Akzo Nobel UK Ltd v Arista Tubes Ltd

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Floyd
Judgment Date19 Mar 2009
Neutral Citation[2009] EWHC 497 (Ch)
Docket NumberCase No: HC08C00726

[2009] EWHC 497 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before:

The Hon Mr Justice Floyd

Case No: HC08C00726

Between:
Akzo Nobel UK Limited
Claimant
and
Arista Tubes Limited
Defendant

Christopher Pymont QC (instructed by Reed Smith Richards Butler LLP) for the Claimant

Jonathan Gaunt QC (instructed by Geldards LLP) for the Defendant

Hearing dates: 11 March 2009

Mr Justice Floyd

Mr Justice Floyd:

Introduction

1

The claimant is the leaseholder of a set of industrial units known as Units 3–7 Gunnel's Wood Park, Gunnel's Wood Road, Road in Stevenage (“the premsises”) pursuant to leases dated 15 th June 1987 granted by Universities Superannaution Scheme Limited (“USSL”). The leases expire in 2012. By this action the claimant seeks specific performance of an agreement it entered into with the defendant for the grant to the defendant of an underlease of the premises.

2

The claimant acquired the leases of the premises in the following circumstances. In late 1998 the claimant (then known as Akzo Nobel UK PLC) purchased the business carried on at the premises by Courtaulds Packaging Limited (“CPL”) as its Plastics Tubes Europe division. The purchase was subject to an agreement that the leases (then in the name of CPL) would be assigned to the claimant. The transaction giving effect to all this was called the Business Transfer Agreement (“the BTA”).

3

Pending the assignment of the leases to the claimant, the claimant and all persons authorised by it were granted a licence to occupy the premises. Under the terms of the agreement between CPL and the claimant, the claimant would pay CPL a licence fee equivalent to the rent, service charges and other outgoings properly paid by CPL in respect of the premises.

4

The leases were not in fact assigned to CPL until 13 th December 2007, more than nine years after the agreement. The assignments required the consent of USSL. The delay is alleged by the claimant to have been due to concerns by USSL as to the covenant strength of the claimant and the need to obtain a foreign lawyer's opinion (the claimant's parent company being Dutch). The reasons for the delay are not material to the outcome of the action.

5

In the meantime, in December 1998, the claimant entered into an agreement with the defendant to sell on its Plastics Tubes Europe division to the defendant. This was in the form of a management buy-out, the defendant being a newly formed company registered for that purpose. By a Business Purchase Agreement (“the BPA”) dated 31 st December 1998 the defendant agreed to take underleases of the premises for the terms granted by the leases (less a nominal reversion) at the rents payable from time to time under the leases. Recognising that the completion of the assignment of the leases from CPL to the claimant had not yet taken place, paragraph 6.2 of schedule 7 of the BPA granted licences to the defendant to occupy the premises on the same terms as the licences granted to the claimant. These licences were to continue pending the obtaining of USSL's consent to (a) the assignment of the leases from CPL (now called Betts UK Ltd) to the claimant and (b) the grant of the underleases to the defendant.

6

By clause 5.2 of Schedule 7 of the BPA:

“The Seller and the Purchaser shall use all reasonable endeavours to procure the obtaining of the Property Consents as soon as reasonably practicable after the Completion Date…”

7

Paragraph 11 of schedule 7 of the BPA provided that:

“If by the date of 12 months after the date hereof all Property Consents shall not have been obtained in respect of the Business Property then either the Seller or the Purchaser may, by 3 months' notice in writing to the other terminate on the date of expiry of that notice, the obligations of the parties thereto in respect of the Business Property, under this Schedule 7 (Properties) (but without prejudice to any antecedent breach) in which event the Purchaser shall vacate the Business Property by the end of such notice period.”

8

It is the meaning and effect of paragraph 11 of Scehdule 7 of the BPA which is at the heart of the present dispute. As the Property Consents had not been obtained by 31 st December 1999, the option to terminate under that paragraph arose on 1 st January 2000.

9

On 30 th October 2007, still before the Property Consents had been obtained, the defendant wrote to the claimant, having referred to the BTA and BPA, as follows:

“Those Agreements require us to give three months' notice to terminate and we accordingly therefore give notice to terminate our Licence Agreement on 31 st January 2008, when all five units will be vacated.”

10

Although a large number of points concerning this notice were pleaded and pursued with differing degrees of enthusiasm thereafter, there is now a considerable measure of common ground. There is now no dispute that this letter constituted a notice to terminate under clause 11 of Schedule 7 of the BPA. There is also now no dispute that the defendant was entitled to serve such a notice when it did: an argument that the notice could only be served on or around the expiry of the 12 months from the date of the BPA was not pursued. It is also common ground that the notice was not invalidated by the fact that it was not received until 1 st November, thereby cutting down by one day the three months notice to which the claimant was entitled, or indeed on any other ground.

11

No doubt spurred on by the service of the defendant's notice, the transfer of the leases to the claimant from Betts UK Ltd occurred on 13 th December 2007. At or about the same time the claimant procured USSL's consent to grant the underleases to the defendant.

12

By paragraph 6.1 of Schedule 7 of the BPA, the date of “delayed legal completion” of the underleases to the defendant of the premises was, so far as relevant here:

“4 business days after … reasonable evidence is provided to the Purchaser's Solicitors that the Property Consent has been obtained”

13

On the date for legal completion the defendant was obliged by paragraph 7.1 of Schedule 7 of the BPA to deliver to the claimant a duly executed counterpart of the underleases.

14

On 14 th December 2007, in a letter addressed to the defendant's company secretary (subsequently re-sent on 18 th December to correct an error), the claimant (by its solicitors) informed the defendant that the leases had been transferred to the clamant by the transfer dated 13 th December 2007. It also informed the defendant that it had procured the necessary agreement to grant the underleases to the defendant. It therefore enclosed forms of underlease for execution by the defendant, and forms of licence to underlet.

15

The letters of 14 th and 18 th December 2007 both stated as follows:

“Our client has passed to us a copy of the letter … dated 30 October 2007, but not received by our client until 1 November 2007. We do not accept the validity of that letter as good notice to terminate your company's obligations in relation to these properties under the [BPA].”

16

The letters of 14 th and 18 th December 2007 were in fact passed by the defendant to its then solicitors, Messrs. Geldards, as confirmed by a letter from them to the claimant's solicitors dated 18 th January 2008. The letter from Geldards having referred to the earlier correspondence, continued as follows:

“Having considered the [BPA] and, in particular, paragraph 11 of Part B Schedule [8], we can see no reason for which our client's Notice of 30 th October should not be regarded as valid and accordingly therefore...

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