England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
(His Honour Judge Langan QC
(sitting as a deputy High Court judge))

		Royal Courts of Justice Strand London WC2 Tuesday 26th March, 2002

1. LORD JUSTICE ALDOUS: The defendants, Mr Jack Loach, Mr Sidney Loach and Mrs Haley, seek permission to appeal against the judgment of His Honour Judge Langan QC of 19th December 2001. Their application was out of time, but an extension of time has already been granted.
2. The action was brought by Michael Gerson (Leasing) Ltd ("Gerson"), which is a leasing company. As recorded in the judgment, Gerson entered into a sale and lease-back arrangement with a company called S&J Loach Ltd of which the defendants were directors. The arrangement included personal guarantees by the defendants. The required payments under the lease were made up to and including November 1997. Thereafter, there was a patchy history of payments. That resulted in Gerson terminating the lease on 25th August 1998 in accordance with clause 9(b)(i) of Schedule 2. On 28th August Gerson notified each of the defendants that unless the company, S&J Loach Ltd, paid to Gerson the amount, called "the termination sum", that was due under the agreement, they would be claiming that amount from the defendants as guarantors. That sum was not paid and that has resulted in these proceedings against the defendants in which Gerson sought to recover just over £160,000 as the termination sum.
3. A number of defences were advanced, but they were rejected by the judge. I need just mention two. Mrs Haley put forward a defence of non est factum. That was rejected by the judge for reasons which he gave, which included a finding that he could not accept her evidence. The second defence was based on an attack upon the valuation evidence. That was also rejected by the judge, who gave judgment for the sum claimed upon the basis of the calculation contained in paragraph 8 of the particulars of claim. That paragraph claimed as the termination sum arrears of rent due on 21st July 1998 and 21st August 1998 including VAT of £11,941.84; interest upon that sum of £151.14; monthly rentals which would have been payable but for the termination of the lease, discounted to reflect earlier receipt, amounting to £136,667.52. From that was deducted £52,875, being the open market value of the equipment at the date of termination. That left a sum of £95,885.50. To that was added interest at the rate provided for in the leasing agreement, which was 2% per month compounded monthly for the period 25th August 1998 to the date of the issue of the proceedings. That amounted to £64,782. The total was just over £160,000, as I have said. There was no claim for statutory interest.
4. The application for permission to appeal was refused by the judge and thereafter an application was made to this court. It came before the single Lord Justice, who considered the two grounds then relied upon to challenge the judge's judgment. One was an attack upon the judge's conclusion on valuation and the second was a submission relating to the interest that the judge had ordered.
5. The amended notice of appeal just raises one issue, namely an allegation that the interest element of the claim had been wrongly calculated. The judgment does not contain any reference to the way the interest should be calculated. I suspect that is because the applicants acted in person and concentrated their submissions upon the issues of valuation and non est factum. The judge did, however, make in his order provision for the applicants to apply to the court to resolve any dispute concerning the calculation of the amount to be paid. He ordered that there should be a stay of enforcement of the judgment until 16th January or determination of any application that they made. I understand they did not make an application in time, and therefore the order was for the sum claimed calculated as set out in the particular of claim.
6. I have had the advantage of submissions from Miss Linklater. She has drawn to my attention clause 9(c) of the leasing agreement. So far as is material, it is in this form:

"(c) Upon acceptance by the Owner of any repudiatory breach by the Lessee as terminating this Agreement and all or any other Lease Agreements the Lessee shall pay to the Owner the following amount (`the Termination Sum'):

(i) all arrears of rental (and any Supplementary Rental as defined in paragraph 11 below) and all other amounts accrued due under the terms of this Agreement.

(ii) all rentals which would have been payable but for such termination during the unexpired term of the Primary Period (including such Supplemental Rental as defined in paragraph 11 below as would have been payable during such unexpired term if the amount of said Supplemental Rental payable in respect of the Primary Period in which termination occurs remained constant throughout such unexpired term) but discounted to present day value at the Discount Rate specified in Clause 10 of this Agreement to reflect accelerated receipt.

...

(iv) an amount equal to interest on all arrears after as well as before judgement at the rate of 2 per cent per month, compounded monthly, from the date of which any such payment became due until the date of payment thereof BUT less a credit for the open market value of the Equipment at the date of termination compared with its estimated value at the end of the Primary Period as notified by the Owner to the Lessee."

7. The matter upon which permission to appeal is sought concerns the application by the judge of the interest, referred to in clause 9(c)(iv), both to the arrears of rent and to the accelerated amount payable under clause 9(c)(ii). Miss Linklater submits that the arrears referred to in clause 9(c)(iv) in the phrase "an amount equal to interest on all arrears" refers back to the arrears of rental in clause 9(c)(i) and cannot refer to the accelerated payments under clause 9(c)(ii) which in no way can be contemplated as arrears. She submits that if there is any doubt on that matter, the clause should be construed against the interest of Gerson, with the result that her clients should not have to pay interest as calculated.
8. I have come to the conclusion that that submission is properly arguable before this court. I therefore propose to give permission to appeal so that the matter can be dealt with. It is a matter which is of short compass. It should not need more than half a day at the most to determine, and it can therefore be listed in the short warned list. The costs will be costs in the appeal.
ORDER: Application for permission to appeal allowed; time estimate of half a day; to be listed in the short warned list; costs of this application to be costs in the appeal; stay of enforcement of any sum exceeding £95,885.50; liberty to apply on notice to discharge the stay of enforcement. (Order not part of approved judgment)