England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EDMONTON COUNTY COURT
(DISTRICT JUDGE COHEN)

		Royal Courts of Justice Strand London WC2
		Wednesday, 3rd October 2001

Wednesday, 3rd October 2001

1. LORD JUSTICE JONATHAN PARKER: I will ask Mr Justice Bodey to give the first judgment.
2. MR JUSTICE BODEY: This is a renewed application by the claimant company, Avebury Taverns Ltd, for permission to appeal an order made by District Judge Cohen sitting at the Edmonton County Court, on 15th March 2001. It follows a refusal on paper by Arden LJ dated 1st August 2001.
3. The underlying proceedings concern a public house in north London known as the Mitre, or sometimes on the documents as the Golden Stool. By a lease dated 2nd October 1998, the claimant company, itself a tenant of the premises, granted a tenancy to the defendants, the terms of which obliged the defendants, putting it very briefly, to purchase specified alcoholic beverages for selling in the public house from the claimant. Subject to certain exceptions the defendants were not to sell in the pub any specified drinks other than those purchased from the claimant.
4. In March 2000 the claimant's evidence is that the defendants were seen to be breaking the above trading obligations and restrictions, both by purchasing drink from elsewhere and by operating a wholesale drinks business from the pub premises. Those assertions are denied by the defendants, and the factual issues thereby joined remain unresolved in view of the course taken at the hearing before the district judge on 15th March 2001 (to which I shall come in a moment).
5. On 27th July 2000 the claimant served on the defendants section 146 Notices as part of the processes of forfeiting their tenancy of the pub.
6. By section 146 a right of re-entry or forfeiture is not enforceable unless and until the lessor serves on the lessee a notice - (a) specifying the alleged breach; (b) if the breach is capable of remedy, requiring the lessee to remedy it; and (c) in any case, requiring the lessee to make compensation in money for the breach, and unless the lessee fails within a reasonable time to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money.
7. The pleadings in the proceedings which followed crystalised an issue between the claimant and the defendants as to, amongst other issues, the validity of the section 146 Notice of 27th July 2000. The Particulars of Claim inferentially asserted its validity, and the Defence (by paragraph 7) denied its validity, saying:

"It is averred that the said document did not amount to a valid notice pursuant to section 146 as aforesaid in that it did not give the Defendants the opportunity of remedying the said alleged breaches of the agreement."

8. As a matter of pure fact that was right (viz that the Notice did not require the defendants to remedy the breaches and/or to make compensation in money for them) the claimant and its advisors having been of the opinion that the breaches were irremediable.
9. When the case came on for hearing on 15th March 2001 it was common ground between the district judge and counsel for both sides that the question of the validity (or not) of the section 146 Notice could and should be tried as a preliminary issue, in the interests of a potential saving of time, effort and expense. There was a consensus that the district judge should assume, for the purpose of this preliminary issue, that the defendants had in fact committed the alleged breaches, and that he should then proceed to decide whether or not they were remediable. If they were not remediable it was agreed that the section 146 Notice as such was valid and that the court would then go on to resolve the factual issues as to breach. However, if the breaches were remediable then it was common ground that the section 146 Notice was invalid and that the claimant's claim would be dismissed without more ado.
10. There was one point of disagreement between counsel as to how the preliminary issue should be handled; Mr Butler, counsel for the claimant, submitting that the district judge should hear evidence on the question of whether or not the breaches were remediable. Counsel for the defendants submitted that such evidence should not be allowed, and that the question of remediability could and should be disposed of on submissions, with reference to the various authorities.
11. In that respect the district judge heard argument and ruled that he would decide the preliminary point just on submissions. It seems to me that the district judge was plainly right.
12. As I have said the issue had been clearly crystalised, by the fact of the defendant's defence of November 2000 having asserted that the notice was invalid for having omitted the requirement that the defendants should remedy their breaches.
13. No reply or other pleading was filed by the claimant to set out a contrary case as to why the breaches were said to be irremediable; nor setting out particulars of any such a case as was later argued by Mr Butler for the claimant before the district judge (for example, on the basis of the potential irretrievable loss of goodwill to Mitre by virtue of customers, who had grown to like the unauthorised brands of beer, perhaps following the defendants to some other pub where the defendants might go and take on another tenancy).
14. Nor had any evidence been prepared by the claimant, nor served on the defendants, seeking to demonstrate that the loss of profits or diminution of goodwill to the claimant would be so relatively incalculable as to render the breaches incapable of being compensated for in money.
15. If the district judge had acceded to the claimant's request to call oral evidence on the preliminary issue it would, in my judgment, have been unfair to the defendants who would have been taken by surprise.
16. In the absence of evidence to establish that the breaches were irremediable, the district judge was left with the competing submissions of counsel. He considered with care the several authorities on the question of remediability to which he was referred (but which it is not necessary for me to rehearse, since it is effectively common ground that ultimately each case turns on its own particular facts). As well as breaches of positive covenants, breaches of negative covenants (as here) can also be remediable, depending on their precise wording and on the factual circumstances.
17. In the event, the district judge was persuaded by the arguments of the defendant's counsel that these breaches were potentially capable of remedy: that is (a) by the defendants desisting selling unauthorised beverages and/or running a wholesale business from the pub; (b) by their undertaking not to do so in future; and (c) by their paying compensation to be agreed or assessed, so as to compensate the claimant for its past financial losses caused by the breaches.
18. In my judgment the district judge was right in that decision. At any rate his decision was not one which can be described as wrong. The defendants could clearly have delivered under (a) and (b) (just mentioned). As to (c) (just mentioned) loss of profits and/or damage to goodwill frequently fall to be assessed and determined in breach of contract and similar situations. I cannot see (absent specific evidence showing this to be for some reason an exceptional case) that such an evaluation and decision would have been beyond the capacity of forensic accountants, or beyond the ability of the court to make a ruling if necessary. If this be so, then it seems to me that the breaches were remediable in the financial sense referred to in section 146.
19. For the above reasons I respectfully agree with the written decision of Arden LJ that the claimant has no real prospect of success on appeal.
20. I would therefore dismiss the application for permission.
21. LORD JONATHAN PARKER: I agree.
(Application dismissed; no order for costs).