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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Prudential Assurance Company Ltd v Ayres & Anor  EWCA Civ 52 (07 February 2008)
Cite as:  EWCA Civ 52
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Mr. Justice Lindsay
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MOORE-BICK
LORD JUSTICE MOSES
| THE PRUDENTIAL ASSURANCE COMPANY LTD
|- and -
|(1) DAVID MONROE AYRES
(2) CHRISTOPHER GREW
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr. Alan Steinfeld Q.C. and Mr. Richard Ritchie (instructed by Kingsley Napley) for the respondents
Hearing date: 13th December 2007
Crown Copyright ©
Lord Justice Moore-Bick :
"3. The Assignee [Altheimer & Gray] hereby covenants:
3.1 with the Landlord [the Leathersellers] that the Assignee will perform and observe all the covenants on the part of the lessee and the conditions and provisions on the part of the lessee contained in the Underlease.
3.2 with the Tenant [the Prudential] that the Assignee will pay the rents in the manner and at the respective times appointed for payment thereof . . . . .
. . . . . . . . . . . . . . . . . . . .
6. The Undertenant [the respondents] covenants with and guarantees to the Tenant that:
. . . . . . . . . .
6.3 the Assignee shall punctually pay the rents and perform and observe the covenants and other terms of the Underlease;
6.4 if the Assignee shall . . . . . make any default in payment of the rents or in performing or observing any of the covenants or other terms of the Underlease the Undertenant will pay the rents and perform the and observe the covenants or terms in respect of which the Assignee shall be in default and make good to the Tenant on demand and indemnify the Tenant against all losses damages costs and expenses arising or incurred by the Tenant as a result of such non-payment non-performance or non-observance notwithstanding:
6.4.1 any time or indulgence granted by the Tenant to the Assignee . . . . . .
. . . . . . . . . .
6.4.4 any other act or thing which but for this provision the Undertenant would have been released."
In addition, clause 6.5 of the Licence contained a covenant on the part of the respondents to accept a new lease for a period equivalent to the residue of the old lease if the assignee should disclaim prior to any further lawful assignment.
"3.3 The Assignee covenants with the Assignor that the Assignee . . . . . will henceforth during the said term and any statutory continuation of it pay the reserved rent and perform and observe the tenant's covenants and the conditions contained in the Lease and will at all times keep the Assignor indemnified against all proceedings, costs, claims and expenses whatsoever in respect thereof."
"2. PARTNERSHIP LIABILITY
Whilst the Lease is vested in Altheimer & Gray or any Group Company of Altheimer & Gray or while Altheimer & Gray or any Group Company of Altheimer & Gray remains liable under an authorised guarantee agreement pursuant to Section 16 of the Landlord and Tenant (Covenants) Act 1995 (but notwithstanding any assignment or other transfer, or any disclaimer, of the same or any other event or circumstances whatsoever):-
2.1 The liability of the Tenant under the Lease and all documents ancillary to or supplemental to the lease and the liability of the Tenant under any authorised guarantee agreement given in connection with any assignment of the Lease shall be limited to the Partnership (including, but not limited to all its assets, income and accounts) and such liability shall not extend to the personal assets of individual partners (present, past or future) therein. Consequently any recovery by the Landlord against the Tenant or any previous tenant under the Lease for any such default shall be limited to assets of the Partnership and shall not extend to the personal assets of any individual partners therein other than the capital and current accounts of such partners in the Partnership. Further, no partner (present, past or future) of the Tenant shall be required by the Landlord at any time to loan or contribute personal money or property to the Tenant to enable it to discharge any obligation owed to the Landlord.
2.2 In the event of the liquidation of Altheimer & Gray . . . . . in circumstances where the liquidator would have a right to bring a claim against the separate estate of any of the individual partners or to prove for the same by reason of any insufficiency in the joint estate for the payment of the joint expenses and joint debts with or without interest thereon, then the Landlord shall not be entitled to any payment, dividend or other distribution from any such liquidator, in either case to the extent that [t]he liquidator may be or become entitled to make or have made any claim or submit or have submitted any proof against the individual partners themselves or their separate estates. The Landlord undertakes that when submitting any proof of debt in any such liquidation it will notify the liquidator of the terms of this Deed and will complete such proof of debt so as to give effect to the intent of this Clause 2.2."
"15. b. The effect of clause 2 of the Supplemental Deed is that the claimant has agreed that during the period in which the Underlease is vested in Altheimer & Gray the rent shall be limited to the amount it can recover out of the assets of the Altheimer & Gray partnership.
c. Altheimer & Gray is not in default of its obligations under the Underlease as those obligations have been expressly varied by clause 2 of the Supplemental Deed . . . . ."
That is reflected in paragraph 1 of their respondents' notice in which they seek to uphold the judge's order on the grounds that
"the effect of the Supplemental Deed was to reduce the liability of Altheimer & Gray under the lease and hence pro tanto the liability of the respondents under their guarantee."
"I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays an indispensable part in the way we interpret what anyone is saying. No one, for example, has any difficulty in understanding Mrs. Malaprop. When she says "She is as obstinate as an allegory on the banks of the Nile," we reject the conventional or literal meaning of allegory as making nonsense of the sentence and substitute "alligator" by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like "allegory."
Mrs. Malaprop's problem was an imperfect understanding of the conventional meanings of English words. But the reason for the mistake does not really matter. We use the same process of adjustment when people have made mistakes about names or descriptions or days or times because they have forgotten or become mixed up. If one meets an acquaintance and he says "And how is Mary?" it may be obvious that he is referring to one's wife, even if she is in fact called Jane. One may even, to avoid embarrassment, answer "Very well, thank you" without drawing attention to his mistake. The message has been unambiguously received and understood."
"It is of course true that the law is not concerned with the speaker's subjective intentions. But the notion that the law's concern is therefore with the "meaning of his words" conceals an important ambiguity. The ambiguity lies in a failure to distinguish between the meanings of words and the question of what would be understood as the meaning of a person who uses words. The meaning of words, as they would appear in a dictionary, and the effect of their syntactical arrangement, as it would appear in a grammar, is part of the material which we use to understand a speaker's utterance. But it is only a part; another part is our knowledge of the background against which the utterance was made. It is that background which enables us, not only to choose the intended meaning when a word has more than one dictionary meaning but also, in the ways I have explained, to understand a speaker's meaning, often without ambiguity, when he has used the wrong words."
"if detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense."
"Any claim (whether sounding in rescission for undue influence or otherwise) that you have or may have against [the Society] in which you claim an abatement of sums which you would otherwise have to pay to that society in respect of sums borrowed by you from that society in connection with the transaction and dealings giving rise to the claim (including interest on any such sums). "
"Any claim sounding in rescission (whether for undue influence or otherwise) that you have or may have against [the Society]. . . . .".
The Court of Appeal thought that the judge had gone too far, but the majority in the House of Lords, agreeing with Lord Hoffmann, upheld his conclusion.
"The liability of the Tenant under the Lease . . . . . shall be limited to the Partnership (including, but not limited to all its assets, income and accounts) and such liability shall not extend to the personal assets of individual partners (present, past or future) therein."
Consequently any recovery by (a) the Landlord against the Tenant or (b) any previous tenant under the Lease for any such default shall be limited to assets of the Partnership and shall not extend to the personal assets of any individual partners therein other than the capital and current accounts of such partners in the Partnership.
"Consequently any recovery by the Landlord or any previous tenant under the Lease against the Tenant for any such default shall be limited to assets of the Partnership and shall not extend to the personal assets of any individual partners therein other than the capital and current accounts of such partners in the Partnership."
". . . . . . an authorised guarantee agreement may—
(a) impose on the tenant any liability as sole or principal debtor in respect of any obligation owed by the assignee under the relevant covenant;
(b) impose on the tenant liabilities as guarantor in respect of the assignee's performance of that covenant which are no more onerous than those to which he would be subject in the event of his being liable as sole or principal debtor in respect of any obligation owed by the assignee under that covenant;"
"Any agreement relating to a tenancy is void to the extent that—
(a) it would apart from this section have effect to exclude, modify or otherwise frustrate the operation of any provision of this Act, . . . . ."
Lord Justice Moses:
Lord Justice Ward: