Aubergine Enterprises Ltd v Lakewood International Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Auld,Lord Justice Ward,Lord Justice Robert Walker |
| Judgment Date | 26 February 2002 |
| Neutral Citation | [2002] EWCA Civ 177 |
| Date | 26 February 2002 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2001/0514 |
[2002] EWCA Civ 177
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (Mr David Vaughan QC)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Auld
Lord Justice Ward and
Lord Justice Robert Walker
Case No: A3/2001/0514
Miss Elizabeth Weaver (instructed by Fladgate Fielder) for the Appellant
Mr Michael Pryor (instructed by Beveridge Milton) for the Respondent
This is an appeal by Aubergine Enterprises Limited ["the buyer"] against the order of Mr. David Vaughan, QC, sitting as a Deputy Judge of the Chancery Division: 1) dismissing its claim for a declaration that it had validly rescinded a contract to buy a leasehold interest from Lakewood International Limited ["the seller"] because of the seller's failure to obtain the landlord's licence to assign; and 2) and giving judgment for the seller on its counterclaim for forfeiture of half of the 10% deposit paid, £234,000 and for payment of the balance of the deposit plus interest, namely £266,316.03.
The seller and the buyer were both registered in the British Virgin Islands. By a contract of 9 th August 1999 the buyer agreed to buy the leasehold interest in Floors 1–7, 18 Berkeley Street, London, W1, including contents, from the seller for £4.68 million. The contractual completion date was 30 th September 1999. The contract incorporated the Standard Conditions of Sale, 3 rd edition, which provided that, if consent to assign was required, the seller was to apply for consent at its expense and to use all reasonable efforts to obtain it (standard conditions 8.3.1 and 8.3.2(a)) and the buyer was to provide all information and references reasonably required (standard condition 8.3.2(b)). Either party, unless in breach of its respective obligations in obtaining the consent, could rescind the contract by notice to the other if consent was not given three working days before "completion date" or the consent had been given subject to a condition to which the buyer reasonably objected (standard condition 8.3.4). In either event the deposit was to be repaid to the buyer with accrued interest (standard conditions 8.3.4 and 7.2(a)). Clause 5 of the contract gave the seller certain rights, including the right to charge interest and recover outgoings on the property in the event of delay in completion caused by the buyer's delay in complying with its contractual obligations or compliance with certain conditions that the landlord might impose as to guarantee and documentation.
Clause 4.18.3 of the lease required the landlord's prior written consent to assign, such consent not to be unreasonably withheld; and clause 14.8.4(d) allowed the landlord to withhold consent unless the buyer covenanted, and any guarantors reasonably required by the landlord guaranteed, by deed, compliance with the lease.
There are two main issues in the appeal. First, did the landlord give its consent to assign in time as required by special condition 8.3.4? Second, if not, was the buyer prevented from rescinding by its own breach of contract in failing to provide information and references under standard condition 8.3.2(b) or by reason of waiver of, or estoppel from exercising, any right to rescind it may have had?
Before summarising the material facts, which, save in one respect, are largely undisputed, I should identify the main players in the story. They are not the landlord or the seller or the buyer, but their respective solicitors, the correspondence between whom tells much of the story. The seller's solicitor was Mr. Ian Jefferson, a sole principal and an experienced conveyancer. The buyer's solicitors were Fladgate Fielder, acting in the main through Mrs Antonia Brandes, one of their partners and also an experienced conveyancer. Both Mr. Jefferson and Mrs. Brandes gave evidence. The landlord's solicitors were Stephenson Harwood, acting through a relatively inexperienced solicitor, Miss Emily Steele. Stephenson Harwood declined to cooperate in the case either by producing documentation or by allowing Miss Steele to give evidence. The other notable absentee from the witness box or by way of production of documents was any representative of the buyer. Of Miss Steele, the Deputy Judge said in his judgment:
"Although I have not heard evidence from Miss Steele, one matter upon which both solicitors [i.e. Mr. Jefferson and Mrs Brandes] were agreed, was that Miss Steele appeared to be very inexperienced and that many of the problems which arose in the present case were due to her inexperience. She appeared to both witnesses to lack the experience to deal with matters outside normal conveyancing practice, such as seeing that an undertaking as to costs would be wholly unnecessary where there was ample protection for her clients in the rent deposit, failing to give firm advice to her clients, and by raising many unnecessary issues or issues at much too late a stage. It also seems that they [sic] were guilty of considerable delay."
On 12 th August 1999, three days after the exchange of contracts, the seller's solicitor wrote to the landlord's agents informing them of 30 th September 1999 as the proposed date for completion and that the buyer would provide a rental deposit, and requested consent to the assignment. The landlord's agents did not reply until 26 th August 1999, when they sent a letter headed "SUBJECT TO CONTRACT" and "WITHOUT PREJUDICE", stating that the landlord "would be prepared in principle to grant a licence for the assignment of the lease". They asked for a rental deposit of £10,000 and their costs and fees in connection with the assignment and, as to the formalities of the licence, referred them to the landlord's solicitors. The following day, 27 th August, the seller's solicitor wrote to the landlord's solicitors proposing a form of assignment, inviting agreement of a draft deed of rent deposit and suggesting addition to it of direct covenants from the buyer. As for the licence itself, they added that, apart from a recital, it need be no more than a single line.
About three weeks had now passed since the parties had exchanged contracts and the seller's solicitor had first sought the landlord's consent to assign. During those three weeks the seller's and the buyer's respective solicitors had proceeded in the ordinary way with their conveyancing tasks, and they would continue to do so over the remaining four weeks before 30 th September. And, as the Deputy Judge observed, at this stage:
"nothing … would have suggested to these experienced conveyancers that there was going to be any problem with regard to the licence to assign. Experience suggested to both solicitors that the Landlord could have no possible grounds for objection provided that the necessary documentation was produced at their request."
However, on 1 st September 1999 the landlord's solicitors wrote to the seller's solicitor marking the letter "SUBJECT TO LICENCE" and repeating that the landlord had "agreed in principle to grant a licence to assign the lease". They stated that they would review the draft deed of rent deposit and requested an undertaking from the seller's solicitor in respect of the landlord's legal and agency costs in respect of the proposed licence, adding that, once the undertaking had been received, they would send a draft licence to assign. By letter of 3 rd September the seller's solicitor replied, declining to guarantee the landlord's obligations, observing that the landlord already held over £20,000 by way of rental deposit from the seller and that there was very little work for the landlord's solicitors to do, simply the preparation of a shortly expressed licence to assign and agreement of the draft rent deposit deed. The landlord's solicitors did not respond until 10th September, and only then after receipt of a letter from the seller's solicitor on that day, protesting about their delay and enclosing a simple form of licence to assign and an engrossment of the rent deposit deed. In their letter, the landlord's solicitors stated that they were instructed to require the seller to provide an authorised guarantee agreement and would only send him, the seller's solicitor, a draft licence once he had agreed to pay the landlord's legal and agency fees.
By letter of 13 th September the seller's solicitor wrote to the landlord's solicitors protesting about their failure to carry out their client's instructions in accordance with its agreement communicated in their letter of 1 st September to grant the licence to assign, and indicating that he would deal with the landlord direct. On the same day, he sent to the landlord's agents copies of the proposed rent deposit deed and the requested authorised guarantee agreement. The landlord's solicitors, by letter to the seller's solicitor of 14 th September, reiterated the landlord's agreement "in principle" to the proposed assignment, but persisted in refusing to proceed with the matter until the seller's solicitor undertook to pay the landlord's legal and surveyor's fees in connection with the licence to assign and authorised guarantee agreement. This prompted the seller's solicitor to reply on 15 th September re-stating his refusal to do so, observing that the seller had an obligation under the lease in respect of any fees reasonably incurred by the landlord in the grant of the licence, for which the latter was already well covered by the seller's rent deposit.
About this time – mid-September –there is the first inkling of another possible impediment to completion taking place on...
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