(1) Pavilion Property Trustees Ltd (2) Pavilion Trustees Ltd v (1) Permira Advisers Llp (2) Permira Advisers (London) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 30 January 2014 |
| Neutral Citation | [2014] EWHC 145 (Ch) |
| Court | Chancery Division |
| Date | 30 January 2014 |
| Docket Number | Case No: HC13F05381 |
[2014] EWHC 145 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Justice Morgan
Case No: HC13F05381
Katharine Holland QC (instructed by Mayer Brown International LLP) for the Claimants
Hearing date: 19 th December 2013
Introduction
This judgment deals with a claim to declaratory relief and, more particularly, with an interim application for declarations by consent. The declarations which are sought concern the meaning and effect of a poorly drafted guarantee in relation to the liability of a lessee under a lease and the effect on that guarantee of the Landlord and Tenant (Covenants) Act 1995 ("the 1995 Act"). This judgment deals with two separate questions. The first question is whether the court should make any declaration at all and the second question arises if the court is prepared to grant declaratory relief, in which case the second question is as to what declarations are appropriate. It is appropriate to set out the material relevant to both these questions before discussing them further.
Background matters
By an underlease dated 10 July 2008 (which I will hereafter describe as "a lease") made between GE Capital Corporation (Estates) Ltd as the Landlord and Permira Advisers LLP (the First Defendant) as the Tenant, the premises at 80 Pall Mall, London, SW1 were demised for a term of 16 years from and including 24 June 2008. The lease created a "new tenancy" as defined in section 1 of the 1995 Act. The reversion on the lease was assigned to the Claimants (under earlier names) on 27 August 2008.
Clause 5.16 of the lease was a tenant's covenant which, amongst other things, permitted the tenant to assign the term of the lease, provided that the tenant complied with certain conditions and obtained the landlord's consent, which was not to be unreasonably withheld or delayed. The specified conditions allowed the landlord to require the assigning tenant to enter into an "authorised guarantee agreement" in accordance with a form of guarantee set out in Schedule 3 to the lease. The form as set out in Schedule 3 defined "authorised guarantee agreement" as defined in the 1995 Act and that form appeared apt as a draft authorised guarantee agreement. The conditions specified in clause 5.16 also referred to a possible requirement by the landlord that there be other guarantees in relation to performance of the tenant's covenants tenant, such guarantees to be in accordance with a form of guarantee set out in Schedule 4 to the lease. It is not necessary to comment on the provisions relating to such guarantees.
On 30 April 2009, by a formal licence to which the Claimants, the First Defendant and Permira Advisers (London) Ltd (the Second Defendant) were parties, the Claimants granted to the First Defendant licence to assign the term of the lease to the Second Defendant. In that licence, the Second Defendant covenanted with the landlord that it would pay the rent and perform the tenant's covenants in the lease during "the Relevant Period", which was defined to be a period from the date of the assignment of the term until the date on which the Second Defendant assigned the term of the lease except by an excluded assignment as defined by section 11 of the 1995 Act.
The guarantee
Also on 30 April 2009, the Claimants (described as "the Landlord") and the Second Defendant (described as "the Guarantor") entered into a further document. This document was described as a "guarantee" on the cover sheet but as a "licence" at the top of the first page. The reference to a "licence" was simply wrong and I will refer to it as a guarantee. The guarantee did not follow the form of guarantee set out in either Schedule 3 or Schedule 4 to the lease. The guarantee defined various terms including "Assignee", "Licence" and "Next Assignee". "Assignee" was defined to mean the Second Defendant. The "Licence" was the licence dated 30 April 2009. "Next Assignee" was defined to mean: "the assignee to whom the Assignee lawfully assigns the Lease in accordance with the provisions of clause 5.17 (Dealings with this Lease) of the Lease". The reference to clause 5.17 was a mistake for clause 5.16; the same mistake is made in clause 14 of the guarantee.
The guarantee contained the following further provisions:
"2 RECITALS
By the Licence, the Landlord consented to an assignment of the Lease to the Assignee.
It was a condition of the Landlord's consent that the Guarantor guarantee the Assignee's obligation and that this extended to the obligations of the Next Assignee.
3 GUARANTEE
If the Assignee fails to comply with any of the Lease Provisions, the Guarantor guarantees that it shall, on demand by the Landlord, immediately perform and discharge the obligations of the Assignee under them.
4 CONTINUING GUARANTEE
The guarantee set out in clause 3( Guarantee) is a continuing guarantee and is additional to, and not in substitution for, any other security or guarantee which is or may be held by the landlord from time to time in respect of the obligations of the Assignee under the Lease.
5 FORBEARANCE AND DELAY
The Guarantor's liability under clause 3 ( Guarantee) shall not be affected by any concession, time, indulgence or release granted by the Landlord to the Assignee or by any other dealing or variation of the Lease, subject to s18 Landlord and Tenant (Covenants) Act 1995, or anything else, whether relating to the Assignee, any co-guarantor or any other person, which would, but for this clause 5, operate to discharge or reduce that liability.
6 PRIMARY OBLIGATION
If anything, including any legal limitation, disability, liquidation or other incapacity on the part of the Assignee or any disclaimer by a liquidator or trustees in bankruptcy, causes any of the Assignee's obligations under the Lease and/or the guarantee set out in clause 3 ( Guarantee) to be or become invalid or unenforceable, the Guarantor shall perform and discharge all of the Assignee's obligations under the lease as if they were the primary obligations of the Guarantor.
7 INDEMNITY
The Guarantor shall indemnify and keep indemnified the Landlord against any losses, liabilities, costs and expenses resulting from the failure of the Assignee to observe any of the Lease Provisions.
8 SET OFF AND COUNTERCLAIMS
The Guarantor shall make any payments due from it under this Guarantee in full, without out any deduction or withholding in respect of any claim, whether by way of set-off, counterclaim or otherwise, asserted from time to time by the Assignee or the Guarantor against the Landlord under the Lease or in respect of anything else.
9 RIGHTS AGAINST THE TENANT
The Guarantor shall not exercise any rights which it may have against the Assignee arising from or otherwise relating to its guarantee under clause 3 ( Guarantee) or its other obligations under this Guarantee unless and until all of the obligations of the Assignee and the Guarantor under this Lease have been performed and observed.
10 ENFORCEMENT OF THE GUARANTEE
The landlord may claim under the guarantee set out in clause 3 ( Guarantee) without first making demand of the Assignee or taking any action to claim under or enforce the Assignee's obligations under the Lease or any other right, security or other guarantee which it may hold from time to time in respect of the Assignee's obligations under the Lease.
11 TO ACCEPT A NEW LEASE
11.1 In this clause 11, the following expressions mean —
'Event of Default' means the disclaimer of the Lease by either a trustee in bankruptcy of the Assignee, if the Assignee is an individual, a liquidator of the Assignee, if the Assignee is a company; the disclaimer of the lease by the Crown, if the Lease becomes bona vacantia, or the striking off of the Assignee from the register of companies pursuant to the provisions of the Companies Act 1985.
'Landlord's Notice' means a notice in writing requiring the Guarantor to take a New Lease or indemnify the landlord as provided in clause 11.4 of this Guarantee served by the Landlord on the Guarantor within three months of an Event of Default coming to the Landlord's knowledge.
'New Lease' means a lease of the Premises for a term commencing on the date of the Event of Default, expiring on the date the Term would have expired had there been no Event of Default, reserving rents equivalent to the Rents and containing terms identical to the Lease Provisions.
11.2 If, following an Event of Default, the Landlord serves a Landlord's Notice requiring the Guarantor to take a New Lease, the Guarantor shall accept a New Lease, execute a counterpart of the New Lease and pay the Landlord's solicitors' costs and disbursements of and incidental to the grant of the new lease.
11.3 If at the date of the Event of Default any review of the rent under the Lease has fallen due but the rent review shall not have been agreed or determined prior to the grant of the New Lease then the New Lease shall provide for a review of the rent upon the first day of the term of that New Lease.
11.4 If, following an Event of Default, the Landlord serves a Landlord's Notice requiring the Guarantor to indemnify the Landlord, the Guarantor shall pay to the Landlord on demand the Rents for the period commencing on the date of the Event of Default and ending on the earlier of —
(a) the date 12 months after the date of Event of Default; and
(b) the date, if any, upon which rent becomes payable after the Premises are re-let.
12 UNCONDITIONAL GUARANTEE
The Guarantor's obligations under this Guarantee, including its guarantee under clause 3 ( Guarantee) are unconditional and irrevocable.
13 NO ASSIGNMENT OF BENEFITS NECESSARY
The benefit of the...
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