Leeds LS1 3BG
B e f o r e :
|(1) BALJIT SINGH SAHOTA
(2) SOHAN SINGH SAHOTA
(3) LAKHBIR SINGH
|- and -
|RR LEISUREWAYS (UK)
James Barker (instructed by Oxley & Coward of 34/46 Moorgate Street, Rotherham, S60 2HB) for the Defendant
Hearing dates: 25, 26 October 2010
Crown Copyright ©
Judge Behrens :
3.2 Negotiations for the Agreement.
With regard to Clause 2(14) of the Agreement and Clause 2(12) of the Lease, he is of the opinion that, although this is a Ground Lease and the buildings will eventually revert to the Council, it is up to your clients to insure comprehensively all of the premises on their own and not jointly with the Council whilst the buildings are under construction and occupied by your clients.
In the fourth paragraph he refers to the proposal for 20 year rent reviews and proposes a period of 10 years between rent reviews. He remarks on the length of time since the term was agreed and referred to in the Heads of Terms.
3.3 The Agreement
3.4 The Buildings.
3.5 The Lease
ALL THAT plot of land containing an area of 877 square yards or thereabouts (formerly stated be 925 square yards in the Agreement) situate adjoining Station Road and Masbrough Street Rotherham in the County of South Yorkshire and more particularly delineated on Plan Number E825 annexed hereto and thereon edged red together with the buildings erected thereon
The rent hereinbefore reserved shall be subject to review at the expiration of the 15th year from the commencement of the said term and at the expiration of each and every ten years thereafter the revised rent being agreed by the Council and the Lessee on the basis of the current open market rental value of the demised premises but disregarding any increase in the current market rental value of the demised premises arising by virtue of
(a) any Lessees improvements fixtures or fittings at the demised premises and
(b) any goodwill attributable to any business carried on by the Lessees at the demised premises.
And that in the event of the Council and the Lessee failing to agree the amount of the revised rent then the matter shall be referred to an Arbitrator whose decision shall be accepted as final by both parties but in no circumstances shall the revised rent be reduced below the sum of £450.
3.6 The title of the Council and of the Defendant
No 131 Masbrough Street
SYK 30932 135 141 Masbrough Street
3.7 The first rent review.
3.8 The purchase of the reversion
4.1 The basis of the valuation
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd.  AC 749.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B.  A.C. 191, 201:
"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."
17. On this issue as to the construction of a business lease, I bear in mind the following guidance from the authorities:
(1) the lease is to be construed against the relevant factual background to the extent known to the parties when it was agreed (in this case in August 1978) and that is apparent from Ipswich Town Football Club Co Ltd v Ipswich Borough Council  2 EGLR 146;
(2) prima facie a rental value for the purposes of a rent review is the value of the demised premises at the review date, see Ravenseft Properties Ltd v Park  2 EGLR 164,  50 EG 52. In this case proviso 2 in clause 1 of the lease makes that express;
(3) prima facie the rental value of premises for the purposes of a rent review clause in a lease is the value of the whole of the demised premises, ie including any buildings on the land, see Braid v Walsall Metropolitan Borough Council (1998) 78 P & CR 94,  EGCS 41;
(4) But that is only a starting assumption from which the parties to a lease are at liberty to depart. Whether they have done so or not in any particular case will depend, like any other question of construction, on the language they have used set against the relevant factual background. The fact that the lessee has built the relevant buildings at its own expense, although highly relevant, is unlikely to be determinative on its own if there is nothing at all in the terms of the lease pointing away from the normal assumption, see: Goh Eng Wah v Yap Phooi Yin  2 EGLR 148, a decision of the Privy Council."
18. But the combination of that fact together with language in the lease pointing away from the normal assumption may be compelling even if the language on its own might have been insufficiently clear to justify such a departure.
First, I will consider how the matter stands on a literal reading of the lease without recourse to any factual matrix to assist construction. The original tenants were the defendants. The defendants are named in the lease, Superdrug Stores Ltd. The defendants are not called "Superdrug Stores Ltd" throughout the lease; they are defined as "the tenant". "The tenant", therefore, becomes the expression which when used in the lease means Superdrug Stores Ltd. True it is that the expression "the tenant" includes, under clause 4(9), the successors and assigns of Superdrug Stores Ltd. But Superdrug Stores Ltd has no successors or assigns as yet and the primary meaning of "the tenant" remains Superdrug Stores Ltd.
So, if the contents of the lease are read literally, the provision in the rent-review clause requires to be disregarded any effect on rent of any improvement carried out by Superdrug Stores Ltd. The removal of the lift hoist and the surrounding walls, the increase of the ground-floor area and the extra length given to the shop front represent improvements which, it is common ground, were carried out by Superdrug Stores Ltd. So far as the literal meaning of the lease is concerned, therefore, in my judgment, the plaintiffs' case fails.
I return briefly then to those facts. Kenfield Properties Ltd agreed, albeit, perhaps, subject to contract, to grant to the defendants a lease containing the rent-review provision I have read and allowed the defendants into possession in advance of the final grant of the lease to enable the defendants to carry out shopfitting works in anticipation of their use of the premises after the grant of the lease. The lease was then granted. The proposition that the landlord can then turn round and say "Now I am entitled to take advantage of all the improvements you have done before we actually got around to executing the lease because those improvements do not fall to be disregarded on the rent review" is one which I find quite unacceptable. It is near to being, in my view, an unconscionable attempt by a landlord to take advantage of a situation which it has itself encouraged by consenting to its tenant going into possession and commencing the shopfitting works in advance of the lease.
For myself I am perfectly happy to follow the approach of the learned judge in that case and apply them to this case. The way I would put it is: are the improvements referable to the grant of a tenancy under consideration, or are they referable to some former interest of the tenant as in the Wonderland case?
4.2 The date of the review.
The rent hereinbefore reserved shall be subject to review at the expiration of the 15th year from the commencement of the said term and at the expiration of each and every ten years thereafter
5.1 As between the Claimants and the Council
33 The party seeking rectification must show that:
(1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;
(2) there was an outward expression of accord;
(3) the intention continued at the time of the execution of the instrument sought to be rectified;
(4) by mistake the instrument did not reflect that common intention.
34 I would add the following points derived from the authorities:
(1)The standard of proof required if the court is to order rectification is the ordinary standard of the balance of probabilities.
"But as the alleged common intention ex hypothesi contradicts the written instrument, convincing proof is required in order to counteract the cogent evidence of the parties' intention displayed by the instrument itself": Thomas Bates and Sons Ltd v Wyndham's (Lingerie) Ltd  1 WLR 505 at page 521 per Brightman LJ.
(2)Whilst it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if in substance and in detail the common intention can be ascertained: Cooperative Insurance Society Ltd v Centremoor Ltd  2 EGLR 52 at page 54, per Dillon LJ, with whom Kerr and Eveleigh LJJ agreed.
(3)The fact that a party intends a particular form of words in the mistaken belief that it is achieving his intention does not prevent the court giving effect to the true common intention: see Centremoor at page 55 A-B and Re Butlin's Settlement Trusts  Ch 251 at page 260 per Brightman J.
5.2 Enforceability against the Claimants
It would be extending the doctrine of notice and the obligation to make enquiry far too much if the doctrine was intended to cover an equity of rectification. Of course the purchaser is bound by the rights of the tenant in occupation . He must look at the agreement and he is bound by the agreement
But in my judgment, a purchaser is not only entitled but also bound to assume when he is looking at the agreement under which the tenant holds that the agreement correctly states the relationship between the tenant and the landlord; and he is not bound to assume or to ask or make enquiry whether the tenant has any rights to rectification.