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All reasonable endeavours

Bristol Rovers v Sainsbury's Supermarket Ltd [ 2016] EWCA Civ 160

When the Court of Appeal recently grappled with an obligation in a Conditional Contract between Bristol Rovers (1883) Limited (the owner of Bristol Rovers Football Club) and Sainsbury's Supermarkets to use "all reasonable endeavours" it was hoped that some additional clarity might be brought to the vexed question of what this means  In contract negotiations, when seeking to resist "all" in "all reasonable endeavours" negotiators are frequently accused of dancing on a pinhead and extending negotiations unnecessarily.  This is somewhat harsh because there is a clear distinction between, for example, the use of "best endeavours" (one rung down from a strict obligation, and imposing on a party the requirement to do everything that is humanly possible, regardless of the commercial impact on that party) on the one hand and "reasonable endeavours" (doing everything that is reasonable, but taking all relevant considerations into account) on the other.  "All reasonable endeavours" has popularly been regarded as somewhere in-between but closer to a requirement to take every available step.  Practitioners awaited the further clarification that the Court of Appeal might provide in Bristol Rovers (1883) Limited v Sainsbury's Supermarkets Limited.  Unfortunately, the judgment does not really explore the legal definition of "all reasonable endeavours" and is, in any event, highly fact-sensitive.  Nonetheless, the case does provide some useful lessons, in particular about the importance of having a written agreement and making sure that such written agreement properly and without ambiguity, expresses the intention of the parties.

Without exploring all of the facts of the case and the subsidiary issues which arose, including a lengthy discussion in the Judgment as to whether a section 73 Planning Act application constituted an appeal under the Agreement between the parties, and the activities of TRASH (a group of local residents and traders opposed to Sainsbury's development) the relevant facts are as follows.  The parties had entered into a conditional contract for the sale by Bristol Rovers to Sainsbury's of its current stadium, the Memorial Stadium on terms that provided for the Agreement to become unconditional, only if by "the Unconditional Date" the Store Planning Condition had been achieved.  An Acceptable Store Planning Permission meant a store planning permission containing no Store Onerous Conditions, one of which meant a restriction of the delivery and dispatch of goods to and from the store between particular hours.  Sainsbury's were required to submit a Store Planning Application within a particular timeframe and were to use all reasonable endeavours to procure the grant of an Acceptable Store Planning Permission as soon reasonably possible.  In the event of a Planning Refusal, Sainsbury's could at its absolute discretion pursue an Appeal but were obliged to do so if Planning Counsel confirmed such an Appeal had a 60% chance or greater of achieving an Acceptable Store Planning Permission on or before the Long Stop Date referred to in the parties' agreement.

Truncating subsequent events for the purpose of this summary, the initial response from Bristol City Council was to attach a condition to the planning approval which restricted somewhat Sainsbury's delivery times.  This constituted a Store Onerous Condition.  Sainsbury's agreed to pursue an application under section 73 of the Planning Act to obtain a permission which did not restrict delivery hours, without taking Planning Counsel's advice regarding chances of success and the application was refused.  Bristol Rovers argued that Sainsbury's had omitted various details from the section 73 application and had therefore not used all reasonable endeavours.  It was agreed between the parties that Sainsbury's would appeal against the section 73 application refusal but at the same time they did take Planning Counsel's advice, which arrived at a view that the prospects were less than 60%.  As a result, Sainsbury withdrew the appeal. 

To complete the story, Bristol Rovers (with qualified consent from Sainsbury's) proceeded with the appeal which ultimately was successful and resulted in there being no restriction on delivery times between the hours of 5:00am to midnight on any day.  However, by now Sainsbury's had realised that the economics of the proposed deal had changed and they wished to terminate the Agreement anyway.  Following the first appeal refusal, Sainsbury's exercised its right to terminate the conditional contract.

At first instance, the High Court rejected Sainsbury's submission that its obligation to use all reasonable endeavours to obtain a suitable planning permission ceased at the Cut Off Date provided for in the conditional contract; the obligation was said to continue until the expiry of the termination notice.  However, the Court also found that Sainsbury's had in fact exercised all reasonable endeavours and therefore fulfilled its obligation in that regard.  The Court found on the facts that Sainsbury's had taken the proper steps in its original section 73 application. 

This dispute then went to the Court of Appeal.  Once again, the Court found in Sainsbury's favour but rejected certain of Sainsbury's submissions (namely the contention that Sainsbury's obligation to use reasonable endeavours obliged it to do no more than make an initial planning application and one appeal, and that the operative date was the Cut Off Date rather than the date of expiry of the termination notice period).  Nonetheless, on its facts, Sainsbury had, according to the Court of Appeal, fulfilled its contractual obligation to use all reasonable endeavours to obtain an acceptable planning permission.

In not defining objective criteria for the use of all reasonable endeavours, the judgment has limited wider application on that particular issue.  Nevertheless, from the complex and interwoven facts, some interesting principles can be divined.  Firstly, the Court of Appeal did not consider that the use of reasonable endeavours extended to Sainsbury's having to consent to Bristol Rovers appealing the section 13 application outcome when Sainsbury's itself was no longer obliged to do so.  Bristol Rovers  sought to argue that because of the obligation in the Conditional Contract for the parties "to act in good faith in relation to their respective obligations in this Agreement" … Sainsbury's should not have restricted its consent relating to Bristol Rovers' application.  It was held that, as there was no contractual obligation on Sainsbury's to pursue any further applications, it did not amount to breach of good faith by relying on the contract between the parties.  On that particular issue, Sainsbury's may be entitled to feel somewhat aggrieved because the clause in the Conditional Contract goes on to oblige the parties "… to assist the other in achieving an Acceptable Store Planning Permission …".

Secondly, there was a protracted dispute between the parties as to whether a section 13 application constituted an "Appeal" for the purpose of the Conditional Contract between Bristol Rovers and Sainsbury's. (This issue had a bearing on what course of action would be "reasonable" for Sainsbury's to take in the circumstances.)  Both the High Court and the Court of Appeal held that, regardless of whether an interpretation of the relevant wording in the Conditional Contract meant that the section 73 application was an Appeal, an issue estoppel arose because both parties had proceeded on the basis that a section 73 application was an Appeal.  It would therefore have been unconscionable for the Court subsequently to override that and to allow Bristol Rovers to depart from what had been a common assumption at the relevant time.

Overall, having basically changed their mind about the financial viability of the proposed development at Bristol Rovers' ground, Sainsbury's were able to take advantage of some seemingly loose drafting in the Conditional Contract and to withdraw from the purchase.  Perhaps, given that the driver was a change of economic weather rather than any perceived judicial injustice, it is not possible to make an agreement dispute-proof.  Nonetheless, both parties would have been saved a lot of expense and inconvenience if ambiguity in the existing clauses had been removed and if clear provision had been made for the other eventualities that arose in this complicated abortive transaction.

By Mark Klimt

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.