Rescission of Development Agreement

Published: 23rd November 2007

Obligations on parties to a development scheme amounted to duties of good faith and disclosure.

Ross River Limited v. Cambridge City FC (2007)

In this case, the High Court held that Cambridge City FC (the Club) were entitled to rescind an Overage Agreement which it had entered into on the basis of misrepresentations made by the developer's agent.

The brief background was that the Club entered into a contract to sell its ground to a developer for residential housing. As part of the deal, the parties also entered into an Overage Agreement in which they agreed to share the uplift in value to the property on an equal basis.

Due to ongoing financial problems, the Club eventually sold its interest in the Overage Agreement to the developer for £900,000.

In coming to an agreement on the value of that share of the overage, the Club relied on information supplied by the developer's agent as to the number of residential units that were to be constructed, the proportion of those which were to be reserved for affordable housing stock and finally, the proportion of the land that would need to be set aside to deal with access problems.

The agreements contained obligations on the developer to consult with and obtain the approval of the Club to the development scheme and an obligation to obtain best value.

The High Court held that the nature of the agreements between the parties created duties of good faith and disclosure which had been breached because the developer's agent failed to disclose key pieces of information and, in general, disclosed information which was more pessimistic as to what the agent actually thought was the likely uplift in value which would be achieved.

The judge found that in a relationship falling short of partnership but which had elements of joint enterprise, duties of good faith and disclosure could be implied.

The case also dealt with other matters, including allegations of bribery but the key point was that a good faith and disclosure obligation was implied into the Overage Agreement, it had been breached and therefore the Club was entitled to rescind the Overage Agreement.

The case is further proof of the willingness of the courts to step in to prevent one party from taking unfair advantage of the other.