Pretoria Energy Company (Chittering) Ltd v Blankney Estates Ltd

• Published date: 06 July 2023
• Subject Matter: Environment, Real Estate and Construction, Energy and Natural Resources, Energy Law, Environmental Law, Landlord & Tenant - Leases
• Law Firm: Fenwick Elliott LLP
• Author: Mr Ted Lowery

[2023] EWCA Civ 482

Before Lord Justices Lewison, Arnold and Birss
In the Court of Appeal
Judgment delivered 9 May 2023

The facts

Pretoria was looking to develop several anaerobic digestion plants in eastern England and during 2013 approached Blankney regarding a derelict factory site in Lincolnshire.

On 27 November 2013 Pretoria and Blankney executed a heads of terms document. Regarding the proposed lease of the site, clause 1 in the HoTs provided for an annual rent of '150k, a term of 25 years and the exclusion of the security of tenure arrangements within the Landlord and Tenant Act 1954. Clauses 2, 3 and 4 concerned the likely arrangements for the feed stock and gas supply to the plant. The HoTs stated that a formal agreement would be drawn up within one month of planning permission subject to confirmation of other consents and easements. The final clause in the HoTs confirmed a lock-out agreement along the lines that these arrangements would be exclusive to the parties until 31 July 2014.

The HoTs were not marked "subject to contract" in circumstances where Pretoria and Blankney agreed that at least some of the provisions, for example the lock-out agreement, were intended to be binding.

Pretoria secured planning permission on 11 June 2014 and Blankney's solicitors prepared a draft lease running to over 40 pages. During August 2014, the parties considered extending the lock-out agreement but thereafter, Blankney lost confidence in Pretoria and during November 2014, Blankney entered into alternative arrangements for the site with a third party.

Whilst it was common ground that clauses 2, 3 and 4 in the HoTs were not intended to create legally enforceable obligations, Pretoria maintained that clause 1 comprised a binding agreement for a lease. In a judgment dated 14 June 2022 the judge at first instance dismissed Pretoria's claim on the grounds that: (i) The existence of a binding contract for a 25 year lease was incompatible with the limited period of the lock-out agreement; (ii) Pretoria could not have become contractually bound to enter into the lease until completion of the procedures required for contracting out of the Landlord and Tenant Act 1954; and, (iii) For a 25 year commercial lease of an unusual property, several important terms had not been considered.

Pretoria appealed contending that the judge had correctly set out but irrationally applied the legal principles concerning whether or not the parties had entered into a binding contract.

The...