Jersey Unreported Judgments

Breach of contract - proceedings brought by the plaintiffs that the defendants failed in their obligations under a sub-lease and counter-claim brought by the defendants for damages against the plaintiffs.

[2017]JRC050

Royal Court

(Samedi)

28 March 2017

Before     :		Sir Michael Birt, Commissioner with Jurats Nicolle and Thomas
Between	Hong Kong Foods Limited		First Plaintiff
And	Robert Alan Gibbons		Second Plaintiff
And	Robin Hood Curry Limited		First Defendant
And	Barry Thirkell		Second Defendant

The Second Plaintiff appeared in person and as Director of the First Plaintiff.

Advocate C. Hall for the First and Second Defendants.

judgment

the commissioner:

1.        In these proceedings, the Plaintiffs sue for damages on the grounds that the Defendants failed to perform their obligations under a sub-lease.  The Defendants deny this and counterclaim for damages on various grounds. 

Factual background

2.        We begin by describing what appears to be the undisputed factual background.  We shall then turn to consider the evidence on the matters which are in dispute. 

3.        On 2^nd April, 2004, the First Plaintiff ("Hong Kong Foods") entered into a 21 year contract lease ("the Head Lease") of premises at 8 Cheapside, St Helier ("the Property") with the then owner of the Property, Mrs Jeanne Moore ("Mrs Moore").  The Second Plaintiff ("Mr Gibbons"), as beneficial owner of Hong Kong Foods, guaranteed that company's obligations as tenant under the Head Lease.  The ground floor of the Property comprised a restaurant. 

4.        The Head Lease was a fully repairing lease and required the tenant also to reimburse the landlord for insurance premiums payable in respect of the insurance of the Property.  The key repairing obligation was contained at clause 5(f) whereby the tenant covenanted with the landlord that it would:

"(i)       Keep the Premises wind and water tight and in good structural condition.

(ii)       Keep the interior and exterior of the Premises well decorated and repaired."

5.        There was a conventional covenant against the tenant making changes at Clause 5(j) which was in the following terms:

"Not without the previous consent in writing of the Landlord make or suffer to be made any alterations in the construction of the Premises or the external appearance thereof, nor cut or injure or suffer to be cut or injured any of the walls, partitions, timbers or floors thereof PROVIDED THAT the consent of the Landlord shall not be necessary for internal works or alterations of a non-structural nature."

6.        Finally there was a provision about assignment and sub-letting which (so far as relevant) provided as follows at Clause 5(q):

"Not without the written consent of the Landlord (which consent shall not unreasonably be withheld in the case of a respectable and solvent sub-lessee ... ) to ... sub-let ... the Premises or any part thereof..."

7.        The opening part of the contract lease excluded the landlord's liability for any vices cachés in the following terms:

"LE TOUT tel qu'il est avec tout et autant de droits, appartenances et dépendances comme peuvent en appartenir et dans l'état où ladite propriété se trouve actuellement avec tous ses vices, apparents ou cachés, s'ils existent....".

8.        The initial rent was £26,000 per annum with regular cost of living reviews.  The Court was informed that, at the time of the material events in 2008, the rental under the Head Lease was £30,000 per annum. 

9.        Mrs Moore gave Hong Kong Foods a 26 week rent free period at the commencement of the Head Lease because it was envisaged that the Plaintiffs - no distinction was made by either of the parties in their evidence between their respective corporate entities and their beneficial owners and accordingly we shall also refer simply to 'the Plaintiffs' or 'the Defendants' when convenient even if technically an obligation fell on the relevant corporate entity - would upgrade, and renovate the Property.  According to Mr Gibbons, he spent some £100,000 on renovating the Property in 2004/2005.  The work was undertaken for him by Mr Jose Gomes ("Mr Gomes"). 

10.      Although Mr Gibbons had originally envisaged running the restaurant himself (with others) this did not come to pass and on 24^th May, 2005, Hong Kong Foods granted a sub-lease for 9 years from 25^th April, 2005, to a company called Chinese Whispers Limited ("Chinese Whispers"), which was guaranteed by two of their shareholders, Mr Stephen Moore (no relation of Mrs Moore) and Mr Brian Chan.  The sub-lease was entered into with the consent of Mrs Moore and contained the following covenants concerning the sub-tenant's repair obligations:

"5(f)     (i) Keep the Premises wind and water tight.

(ii)       Keep the interior and exterior of the Premises well decorated and repaired ..."

11.      The covenant in respect of the sub-lessee making changes to the Property was at clause 5(j) in the following terms:

"Not without the previous consent in writing of the Sub-Lessor and the Owners make or suffer to be made any alterations in the construction of the Premises or the external appearance thereof, nor cut or injure or suffer to be cut or injured any of the walls, partitions, timbers or floors thereof."

12.      Clause 5(q) provided (inter alia) that the sub-tenant could not assign the sub-lease without the written consent of both the owner (i.e. Mrs Moore and her successors) and the sub-lessor (which consents were not to be unreasonably withheld in the case of a respectable and solvent assignee). 

13.      In consideration for the granting of the sub-lease, Chinese Whispers agreed to pay Hong Kong Foods £30,000.  £5,000 was paid at the beginning of the sub-lease but the outstanding balance plus interest was to be repaid in monthly instalments. 

14.      Of particular significance in relation to the present dispute is that, at or about the time of granting the sub-lease, Hong Kong Foods removed the chimney breast situated on the first floor of the Property in order to facilitate the addition of a shower and toilet in that area. 

15.      Mrs Moore died in July 2007 and the Property was inherited by her daughter ("Miss Moore"). 

16.      Chinese Whispers conducted a restaurant business at the Property.  It appears that Chinese Whispers had difficulty in meeting its obligations under the sub-lease and the rent was often paid late, with the consequence that Hong Kong Foods was in turn late in paying rent under the Head Lease.  On one occasion Hong Kong Foods instituted action in the Petty Debts Court for an outstanding quarter's rental but this was ultimately paid. 

17.      In July/August 2008 various discussions took place between Chinese Whispers, Mr Gibbons and the Second Defendant ("Mr Thirkell") which culminated in an oral agreement that Chinese Whispers would assign the remainder of the sub-lease to the First Defendant ("Robin Hood") with Mr Moore and Mr Chan being replaced as guarantors under the sub-lease by the Second Defendant ("Mr Thirkell"), the owner of Robin Hood.  This agreement was reflected in a deed of assignment which is dated 6^th September, 2008.  Unfortunately, it appears that lawyers were not consulted by any of the parties at the time. 

18.      Although there is a dispute as to exactly what was agreed in this respect, it is not disputed that Mr Thirkell made it clear that Robin Hood would need to carry out certain works to the Property which had become a little 'tired' whilst Chinese Whispers held the sub-lease. 

19.      According to the Defendants, in the course of undertaking this work, it became clear the Property was structurally unsafe and that further work was needed to make the Property safe. 

20.      In circumstances which are disputed, Miss Moore attended on site with Mr Thirkell and Mr Gibbons in late September or early October 2008.  According to Mr Thirkell she had been unaware of the assignment and had also not been consulted in relation to the works.  Mr Thirkell states that it was made clear to him by her that Robin Hood had no entitlement to remain in the Property and that the sub-lease was invalid.  Mr Gibbons disputes that Miss Moore said this. 

21.      In circumstances which we shall need to consider below, Robin Hood stopped work and vacated the Property.  A quarter's rent had been paid by Robin Hood but no further rental under the sub-lease was paid for any period thereafter. 

22.      In the absence of rental coming in from Robin Hood, Hong Kong Foods was unable to pay the quarter's rental due under the Head Lease for the quarter December 2008 to March 2009.  On 12^th January, 2009, Miss Moore wrote to Mr Gibbons demanding the rental and outstanding insurance premium.  On 22^nd January Viberts wrote on behalf of Miss Moore demanding the same sums.  On 20^th February Viberts wrote to Hong Kong Foods asserting a number of breaches of the sub-lease including non-payment of the quarter's rental and sub-letting the property without Miss Moore's consent. 

23.      On 11^th March, 2009, Miss Moore instituted an Order of Justice against Hong Kong Foods and Mr Gibbons (as guarantor) seeking cancellation of the Head Lease and damages.  This was based on a number of alleged breaches of the Head Lease, including non-payment of rental, breach of the repair obligations and sub-letting the Property to Robin Hood without her consent. 

24.      Faced with these proceedings, Hong Kong Foods instituted proceedings against Robin Hood for outstanding rental in the Petty Debts Court.  We have not been provided with the date of institution of the proceedings but they were initially adjourned sine die on 13^th May, 2009.  When Hong Kong Foods sought to bring the proceedings back before the Petty Debts Court, Messrs Sinels wrote to the Court on behalf of Miss Moore pointing out that it was part of Miss Moore's case in the proceedings which she had instituted in the Royal Court that Hong Kong Foods had sub-let the Property to Robin Hood without her consent and that therefore there was no valid contract of sub-lease to enforce.  It appears that, perhaps as a result of this letter, the Petty Debts Court again adjourned the proceedings sine die pending the outcome of the proceedings in the Royal Court.  They have never proceeded any further. 

25.      On 9^th July, 2009, at the request of Miss Moore, a building inspector from the Planning Department attended the Property to see whether any unauthorised works had been carried out.  The inspector's file note shows that it is apparent that structural alterations, including the removal of the chimney breast on the ground and first floor and the removal of a section of the party wall, had been undertaken without any consent from the Planning Department.  It was agreed that further work needed to be undertaken to stabilise the building under the supervision of an engineer.  On 29^th July, 2009, the enforcement officer of the Planning Department wrote to Mr Gibbons saying that he understood certain unauthorised building works had taken place at the Property and asking Mr Gibbons to contact him.  A meeting was duly held and on 13^th January, 2010, the building inspector wrote to Mr Gibbons pointing out that the removal of the chimney breast required a retrospective application to the Department.  An application was in due course submitted describing the required work as "The renewal of part of first floor and form shower/w.c.  Remove chimney breast and provide support for existing chimney stack."  According to Mr Gibbons he started some of this work but it was completed by builders instructed by Miss Moore.  A certificate of completion in respect of this work was issued by the Planning Department in November 2011. 

26.      The proceedings brought by Miss Moore were defended by Hong Kong Foods and Mr Gibbons but in due course an application for summary judgment came before the Royal Court presided over by Sir Philip Bailhache, Commissioner.  This resulted in a judgment dated 9^th July, 2010, Moore-v-Hong Kong Foods and Gibbons [2010] JRC 127.  The Court found in favour of Miss Moore and cancelled the Head Lease.  It found that the non-payment of rental was sufficient to justify cancellation and accordingly it did not need to make any findings in relation to the other alleged breaches.  It made an award of damages in respect of outstanding rental, insurance premiums and interest and also gave judgment in principle in respect of the necessary repairs to comply with the repair obligations under the Head Lease, with these damages to be assessed by the Greffier.  All the awards were against both Hong Kong Foods (as tenant) and Mr Gibbons (as guarantor).  Miss Moore was also awarded her costs against Hong Kong Foods and Mr Gibbons. 

27.      Agreement was subsequently reached between Miss Moore and the Plaintiffs (acting through their advocate) whereby the following sums were paid to Miss Moore pursuant to the Royal Court judgment:

(i)        Outstanding rent, insurance premiums and interest to the date of the judgment £54,383.40. 

(ii)       Taxed costs £88,779.70. 

(iii)      Damages in respect of the necessary repairs to comply with the repair covenant £60,000. 

(iv)      Interest on (iii), £986.31.  

Shape of the dispute

28.      The Plaintiffs' case is in essence straightforward.  They contend that Robin Hood breached the terms of the sub-lease by failing to pay the rental and vacating the Property in a state of disrepair.  Those breaches caused Hong Kong Foods to be unable to pay the rent under the Head Lease, which resulted in Miss Moore obtaining the cancellation of the Head Lease.  In these circumstances the Plaintiffs have suffered financial loss which is recoverable from Robin Hood (or Mr Thirkell as guarantor).  Those losses comprise:

(i)        the amounts paid to Miss Moore;

(ii)       the legal costs incurred by Hong Kong Foods in defending the proceedings brought by Miss Moore;

(iii)      the loss of profit which Hong Kong Foods would have made for the period of the sub-lease by reference to the surplus of the rental receivable under the sub-lease over the rental payable under the Head Lease;

(iv)      the rental for the September 2008 quarter; and

(v)       various other minor heads of expenditure. 

29.      The Defendants deny liability and bring a counterclaim.  They contend that Robin Hood was entitled to rescind or terminate the sub-lease on any one or more of the following grounds, with the result that they are not liable for any loss suffered by the Plaintiffs:

(i)        Mr Gibbons on behalf of Hong Kong Foods made material misrepresentations as to the structural state of the Property which induced Robin Hood to enter into the sub-lease as assignee;

(ii)       The structural state of the Property was such as to place Hong Kong Foods in breach of the implied term against vices cachés;

(iii)      Hong Kong Foods failed to obtain the prior written consent of Miss Moore to the assignment of the sub-lease which meant that Robin Hood had no entitlement under the sub-lease. 

They counterclaimed for the losses suffered by Robin Hood as a result. 

The evidence

30.      Apart from Mr Gomes, all the witnesses who gave evidence had provided witness statements or affidavits in advance and adopted these as part of their evidence.  However, apart from Mr Moore, Miss Francisco and Mr May, they also gave evidence in chief.  All witnesses were then subject to cross-examination.  The evidence in some cases ranged over a wide area.  For the purposes of this judgment, we propose simply to refer to those aspects of the evidence which are necessary to understand and explain our decision. 

(a) Evidence for the Plaintiffs

(i) Mr Gibbons

31.      Mr Gibbons explained that he was the sole director and 100% shareholder of Hong Kong Foods.  As set out earlier, on 2^nd April, 2004, Hong Kong Foods entered into the Head Lease whereby it leased the Property from Mrs Moore for a period of 21 years.  Mr Gibbons was a guarantor.  The Head Lease provided for a rent free period which was to recognise that work needed to be undertaken to the Property.  Mr Gibbons employed Mr Gomes to undertake that work which cost in excess of £100,000.  So far as Mr Gibbons was aware, the work was carried out to a good standard. 

32.      On 24^th May, 2005, Hong Kong Foods granted a 9 year sub-lease of the Property to Chinese Whispers, which sub-lease was guaranteed by Mr Stephen Moore and Mr Chan ("Mr Chan").  Mrs Moore consented to the sub-lease to Chinese Whispers.  It was agreed that Chinese Whispers would pay £30,000 as ingoing as a form of contribution to the sum invested by Hong Kong Foods.  £5,000 was paid upfront and the outstanding balance of £25,000 plus interest was to be repaid in equal monthly instalments in addition to the rental. 

33.      Mr Chan requested the installation of the shower and toilet on the first floor.  This necessitated the removal of a chimney breast on the first floor.  This had not been shown on the original plans drawn up for the work to be undertaken to which Mrs Moore had consented.  However, Mr Gibbons said that, when he went to see Mrs Moore and show her the original plans, she had said that he did not need to come back if he wanted to make other changes unless it was something which would cause structural damage.  Accordingly he believed he had a 'carte blanche' (his expression) to make changes and did not need to go back to her about the removal of the chimney breast, which had not been shown in the original plans. 

34.      Mr Gibbons said in evidence that the chimney breast did not appear to be giving much support but a wooden frame was inserted to give support to the chimney on the second floor following the removal on the first floor.  No structural engineer was consulted; the work was done by a Portuguese builder whom Mr Gomes had engaged to assist him with the task and who was said to have relevant experience.  Mr Gibbons said that he relied upon Mr Gomes and the sub-contractor Mr Gomes had engaged. 

35.      He accepted that no building permission was obtained under the Planning and Building Law to the removal of the chimney breast, as it should have been.  The plans submitted with the application for building permission in May 2004 did not show the removal of the chimney breast as this was not envisaged at that stage.  However he said that, at the conclusion of the work for which permission had been sought, the building inspector had attended to inspect the work.  Mr Gibbons said that on that occasion he told the inspector about the chimney breast removal on the first floor and its replacement with the shower and toilet, although it was not possible to inspect behind the newly constructed shower and toilet.  The inspector nevertheless issued a certificate dated 20^th October, 2005, and the work approved was described as "Reposition staircase leading from restaurant kitchen to stockroom.  Minor alterations to improve existing flat layout."  Mr Gibbons asserted that the wording of the second sentence was to cover the removal of the chimney breast and construction of the shower and toilet even though they had not been in the original plans submitted to the Planning Department. 

36.      Following the granting of the sub-lease, Chinese Whispers ran a Chinese restaurant from the Property.  Mr Gibbons said that he had little to do with matters thereafter other than as an occasional customer of the restaurant.  He did however notice that the interior of the Property was becoming increasingly shabby and that cosmetic work was needed to make the Property more aesthetically pleasing. 

37.      He said that in about July 2008, Mr Stephen Moore told him that Chinese Whispers wished to assign the sub-lease to Robin Hood having had discussions with Mr Thirkell who was interested in taking the business over.  Mr Gibbons said that he thought an assignment was the cleanest solution. 

38.      Following this approach, Mr Gibbons visited Miss Moore at her home and told her about the proposal to assign the sub-lease to Robin Hood, mentioning also Mr Thirkell.  He seemed to recall that Miss Moore was aware of the Robin Hood takeaway business which was run by Robin Hood.  He said that she agreed to the assignment saying that "this will be better for both of us...." by which he understood her to mean that a change of sub-lessee would offer greater financial security for both Hong Kong Foods and her.  He asked her if she wanted the assignment done through her lawyers Viberts but she said that, as there would be no change to the sub-lease, she did not see any need to consult lawyers.  Mr Gibbons did not ask her to put her consent to the assignment in writing as he was a trusting person and also he thinks that his health was affecting him at the time. 

39.      He met Mr Thirkell several times before the written assignment was signed.  Mr Thirkell told him what he planned to do.  He intended to change from Chinese décor to Thai décor.  Mr Gibbons made it clear that he wished everything which was owed by Chinese Whispers to be paid as a condition of any assignment.  He didn't gather at the time that Mr Thirkell intended to do extensive works. 

40.      Mr Gibbons said that he told Mr Thirkell in general terms of the nature of the work which he had undertaken at the Property at the beginning of the Head Lease.  Mr Thirkell was a professional builder.  Mr Gibbons did not say anything about the structure of the building although he did say that, as far as he knew, everything was in a good state. 

41.      An oral agreement was reached between the three parties which was then put into written form in a document drawn up by a firm of accountants.  This document was signed first by Chinese Whispers and the two guarantors, Mr Stephen Moore and Mr Chan.  It was then signed by Mr Gibbons on behalf of Hong Kong Foods and given to Mr Thirkell for signature on behalf Robin Hood and by Mr Thirkell himself as guarantor.  Mr Thirkell returned it about a week later although, like Mr Gibbons' signature, Mr Thirkell's signatures as director of Robin Hood and in his own right were not witnessed. 

42.      The deed of assignment was dated 6^th September, 2008, and provided for the substitution of Robin Hood as sub-tenant under the sub-lease in place of Chinese Whispers and for the consent of Hong Kong Foods thereto.  It also provided for the release of the existing guarantors and the introduction of Mr Thirkell as a new guarantor.  Chinese Whispers was relieved of any unpaid rental and other obligations under the lease such as insurance, rates, etc. and Chinese Whispers also agreed to transfer ownership of all assets left on the premises to Hong Kong Foods for the sum of £1 except for items which were subject to a lease or hire purchase agreement, which it was agreed Robin Hood would take over responsibility for. 

43.      Although the written deed of assignment made no mention of it, Robin Hood also agreed to pay Hong Kong Foods the sum of £30,000 comprising £21,000 which was still owed by Chinese Whispers under the loan referred to at para 32 above and £9,000 being an outstanding quarter of rental.  Mr Gibbons asserted that the £21,000 was paid in cash and the sum of £9,000 was paid by cheque. 

44.      Mr Gibbons pointed out that, at the first presentation of the Order of Justice in the present case before the Royal Court, Mr Thirkell had attended in person and claimed that the signatures on the deed of assignment were not his.  He had asked for more time to get advice from a hand-writing expert.  However he appeared now to accept that he had signed it. 

45.      Mr Gibbons said that Mr Thirkell had informed him that the changes to the Property would be of a cosmetic nature.  Mr Gibbons used to pop in on a regular basis.  He did not expect Mr Thirkell to remove doors, toilets etc.; he did think that Mr Thirkell might have wanted to improve the ventilation in the toilets although there had not been any discussion on it.  Mr Gibbons went in one day and the wooden skirting had been removed and he was told it would be replaced with hardwood skirtings.  On another occasion, the ceiling had been brought down in the restaurant area and later the floorboards above the ceiling were removed.  Mr Gibbons said that this would be alright provided it was replaced. 

46.      Sometime after the signing of the deed of assignment, Mr Thirkell had asked Mr Gibbons if he would have any objection to Mr Thirkell removing the chimney breast on the ground floor in order to improve the layout on the ground floor.  The chimney breast was redundant.  Mr Gibbons said that he had previously told Mr Thirkell that he (Mr Gibbons) had earlier removed the chimney breast on the first floor.  He said that he had probably said this to Mr Thirkell after the deed of assignment but it might have been before.  Mr Gibbons said that, as far as he was concerned, he would be happy for the removal of the chimney breast on the ground floor.  Mr Gibbons told Mr Thirkell that, although he had 'carte blanche' for alterations from Mrs Moore, Mr Thirkell should perhaps contact Miss Moore and the building inspectors. 

47.      Mr Gibbons said that he was surprised that the ceiling on the ground floor was removed as he would have thought that only that part near the chimney breast would have had to have been removed.  Furthermore he could not understand why the first floor flooring had been removed as well as the ceiling of the ground floor.  In addition, wires were hanging down whereas Mr Thirkell had not asked to do any electrical works.  Mr Gibbons said that he protested about the extent of the works and whether Mr Thirkell should have presented plans to Mr Gibbons and Miss Moore.  Mr Thirkell replied that he believed from his experience that he was entitled to do the work under the terms of the sub-lease and that he was going to put it back in good order so that, when it was finished, the Property would be in better condition.  Mr Gibbons need not therefore be concerned.  Mr Gibbons said that he felt that, if Mr Thirkell was going to do this, it would be alright. 

48.      On a later occasion, Mr Thirkell said that there were structural problems with the Property which were not down to him to deal with.  He mentioned cracks in the building he was concerned about but did not mention the chimney breast on the first floor at that time. 

49.      Mr Gibbons then contacted Miss Moore and suggested that they all meet on site in order to see what should be done.  Mr Gibbons said that at that stage, he was still unaware of the implications of the 'vice caché' clause in the Head Lease which meant that all the structural problems were his responsibility.  His understanding at that time had been that some might be Miss Moore's responsibility and others might be his responsibility under the Head Lease. 

50.      Miss Moore attended the meeting with Mr Barnett, who had been the partner of Miss Moore's mother.  Mr Barnett tended to do most of the speaking.  Mr Gibbons presented a cheque for the fourth quarter's rent under the Head Lease, so he thought that the meeting was in early October.  Mr Thirkell also attended the meeting.  Various options were discussed e.g. Miss Moore selling the Property as it was.  Mr Gibbons had no surveyor at the time and was therefore not sure who was responsible for doing what.  Mr Barnett said that he and Miss Moore would come back with a decision as to what offer might be acceptable.  Miss Moore and Mr Barnett were shocked at the state of the Property as they had no knowledge of the work being done.  Miss Moore had subsequently denied knowing anything about the assignment to Robin Hood/Mr Thirkell but she did not query this at the meeting when Mr Gibbons introduced Mr Thirkell to her.  Mr Thirkell had said prior to the meeting that he was not prepared to continue with the work because it was going to cost too much.  Nothing was said at the meeting about the ongoing work.  However, following the meeting, Robin Hood/Mr Thirkell stopped any further work and did not pay any rental.  The Property was left in a poor state of repair because of the uncompleted works. 

51.      In the absence of receipt of rental under the sub-lease, Hong Kong Foods was not in a position to pay the rental under the Head Lease from the quarter day in December 2008 onwards and in March 2009 Miss Moore instituted proceedings against Hong Kong Foods seeking cancellation of the Head Lease and damages.  This eventually resulted in the summary judgment dated 9^th July, 2010, when the Court cancelled the Head Lease and awarded damages. 

52.      Hong Kong Foods had taken Robin Hood to the Petty Debts Court in order to obtain judgment for outstanding rental but Messrs Sinels had written to the Petty Debts Court on behalf of Miss Moore explaining that proceedings were taking place before the Royal Court with the consequence that the action in the Petty Debts Court had been stayed. 

53.      In relation to the question of whether Miss Moore had agreed to the sub-letting, he drew attention to the fact that she had written to him on 12^th January, 2009, demanding the outstanding rental but making no reference to sub-letting without her permission.  The first clear reference to this allegation was in the letter from Viberts dated 20^th February, 2009, in which notice was given on behalf of Miss Moore that she intended to commence proceedings to seek termination of the Head Lease on a number of grounds, including that Hong Kong Foods had sub-let the premises without the consent of the landlord. 

54.      In his evidence, Mr Gibbons went on to explain the quantum of his claim but we do not propose to consider that at this stage. 

55.      In cross-examination, Mr Gibbons was referred to his counterclaim filed in February 2010 in the proceedings brought by Miss Moore where he asserted "the Premises have proved to be unfit for purpose; due to the Inherent Flaws that had been uncovered by the sub tenant."  It was put to him that this appeared to be inconsistent with his case in the present proceedings as exemplified in para 10 of his witness statement for the present proceedings signed on 4^th May, 2016, where he stated "I am certain that the Premises remained structurally sound following the extensive improvements and investments I made prior to the sub-lease".  He said that he had not had the Property surveyed at the time of the Head Lease but in his opinion it was structurally sound albeit with some cracks as it was an old building.  That was still his state of knowledge both when the sub-lease was granted (in 2005) and at the time of the assignment (in 2008).  What he was saying in his witness statement in May 2016 was that nothing he had done had made the Property structurally unsound; on the contrary the work that he had done had improved the structural integrity of the Property.  He did not know if work which Mr Thirkell had done had affected the structural integrity but in 2016, when he made his statement, he did not believe that the inherent defects were affecting the structural integrity to a point where there was a danger which would prevent the use of the Property as a restaurant. 

56.      He accepted that the removal of the chimney breast on the first floor was a structural matter and that he was in breach of the Head Lease by not getting the appropriate building permission at the time.  It was however a technical breach because in his opinion the chimney breast at the first floor level was not giving structural support to the chimney above it because, between the first and second floors, the chimney went diagonally sideways so that the first floor chimney breast was giving limited support to that on the second floor.  He would say that the chimney breast on the first floor was removed correctly by Mr Gomes.  He did however accept that, after Robin Hood had vacated the Property, the building inspector did say that additional strengthening might be desirable and this was duly undertaken. 

57.      Mr Gibbons was pressed on his knowledge of the financial position of Chinese Whispers.  He said that although they were often late paying the rental under the sub-lease so that he was in turn late in paying under the Head Lease, they always paid up and therefore he could not say that he knew Chinese Whispers was in financial difficulty.  He did accept that in June 2008, he became aware that they were in difficulty.  He said however that he was not overly concerned and was not in a rush to replace Chinese Whispers.  He was nevertheless happy for Mr Thirkell to be the assignee as he was a successful business man and Mr Gibbons believed him to be a better covenant than Chinese Whispers and its guarantors. 

58.      He said that during his discussions with Mr Thirkell he gave no express or implied warranties about the state of the Property.  There were simply casual and informal conversations.  He never guaranteed to Mr Thirkell that Robin Hood would have a fully functioning restaurant as this was between Chinese Whispers and Mr Thirkell.  He didn't expect Mr Thirkell to run the restaurant immediately.  Although it was operational at the time Chinese Whispers handed it over to Mr Thirkell, the restaurant would have to be closed for work to turn it into a Thai restaurant. 

59.      In relation to payment, he accepted that £21,000 had been paid in cash.  He denied the suggestion that he had asked for it to be paid in cash because he wished to contribute to an animal sanctuary.  He accepted that he may have said that some of the money might be used for that purpose.  It was Mr Thirkell who offered to pay in cash.  He accepted that he had told Mr Thirkell that Miss Moore knew about him (Mr Thirkell) and had given her agreement to the assignment.  He also agreed that he did not return a copy of the signed assignment to Mr Thirkell but he would have given him a copy if he had asked for it, which he did not.  He assumed that Mr Thirkell would have kept a copy. 

60.      He accepted that he saw the work being undertaken by Mr Thirkell.  He, Mr Gibbons, was popping in on 90% of the days, although he subsequently changed his evidence to say that it was every second day.  He told Mr Thirkell that he thought the carte blanche which he had received from Mrs Moore as to alterations would be sufficient but he said that Mr Thirkell should nevertheless contact Miss Moore and seek building control permission.  He accepted that he should perhaps have contacted Miss Moore himself.  He himself was not sure whether permission from Miss Moore was required although he had his suspicions.  He did not tell her partly because Mr Thirkell had assured him that the Property would be put back in a better condition than it was before and that in Mr Thirkell's experience, permission was not required.  He accepted that he had not checked the terms of the Head Lease or sub-lease but said that he thought he was under a psychiatrist at the time, although later he said that he could not be sure when he first saw his psychiatrist.  He accepted that he might have been thought to have been giving his consent to the works he had seen by not objecting, although that had not crossed his mind at the time. 

61.      Mr Gibbons denied that it was Mr Thirkell who asked for the meeting with Miss Moore.  He said that he had initiated it and brought her to the meeting.  He thought that he had told her ahead of the meeting that Mr Thirkell had said there were some cracks, but he did not warn her about the extent of the works.  He did not think that the point about danger from the chimney breast had been raised at the time of the meeting.  Mr Thirkell had only raised cracks as a specific complaint of structural problems. 

62.      So far as the meeting was concerned, he accepted that this was the first occasion upon which Mr Thirkell was personally introduced to Miss Moore but maintained that she had agreed to the assignment at her house as he had previously described.  At the meeting there was some general discussion about who was liable for the works and there was a suggestion of a possible sale.  He did not hear Miss Moore tell Mr Thirkell that he had no valid sub-lease and he (Mr Gibbons) would have reacted if he had, because it would have been contrary to what she had said when he met her at her house. 

63.      Advocate Hall put to Mr Gibbons that in 2010, he believed that the putting right of any inherent defects was the responsibility of Miss Moore and was therefore content in the proceedings brought by Miss Moore to assert that there were such defects whereas, now that he knew it was his responsibility because of the vice caché clause in the Head Lease, he had changed his evidence.  Mr Gibbons denied that this was the case. 

64.      Advocate Hall referred Mr Gibbons to paragraph 6(h) of his answer in the proceedings brought by Miss Moore where he asserted that, at the time the chimney breast on the first floor was removed "...the second defendant was incapacitated at the time due to a stroke and therefore was in no condition to ensure that everything was done correctly...".  She put it to him that this contrasted with his evidence before the Court that he had attended the works carried out by Mr Gomes on a daily basis.  Mr Gibbons said that he had attended at the time and had decided that the chimney breast on the first floor was not weight bearing, an opinion with which Mr Gomes agreed.  He accepted that he had perhaps not been as incapacitated as he thought when paragraph 6(h) of the answer was drafted. 

65.      In relation to the alleged misrepresentations, he stated that he had told Mr Thirkell that he had spent some £100,000 on the Property and that the Property was capable of being run as a restaurant.  He did not believe he had said anything specific about the structure.  He was quite sure that the work he had undertaken had been done to a reasonable standard.  As far as he knew, the Property could be run as a restaurant, subject to cosmetic work being undertaken.  He had told Mr Thirkell about the removal of the chimney breast at first floor level.  At this stage of his evidence he said that he thought this was before the assignment was signed, but this was at variance with his earlier evidence (see para 46 above).  In terms of the quality of Mr Gomes' work, he had heard that Chinese Whispers thought that Mr Gomes' work was of poor quality but he did not accept that. 

66.      Finally, in answer to questions from the Court, he said in relation to the meeting which he had had with Miss Moore at her house that she had not asked for any references in relation to Robin Hood or Mr Thirkell before consenting to the assignment.  She did not know Mr Thirkell or of him but she did know of the Robin Hood takeaway business. 

(ii) Mr Chan

67.      At the beginning of his oral evidence, Mr Chan adopted his witness statement as evidence although it transpired that he has serious dyslexia and was unable to read it. 

68.      In the statement, he explained how he and Mr Stephen Moore were directors of Chinese Whispers.  When Chinese Whispers took the sub-lease from Hong Kong Foods, it agreed to pay £30,000, with £5,000 being paid immediately and the balance being payable by monthly instalments.  He stated that Mr Gibbons had provided a cooker and walk-in fridge on a permanent loan and had also put Mr Chan up in his own home until completion of the work turning the first floor of the Property into accommodation for Mr Chan.  He said that he had asked for a shower and toilet to be installed on the first floor and this was arranged by Mr Gibbons.  Although there had subsequently been a leak, Mr Gibbons had arranged for Mr Gomes to pull out the whole shower and re-fix it, which had solved the leak.  Thereafter there were no problems in connection with the shower and toilet nor had he seen any sign of defects concerning the removal of the chimney breast on the first floor. 

69.      He said that, at the time of the assignment in 2008, business had dropped off and Chinese Whispers was finding it more difficult to pay its way.  He relied upon Stephen Moore to read out the assignment to him, which he signed in the presence of Mr Gibbons.  He confirmed that it was a term of the assignment that Robin Hood should pay off the outstanding amount owed to Mr Gibbons by Chinese Whispers in respect of the loan.  He said it was part of the agreement that all stock etc. left behind by Chinese Whispers was transferred to Mr Gibbons save for those items which were subject to a lease or hire purchase agreement.  Those agreements were taken over by Robin Hood.  The drinks that were left behind were not worth more than £200 at cost and many of the bottles of spirits had been opened.  When Chinese Whispers left, everything was in working order although some decoration was needed.  He considered that Mr Gibbons had been a good landlord. 

70.      In cross-examination, he said that although Mr Moore had told him that Chinese Whispers had paid £30,000 at the commencement of the sub-lease, he did not know anything more about it.  It transpired in cross-examination that Mr Gibbons had written out his (Mr Chan's) witness statement for him as he was unable to do so and had then read it out to him.  He said that some of the words were his and some were those of Mr Gibbons.  He explained that Mr Moore looked after the finances of Chinese Whispers whereas he was responsible for the cooking. 

(iii) Mr Gomes

71.      Mr Gomes had not provided a witness statement in advance but, following an application by Mr Gibbons, the Court agreed to give leave for Mr Gomes nevertheless to be called as a witness. 

72.      Mr Gomes confirmed that he had been employed by Mr Gibbons on behalf of Hong Kong Foods to carry out the work to the Property at the time of the granting of the Head-Lease.  He had been paid some £100,000 for the work. 

73.      This had included removing the chimney breast on the first floor and building a shower and toilet in its place.  When he removed the plaster at the chimney breast he found the bricks and mortar to be in a bad state; the bricks were loose.  He made a timber frame to support the chimney on the upper floor and to prevent bricks higher up from falling down.  The chimney bent as it went up to the next floor.  There had subsequently been a leak in the shower caused by the silicone becoming loose but he had repaired this under warranty. 

74.      In cross-examination he confirmed that he had employed a sub-contractor to assist him in the removal of the chimney breast and they undertook this work together.  He had not consulted an engineer.  He agreed that one would usually employ an engineer when removing a chimney breast but said that perhaps he had not done so because he was not as experienced then as he was now.  The chimney was more dangerous before he had removed it than afterwards because the bricks were loose.  He had not applied for any form of building or planning permission as he considered this was up to the customer, i.e. Mr Gibbons.  He did not know whether this had been done. 

75.      He had not done any structural work other than the removal of the chimney breast.  He had however replaced some floorboards in the storeroom on the first floor.  He was not sure but he might have changed some joists in the storeroom.  He thought that perhaps one or two had not been in a good condition and needed to be changed. 

76.      In answer to questions from the Court, he confirmed that he had been a builder for fifteen years but had only been a builder for four years at the time of the works to the Property.  This was the first chimney breast he had removed.  He would always now get an engineer before removing a chimney breast because one had to install an RSJ to support the rest of the chimney.  He had not put in an RSJ on this occasion as he had no experience at that time. 

77.      In re-examination he said that the sub-contractor had told him that he had removed chimney breasts before. 

(b) Evidence for the Defendants

(i) Mr Thirkell

78.      Mr Thirkell said that he was the owner of Robin Hood which had carried on the Robin Hood takeaway and home delivery business for over 20 years.  He had also been in the building trade for some 25 years and had considerable experience as a builder. 

79.      His involvement in the present matter began when he was approached by Mr Stephen Moore in about July 2008, who explained that the restaurant run by Chinese Whispers was not performing well and that he had financial problems.  He wondered whether Mr Thirkell could take it over.  Mr Thirkell went to have a look at the Property and said that he would be willing to proceed if a deal could be sorted out.  There then followed discussions with Stephen Moore and Mr Gibbons.  Mr Gibbons said that he would be quite happy for Robin Hood to take the sub-lease on by Chinese Whispers selling the business to Mr Gibbons for £1.  Mr Thirkell said that Robin Hood would then pay Mr Gibbons £30,000 for the business which was a fully functioning restaurant but running at a loss.  All the equipment would become Robin Hood's, which would have a restaurant ready to trade.  Mr Thirkell/Robin Hood would also take over responsibility for the hire purchase/lease agreements entered into by Chinese Whispers in relation to certain catering equipment.  Mr Thirkell thought the amount outstanding under those agreements was some £23,000 at the time. 

80.      During the course of the discussions Mr Gibbons told Mr Thirkell that he had spent £100,000 renovating the Property.  He said that it was in very good condition, that everything had been done that needed to be done and that it had been renovated from top to bottom.  Mr Gibbons said that it just needed cosmetic work to carry on as a restaurant. 

81.      Mr Thirkell was referred to the deed of assignment.  He said that he had been provided with this document by Miss Moore who had sent it to him much later during the course of the proceedings by her against Hong Kong Foods.  He said that he did not remember signing the deed of assignment.  He accepted that before the Royal Court he had referred to the need to get a handwriting expert but he had never obtained the required 30 samples of signature.  He was referred to paragraph 12 of the affidavit dated 2^nd March, 2010, which he had sworn in connection with the proceedings by Miss Moore against Hong Kong Foods and accepted that he had there said "Mr Gibbons presented me with a document stating that I was to take over the sub-lease from Chinese Whispers Limited.  I signed this document, however I have never been given a copy by Mr Gibbons."  The deed of assignment did not include that part of the agreement concerning the payment of £30,000 to Hong Kong Foods/Mr Gibbons.  At that stage Chinese Whispers were desperate for Mr Thirkell to take over as they were not in a position to continue financially.  Mr Gibbons was aware of this and knew that he needed to have Mr Thirkell as a tenant, otherwise he would not be seeing any rent for quite some time. 

82.      Mr Thirkell explained how, when he entered the Property, he found that Mr Gibbons had removed stock (such as bottles of drink) and other items which he had expected to be in the restaurant but Mr Gibbons had not agreed that this was part of the arrangement.  It is clear that this incident damaged the relationship between Mr Thirkell and Mr Gibbons with each believing that he was in the right; but we do not think that we need to consider it further as it does not assist in resolving the present dispute. 

83.      He said that after he had gone in and started work, Mr Gibbons had referred to the fact that there was a leak from the shower and toilet on the first floor into the restaurant ceiling and had asked him to repair this.  Mr Gibbons accepted that he would be responsible for reimbursing Mr Thirkell for this and also for certain work to the drain which he requested Mr Thirkell to undertake. 

84.      Mr Thirkell explained in some detail the work which he began to undertake.  He said it began as mostly cosmetic work that expanded as they discovered problems.  We do not think it is necessary to describe this fully.  Suffice it to say that it included the following:

(i)        He had said to Mr Gibbons that he wanted to put an additional walk-in freezer and/or fridge in the storeroom on the first floor.  Because of the extra weight, he checked the joists under the flooring in order to ensure they were strong enough.  Mr Gibbons had told him that the joists had been renewed when he (Mr Gibbons) had put a freezer in the storeroom.  When Mr Thirkell opened up the floor he found that the new joists had simply been nailed onto the existing joists which extended some 6 inches into the wall to support the flooring and the ceiling on the ground floor.  The new joists stopped short of the wall and therefore each joist was only as strong as the part of the old joist which extended into the wall.  They were inadequate to support what was required.  Mr Thirkell therefore installed completely new joists.  Mr Gibbons was aware of this as he was inspecting the Property on a very regular basis.  When Mr Thirkell pointed out to Mr Gibbons that the joists had not been done properly, Mr Gibbons said that he had been ill when the flooring was done by Mr Gomes and had not seen it. 

(ii)       When Mr Thirkell scraped off the flaky paint in the restaurant, some would not come off because the walls were bumpy.  The skirting boards had to be removed and the walls were going to be skimmed in order to make them smooth at which stage the skirting boards would have been re-fixed. 

(iii)      It was agreed with Mr Gibbons that the chimney breast on the ground floor could be removed and Mr Gibbons explained that he had removed the chimney breast on the first floor in order to make the shower and toilet.  He only told Mr Thirkell this after the assignment and after Mr Thirkell had started work.  Mr Thirkell engaged Mr Christopher Clarke, the structural engineer, to prepare plans for putting in steel support etc. in relation to the removal of the chimney breast on the ground floor. 

85.      Mr Thirkell said that Mr Gibbons knew of the work which was being undertaken.  He visited the site nearly every day and inspected the work regularly.  He said nothing about the work being done and Mr Thirkell got the impression that Mr Gibbons was pleased that he (Mr Thirkell) was doing work which should have been done properly when Mr Gomes did the work initially.  Mr Gibbons never suggested to Mr Thirkell that he should get planning permission or seek permission from Miss Moore.  Indeed at that stage Mr Thirkell did not know who the landlord was.  Mr Thirkell assumed that under a nine year lease he would be liable for ordinary repairs but not something like removing a chimney breast. 

86.      In order to repair the leak and the bulging ceiling on the ground floor, it was necessary to take down part of the ceiling. 

87.      During the course of the work to the chimney breast on the ground floor, Mr Thirkell had occasion to look at the position of the chimney between the first and second floor and it was established that the wooden beam put in by Mr Gomes was not strong enough to support the chimney breast on the second floor.  When asked, Mr Gibbons confirmed that no building inspector or engineer had been involved.  It was when he found this out that Mr Thirkell asked Mr Gibbons to arrange for a meeting with the owner as he could see that there were potentially big problems with the chimney. 

88.      Mr Gibbons duly arranged the meeting, which Mr Thirkell believed took place at the end of September.  He thought that the necessary work to stabilise the chimney breast would take some three to four months (including time to get permission etc.).  In the meantime he would be paying rent without being able to get on with running a restaurant.  Although the rest of the work had turned out to be more than pure redecoration, the rest of the work would not have taken long to complete. 

89.      At the meeting, Miss Moore was accompanied by Mr Barnett.  Mr Thirkell and Mr Gibbons were also present.  He said it became clear very quickly that Miss Moore had not been informed that Mr Thirkell/Robin Hood had taken over the sub-lease and had not been told about the work which was being done.  Mr Thirkell accepted that the Property would at that stage have looked like a building site because the floor around the chimney had been taken up and also the ceiling had in part been removed. 

90.      Mr Gibbons introduced Mr Thirkell as the sub-tenant and Miss Moore replied that she had not granted anyone a sub-tenancy and that therefore Mr Thirkell did not have a sub-lease.  Mr Thirkell was shocked and said to Miss Moore that Mr Gibbons had told him that he had a sub-lease and that Miss Moore knew about him, but Miss Moore denied this and said that he was not her sub-tenant.  She told him that he could not continue with the work as he did not have a lease and was not a tenant. 

91.      Mr Gibbons raised a question as to whether any of them could buy the Property and the matter was left there at that stage. 

92.      Shortly afterwards, Miss Moore telephoned Mr Thirkell, who said that he was interested in buying the Property but not with Mr Gibbons.  Miss Moore said that she certainly would not sell to Mr Gibbons but she would sell to Mr Thirkell.  However, it proved impossible for them to agree upon a price and nothing materialised in that respect.  He said that he did not do any more work after the meeting following Miss Moore's comments nor did he pay any rent as he had been told that he did not have a lease and was not a tenant.  He told Mr Gibbons that he would not continue with the work unless he received a valid sub-lease. 

93.      Miss Moore confirmed her approach when she emailed him on 23^rd April, 2009, after commencing her proceedings against Hong Kong Foods.  The email included the following passage "as far as I am concerned, you are not my subtenant as I have had nothing in writing from Mr Gibbons to that effect at all.  The first I heard of his 'arrangement' was when we met at Cheapside back in October!  I hadn't a clue who you were as Mr Gibbons had never even written to me.  This was in total breach of the lease....".  She went on to say that normal procedure would have been for Mr Gibbons to write seeking a change of sub-tenant at which stage her advocate would have required proof that Mr Thirkell was a suitable sub tenant, capable of paying the rents etc.  Only once the details had been checked by her lawyer would a change in sub tenancy have been possible. 

94.      In answer to questions from the Court, Mr Thirkell confirmed that it was when he had discovered that the chimney breast above the first floor was just supported on a piece of wood following the removal of the chimney breast at first floor that he contacted Mr Gibbons and asked for a meeting with Miss Moore as he knew it was dangerous.  He did not recall thinking that the cracks were a significant matter; it was the chimney which was the problem. 

95.      In their evidence, both Mr Gibbons and Mr Thirkell went into some detail in relation to the various work which Mr Thirkell had undertaken to the Property and in cross-examination, Mr Gibbons asked Mr Thirkell in some detail about aspects of this work and whether or not it arose out of poor workmanship when the work was originally undertaken on behalf of Mr Gibbons at the commencement of the Head Lease.  Apart from the question of the joists in the storeroom and the chimney breast, we have not found this evidence to be of assistance and accordingly we do not propose to rehearse it. 

96.      Some time was also spent in consideration of whether the removal by Mr Gibbons, at the time of the assignment, of the bottles of drink left by Chinese Whispers was or was not a breach of the assignment agreement.  Again, we have not found it necessary to consider this or to make a finding of fact, as we do not consider it significant for the purposes of our decision. 

97.      In cross-examination, Mr Thirkell maintained that Mr Gibbons had told him that Chinese Whispers was making a loss and that Mr Moore ran the risk of losing his house if he could not find someone to take over the business. 

98.      As to the meeting with Miss Moore, Mr Thirkell accepted that they were all talking as a group; there were no separate conversations.  She had asked who he was and Mr Gibbons had explained that he was the sub-lessee.  Miss Moore said that he did not have a sub-lease and that he should stop work as he had no right to be there. 

99.      He agreed that the sum of £9,000 for a quarter's rent was included in the £30,000 payment which he had made.  He accepted that the September - December rental under the Head Lease had been paid by Mr Gibbons to Miss Moore and he believed that the £9,000 which he had paid was for the September - December quarter under the sub-lease. 

100.   He reiterated that Mr Gibbons had told him that he (Mr Gibbons) had spent £100,000 and that everything was done but said that unfortunately Mr Gibbons had used a builder who did not know what he was doing.  In particular the builder had used a piece of wood to support the chimney breast after removal at first floor level which was not strong enough. 

101.   In response to the suggestion that he had never said anything following the meeting, Mr Thirkell said that he had told Mr Gibbons that he was not doing any more work unless Mr Gibbons got a proper sub-lease, in which event he would continue.  Mr Thirkell said that he hoped that Mr Gibbons would resolve the matter.  Mr Thirkell had spent a lot of money and he wanted to run the restaurant. 

102.   Although he could not recall asserting before the Royal Court that the deed of assignment was a forgery, that remained his belief although he had accepted its validity for the purposes of the case as he could not show it was a forgery.  He also accepted that, whereas he had initially thought that Mr Pickersgill had never given him legal advice in the case, it transpired from a letter presented to him by Mr Gibbons that Mr Pickersgill clearly had given him advice for a limited period.  

103.   In re-examination he said that he had hoped to open the restaurant some four to five weeks after taking over the sub-lease. 

(ii) Christopher Clarke

104.   Mr Clarke is a chartered structural engineer and was a director at Ross-Gower Associates from 2002 to 2016.  He retired in March 2016 although he still provides consultancy work for his old firm. 

105.   He often provided professional services for Mr Thirkell in connection with properties which Mr Thirkell was renovating or carrying out work to. 

106.   He said that his recollection of the sequence of events was, after this length of time, somewhat hazy.  He had been able to find certain documents from his files and also read the affidavit of Mr Thirkell prepared for the present case and Mr Thirkell's affidavit (exhibited to his present affidavit) sworn in the proceedings brought by Miss Moore. 

107.   His records suggested that he was telephoned on 15^th September, 2008, by Mr Thirkell and he visited the Property on 16^th September and again on 17^th September.  He was requested to produce calculations etc. in relation to the removal of a chimney breast.  He did not think that he knew at that stage that the chimney breast had been removed from the first floor.  He prepared various drawings and calculations and submitted an account on 6^th October.  He thinks he may have been telephoned by Mr Thirkell about problems encountered during the works but he had no independent recollection of the nature of those problems and what his recommendations were. 

108.   However, on 18^th May, 2009, following a further telephone call from Mr Thirkell, he revisited the Property and produced a report in the form of a letter dated the same date.  The relevant part of the letter stated:

"-¢ From site measurements it would appear that the party wall (6/8 Cheapside) has been partially removed to accommodate the first floor shower cubicle. 

-¢ The exposed party wall above the shower cubicle revealed loose masonry supported on timber, presumably spanning over the end of the cubicle. 

-¢  None of the above is structurally satisfactory and is potentially dangerous due to the risk of falling masonry. 

-¢ In addition, such structural work should have been covered by an application to Planning, signed by the property owner, with the works inspected by the Building Control Surveyors."

109.   Mr Clarke elaborated by saying that he saw three things which troubled him on his inspection in May 2009.  First, he saw loose masonry, secondly some of this had fallen on the timber installed on removal of the first floor chimney breast, and thirdly the timber was above the opening to the shower.  The combination of these three things made it potentially dangerous.  The loose masonry would allow water ingress, water would flow through the cracks in the masonry on to the timber and the timber above the opening was dangerous because it was acting like a beam but was not designed as such.  Mr Clarke would have recommended a steel beam had he been consulted when the chimney breast was removed.  In due course the timber would deflect, crack and then collapse.  Collapse was not imminent but it could not be left as it was. 

110.   Mr Clarke commented on the report dated 7^th August, 2009, prepared by Barnes Noble Edwards Limited, chartered surveyors, but emphasised that this was not a structural report and nothing in that report caused him to change his opinion. 

111.   In cross-examination, Mr Gibbons suggested to him that the chimney above the first floor slanted diagonally to the right and that this would accordingly reduce the load as compared to the position if the chimney went straight up.  He also postulated the possibility that the party wall got thinner as it went up to the second floor and Mr Clarke agreed that, if this was so, the load would be less as you went higher.  However, Mr Clarke said that this did not cause him to change his opinion in any way as to the potential danger.  He was satisfied that he had sufficient evidence from his inspection to reach his conclusion.  He said that undertaking the necessary work to eliminate the danger would take a month or so but doing the work and obtaining the necessary paperwork to obtain approval and then obtain a certificate following completion would take some two to three months.  In his opinion, because of the potential danger, the public should not be allowed into the Property until the above work had been done and the paperwork concluded. 

(iii) Stephen Moore

112.   As his evidence in chief, Mr Moore simply adopted his witness statement.  It has to be said that his evidence was mostly concerned with the difficulties which he says Chinese Whispers encountered in dealing with Mr Gibbons particularly at the outset of the sub-lease and we do not consider that this gives material assistance in connection with the events of 2008, which we have to determine. 

113.   Suffice it to say that he said that the works which Mr Gibbons undertook through Mr Gomes took longer than expected and as a result the restaurant was unable to open until June 2005 rather than January 2005 as originally envisaged.  In addition Chinese Whispers ended up paying for certain works which he, Mr Moore, did not consider were their responsibility.  He also felt that the work undertaken by Mr Gomes was of sub-standard quality as the paint began peeling off the wall at an early stage.  He said that trying to conduct business with Mr Gibbons was impossible as he would tell you one thing and then try to do another.  It did not surprise him that Mr Chan recalled things rather differently as he was not business minded. 

114.   He confirmed that Chinese Whispers was in financial difficulties and that Mr Gibbons was aware of this.  Chinese Whispers was constantly late in paying its rent and on one occasion Mr Gibbons took Chinese Whispers to the Petty Debts Court for outstanding rental. 

115.   He said that he initially approached Mr Thirkell to take over the business and that thereafter the effective negotiations took place between Mr Gibbons and Mr Thirkell.  He was just very relieved that someone was taking over the obligations of Chinese Whispers as he desperately wanted to be free of the sub-lease.  At the time of the assignment, Mr Moore considered the condition of the Property was not great but the work required appeared to be cosmetic rather than anything more serious. 

116.   He had been asked by Mr Thirkell's advocate about the amount outstanding under the various lease/hire purchase agreements in respect of equipment which were subsequently taken over and discharged by Robin Hood.  At the time of giving his initial evidence, he was unable to produce any documents, although he thought that the sum was between £8,000 and £10,000.  After he had given his initial evidence he returned to his office and came back later to give further evidence.  He produced a document dealing with a particular lease agreement with Lombard Finance (CI) Limited.  This showed that if Robin Hood took over responsibility for payment from August 2008, it had paid a total of £4,851 by the end of the agreement whereas, if it had only taken over responsibility from September 2008, it had paid £4,158. 

117.   In cross-examination, Mr Gibbons challenged some of Mr Moore's assertions about the events at the time the sub-lease was originally entered into but, as we say, we do not think that the rights and wrongs of the events at that time and the relationship between Chinese Whispers and Mr Gibbons assists us in our task. 

(iv) Antonia Francisco

118.   Miss Francisco has been Mr Thirkell's partner for some 12 years although they are not married.  She has also held the position of manager of Robin Hood for some nine years.  She too simply adopted her affidavit as her evidence in chief.  It has to be said that much of it was hearsay in that it records what she was told by Mr Thirkell.  No application was made under the Civil Evidence (Jersey) Law for the admission of such hearsay evidence but, under that Law, the evidence remains admissible albeit that the weight to be attached to it may be affected. 

119.   She said that Mr Thirkell had told her about the proposal to take over the sub-lease from Chinese Whispers.  She recalled specifically that the sum of £30,000 was paid to Mr Gibbons in the summer of 2008 because she remembered helping Mr Thirkell to count out the money.  She said that they expected to receive a restaurant from which one could immediately begin trading and that they therefore expected all the equipment, including matters such as tables and chairs together with any stock, to be left on the premises.  She said that when they went into the premises for the first time they realised that the bar was empty and that other items such as tables and chairs had been removed.  She said that Mr Thirkell got in touch with Mr Gibbons about this who admitted he had removed the equipment, furniture and stock because he considered that these items belonged to him. 

120.   She described in her written statement the nature of the work which they had to undertake because the decorative state of the Property was not good.  There were other items such as mould in the bar, tiles in the toilets not properly fixed to the walls and a number of other matters.  She confirmed that on lifting the floorboards in the storeroom, they found that the new beams were simply attached to the old rotten beams and were not embedded in the wall.  They therefore had to be replaced.  She said that she was present at a meeting with Mr Thirkell and Mr Gibbons at which time Mr Gibbons told them that the chimney breast on the first floor had been removed so that a shower could be installed.  It was agreed that the chimney breast on the ground floor could be removed and they subsequently contacted Mr Clarke.  She said that Mr Gibbons came onto the site virtually every day and appeared to be checking the work although she had never spoken to him.  She confirmed that after the meeting with Miss Moore, Mr Thirkell returned home and said that the meeting had not gone well.  He said that Miss Moore had had no idea who he was and did not know what he was doing on the Property.  After that meeting Miss Francisco had never gone back to the Property. 

(v) Christopher May

121.   Mr May also simply adopted his affidavit as his evidence in chief.  He said he was a builder and had worked for Mr Thirkell for some 25 years.  He recalled working at the Property in 2008.  When he first attended, he could see that it needed some work as it was in poor condition, e.g. the paint was peeling off the walls.  He thinks he spent between six weeks and two months on site and was there on an almost daily basis.  He met Mr Gibbons on numerous occasions on the Property and it would have been obvious to Mr Gibbons that work was being undertaken at the Property.  He described certain pieces of work he had undertaken such as taking the paint off the wall and repairing the drain which Mr Gibbons had asked Mr Thirkell to arrange. 

122.   He mentioned in particular the replacement of the joists in the storeroom on the first floor where the new joists had simply been attached to the old joists which were rotten within the walls and the strengthening with the new joists was therefore ineffective.  He removed the old joists and installed new joists before replacing the floor. 

123.   He recalled being asked by Mr Thirkell to remove a chimney breast on the ground floor.  He said that he could not do so until the chimney breast on the first floor and the attic had been removed but Mr Thirkell told him that the chimney breast on the first floor had already been removed.  He recalled Mr Clarke becoming involved.  He confirmed that if one removed the bottom of a chimney breast but not that which is above it, it is likely to fall down.  However, if the first floor chimney breast had been removed properly, it would have been safe to remove the ground floor chimney breast. 

Findings of fact

124.   At the conclusion of the evidence, it was agreed that closing submissions should be reduced to writing, not only because the time allocated to the case had expired but also to give the parties time to reflect on the evidence which had been adduced.  Unusually, because Advocate Hall anticipated giving birth to her child shortly, it was agreed that she would put in the first closing submission and this would be followed by Mr Gibbons. 

125.   The Court has had the opportunity of considering those closing submissions and also had the opportunity of seeing and hearing the various witnesses give evidence. 

126.   Having done so, the Court has come to the clear conclusion that, in relation to the key events of 2008, it prefers the evidence of Mr Thirkell to Mr Gibbons.  We acquit Mr Gibbons of deliberate lying but we think he is someone who tends to convince himself that events have occurred as he wishes they had rather than as they in fact did. 

127.   We base this conclusion on the evidence as a whole as well as the manner in which Mr Thirkell and Mr Gibbons respectively gave evidence.  However, examples of Mr Gibbons' habit of varying his evidence (often explaining this by reference to illness) included the following:

(i)        As set out at para 55 above, in his counterclaim filed in February 2010 in the proceedings brought by Miss Moore, he asserted "the Premises have proved to be unfit for purpose; due to the Inherent Flaws that have been uncovered by the sub tenant."  Mr Gibbons accepted before us that at this time he was not aware of the implications of the 'vice caché' clause in the Head Lease and thought that any pre-existing structural problems would be the responsibility of Miss Moore rather than him.  He now knows that that is not the case and in the present case is asserting the exact opposite of what he said in 2010 because he now asserts that the Property was structurally sound following the work he had undertaken prior to the sub-lease. 

(ii)       In his witness statement for the present proceedings, Mr Gibbons stated at paragraph 13 "... I was not overly concerned about the rent owing [by Chinese Whispers] at this stage as only a single quarter's rent was overdue.  It is certainly not the case that I was keen for the Defendants to take the sub-lease on as has been stated in the Second Defendant's affidavit..." (emphasis added).  That was consistent with his oral evidence.  But it is in complete contrast to the assertion in his second affidavit in the proceedings brought by Miss Moore sworn on 6^th July, 2010, where at para 13, having alluded to Chinese Whispers having financial difficulties, he went on to say "accordingly, Hong Kong Foods Limited was eager for the sub-lease to be assigned."

(iii)      Mr Gibbons accepted that the application (made on 13^th May, 2004,) for building permission in respect of the works which he undertook in 2004/2005 did not include reference to the removal of the chimney breast on the first floor because that was not envisaged at that time.  However, he asserted that, when the building inspector came round with a view to granting his certificate of completion (dated 20^th October, 2005), he told the building inspector about the removal of the chimney breast (albeit nothing could be seen of it because it was behind the newly installed shower and toilet) and that the inspector had apparently been satisfied. He said that the wording emphasised below on the certificate of completion was to cover the removal of the chimney breast as well.  The wording was "Reposition staircase leading from restaurant kitchen to stockroom, minor alterations to improve existing flat layout".  He said the final seven words were to cover the removal of the chimney breast.  The difficulty with this contention on his part is that the wording of the completion certificate is identical to that on the original building permit (including the same seven words), which he admits was issued in ignorance of and well before there was any intention to remove the chimney breast.  It cannot therefore be seriously contended that the expression "minor alterations to improve the existing flat layout" somehow covered the removal of the chimney breast and we think this was an example of Mr Gibbons clutching at straws and convincing himself that things have occurred as he wishes they had.  The notion that the building inspector was told about and agreed to the first floor chimney breast removal after the event in October 2005 despite the area being completely covered up by then with the new shower and toilet, is wholly inconsistent with the fact that a specific retrospective application to cover the removal of the chimney breast was later required by the Planning Department and the retrospective permission granted on 16^th November, 2011, described the work as "remove part of the first floor and form shower/w.c.  Remove chimney breast and provide support for existing chimney stack."  We reject Mr Gibbons' evidence that he told the building inspector in 2005 about the removal of the first floor chimney breast and that the building inspector agreed to it. 

128.   As to Mr Thirkell's evidence, we accept that he too was occasionally inconsistent.  For example, it is clear that he said to the Royal Court at the first presentation of these proceedings that he thought the deed of assignment might have been forged and Mr Pickersgill subsequently wrote a letter on his behalf making an assertion to that effect.  In his evidence he said that he still thought it might be forged but he was content to accept that it was not.  Conversely, in his affidavit of 2^nd March, 2010, sworn in the proceedings brought by Miss Moore, he accepted at para 12 that he had signed it.  We are satisfied that the deed of assignment was not forged and this is a case where Mr Thirkell has simply forgotten he had signed it and does not immediately recognise the signature as being his.  Certainly no-one contends that there was any material difference between what is said in the deed of assignment and the oral agreement reached between the parties other than the admitted fact that the deed of assignment says nothing about the payment of £30,000 which Robin Hood made to Hong Kong Foods.  Nevertheless, having seen and heard Mr Thirkell give evidence, the Court accepts him as a truthful witness seeking to do his best to recall events of many years ago. 

129.   Turning to our specific findings of fact, we begin by accepting Mr Clarke's evidence.  He is a structural engineer who gave his evidence in a measured and impressive manner and no evidence to the contrary was produced.  Despite Mr Gibbons' valiant attempt to assert that there was adequate strength in the structure, we find that the work undertaken by Mr Gomes in connection with the removal of the chimney breast on the first floor was unsatisfactory and led to a potentially dangerous situation.  To be fair to Mr Gomes, he accepted immediately that this was the first occasion that he removed a chimney breast and that he had not consulted a structural engineer.  He accepted that he was now more experienced and would invariably consult an engineer and expect an RSJ to be inserted to provide support.  We accept, as did Mr Clarke, that Mr Clarke was not suggesting that there would be an imminent collapse; but he was clear that there would be a collapse at some stage and it was impossible to say when this would occur.  We accept his evidence in this respect and his opinion that, because of the potential danger, members of the public should not be allowed in to the Property (e.g. by using it as a restaurant) until the necessary strengthening work had been undertaken and a certificate of completion obtained from the Planning Department.  

130.   As to the events leading up to the meeting in late September/early October between Miss Moore (with Mr Barnett), Mr Gibbons and Mr Thirkell, we accept Mr Thirkell's evidence.  We find that he began work as envisaged, namely undertaking fairly superficial/decorative work (other than in respect of the drain and the leaking shower which Mr Gibbons asked him to do and agreed to pay for) but that the work gradually expanded as he found defects in the work previously undertaken.  We accept that he was growing increasingly concerned and that the final trigger for requesting a meeting with Miss Moore was his concern in relation to the removal of the chimney breast at the first floor.  We find it was he who requested the meeting rather than Mr Gibbons, although it was Mr Gibbons who, at Mr Thirkell's request, contacted Miss Moore to arrange the meeting.  We reject Mr Gibbons' evidence that he had advised Mr Thirkell to perhaps get permission for the works from Miss Moore and the Planning Department.  We find that Mr Gibbons believed that, following completion of the work by Mr Thirkell, the Property would be in better condition and this would be to his advantage.  We also find that Mr Gibbons did not tell Mr Thirkell that the chimney breast on the first floor had been removed until after the assignment of the sub-lease and after Mr Thirkell had begun work. 

131.   As to the meeting itself, we again accept Mr Thirkell's evidence as to what occurred.  We find that Miss Moore made it clear that she had no idea that the sub-lease of the Property had been assigned to Robin Hood/Mr Thirkell and said that she had not given her consent.  She told Mr Thirkell that he had no right to be there, that she had not consented to the works and that he should not continue with the works.  We accept that Mr Thirkell told Mr Gibbons that he would not be proceeding further unless Mr Gibbons sorted out the question of the sub-lease.  Thereafter Mr Thirkell did not undertake any further work and paid no further rent.  We accept Mr Thirkell's evidence that in the weeks that followed, he entered into negotiations with Miss Moore concerning a possible purchase but that a price could not be agreed.  We find that Mr Gibbons did little thereafter to resolve the position. 

132.   We further find that Miss Moore had not in fact granted her consent to the assignment.  We find that for the following reasons:

(i)        It is highly unlikely that she would have said the things which she did at the meeting about not having consented to the assignment if in fact she had previously consented.  We do not think that is something she could have forgotten. 

(ii)       Although she was not called to give evidence, as Advocate Hall explained, and therefore anything said by her in the course of the proceedings against Hong Kong Foods and Mr Gibbons is hearsay - with comparatively little weight to be attached thereto particularly bearing in mind the lack of an application under the Civil Evidence (Jersey) Law for admission of her previous affidavits as hearsay evidence - we find what she said at the meeting to be consistent with what she said in those proceedings.  Thus, not only was it her case in the pleadings (see para 6(i) of the Order of Justice) that she had not consented to the assignment but her affidavit dated 11^th February, 2010, in support of her application for summary judgment was to like effect at paras 38-39.  This was also consistent with the letter from her advocates Messrs Viberts dated 20^th February, 2009, and her email to Robin Hood dated 23^rd April, 2009, (described at paras 22 and 93 above respectively). 

(iii)      In reaching this conclusion, we have not ignored Mr Gibbons' evidence that he visited Miss Moore at her home at which time she consented to an assignment of the sub-lease to Robin Hood and note that that is consistent with the case he pleaded at para 6(iv) of his answer and counterclaim in the proceedings brought by Miss Moore.  However, we also note that in her reply in those proceedings Miss Moore said that in that meeting Mr Gibbons had informed her that Chinese Whispers was not paying its rent on time and it was in that context she had said that if a new sub-tenant was necessary, a more reliable sub-tenant would be "better for both of us".  She pleaded that she had not consented to any new sub-tenant at the meeting and had said that her lawyers would have to be informed in writing of any proposed new tenants so that they could ascertain such sub-tenant's suitability.  We find that that version of the meeting is much more consistent with all the other events we have described (in terms of what was said at the meeting in September/October and Miss Moore's subsequent correspondence and actions) rather than the version put forward by Mr Gibbons. 

(iv)      Mr Gibbons asserted that Miss Moore consented to the assignment of the sub-lease at the meeting at her home despite not knowing or having heard of Mr Thirkell and knowing only of the existence of the Robin Hood takeaway business.  She apparently asked for no references in relation to either Robin Hood or Mr Thirkell.  We regard this as being unlikely. 

133.   As to what was said by Mr Gibbons as to the state of the Property prior to the assignment, Mr Thirkell's oral evidence (as summarised at para 80 above) was that Mr Gibbons told him he had spent £100,000 on renovating the Property, that it was in very good condition, that everything that needed to be done had been done and that it just needed cosmetic work to carry on as a restaurant.  Mr Gibbons accepted that he had said that he had spent some £100,000 on the Property and that, as far as he knew, everything was in a good state and the Property could be run as a restaurant subject to cosmetic work being undertaken.  He did not believe he had said anything specific about the structure. 

The law

(i)        Misrepresentation

134.   In Kwanza Hotels Limited v Sogeo Company Limited (1981) JJ 59, the Royal Court accepted the following as a definition of a representation:

"A statement of fact made by one party to the contract (the representor) to the other (the representee) which, while not forming a term of the contract, is yet one of the reasons that induces the representee to enter into the contract.  A misrepresentation is simply a representation that is untrue."

The Court of Appeal, on appeal in that case (at 1983 JJ 105), must be taken to have agreed with that definition and upheld the Royal Court's decision that, on the facts of that case, there was no misrepresentation as there was no statement of fact.  A broadly similar definition was applied in McIlroy v Hustler (1969) JJ 1181 at 1185 and Newman v Marks [1985-86] JLR 338 at 351. 

135.   A statement of opinion (unless not honestly held) is not a representation of fact; nor is a mere commendatory statement eg mere puff; accordingly neither of these, even if incorrect, can amount to a misrepresentation. 

136.   Until fairly recently, it appeared from cases such as McIlroy, Channel Hotel and Properties Limited v Rice (1977) JJ 111, Kwanza and Newman that Jersey law recognised an ability to rescind a contract or award damages in lieu in the case of misrepresentation.  In other words a contract induced by misrepresentation (at least if not fraudulent) rendered a contract voidable rather than void.  In none of these cases was there any suggestion that misrepresentation amounted to a vice du consentement.  Thus:

(i)        In McIlroy the defendant claimed that the contract had been induced by misrepresentation and sought rescission, alternatively damages.  The Court (Ereaut, Bailiff) found that the alleged misrepresentations were in fact statements of opinion and therefore did not amount to misrepresentations.  The defendant's claim was therefore dismissed.  However there was no suggestion that the alternative claim for damages was not something which the Court could award. 

(ii)       In Channel Hotel and Properties, there was no claim for rescission.  The plaintiff only claimed damages under the headings of misrepresentation, breach of warranty and negligence.  Although the judgment of Crill, Deputy Bailiff, is not entirely easy to follow, the Court specifically held at 115 that the Court had jurisdiction to award damages for innocent misrepresentation (although somewhat confusingly it declined to say whether that extended to negligent misrepresentation).  The Court appears in the latter context to have been thinking of a liability in tort for negligent mis-statements rather than misrepresentation inducing a contract.  The Court found for the plaintiff on liability. 

(iii)      In Kwanza the plaintiff sought only damages.  It did not seek rescission of the relevant contract as it wished to retain the property it had purchased.  It was not suggested by Ereaut, Bailiff or the Court of Appeal that this remedy was not available for misrepresentation although, on the facts, it was held that the statement relied upon was not a statement of fact but merely a descriptive expression. 

(iv)      In Newman the plaintiff sought rescission, alternatively damages for, inter alia, misrepresentation as to the age of a horse which she had purchased from the defendant.  On the facts, the Court (Tomes, Deputy Bailiff) held that any misrepresentation as to the age of the horse had not induced the contract but at page 359 the Court said "it is clear that under Civil Law, the judge had a wide discretion to decide whether the contract should be rescinded, or the price lessened, or damages paid, or whether any regard at all ought to be had to the complaint."

137.   However, in Steelux Holdings Limited v Edmonstone [2005[ JLR 152 the Royal Court (Bailhache, Bailiff) indicated at paragraph 10 that an innocent misrepresentation which induces a contract amounts to a vice du consentement.  Thus, having stated that a fraudulent misrepresentation would amount to dol and would therefore be a vice du consentement, the Bailiff went on to say:

"It may not be necessary that the statement is, at the time it is made, knowingly false; if the statement is in fact false, and the other party acts upon it, there is nonetheless a defect of consent (vice du consentement) because the other party enters the contract under the mistaken impression that the statement or representation is true.  It may be seen, therefore, that the distinction between mistake (erreur) and fraud (dol) as defects of consent may sometimes be blurred. There is, in either event, a defect of consent which allows the injured party to treat the contract as void. ..."

138.   This approach was followed by the Royal Court in Sutton v Insurance Corporation of the Channel Islands Limited [2011] JLR 80 where at para 46 William Bailhache, Deputy Bailiff, having referred to the fact that in earlier decisions the Royal Court had been prepared to investigate whether there had been an innocent misrepresentation which induced the contract, said this:

"This must have been taken to have been upon the basis of a vice du consentement which goes to the issue as to whether there was any true common will or volonté to agree the terms of the contract ...  A fraudulent misrepresentation clearly allows the contract to be avoided. But we go further and hold that Jersey's contract cases show that, depending on the facts, including, in particular, the materiality of the alleged misrepresentation to the contract and its actual impact on the party to whom it was made, an innocent misrepresentation which induces a contract can be another form of vice du consentement, just as erreur or dol."

It is clear that in this passage the Court was differentiating Jersey law from modern French law.  Under French law an innocent misrepresentation which induces a contract can only constitute a vice du consentement if it amounts to an erreur sur la substance, which in many cases it will not.  Thus the Court in Sutton held that Jersey law should recognise an additional category of vice du consentement in addition to erreur and dol. 

139.   The problem with seeking to bring misrepresentation under the rubric of vice du consentement is that it may lead to difficulties in connection with remedies.  In this respect, there is an interesting discussion in Section 7 of the Law of Contract Study Guide 2015 - 2016 issued by the Institute of Law. 

140.   Our understanding is that the consequence of holding that a vice du consentement exists is that the contract has to be considered as 'nul' and is therefore void ab initio.  The contract does not and never has existed.  Although some vices du consentement lead to nullité relative and some to nullité absolue, this does not affect the consequences for the parties or for third parties to whom any asset may have been transferred in the meantime because whichever type of nullité results, the contract is void; see Nicholas, French Law of Contract,  second edition at 77 (1992) quoted with approval by Bailhache, Bailiff, in Selby v Romeril [1996] JLR 210 at 219/220; and see also Marett v Marettt [2008] JLR 384 where the Court of Appeal said at para 59 with apparent approval:

"Steelux Holdings Limited v Edmonstone is recent Jersey authority for the proposition that a vice du consentement ... will render a contract void ab inito, that is to say, it never existed.  ...".. 

141.   In our judgment, the Court should, so far as consistent with legal principle and precedent, develop the Jersey law of contract so as to be suitable for the requirements of commercial life in the 21st century and to be as easily ascertainable and understandable as possible.  In our judgment, to hold that a contract induced by an innocent (ie non-fraudulent) misrepresentation is void ab initio (nul) would be an undesirable outcome and furthermore is not required by precedent. 

142.   In the first place, unless one were to introduce for the very first time into Jersey law an exception which modern French law has apparently introduced in connection with movable goods, the consequence of a contract being void is that the purchaser cannot transfer title because he does not have any title himself.  Thus, an object purchased on the basis of misrepresentation might have been sold on one or more times before the contract is formally voided and all such sales would also be void because of the nullity of the original contract induced by misrepresentation.  

143.   Secondly, there are many circumstances where a purchaser induced to enter a contract by misrepresentation does not wish to have the contract rescinded but merely seeks damages to compensate him for any loss caused by the misrepresentation.  A typical example is where the purchaser wishes to keep the thing purchased but to claim damages equal to the difference between the value of the thing as it was represented to be and the thing as it actually is.  That course is not open to him if the contract is void ab initio.  

144.   Whilst it appears that under French law, where there is a vice du consentement leading to nullité relative (i.e. dol, erreur, or violence), the contract may be subsequently validated by confirmation by the person protected by the nullité, it is not clear that he can then claim damages for such vice because, once a vice du consentement is proved, the Court has no option but to declare the contract void (see Nicholas (supra) at 77-81).  It seems that there may be some alternative type of action available in France to such a plaintiff, namely an action en resolution pour inexécution but this would require the introduction in this jurisdiction of procedures and concepts which are unknown to Jersey law at present, which do not appear to work entirely satisfactorily in France, and which would not conduce to the law being easily ascertainable and understandable as envisaged at para 141 above. 

145.   We consider that the preferable solution is to revert to the position which it seems to us was envisaged by the Royal Court and the Court of Appeal in the earlier misrepresentation cases prior to Steelux and Sutton and to hold that a contract induced by innocent misrepresentation is voidable rather than void.  This protects the position of bona fide third parties and also gives the Court and the plaintiff flexibility as to whether rescission and/or damages is the appropriate remedy.  It seems to us that that can be achieved by continuing to regard misrepresentation as a principle of Jersey contract law which stands alone rather than seeking to shoehorn it into the structure of a vice du consentement with all the undesirable consequences which may follow. 

146.   This approach seems to us not only to be preferable as a matter of policy but also to be more in accordance with precedent and principle, in that it is consistent with the Jersey cases prior to Steelux and Sutton.  Furthermore, it also appears to be consistent with the views of earlier writers.  Thus Le Geyt, Constitution, Les Lois et Les Usages (1946 Edition) Tome 1 at page 119 appears to have drawn a distinction between contracts which were nul ab initio and those which were merely voidable.  Thus he refers first of all to various grounds of nullity which lead to a contract being void ab initio.  He summarised these grounds as "des nullitez évidentes et perpétuelles, contre lesquelles il n'est besoin de restitution ni de révocation expresse, parce qu'elles sont accompagnées d'un vice inséparable"; in translation "evident and perpetual nullities against which there is no need for restitution or express revocation because they come with an inherent defect".

147.   He contrasts these with other types of nullity as follows:

"Il y a des Contrats dont les défauts ne sont pas si manifestes, ni d'une si grande importance. Les causes en sont occultes ou douteuses, il y faut de l'examen et de la preuve; tels sont le dol, la lésion d'outre moitié, la crainte, etc de tout quoy, pour se faire relever, on a besoin du ministère de la Justice, et l'on ne déclare pas le Contrat nul ab initio, mais on le casse comme fait injustement. (translation: there are contracts where defects are neither manifest nor of such great importance.  Their causes are obscure or dubious and need to be examined and proved, for instance dol, lesion d'outre moitié, violence etc, and all requires the intervention of the Courts to remove them, and it is not possible to declare the contract null ab initio but it shall be terminated for having been made unfairly.)"

148.   It seems to us that this approach is also consistent with that of Domat, Loix Civiles Volume 1, Book 1, Title 2, Section XI at para XII where, as the Court of Appeal made clear in Kwanza (at page 122), he deals specifically with cases of misrepresentation in the following terms:

"Si le vendeur a declaré quelque qualité de la chose vendue, outre celles qu'il doit garentir naturellement : & que cette qualité se trouve manquer, ou que même la chose vendue se trouve avoir les défauts contraires ; il faudra juger de l'effet de la déclaration du vendeur, par les circonstances de la conséquence des qualitez qu'il aura exprimées, de la connoissance qu'il pouvoit ou devoit avoir, de la verité contraire à ce qu'il a dit, de la manière dont il aura engagé l'acheteur, & sur tout il faudra considerer si ces qualitez ont fait une condition sans laquelle la vente n'eut pas été faite.  Et selon les circonstances, ou la vente sera résolue, ou le prix diminué : & le vendeur tenu des dommages & intérêts s'il y en a lieu .... Mais si le vendeur a seulement usé de ces expressions ordinaires aux vendeurs, qui louent vaguement ce qu'ils veulent vendre, l'acheteur n'ayant pas dû prendre ses mesures sur des expressions de cette nature, il ne pourra faire résoudre la vente sur un tel pretexte."

In this passage Domat clearly envisages that, according to the circumstances, the Court in its discretion may rescind the sale or it may simply reduce the price or award damages.  Applying modern terminology, he was saying that the contract is voidable rather than void because it is up to the Court whether to rescind the contract (if applied for by the plaintiff) or leave it in place with an award of damages for any loss caused by the misrepresentation.  In our judgment the weight to be placed on Le Geyt and Domat on this occasion is greater than that to be placed on modern French law. 

149.   We can understand that, if one introduces into Jersey law the concept of a vice du consentement, it may be logical to regard misrepresentation as another form of vice du consentement for the reasons described in Steelux and Sutton.  However, the law is not built on logic alone.  Logic often has to give way to precedent or to the interests of achieving justice.  In our judgment, for the reasons we have given, which relate to both precedent and the achievement of justice, we would hold that a contract induced by innocent misrepresentation (by which we mean a negligent misrepresentation or one which is made wholly innocently) is voidable rather than void, with the consequence that the plaintiff may seek rescission and/or damages and the Court has a discretion as to the appropriate remedy.  We specifically do not address the position where there is a fraudulent misrepresentation (which may be said to amount to 'dol') and leave that open for consideration when the point arises. 

150.   Finally, we should add that, if it is desired to bring innocent misrepresentation under the rubric of a vice du consentement, an alternative approach to that envisaged at para 145 above might be to hold that under Jersey law - regardless of the position under modern French law - the issue of whether a vice du consentement renders a contract void or voidable depends upon the nature of the vice.  This approach would enable our law to be consistent with the approach envisaged by Domat.  Thus, an erreur as to the identity of what is actually being sold would no doubt result in a contract being considered as void because there would never have been the necessary consent to a contract for the purchase of an agreed item.  Accordingly there never was a contract.  However, other types of vice du consentement - such as a contract induced by an innocent misrepresentation if that were to be categorised as a vice du consentement - could be regarded as being voidable on the basis that the necessary elements for a contract (including consent) are present but the consent was wrongly induced, so that the Court has a discretion to rescind the contract if the innocent party so wishes but such a vice du consentement does not render the contract void ab initio.  However, the present case does not require us to consider this matter further and accordingly we say no more about it. 

(ii) Breach of contract

151.   In Selby v Romeril there was a complicated dispute in which the plaintiffs brought an action against the defendant for his alleged failure to pay the costs of repairs which the plaintiffs had made to the defendant's property and the defendant counterclaimed for unpaid rent.  On the facts, there came a time when the Chief Fire Officer informed the parties that, due to the poor structural condition of a means of escape from the rear of the building, he was prohibiting the use of the building as accommodation until the necessary repairs had been undertaken.  One of the questions which was considered by the Court was whether the defendant was liable to pay rent after that point.  The Royal Court held that he was not in the following terms at 221:-

"Counsel for the defendant conceded that it was difficult to argue that rental was due after the Chief Fire Officer had effectively closed down the premises.  We agree.  A lessor is under an obligation to guarantee a tenant against defects which prevent the enjoyment or use of the demised property.  We return to Pothier Traité du Contrat de Louage, Part 2, Chapter 1, paras. 109-110, at 83-84:

"Cette obligation est encore renfermée dans l'obligation, que le locateur contracte par le contrat de louage, de faire jouir le conducteur de la chose qui lui est louée; car lorsque nous disons que le locateur s'oblige à la garantie de ces vices, cela ne doit pas, s'entendre en ce sens que le locateur s'engage à empêcher que la chose louée n'ait ces vices, ce qui est impossible, si elle les a effectivement; l.31, ff. de evict. Mais cela doit s'entendre en ce sens, que le locateur s'oblige, au cas que la chose ait ces vices, ou aux dommages et intérêts que le conducteur en souffre, ou du moins à la décharge du loyer, selon les différents cas, comme nous verrons infrà....

110. Les vices de la chose louée, que le locateur est obligé de garantir, sont ceux qui en empêchent entièrement l'usage; il n'est pas obligé de garantir ceux qui en rendent seulement l'usage moins commode.""

It is implicit from its ruling that the Court held in Selby that the tenant was entitled to terminate the lease once (following the decision of the Chief Fire Officer) there was a defect which prevented the use and enjoyment of the premises.  We agree that that is the law and we follow that approach in the present case. 

Application to the facts

152.   In order to resolve this dispute as summarised in paras 28 - 29 above, it is necessary first to consider the counterclaim.  If the Defendants succeed on that the Plaintiffs' claim fails.  If, on the other hand, the Defendants fail on the counterclaim, the Plaintiffs' claim will succeed and it will then be a question of quantifying that claim.  Accordingly we turn to consider the Defendants' counterclaim as summarised at para 29. 

(i) Misrepresentation

153.   We accept - and it has not been contended to the contrary - that Mr Gibbons did not know that the removal of the first floor chimney breast in the way in which it had been done had rendered the Property structurally unsound and potentially dangerous as described by Mr Clarke.  Accordingly there is no question in this case of any deliberately false (i.e. fraudulent) statement. 

154.   The issue is whether what Mr Gibbons said amounted to a false statement of fact which induced Mr Thirkell to enter the assignment. 

155.   The relevant evidence of each of Mr Gibbons and Mr Thirkell is summarised at para 133 above.  There is not in fact much difference between them.  Mr Thirkell said that Mr Gibbons had told him (i) that he had spent £100,000 on renovating the Property, (ii) that it was in very good condition, (iii) that everything that needed to be done had been done and (iv) that it just needed cosmetic work to carry on as a restaurant. 

156.   Mr Gibbons accepted that he had said (i) that he had spent some £100,000 on the Property, (ii) that as far as he knew, everything was in a good state and (iii) that the Property could be run as a restaurant subject to cosmetic work being undertaken. 

157.   Alleged representations have to be considered in the context of the circumstances in which they are made.  In this case, we bear in mind that Mr Thirkell is a professional builder of many years' experience whereas Mr Gibbons is not a builder and Mr Thirkell was aware of this.  In our judgment, even on the basis that Mr Gibbons made the remarks as stated by Mr Thirkell, we do not consider that, in the circumstances of this case, they amounted to more than an expression of opinion on Mr Gibbons' part.  As is stated in Chitty on Contracts 30th Edition (Vol. 1) at para 6-012:

"It has been recognised that sometimes a statement which was on its face a statement of fact was really only one of opinion because it was apparent that the maker had no real knowledge or was simply passing on information for what it was worth."

158.   There is no suggestion that Mr Gibbons said anything specifically about the first floor chimney breast or indeed about the structure prior to the assignment.  The only allegations are that he said the Property was in very good condition, that everything that needed to be done had been done and that it just needed cosmetic work to carry on as a restaurant.  We do not think it right to treat general remarks of this nature made to a qualified builder as amounting to a statement of fact that there are no unknown structural problems with the Property.  They are either statements of opinion or mere commendatory statements. 

159.   Quite apart from this finding, it is the case that at no stage in his witness statement for these proceedings, his witness statement in the proceedings brought by Miss Moore against Hong Kong Foods or in his oral evidence did Mr Thirkell say specifically that the statements by Mr Gibbons referred to in the preceding paragraph induced him to enter into the assignment of the sub lease.  Furthermore, given that he is a builder and that he knew Mr Gibbons was not, we decline to infer that it was the statements which caused him to enter into the sub lease rather than his own judgment. 

160.   It follows that we find for Hong Kong Foods in relation to the counterclaim insofar that it is based on misrepresentation. 

(ii) Breach of contract and failure to obtain the consent of the owner

161.   As summarised above and following Selby, subject to any express provision to the contrary in the lease, a tenant is entitled to withhold rent and treat the lease as terminated if the leased property is incapable of use and enjoyment for the purpose for which it was intended.  As already stated, we accept the evidence of Mr Clarke that the removal of the first floor chimney breast by Hong Kong Foods had led to a potentially dangerous situation with a likelihood of collapse at some stage and that accordingly members of the public should not be allowed on to the Property until the work had been undertaken.  We find therefore that this was a case where the Property could not be used or enjoyed for so long as the first floor chimney breast problem was unremedied.  That remained the position until November 2011 when a certificate of completion was issued by the Planning Department in respect of the necessary remedial work.  The Head Lease (and therefore the right of any sub tenant to remain in occupation) had been cancelled by the Royal Court on 9^th July, 2010.  It follows that at all times from the discovery of the problem with the chimney breast until the cancellation of the Head Lease, the Property was incapable of enjoyment and use by Robin Hood. 

162.   Furthermore, it was not just the problem with the structural defect caused by the removal of the first floor chimney breast.  The Court has found that Miss Moore had not consented to assignment of the sub-lease to Robin Hood and that she told Mr Thirkell at the meeting in late September/beginning of October 2008 that she had not consented to the assignment of the sub-lease, that Robin Hood had no right to be there and that the work should not continue.  Mr Thirkell was therefore faced with a situation where structural work - which on any view was not Robin Hood's responsibility - needed to be done before the Property could be used as a restaurant, where there was a dispute between Mr Gibbons and Miss Moore as to who was responsible for that work, and where he had been told that Robin Hood had no right to be there.  In those circumstances it was in our judgment entirely reasonable for him to conclude that he was not willing to invest further money in a property which he was told his company had no right to occupy and where structural works needed to be done to make the Property safe for use as a restaurant. 

163.   We find therefore that on the facts of this case Robin Hood was entitled to terminate the sub-lease following the meeting with Miss Moore and to stop paying rent.  The breaches of contract by Hong Kong Foods went to the root of the contract.  It follows that Robin Hood was not in breach of the sub-lease by doing so and accordingly none of the losses suffered by Hong Kong Foods are legally the responsibility of Robin Hood.  We therefore find for Robin Hood on the counterclaim.  It follows that the Plaintiffs' claim is dismissed. 

Quantum

(i) The counterclaim

164.   The Court has found that Hong Kong Foods was in breach of the sub-lease as described.  It follows that Hong Kong Foods is liable for any loss suffered by Robin Hood as a result of such breach in accordance with the normal rules of remoteness in contract cases. 

165.   The amount originally claimed by Robin Hood as damages under the counterclaim was set out in the witness statement of Mr Thirkell as follows:

(i)        Salaries paid to staff carrying out the works which had turned out to be wasted and unnecessary £18,540

(ii)       Materials for such works        £2,832.75

(iii)      Fee paid to Mr Clarke            £260.45

(iv)      Amounts paid under lease/hire purchase agreements taken over from Chinese Whispers £23,000

(v)       Repayment of the £30,000 (for which no benefit received)          £30,000

(vi)      Repayment of first quarter's rental      £9,000

Total  £83,633.20

166.   In addition, Robin Hood claimed loss of profits at the rate of £12,000 per month for the anticipated period of the sub-lease. 

167.   In evidence, Mr Thirkell accepted that a number of these claims could not be fully justified.  Our findings on the various heads of claim are as follows. 

168.   As to item (i), the Defendants have produced payroll records for five employees including Mr May and Miss Francisco.  The figures claimed above are for two months' salary for each employee, namely August and September 2008.  This is on the basis that Mr Thirkell believes that work on the Property started at the beginning of August.  Mr Gibbons, on the other hand, says that the work did not begin until September, which was at or about the time the written assignment was executed. 

169.   There is no satisfactory evidence as to exactly when Robin Hood began work on the Property.  In his affidavit of 2^nd August, 2010, prepared for the proceedings brought by Miss Moore, Mr Thirkell stated at para 14 that his employees began work 'in or around the middle of August 2008'.  The only other evidence is that of Mr May who says that he estimates that he spent between six weeks and two months on the site. 

170.   The burden rests upon the Defendants to prove their loss.  We accept that the oral agreement for the assignment occurred a while before the execution of the written assignment on 6^th September and we find on the balance of probabilities that Mr Thirkell and his team were allowed access to the Property from the middle of August.  Given that work stopped by the end of September, we are content to allow approximately six weeks salary rather than the two months claimed. 

171.   As to Miss Francisco, she was employed as a manager and was paid a higher salary than the other employees.  However, Mr Thirkell accepts that, although she was working at the Property, she was also carrying out her job as manager of Mr Thirkell's business generally.  Mr Thirkell dealt with this in his witness statement by reducing the amount claimed for her to the same level as one of the unskilled employees, but we think a more appropriate solution is, in the absence of any other evidence, to assume that she spent approximately half her time on the Property. 

172.   Assuming that the employees spent half of August working at the Property (and taking the actual August and September figures from the payroll records) the amount allowed for each employee is as follows:

(i)        Christopher May  £2,275

(ii)       Neilio Basilio       £2,275

(iii)      Antonia Francisco     £1,300

(iv)      Juan De Freitas   £2,080

(v)       Jose Fernandes   £2,340

Total        £10,270

173.   The Defendants also claim £3,240 in respect of hours worked at the Property by Mr Thirkell.  However, as he stated, he is not paid an hourly rate as the owner of the business and we do not think that this can be claimed as a recoverable loss from the Plaintiffs.  It follows that we reduce the claim for salaries from £18,540 to £10,270. 

174.   As to item (ii), the Defendants have produced invoices from Romerils attributable to the Property totalling £247.47 and an invoice from the Iron Stores for £85.28.  Although Mr Thirkell has one invoice from Normans, he estimates that he would have spent at least £2,500 there on the basis that he had to purchase new joists, plaster board, flooring boards, underground pipe, cement chippings, unibond and steel bars.  We accept that, given the extent of the work carried out, this is a fair estimate and accordingly we award the amount claimed in respect of materials, namely £2,832.75. 

175.   We accept item (iii) in the sum of £260.45. 

176.   As to item (iv), no paperwork has been found after all this time except the document produced at the hearing by Mr Moore and referred to earlier.  This shows that, if Robin Hood took over responsibility for the lease payments from September 2008, the amount paid by Robin Hood was £4,158 whereas, if Robin Hood also paid the August payment, it would be £4,851.  Again, the burden lies upon Robin Hood to prove its loss.  We accept that by September it would certainly have taken over responsibility for the lease payments but we cannot be satisfied on the balance of probabilities that Robin Hood paid the August instalment.  Mr Thirkell accepted in evidence that he had no paperwork or evidence to justify the figure of £23,000, although he stood by this sum on the basis that there were a number of other lease/hire purchase agreements.  Nevertheless, in the absence of any supporting evidence whatsoever, Advocate Hall realistically accepted that the claim should be limited the amount identified in respect of the Lombard Finance agreement which, as we have said, we limit to £4,158. 

177.   As to items (v) and (vi) there appeared to be no dispute between Mr Thirkell and Mr Gibbons that Robin Hood had paid £30,000 to Mr Gibbons/Hong Kong Foods and that £9,000 of this constituted a quarter's rent.  It follows that the sum of £21,000 was paid to Hong Kong Foods by way of ingoing at the time of the assignment.  This sum was to reflect the amount still owed by Chinese Whispers to Hong Kong Foods.  We accept that the consideration for this sum entirely failed as, because of the breach of the sub-lease by Hong Kong Foods, Robin Hood was at no stage able to operate a restaurant from the premises.  We consider therefore that Robin Hood is entitled to reclaim the sum of £21,000. 

178.   The sum of £9,000 is more difficult.  There was no satisfactory evidence before us as to whether this was in respect of the June - September 2008 quarter or the September - December quarter.  Mr Gibbons thought it was the former whereas Mr Thirkell thought it was the latter.  Again, the burden lies upon Robin Hood to prove its loss and in any event, given that it was acknowledged that Chinese Whispers was having difficulty in paying its rental and that the sum was paid at the same time as the assignment, we consider on balance that the £9,000 was for the June - September quarter which should have been paid by Chinese Whispers.  Robin Hood did have the use and benefit of the Property up until the end of September and it was always envisaged that during this period it would not be using the Property as a restaurant because of the necessary works of redecoration.  We consider therefore that no loss was suffered by Robin Hood in respect of that period and we do not order the £9,000 to be repaid. 

179.   As to the claim for loss of profit which the restaurant would have made, we simply have no evidence whatsoever that such a figure was achievable.  This was a new restaurant.  Some restaurants succeed and make a profit, others do not and make a loss.  We cannot find that Robin Hood has proved on the balance of probabilities that it would have made a profit of £12,000 a month or indeed any other sum.  Accordingly we decline to award any sum for loss of profits. 

180.   It follows from the above that, subject to what follows, we award damages as follows:

(i)        Salaries     £10,270

(ii)       Materials    £2,832.75

(iii)      Fee to Mr Clarke £260.45

(iv)      Lease/hire purchase  £4,158

(v)       Ingoing/premium £21,000

Total £38,521.20

181.   Mr Thirkell and Advocate Hall accepted that there should be off-set against this amount the amount necessary to complete the works undertaken by Robin Hood.  At the date of the assignment, the Property did not look like a building site.  Because Robin Hood left the works that it had been doing unfinished, the cost of completing those works must be borne by Robin Hood.  We have little evidence as to the cost of this.  At paragraph 62 of his witness statement, Mr Thirkell said that if he had been allowed to finish off the repairs (apart from the structural work in connection with the removed chimney breast on the first floor), he estimated the costs (as listed in his witness statement) would total some £7,450.  However, in evidence, he said that this would be the cost to him as a builder but that if someone else were to do it and make a reasonable profit, the cost would be some £12,500 - £13,000. 

182.   It seems to us that it is that latter sum which is relevant as being the cost which would be incurred by Hong Kong Foods to complete the work and, given the burden on the Defendants in respect of proving loss, we take the higher sum of £13,000.  It is this sum which falls to be deducted from the damages otherwise awarded. 

183.   It follows that we award the sum of £25,521.20 on the counterclaim (£38,521.20 less £13,000).  It seems to us that this can only be an award against Hong Kong Foods.  Although Mr Gibbons was a guarantor of the Head Lease, he was not a party to the sub-lease, which was a contract between Hong Kong Foods and Robin Hood with Mr Thirkell as guarantor of the obligations of Robin Hood.  It was Hong Kong Foods (albeit through the actions of Mr Gibbons as director) which breached the sub-lease in respect of the first floor chimney breast structural defects and it was Hong Kong Foods which purported to grant a sub-lease to which no consent had been given by the owner.  The award of £25,521.20 can therefore only be against Hong Kong Foods, not against Mr Gibbons.  Furthermore, on the available evidence, the losses were suffered by Robin Hood as the entity which took over the sub-lease.  It is not clear that Mr Thirkell as an individual is entitled to recover these losses.  Accordingly the award is in favour of Robin Hood. 

(ii) The Plaintiffs' claim

184.   Having dismissed the Plaintiffs' claim, quantification of that claim does not arise.  However, in case it is of assistance, we propose to deal very briefly with the question of what we would have awarded had we found in favour of the Plaintiffs i.e. that Robin Hood was not entitled to terminate the sub-lease and withhold rent and accordingly was in breach of the sub-lease by so doing and by failing to comply with the repair covenant in the sub-lease. 

185.   The Plaintiffs' claim as set out in the schedule attached to their skeleton argument is as follows:

(i)        Outstanding rent, insurance premiums and interest paid to Miss Moore pursuant to the judgment of the Royal Court £54,383.40

(ii)       Taxed costs awarded to Miss Moore in respect of the above proceedings and subsequently paid to her (including £5,000 paid to Sinels as a condition for an adjournment)           £85,802.70

(iii)      The Plaintiffs' own costs incurred with Hanson Renouf and Advocate Blakeley in connection with the litigation brought by Miss Moore          £43,064.37

(iv)      The amount paid to Miss Moore in respect of breaches of the repair covenant in the Head Lease       £60,000

(v)       Rental paid under the Head lease for the quarter September - December 2008.              £7,500

(vi)      Loss of profits from the last quarter of 2008 reflecting the difference between the rental under the sub-lease and the rental under the Head Lease at the rate of £6,000 per annum until 24th April 2023, being a period until the end of the original sub-lease and thereafter on the assumption that a further sub-lease for 9 years had been granted pursuant to the option to renew contained in the sub-lease.      

(vii)     Sums of £1,917.28 and £3,510.50 paid to surveyors to investigate and report     £5,427.78

(viii)    Interest paid on loans taken out by Mr Gibbons/Hong Kong Foods to pay the sums owed to Miss Moore.

The Plaintiffs also included certain legal costs incurred in connection with the present proceedings.  Such costs cannot of course be claimed as damages.  They would fall to be determined when the Court considers the question of the costs of the present proceedings following judgment. 

186.   If we had found in favour of the Plaintiffs on the claim, our findings would have been as follows in relation to these various heads of claim. 

187.   As to (i), the Plaintiffs would have been entitled to recover the outstanding rent, insurance premium and interest paid to Miss Moore as this would have been caused by Robin Hood's breach of contract in not paying the rent under the sub-lease. 

188.   As to (ii), the costs of the proceedings brought by Miss Moore, we would not have allowed these.  The Plaintiffs chose to defend those proceedings which eventually resulted, unsurprisingly, in the summary judgment.  It was an unreasonable decision to resist and the costs awarded against the Plaintiffs cannot be said to be a consequence of any breach of contract by Robin Hood in failing to pay the rental under the sub-lease.  The costs were incurred because of the decision of the Plaintiffs wrongly to oppose Miss Moore's claim. 

189.   As to (iii), the same argument applies.  The Plaintiffs incurred these costs because they chose wrongly to resist the proceedings brought by Miss Moore.  We would not therefore have made any award under item (iii). 

190.   As to (iv), we would not have awarded the sum of £60,000.  This was a compromise figure as a result of negotiations with Miss Moore and is not attributable to particular repairs, as she was originally claiming much more.  Nevertheless it must be taken to be split between those repairs which were necessary because of the work which the Defendants had undertaken and left uncompleted and those repairs which were necessary because of faulty workmanship undertaken by Hong Kong Foods including the necessary work in connection with the first floor chimney breast.  The Plaintiffs produced no evidence to support any allocation of this sum.  In the absence of any figure from the Plaintiffs, we would have taken the figure put forward by Mr Thirkell, namely the sum of £13,000 as being the costs which would have been incurred by Miss Moore to complete the works left unfinished by Robin Hood.  We would therefore have awarded £13,000 under this heading rather than £60,000. 

191.   As to (v), we would have awarded a quarter's rental to cover the last quarter of 2008 which was not paid by Robin Hood but in respect of which the rental under the Head Lease was paid by Hong Kong Foods to Miss Moore.  We would however have awarded a quarter's rent at the rate under the sub-lease rather than under the Head Lease as that is the true measure of loss suffered by Hong Kong Foods on this hypothesis. 

192.   As to (vi), for the period after 25^th December, 2008, we would have awarded loss of profits by reference to the difference between the rental receivable under the sub-lease and that payable under the Head Lease.  The annual surplus - we were told that it was £6,000 - would have been an annual profit to Hong Kong Foods.  However we would only have awarded that until the end of the original term of the sub-lease i.e. 24^th April, 2014.  It would be entirely speculative as to whether the sub-lease would have been renewed and any such continuing loss would have been too remote to be recoverable. 

193.   As to (vii), we would have awarded the two surveyors' fees. 

194.   As to (viii), we would not have awarded any interest paid on loans taken out by Mr Gibbons/Hong Kong Foods on the basis that this was too remote. 

195.   The question then arises as to who should be awarded such damages.  Because Mr Thirkell guaranteed the obligations of Hong Kong Foods under the Head Lease, he was also liable for the losses suffered at items (i) and (iv).  We were not provided with clear evidence as to who actually paid such sums and this would have been necessary in order to decide who had actually suffered the loss under those headings.  Items (v) and (vi) were suffered by Hong Kong Foods, not Mr Gibbons.  Item (vii) would have required further evidence as to who had actually paid for the fees. 

196.   Liability for these heads of claim would rest primarily with Robin Hood as the sub-lessee.  The obligations of Robin Hood were however guaranteed by Mr Thirkell and the sub-lease contained a waiver of the droit de discussion.  Accordingly, Robin Hood and Mr Thirkell would be jointly and severally liable. 

Conclusion

197.   However, for the reasons which we have given, this is academic.  We dismiss the Plaintiffs' claim in its entirety and we award Robin Hood the sum of £25,521.20 against Hong Kong Foods on the counterclaim. 

Postscript

198.   A draft of this judgment up to and including the preceding paragraph was circulated in accordance with usual practice on 27^th February, 2017.  This was primarily for the normal purpose of inviting the parties to consider consequential orders and submit suggestions to the Court about typing errors, factual errors, wrong references and other minor corrections of that kind.  However, the Court also indicated that it was willing to receive written submissions on the content of paragraph 182 of the draft judgment where the Court held that the counterclaim succeeded against Hong Kong Foods but not against Mr Gibbons personally.  These submissions were invited because this issue had not been addressed by the parties during the hearing or in their closing submissions.  The Court therefore wished to give the Defendants in particular an opportunity of raising any arguments suggesting that the Court's conclusion that the counterclaim could not succeed against Mr Gibbons was erroneous.  We should add that para 182 of the draft judgment has now been renumbered as paragraph 183 of this final judgment and we shall use the latter numbering hereafter. 

199.   The Defendants duly filed written submissions concerning para 183.  These submissions asserted that the Defendants had discovered on 27^th February, 2017, that Hong Kong Foods had been struck off the Register of Companies.  The Court was provided with a copy of a letter dated 30^th June, 2014, from the Deputy Registrar of Companies (the "Deputy Registrar") which gave Hong Kong Foods notice in accordance with provisions of Article 205(2) and 205(6) of the Companies (Jersey) Law 1991 (the "Law") that, unless reason was shown to the contrary or the company filed its annual return as at 1^st January, 2014, the company might be dissolved without further legal process at the expiration of three months from the date of the notice.  That notice was sent to Hong Kong Foods at Mr Gibbons' home address. 

200.   On 1^st October, 2014, the Deputy Registrar issued a notice under Article 205 of the Law that the companies whose names appeared therein were struck off the Register and dissolved on 1^st October, 2014.  Hong Kong Foods was named in that notice. 

201.   It follows that Hong Kong Foods has ceased to exist since 1^st October, 2014.  This fact was apparently not known to the Defendants nor was it referred to during the hearing, which proceeded throughout on the basis that Hong Kong Foods still existed. 

202.   The Defendants assert that, as previously the sole director and beneficial owner of Hong Kong Foods, Mr Gibbons has allowed the proceedings to continue and conducted the hearing whilst at all material times being aware that Hong Kong Foods no longer existed.  The Defendants submit that the conduct of Mr Gibbons (by his implied representation that there was still in existence a company on whose behalf he could speak) has materially misled the Defendants and the Court since the date on which Hong Kong Foods was struck off the Register.  They submit therefore that he should be held personally liable on the counterclaim in addition to Hong Kong Foods. 

203.   They submit that this should occur on one or more of three grounds. 

204.   First, they submit that the conduct of Mr Gibbons in allowing all parties to proceed in the false belief that Hong Kong Foods still existed entitles the Court to pierce the corporate veil.  They referred in particular to Mr Gibbons' witness statement dated 4^th May, 2016, (which included the usual statement of truth and was adopted as part of his evidence) where he stated at paragraph 3 "I am the sole director and 100% shareholder of the First Plaintiff Hong Kong Foods Limited."  They assert that that statement was simply untrue because Hong Kong Foods no longer existed and Mr Gibbons never disclosed to the Court or the Defendants that this was the case. 

205.   Advocate Hall referred in her submission on this aspect to Re Esteem Settlement [2003] JLR 188 where at paragraph 75, the Court adopted the definition of piercing the corporate veil established in Atlas Maritime Co. SA v Avalon Maritime Limited [1991] 4 All E R 769 at 779:-

"To pierce the corporate veil is an expression that I would reserve for treating the rights or liabilities or activities of a company as the rights or liabilities or activities of its shareholders."

206.   The Court in Esteem went on to consider the various authorities on piercing the veil of a company and summarised the position at paragraph 82 in the following terms:

"Ultimately, there was a certain measure of agreement between the parties on what was required.  There had to be both control of the company linked with impropriety and the use of the company as a façade to conceal the true facts.  In our judgment, Mr Santos-Costa summarised the position quite usefully by saying that, in order to justify piercing the veil, two elements must be demonstrated - (i) control over the company such that the controller is able to cause the company to act in the manner complained of; and (ii) that the act complained of involved some illegality or impropriety - the combined result being that the company's action operates to mask or conceal an action which in substance is the act of the controller and, if so treated, produces a cause of action against the controller and/or the company. ...."

207.   Advocate Hall submits that these two requirements are satisfied in the present case.  Mr Gibbons had complete control of the company and thus the first limb was satisfied.  As to the second limb, there had been clear impropriety on the part of Mr Gibbons.  He had recklessly (or deliberately) failed to notify the Defendants and the Court that Hong Kong Foods had been struck off and had allowed the proceedings to be conducted on an entirely false basis. 

208.   We have considerable sympathy with the Defendants.  However we do not think that the facts can be brought within the principle outlined in Esteem.  That is because the impropriety alleged (namely the failure to disclose the dissolution of Hong Kong Foods) occurred many years after the actions which gave rise to the counterclaim.  The second limb of the test in Esteem requires that the act complained of involves some illegality or impropriety and that the combined result is that the company's action operates to mask or conceal an action which in substance is the act of the controller. 

209.   The acts complained of in this case and which give rise to the successful counterclaim are summarised in paras 161-163 above.  They consist of the failure by Hong Kong Foods to provide a property which was capable of use and enjoyment under the sub-lease and the failure by Hong Kong Foods to obtain the consent of Miss Moore to the assignment of the sub-lease to Robin Hood. 

210.   At the time, Hong Kong Foods existed.  It was Hong Kong Foods which carried out these acts.  Liability on the counterclaim therefore existed from that time, albeit that such liability was not legally established until the Court's judgment.  There is no question therefore of the company's action operating to mask or conceal an action which in substance was that of Mr Gibbons; on the contrary the actions were in fact and in law those of Hong Kong Foods and accordingly liability rests with Hong Kong Foods.  We accept of course that Hong Kong Foods acted through Mr Gibbons as director and controlling shareholder but that fact alone is insufficient to attribute a liability of a company to its shareholder and thereby pierce the corporate veil. 

211.   Although Advocate Hall did not refer to any case other than Esteem, the United Kingdom Supreme Court has considered the principle of piercing the corporate veil on two occasions recently, namely in VTB Capital Plc v Nutritek International Corporation [2013] 1 All ER 1296 and Prest v Prest [2013] 4 All ER 673.  In the latter case, Lord Sumption said this at paras 27 and 28:

"27.    In my view, the principle that the court may be justified in piercing the corporate veil if a company's separate legal personality is being abused for the purpose of some relevant wrongdoing is well established in the authorities.  ...

28.      The difficulty is to identify what is a relevant wrongdoing.  References to a 'façade' or 'sham' beg too many questions to provide a satisfactory answer.  It seems to me that two distinct principles lie behind these protean terms, and much confusion has been caused by failing to distinguish between them.  They can conveniently be called the concealment principle and the evasion principle.  The concealment principle is legally banal and does not involve piercing the corporate veil at all.  It is that the interposition of a company or perhaps several companies so as to conceal the identity of the real actors will not deter the courts from identifying them, assuming that their identity is legally relevant.  In these cases the court is not disregarding the 'façade', but only looking behind it to discover the facts which the corporate structure is concealing.  The evasion principle is different.  It is that the court may disregard the corporate veil if there is a legal right against the person in control of it which exists independently of the company's involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement.  Many cases will fall into both categories, but in some circumstances the difference between them may be critical...".

212.   Lord Sumption summarised the position further at para 35 in the following terms:

"35.    I conclude that there is a limited principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control.  The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality...."

213.   If anything, the decision in Prest has limited the principle of piercing the corporate veil so that it applies more narrowly than suggested in Esteem.  Given our conclusion that the facts of this case do not enable the veil to be pierced in accordance with Esteem, it follows that Prest does not assist the Defendants.  All that has happened in this case is that, long after the events which give rise to a liability on the counterclaim, the company liable in respect of those actions has been dissolved. That is a commonplace occurrence and does not enable the liability of the company to be attributed to its shareholders.  The only differentiating factor in this case is that Mr Gibbons did not tell anyone about the subsequent dissolution of the company.  That may well be relevant when the Court considers questions of costs but it cannot affect the underlying liability on the counterclaim. 

214.   The second ground relied upon by the Defendants is that Mr Gibbons, as a director of Hong Kong Foods, can be held personally liable for a false representation made on behalf of the company.  We were referred to the case of Contex Drouzhba Limited v Wisemen [2007] EWCA Civ 1201.  In that case, a director of a company was held liable in the tort of deceit for falsely representing that the company was able to pay for goods to be supplied. 

215.   We cannot see that that case assists the Defendants.  In that case the director, being the person who made the representation, was personally liable in the tort of deceit because he knowingly made a false statement which caused loss.  In the present case, the false statement relied upon is the implied representation that Hong Kong Foods continued to exist.  But that can only be a false representation since 1^st October, 2014, and therefore cannot render Mr Gibbons personally liable for the actions in 2008 which gave rise to liability under the counterclaim.  Again, it may be relevant on the issue of costs but that is a separate matter.  

216.   Thirdly, the Defendants submitted that Mr Gibbons had breached his ongoing duty to give discovery because he did not disclose the documents showing that Hong Kong Foods had been dissolved.  Again, that may well be an issue which can be raised on the issue of costs but it cannot possibly affect the question of who in law is liable for the actions in 2008 which gave rise to the counterclaim. 

217.   For these reasons, we remain of the view expressed in paragraph 183 of this judgment and liability on the counterclaim lies with Hong Kong Foods, not Mr Gibbons. 

Authorities

Moore-v-Hong Kong Foods and Gibbons [2010] JRC 127.

Kwanza Hotels Limited v Sogeo Company Limited [1981] J.J. 59.

McIlroy v Hustler [1969] JJ 1181.

Newman v Marks [1985-86] JLR 338.

Channel Hotel and Properties Limited v Rice [1977] J.J. 111.

Steelux Holdings Limited v Edmonstone [2005] JLR 152.

Sutton v Insurance Corporation of the Channel Islands Limited [2011] JLR 80.

Law of Contract Study Guide 2015 - 2016.

Nicholas, French Law of Contract, (Second Edition at 77 (1992)).

Selby v Romeril [1996] JLR 210.

Marett v Marett [2008] JLR 384.

Le Geyt, Constitution, Les Lois et Les Usages (1946 Edition) Tome 1.

Domat, Loix Civiles Volume 1.

Chitty on Contracts 30th Edition (Vol. 1).

Companies (Jersey) Law 1991.

Re Esteem Settlement [2003] JLR 188.

Atlas Maritime Co. SA v Avalon Maritime Limited [1991] 4 All E R 769.

VTB Capital Plc v Nutritek International Corporation [2013] 1 All ER 1296.

Prest v Prest [2013] 4 All ER 673.

Contex Drouzhba Limited v Wisemen [2007] EWCA Civ 1201.