'All reasonable endeavours' and 'good faith': How much do contracting parties need to do to secure a third party's permission?

04 May 2016

Andrew White, Esther Johnson

This case involved the proposed sale of Bristol Rovers football stadium to Sainsbury's for the construction of a new superstore. The sale agreement was conditional on Sainsbury's being able to get planning permission for the store. Sainsbury's was required to use all reasonable endeavours to obtain an acceptable store planning permission as soon as reasonably practicable. There was also a cut-off date for obtaining the permissions. The agreement contained provisions providing that the parties would use good faith in relation to their respective obligations and in getting the necessary planning permission and also lend reasonable assistance to the other.

There were concerns over the viability of the store and in the event, Sainsbury's failed to get acceptable planning permission before the required date and, following an unsuccessful appeal against the planning decision, sought to exercise its right not to complete the sale and terminate the agreement.

Bristol Rovers argued that the obligation to use all reasonable endeavours survived beyond the cut-off date and would require Sainsbury's to have pursued alternative courses of action to secure acceptable planning permission. It also claimed that Sainsbury's had failed in its duties of good faith and lending reasonable assistance.

The issue for the Court of Appeal was how far Sainsbury's had to go to get planning permission. Lord Justice Floyd giving the lead judgment (with which the other judges agreed) held that the overall purpose of the provisions was to impose an obligation on Sainsbury's to use all reasonable endeavours to obtain an acceptable store planning permission as soon as was reasonably practicable. That had been spelt out in the agreement and reflected the terms of the agreement itself.

Sainsbury's obligation to pursue planning permission did not come to an end after an unsuccessful appeal and continued beyond the cut-off date until brought to an end by the service of a valid termination notice (paras 71-75 of the judgment). The all reasonable endeavours obligation in the agreement did not require Sainsbury's to file a further appeal and could not, therefore, require Sainsbury's to allow the club to file its own further appeal. The all reasonable endeavours obligation was curtailed by the terms of the agreement so as not to require further appeals to be filed by either party.

Sainsbury's had discharged its obligations under the agreement and had not failed to act in good faith in relation to them. The obligation to use good faith applied in relation to the fulfilment of the specific obligations contained in the agreement; it could not be used to require the parties to do things not specified by the agreement itself.  The same, limited interpretation had to be given to the duty to provide assistance: it could only be required in relation to the fulfilment of the opposite party's obligations under the Agreement. Therefore, Sainsbury's had been entitled to serve the termination notice (paras 94-104).

Bristol Rovers (1883) Ltd v Sainsbury's Supermarkets Ltd [2016] EWCA Civ 160