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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Wigan Borough Council v Scullindale Global Ltd & Ors [2021] EWHC 779 (Ch) (01 April 2021) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2021/779.html Cite as: [2021] EWHC 779 (Ch) |
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BUSINESS AND PROPERTY COURTS IN MANCHESTER
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Long lease of hotel - Construction - Implication of terms - Landlord's break clause - Whether validly exercised - Completion of development - Time - Prevention principle - Waiver - Estoppel - Valuation - Mesne profits - Repudiation of lease
1 Bridge Street West Manchester M60 9DJ |
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B e f o r e :
Sitting as a Judge of the High Court
____________________
WIGAN BOROUGH COUNCIL |
Claimant |
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- and – |
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(1) SCULLINDALE GLOBAL LIMITED (2) CRAIG BAKER (3) AMIR MADANI |
Defendants |
____________________
Mr Andrew Latimer (instructed by Jolliffe & Co LLP, Chester) for the Defendants
Hearing dates: 22-26 February, 1-5, 10, 11 March 2021
____________________
Crown Copyright ©
Covid-19 Protocol: This judgment was handed down remotely by circulation by email to the parties' legal representatives and representatives of the press and by release to BAILII. The date and time for hand-down is deemed to be 10.00 am on Maundy Thursday, 1 April 2021.
The following cases are referred to in the judgment:
Arnold v Britton [2015] UKSC 36, [2015] AC 1619
BDW Trading Ltd v JM Rowe (Investments) Ltd [2011] EWCA Civ 548
Blue Chip Hotels Ltd v Revenue & Customs Commissioners [2017] UKUT 204 (TCC)
Borwick Development Solutions Ltd v Clear Water Fisheries Ltd [2019] EWHC 2272 (Ch), [2020] 1 WLR 599, reversed [2020] EWCA Civ 578, [2020] 3 WLR 755
Buckland v Papillon (1866) LR Ch App 67
Cooke v Scotfield Ltd [2000] All ER (D) 532
Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18, [2020] AC 845
Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, [2010] 3 EGLR 165
Eurobank Ergasias SA v Kalliroi Navigation Co Ltd [2015] EWHC 2377 (Comm)
Fuller v Kitzing [2017] EWHC 810 (Ch), [2017] (Ch) 485
Hersey v Giblett (1854) 18 Beav 174
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Mears Ltd v Costplan Services (South East) Ltd [2019] EWCA Civ 502, [2019] 4 WLR 55
Moss v Barton (1866) LR 1 Eq 474
Proxima GR Properties Ltd v Spencer [2017] UKUT 450 (LC), [2018] L & T R 9
Rider v Ford [1923] 1 Ch 541
Rockferry Waterfront Trust v Pennistone Holdings Limited [2020] EWHC 3007 (Ch)
Satyam Enterprises Ltd v Burton [2021] EWCA Civ 287
Siemens Hearing Instruments Ltd v Friends Life Ltd [2014] EWCA Civ 382, [2014] 2 P & C R 5
Swedac Limited v Magnet & Southerns Plc [1989] 1 FSR 243
United Scientific Holdings Ltd v Burnley BC [1978] AC 904
The following additional cases were cited to the court or were referred to in the skeleton arguments:
Active Media Services Inc v Burmester, Duncker & Joly Gmbh [2021] EWHC 232 (Comm)
Beazer Homes Ltd v Durham County Council [2010] EWCA Civ 1175
Ben Cleuch Estates Ltd v Scottish Enterprise [2008] CSIH 1, [2008] SC 252
Berkeley Community Villages Ltd v Pullen [2007] EWHC 1330 (Ch), [2007] 3 EGLR 101
Biondi v Kirklington & Piccadilly Estates Ltd [1947] 2 All ER 59
Delta Petroleum (Caribbean) Ltd v British Virgin Islands Electricity Corporation [2020] UKPC 23
First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] BCLC 1409
French v Elliott [1960] 1 WLR 40
Kelly v Fraser [2012] UKPC 25, [2013] 1 AC 450
Mackay v Dick & Stevenson (1881) 6 App Cas 251
Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga) [1990] 1 Lloyds Rep 391
Multon v Cordell [1986] 1 EGLR 44
Sainsbury's Supermarkets Ltd v Olympia Homes Ltd [2005] EWHC 1235 (Ch), [2006] 1 P & C R 17
TFS Stores Ltd v The Designer Retail Outlet Centres (Mansfield) General Partner Ltd [2019] EWHC 1363 (Ch), [2019] Bus LR 1970
JUDGE HODGE QC:
I: Introduction and overview
II: The trial and the witnesses
III: The Lease: its true meaning and effect
"(a) The 'Milestones':
(i) Within 6 months of the date of this Lease at the Lessee's own cost to commence the Works; and
(ii) Prior to 23 May 2018 (insert date 2 years from date of Lease) to complete the Development in accordance with the Planning Permissions
(b) The Lessee shall proceed diligently with the Works and carry on and complete the Development in a good and workmanlike manner in accordance with Planning Permission and with all practicable speed in compliance with the programme which forms part of the Building Contract'
(c) Clauses…..4.6(a)(i) and, 4.6(a)(ii) each represent a Milestone in terms of the Development. If any or all of the Milestones are not achieved in accordance with the timescales set out in the clauses above the Lessor shall have a right to determine this Leaser and serve a Break Notice in accordance with clause 10'.
'9.1 "Break Date" a date which is at least 2 months after the service of the Break Notice
"Break Notice": written notice to terminate this lease specifying the Break Date
"Event of Default" means the occurrence of one of the following events:
(a) any Act of Insolvency defined in the Agreement [for Lease] until the date of the Practical Completion Certificate
(b) the Lessee not achieving any or all of the Milestones defined in clause 4.6
9.2 Following an Event of Default the Lessor may terminate this Lease at any time by serving on the Lessee a Break Notice
9.3 If a Break Notice is served in accordance with clause 9.1 then on Termination of this Lease the Lessor will pay to the Lessee the lower of:
(a) The open market value of the Premises; or
(b) The Premium plus the value of any improvement carried out at the Premises prior to the Termination'
9.4 If the parties cannot agree the value in accordance with clause 9.3 this will be determined by the Independent Surveyor in applying the procedure referred to at clauses 4.14 (g)-(n) reading reference to clause 4.14 as clause 9.3
9.5 Termination of this Lease on the Break Date shall not affect any other right or remedy that either party may have in relation to any earlier breach of this lease.
"The lease with a break clause entitling the landlord or tenant to terminate the lease after the end of part of the term does not have to be exercised immediately unless the lease so provides. In most cases it will remain exercisable at any time after the right has arisen. The continued acceptance of rent by the landlord will not, without more, operate as a waiver of his rights under the break clause because there is nothing inconsistent between the continuation of the landlord and tenant relationship and the reservation of the right to break. If it is exercisable at any time during the remainder of the term the landlord is not put to an election and does not make an election by continuing to perform the contract until he chooses to exercise his right to break."
Moreover, the words in clause 9.2 cannot mean "at any reasonable time" as the defendants allege. The parties would no doubt have wanted to avoid such an imprecise formula, precisely because of the uncertainty it would create.
IV: The validity of the break notice
77. The classic and common situation in which a party to a contract is put to an election … is where the other party has committed the breach of a significant term of the contract amounting to a repudiation. The innocent party is then faced with a choice between accepting that repudiation and thereby terminating the contract or affirming the contract and thereby waiving the breach. Because the continued performance of the contract is ipso facto likely to amount to an affirmation of the contract, the innocent party is necessarily put to his election and must choose…
78. But not all rights to terminate a contract arise in these circumstances or have the effect of putting the party with the right to rescind to an immediate election. The lease with a break clause entitling the landlord or tenant to terminate the lease after the end of part of the term does not have to be exercised immediately unless the lease so provides. In most cases it will remain exercisable at any time after the right has arisen. The continued acceptance of rent by the landlord will not, without more, operate as a waiver of his rights under the break clause because there is nothing inconsistent between the continuation of the landlord and tenant relationship and the reservation of the right to break. If it is exercisable at any time during the remainder of the term the landlord is not put to an election and does not make an election by continuing to perform the contract until he chooses to exercise his right to break.
79. The same principle applies in my view to the right to rescind under clause 6.2. It conferred upon Barratt the right to rescind the Contract by the service of a notice at any time following the non-satisfaction of any of the specified conditions. In addition, it also precluded the service of a notice if at the time the party in question was in default of its obligations under clause 6.2. In the case of Barratt this was a reference to its obligations under clause 6.2(iii) to act reasonably and to use all reasonable endeavours to agree the specification, warranties and method statement with Rowe and A&L.
80. Barratt was therefore entitled to wait after 7th July before serving its notice and, in the meantime, it was obliged to continue to attempt to agree the form of the warranties and other documents. I cannot see how, in those circumstances, its performance of that obligation was in any way inconsistent with its right to rescind when it was under the contract a necessary pre-condition to the exercise of that right.
81. The correct analysis is, I think, that Barratt did not make an election before 25th November 2008 when it served its notice to rescind and that nothing it did between 7th July and then can amount to a waiver of its rights. It could, of course, have chosen to waive its right to rescind but for that to occur Barratt would need to have indicated its intention to abandon its right in clear and unequivocal terms..."
"37. On or about 13 June 2018 Phil Haslam, a strategic asset manager of the Claimant, visited Haigh Hall Hotel. Mr Haslam inspected the hotel and confirmed to the Second Defendant that the Claimant was content with the progress of the completion of the Development.
38. On or about 27 June 2018, the Claimant's Deputy Chief Executive Paul McKevitt, visited the Haigh Hall Hotel. Like Mr Haslam before him, Mr McKevitt spoke to the Second Defendant. Mr McKevitt told the Second Defendant that the Claimant was content with the work done and the progress which had been achieved to date.
39. The Second Defendant understood that Mr Haslam and Mr McKevitt were visiting to inspect progress to date, the second Milestone having passed. The net effect of either or both of these visits was that the Claimant demonstrated that it was satisfied with the progress towards completion of the Development and/or the Claimant through the words and conduct of Mr Haslam and/or Mr McKevitt made unequivocal representations to that effect.
40. In reasonable reliance on the words and conduct set out above, the First Defendant spent or caused to be spent approximately £2,000,000 on progressing the Development.
41. That money would not have been spent had the Defendants been told that the Claimant believed that it had grounds to serve a break notice and, at the minimum, work would have been suspended and no further sums spent until that serious issue had been resolved.
I note that Mr Latimer quantified the invoiced expenditure between July 2018 and September 2018 at £1,111,161.
V: Valuation issues
VI: Damages and mesne profits
VII: The counterclaim
VIII: Conclusion
[i] The late Sir Jeremiah Harman was the subject of a critical obituary in "The Times" newspaper on 13 March 2021, which was compounded by an unfortunate "tribute" on the day of his funeral (23 March 2021). An appropriate counterweight to these reports was supplied by the Treasurer of Lincoln's Inn (David Richards LJ) in his funeral address at Chelsea Old Church. As the junior member of Jerry's chambers at 9 Old Square for the final two years he was in practice before his elevation to the Chancery Bench, it is appropriate to record that Jerry was a good lawyer, possessed of a fine commercial nous and a great understanding of financial matters. Although at times he could be intemperate and he found it difficult to resist headline-grabbing comments, he was capable of generating a high standard of debate in court and he relished, and respected, advocates who stood up to him. At a time when Oxbridge still dominated the High Court Bench, Jerry had not studied at any university. At the retrial of the case that proved to be Jerry's nemesis, the new trial judge arrived at the same ultimate disposal (which was affirmed by the Court of Appeal). Jerry loved Lincoln's Inn and gave generously of his time to it, serving as Treasurer in the year 2000. By common consent, he was a very fine Treasurer who was regarded by many members of staff as the very best Treasurer they ever served. [Back]
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URL: https://www.bailii.org/ew/cases/EWHC/Ch/2021/779.html