England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE CENTRAL LONDQN
COUNTY COURT HHJ GREEN QC

		Royal Courts of Justice Strand, London WC2A 2LL
		8 July 2003

Mr Justice Lightman:

INTRODUCTION

1. This is an appeal by the claimant Bentley and Skinner (Bond Street Jewellers) Limited ("the Tenant") brought with the permission of Laddie J against the judgment of His Honour Judge Barry Green ("the Judge") on two preliminary issues in favour of the defendant Searchmap Limited ("the Landlord") on 10 July 2002. The ground for the appeal is that credible new evidence has become available which could not with reasonable diligence have been obtained for use at the trial and would have had an important influence on the trial. The Tenant in the Appellant's Notice seeks on this ground determination of the preliminary issues in favour of the Tenant, but more realistically at the hearing the Tenant seeks a new trial where the findings on the preliminary issues can be reconsidered in the light of the new evidence.

FACTS

2. The Tenant was at all times until 4 November 2002 the lessee of a high class jeweller's shop at 8 New Bond Street. London W1 ("No 8") under a lease dated 21 July 1992 ("the Lease"). The Lease was for a term of 25 years from 24 June 1992 at an annual rent of £120,000 subject to five-year reviews and was protected as a business tenancy by Part II of the Landlord and Tenant Act 1954 ("the Act"). The reversion on the Lease has since December 1999 been vested in the Landlord, of which an associate company has at all material times been the owner of 6 and 7 New Bond Street (respectively "No 6" and "No 7").
3. The Lease granted to the Landlord the option of determining the Lease by giving the Tenant not less than six months prior written notice expiring on 23 June 2002 in the event that the Landlord required No 8 or any part of it or the means of access to it in connection with a scheme of rebuilding, refurbishment or development. The Lease provided that service of a notice under section 25 of the Act would be sufficient notice and good service for the purposes of this clause. Section 30(1)(f) of the Act provides that a landlord can oppose any application for a new tenancy if (1) he intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and (2) if he cannot reasonably do so without obtaining possession of the holding.
4. On 19 December 2001 the Landlord served a notice under section 25 of the Act invoking section 30(1)(f) of the Act which expired on 23 June 2002. At the same time the Landlord exercised the option to determine the Lease. On 27 December 2001 the Tenant served a counter-notice stating that it would not be willing to give up possession on the date of termination. On 4 March 2003 the Tenant issued an application for a new tenancy. On 19 April 2002, an order was made in the following terms:

"There be a trial of the following preliminary issues herein,

namely-

(a) Whether there is any scheme of rebuilding, refurbishment or development sufficient to justify termination of the lease (as that term is defined in the particulars of claim herein) pursuant to clause 8 of the lease.

(b) Whether the respondent has a sustainable intention to demolish or reconstruct the premises, comprised in the lease or a substantial part thereof, or to carry out substantial work of construction on the premises or part thereof and that it could not reasonably do so, without obtaining possession of the premises."

5. At the hearing of the two preliminary issues the Landlord set out to establish that he satisfied the requirements of section 30(1)(f) of the Act (and with them the requirements of the option in the Lease) by reason of his commitment to a scheme of development involving the provision of a connection between No 6 and No 7 on the one hand and No 8 on the other and the demolition of the first floor on No 8 to create a salon of two storeys in height. The primary object of the scheme was to provide more retail space. Three possible obstacles had to be surmounted, namely Conservation Area consent, planning permission and the necessary settled intention of the Landlord to develop. The Judge was persuaded by the evidence called by the Landlord (and in particular his architect Mr Hugh Cullum) that Conservation Area consent was not required and that the Landlord had a real, and not merely a fanciful chance, of obtaining the necessary planning permission. Indeed the Judge held that he had no doubt that, following negotiations between the Landlord and the planning authority, an appropriate planning consent would be obtained.
6. In support of the existence of the settled intention to develop, Mr Graff of the Landlord offered to the court an undertaking in the following terms:

"That the works described in the witness statement of Hugh Cullum, will be carried out as soon as practicable, in the event of possession of Number 8 New Bond Street being obtained and subject, in the case of work requiring planning permission and/or conservation area consent, to the grant of those consents."

7. The Judge perfectly properly accepted the undertaking as decisive of the fixity of intention. He went on to add:

"If it turned out that he could not honour the undertaking because, for example, the building turned out to be unstable, I would be unlikely to release him from the undertaking, unless he consented to a new lease on acceptable terms."

8. Accordingly in his full and carefully considered judgment delivered on 10 July 2002, the Judge decided the two preliminary issues in favour of the Landlord and dismissed the Tenant's application for a new tenancy.
9. The Lease terminated on 10 October 2002, but by a consent order dated 23 October 2002 the parties agreed that the Tenant should be allowed to remain in occupation until 17 January 2003. In anticipation of the need to vacate on this date, the Tenant negotiated for the grant of a lease of alternative relief premises nearby in Old Bond Street. But on 1 November 2002 Mr Clarke of the Landlord's agents telephoned the Tenant's agents to say that the Landlord wished to offer the Tenant a new lease for five years outside (and unsecured by) the provisions of the Act at the rent of £295,000 per year. A meeting took place on 4 November 2002 attended by Mr Clarke and the Tenant's managing director Mr Evans, the Tenant's agent Mr Trevor and the Tenant's manager Mr Greer. At this meeting, according to Mr Evans (supported by Mr Trevor and Mr Greer), Mr Clarke explained that the Landlord had decided to drop its plans for development of No 8 because since the date of the court order the Landlord had acquired a new property in Albemarle Street ("the Albemarle Property") and therefore no longer required the premises at No 8 for its own purposes. Mr Clarke denies making any such statement.
10. The Tenant decided to discontinue negotiations for the alternative premises and accept the Landlords offer, and on 14 November 2002 an order was obtained under section 38 of the Act excluding the provisions of section 24 to 28 inclusive of the Act in relation to the proposed new lease and a new lease ("the New Lease") for five years at the annual rent of £260,000 was granted the same day.
11. Thereafter correspondence ensued between the parties' solicitors, in the course of which on 14 January 2003 the Landlord's solicitors disclosed that completion of the acquisition of the Albemarle Property was completed on 24 June 2002, the first day of the trial.
12. On 3 March 2003 the Tenant filed its Appellant's Notice seeking an extension of time for appealing and permission to appeal. The Appellant's Notice stated the grounds of appeal as follows:

"The decision of the learned judge deciding the two preliminary issues against the claimant ought to be reversed because there is new evidence available to the appellant/claimant (which was not before the lower court) and which would have had an important influence upon the result of the hearing before the lower court.

At the trial the respondent/defendant asserted that it required the premises occupied by the appellant/claimant for redevelopment as an extension to it's [sic] own jewellery showrooms. That assertion was given force by an undertaking from the Respondent's managing director that it would carry out the redevelopment. There is now evidence that at the time of the trial the respondent had acquired alternative premises and did not in fact intend to redevelop the premises occupied by the appellant. Further it is apparent that the respondent at the time of the service of it's [sic] notice should be declared void and of no effect.

The appellant relies upon the witness statement of Mr Mark Evans dated 28 February 2003 appended hereto. The evidence set out therein was not available to the learned judge below as the appellant was not aware of the respondent's purchase of new premises until the respondent offered the appellant a new lease of the premises which it had undertaken to redevelop."

13. The witness statement of Mr Evans referred to in the Appellant's Notice, after setting out Mr Evans's account of the conversation with Mr Clarke on 4 November 2002, continued as follows:

"12. We were at that stage at the point of exchange of contracts on a lease of alternative but unsatisfactory, premises which I would have risked losing had there been any delay. I was mindful that the future success of the business depended, in my view, on the continuing occupancy of our current premises. There was no time to challenge the respondent in court, and I could not risk falling between two stools, and ending up with no premises from which to trade. In the circumstances I felt I had no choice but to enter into the new lease of No 8, and this was completed on 14 November 2002.

13. The more I reflected on the injustice of the situation in which I found myself placed, the more appalled I was by what I considered to be the deceitful behaviour of the respondents. On 22 November 2002 my solicitors wrote on my instructions to Kerman & Co, Solicitors for Searchmap Limited. A copy of that letter and the subsequent exchange of correspondence are exhibited to this statement as exhibit MEl. It will be seen that on 14 January 2003 the Respondents revealed not only that Graff's negotiations to acquire the premises at Albemarle Street predated the trial of preliminary issues, but that completion of the transaction had actually taken place on 24 June 2002, the first day of the trial!

14. Had I been told the truth by Mr Clarke at the meeting of 4 November 2002, namely that before the court hearing the Albemarle Street premises had been acquired and that No 8 was no longer required, I would have resisted the new lease, confident that the court's original finding would have been reversed.

15. I am also confident that had the respondent disclosed the existence of the Albemarle Street premises as a possible alternative to number 8 (the only reason cited by Martin Clarke why the Respondent now felt able to offer us a new five-year term), the Judge would have found against the respondent at the trial of preliminary issues on the matter of settled intention to carry out the works to the premises.

16. I therefore wish to appeal out of time from the decision of HHJ Green, since I believe that had he known the true facts, he would not have found in the respondent's favour. In fact, it appears that the respondents at the time of the trial had no settled intention, as they were required to have in order to be successful. Moreover, with the Respondent's granting to us of a new lease there is now incontestable proof that Searchmap had no settled intention to develop No 8, despite Mr Graff's personal undertaking to the court to the contrary. I have, through my solicitors, attempted to obtain the respondent's agreement to restore the original lease but the respondent refuses to negotiate and in the circumstances I am left with no option but to mount this appeal."

14. Laddie J made the order asked for extending time for appealing and giving permission to appeal. He stated his reasons as follows:

"The evidence sought to be adduced was not available to the appellant at the time of the hearing before HHJ Barry Green. It is clearly of great relevance to the issues determined by the learned judge. If that evidence is true, there is a good prospect that the judge would not have decided the preliminary issues before him in favour of the defendant. The appellant has good prospects of success."

DECISION ON THE ISSUES

15. In my judgment this appeal is hopeless and should be dismissed on a whole series of grounds. I shall consider each of them in turn.
16. (a) Laddie J was in my view misled into granting permission to appeal. He was led by Mr Evans's witness statement to believe that the Albemarle Property was an alternative to No 8 and its acquisition was the reason why the Landlord could not have ever intended at the time of the trial to carry out the development of No 8. This was clearly not the case and could never have been the case: Mr Ellis (for the Tenant) does not even suggest otherwise. The reason is that the Albemarle Property is office premises. It can never have been, or been thought to be, alternative retail premises to No 8. Laddie J was not told this. No significance could accordingly be attached to any non-disclosure of its acquisition at the trial: its acquisition was totally irrelevant and could not afford ground for the grant of permission to appeal. This appeal can and should be dismissed on this ground alone.
17. (b) The relief sought on this appeal on any basis must be totally futile. For with the grant of the New Lease, at any new trial which I might order relief in the form of the grant of a new lease under the Act is out of the question. The grant of the New Lease operated by reason of an estoppel as a surrender of the Lease and all and any rights to a new lease under the Act. The parties clearly intended that for the future their rights and entitlement should be governed by the New Lease, and it would be inequitable for either party, having now for 8 months rested on their rights under the New Lease, to treat as continuing to subsist a relationship superseded by the New Lease: consider Gibbs Mews plc v Gemmell [1999] 1 EGLR 43 at 45. It is correct that the Lease terminated on 10 October 2002 by virtue of section 64 of the Act (and with it all rights under the Act), and that (in the absence of the surrender) by reason of the grant of permission to appeal by Laddie J the effect of the notice determining the tenancy would be postponed until after the determination of this appeal: see Shotley Point Marina (1986) Ltd v Spalding [1997] 1 EGLR 233. But in this case the service of the notice does not operate alone in terminating the Lease. The surrender had the effect of determining the Lease and all rights to a new lease attaching to it under the Act. This includes rights which under section 64 had expired but might revive on the grant of permission to appeal. Where there has been a surrender by operation of law in consequence of the grant of a new lease, there can be no revival of the surrendered lease at any rate unless the new lease itself is avoided on independent grounds. There has been no such avoidance and (for reasons which I shall give later in this judgment) there can be no prospect of any avoidance of the New Lease in the future.
18. (c) The "merits" of the challenge to the judgment for which permission to appeal was granted are totally lacking for the reasons which I have given. The challenge was based on the fact that the evidence was not available to the Tenant at the hearing before the Judge that the Albemarle Property had been acquired as a substitute retail premises for No 8. As I have already said, the Albemarle Property was acquired as office premises only: its acquisition was irrelevant to the need for or intended use or redevelopment of No 8. Proof at the trial or any new trial of its acquisition could not possibly affect the outcome. Faced with this fact, Mr Ellis submitted that on 4 November 2002 Mr Clarke told lies about the role the acquisition played in the Landlord's change of mind regarding the development and as to the date of the acquisition (ie that it was after instead of before the date of the trial) and that this dishonesty signalled (even as it was designed as a cover-up for) the dishonesty of Mr Graff's evidence before the Judge as to the Landlord's intention to develop. As to this argument, I have only three things to say. First, it is not possible to determine on this application whose account of what was said on 4 November 2002 was correct: this must remain a matter of conjecture. Secondly, in any event a misstatement by Mr Clarke at that meeting (even if established) can in no way operate to falsify or even render questionable the tested evidence of Mr Graff at the hearing. Thirdly, permission was never granted to appeal on this ground. The submission first emerged in the course of Mr Ellis's submissions which was far too late to allow any evidential response by the Landlord or Mr Clarke. In short it is both an impermissible charge and it lacks any substance or credibility.
19. (d) Mr Ellis at the hearing without any prior amendment of the Appellant's Notice (although foreshadowed in a very late supplemental skeleton argument) produced a document purporting to set out the contentions which the Tenant would wish to assert at a new trial in support of the case that the Landlord did not have a fixed and settled intention to develop at the date of the trial. These included: (1) the offer of the New Lease; (2) the alleged statement by Mr Clarke as to the reason for the offer of the New Lease; (3) the failure of the Landlord to pursue negotiations for a compromise with the planning authority over the planned development; and (4) the decision by the Landlord about the time of the offer of the New Lease to halt further preparatory work for the development.
20. In accordance with the principles stated in Hughes v Singh (CA) 13 April 1989, the court on an appeal has a discretion to admit evidence of events that took place after the judgment appealed from when justice so requires, but it is a discretion to be exercised sparingly. I do not think that I should exercise my discretion to admit this or allow the Tenant to challenge the decision of the Judge on grounds resting on this evidence. My reasons include the following: (1) the Tenant never applied for or obtained permission to appeal on this ground; (2) for no reason (let alone a sufficient reason) the Tenant never amended (or applied for permission to amend) the Appellant's Notice to raise these grounds which (if raised) might have called for further evidence to be filed by the Landlord; (3) nothing in the matters relied on is cogent evidence (let alone unequivocal evidence) of the absence of fixity of intention on the part of the Landlord at the date of the hearing: all the matters are consistent with the case presented by the Landlord before me (and supported by witness statements made on behalf of the Landlord) that an increase in the overall costs of the redevelopment of Nos 6, 7 and 8 made the scheme financially unattractive and therefore occasioned a change of heart regarding the grant of the New Lease to the Tenant. The Landlord's case in this regard is reinforced by the very substantial sums expended by the Landlord after 10 July 2002 on consultants' and professionals' fees in respect of the proposed redevelopment. The undertaking placed a serious obstacle in the way of the Landlord's change of heart, but, acceptance of the offer by the Tenant would be and did get the Landlord "off the hook" in respect of the undertaking. The undertaking only "bit" in the event of the Landlord obtaining possession. The Tenant, when the offer of the New Lease was made to it, had the choice between accepting the offer and insisting upon performance of the undertaking. If the Tenant insisted upon performance of the undertaking and if the Landlord applied to be released from it, (as intimated by the Judge in his judgment) the Judge was likely to insist as the price for such release on the grant to the Tenant of a new lease on acceptable terms. With the benefit of legal advice the Tenant made its informed choice to accept the offer of the New Lease.
21. Mr Ellis has told me that, if the court on this appeal orders a rehearing (but not otherwise), the Tenant will commence proceedings to set aside the New Lease for fraud. The fraud relied on is the alleged false statement by Mr Clarke relating to the date and significance of the acquisition of the Albemarle Property. In my view such a claim is hopeless for a multitude of reasons: (1) there is no prospect of establishing any fraud, let alone a fraudulent inducement to take the New Lease. Indeed in his witness statement Mr Evans says that Mr Clarke (remarkably and in breach of his duties to the Landlord) tried to persuade him not to take the New Lease; (2) according to paragraph 13 of his witness statement (which I have set out) Mr Evans already knew that the Landlord was acting dishonestly when he gave consideration whether to accept the New Lease; (3) avoidance is already far too late. The Tenant has already for eight months affirmed the New Lease and even now his proposals to avoid it are entirely tentative and conditional. The reality is clear. The Tenant has at all times and at all costs wanted to retain its existing premises under a new lease granted under the Act or (in default of such a new lease) the existing New Lease. In the circumstances he has never been prepared to risk taking action to avoid the New Lease unless and until practically sure that he will obtain a new lease under the Act. Such attitude and conduct is totally inconsistent with the necessary unequivocal election to avoid the New Lease.

CONCLUSION

22. I accordingly dismiss this appeal.