these terms:
Staughton LJ referred to the citation of
the passage from Atkins set out in the Supreme Court Practice (1991),
limited to the words to the effect that as a general rule the only ground for a
stay is the probability of nonrecovery and said that that seems to be a far too
stringent a test today. If a defendant can say that without a stay of execution
he will be ruined, and that he has an appeal which has some prospect of
success, that is a legitimate ground for granting a stay. For my part, I
respectfully agree with the decision of Staughton LJ in this case and that the
prospect of financial ruin may provide a legitimate ground for stay. Such facts
may, of course, amount to ‘some other reason’ as contemplated by Lord Esher in Atkins
v Great Western Railway Company.
Ralph Gibson LJ then cited a judgment of
Balcombe LJ in Rimgee v Shapwanee, which was in these terms:
The principle to be applied in cases of
this kind is laid down in a series of cases largely in the late 19th/early 20th
century which can be summarised in the phrase that a person who has a judgment
is not lightly to be deprived on the fruits of that judgment, and therefore in
granting the stay one starts with the assumption that where someone has a
judgment, as in this case the defendants have a judgment, under the Millett
order for costs, this court should not stop the plaintiffs from exercising the
necessary court proceedings in order to have the benefit of that judgment even
though an appeal is pending.
As Staughton LJ said quite recently the
practice of the court has moved on and I believe he is right in saying that one
approaches this really as a matter of commonsense and balance of advantage.
Ralph Gibson LJ then said having quoted a
little more of Balcombe LJ:
I respectfully agree with the approach of
Balcombe LJ to the question, namely that one starts with the assumption that a
successful plaintiff is not to be prevented from enforcing his judgment even
though an appeal is pending.
I also agree that the practice of the
court has moved on in that the increased work of the court has produced more
examples of other reasons in addition to prove the improbability of recovery
which Lord Esher MR contemplated in Atkins v Great Western Railway
Company. I do not disagree with the formulation of the balance of advantage
provided that in holding that balance full and proper weight is given to those
starting principles, that there must be good reason to deprive a successful
plaintiff of the right to enforce his judgment and that the mere existence of
an arguable ground of appeal is not by itself such a reason.
He then said that the practice had become
considerably less rigid than it used to be, and continued on p4 of the
transcript:
The fact that more and/or different
factual situations have been recognised as capable of constituting a sufficient
ground for the grant of a stay of execution of a money judgment has not, in my
judgment, reduced the importance of the starting principles to which I have
referred.
Hobhouse LJ in the Winchester
Cigarette case on p5 said:
It is however [‘it’ being Ord 59, r 13]
gives to the court or single judge an unfettered discretion to order a stay.
There must be some ground for ordering a stay beyond the fact that an appeal is
pending. The discretion is not circumscribed. It therefore should be exercised
judicially having regard to all the circumstances of the case.
A little later on he said:
Since the discretion is unfettered, no
authority can lay down rules for its exercise. All that can be done is to say
it must be exercised judicially and to provide guidance.
In relation to a money judgment it has
been recognised that it is relevant that the appellant might be unable to
recover from the respondent the sum ordered in the event of the judgment being
set aside on appeal: see for instance Atkins v Great Western Railway
Company.
It is also relevant that the appellant
can say that without a stay he would be ruined regardless of the outcome of the
appeal [see Linotype-Hell Finance] or that the appeal would have been
impossible or academic [see various illustrations]. Limit should not be imposed
on situations in which the court may exercise its discretion provided that it
does so judicially, but in any case, the terms of Ord 59, r 13 must be
recognised. The appellant must show some special circumstances which take the
case out of the ordinary so that the ordinary rule should not apply, and that a
stay be granted.
If showing that such circumstances exists
involves making good factual submissions, the facts have to be made good by
evidence.
Within the ambit which I have quoted I am
to exercise a discretionary jurisdiction as a matter of ‘commonsense and
balance of advantage’, to quote Balcombe LJ I take the balance of advantage to
be equivalent to balance of fairness between the parties.
Mr Lyndon Stanford submits in summary
that this Winchester case may be taken to indicate the following:
First, that a stay of a money judgment
has its own consideration and for a money judgment it is unlikely that the
balance of convenience will be material. A good ground of appeal is not by
itself sufficient. The starting point is that the plaintiff should not be
prevented from enforcing his judgment without special circumstances amounting
to ruin. It is irrelevant that the plaintiff would not miss the money. The only
considerations, he submits, so far as apply to money judgments, would be if the
plaintiff might be unable to repay, or that the defendant would be ruined.
Inconvenience to the defendants, short of ruin, he submits, is not enough. The
applicant has to show sufficient circumstances by proper evidence.
Mr Lyndon Stanford submits that the
council do not make a sufficient case and that their evidence is inadequate. He
submits, by way of parallel, that a rich individual who has not made prudent
provision for an anticipated judgment should not expect not to have to tighten
his belt considerably and dispense with all the essentials.
The evidence from the applicant council
comes from two affidavits of Mr Saminaden. Mr Porten refers, in particular, to
paras 6, 7, 35 and 36 of those affidavits. Para 6 reads as follows:
The 1988 Act identifies certain
accounting practices to be followed by local authorities and which constrain
the Council’s powers to raise revenue. Part 4 of the Local Government and
Housing Act 1989, contains provisions as to revenue accounts of local
authorities and controls on their borrowing and capital finance. Section 41 of
the 1989 Act requires any expenditure made by the Council in satisfaction of
the judgment debt to be charged to its revenue account as it is not expenditure
falling within the provisions of Section 42 of the Act. Given this restriction
the Council must first look at revenue resources to seek to satisfy the debt.
For reasons I explain below the Council’s current revenue resources are
manifestly insufficient to meet a debt of the magnitude involved and given the
matters which were identified below, the Council is unable to utilise its
capital resources to pay the debt. Even if the Secretary of State for the
Environment were to be persuaded to employ his discretionary powers under the
legislation to permit the Council either to discharge the liabilities of deemed
capital payment of the Borrower to repay the debt, or a combination of these,
the Council would still be constrained in the realisation of its capital
resources which are protected by other legislation as well as its duties to
provide and maintain a number of services to the community, the cost of
borrowing, the loss of interest from its assets which are invested.
These restrictions mean that the Council
is presently unable to satisfy the judgment in full, if it were to become
immediately due to the Plaintiffs. And if no stay is ordered the community to
whom the Council provide the services would suffer irreparable harm in the loss
or diminution of services. These consequences will follow in any event should
the Council be required to pay over any substantial proportion of the judgment
sum pending the determination of the appeal. Such harm would be incurred
unnecessarily in the event that the appeal was successful and I believe that no
repayment by the Plaintiffs at that time could remedy the harm.
The affidavit then goes into detail of
various accounts, funds and reserves to which I shall return. In summary in
para 35, Mr Saminaden says:
The funds immediately available to the
Council to satisfy this judgment are limited. I have identified them above as
follows:
(a) The sum of £0.9 million from general
balances. The use of this would lead the Council with no balance to meet
unforeseen contingencies;
(b) A sum amounting to some £2.9 million
being the aggregate of the amounts I have shown to be available from earmarked
and allocated reserves. The use of this sum would have two consequences: (1)
the Council would be unable to carry out programmes for which those monies had
been carefully set aside with no prospect of replacement funds becoming
available within the budgets for the years 1997 to 1999 inclusive; (2) the
Council would suffer loss of interest on these sums which it would have
earmarked whilst they remained unspent and which I estimate to be in the order
of £100,000 a year. I have explained above that in order to maintain existing
service levels against the background of expenditure limitation, the Council is
dependant on such interest. If this money were not available, the Council would
have no choice but to reduce its expenditure on services.
(c) A sum of £6 million, which is the
amount in the Business Rates Suspension Account and, as I have said above, may
need to be returned to the Department of the Environment. I have explained that
the Council has prepared its budget plans for future years in the expectation
of using the interest on this money estimated at £450,000. Again, as I have
explained above, the Council is dependant on this interest to avoid cuts on
expenditure and services.
In the time available for the preparation
of this affidavit, I have not been able to make detailed assessments of the
precise effect on the delivery of the Council services of any range of payment
to satisfy the judgment debt. In broad terms, however, it appears to me that:
(a) The Council cannot pay the total
judgment debt immediately.
(b) The Council could pay a sum of up to
£2.9 million, I have identified as available from reserves, without immediate
adverse effect on services.
(c) If the Court should order payment of
more than £6 million immediately, the Council will face exceptional difficulty
in maintaining its existing level of activities.
Mr Porten explained that (b) and (c) are
cumulative; that is to say, the £2.9m is from various funds and the £6m
represents the business rates suspension account sum.
(d) If the court should order immediate
payment of all the sums I have identified above as available, totalling £9.8
million, the Council would find it impossible to maintain its existing level of
statutory duties and its discretionary services. I have explained that the
Council cannot borrow to make good any shortfalls in its required revenue;
therefore, as the Council has little scope to reduce its spending on its
statutory duties, the burden of reductions would fall on its discretionary
services, the nature of which I have set out above.
(e) If the court should order payment of
more than £12 million immediately, the Council would be forced to cease many of
its discretionary activities with no possibility of other agencies meeting the
needs of disadvantaged groups currently met in the community by their services.
It would need to close public service buildings; it would be forced to neglect
the condition of public spaces; to withdraw grants to voluntary bodies; to
cease support to business development initiative and economic regeneration; to
scale down the statutory services to the absolute minimum and to make redundancies.
Further, it is my considered opinion that services which are provided pursuant
to statutory duties would be at risk and the Council would be vulnerable to
mandamus actions by local residents in respect of any such failure.
(f) The consequences I have referred in
regard to d) and e) above would, in my view, be gravely harmful to the
residents and business community in the district of Welwyn Hatfield. The
repayment of monies in due course, if the Council’s appeal were to succeed,
would not, in my judgment, repair the damage caused.
The council have resolved to adopt a
policy of savings intended to accumulate the money to meet the contingency that
the appeal fails or is only partially successful. Mr Lyndon Stanford suggests
that this should have been done much earlier and points to the fact that in
July 1991 the council apparently had to choose between being in breach of
contract to Carroll and risking liability to Slough, a risk which they then
thought might amount to as much as £20m. It was, says Mr Lyndon Stanford,
imprudent not to provide for this.
It is clear that there are stringent
statutory limitations upon a local authority on what money may be used for
what. To use capital funds to meet a judgment generally requires sanction from
central government. Inquiries have been made which, not surprisingly, show that
such sanction might or might not be granted.
Mr Porten submits that capital reserves
are a matter of extreme complexity. He submits that services are not easily
disposable even if, perhaps, they are not in absolute terms essential.
General submissions which Mr Porten makes
include the following: that the damages which have been awarded are not to be
seen as money which has enriched the defendants. I agree. He submits that there
is a balance of advantage which shows a clear disadvantage to the defendants
and no evidence of disadvantage to the plaintiffs if they are not paid
immediately.
Mr Lyndon Stanford submits, and I agree,
that this is not a material consideration in the light of the Winchester
Cigarette judgment.
Mr Porten says that no stay is sought in
relation to the costs order which is likely to exceed £1m. He says — and this
is an inevitable condition of any stay — that the council will seek to
prosecute the appeal with expedition. He points out that the council has
resolved to save money against the eventuality of having to pay the judgment in
full or in part after an appeal. Mr Lyndon Stanford submits this is
unsatisfactory, and he also submits that it looks as if expenditure is being incurred
while the application for a stay is in progress. However, Mr Porten has
satisfied me in two particulars that are referred to that this is not so.
Mr Porten submits that this is an unusual
position because one is dealing with the local authority who cannot satisfy a
judgment immediately and because there is so much by way of statutory control.
The evidence he suggests is that revenue resources are inadequate and that
freeing of capital is not easily to be achieved; it will depend on authority
from central government. The restrictions, he submits, flow from primary
legislation including sections 59 and 60 of the Local Government and Housing
Act 1989. Payment, he submits, will have to be met from other resources and
that will, on the evidence, lead to a reduction in services. Such reduction
will be felt by those who most rely on those services, for example the elderly
and those in need. Later repayment will not, he submits, remedy hardship thus
caused. The plaintiffs, he submits, appear to be saying that the consequences
of making payment should nevertheless be borne, but he submits that most
discretionary services are welfare services.
Mr Lyndon Stanford submits that the
evidence does not show any exact programme for dealing with the consequences of
the judgment and that the evidence provides no means of knowing in detail
whether cuts in services would or would not fall on the elderly or
disadvantaged.
Mr Porten submits that freeing capital
will take some time and, as I have said, that revenue resources are not in any
event available to satisfy the judgment. He submits that there would be
irreversible hardship even if the appeal succeeds; this application was for a
stay of the whole of the judgment.
It is necessary to look in rather more
detail at the evidence of the money which might be available. This may be found
in paragraphs, beginning with para 13 of Mr Saminaden’s first affidavit, and
there are summaries that may be referred to in the second exhibit to Mr Dallas
affidavit on behalf of Slough.
The first of Mr Dallas’ notes, starting
on his p2, compares his assessment with Mr Saminaden’s assessment of money
available from various funds. Mr Saminaden has totalled and summarised these
amounts as the £2.9m to which I have already referred. Mr Dallas reckons, with
the assistance of Mr Hopkins, that that sum from those sources should be seen
as something over £5.3m.
Slough, in effect, submit that anything
which is not contractually committed should be taken as available and that
services which the council provide should be pared down to bare essentials
only. It is suggested, for instance, but only as an example, that payments
required by the Ombudsman should take second place to Slough’s entitlement to
their judgment.
Mr Saminaden’s evidence is that only the £2.9m
should be regarded as available because the services for which the balance of
the money is earmarked are essential and because an expenditure, which is
committed but not necessarily contractually, should not be overlooked. So there
is a difference of opinion, if those are the right words, as to how much is
available from those sources.
The next amount is that referred to in
para 14 of Mr Saminaden’s affidavit. It is a sum of £6m in a business rate
suspension account. There is doubt whether this amount is, in due course,
repayable as an overpayment to the Department of the Environment. Meanwhile, it
earns valuable interest and helps balance an already stretched budget. It
appears that the question whether it is repayable or not is unlikely to be
resolved for at least two years. Slough submit that it should go, meanwhile, to
meet the judgment.
There is then a general fund balance for
contingencies. Mr Saminaden’s evidence that, of sums in this account, £0.9m
might be made available. On a slightly different calculation and with the
benefit of an opinion from Mr Hopkins as to what a suitable reserve might be,
Slough suggest that £1m is available from this source.
Slough further suggest — and this is
summarised on the first page of Mr Dallas second exhibit — that savings are
capable of being made on 1996/1997 revenue and that further savings are capable
of being achieved from 1997/1998 revenue. The calculation extends for that
period upon the footing that it might take that long to bring an appeal before
the Court of Appeal.
As to capital receipts, Slough say that
appropriate applications should be made to central government and that the
court should expect that these will be granted. There is, however, a clear
statutory distinction between usable capital receipts and reserved capital
receipts to be seen in the distinction between section 59 and section 60 of the
1989 Act.
In the result, Slough submit that there
are nearly £15m available from resources without the sanction of the Department
of the Environment and they further say that capital resources should be made
available to cover the balance of the judgment. As to capital receipts, a
letter from Mr Riddle confirming a conversation with an official of the
Department of the Environment — Mr Riddle’s letter being dated July 17 1996 —
says that the council have approximately £9m in usable capital receipts. The
official from the Department of Environment writing back, said, of sums of that
nature, that the department would consider a request from the council for a
direction under section 40(6) of the 1989 Act:
I cannot give a definite view as to the
outcome, though I can say that such directions are given fairly frequently in
response to authorities’ requests.
It appears that there is, therefore, a
strong hint from the department that sanction would be given in relation to Mr
Riddle’s £9m. Needless to say, if that were paid there would be a loss of
interest.
Mr Lyndon Stanford submits that the
council are not above the law and that it is not only a question of how much
should be paid now, but how the council would pay if the appeal fails. He
invites me to look at what steps are being taken to enable the council to do so
in that eventuality and submits that the evidence is unsatisfactory in that
respect. He submits that the evidence overall is extremely woolly; that there
is nothing that can be grappled with; and that it is for the applicant to
establish appropriate facts by appropriate evidence.
How essential, he asks, are essential
services? There is nothing, he submits, that is concrete here. That, he
suggests, puts not only Slough but the court in difficulties. He submits that,
in any event, the evidence does not add up to ruin. The evidence, he submits,
is so rolled up that it is not possible to see to what extent vulnerable people
would suffer. He submits it is not right to act upon such vague evidence. He
complains that the council have no concrete proposals for raising the money if
they have to and that I should not be seduced by vague proposals. There is no programme,
he suggests, even for meeting the interest on the judgment. He submits that the
whole of the judgment could and should be met in the short term from cash
reserves and by borrowing; in the longer term, the council should embark on a
programme of disposal of their fixed assets if that is necessary.
As I have said, the starting principle is
that the plaintiffs should not be deprived of the fruit of their judgment
without good reason amounting to special circumstances. I take that from the Winchester
Cigarette case to which I have referred. The existence of a ground of
appeal cannot, by itself, amount to sufficient reason.
I have held in another case relatively
recently involving individuals that acute and irreversible financial and
personal hardship to individuals is to be equated with ruin. That could occur
if meeting a judgment subject to appeal meant that, for instance, individuals
had to sell their houses. This, of course, is a case which does not concern
individuals. It is an unusual case. You do not often get a local authority
applying for a stay, but then you do not often have a local authority with a
judgment against them of around £50m.
It may have been acceptable 50 years ago
for a drainage authority to be rendered incapable of performing their statutory
function by a levy of execution in favour of a judgment creditor, but I
question whether that would be regarded as acceptable today. There is a tension
between the interests of the party in whose favour the judgment has been given,
which is the starting point, and the extent to which in a discretionary
jurisdiction those who rely on council for what, I venture to say, are properly
described as the essential services should be deprived of those services.
In my judgment, if the strain which
meeting this judgment would obviously engender meant that, for instance,
services to the elderly or refuse collection services in the area had to be
materially curtailed, that should be equated in this case with acute and
irreversible personal hardship and to be equated (but the equation is obviously
not exact) with ruin.
Other local authority services are not so
essential. But it would, in my judgment, be a blot on the law, if hardship
resulting from withdrawal of essential services, of the kind to which I have
referred, where to be suffered by individuals who live in the council’s area
only to find that the appeal is allowed in whole or in part and that the
personal sacrifice was, with hindsight, unjustified.
Equally, I do not regard it as reasonable
to require serious dismantling of the council’s capital structure in
circumstances where a successful or partly successful appeal would render that
unnecessary.
I do not, for instance, regard it as
reasonable to suppose that in order to meet this judgment the council should
here and now set about selling some of its council houses, even if that could
be done, which I doubt, reasonably quickly.
Not withstanding Mr Lyndon Stanford’s
submissions about the quality of the evidence advanced, I am satisfied that the
position outlined in Mr Saminaden’s para 36 and especially his paras E and F is
broadly, but I emphasise the words ‘broadly’, established. I am persuaded that
there would be hardship to individuals if more than a proportion of the
judgment had to be paid now. I am persuaded that there are special
circumstances which make it unjust to make an order whose effect would be the
dismantling of part of the council’s capital structure.
There is, on the other hand, revenue
account money which on the evidence can be paid without undue hardship. There
is £6m which may not have to be repaid to the Department of the Environment and
will not have to be paid yet. There is, I judge, usable capital receipts for
which it appears that Department of Environment sanction may readily be
achieved. If some or all of this has to be paid, there will a loss of interest
which currently contributes to a balanced budget.
Mr Porten submits first of all, there
should be no payment condition of a stay, but against the suggestion that at the
least interest of Judgment Act rate should be paid as time passes, he submits
that any condition over that which requires payment of interest and costs
should not be imposed.
It in these circumstances becomes a
matter of broad judgment how much should be required to be paid and it will, of
course, be a matter entirely for the council how they achieve the conditions
which I am persuaded to impose.
Applying, to the best of my ability, the
principles which I have outlined, and adopting, as I hope, a common-sense
approach, I grant a partial stay pending appeal on the following conditions:
notice of appeal is to be lodged in accordance with the rules and the council
are to prosecute the appeal with diligence. There is a condition of a stay that
the council will pay £10m within two months of today.
In addition, the council should pay, as a
condition of the stay, interest at the Judgment Act rate on the unpaid balance
of the judgment. That should be paid at three calendar monthly intervals, the
first such payment to be made on or before November 1 1996 and, thereafter, at
three monthly intervals. That will result in payments at a rate of something
rather over £3m a year, once the £10m has been paid. The interest obligation
applies to the full amount of the judgment until the £10m is paid.
Those conditions will amount, if the
appeal were to take two years, to a total payment as a condition of the stay of
something over £16m. In addition, these payments will result in an interest
loss of something over £1m a year, so that the cost of the conditions may be
assessed at rather more than £18m. I say again, it is entirely up to the
council how they raise this money. I simply point out that as a matter of
arithmetic, the council’s evidence accepts that £2.9m may be achieved from
various funds and an additional £0.9m from the general fund, that makes £3.8m.
The usable capital receipts, subject to direction from the department, are £9m,
and the business rates special reserve is £6m. Those sums total £18.8m.
For further cases on this subject see p
123