Appeal relating to decision of the Court dated 28 March 2017.
Before : |
James W. McNeill, Q.C., President; George Bompas, Q.C., and David Anderson, Q.C. |
|||
Between |
(1) Hong Kong Foods Limited (2) Robert Alan Gibbons |
Appellants |
|
|
And |
(1) Robin Hood Curry limited (2) Barry Thirkell |
Respondents |
|
|
The Second Appellant appeared in person.
Advocate C. Hall for the Respondents.
judgment
bompas ja:
This is the Judgment of the Court
1. This appeal arises from proceedings which were started in December 2010 by Hong Kong Foods Ltd ("Hong Kong") and Mr Robert Gibbons (the beneficial owner of Hong Kong). These proceedings were against Robin Hood Curry Ltd ("Robin Hood") and Mr Barry Thirkell (the beneficial owner of Robin Hood). In what follows, as in the judgment appealed from (Hong Kong Foods Ltd v Robin Hood Curry Ltd [2017] JRC 50), those two companies and their respective beneficial owners will be referred to as though they were one and the same, albeit that legally they are different persons, except on occasions where distinction is required. As will be narrated below, Hong Kong was struck off the Companies Register on 1 October 2014.
2. Until July 2010 Hong Kong had been the lessee of a building at 8 Cheapside, St Helier (referred to in this judgment, as in the relevant leases, as "the Premises") holding under a 21 year contract lease ("the Head Lease") commencing in 2004. Mr Gibbons had been a guarantor of Hong Kong's obligations under the Head Lease. However, on 9 July 2010, in proceedings started in March 2009 by the Head Lessor, by then Miss Diane Moore ("Miss Moore"), and in which Hong Kong and Mr Gibbons were defendants, the Royal Court gave judgment against Hong Kong cancelling the Head Lease for non-payment of rent, and against Hong Kong and Mr Gibbons for arrears of rent and costs. Hong Kong and Mr Gibbons were also found liable to pay for dilapidations (see Moore v Hong Kong Foods Ltd [2010] JRC 127).
3. The immediate problem which had led to the Royal Court's judgment in those proceedings was that, shortly after Hong Kong had entered into the Head Lease, there had been works carried out to the Premises which involved the removal of a chimney breast from the first floor and the installation of a shower in the newly created space. These works had been done by Mr Gibbons without appropriate Planning and Building Law permission, and without adding proper structural support in the place of that which had been lost with the removal of the chimney breast. In the present proceedings the Royal Court (Sir Michael Birt, Commissioner, with Jurats Nicolle and Thomas) found that the works were structural and had required lessor's consent which had not been given.
4. In May 2005 the Premises had, with the consent of the Head Lessor, been sub-let on a paper lease ("the Sub-Lease") for 9 years to a company Chinese Whispers Ltd ("Chinese Whispers"), with a guarantee given by two shareholders of that company. The Head Lessor was a party to the Sub-Lease. On 6 September 2008 a deed of assignment of the Sub-Lease (the "Deed of Assignment"), described below, was entered into, Chinese Whispers assigning the benefit of the Sub-Lease to Robin Hood, with Mr Thirkell (who was also a party to the Deed of Assignment, as was Hong Kong) becoming guarantor of Robin Hood's obligations under the Sub-Lease.
5. In the present proceedings the Royal Court found that the Head Lessor (by then Miss Moore) had not consented to the Deed of Assignment.
6. Chinese Whispers had used the Premises as a restaurant; Robin Hood was intending to refurbish the Premises, and then to continue using them as a restaurant. Robin Hood took possession in about the middle of August 2008, as the Royal Court found, and started carrying out refurbishment works. Differences arose between Hong Kong and Robin Hood about the state of the Building. Robin Hood's works had extended to removing floor boards on the first floor and the ceiling of the ground floor. The Royal Court found that these works began, as envisaged, as superficial decorative work, but that they had become more extensive as defects had been found in respect of what had previously been done. Further, Robin Hood, with Mr Gibbon's agreement, had started removing the ground floor chimney breast; and then, when looking at the position of the chimney between the first and second floor, had found that the first floor removal had been without any building inspector or engineer being involved and without proper support having been put in place.
7. The differences between Hong Kong and Robin Hood came to involve Miss Moore, as then Head Lessor. She attended a meeting between them at the Premises in September, or perhaps early October, 2008 ("the Autumn 2008 Meeting"). According to Mr Gibbons' written evidence before the Royal Court, when Miss Moore came to that meeting she "was rightly shocked at the condition of the Premises, just as I had been when I discovered the extensive works [Mr Thirkell] had chosen to undertake without notifying me or obtaining permission from the Owner as I had suggested was required". The Royal Court found that at the meeting Miss Moore expressed objection to the presence of Robin Hood and to the state of the Building, saying that Robin Hood had no right to be there and should not continue with the works. Robin Hood, which had paid one quarter's rent, stopped work and stopped paying rent.
8. Early the following year, on 20 February 2009, Miss Moore, by her lawyers, objected to the Deed of Assignment, as well as to the condition of the Premises. Hong Kong failed to pay the quarter's rent due under the Head Lease for the quarter from December 2008 to March 2009; and on 11 March 2009 Miss Moore instituted the Order of Justice which, by reason of Hong Kong's failure to pay rent, led to the judgment against Hong Kong and Mr Gibbons on 9 July 2010 referred to in paragraph 2 above.
9. In an affidavit sworn on 11 February 2010 for the purposes of her proceedings, Miss Moore described her case against Hong Kong, so far as concerns the presence of Robin Hood at the Premises, as being that Hong Kong had made an unauthorised sub-letting to Robin Hood in breach of a term in the Head Lease (clause 5(q)), set out in paragraph 21 below, preventing Hong Kong from assigning the Head Lease, sub-letting or parting with possession of the Premises without prior consent. As regards Robin Hood, her affidavit made no claim to rely on any other matter, and was clear and simple: the claim was that there was a "new sub tenancy" granted without her consent to Robin Hood. This she summarised as follows:
"The Defendants never sought my consent to sub-let the Property and it was never granted in unity or otherwise. Mr Thirkell will provide a short affidavit in support of these proceedings."
10. In the present case the Royal Court found that the failure on the part of Hong Kong to pay the rent due to Miss Moore was caused by Robin Hood's failure to pay the rent under the Sub-Lease. The Royal Court's judgment also records that, following the institution of Miss Moore's proceedings on 11 March 2009, Hong Kong brought proceedings against Robin Hood for outstanding rent in the Petty Debts Court. On 13 May 2009 Hong Kong's proceedings were adjourned. When Hong Kong sought to progress the proceedings, Miss Moore's lawyers wrote to the Court pointing out that it was part of her case in her proceedings that Hong Kong had sub-let the Building to Robin Hood without her consent and that therefore there was no valid contract to enforce. The Petty Debts Court proceedings were again adjourned pending the outcome of Miss Moore's proceedings and were never resumed.
11. Meanwhile, on 9 July 2009, at Miss Moore's request, a building inspector from the Planning Department had visited the Premises to see whether any unauthorised works had been carried out. It appeared that structural alterations, including the removal of the chimney breast on the ground and first floor and of a section of party wall, had been undertaken without any consent from the Planning Department, and it was agreed that further work needed to be undertaken to stabilise the Premises under the supervision of an engineer. On 29 July 2009 an enforcement officer of the Planning Department became involved. Mr Gibbons met with the Planning Department and in early 2010 a letter was sent to Mr Gibbons from the Planning Department pointing out that the removal of the chimney breast required a retrospective application. This was then duly made, the required work to be retrospectively sanctioned including "Remove chimney breast and provide support for the existing chimney stack". Whatever start may have been made on these works by Mr Gibbons (and it is clear that little, if any, real progress had been made by July 2010), they were completed by builders instructed by Miss Moore, and a certificate of completion was issued by the Planning Department in November 2011.
12. At the time of the Autumn 2008 Meeting, and until after the judgment of 9 July 2010, the Premises had been in a state of disorder: out of repair both structurally and decoratively. At the date of the Deed of Assignment, as the Royal Court recorded, the Premises had not looked like a building site; but that was the description given of it by the time Miss Moore's proceedings against Hong Kong came to trial. As to the position at the time of the Autumn 2008 Meeting, Mr Thirkell's written evidence, in an affidavit sworn on 23 February 2016, explained that at the meeting:
"... it became clear very quickly that [Miss Moore] had not been informed that I had taken over the sub-lease and had not been told about the work we were doing. It must have been a terrible sight for her because the nature of the work we were doing effectively meant the Property would have looked to her like a building site because the floor around the chimney had been taken up and also the ceiling below the chimney had been removed."
13. Throughout the period from before the Deed of Assignment until after July 2010 the Building was potentially dangerous, and therefore unfit to be used as a restaurant, by reason of the inadequate support put in place on the removal of the first floor chimney breast. Further, the defective state of the chimney, with the implications for the use of the Premises as a restaurant, was known to the parties by the time of the Autumn 2008 Meeting; although Mr Gibbons may not have accepted that its condition was defective.
14. In essence the present proceedings, started by Hong Kong and Mr Gibbons in December 2010, were directed at seeking from Robin Hood, and also from Mr Thirkell as guarantor of Robin Hood, unpaid rent and compensation for the loss of the Head Lease referred to in paragraph 2 above, and loss of income, and the amounts which had been required to be paid to Miss Moore. These matters were, so it was said, caused by Robin Hood's failure to pay rent due and by its leaving the Premises in a state of disrepair. Robin Hood for its part counterclaimed against Hong Kong, claiming (among other matters) that by reason of the structural state of the Premises Hong Kong was in breach of the Sub-Lease, thereby causing Robin Hood wasted expenditure. Further, there was a counterclaim by the Robin Hood for misrepresentation by the Hong Kong.
15. In the Notice of Appeal and Appellants' Contentions (put in by Mr Gibbons acting in person, as he had at the trial before the Royal Court, both on his own behalf and purportedly on behalf of the now non-existent Hong Kong) there was a preliminary point taken concerning the ill-health of Mr Gibbons, and his suggested inability to represent himself and Hong Kong at the trial. Subject to that, it was submitted that the Royal Court:
(i) was wrong to find as it did concerning what Miss Moore said at the Autumn 2008 meeting;
(ii) was wrong to accept evidence called by the Robin Hood concerning the structural significance of the removal of the chimney breast;
(iii) was mistaken in failing to see and take account of the fact that Robin Hood had "walked away from [its] obligations when [it] had no grounds whatsoever to do this" and that this was a "wrongful application of the Court's discretion re. the grounds for permitting renunciation of a contract"; and
(iv) had been "incorrect in law. i.e. law of contract".
16. In addition, the Appellants' Contentions indicate that Mr Gibbons has been seeking to obtain fresh evidence in order to rebut the findings of the Royal Court concerning what was said by Miss Moore at the Autumn 2008 meeting, and concerning the significance of the work to the chimney breast. No such evidence is before us, however, and there is no explanation as to why such evidence - even if it could ever be obtained and turned out to be to the effect hoped for by Mr Gibbons - would have been admissible on this appeal. We therefore need give no further consideration to this aspect of the Appellants' Contentions.
17. There was before the Royal Court a difficult question as to the remedies available for innocent misrepresentation; a question which the Royal Court examined in detail but which in the event it did not need to decide. However, the assistance available to the Royal Court was limited by the fact that one party, Mr Gibbons, was a litigant in person. Before us on this appeal that has also been the position, and we compliment Advocate Christina Hall (for the Respondents) for having maintained the difficult balance between developing properly her clients' arguments and advancing their defence of this appeal while making sure that the presentation of the case to us has been fair and complete.
18. One particular limitation we would note is that for this appeal we have not had the usual advantage of a transcript of even salient parts of the proceedings before the Royal Court. All the documents provided to us from the proceedings before the Royal Court have been, very helpfully, provided by the Respondents as part of their contentions on this appeal.
19. Relevant to the proper determination of the respective rights and obligations of the parties to the Sub-Lease, are the covenants in the Head Lease and Sub-Lease, given, respectively, by the lessee and the sub-lessee, concerning both works to the Premises and sub-lettings and assignments.
20. In the case of the Head Lease there was a covenant on the part of the lessee to keep the Premises wind- and water-tight and in good structural condition, with the interior and the exterior kept well decorated and repaired. There was a covenant not to make alterations in the construction or general appearance of the Premises, and not to cut or injure or suffer to be cut or injured any of the walls, partitions, timber or floors, unless in any such case the lessor's previous written consent had been given (not to be necessary, however, for internal works or alterations of a non-structural nature). There was, in the preamble to the Head Lease, an exclusion of the lessor's liability for vices, apparents ou cachés. Finally, there was a covenant against sub-letting etc. without consent, not to be unreasonably withheld in the case of a respectable and solvent sub-lessee.
21. This last mentioned covenant, in clause 5(q) of the Head Lease, provided that the lessee was:
"not without the written consent of the Landlord (which consent shall not be unreasonably withheld in the case of a respectable and solvent sub-lessee or assignee) to assign this lease or sub-let or otherwise part with possession of the Premises or any part thereof PROVIDED THAT should the Tenant or any party holding title by virtue of any assignment or sub-lease (however remote) wish to assign this lease, sub-let or otherwise part with possession of the Premises (or any part thereof) then in any of these events the Landlord may require:-
(i) the proposed assignee or sub-lessee to covenant directly with the Landlord to perform all the covenants herein contained; and
(ii) that if the proposed assignee or sub-lessee is a limited liability company the directors of such company (or two of them) shall prove to the reasonable satisfaction of the Landlord that they are of good financial standing and personally shall guarantee the company's performance of the covenants herein contained in the place and instead of the Guarantors."
22. The Sub-Lease, on the other hand, contained a repairing covenant on the part of the sub-lessee in similar terms to that in the Head Lease, with the important difference that the sub-lessee gave no covenant to keep the Premises in good structural condition. Likewise, there was a covenant on the part of the sub-lessee concerning the making of alterations to the Premises in similar terms to that in the Head Lease, again with the important difference that there was no exception dispensing with the need for consent from the sub-lessor in the case of internal works or alterations of a non-structural nature. Another difference between the Head Lease and the Sub-Lease was that Sub-Lease did not exclude the sub-lessor's liability for vices, apparents ou cachés. There was a covenant at clause 5(q) however, that the sub-lessee was not to sub-let or part with possession of the Premises or any part of them, or assign the Sub-Lease without the written consent, not only of the sub-lessor, but also of the Head Lessor (by that time, Miss Moore), such written consents not to be unreasonably withheld in the case of a respectable and solvent sub-sub-lessee or assignee. In other words, a covenant in materially the same terms as those in the equivalent provision in the Head Lease.
23. As mentioned earlier, the Head Lessor was a party to the Sub-Lease. However, there was no covenant in the Sub-Lease made by the Sub-Lessee to perform all the covenants contained in the Head Lease, despite the right which the Head Lessor had had by clause 5(q) of the Head Lease to require such a covenant as a condition of consenting to the Sub-Lease being made. Further, the covenant in the Sub-Lease against further sub-letting or assignment without consent was not expressed to have been made with the Head Lessor; it was only expressed to have been made with the sub-lessor (Hong Kong). That covenant, therefore, was made between Chinese Whispers and Hong Kong (but not, in terms, with Miss Moore). It stipulated that any assignment by Chinese Whispers would require the consent of both Hong Kong and Miss Moore. In the absence of consent from Miss Moore, and on the face of the deed, it would appear to be for Hong Kong, not Miss Moore, to take appropriate action. Again on its face, Hong Kong would not be in breach of the Sub-Lease if no consent had been obtained.
24. We have set out in full in paragraph 21 the lessee's covenant in the Head Lease as regards sub-letting and assignments. This is because there may be an issue as to how it might have been relevant in relation to the Deed of Assignment. It did not contain on its face a prohibition on the making by a sub-lessee of an assignment of a sub-lease without the lessor's prior written consent. Further, its impact on an assignment of the Sub-Lease was not the subject of detailed analysis, either in Miss Moore's proceedings (where the Royal Court made no finding as to the scope of the covenant), or in the present proceedings. As to the impact of the Head Lease, we observe:
(i) Taking only the express terms of prohibition in clause 5(q) of the Head Lease, that is the first part of the clause down to "PROVIDED THAT ...", while there is a covenant requiring the lessor's consent for a sub-letting or assignment of the Head Lease, there is no requirement for the lessee to obtain consent from the Head Lessor for an assignment of a sub-lease by a sub-lessee.
(ii) On the other hand, that part of clause 5(q) introduced by the words "PROVIDED THAT ..." may be open to the construction that it contains a promise by the lessee, and not simply a qualification to the position of the Head Lessor (as set out in the preceding words of the clause) indicating conditions that the Head Lessor might insist upon when giving a requested consent.
25. As regards terminology, and as we shall say later, there is from time to time, both in the judgment given by the Royal Court and in the materials presented to the Royal Court, some confusion in the characterisation of the transaction which led to Robin Hood replacing Chinese Whispers: the transaction was an assignment by Chinese Whispers, not a fresh sub-letting by Hong Kong. It seems to us that there is also some confusion as to the complaint which might properly be laid at Hong Kong's door in relation to the transaction.
26. Whilst at an early stage of these proceedings it had been Mr Thirkell's case that the Deed of Assignment might have been forged, in an affidavit sworn by him on 2 March 2010 in Miss Moore's proceedings against Hong Kong and Mr Gibbons, he had accepted that he had signed the Deed of Assignment. At paragraph 128 of the judgment given by the Royal Court, the Royal Court concluded "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".
27. Looking at the Deed of Assignment, we note that it was made between Hong Kong, Chinese Whispers, the guarantors of Chinese Whispers as sub-lessee, Robin Hood, and Mr Thirkell as new guarantor. In it there was a recital of the existence of the Sub-Lease, and that Chinese Whispers wished to assign to Robin Hood together with the wish of the existing guarantors to be released. The principal operative parts involved Hong Kong consenting to the assignment, "at today's date", with Robin Hood undertaking to Hong Kong to be bound by the terms of the Sub-Lease. The rent reviews in the Sub-Lease were provided for and Hong Kong waived any unpaid rent from 25 September 2007 to the date of the Deed of Assignment. Most of the assets left at the Premises were transferred by Chinese Whispers to Robin Hood. Hong Kong released the existing guarantors of the Sub-Lease and Mr Thirkell gave a guarantee in their place. There was no promise in the Deed of Assignment, by either Chinese Whispers or Hong Kong, concerning Miss Moore's consent to the assignment of the Sub-Lease, whether to the effect that that consent was not required or to the effect that any required consent had been or would be obtained.
28. Finally, it is important to clarify that both the Head Lease and the Sub-Lease contained a covenant on the part of the lessee and sub-lessee respectively not to use the Premises other than as a restaurant with one unit of living accommodation, unless the Head Lessor or sub-lessor had previously consented to a different use (consent not to be unreasonably withheld).
29. For reasons which we explain later, but connected with the absence of Miss Moore's consent to the Deed of Assignment, it is convenient to quote from the Royal Court's summary of the defence and counterclaim of Robin Hood and Mr Thirkell as it was presented to the Royal Court. What is to be noted is that the Royal Court did not connect the Defendants' misrepresentation claim with anything other than misrepresentation as to the physical condition of the Premises. Specifically, the Royal Court made no reference to any contention that the misrepresentations complained of included a misrepresentation on the part of Hong Kong or Mr Gibbons that Miss Moore had consented to the assignment when in fact she had not.
30. The Royal Court explained the case (in paragraph 29 of the judgment) as follows:-
"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."
31. After the trial of the present proceedings the Royal Court, on 28 March 2017, dismissed the claims brought by Hong Kong and Mr Gibbons, and gave judgment for Robin Hood on part of its counterclaim against Hong Kong, namely the claim for damages for breach of the Sub-Lease (saying, at paragraph 164, "The Court has found that Hong Kong Foods was in breach of the sub-lease as described"). This judgment in favour of Robin Hood's counter-claims followed, so the Royal Court reasoned, because Hong Kong had been in breach of the Sub-Lease in a way which "went to the root of the contract", so that Robin Hood and Mr Thirkell ceased to be under any obligation to Hong Kong in respect of the Sub-Lease. It is against these decisions that the present appeal has been brought.
32. As mentioned above, the Royal Court dismissed the misrepresentation claim; and from this there has been no appeal. As to this claim the principal finding made by the Royal Court, at paragraph 158, was as follows:
"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."
33. The central finding, leading to the Royal Court's rejection of the Hong Kong's claims and judgment in favour of Robin Hood on the counterclaim, was that the structural condition of the Premises made them unsuitable for use as a restaurant, unless and until the damage caused by the removal of the chimney breast had been put right. This finding, in paragraph 161 of the Royal Court's judgment, was expressed as follows:
"...we accept ... 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."
34. However, this finding was only the start of the chain of reasoning which lead to the rejection of Hong Kong's claims. The finding did not stand alone. In the following paragraph the Royal Court concluded that the potentially dangerous condition of the Premises, coupled with objections being taken by Miss Moore as to the position there (that is, as to there being unauthorised and unsatisfactory structural building works, and as to there being a sub-tenant to whom she objected on an assignment of the Sub-Lease to which she had not consented), entitled Robin Hood to treat the Sub-Lease as at an end, and to stop paying rent.
35. Paragraph 162 of the judgment began: "Furthermore, it was not just the problem with the structural defect caused by the removal of the first floor chimney breast ..." The Royal Court then indicated that "The Court has found that Miss Moore had not consented to [the] assignment of the sub-lease to Robin Hood", and continued by finding that at the Autumn 2008 Meeting Miss Moore had told Mr Thirkell:
"that she had not consented to the assignment of the sub-lease [to Robin Hood], that Robin Hood had no right to be there and that the work should not continue."
In the light of this finding the Royal Court concluded:
"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 [Mr Thirkell] 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 need to be done to make the Property safe for use as a restaurant."
36. The Royal Court's determination was set out in the immediately following paragraph (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."
37. The Royal Court's findings concerning Miss Moore's objections to the assignment of the Sub-Lease, and her voicing of those objections at the Autumn 2008 Meeting were, in our judgment, material to its decision as to Robin Hood's termination rights. In this respect we reject a submission made by Advocate Hall on behalf of the Robin Hood and Mr Thirkell, that even had the Royal Court not made the findings at paragraph 162 of the judgment, it would have decided in favour of the Respondents in accordance with the facts described at paragraph 161. In the context of a 9 year lease the removed chimney breast might not, by itself, have involved so significant a breach as to justify the sub-tenant as regarding itself as immediately discharged from any further obligation under the Sub-Lease: works to replace the support which had been lost when the chimney breast had been removed, although not the responsibility of Robin Hood, were perfectly practicable, and were in fact completed by November 2011 at the latest (when a certificate of compliance was issued). But Miss Moore's objections mattered: the Royal Court's reasoning was that the precarious nature of the rights which Robin Hood held in view of the fact that their position as sub-tenant was objected to, as were the works to the Premises, meant that Robin Hood could not be expected to invest in attempting to have the Premises put into condition when they might find themselves, and therefore might reasonably be unwilling to find themselves, with nothing to show for their investment.
38. However, in relation to the absence of consent, there was no finding that anything had been said, or not said, to Robin Hood or Mr Thirkell concerning the need for Miss Moore's consent or concerning its having been or not having been obtained. There was a pleaded allegation in the Defence and Counterclaim (at paragraph 25) that in negotiations "the Defendants were told that the Owner of the Premises consented to the assignment of the existing Sub Lease to the Defendants"; but the pleading did not identify by whom Robin Hood were told this. More importantly, however, Mr Thirkell's written evidence before the Royal Court did not say anything to confirm this pleaded allegation; and the Royal Court's rehearsal of Mr Thirkell's evidence makes no reference at all to his having been told anything about Miss Moore's consent.
39. On the other hand, the Royal Court's description of Mr Thirkell's evidence demonstrates that Mr Thirkell knew that what Robin Hood was taking was the assignment of a sub-lease from Chinese Whispers and that Miss Moore was the Head Lessor of the Premises; and at paragraph 130, when accepting Mr Thirkell's evidence, the Royal Court concluded that the Autumn 2008 Meeting was prompted by Mr Thirkell's request for the meeting with Miss Moore.
40. An important finding made by the Royal Court concerned whether or not Hong Kong had been in breach of duty in respect of Robin Hood's taking of the Sub-Lease. We observe:
(i) At paragraph 183 the Royal Court said: "It was Hong Kong Foods ... 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." This finding, which reflects Miss Moore's contention in her proceedings, contains an error: the arrangement was by Deed of Assignment, not by way of a fresh sub-letting. Albeit an error of expression, the finding embraces a conclusion that, juristically, Hong Kong was in breach of an obligation to Robin Hood by reason of the assignment without consent.
(ii) In earlier parts of the judgment, however, the Royal Court had been clear that the Sub-Lease had been the subject of an assignment. There too, however, the Royal Court appears to have found the assignment to have involved breach of some duty on the part of Hong Kong. At paragraph 163 the Royal Court referred to "breaches" of contract going "to the root of the contract". The two preceding paragraphs had first described a breach of the Sub-Lease caused by the unremedied defect with the missing first floor chimney breast (para 161), and then had explained that this did not stand alone but was accompanied by the absence of Miss Moore's consent to the assignment and her voiced objection at the Autumn 2008 Meeting (para 162). The ensuing statement, in paragraph 164 of the judgment, that "The Court has found that Hong Kong Foods was in breach of the sub-lease as described", must be fairly be understood as including a finding that Hong Kong was in breach of the Sub-Lease as regards the assignment made without Miss Moore's consent, and not only as regards the unauthorised structural building works.
41. The implications of these findings by the Royal Court, and in particular concerning the absence of Miss Moore's consent to the Deed of Assignment, we shall proceed to consider.
42. In concluding that Hong Kong was in such breach of contract that Robin Hood could terminate the Sub-Lease the Royal Court founded itself on the case of Selby v Romeril [1996] JLR 210, a case concerning the letting of a dilapidated hotel. Two propositions were extracted from the case.
43. First is the proposition that a lessor undertakes to the lessee that the subject of the letting is free from defects (vices) which make the property incapable of being used for the purpose for which it is let.
44. The authority cited in Selby at page 221 for this proposition is Pothier, Traité du Contract de Louage, Part 2, Chapter 1, paras 109-110 at 83-84. These paragraphs stand in Section 4 of the chapter under the heading "De l'obligation de garantir le conducteur des vices de la chose louée, qui empêcherons la jouissance ou l'usage"; and paragraph 110 (headed "Quels sont les vices que le locateur est obligé de garantir" ) starts with the following sentence, before providing examples to illustrate the relevant obligation:
"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."
45. The examples given by Pothier are homely, concerning such matters as the hiring of a pasture with poisonous grazing, of porous barrels, and of a lame horse. But the point sought to be driven home is that the relevant obligation is concerned with total unfitness for purpose rather than some condition short of that.
46. In essence the first proposition, in our judgment, is that in a contract of letting or hire there is normally to be implied a condition as to the absence of defects destructive of the substance of the letting. This proposition is, in modern terms, an application of the general principles on which terms are implied into contracts. As appears from Moore v Hong Kong Foods Ltd [2010] JRC 127, those principles are applicable in the context of landlord and tenant contracts: at paragraph 17 of the judgment reference was made to Grove v Baker [2005] JLR 348, a case which has been described as the leading case in Jersey so far as the implication of terms is concerned. This description was given most recently in The Minister for Infrastructure v The Parish of St Helier [2016] JRC 153 (Clyde-Smith, Commissioner, with Jurats, Listron and Ronge), upheld on appeal to this Court ([2017] JCA 27), where at paragraph [97] it was explained:
"The leading case on implied terms is Grove v Baker ..., where it was held that a party seeking to persuade the Court that a term should be implied into a contract must show either that the term is customarily included in contracts of the kind in question or that it is necessary to imply the term in order to ensure that the contract is not futile, inefficacious or absurd."
47. In deciding whether or not a term as to the absence of defect is to be implied, it is of course necessary to take into account the express terms of the agreement made between the lessor and lessee: in accordance with the maxim "la convention fait la loi des parties", it is open to parties to a lease to decide by their contract on the allocation of their respective rights and responsibilities.
48. For example, in the present case the Sub-Lease contained a term requiring the lessor to have the Premises insured, and in the event of them "being rendered wholly or partially unfit for occupation through damage by any of the insured risks" to have the insurance proceeds applied "to the reconstruction and rehabilitation" of the Premises. The insured risks were defined as fire, storm, tempest, flood, aircraft and aerial devices and articles dropped therefrom, three years loss of rental and such other risks as the sub-lessor might reasonably determine. There was to be for the sub-lessee a rent abatement if the Premises were wholly or partially unfit for occupation, the abatement being proportionate to the sub-lessee's loss, provided that the insurance moneys were not irrecoverable through the fault of the sub-lessee. And the term concerning the application of the insurance proceeds in reinstatement, permitted the lessee to give notice cancelling the Sub-Lease if "the said reconstruction and rehabilitation is not completed" within thirty-six months "from the date when the Premises thus were rendered unfit for occupation". The precise operation of this particular provision, and its impact on the scope of Hong Kong's obligation in relation to defects, does not fall to be decided on this appeal. It is sufficient to say that the provision is inconsistent with an implied obligation on the part of the sub-lessor to ensure that in all circumstances the Premises were free from defects making them incapable of use.
49. On the other hand we accept that, as the Premises were in principle to be used only as a restaurant, with living accommodation above, and as the sub-lessee's express repairing obligation did not extend to remedying structural defects, there was implicit in the Sub-Lease a term that when let there was no structural defect which would prevent that use.
50. The second proposition which the Royal Court took from Selby was that, where a lessor is in breach of an implied term concerning freedom from defect, the lessee may treat the letting as at an end. Having referred to the judgment at page 221, including a quotation from Pothier, the court below stated (paragraph 151): "It is implicit from its ruling that the court 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". In a later passage the Royal Court described Hong Kong's breaches of contract as going "to the root of the contract".
51. We agree with the Royal Court's construction of the judgment in Selby. On the one hand the Court in Selby, at page 221, referred in terms only to rent becoming due following the closing of the premises:
"Counsel for the defendant conceded that it was difficult to argue that rental was due after the Fire Chief Officer had effectively closed down the premises. We agree".
However, as we have noted, the Royal Court in Selby relied on passages from Pothier, including the following in paragraph 109, which is stated immediately after a description of the obligation on the part of the lessor concerning the freedom of the premises from operative defect:
"... 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 différent cas, comme nous verrons infrà ... "
This statement supports the conclusion that in an appropriate case the lessor is obliged to accept the termination of the letting, and damages where sustained by the lessee.
52. We agree also with the Royal Court that in this Island the law recognises that, in an appropriate case, a breach of contract can give the innocent party the right to treat the breach as discharging the parties from further obligation under the contract (apart, that is, from any obligation on the part of the contract-breaker to pay compensation for non-performance), without having to apply to court for the remedy of resolution to have the contract avoided for breach. In the present case the Royal Court was correct to see the Selby case as having applied that principle, and as having done so in the case of such a breach by a landlord. But the discharge by reason of breach requires the innocent party to show by some word or action that that party is treating further performance of the contract (apart, that is, from any obligation on the part of the contract-breaker to pay compensation for non-performance) as at an end. Unless and until the innocent party does so, the contract will continue as before; and the innocent party may lose the right to treat the contract as terminated, where the innocent affirms the contract or delays in accepting that it has terminated.
53. It is appropriate, however, to consider further the requirement for a breach of a lease on the part of the lessor to be sufficiently serious to entitle the lessee to treat further obligation on the part of the lessee as discharged by reason of the lessor's breach.
54. The facts of Selby are instructive. In that case the breach of the tenancy was the failure of the lessor as to a structural defect, an external fire escape, which prompted the Chief Fire Officer to serve a notice preventing the leased hotel from being used as an hotel until the defect was remedied. The tenancy in question had arisen by a tacite réconduction (that is a tenancy implied from a holding over) following a previous 2½ year lease which had expired on 31 December 1993. The Royal Court's judgment does not indicate the length of the tenancy remaining on 24 November 1994, the date of the Chief Fire Officer's letter. Whatever remained cannot have been longer than a few months at the outside. In the circumstances, the lessor's breach could be viewed rendering the building let wholly incapable of being used for the remainder of the term for the purpose for which it was let.
55. For the purposes of this appeal we do not need to decide whether an implied term concerning the absence of material defects is necessarily confined to defects which prevent altogether the use and enjoyment of the premises let; although, for reasons mentioned below, we doubt that it should be so confined. It is sufficient to hold (as we do) that any right on the part of the lessee to treat a breach of an implied term as to the absence of defects as enabling the lessee to consider himself as discharged from further obligation under the letting must depend upon the particular defect being destructive of the substance of the letting, or as going "to the root of the contract" (as it was put by the Royal Court in the present case). This is a function both of the significance of the term broken and of the significance of the breach.
56. In the English case of Hussein v Mehlman [1992] 2 EGLR 87 the character of a breach of a lease by a lessor sufficient to justify a lessee as treating the lease as terminated was described as being one which "vitiated the whole purpose of the contract of letting". That was case in which the lessor had repeatedly refused to perform obligations concerning the condition of a let property. We consider that this characterisation is apt, particularly in the context of leases where what is being invoked is a self-help remedy notwithstanding circumstances where, frequently, the engagements are long-term and drawn as formal written contracts with elaborate terms.
57. We also derive assistance on this point from Gloag, Law of Contract, 2nd Edn, at 605, where the relevant Scots Law is explained as follows:
"In leases the question has often been raised whether the failure of the landlord to place, or to maintain, the subjects let in a tenantable condition, or in the condition agreed upon, constitutes a breach of contract so material as to justify the tenant in repudiating the lease. The question is a delicate one, and the decisions do not afford any very definite guidance. Much may depend upon the length of time which the lease has to run. It would appear that a tenant, in a lease for a term of years, has no right to abandon merely because the landlord has failed, in the early years of the lease, to carry out some repairs or alterations which have been agreed upon. Such failure will entitle the tenant to damages, and may justify him in withholding payment of his rent, but not in resorting to the extreme remedy of rescinding the contract. (Todd v Bowie (1902) 4 F. 435) If during the currency of a lease a house becomes uninhabitable, or a farm or shop unfit for the purpose for which it was let, the duty of the tenant is to call the attention of the landlord to the matter. The contractual obligation of a landlord is not of the nature of a warranty that the subjects will always remain in a tenantable condition; it is an obligation to execute repairs on being made aware of their necessity. (Hampton v Galloway & Sykes (1899) 1 F. 501) The tenant, therefore, if an offer of repairs is made, must allow a reasonable time to determine whether these repairs are effectual; he would not be justified in instant repudiation and removal (M'Kimmie's Trustees v Armour (1899) 2 F. 156), except, probably, in cases such as the hire of a furnished house for a particular season, where it was an implied condition of the contact that the house should be fit for immediate occupation. (Wilson v Finch Hatton (1877) 2 Ex. D. 336) But if the landlord, on being appealed to, refuses to remedy the defect, or if the remedies he applies prove ineffectual, the tenant is entitled to leave, and to claim damages for the loss or inconvenience he has sustained. 'I do not know that there is any rule of law governing the relation of landlord and tenant at that stage except this, that both parties must be reasonable, and that if the landlord undertakes to put the house into a habitable condition, the tenant should give him a sufficient opportunity of doing so.' (per Lord Kinnear, M'Kimmie's Trustees v Armour (1899) 2 F. 156 at p.162)"
58. This passage explains that it is an extreme remedy for a lessee to treat himself as immediately and without more discharged from further obligation under the letting by reason of the lessor's breach of terms as to repairs or condition: the example given is one where the breach is destructive of the substance of the letting. Generally speaking where there has been a breach by a lessor of such terms, whether express or implied, the lessee's right is to seek compensation and to enforce performance. To adopt the expression used by the Royal Court in the present case, the breach would need to go to the root of the contract of letting. Another way of characterising such a breach would be one which vitiated the whole purpose of the contract of letting.
59. In the present case, as we understand the Royal Court's judgment, it was not held that Hong Kong's breach of the implied term was by itself sufficient to justify an immediate termination. This is because the breach was reasonably capable of remedy. What was needed to correct the missing support where the chimney breast had been removed was the installation, under the direction of a structural engineer, of suitable supporting steelwork, together with building approval. As we have pointed out above, the Sub-Lease had been granted for a term of 9 years, and still had several years to run in 2008. While there is no finding as to the period which the remedial works might reasonably have been expected to take, Mr Thirkell is recorded by the Royal Court as having estimated three to four months. It is therefore not self-evident that the breach was, without more, destructive of the substance of the letting. The Royal Court did not find that it was; and we agree with this. What was held sufficient to allow Robin Hood to treat itself as immediately discharged from further performance of the Sub-Lease was, in the judgment of the Royal Court, both the fact of the breach of Hong Kong's obligations as regards the condition of the Premises, and the fact that Robin Hood's position as sub-lessee was insecure as a result of the absence of Miss Moore's consent to the assignment: this appears from 161 to 164 of the judgment, as well as from paragraph 209 of the postscript to the judgment.
60. There is, as we have explained, an appeal by Mr Gibbons personally. The notice of appeal put in by him is ostensibly also on behalf of the now non-existent, Hong Kong.
61. We consider first Mr Gibbon's own appeal. This can be dealt with very shortly. While Mr Gibbons is able to conduct proceedings and appear in his own right, he was never in a contractual relationship with Robin Hood or Mr Thirkell. It has not been explained to us, therefore, what possible claim he could have had in his own name as against the Respondents for breach of contract. Neither has it been explained what other basis of claim he might have had. Therefore, insofar as nominally brought by Mr Gibbons in his own name, this appeal must necessarily fail.
62. Out of deference to Mr Gibbons, we mention two particular arguments made to us by Mr Gibbons. The first concerned his state of health at the trial. He did not at the time of the trial seek an adjournment on the grounds of ill-health, or with a view to having an advocate instructed to represent himself and Hong Kong. It is only now that he contends that he was unfit. However, his condition was clearly not apparent to the Royal Court. Further, what is said in a doctor's letter, dated 19 April 2017 and put before this Court by Mr Gibbons, is only that, by reason of an injury which Mr Gibbons had suffered on 21 September 2016 and antidepressant medication which Mr Gibbons takes, "I do not believe that he was able to act to full capacity". It is not said that Mr Gibbons was incapable of taking part in legal proceedings. In our judgment it simply cannot be correct for an appeal to be allowed, and presumably a retrial ordered, merely because an advocate or litigant in person is not up to their best on the day; and the effect of the doctor's letter goes no further than that.
63. The second concerned Mr Gibbons' state of health at the hearing before us. As to this, Mr Gibbons put before us a further doctor's letter which he had just received and which explained that he has a history of depression; and he explained to us that, in view of his condition, he might be unable to acquit himself on this appeal as well as he should. He did not, however, invite us to adjourn the appeal. We of course had well in mind the disadvantage that he found himself as a litigant in person without legal representation, as well as what he said about his condition. As to this, we comment also that Mr Gibbons spoke fluently, his submissions were organised, and he showed himself well able to understand, and to engage with us on, the arguments made on both sides. His state of health does not affect the outcome of his appeal.
64. We now turn to the appeal in the name of Hong Kong. This we were initially minded to deal with substantively, giving judgment on the merits of the appeal as if, contrary to the true position, Hong Kong remained in existence. We have, however, after careful reflection, decided not to take this course. Rather, if ever Hong Kong is restored to the Register, it will be for the parties to the proceedings to take such course, if any, as they may be advised in relation to the Royal Court's judgment and any appeal then sought to be made.
65. Our reason for reaching this decision may be shortly stated. The appeal raises a question of landlord and tenant law, possibly of some importance, as to which the state of the record before us is incomplete, and which deserves greater argument than has been possible before us. This question concerns, among other matters, the interpretation and effect of the Lease (in particular clause 5(q)), of the Sub-Lease, and of the Deed of Assignment. It is whether Miss Moore had any, and if so what, right to object to the making of the Deed of Assignment without her consent; and, if she did, whether the absence of that consent for the assignment involved a breach of duty owed by Hong Kong to Robin Hood. Further, and in any event, the materials before us do not allow any conclusion as to whether, having regard to the way in which the proceedings below were conducted, it would be open to Hong Kong (if now in existence) to pursue an appeal as regards this question.
66. We are satisfied that this course will not involve any unfairness towards Hong Kong (or more accurately towards Mr Gibbons as its beneficial owner and sole director). There is on the record a judgment against Hong Kong for substantial damages. But it was Mr Gibbons who allowed the proceedings before the Royal Court to continue long after Hong Kong had ceased to exist.
67. In the result, we dismiss Mr Gibbons' appeal.
68. As to the appeal in the name of Hong Kong, we make no order other than to direct that any further proceedings on the appeal should be stayed until such time, if ever, as Hong Kong is restored to the Register of Companies and further application is made to the Court of Appeal.
69. We invite written submissions, within 21 days from the handing down of this judgment, on any costs order we should make. Our preliminary view is that Mr Gibbons should pay the Respondents' costs of his appeal, but that otherwise there should be no order; but we will consider carefully any submissions made to us on the point.
Authorities
Hong Kong Foods Ltd v Robin Hood Curry Ltd [2017] JRC 50.
Moore v Hong Kong Foods Ltd [2010] JRC 127.
Selby v Romeril [1996] JLR 210.
Pothier, Traité du Contract de Louage.
The Minister for Infrastructure v The Parish of St Helier [2016] JRC 153.
Hussein v Mehlman [1992] 2 EGLR 87.
Gloag, Law of Contract, 2nd Edition.