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Greater access to the courts

Before civil proceedings in the High Court are commenced or once commenced, in the period before trial, it is possible to make an urgent interim application to a judge.  It might be made, for instance, to protect property from sale (known as a ‘freezing order’), or to obtain or prevent disclosure of confidential information.

The procedure is conducted pursuant to Part 23 and Part 25 of the Civil Procedure Rules and their Practice Directions 23A and 25A.  If really urgent, the court may allow an application to be made without notice being given to another party and in some circumstances, even heard over the telephone.

With thanks to Wilberforce Chambers for drawing this to our attention, the Insolvency and Companies Court has, as with other branches of the High Court, introduced with immediate effect an Interim Applications Court.  Applications will be heard on Thursdays, Fridays and every other Monday and the list will be run in the same way as the High Court Judges’ Interim Applications Court.  The latter remains unaffected by the introduction of the new interim applications court.

It is intended that the new list will be used to hear applications for, for instance, an injunction to restrain the presentation of a petition to wind up a company or to appoint a provisional liquidator.  The courts have made it clear the “Applications with a time estimate of more than two hours (including pre-reading time, judgement and consequentials) are generally not suitable for the ICC Interim Applications Court.”

Such applications are with the purpose of enabling greater access to the courts and it is hoped this aim will be achieved.

The law has changed

As we reported in October, the property world awaited the Supreme Court decision in the case of S Franses Ltd v The Cavendish Hotel (UKSC 2017/0151) in which the meaning and effect of the word ‘intends’ within ground (f) of s30(1) of the Landlord and Tenant Act, 1954 was to be considered.  The case turned on the landlord’s intention to conduct works sufficient to defeat the tenant’s application for a new tenancy.

The law was long thought to be settled.  The question to be asked of the judge was ‘would the landlord require possession of the demised property in order to do the substantial works it has said it would do’?  Why it was doing the works was irrelevant.  In this case, the landlord gave an undertaking to the court to the effect that it would conduct substantial works but admitted it was doing so to defeat the tenant’s application.  Would the admission be relevant?

Giving judgement, Lord Sumption said

“This appeal does not, it seems to me, turn on the landlord’s motive or purpose, nor on the objective reasonableness of its proposals.  It turns on the nature or quality of the intention that ground (f) requires.”

However, he then continued to say

“The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.”

We cannot help but think that ‘the acid test’ does turn on the landlord’s motive or purpose but who are we to question Lord Sumption’s view?

In future, therefore, the question to be asked of any landlord opposing a tenant’s application for a new tenancy is: ‘would you intend to do the same works if the tenant were to leave the property voluntarily and abandon its application?”  The law has changed.


Whether you itch to hear the latest on Brexit or rush to switch off the news, one has to wonder what differences it will make to our lives.  There has been much written, for instance, about potential changes to the property market but one question has arisen at Canary Wharf which may affect the law.  Lawyers up and down the land await the outcome of the court proceedings.

Canary Wharf granted a 25 year lease commencing in 2014 to the European Medicines Agency of 10 floors of a building in Canary Wharf.  The demised premises were to be used as the Agency’s European headquarters.  Due to Brexit, the Agency is to move its headquarters to Amsterdam.  In consequence, it is claiming that the whole reason behind taking the lease has been undermined, the lease is legally ‘frustrated’ and is of no effect.  Canary Wharf has issued proceedings for unpaid rent, rates and service charges allegedly reaching a sum in excess of £550M.  The landlords claim that Britain withdrawing from the EU was always on the cards and was foreseeable.  The question of frustration does not arise.  The case awaits hearing.

Interestingly, it has never been finally decided whether or not the doctrine of ‘frustration’ – recognized in other contractual relationships – extends to leases.  The point is open for the Supreme Court to decide although it has always been recognized that if the answer should be ‘yes’, the concept will be used rarely.  Lord Hailsham said in National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8 “The point, though one of principle, is a narrow one.  It is the difference immortalised in H.M.S. Pinafore between “never” and “hardly ever””.  He commented that the judges in previous cases “clearly conceded that, though they thought the doctrine applicable in principle to leases the cases in which it could properly be applied must be extremely rare.”

Will the judges in this case sidestep the question of frustration and do as others have done before them and say even if the doctrine of frustration applies to leases, the facts of this case do not amount to an example?  Watch this space.

Awaiting Judgement

One would have thought the law surrounding Part II of the Landlord and Tenant Act, 1954 was settled long ago, but it appears it may not be.

A case surrounding the meaning and effect of the word ‘intends’ within ground (f) of s30(1) of the Act (one of the landlord’s grounds of opposition to the grant of a new tenancy) has hit the headlines for several reasons – one being that it has leapfrogged from the High Court directly to the Supreme Court (S Franses Ltd v The Cavendish Hotel (UKSC 2017/0151).  Heard in that court on 17 October, we await their Lordships’ decisions.

Ground (f) of course states:

“that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding”.

It has always been thought and held that the landlord’s intention is simply a question of fact.  In this case, there is no question that the landlord did intend to do substantial works.  Indeed, it gave  an undertaking to the court that it would do the works.

However, the question asked by the Appellant is whether it would make a difference if the landlord only intended to do the works in order to defeat the tenant’s application for a new tenancy?  Has the landlord the requisite intention for the purposes of ground (f)?  The judge at first instance (County Court) and the judge on appeal (High Court) both held that the landlord’s motive for doing the works was separate from the question of its intention and was not relevant.  The question did not go to the Court of Appeal (as the law was settled) but was allowed, as we say above, to go directly to the Supreme Court.

A definite case of ‘watch this space’.

At Your Service

The much anticipated RICS Professional Statement re Service Charges in Commercial Property was launched this month and the management of service charges will never be the same again!  Acknowledging the very positive impact the service charge code has had on the property industry over the 22 years since its inception, it takes matters forward by introducing mandatory requirements which must be followed by those administering service charges.  It comes into effect in April 2019.

Whilst this new Professional Statement cannot and does not over-ride the terms of any lease of commercial property, it dictates how a lease should be interpreted and how the charges are calculated and managed.  Its aim is to reduce the number of disputes which commonly arise in the service charge arena and to improve standards in the administration and management of the charges made.  It underlines the timely issuing of budgets, with an explanatory commentary, and year end accounts as required by most commercial leases which have in the past been woefully ignored.

Aimed at those managing and administering the charges, it does, for instance, require practitioners acting for tenants in dispute with their landlords over the charges made, to advise their clients that any retention of monies made from the charge allegedly due should reflect only the actual sum in dispute.  Landlords and their managing agents should, on the other hand, make sure all expenditure charged accurately reflects the meaning and effect of the lease terms and the expenditure made.  Service charge monies (including any reserve and sinking funds) must be held in discrete bank accounts and any interest earned should be credited to the appropriate service charge account.

Turning to the accounts, all costs should be transparent and management fees should be a fixed price with no hidden mark-ups.  Apportionment between the tenants of the sums expended should be demonstrably fair and reasonable reflecting the availability, benefit and use of the srvices provided – draftsmen of leases will need to take note and it will be interesting to see how this part of the Professional Statement is interpreted.  Those certifying accounts should recognise they have a duty of care to both owners and occupiers.  In fact, anyone with the commercial property field should be aware of this important Professional Statement.

Prepare or Fail

With thanks to Wilberforce Chambers, which brought this case to our attention (Jonathan Seitler QC and Emer Murphy acting for the successful party), Clutterbuck & Paton v Cleghorn [2018] EWHC 2125 (Ch) is a stark reminder to parties that failure to fully prepare one’s case opens the door to failure.

The case concerned the redevelopment of a dilapidated residential property being part of a claim revolving around a property joint venture agreement.  The claimant alleged, inter alia, that wrongful delay, caused by another partner to the scheme (who had since died), led to the redeveloped property coming to the market later than originally envisaged.  It was further alleged that the delay and a lack of quality in workmanship had led to the property selling for a sum less than that at which it would have sold if the property had come to the market at an earlier date and in the physical state required by the agreement.

The judge said “Where a claimant’s case depends on an allegedly actionable wrong that is alleged to have caused a loss the nexus between alleged cause and alleged effect must be pleaded in an intelligible form.  Where loss is alleged to have been caused by allegedly actionable delay, it will usually be necessary for a claimant to plead the period of delay relied on, plead why it is alleged to be actionable as against the defendant, what the result of the delay was and what loss is alleged to have been caused thereby.”  However, the necessary evidence to support the claim, the quality of work and the assertion of loss had not been called.  The claimant had sought, at an earlier directions hearing, that the trial be split between liability and quantum, an application which had been refused.  No appeal had been lodged and the trial judge would not hear of the matter being raised again – in any event: “Making such an Order would not address the absence of expert evidence relating to the quality of the work carried out to the Property, which is relevant to liability in respect of the Defects Claim.”

The claimant finally attempted to rely on general comments made about quality of work and finishes and about valuation in estate agents’ reports before the court.   The judge held the key point was that there was no evidence directed at valuation or quality of work and he could not “simply pull a figure from the air as to what price might have been achieved”.  Hence the claim failed.

The moral of this story is that a party must fully prepare its case before trial or risk failure.

The Knotty Question of Knotweed

Japanese knotweed is a fast-growing, invasive plant which, if left uncontrolled, can cause extensive damage to the built and unbuilt environment.  It is amongst the plants listed in Part II of Schedule 9 of the Wildlife and Countryside Act, 1981 (‘the schedule’) to which s14 of that Act applies i.e. a person shall be guilty of an offence if he or she plants or causes to grow wild any species listed in the schedule.  It is not a crime to have the plant within your own grounds but you will be liable if it spreads into the wild or (pursuant to the civil law) on to a neighbour’s land.  Further, disposal of the plant material may cause difficulties as it is classified as ‘controlled waste’ under the Environmental Protection Act, 1990.  It can, therefore, only be transported and disposed of at a licenced site by a licenced contractor.

The question of how damages are assessed when the plant is in danger of spreading onto a neighbour’s land came recently before the courts (Network Rail Infrastructure v Williams & Waistell [2018] EWCA (Civ) 1514).  The plant had grown on Network Rail’s land for some 50 years or more.  When it spread to within 7 metres of the neighbouring borders, the owners issued proceedings seeking an injunction against Network Rail requiring that it abate the nuisance.  They claimed mortgagees refused to lend on properties within 7 metres of the plant and therefore the value of their properties was reduced.  The Recorder at first instance refused a mandatory injunction but considered damages in lieu.  He awarded treatment and insurance costs plus £10,000 to one claimant and £10,500 to the other in respect of residual diminution in the market value of their respective properties.  However, the Court of Appeal said “The Recorder’s conclusion that the presence of knotweed on NR’s land within seven metres of the claimants’ properties, because it diminished the market value of the claimants’ respective properties, because of lender caution in such situations, was wrong in principle.”  Nevertheless, the plant and its rhizomes “can fairly be described, in the sense of the decided cases, as a “natural hazard”.  They affect the owner’s ability fully to use and enjoy the land.  They are a classic example of an interference with the amenity value of the land.”

The appeal court did not resubmit the question of damages to the lower court feeling “the cost of that exercise would be out of all proportion to the amount of damages in issue”.  In consequence, the decision of the Recorder was upheld but for different reasons to those which he gave.

Call for urgent review of CVAs

In our newsletter of March 2016 we highlighted the rental reduction voted on by creditors of British Home Stores upon that Company’s Voluntary Arrangement (‘CVA’).  Since then, several retailers and restaurateurs have used similar tactics (including the closure of some stores or restaurants) in an attempt to save their business.  As we previously stated, a proposed reduction in rent or store closure does not have to receive unanimous creditor support – the arrangement will be binding so long as it receives 75% in debt value amongst those creditors attending the CVA meeting.  However, many landlords, whilst having sympathy with retailers who are facing genuine financial difficulties, are feeling that they are being forced to shoulder the loss suffered by their tenants.

Until now, property owners appear to have obtained little public sympathy but the imminent closure of many House of Fraser stores has highlighted the fact that much of the nation’s retail portfolio is owned by large pension funds.  Store closure and a drop in rental value will have a negative effect upon these funds.

Speaking for property owners across the country, the British Property Federation (‘BPF’) has this month called upon the Government to conduct an urgent review of the CVA procedure.  To quote from the BPF’s website “We believe the process is now being mus-used, and this risks undermining the UK’s global reputation and deterring much-needed investment into our town and city centres, at a time when it is arguably more important than ever that the UK demonstrates it is open for business.”

Whilst the BPR supports the proper use of CVAs, it says the full impact on property owners “and the pensioners’ savings they invest”, upon tax payers, local communities, businesses and economies should be appreciated.  Melanie Leech, Chief Executive of the BPF says “Urgent action is required and we are calling on government today to undertake a review, so that we can restore the CVA process to its oriuginal purpose.”

If you wish to hear more about CVAs and tenant insolvency as a whole, why not contact Hatherleigh Training?

Communication Apparatus Can Go Anywhere!

The Communications Act, 2003 introduced a regulatory framework for the communications sector.  It also established the regulatory Office of Communications (‘OFCOM’).  Annexed to it was a code (‘the Code’) enabling communication operators (‘Operators’) to install and maintain apparatus on public land and to apply to the courts for an order to install and maintain equipment on private land if the Operator was unable to reach agreement with the private landowner.  Over the years, the Code became outdated and insufficient for the needs of Operators.  Hence, in order to improve communication coverage, capability and capacity, as demanded by the Operators, communities and the general public as a whole, the Code had to be updated.

A new Code has now, through the Digital Economy Act, 2017, been introduced and the powers given to Operators, substantially increased.  It came into operation on 28 December 2017 and applies to any agreement between Operators and landowners entered into after that date.  To accompany the new Code, OFCOM produced a Code of Practice, a set of proposed standard terms to be used in the agreements and, finally, a number of templates for notices, some of which are compulsory under the legislation.

The powers included in any agreement are now extensive.  In addition to entering any land, public or private, to install equipment, maintain, alter and repair it, the Operators may connect to the landowner’s power supply, obstruct access to the land and lop back trees and vegetation interfering with apparatus.  They may also assign or share their equipment with other Operators and conduct street works.  The Code relates, too, to the termination of agreements (landowners can only terminate for specified reasons including the Operator’s non-payment of the agreement fee, or for the purposes of redevelopment), the terms to be included (including the consideration paid) and makes provision for dispute resolution.  Powers are enforced by the courts.

Longer notice periods before an agreement can be terminated, the assignment provisions and the basis of the consideration to be paid by Operators (which has substantially decreased the payments made), have already given rise to negative comment by landowners and their representatives.  It will be interesting to see whether these mutterings lead to disputes.  Watch this space.

‘Wrotham Park’ damages not for breach of contract

Almost a year ago, in May 2017, we looked at the Court of Appeal judgement in Morris-Garner v One Stop (Support) and anticipated a future Supreme Court judgement.  This was given on 18th April ([2018] UKSC 20), having been heard last October.  Lord Reed gave judgement, with whom the majority of the court agreed.  The Supreme Court found the trial judge and the Court of Appeal had adopted the wrong approach in enabling Wrotham Park damages to be applied to a breach of contract and has remitted the case to the judge at first instance to measure the financial loss suffered by the claimant.

In breach of a restrictive covenant in a buy-out agreement, the defendants in the case set up a business in competition with the company in which they had previously had shares.  Despite having threatened seeking an injunction, the claimant delayed considerably in bringing its proceedings and, at the end of the day, merely sought damages for breach of contract.  The Supreme Court has held that if an injunction is denied, Wrotham Park damages may be awarded in lieu of an injunction.  However, if seeking damages for breach of a contact, the claimant must prove loss and the loss must be calcualted.

Damages in lieu of an injunction are awarded under Lord Cairns’  Act.  Lord Reed held “One possible method of quantifying damages under this head is on the basis of the economic value of the right which the court has declined to enforce, and which it has consequently rendered worthless.  Such a valuation can be arrived at by reference to the amount which the claimant might reasonably have demanded as a quid pro quo for the relaxation of the obligation in question.  The rationale is that, since the withholding of specific relief has the same practical effect as requiring the claimant to permit the infringement of his rights, his loss can be measured by reference to the economic value of such permission.”  He then continued “That is not, however, the only approach to assessing damages under Lord Cairns’ Act.  It is for the court to judge what method of quantification, in the circumstances of the case before it, will give a fair equivalent for what is lost by the refusal of the injunction.”

So, the claimant must make a choice on breach of contract – either act quickly and seek an injunction or delay and risk refusal of an injunction (leading to damages in lieu) or seek calculated damages.

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