Akzo Nobel UK Ltd v Arista Tubes Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Richards,Sir David Keene |
| Judgment Date | 29 January 2010 |
| Neutral Citation | [2010] EWCA Civ 28 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 January 2010 |
| Docket Number | Case No: A3/2009/0888 |
[2010] EWCA Civ 28
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Floyd
Before: Lord Justice Mummery
Lord Justice Richards
and
Sir David Keene
Case No: A3/2009/0888
HC08C00726
MR CHRISTOPHER PYMONT QC (instructed by Reed Smith Richards Butler) for the Appellant
MR JONATHAN GAUNT QC (instructed by Geldards LLP) for the Respondent
Hearing date: 10 th December 2009
Lord Justice Mummery:
Background
This action is brought by Akzo Nobel UK Limited (Akzo), as seller, against Arista Tubes Limited (Arista), as buyer, for specific performance of an agreement to take underleases of five units totalling 75,000 square feet of factory premises at Units 3–7 Gunnels Wood Industrial Estate, Stevenage (the Premises). On 30 March 2009 Floyd J dismissed the action. He gave permission for an appeal, which turns on a short point of construction of a notice provision in the Business Purchase Agreement (BPA) made between the parties on 31 December 1998.
Arista, a company newly formed for the purposes of a management buy-out, purchased from Akzo (formerly Courtaulds PLC) the “Plastic Tubes Europe” business carried on at the Premises through a subsidiary, Courtaulds Packaging Limited. Akzo, which had purchased the business and the Premises under a Business Transfer Agreement dated 5 November 1998 (BTA) in order to sell them on to Arista, agreed to arrange for the lease of the Premises to be assigned to it and for it then to grant underleases of the Premises to Arista for the residue of the term, less 5 days. The Premises were all leasehold being subject to a head lease for a term of 25 years from 25 March 1987. The leasehold interest in the Premises could only be assigned to Akzo and the Premises could only be underlet to Arista with the landlord's consent. Akzo agreed to use all reasonable endeavours to procure consents to the transactions (the Property Consents). Pending the obtaining of the Property Consents, the completion of the assignment and the execution of the underleases Akzo and persons authorised by it were permitted to have the unrestricted use and occupation of the Premises and Arista was in its turn allowed into occupation of the Premises on the same terms. Arista in fact paid the licence fee for its occupation of the Premises direct to the landlord, not to Akzo. Azko was not intended to profit from the assignment or from the underleases of the Premises. Its role in relation to the Premises was to facilitate the sale of the business to Arista.
Arista remained in occupation under the licence arrangement for another 8 years. During that period Akzo made efforts to obtain the Property Consents and to obtain a transfer of the lease into its own name but, due to various problems, the assignment of the lease and agreement for the grant of the Property Consents were not obtained by Akzo until 13 December 2007. Akzo then called upon Arista to complete the underleases of the Premises in accordance with its obligations under the BPA. Arista refused, saying that it was too late for Akzo to require it to take the underleases. As Akzo well knew, Arista had already taken steps to terminate the parties' obligations under the BPA, having decided that it no longer required the Premises for the purposes of its manufacturing operations in the UK and that it would vacate them at the end of January 2008. Arista had accordingly served on Akzo on 30 October 2007 a notice to terminate the obligations of the parties in respect of the Premises on 31 January 2009. Arista purported to do so in exercise of its rights under the BPA. Its notice to Akzo and the landlords was in the following terms—
“Those Agreements require us to give three months' notice to terminate and we accordingly therefore give notice to terminate our Licence Agreement on 31 January 2008, when all five units will be vacated.”
The notice was given under paragraph 11 of Part B of Schedule 7 to the BPA—
“If by [31 December 1999] all Property Consents shall not have been obtained in respect of any Business Property then either the Seller or the Purchaser may, by three months notice in writing to the other, terminate on the date of expiry of that notice, the obligations of the parties hereto in respect of that Business Property under this Schedule 7 (Properties) (but without prejudice to antecedent breach) in which event the Purchaser shall vacate the Business Property in question by the end of such notice period.”
Important points to remember are that Akzo did not obtain a transfer of the lease or the Property Consents until after Arista had served the notice to terminate; that it was a notice, which could have been given by either side, to terminate the obligations of the parties in respect of the Premises; that it was not a notice to complete the BPA in relation to the Premises; and that in the specified event (as to which there is a dispute whether it was the giving of the notice as the judge held, or the expiry of the notice, as Akzo contends) Arista had to vacate the Premises by the end of the notice period.
Arista's case is that its obligation to take the underleases did not arise before the service of the notice, that it was entitled to serve the notice, because Akzo had not obtained the Property Consents before the specified date, and that the obligation to take the underleases could not arise after service of the notice, because the notice had terminated the parties' obligations under the BPA. According to the terms of paragraph 11 the effect of giving notice is to terminate each party's obligations under Schedule 7 and to require Arista to vacate the premises by the expiry of the date of the notice (31 January 2008). On service of the notice Arista was under an obligation to vacate the premises at or before the end of the 3 months, which would give it time to move its plant out before its licence to occupy and its obligation to pay the licence fee actually expired: the notice period also gave Akzo 3 months in which to find someone else to occupy the Premises.
Arista contends that the notice was legally valid and that it effectively terminated the parties' obligations, including Arista's obligation to take the underleases. Akzo's outstanding obligations to obtain the lease and the Property Consents fell away on the service of the notice to terminate. There was no point in them any more. After notice to terminate was given it was too late for Akzo to perform its obligation to obtain the lease or the Property Consents. To allow it to do so would be inconsistent with the termination of the parties' obligations by the notice and with Arista's unqualified obligation to vacate the premises on the expiry of the notice. In other words it was legally impossible for Akzo to disapply a notice validly given by obtaining the lease and the...
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Irwin v Wilson
...notice to expire. 44 Mr Carlisle was able, however, to draw my attention to a very recent decision of the Court of Appeal in Akzo Nobel UK Ltd v Arista Tubes Ltd [2010] EWCA Civ 28 (" Akzo") in which the same point had arisen for decision. In that case, the claimant, Akzo, had sought specif......