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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Thompson v Bryant Homes Northern Ltd [2002] EWCA Civ 1079 (25 July 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1079.html Cite as: [2002] EWCA Civ 1079

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		Neutral Citation Number: [2002] EWCA Civ 1079
		Case No: A3/2001/2392 CHANF

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
(His Honour Judge Langan QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		25 July 2002

B e f o r e :

LORD JUSTICE AULD
LORD JUSTICE ROBERT WALKER
and
LADY JUSTICE ARDEN
____________________

Between:


	David Thompson	Respondent
	- and -
	Bryant Homes Northern Ltd	Appellant

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr John McGhee (instructed by Eversheds) for the Appellant
Mr Derek Wood QC and Mr S J Pritchett (instructed by Cobbetts) for the Respondent
____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
____________________

Crown Copyright ©

Lady Justice Arden :

1. This is an appeal with the permission of Chadwick LJ from the order of His Honour Judge Langan QC dated 26 October 2001, whereby following the trial of a preliminary issue, the court declared that the respondent, Mr Thompson, was entitled to rely on clause 4.5.3.3 of an agreement dated 5 August 1994 (“the agreement”). The preliminary issue directed to be tried was whether Mr Thompson was entitled by rectification, estoppel or otherwise to rely on the covenants contained in that clause.
2. The background facts so far as relevant to this appeal may be summarised as follows. By the agreement, Mr Thompson gave Bryant an option to purchase part of the land owned by him at Strensall Road, Earswick, York. Bryant is a property developer and planned to put houses on the land sold. The adjacent land, which Mr Thompson retained, had on it Mr Thompson’s residence and two bungalows. Mr Thompson envisaged that at some time in the future he might wish to sell the retained land with a view to development for housing. The existing drainage for his house and the bungalows was into septic tanks. The agreement contained detailed provisions about the terms of a conveyance from Mr Thompson to Bryant in the event of the option being exercised. Three of the provisions dealt with drainage for the retained land into the land to be sold to Bryant.

“4.5.1 In the conveyance ... of the Property to the Purchaser:-

...

4.5.3 there shall be reserved a right in fee simple to use and to lay and connect into any drains sewers or pipes now (or within 80 years of the date of the conveyance) in or under the Property and the right to the free and uninterrupted passage of surface and foul water and sewage through them for the benefit of such of the Second Vendor’s Retained Land as may be specified by the Second Vendor on or before actual completion and the Purchaser shall covenant to:-

4.5.3.1 use its reasonable endeavours to procure the consent of the relevant statutory authorities to the provision of such sewers drains and pipes under the Property to serve no more than 20 houses on the Second Vendor’s Retained Land

4.5.3.2 notify the Second Vendor if it appears to the Purchaser that any such consent shall not be forthcoming

4.5.3.3 (subject to obtaining such consents) to provide at the boundary of the Property and the Second Vendor’s Retained Land at such point as shall be approved by the Second Vendor (such approval not to be unreasonably withheld or delayed) a suitable connection or connections to such sewers drains and pipes at such level and to such specification as shall be sufficient to serve no more than 20 houses on the Second Vendor’s Retained Land and to be to adoptable standards

4.5.3.4 in the event that such consents are not forthcoming to provide at the boundary of the Property and the Second Vendor’s Retained Land at such point as shall be approved by the Second Vendor (such approval not to be unreasonably withheld or delayed) a suitable connection or connections to such sewers sufficient to serve the existing dwellings on the Second Vendor’s Retained Land”

3. The judge referred to the provisions of 4.5.3 as “the exception and reservation”. He referred to the covenant in clause 4.5.3.3 as “the primary covenant”. He referred to the covenant in clause 4.5.3.4 as “the alternative covenant”. I will adopt the same definitions. It will be noted that the obligation imposed by the primary covenant was to provide connections to adoptable standards for 20 houses on the retained land, whereas the obligation imposed by the alternative covenant was simply to provide connections for the existing houses on the retained land. Neither the primary covenant nor the alternative covenant set any time limit within which the obligations which they respectively imposed had to be performed.
4. Bryant exercised the option and the sale was completed by a transfer dated 30 August 1995 (“the transfer”). The exception and reservation was set out in paragraph 2 of schedule 2 of the transfer. A clause which partially resembles the alternative covenant, but containing a time limit, was set out in schedule 3 of the transfer as follows:-

“To provide within 9 months of the date hereof at the boundary of the Property and the Second Transferor’s Retained Land at such point as shall be approved by the Second Transferor (such approval not to be unreasonably withheld or delayed) a suitable connection or connections to the sewers sufficient to serve the existing dwellings on the Second Transferor’s Retained Land.”

However, the primary covenant was not included in the transfer.

5. Mr Thompson’s case was that his solicitor, Mr Stone, agreed with Bryant’s solicitors, Eversheds, that the primary covenant should not appear in the transfer, but that Bryant should remain bound by the primary covenant. Bryant’s case was that Eversheds agreed with Mr Stone that not only should the primary covenant not appear in the transfer, but that the corresponding obligations should be abrogated. There was a subsidiary dispute as to who first suggested that the primary covenant should not be reproduced in the transfer. Mr Stone said it was Eversheds (Ms Brooks). Ms Brooks said that it was Mr Stone. There was a dispute of law, which the judge regarded as of theoretical interest only, as to whether, if Mr Thompson was right, the correct analysis in law was that the parties intended that the primary covenant should not merge in the transfer on completion, but should survive as an independent obligation (see Palmer v Johnson (1884) 13 QBD 351 at 357 per Bowen LJ), or, as Bryant contended, the case was one of estoppel.
6. The judge examined the correspondence between solicitors leading to the transfer. The initial draft of 8 August 1995 did not contain a reference to drainage matters. By letter dated 9 August 1995 Mr Stone took the point that provision would need to be made for the exception and reservation anticipated by clause 4.5.3 of the agreement. Eversheds duly amended the draft transfer to include the exception and reservation, the primary covenant and the alternative covenant. However, Mr Stone then deleted the primary covenant and recast the alternative covenant in the form in which it finally appeared in the transfer. In the margin he wrote “subject to approval of drainage proposals and to the amendment in [the alternative covenant] our client is prepared to waive their entitlement”. He returned it to Ms Brooks on 18 August 1995. The accompanying letter asked to see Bryant’s drawings relating to drainage systems. The amendment to the alternative covenant was the insertion of the nine month time limit.
7. There were further negotiations. By letter dated 23 August 1995, Bryant through Ms Brooks made a new proposal about installing a private drain (that is, one not to adoptable standards). Mr Stone marked the relevant part of his copy of this letter “Not agreed. Contract provisions must be observed. Clients to talk.” However, Ms Brooks marked the relevant part of her copy of this letter: “Draw up transfer as amended” by Mr Stone. On 24 August 1995 Mr Stone wrote to Ms Brooks “...we have agreed that schedule 3 to the transfer should be as amended by me though your client will arrange to supply its current (unapproved) layout for comment.” On the same day Ms Brooks wrote to Mr Stone “As agreed I have deleted paragraphs 1.1 to 1.3 from the third schedule and have amended paragraph 1.4” thus incorporating Mr Stone’s changes to the transfer. The document was submitted for execution by Mr Thompson, and it was duly executed.
8. The judge heard oral evidence from Mr Thompson and Mr Linklater (a technical manager employed by the Bryant group), and from the three solicitors involved, Mr Stone, Ms Brooks and Ms Wylde, another solicitor at Eversheds. The evidence of the lay witnesses did not assist. Indeed, they both thought that the primary and alternative covenants were cumulative rather than alternative. As to the solicitors, the judge held that none of the three was an impressive witness. He held that Ms Wylde’s evidence was feeble and that of Ms Brooks unreliable. He did not consider that their evidence assisted in determining whether the primary covenant was to remain binding on Bryant. In those circumstances, he held that he was bound to look at the events after completion and the conduct of the litigation on behalf of Bryant.
9. The judge found that on 25 August 2000 Eversheds had written to Mr Thompson’s solicitors putting forward plans as to sewers and drains. On 8 September 2000, they asserted that Mr Thompson was in breach of his contractual obligations by unreasonably withholding his approval to the proposed works. In April 1997, Eversheds had sent an information pack to the solicitors dealing with intended purchases of houses on Bryant’s land. This pack was revised on four subsequent occasions. In the last of these revisions (September 2000) reference was made to the fact that a drainage connection sufficient to serve 20 houses on the adjoining land would run under the gardens of two of the plots to be sold. Bryant did not communicate that it was going to maintain that it was no longer bound by the primary covenant until 11 October 2000. This came in the course of proceedings to remove the caution lodged by Mr Thompson against their title.
10. The judge held that there were a number of signposts in the evidence which assisted him to answer the preliminary issue. First, the judge held that it was improbable that Mr Thompson, or Mr Stone on his behalf, would give up the right to a connection for 20 houses with practically nothing in return.
11. Second, the judge considered from whom the suggestion for a change came. The judge held that it was inherently improbable on the dates that the suggestion could have come from Mr Stone.
12. Third, the judge looked at the events after completion. He accepted that he had to be cautious about this. However, from August 1995 to October 2000 it was assumed on all sides that Bryant remained bound by the primary covenant. That view was held not simply by the solicitors but also by Mr Linklater. As explained above, Mr Linklater was a technical manager employed by a company in the same group as Bryant. He was an engineer by profession and had since 1995 been involved with Bryant’s development of the land sold by Mr Thompson. The view was also held by Bryant’s regional director, Mr Monkman. The judge held that the possibility of a mistake was a remote one. Furthermore, Mr Monkman was the most senior person from Bryant who had been involved in the development. He was the person to whom Ms Wylde reported in writing after completion. He may well have been the person from whom Mr Linklater derived his understanding of the contractual obligations. In 1998 Mr Monkman had written a letter in which he affirmed that Mr Linklater’s understanding was correct. However, he was not called as a witness. There was no explanation. The judge considered that in the light of Mr Monkman’s seniority and his role in the events the explanation that Bryant could not bring everyone to the trial and had chosen to rely on Mr Linklater did not “hold water”. The judge felt bound to infer that such evidence as he might have given in support of Bryant would not have stood up to the scrutiny of cross-examination and that this was a case in which it was proper to draw an adverse inference from the absence of a witness (see Wisniewski v Central Manchester Health Authority (Court of Appeal, 1 April 1998)).
13. In those circumstances, the judge found the case in favour of Mr Thompson to be “overwhelming”. He held:

“Whatever Mr Stone’s deficiencies as a witness, there is nothing improbable in the following sequence of events. I find that the proposal for a change in the draft transfer came from Eversheds. It is not in dispute that it was Mr Stone who made the necessary amendment to the draft transfer and that thereafter those amendments were discussed between solicitors. I find therefore that, before the transfer was executed, Mr Stone made it clear to Eversheds that he was insisting on the maintenance of his client’s contractual rights, notwithstanding the attenuated form in which the transfer was to be executed.”

14. The judge then concluded by criticising Mr Stone for his lack of relevant attendance notes.
15. Accordingly, the judge determined the preliminary issue in favour of Mr Thompson.

Appellant’s submissions

16. Mr John McGhee, for Bryant, submits that it was common ground at trial that there had to be an agreement between solicitors that the obligations between the parties would be those set out in the agreement and not those set out in the transfer. Mr Thompson’s case was that such an agreement had been made over the telephone between 11 and 18 August 1995, and that the proposal to draw up the transfer in a different form from that envisaged by the agreement had emanated from Ms Brooks.
17. Mr McGhee submits that the judge failed to perform a balancing exercise in relation to the various probabilities. In particular he failed to consider improbabilities which weighed in Bryant’s favour, in particular the improbability of obligations remaining as set out in the agreement, but not as set out in the transfer, and the improbability of the alleged agreement being made without its also being documented.
18. Mr McGhee further submits that Mr Thompson failed to establish his allegation as to motivation, namely that Bryant wished for some reason to keep the covenants in the agreement off its title. The furthest the evidence went was that Mr Stone thought that the suggestion had come from Ms Brooks. However, both she and Ms Wylde rejected that allegation.
19. In effect, Mr Thompson’s allegation was that schedule 3 to the transfer was a sham. Mr McGhee submits that it is unlikely that solicitors of repute would agree to a clause which did not reflect the obligations of the parties as this might prejudice enforcement of the real obligations and also the interests of purchasers of houses on the land developed by Bryant.
20. Moreover, Mr Thompson’s case made no sense. He asks rhetorically why Mr Thompson’s approval of any drainage plans should be required before schedule 3 took effect in substitution for the drainage covenants in the agreement if, either way, the drainage covenants were as set out in the agreement.
21. Further, the agreement alleged by Mr Thompson was not, on Mr McGhee’s submission, supported by the contemporaneous correspondence. In particular, the natural inference from Mr Stone’s marginal comment on the travelling draft was that Mr Thompson was prepared to give up his contractual rights under the agreement, not just, as Mr Stone maintained, to the inclusion of the covenants in full in the transfer.
22. The evidence of Mr Thompson and Mr Stone was that the proposal to modify the agreement came from Ms Brooks. This was inconsistent with the course of the negotiations. Mr Stone had deleted the provisions of schedule 3 which reflected the primary covenant and amended the alternative covenant and added the marginal note:

“subject to approval of drainage proposals and to the amendments to 1.4 our client is prepared to waive this entitlement.”

23. Ms Brooks then took instructions and came back with a proposal for drainage for Mr Thompson’s existing houses. This proposal was consistent with the proposition that schedule 3 amended the drainage covenants in the agreement as it was inconsistent with those covenants. Mr Stone said that despite Ms Brooks’ counter-proposal, the parties agreed to revert to the agreement. This evidence was inconsistent with Mr Stone’s evidence that he and Ms Brooks had reached an agreement before Mr Stone amended the draft.
24. The respondent’s case was not consistent with Mr Stone’s letter dated 24 August 1995 in which he stated to Ms Brooks that “we have agreed that schedule 3 to the transfer should be amended by me though your client will arrange to supply its current (unapproved) layout for comment.” This letter made it clear that Mr Stone was agreeing to the form of schedule 3 and moreover only asking for an opportunity to see, and comment on, current unapproved plans.
25. Mr McGhee submits that Mr Thompson’s case involved a substantial about-turn in the negotiations by Ms Brooks.
26. As regards the subsequent conduct of Bryant on which the judge relied, Mr McGhee submits that the effect of this was diminished by the fact that Mr Linklater thought that Bryant’s obligations were to provide both a connection for twenty houses on the retained land and also a connection for the existing houses on that land, that is that the primary and alternative covenants were cumulative. This was clearly a misconception. As to the information packs, while Ms Wylde did refer to the obligations in the agreement in the last version of the information pack, her earlier versions did not do so.
27. Mr Monkman was not likely to be an important witness since the agreement relied on was alleged to have been made between solicitors. The fact that Ms Wylde reported to him only emerged in the cross-examination of Ms Wylde. Accordingly, it was not unreasonable not to seek an adjournment to call Mr Monkman. The judge should not have drawn an adverse inference from his not being called as a witness.
28. The judge failed to make clear findings of fact as to what the solicitors said to each other in the material telephone conversations. The judge should also have taken into account that Mr Stone had no clear recollection of the course of the negotiations.

Respondent’s submissions

29. Mr Derek Wood QC, for the respondent, submits that the court should be slow to interfere with the judge’s findings of fact. An important factor was that it was inherently improbable that Mr Thompson would agree to give up his valuable claims. Moreover, there was no evidence of any agreement that he should do so. Furthermore, the post completion events supported Mr Thompson’s case.
30. As to the evidence, on 9 August 1995 Mr Stone wrote to Eversheds requiring the transfer to contain the covenants required by the agreement. On 23 August 1995, he endorsed upon a fax from Eversheds a note “Not agreed. Contract provisions must be observed”.
31. Ms Wylde in her evidence stated that she had made a post-completion report to Mr Monkman to the effect that the obligations in the agreement were no longer binding. Significantly, however, that report was never produced.
32. Mr Linklater accepted that his version of events would have come from a superior within Bryant. The post-completion correspondence from Mr Linklater and from Mr Monkman show that they considered that Bryant remained bound to provide the connection envisaged by the primary covenant and this stance was later adopted by Eversheds themselves. In all the circumstances, the judge was entitled to come to the conclusion to which he came.
33. Mr Wood submits that schedule 3 was not a sham. The obligation was a positive covenant which would not run with the land and might not even appear on the face of the land register in any event. The exception and reservation (which was what a third party purchaser would want to know about) would be revealed by the transfer itself and by an appropriate entry on the register.
34. The court was entitled to assess and cross-check its provisional conclusions from the correspondence against the balance of probabilities and improbabilities. There was ample evidence on which the judge could come to his conclusion.
35. Mr Linklater and Mr Thompson both thought that the obligation imposed by the primary covenant and the obligation imposed by the alternative covenant were cumulative and not alternative. However, the important fact is that Bryant continued to think that it was bound by the primary covenant, notwithstanding the form of schedule 3 to the transfer.
36. Ms Wylde amended the information packs in September 2000 to include a reference to the primary covenant connection. She reported to Mr Monkman following completion and it was Mr Monkman who wrote on 3 August 1998 and who (most likely) gave Mr Linklater information which led Mr Linklater to write in the terms in which he did in his letters of 1 May 1997 and 17 February 1999.
37. Mr Wood did not press the submission that Mr Monkman was a crucial witness and that the judge was entitled to draw an adverse inference from the fact that he was not called as a witness.

Conclusions

38. The judge was faced with a very difficult situation. It was alleged that two solicitors had made an agreement over the telephone in the course of the conveyancing transaction. Neither side had recorded the arrangement in attendance notes. Mr Thompson had no letters from his solicitor and, while Bryant may have had such letters, it had not waived any legal professional privilege from disclosure. The judge heard oral evidence from all three solicitors involved. As to the two solicitors instructed on behalf of Bryant, the one (Ms Brooks) the judge concluded was unreliable and the other’s evidence was in his judgment “feeble”. Mr Thompson’s solicitor, Mr Stone, had on the judge’s findings a very imprecise recollection except that he recalled insisting on adherence to the drainage covenants. The correspondence between the solicitors was not self-explanatory. The respondent’s case was, as he saw it, supported by inherent probabilities and by the subsequent conduct of the parties.
39. As I see it, there was no objection in principle to the judge’s approach. It was open to him to consider whether, despite Mr Stone’s poor memory, Mr Thompson’s case was supported by other evidence, namely correspondence, subsequent conduct and the inherent probabilities of the situation. However, insofar as the judge relied on these other matters he could not do so selectively. He had to make a balanced assessment of all the relevant evidence.
40. Mr McGhee has launched a skilful and detailed attack on the judge’s assessment of this other evidence and submits that the judge’s conclusion is inconsistent with the contemporaneous correspondence and subsequent conduct of the parties. As to the correspondence, Mr McGhee submits that, as soon as Mr Stone raised the point about the absence of the drainage covenants in the transfer, Ms Brooks put the drainage covenants into the transfer and sent it to Mr Stone (11 August 1995). It was Mr Stone who on 18 August 1995 returned the transfer with schedule 3 amended and bearing the marginal note “subject to approval of drainage proposals and to the amendments in 1.4, our client is prepared to waive this entitlement”. The word “entitlement”, submits Mr McGhee, naturally refers to waiver of the drainage covenants themselves. Ms Brooks then said that she had to take instructions (21 August 1995) – not that the matter had been agreed in the course of a telephone conversation, as Mr Stone alleged. She then came back with a counter-proposal (22 August 1995) that Bryant would provide a suitable private drain connection within the time limit of nine months proposed in paragraph 1.4 of schedule 3, as amended by Mr Stone, and her letter states that this was “subject to deletion of its obligation at paragraphs 1.1 – 1.3”. She did not say that those paragraphs would remain enforceable in the agreement. She continued by saying that Bryant could not supply its drainage layout at that stage. There were then separate notes endorsed on this letter. In Mr Stone’s case, he added a note before speaking to Ms Brooks “Not agreed. Contract provisions must be observed. Clients to talk.” However, after a conversation with Mr Stone, Ms Brooks endorsed her copy “Draw up transfer as amended”.
41. Mr McGhee submits that Mr Stone, therefore, accepted the position, and indeed, on 24 August 1995 wrote saying “... we have agreed that schedule 3 to the transfer should be amended as by me, though your client will arrange to supply its current “unapproved” layout for comment.”. Significantly, he was only looking to see current plans for comment, not approval.
42. Part of the difficulty, as I see it, is the lack of clarity in the judge’s findings of fact. Nonetheless, there are findings in paragraph 45. He holds first: “I find that the proposal for a change in the draft transfer came from Eversheds.”. In my judgment, he must be accepting Mr Stone’s evidence that a conversation took place between 11 and 18 August 1995 in which Ms Brooks made a proposal to take the drainage covenants out of the transfer. The judge continues: “It is not in dispute that it was Mr Stone who made the necessary amendments to the draft transfer”. The judge there must be referring to amendments made after that conversation, namely, his amendments to schedule 3 and his marginal note. The judge continues: “It is not in dispute ... that thereafter those amendments were discussed between solicitors.”. The judge there must be referring to the two apparently contrary endorsements on the letter of Ms Brooks of 23 August. As I see it, they are not necessarily conflicting. Mr Stone’s position was that he would agree schedule 3 provided that it was also agreed that the drainage covenants remained as stated in the agreement. Ms Brooks was saying that (accordingly) the transfer could be drawn up as amended. She did not record the agreement that the drainage covenants should survive, but she was correct in saying that Mr Stone agreed that the transfer could be drawn up as amended. It was on the basis of these findings that the judge proceeded to hold that before the transfer was executed Mr Stone made it clear to Eversheds that he was insisting on the maintenance of his client’s contractual rights, not withstanding the limited form of the transfer. In this regard, the judge preferred the evidence of Mr Stone to that of Ms Brooks and Ms Wylde, whose evidence he had discounted earlier in his judgment.
43. At one point in his judgment the judge described Counsels’ submissions on the correspondence as largely self-cancelling. However, it is clear when his findings of fact are examined that he had close regard to the correspondence and those findings are on his reading of the correspondence substantially consistent with it.
44. In my judgment, there is ample evidence to support the judge’s preference for Mr Thompson’s case. The judge had regard to the fact that it was inherently improbable that Mr Thompson would give up the drainage covenants, described by him in evidence as “his pension”, for virtually nothing in return. All Mr Thompson obtained was the nine month time limit which was added to the alternative covenant. Mr McGhee stresses that Mr Thompson failed to prove any motive on Bryant’s side and that his case involved an about-turn by Ms Brooks and that the arrangement was undocumented. However, both sides could be said to have made an about-turn and in the point about lack of documentation cuts both ways – the arrangement about the drainage covenants not carried forward to the transfer was not documented so far as either party was concerned. Mr McGhee also submits that the arrangement must have involved agreeing a transfer containing sham provisions, but it is clear from Mr Stone’s evidence that he did not see it that way. In addition the judge had the benefit of the subsequent conduct of Bryant and the terms of the revised information pack. I agree with Mr Wood that the important point is that Bryant’s conduct was consistent with the survival of the primary covenant.
45. Moreover, I do not consider it could be said that the judge weighed up these matters selectively. His acceptance of the inherent improbability of Mr Thompson giving up the primary covenant involves the conclusion that that improbability is of greater weight than the improbability of the drainage covenants remaining enforceable but only in the agreement. The judge cannot be expected to articulate every process in his reasoning. The judge’s preference is supported by the fact that the Standard Conditions of Sale (incorporated into the agreement) provide for obligations in a contract which have not been performed at completion to remain binding: strictly the only obligation in the agreement was to insert the drainage covenants in the transfer but the substance of the arrangement was that the drainage covenants should be performed. There is some force in Mr McGhee’s point that it was odd that Mr Stone should insist on approval of the drainage plans as a condition to the inclusion of schedule 3 in the transfer, but again this is a matter which the judge must inevitably have weighed in the balance. The judge’s conclusion is arguably supported rather than undermined by the fact that in the end Mr Stone did agree to the inclusion of schedule 3 in the transfer and (according to the correspondence) only requested to see the current unapproved plans and to comment on them.
46. The fact that Mr Stone could not remember why Ms Brooks proposed taking the drainage covenants out of the transfer is a matter which the judge would have to have considered when he made his (clear) finding that the proposal came from Eversheds. I do not consider that his findings can be upset simply because the pleaded allegation was not proved when Mr Stone came to give his evidence. Mr Stone had a very imperfect recollection of the transaction and the judge did not hold that his evidence, such as it was, was embroidered or unreliable.
47. The judge drew adverse inferences from the failure to call Mr Monkman. I do not think this forms any great part of his judgment. I consider that Mr McGhee is correct in his submission that it was not right for the judge to draw an adverse inference from the failure to call Mr Monkman. This should not be done where there is a credible explanation given for not calling a witness: see T C Coombs v IRC [1991] 2 AC 283, 300 per Lord Lowry and Wisniewski v Central Manchester Health Authority, above. Here the judge should have accepted the reasons which he was given for Mr Monkman not having been called as a witness as they provided a reasonable explanation. However, this error does not undermine the judge’s factual findings.
48. In the circumstances, I would dismiss this appeal.

Lord Justice Robert Walker:

49. I agree that this appeal should be dismissed for the reasons given by Arden LJ. I add a few comments of my own in deference to Mr McGhee’s skilful argument.
50. At the end of his reply Mr McGhee put forward an alternative theory (which he himself described as a dangerous thing to do) as a means of explaining the rather baffling exchanges of correspondence between the solicitors. It was possible, he said, that the changes to schedule 3 of the draft transfer, made in Mr Stone’s handwriting on or shortly before 18 August 1995, really did originate from Mr Stone. Mr McGhee pointed out that Ms Brooks’ reply on 21 August 1995 was that she was taking instructions.
51. I have been attracted by this theory. Indeed I have been tempted to enlarge on it in a way which would go some way to explain another puzzling feature of this case, that is that Mr Thompson and Mr Linklater (both sensible men whose evidence the judge accepted) believed that the covenants in clause 4.5.3.3 and clause 4.5.3.4 were not alternative, but cumulative.
52. As a matter of language they plainly were alternative, since clause 4.5.3.3 was conditional on official consent, and clause 4.5.3.4 was to take effect if the official consent could not be obtained. But as a matter of practicality they could be seen as cumulative, especially as they were both contemplating the use of new sewers and drains, to be constructed on Bryant’s building estate, for the discharge of waste from (i) the three existing dwellings on the retained land, and (ii) up to 20 new dwellings which might, at some uncertain future time, be built on the retained land.
53. It must be remembered that the agreement dated 5 August 1994 was only an option agreement, probably entered into before Bryant had obtained planning permission. At that stage there would have been no final detailed plans for the layout of sewers and drains. The exception and reservation in clause 4.5.3 (the inclusion of which in the transfer was never in doubt after Mr Stone had pointed out its omission on 9 August 1995) gave Mr Thompson most of what he wanted, but it had two shortcomings. One was that it did not provide any guarantee that the sewers and drains to be constructed to serve Bryant’s development would be built at a sufficient depth, and to a sufficient size, to serve dwellings on Mr Thompson’s retained land also. The other was that although it entitled Mr Thompson or his successors “to lay and connect into” Bryant’s sewers and drains, they would have to incur the expense of doing so not only up to the boundary, but also over whatever distance lay between the boundary and the nearest convenient point on Bryant’s system.
54. If that was how the parties and their solicitors were looking at the matter at the time, it would be understandable that Mr Thompson might have been willing ‘to waive’ his clause 4.5.3.3 ‘entitlement’ (the language of Mr Stone’s note on the travelling draft) if, and only if, he was satisfied with the detailed drainage plans for Bryant’s development. He would have been giving up the convenience of a connection on the boundary to serve a future development on the retained land, but he would have known that the exception and reservation in clause 4.5.3 was in practice going to give him most of what he wanted. He might have been prepared to settle for the prompt provision of a connection for the three existing dwellings. The terms of Mr Stone’s letter of 18 August 1995 (which refers to wanting the drainage plans in relation to the easement, rather than the clause 4.5.3.3 covenant) are consistent with that possibility.
55. However that is not a view of the matter which was put forward by either side, either below or (except for the short passage in Mr McGhee’s reply) in this court. It would be wrong to pursue the theory any further, especially as it still provides no answer to the riddle of the solicitors’ inconsistent notes on their respective copies of Ms Brooks’ letter of 23 August 1995. I would dismiss this appeal.

Lord Justice Auld:

56. I also agree that this appeal should be dismissed.
Order Appeal dismissed with costs as in the agreed draft. (Order does not form part of the approved judgment)