ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
HIS HONOUR JUDGE COLLINS
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE TOMLINSON
| MRS AFREEN BEGUM HAQ
|- and -
|(1) ISLAND HOMES HOUSING ASSOCIATION
|- and -
|(2) THE MAYOR AND BURGESSES OF THE LONDON BOROUGH OF TOWER HAMLETS
Ms Sarah Asplin QC and Mr Oliver Hilton (instructed by Archer Fields)
for the Respondent, Mrs Haq
Ms Michelle Stevens-Hoare (instructed by the Mayor and Burgesses of
London Borough of Tower Hamlets) for the Respondent Council
Hearing dates: 22 and 23 June 2011
Crown Copyright ©
See also: Statement on handing down judgment
See also: Order
Lord Justice Lloyd:
"We would suggest that you consider carefully whether it is viable to invest £300,000 in the business, as you advised is your intention, over what is a relatively short period of time. Your bank may wish you to have a lease for a longer period of time such as 90 or 99 years. We are curious as to why the Council have only offered a lease for 40 years and would recommend that your solicitors make the necessary enquiries."
"When lease is completed – keys for storage rooms with housing department - Janice Richards will release them when lease is completed."
The draft documents
The Eighty-five percent reduction in the Rack Rental Value is limited to the Term of this Lease and has been inserted to amortise the costs of certain works done by the Tenant to the Premises and Building prior to the commencement of this Lease and for which the Landlord will retain the benefit of. The parties agree that any renewed term or period under this Lease shall be without such reduction and the Rack Rental Value would be read as if the words "an amount equal to Fifteen percent (15%) of." did not appear in its definition."
No other points need attention under the lease itself.
What happened after 29 July 2002?
"The Council has been very supportive of Mr Haq of Muree Food Stores Limited and his desires to expand his food store in Manchester Road.
The process that needs to be followed is for a Licence for the building works to be granted. On completion of the works the existing lease would be surrendered and a new longer lease granted.
In order for this process to work, Mr Haq was requested to supply full plans of the work. In the absence of these plans no licence for building works could be granted, however, the Council allowed works to commence and simply asked for plans to be provided as soon as possible.
Despite the works having been completed some months ago, and indeed the enlarged area of the store open for trading since June 2003, Mr Haq has still not supplied the plans. Indeed, a further issue has arisen since the area taken specifically for the air conditioning units is much larger than that originally agreed.
The Council is happy to grant the new lease to Mr Haq, and to enlarge the area to reflect what is actually the case on site. However, despite meetings on site and correspondence, Mr Haq has consistently failed to provide these plans to the Council.
As a last resort the Council has taken legal action against Mr Haq under the Law of Property Act 1925 stating there was a breach of the lease. The remedy for that breach is for the plans to be provided by Mr Haq to the Council.
Mr Haq therefore, has the matter entirely in his hands, he has only to provide the plans, the licence can then be granted followed by the new lease coming into effect.
I feel the Council has been extremely patient with Mr Haq in this matter. However, the situation has to be regularised. I greatly regret that legal action was necessary but in the absence of any reciprocal co-operation from Mr Haq that was the only alternative left to the Council."
"Mr Haq had no right to start building works in advance of the grant of the building licence nor to arbitrarily extend the scope of the building works beyond that discussed. The Council would have been well within its rights to insist at that stage that all work ceased, it chose not to on the expectation that there was a willingness on the part of Mr Haq and his advisers to meet their obligations to the Council. We have been greatly disappointed in respect of the failure in that regard."
"Mr Haq gave evidence for the best part of a day. His English, with respect to him, was poor when it came to dealing with the sort of matters that he was asked about in this case, although I am sure his English is perfectly good for everyday purposes and, as he told me, several times, quite rightly, he said, "I run a convenience store, I'm not a lawyer." And as Mr Dutton fairly accepted, in the course of his cross-examination, he was obliged to put many matters to the Claimant, which were virtually impossible for somebody with a limited knowledge of legal and property matters to answer. Although the cross-examination lasted the best part of the day, there is no criticism of that. Mr Dutton rather ruefully accepted in his closing submission that very little had come out of it which took the case much further than the written evidence."
"Q. But presumably you thought that there was some sort of agreement between you and the council which you could rely on if the council refused to complete the lease, did you not, or did you?
A. I never thought council can refuse the lease after all that, so you know, after all the work. I haven't seen any document from the council saying -
Q. At the moment I'm not asking for documents. What I am saying is did you think that you had a binding agreement with the council so that, if the council failed to grant the lease, you could sue the council. Is that what you thought at this time?
A. I never thought council would need to – I mean, grant the lease or I could sue the council or anything like that. I never thought. I thought in good faith they will do it.
Q. You thought they were going to grant it.
A. In a good, you know, good intention, you know because they are the – I mean, the people's authority. The people in our council, so you know, the people where they work for next century, you know.
Q. So would it be true to say then that you expected the council to sign the lease, but you did no think it had a legal obligation to. Is that what you are saying?
A. I don't know, that is what my solicitors can, you know –
Q. That is where your solicitors come in?
A. My solicitors should have done –
Q. So we are really back to the point that the judge made earlier on, that these are really matters that were matters for the lawyers to think about were they not?
The keys to the sheds
"Now, in the light of that history I make the following findings of fact. (1) The local authority waived the requirement for a written licence as a condition of the works starting. (2) They waived the associated requirement for an agreement for a lease to be signed before the works started. (3) They encouraged the Claimant to commence a programme of works on land which was partly subject to a lease vested in her and partly owned by the local authority, knowing that hundreds of thousands of pounds would be spent on this work by the Claimant. (4) They actively monitored the progress of these weeks over the best part of a year until completion. (5) They knew or must have known that there were no circumstances in which the Claimant would have (a) commenced or (b) continued until completion, works of this magnitude if he had any doubt that the lease would be granted on the date which had been provided for in the draft documentation. (6) The local authority knew that the Claimant was relying upon an expectation actively encouraged by them by their conduct, which in my judgment was the only expectation consistent with their conduct. I ought to add that it was suggested by Mr Dutton in his closing submissions that the Second Defendant's conduct could have been consistent with a pragmatic wish to let the works start as the builders were on the starting blocks, but with the need to get the documents signed as a condition of the legal status of the works being regularised still clear in the minds of both parties. The weakness of that suggestion was that it has absolutely no evidence to support it, although as I have indicated, the evidence was potentially available from Ms Richards if that were the case. And although there was correspondence from the legal department still trying to set up the licence documentation well after the works had been completed, let alone commenced, it seems to me that the need for the licence would have become otiose once the work had been completed. Rather than giving any indication of what might anybody have thought was the legal position, it shows the tidy legal mind at work of someone who had taken over the file and did not have any real grasp of what had happened on the ground. But the essential point is that the absence of evidence from Ms Richards speaks volumes on this point."
"To mention one matter which is canvassed in the authorities, this is not a case where the Claimant's belief was simply that the Defendant was bound in honour to grant the lease. He believed and the Second Defendants must have known he believed, that the handing over of the keys without any licence or agreement and allowing him to do the works and cooperating with the progress of the works meant that he believed that all legal technicalities had been dispensed with and the lease would automatically follow when the works were done and in reliance upon that he spent the money."
"Their Lordships accept that the government acted to their detriment and to the knowledge of HKL in the hope that HKL would not withdraw from the agreement in principle. But in order to found an estoppel the government must go further. First the government must show that HKL created or encouraged a belief or expectation on the part of the government that HKL would not withdraw from the agreement in principle. Secondly the government must show that the government relied on that belief or expectation. Their Lordships agree with the courts of Hong Kong that the government fail on both counts."
Next, later on page 124 and into page 125:
"Their Lordships accept that there is no doubt that the government acted in the confident and not unreasonable hope that the agreement in principle would come into effect. As time passed and more and more actions were undertaken in conformity with the proposals contained in the agreement in principle, the government's hopes were strengthened. It became more and more unlikely that either the government or HKL would have a change of heart and would withdraw from the agreement in principle. But at no time did HKL indicate expressly or by implication that they had surrendered their right to change their mind and to withdraw. That right, expressly reserved and conferred by the government, was to withdraw at any time before "document or documents necessary to give legal effect to this transaction are executed and registered." HKL did not encourage or allow a belief or expectation on the part of the government that HKL would not withdraw. HKL proceeded in accordance with the proposals contained in the agreement in principle but at the same time they continued to negotiate the exact provisions of the documents which were necessary to be executed before the parties could become bound."
Lastly at pages 127 to 128:
"It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations set out in a document expressed to be "subject to contract" would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transactions envisaged by the document. But in the present case the government chose to begin and elected to continue on terms that either party might suffer a change of mind and withdraw."
Lord Justice Tomlinson
Lady Justice Arden
UPON READING the Appellant's notice filed on 22 July 2010 on behalf of the Appellant, on appeal from a decision of HHJ Collins dated 1 July 2010 and subsequent order sealed on 22 November 2010
AND UPON READING the Respondent's Notice filed by the Respondent Council on 9 June 2011
AND UPON HEARING Leading Counsel for the Appellant, Junior Counsel for the Respondent Council and Leading and Junior Counsel for the Respondent Mrs Haq
IT IS ORDERED THAT:
a. There shall be no order as to costs as between the Respondent, Mrs Haq, and the Respondent Council; and
b. The Respondent, Mrs Haq, shall pay the Appellant's costs, to be the subject of detailed assessment on the standard basis if not agreed.
Island Homes v Haq
A3 2010 1785
Statement on handing down judgment
20 July 2011