Dandara Holdings Ltd v Co-Operative Retail Services Ltd & Anor

Factual and Procedural Background

This action arises from an exclusivity agreement between the Plaintiff and the First Defendant ("CRS") concerning the proposed sale of CRS's headquarters in Rochdale to the Plaintiff. The exclusivity period lasted about seven weeks, during which CRS agreed to deal only with the Plaintiff. No contract for sale was concluded by the end of the exclusivity period or thereafter. Months later, the property was sold to a third party ("Airtours") at a higher price. The Plaintiff alleges breaches of the exclusivity agreement by CRS, claiming damages for loss of the chance to purchase the property at the originally agreed price and an indemnity for abortive costs under a clause of the agreement.

CRS ceased to exist before the claim was brought, having transferred engagements to the Second Defendant ("CWS"), which succeeded to CRS's rights and liabilities. Although claims were originally made separately against CRS and CWS, only those against CRS are now pursued. The background includes a history of CRS's property decisions, its declining fortunes, and a proposed merger with CWS approved in early 2000.

The exclusivity agreement was entered into in February 2000, with a lock-out period extended to 22 March 2000. During this period, the Plaintiff was the only party CRS would negotiate with for the sale. However, in February and March, CRS and CWS allowed other parties, including Airtours, to view and eventually offer for the property, leading to the sale to Airtours in June 2000.

The Plaintiff seeks to prove that breaches of the exclusivity agreement caused it to lose a substantial chance of completing the purchase and making a profit. The case involves detailed factual findings about marketing, negotiations, and the terms and effects of the exclusivity agreement, as well as the merger between CRS and CWS.

Legal Issues Presented

1. Whether CRS breached the exclusivity agreement during the exclusivity period, particularly in February and March 2000.
2. Whether any breach caused the Plaintiff to lose a real or substantial chance of purchasing the property at the agreed price.
3. The extent of damages recoverable by the Plaintiff for loss of chance.
4. The scope and amount of indemnity payable under the indemnity clause of the exclusivity agreement for abortive costs incurred by the Plaintiff.

Arguments of the Parties

Plaintiff's Arguments

• CRS breached clauses 2.2, 2.4, 2.5, and 6 of the exclusivity agreement by allowing third parties access to the property and revealing the existence of the exclusivity agreement.
• The breaches in February led to Airtours viewing the property and making an offer in March, which caused the Plaintiff to lose a substantial chance of completing the purchase.
• The Plaintiff was entitled to damages for loss of chance and indemnity for abortive costs under the exclusivity agreement.

Defendant's Arguments

• The delivery of a sales brochure did not constitute a breach of clause 2.2 as it was not "documentation in connection with a Disposal".
• There was no breach of clause 2.5 in February as no negotiations with third parties had occurred.
• Mentioning the existence of the exclusivity agreement did not breach clause 6 since it did not disclose the detailed terms.
• Even if there was a breach in February, it did not cause the Plaintiff to lose the chance to buy because there were significant obstacles to completion, including issues with the Atos outsourcing agreement, absence of building warranties, and funding delays.
• CWS would have decided to remarket the property regardless of the Airtours offer.
• The Plaintiff's indemnity claim should exclude costs for planning advice and leaseback negotiations as outside the scope of the indemnity clause.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the terms of the exclusivity agreement, focusing on clauses 2.2, 2.4, 2.5, and 6. It found that:

• The provision of a sales brochure to Matthews & Goodman in February 2000 breached clause 2.4 (requiring CRS to instruct agents to discontinue marketing), as it constituted marketing of the property. However, this breach was of minimal consequence because Matthews & Goodman already had substantial information about the property.
• There was no breach of clause 2.2, as sales brochures are not "documentation" in connection with disposal, which refers to contractual or negotiation documents.
• There was no breach of clause 2.5 in February since no negotiations with third parties had taken place at that time.
• Disclosure of the existence of the exclusivity agreement to Matthews & Goodman did not breach clause 6 because the clause protects the confidentiality of the terms, not the mere existence of the agreement or the identity of the Plaintiff's agents.

Regarding causation, the court found that the breaches in February did not cause the Plaintiff's loss. The decision by CWS to remarket the property would have been taken regardless of Airtours' offer due to significant obstacles, including the Atos outsourcing agreement, the absence of a building warranty, and incomplete funding arrangements. The court accepted the evidence that the Plaintiff did not have a real or substantial chance of completing the purchase by the expiry of the exclusivity period or shortly thereafter.

The court rejected the Plaintiff’s contention that the breach caused the loss of chance, concluding that even without the Airtours offer, CWS would have ceased negotiations and sought to remarket the property.

On damages, the court noted disputes about the value of the property and the Plaintiff's funding arrangements but did not make a definitive finding on quantum, given the conclusion on causation and the loss of chance.

Regarding the indemnity claim, the court held that only costs properly and reasonably incurred in carrying out the due diligence searches and enquiries under clause 3.1 were recoverable. Costs related to planning advice and negotiating the leaseback were not within this scope. The amount recoverable was therefore limited to £22,502.77 plus interest.

Holding and Implications

The court held that:

• There was a breach of clause 2.4 of the exclusivity agreement in February 2000 by CRS providing a sales brochure to Matthews & Goodman.
• There was no breach of clauses 2.2, 2.5, or 6 in February, and the breaches in March occurred after Airtours' offer and did not cause the Plaintiff's loss.
• The breaches did not cause the Plaintiff to lose a real or substantial chance of purchasing the property.
• The Plaintiff's claim for damages for loss of chance fails on causation.
• The Plaintiff is entitled to indemnity for abortive costs under clause 7 of the exclusivity agreement, but only for properly incurred due diligence costs, amounting to £22,502.77 plus interest.

The direct effect is that the Plaintiff’s damages claim fails, but it recovers a limited sum on the indemnity claim. No new legal precedent was established, and the decision clarifies the application of loss of chance principles and contractual breach consequences in the context of exclusivity agreements and property transactions.