"All reasonable endeavours" considered by Court of Appeal

Bristol Rovers football club entered into a conditional contract to sell its football stadium to Sainsbury's. The contract contemplated the demolition of the Memorial Stadium and the building of a Sainsbury's superstore. One of the conditions was that there should be no restrictions on delivery and despatch of goods to and from the store between the hours of 5am to midnight on any day. Over time the economics of the deal changed and Sainsbury's wanted to terminate the contract lawfully.

The contract required Sainsbury's to "use all reasonable endeavours to procure the grant of [acceptable planning permission] as soon as reasonably possible…". There was a further provision which obliged Sainsbury's to pursue an appeal against a planning refusal if planning counsel advised that such an appeal had a 60% chance or greater of achieving acceptable planning permission.

Bristol City resolved to grant, but did not grant, planning permission subject to restrictions on the times when deliveries could be made. These restrictions were unacceptable to Sainsbury's and ultimately agreed by the parties to be contrary to one of the conditions in the contract. Accordingly, Sainsbury's pursued an application under the Planning Act to obtain planning permission without the restrictions on deliveries. This application was refused. There was a disagreement between the parties as to whether this Planning Act application was an appeal within the meaning of the contract. Ultimately, and simplifying matters since both parties acted as if this application was an appeal, they were held to this, by way of an estoppel by convention, at first instance and on appeal.

Having obtained planning counsel's advice that an appeal of the refusal of the Planning Act application was less than 60% likely to succeed, Sainsbury's sought to terminate the contract on the grounds that one of the conditions had not been met. Bristol Rovers claimed that the contract had been terminated in breach of contract. Bristol Rovers lost at first instance and appealed to the Court of Appeal where it also lost.

Context

As Lewison LJ puts it in his book The Interpretation of Contracts: "An obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course, not all of them; whereas an obligation to use best endeavours probably requires a party to take all the reasonable courses he can. In that context, it may well be that an obligation to use all reasonable endeavours (or to do all things reasonably necessary) equates with using best endeavours." The Court of Appeal in this case did not grapple with these distinctions. Instead it focused on whether the obligation persisted at the relevant time and if so whether it had been breached.

"All reasonable endeavours" obligation did not end after first appeal

The Court of Appeal rejected Sainsbury's argument that its "all reasonable endeavours" obligation ended with an initial planning application which is refused (and an appeal would have less than 60% chance of success) or an unsuccessful appeal. It was clearly envisaged elsewhere in the contract that Sainsbury's might withdraw a planning application and submit another one where it was reasonable to do so or where to do so would enhance the prospects of obtaining planning permission. The Court of Appeal acknowledged that Sainsbury's obligation to appeal was qualified by the provisions about the 60% test but that did not mean the process came to an automatic halt after an unsuccessful appeal. Rather "it will do so when there are no more reasonable steps which Sainsbury's can take to secure the grant of [planning permission]".

If so, what did "all reasonable endeavours" entail?

Sainsbury's was not in breach of its "all reasonable endeavours" obligation by its failure to lodge a further Planning Act application. It was not obliged to do so unless planning counsel advised that it had passed the 60% test, and this had not occurred.

The Court of Appeal was not prepared to accept that the "all reasonable endeavours" obligation required Sainsbury's, as Bristol Rovers claimed, to give consent to Bristol Rovers to file its own Planning Act application in circumstances where Sainsbury's would not themselves be obliged to file such an application.  

Comment: This case is a useful illustration of how the court approaches endeavours clauses in the planning context. All reasonable endeavours extended to appealing a planning a decision, or in this case, making a new planning application. Once Sainsbury's had done so, its endeavours obligation did not cease unless counsel's advice was that further appeal or application would be less than 60% likely to succeed.  

The case shows that the scope of a general "all reasonable endeavours obligation" will be limited by any express provisions in the contract which regulate a party's obligation to take a particular course of action. If acting for the obligor, consider other express terms that can be used to limit the scope of such an obligation including, for example, time limits and limits on expenditure. In return, the obligee may want to specify the nature or frequency of update reports, or state that such an obligation "includes but is not limited to" certain steps (thus avoiding any later argument that an activity that is not covered by the express wording in a clause is therefore not part of the endeavours obligation). 

Careful consideration should be given before using a best endeavours or all reasonable endeavours obligation. In Jet2.com v Blackpool Airport Ltd [2012] EWCA Civ 417, the Court of Appeal concluded that a party may be required to take action which is contrary to its own commercial interests. 

Further Information

This case summary is part of the Allen& Overy Litigation and Dispute Resolution Review, a monthly publication.  For more information please contact Sarah Garvey sarah.garvey@allenovery.com, or tel +44 20 3088 3710.