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Away Win for Sainsbury’s against Bristol Rovers: Court of Appeal Considers Reasonable Endeavours and Good Faith Obligations

Away Win for Sainsbury’s against Bristol Rovers: Court of Appeal Considers Reasonable Endeavours and Good Faith Obligations

In Bristol Rovers (1883) Ltd v Sainsbury’s Supermarkets Ltd [2016] EWCA Civ 160, the Court of Appeal considered reasonable endeavours and good faith obligations in the context of detailed obligations.

Facts

In 2011 Bristol Rovers (1883) Limited (“Bristol”), the owner of Bristol Rovers football club, entered into a conditional contract (“the Agreement”) for the sale of its Memorial Stadium to Sainsbury’s Supermarkets Limited (“Sainsbury’s”).

Under the agreement, the stadium would be demolished and a retail-led mixed use development would be built on the site, comprising residential units and a Sainsbury’s superstore. Completion of the Agreement was conditional on Sainsbury’s obtaining planning permission for 24-hour delivery access. Any planning permission would be deemed “acceptable” if it was not made subject to “onerous conditions”, as listed in the agreement. Sainsbury’s was also contractually obliged to act in good faith and use reasonable endeavours to obtain said“acceptable” planning permission.

Sainsbury’s obtained planning permission that it did not consider “acceptable” as it did not provide for 24-hour delivery access. Following a failed appeal, Sainsbury’s asserted that it had lawfully terminated the Agreement for non-satisfaction of a condition precedent. Bristol argued that the Agreement was still active as Sainsbury’s had failed to use reasonable endeavours to obtain permission; it had not exhausted Bristol City Council’s appeals procedure.

A Chancery judge found that Sainsbury’s had validly terminated the Agreement. Bristol appealed, with permission from the judge herself.

Appeal Dismissed

A key issue before the Court of Appeal was whether Sainsbury’s refusal to allow Bristol Rovers to launch a further planning appeal in its own name breached the agreement via the obligations to use all reasonable endeavours to procure acceptable planning permission and to act in good faith. The Court agreed that it did not – the parties’ obligation to act in good faith did not require Sainsbury’s to consent to Rovers filing its own application.

The Court of Appeal agreed that in any event, the obligation to act in good faith only applied to the respective parties’ obligations under the contract. As the obligation to apply for planning permission only applied to Sainsbury’s, its lack of consent to allow Bristol Rovers to apply could not amount to a failure to act in good faith.

The case demonstrates how detailed drafting can reduce uncertainty about the scope of endeavours and good faith obligations. The judge took the view that it could not have been the parties’ intention that Sainsbury’s was obliged to consent to an appeal by Bristol Rovers on Sainsbury’s behalf.

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