ON APPEAL FROM THE HIGH COURT OF JUSTICE
Peter Smith J
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE AIKENS
LORD JUSTICE PATTEN
| BDW TRADING LIMITED (T/A BARRATT NORTH LONDON)
|- and -
|JM ROWE (INVESTMENTS) LIMITED
Mr Nigel Jones QC and Ms Michelle Stevens-Hoare (instructed by Owen White) for the Respondent
Hearing dates : 12th and 13th April 2011
Crown Copyright ©
Lord Justice Patten :
"52.1 If the Landlord wishes to terminate this Lease at any time after 25 March 2007 and shall have given to the Tenant not less than six months notice in writing of its intention to do so then on the expiration of such notice this Lease shall absolutely cease and determine but without prejudice to any rights of action or claims of either party in respect of any antecedent breach or breaches of covenant save that the Landlord shall not make any claim against the Tenant in respect of dilapidations.
52.2 In the event that Landlord terminates this Lease in accordance with clause 52.1 it will pay to the tenant the sum of £95,500 to be apportioned as follows:
52.2.1 A capital payment of £68,000
52.2.2 An allowance made by the Landlord against the rent payable by the Tenant in respect of the Adjoining Property in the sum of £27,500
52.3 In the event that the Landlord terminates this Lease in accordance with clause 52.1 the Landlord will at its own expense carry out the Separation Works as defined in and in accordance with the provisions set out in the Fifth Schedule hereto
52.4 For the avoidance of doubt the Landlords obligations set out in the Fifth Schedule hereto shall not merge upon termination of the Lease and shall continue in full force and effect until discharged."
1.2 "Specification" means the specification detailing the Separation Works to be agreed between the Landlord and the Tenant before the Lease terminates under clause 52.1 (both parties acting reasonably)
1.4 "Landlord's Notice": The notice in writing to be served by the Landlord on the Tenant confirming the date of commencement of the Separation Works for the purposes of paragraph 2 hereof
1.6 "Method Statement" means a method statement and programme for carrying out and completing the Separation Works in accordance with this Schedule
1.7 "Warranties" means BPF form of design and construction warranties form the Contractors and Professional Consultants employed and appointed by the Landlord in respect of the Separation Works
2 The Separation Works
If the Landlord terminates the Lease in accordance with clause 52.1 the Landlord hereby covenants with the Tenant as follows:
2.1 To carry out and complete the Separation Works within twelve weeks of the date specified as the date of commencement of the Separation Works in the Landlord's Notice to the reasonable satisfaction of the Tenant subject to any strikes lock-outs shortage of materials or labour or other services weather conditions inevitable accident emergency Act of God or any cause or circumstances whatsoever beyond the control of the Landlord in which event a reasonable extension shall be agreed between the parties and failing agreement determined by independent expert pursuant to paragraph 6 of this Schedule
2.2 Provide Method Statement and copy of the Warranties for approval by the Tenant before the Separation Works commence such approval not to be unreasonably withheld or delayed
2.3 At least 12 weeks prior to the Landlord commencing the Separation Works the Tenant shall upon the written request of the Landlord attend a pre-contract meeting to discuss and agree (both parties acting reasonably) the scope and method of the Separation Works provided that if the Tenant fails to attend such a meeting after two reasonable attempts to schedule the same the Tenant shall be deemed to have accepted the scope and method of the Separation Works
2.4 To carry out the Separation Works in accordance with all necessary consents and permissions (if any) from the Local or any other Authority and under or by virtue of the Town and County Planning Act 1990 or any statutory modification or re-enactment thereof for the time being in force and any other relevant statutes bye-laws or regulations:
2.4.1 in accordance with the Specification and the Method Statement
4. Deed of Variation
Within 5 working days of the Landlord's Notice or the Tenant's Notice the Landlord shall enter into a Deed of Variation ("Deed of Variation") of the lease of the Adjoining Property to grant the Tenant the following rights:
4.1 A right of way on foot only (in Common with the Landlord) to the rear of the Adjoining Property over such reasonable access route as shall be agreed between the Landlord and the Tenant
4.2 A right of fire escape from the upper floors of the Adjoining Property
4.3 A right to place on the external rear wall of the Premises air conditioning condenser units and associated equipment at least equivalent to those as presently serving the Premises and the Adjoining Property Provided that the location of the air conditioning equipment must first be agreed with the Landlord such agreement not to be unreasonably withheld or delayed
4.4 A right to place and use waste bins placed in an area reasonably designated by the Landlord from time to time
4.5 Any other rights as are reasonably required for the use and enjoyment of the Adjoining Property that might arise as a consequence of the Separation Works
4.6 In both cases the parties shall act reasonably in agreeing the Deed of Variation incorporating the terms of this clause."
" The Vendor and the Purchaser agree the following in respect of the Separation Works:
15.1 The Vendor will seek confirmation from Alliance and Leicester Plc ("A & L") that a meeting dated 14 November 2007 between A & L, the Vendor's Surveyor and the Purchaser is agreed as the pre-contract meeting required by clause 2.3 of the Fifth Schedule of the Lease and, if not, the Vendor will as soon as practicable agree a date for a meeting with A & L (and the Purchaser) in accordance with the provisions of the Fifth Schedule of the Lease and the Purchaser will attend such meeting upon being given at least 3 working days notice;
15.2 The Purchaser will provide the Specification (as defined in the Fifth Schedule of the Lease) and the method statement and warranties referred to in clause 2.2 of the Fifth Schedule to the Lease within 8 weeks of the date of this Agreement and the Vendor will request approval of them in writing by A & L in accordance with the provisions of the said clause 2.2;
15.3 As soon as the Vendor receives from A & L the executed Deed of Variation (as defined in paragraph 4 of the Fifth Schedule of the Lease ("Deed of Variation") in readiness for completion of it the Vendor will notify the Purchaser in writing.
15.5 The Vendor and the Purchaser agree to use all reasonable endeavours to agree the Deed of Variation and carry out the provisions of this clause 15 as quickly and expeditiously as reasonably practicable after the date of this Agreement
15.6 The Purchaser agrees and covenants it shall carry out the Separation Works in accordance with the provisions contained in the Fifth Schedule of the Lease and the agreed method statement as referred to in clause 6.2 to the reasonable satisfaction of the Vendor's Surveyor (acting reasonably) and the Purchaser shall indemnify the Vendor against all costs claims actions and losses directly suffered by the Vendor arising out of any breach of this obligation save where the Purchaser is unable to comply with such obligations due to any act or omission by the Vendor or the Tenant."
"6.2 The Purchaser shall be entitled to refuse to complete until such time as:-
(i) the Vendor's Solicitors provide written confirmation to the Purchaser's solicitors that a form SDLT1 has been duly completed and submitted to the Inland Revenue in respect of the determination of the Lease with a copy of such form and the electronic receipt once received and
(ii) an application has been submitted to the Land Registry for the closure of the leasehold title number HD467416 and removal of the Lease from Title Number HD4668718 and a copy of the application has been provided to the Purchaser's solicitors together with a written undertaking from the Vendor's solicitors to the Purchaser's solicitors to use reasonable endeavours to deal with any requisitions raised by the Land Registry as soon as practicable, and
(iii) the Deed of Variation has been completed or is ready to be completed simultaneously with completion of the sale and purchase of the Property and the Deed of Variation executed by A & L (as defined in clause 15) is being held by the Vendor's solicitors and has been released to the Vendor's solicitors by A & L's solicitors and the method statement and all matters to be agreed with or approved by A & L pursuant to the Fifth Schedule of the lease have been agreed or approved by A & L the Vendor and the Purchaser in writing (and the Vendor and the Purchaser shall act reasonably and use all reasonable endeavours to agree such matters), and
(iv) The Vendor's solicitors have confirmed in writing that they are holding an original signed letter from the Vendor addressed to the Purchaser (in a form previously approved by the Purchaser's solicitor as shown attached at Appendix 1) confirming the vesting of the copyright of all plans in respect of the Planning Permission in the Purchaser together with the original letter date 9th January 2008 from W Griffiths & Glass (copy attached at Appendix 2) and have undertaken to send both letters to the Purchaser's solicitors on the Completion Date
(v) the Vendor has provided a written consent for the Purchaser to temporarily oversail the Retained Land (as defined in the Transfer) and to erect temporary scaffolding abutting the Retained Land and bridging across part of the roof of the building on the Retained Land during redevelopment of the Property pursuant to the Planning Permission provided that neither such oversail rights nor such scaffolding materially interferes with the access of light or air to the Retained and the Adjoining Land (as defined in the Transfer) together "the Land" or with any other right or easement and so that pedestrian access and vehicle deliveries to the High Street entrances of the buildings on the Land and supplies of water gas electricity telecoms and drainage are maintained to the Land and otherwise in a form agreed by the parties (acting reasonably), and provided further that all or any damage caused to the Land shall forthwith be made good by the Purchaser at its own cost to the reasonable satisfaction of the Vendor and
(vi) the Vendor's solicitor has confirmed in writing that all sums due to A & L as a result of the Vendor terminating the Lease (being a capital payment of £68,000 and an allowance of £27,500 under their lease of the adjoining property) have been paid in full to A & L and receipt has been acknowledged in writing (a copy of which has been provided to the Purchaser's solicitors)
Provided That the Vendor or the Purchaser shall be entitled to rescind this contract by serving written notice on the Vendor at any time if the matters referred to in paragraphs (i)-(vi) above have not occurred within 5 months of the date hereof (save where the party purporting to serve such notice is in default of its obligations under this clause 6.2) whereupon this Agreement shall automatically determine (and the Deposit shall be returned to the Purchaser)."
Reliance on own wrong
"Party Cannot Rely on His Own Breach
It has been said that, as a matter of construction, unless the contract clearly provides to the contrary it will be presumed that it was not the intention of the parties that either should be entitled to rely on his own breach of duty to avoid the contract or bring it to an end or to obtain a benefit under it. This presumption applies only to acts or omissions which constitute a breach by that party of an express or implied contractual obligation, or (possibly) of a non-contractual duty, owed by him to the other party….".
"In the course of the speeches, which are not entirely consistent with one another, [in the New Zealand Shipping case  AC 1] reference was made by all their Lordships to the well known rule of construction that, except in the unlikely case that the contract contains clear express provisions to the contrary, it is to be presumed that it was not the intention of the parties that either party should be entitled to rely upon his own breaches of his primary obligations as bringing the contract to an end, i.e. as terminating any further primary obligations on his part then remaining unperformed…."
"I am prepared to accept the principle as stated in Chitty subject to the reservation that as an exercise in construction the requirement of 'clear express provisions to the contrary' should not be read as meaning more than a clear contractual intention to be gathered from the express provisions of the contract."
" It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must "go without saying", it must be "necessary to give business efficacy to the contract" and so on – but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?
 In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282-283 Lord Simon of Glaisdale, giving the advice of the majority of the Board, said that it was "not . . . necessary to review exhaustively the authorities on the implication of a term in a contract" but that the following conditions ("which may overlap") must be satisfied:
"(1) it must be reasonable and equitable;
(2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3) it must be so obvious that 'it goes without saying'
(4) it must be capable of clear expression;
(5) it must not contradict any express term of the contract."
 The Board considers that this list is best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so. The Board has already discussed the significance of "necessary to give business efficacy" and "goes without saying". As for the other formulations, the fact that the proposed implied term would be inequitable or unreasonable, or contradict what the parties have expressly said, or is incapable of clear expression, are all good reasons for saying that a reasonable man would not have understood that to be what the instrument meant."
(i) its failure to provide the warranties by 3rd April 2008. They were not sent out until 24th June;
(ii) the form of the warranties sent out. They are said not to have been in the required BPF form and to have contained provisions for assignment which were meaningless;
(iii) Barratt's failure to deliver the specification and method statement by 3rd April. These were not sent out until 21st April; and
(iv) Barratt's failure to provide a complete version of the specification and method statement until 4th July.
The validity of the first notice
"In my view Mr Murray and Mr Horn exploited Mr Day's lack of legal expertise. The drafts dealing with the assignment of the warranties as drafted by Mr Day were inadequate because there was lack of clarity as to who was to have the benefit of the warranties. Initially Mr Day drafted it with the word "tenant" in it. Mr Horn changed that by extending the definition of tenant to extend to assignees. This had the effect of potentially allowing an unlimited number of assignments. Mr Day plainly did not appreciate that. Mr Horn (see his email of 20th August 2008 to Mr Day) sought that the warranties be given for the benefit of A & L and reinstate the word "Tenant" and an extended definition of the word tenant to include "successors in title and permitted assignees under this Agreement" that had the effect of meaning that anybody who stood in the shoes of a tenant also had the benefit of the warranty. Plainly that was never something Barratt contemplated and both Mr Horn (and later Mr Murray) knew that. In his email of 15th August 2008 for example to Mr Day Mr Horn expressly referred to a maximum of two assignees being permitted. The changes introduced by Mr Horn removed by stealth that limitation."
"As I pointed out in September, the contract for the execution of the separation works is the contract Barratt and JM Rowe. At clause 15.6 Barratt covenants to carry out the works in accordance with the Deed of Variation. This contract was negotiated at length.
You may recall that I advised that, whilst Barratt has agreed that the A&L may be added as a party to the warranties (in an attempt to get these settled), this is not contractually correct. Barratt is being employed by JM Rowe to do the separation works. JM Rowe is to procure the warranties under the obligations as Landlord. Technically Barratt should only be providing warranties to their employer (JM Rowe) which JM Rowe could then assign to their Tenant.
As part of its obligation to carry out the separation works Barratt will supply the agreed form of warranties to JM Rowe so that they can comply with their obligations as Landlord under the terms of the lease."
"I note your comments and am slightly surprised at your interpretation of the warranties (whose form you have after all agreed) where you seem to suggest that A&L could only take the benefit of the warranties in circumstances where the warranties were assigned to them by JM Rowe. In this respect can I draw your attention to clause 1 of each of the warranties where it reads "the Warrantor warrants and undertakes to the Employer and the Tenant" i.e. a direct warranty to both JM Rowe and A&L.
Whilst I feel that strictly speaking JM Rowe do not require the warranties from the consultants since they can revert to BDW under the terms of the agreement of the 7th February, if there is any problem with the Separation Works, without recourse to the consultants. However you will appreciate that both the agreement between our clients and the 5th Schedule of the surrendered lease assume that warranties will be provided to A& L and all the attached document does is give effect to that agreement.
In the light of the above can I ask you to reconsider your stance on the deed of agreement which after all is a completely uncontroversial document and one reasonably necessary to give effect to the intentions of the parties."
"Please could you explain to me why this is not therefore already dealt with in clause 15.6 of the contract dated 7th February 2008?"
"63. Paul Murray challenged that in an email of 20th November 2008 (timed 12:25). On 24th November 2008 timed 11:05 Mr Horn had sent an email to Mr Murray and had copied in Ms Beidas (of Owen White). He was referring to the draft that he had created back in July/August. He said "however for the purpose of the warranties I believe it would be preferable that a specific right for A & L to assign is expressly set out". Ten minutes later Mr Murray replied to Mr Horn and copied in David Gough. He said this "do you think it is sensible to draw their drafting errors (which after all benefit your client) to Owen White's attention?"
64. This to my mind was an attempt (in which Mr Horn participated) to have Barratt sign a document where the definition of tenant meant that the assignments potentially could exceed two. They both knew that this was not what Barratt had ever agreed or intended. Mr Murray justified this as getting the best for his client.
65. It is clear from the evidence of Mr Murray and Mr Horn that they were setting a trap whereby they hoped that Barratt would inadvertently agree to unlimited assignments. I refer to the cross examination of Mr Murray (T4) and Mr Horn (T5). To my mind this is unacceptable. All that it would do would be to create an ambiguity in the understanding of the parties which ultimately, if it became important, would have led to more litigation and claims for rectification. Lawyers who are instructed to draft documents do it for the purpose of avoiding litigation, not creating it. Mr Horn acknowledged this. He was quite willing to concede to the assignment point knowing that is what Barratt wanted if Barratt came back but they never did. He acknowledged that this is the kind of attitude that would create litigation in the future (T5/69/20;T5/82-84). In particular he clearly took on board Mr Murray's suggestion about silence."
""Waiver" is a word which is sometimes used loosely to describe a number of different legal grounds on which a person may be debarred from asserting a substantive right which he once possessed or from raising a particular defence to a claim against him which would otherwise be available to him. We are not concerned in the instant appeal with the first type of waiver. This arises in a situation where a person is entitled to alternative rights inconsistent with one another. If he has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is consistent only with his having chosen to rely on one of them, the law holds him to his choice even though he was unaware that this would be the legal consequence of what he did. He is sometimes said to have "waived" the alternative right, as for instance a right to forfeit a lease or to rescind a contract of sale for wrongful repudiation or breach of condition; but this is better categorised as "election" rather than as "waiver." It was this type of "waiver" that Parker J. was discussing in Matthews v. Smallwood  1 Ch. 777."
"Election leads, I think, to waiver, whether in choosing to object or not to object to breaches of contract or in acting in accordance with rules of procedure or statutory provisions. But common sense prevents landlords from saying that when they demanded rent from a tenant in breach of covenant they did not know they had a right to retake possession, which they were waiving (David Blackstone Ltd. v. Burnetts (West End) Ltd.  1 W.L.R. 1487), and the Sale of Goods Act 1979 prevents buyers from saying that when they accepted goods from a seller in breach of a condition they did not know that they had a right to reject the goods, which they were waiving. When a party has legal advice, he will be more easily presumed to know the law and evidence or special circumstances may be required to rebut the presumption, as in this case. The principles on which one party to a contract is held to affirm it so that he cannot repudiate or rescind it are not peculiar to forfeiture of leases, as was pointed out in Aquis Estates Ltd. v. Minton  1 W.L.R. 1452, 1458E. Nor are they confined to the sphere of contract, as Evans v. Bartlam  A.C. 473 and Leathley v. John Fowler & Co. Ltd.  K.B. 579 demonstrate.
Lord Diplock's words were on any view obiter dicta and Lord Pearson's unnecessary to his (and Lord Reid's) dissenting opinion that there had in fact been waiver; and if they have to be interpreted as we are asked to interpret them, they seem to me, if I may respectfully say so, to conflict with the earlier opinions in their Lordships' House which I have already cited, particularly in Evans v. Bartlam  A.C. 473. I therefore feel free to follow the decision of this court in Leathley v. John Fowler & Co. Ltd.  K.B. 579 and to hold that knowledge of the facts which give rise to the right to rescind is not enough to prevent the plaintiff from exercising that light, but he must also know that the law gives him that right yet choose with that knowledge not to exercise it."
"122. Rowe based its contention on the (admitted) fact that from 7th July 2008 to 24th November 2008 Barratt continued discussions with Rowe to achieve the specification for the Separation Works under clause 15.2, they continued to discuss and provide the method statement, they continued to discuss the warranties and continued to attend meetings and attempt to agree a Deed of Variation. Rowe submits that these were only consistent with Barratt deciding to choose to carry on with the Agreement and not exercise the right to rescind which accrued on 7th July 2008.
123. Barratt did in my view (and I so find) no such thing. I have analysed what Barratt and Rowe did up until 25th November 2008. It is clear that Barratt never considered the accrual of and existence of the right to rescind between 7th July 2008 and 24th November 2008. It was never put to Barratt's witnesses that they had. There is (whatever the legal principle) no factual platform to sustain it.
124. Whether this is called election waiver or estoppel by conduct in this context in my view does not matter because the factual basis for it is simply not made out. All of those in my view require some active conduct by the person alleged to be debarred. By that I mean there must be some kind of considered decision to choose between the rights or to give up (or waive the rights) or to conduct themselves in such a way that the other party in reliance upon that conduct was entitled to assume that the rights had been given up. It all relates back in my view to the important decision of the Court of Appeal in Peyman v Lanjani above. I do not see that a party can give up a right if it is not aware of it arising. It is quite clear as I have said Barratt's employees until 24th November 2008 never considered that rights had accrued on 7th July 2008 which they could exercise. As Rowe point out in their closing the classic formulation in Kammins Ballrooms v Zenith Investments Ltd  AC 850 at page 883 does not in my view arise on the facts. For the doctrine of election or waiver or estoppel by conduct to arise it must arise "in a situation where a person is entitled to alternative rights inconsistent with one another. If he has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is consistent only with his having chosen to rely on one of them, the law holds him to his choice even though he was unaware that this would be the legal consequence of what he did".
125. There is nothing in the evidence in my view which showed that Barratt acted in such a way. Nor was it ever put to them that they had consciously or unconsciously exercised their rights in a way in which was consistent only with giving up of the rights which accrued to rescind the Agreement on 7th July 2008.
126. Equally Rowe's evidence failed completely to establish that it had acted any way in reliance on an understanding that Barratt had given up its alternative rights. This is reinforced by the observations in Peyman v Lanjani where not only was it necessary for the doctrine to be established to show that the person knew the facts which gave rise to inconsistent rights but also of the existence of the inconsistent rights. Obviously Barratt as an organisation knew the contractual terms but it seems to me that the conduct being analysed is that of the people who were negotiating the Agreement of the conditional matters. It does not seem to me that there is evidence to show that when they carried on the negotiations after the right to rescind had arisen on 8th July 2008 that they were doing anything other than merely carrying on the negotiations. Nothing significant happened. As I have said the contractual date for completion passed and the date for fulfilment of the conditions passed without having any impact on the way in which Barratt and Rowe carried on addressing the finalisation of the conditional matters. It is insufficient in my mind to add the clear corporate knowledge that Barratt had of the rights accruing and merge that with the officers in question who were conducting the negotiations when they never appeared to have considered the rights let alone the possible exercise of the rights. Equally they cannot be said to have communicated to Rowe the fact that they intended on behalf of Barratt to elect between these two supposed alternative rights."
"In my judgment this is not a case involving election at all as I have said. Both parties negotiated for an additional right to terminate the agreement without breach if the conditions were not satisfied by a particular date. When such clauses are drafted they regularly set an express time limit within which that right can be exercised. In so far as the Agreement purported to do so it gave a right to exercise at any time. Effect must be given to that provision and I have given meaning to it earlier in this judgment. When both parties are given the identical right by reason of the non fulfilment to a condition the concepts of doctrine of election and the position of the innocent and guilty party simply do not arise."
Lord Justice Aikens :
Lady Justice Arden :