Aviva Life and Pensions UK Ltd v Linpac Mouldings Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Etherton,Lord Justice Dyson,Lord Justice Sedley |
| Judgment Date | 22 April 2010 |
| Neutral Citation | [2010] EWCA Civ 395 |
| Docket Number | Case No: A3/2009/1233 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 April 2010 |
[2010] EWCA Civ 395
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
Mr Justice Lewison
Before:lord Justice Sedley
Lord Justice Dyson
and
Lord Justice Etherton
Case No: A3/2009/1233
HC09C001137
Christopher Nugee Q.C., Tim Dutton (instructed by Linklaters) for the Appellant
Martin Rodger Q.C, Elizabeth Fitzgerald (instructed by Aviva Legal Services) for the Respondent
Hearing dates: 29 th March 2010
Lord Justice Etherton:
Introduction
This is an appeal by Linpac Mouldings Ltd (“Linpac”) against an order of Mr Justice Lewison dated 21 May 2009 by which he made declarations that (1) the refusal of consent of the claimant, Norwich Union Life & Pension Limited (“NU”), to the assignment by the second defendant, Ecomold Limited (“Ecomold”), to Linpac of certain leases was reasonable, and (2) Linpac's right to break those leases was irretrievably lost when it assigned those leases to Ecomold in 2005. By the date of the hearing Linpac had limited its appeal to that part of the Judge's order concerning the loss of the right to break the leases.
The Judge's declaratory order concerned two leases, both dated 4 February 1972 and made between The Archie Sherman Trust Nominees Limited, as landlord, and Pye of Cambridge Limited, as tenant (together “the 1972 Leases”). One of them related to Unit 2, and the other related to Units 9, 10, 11, 12, 17, 18, 22 and 23, Prittlebrook Industrial Estate, Priory Crescent, Southend on Sea (“the Industrial Estate”).
The principal issue is whether a contractual right to break the 1972 Leases was limited to the exercise of the right by Linpac during such time as it was tenant, and was lost on assignment of the term by Linpac. Since, in any event, the 1972 Leases can only be broken if it is possible to determine at the same time a lease dated 18 February 2005 between NU and Linpac of Unit 8 on the Industrial Estate (“the 2005 Lease”), a related issue is whether a break clause in the 2005 Lease can only be exercised by Linpac while it remained the original tenant, and was lost on assignment.
Since the commencement of the proceedings NU has changed its name to Aviva Life and Pensions UK Limited, but the Judge's judgment, the parties’ skeleton arguments and the oral submissions of counsel have all ignored the change of name, and I shall therefore do the same in this judgment.
The contractual provisions
Each of the 1972 Leases was for a term of 99 years from 1 December 1971. Each Lease contained a tenant's covenant not to assign the whole of the demised premises or underlet or part with possession of the same without first obtaining the licence of the landlord in writing. They also contained provision for upwards —only rent review to the fair rack rental market value every seven years. The annual rents currently payable under one of the 1972 Leases is £110,000, and under the other is £440,000.
By April 1986 the 1972 Leases had become vested in National Plastics Limited (“National Plastics”), and the reversion had become vested in NU (in fact, another company in the same group, but it is not necessary to distinguish between them).
On 4 April 1986 NU granted National Plastics licence to assign each of the 1972 Leases to Linpac. Both licences contained a break clause. For practical purposes they are in the same form. It is only necessary to refer to the licence (“the 1986 Licence”) relating to Unit 2 (“the 1972 Lease”).
In the Introduction to the 1986 Licence, NU is defined as “the Landlord”, National Plastics as “the Assignor”, and Linpac is described as:
“Linpac Mouldings Limited whose registered office is at 1 Charles Street, Louth, Lincolnshire (hereinafter called ‘the Assignee’).”
Clause 1 gave licence to assign the demised premises to the Assignee for the residue of the term.
Clause 2(i) contains a covenant by the Assignee:
“as from the date of the completion of the assignment and thenceforth during the residue of the term to pay the rent reserved by the Lease (including rent and any balancing payments insurance premiums rates or other payments which may have accrued or become payable in respect of any period prior to the aforesaid dates) and to observe and perform the covenants and conditions on the part of the lessee in the Lease contained.”
Clause 5 contains the break clause with which the proceedings and this appeal are concerned. It was as follows so far as relevant:
“The Landlord and the Assignee hereby agree that if the Assignee (meaning Linpac Mouldings Ltd only) shall desire to determine the Lease on the First day of December Two thousand and ten and shall give to the Landlord not less than eighteen months previous notice in writing of such desire and subject to compliance with the provisos hereinafter contained and subject to vacant possession of the demised premises being given then immediately on the expiration of such notice everything in the Lease shall cease and be void but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of covenant Provided that:
(i) the Assignee shall up to the date of such determination pay the rent and in all material respects perform and observe the covenants on the tenant's part reserved and contained in the Lease;
(ii) the Assignee shall pay to the Landlord on or before the date twenty eight days prior to the determination of the said notice a sum equivalent to two years annual rent payable in respect of the demised premises at the first day of December Two thousand and ten or the sum of NINETY SEVEN THOUSAND POUNDS (£97,000), whichever shall be the greater;
(iii) the determination of the lease aforesaid shall take place simultaneously with the determination by the assignee of the two leases dated …”
Proviso (iii) to clause 5 of the 1986 Licence was varied by a deed of variation dated 18 February 2005 between NU and Linpac so as to eliminate reference to leases which had been surrendered by agreement, and to include reference to the 2005 Lease which was executed on the same date. The revised proviso (iii) to clause 5 of the 1986 Licence is as follows:
“(iii) the determination of the Lease as aforesaid shall take place simultaneously with the determination by the Assignee of the Lease dated the fourth day of February One thousand nine hundred and seventy two made between The Archie Sherman Trust Nominees Limited (1) Pye of Cambridge Limited (2) and Philips Electronic and Associated Industries Limited (3) of the premises known as Buildings numbered 9, 10, 11,12, 17, 18, 22 and 23 Priory Crescent Industrial Estate Southend on Sea and the Lease dated the 18 day of February Two thousand and five made between Norwich Union Life and Pensions Limited (1) and Linpac Mouldings Limited (2) of the premises known as Building 8 Priory Crescent Industrial Estate Southend on Sea”.
The 2005 Lease
Clause 1.13 of the 2005 Lease provides that the expression “the Tenant”“means [Linpac] and includes the successors in title of the Tenant where permitted by the Landlord and Tenant (Covenants) Act 1995”.
The 2005 Lease is for a term commencing on 18 February 2005 and expiring on 30 November 2070. Clause 6 contains a tenant's option to determine on the “Determination Date”, which is defined to mean 1 December 2010. Clause 6.2 is as follows:
“6.2 If the Tenant wishes to determine this Lease on the Determination Date, it must
6.2.1. serve notice upon the Landlord not less than eighteen months before the Determination Date of its intention to determine its Lease
6.2.2. pay the rents and other sums payable under this Lease and materially perform and observe the covenants and conditions on the part of the Tenant contained in this Lease up to the Determination Date and
6.2.3. yield up the Premises on the Determination Date with vacant possession and, otherwise, in accordance with clause 3.5
6.2.4. pay to the Landlord on or before 3 November Two thousand and ten a sum equivalent to two years annual rent payable in respect of the Premises at 1 December Two thousand and ten or the sum of Fifty eight thousand pounds (£58,000) whichever shall be the greater
6.2.5. simultaneously determine the two Leases each dated fourth day of February 1972 of the premises known as buildings numbered 2, 9, 10, 11, 12, 17, 18, 22 and 23 Priory Crescent Industrial Estate, Southend on Sea.”
Clause 6.5 of the 2005 Lease provides:
“In this clause 6 references to “the Tenant” mean Linpac Mouldings Limited as original tenant or any company forming part of the same group of companies (within the meaning of S42 of the Landlord and Tenant Act 1954).”
The proceedings
On 22 February 2005 the 1972 Leases and the 2005 Lease were assigned with NU's consent by Linpac to Linpac Automotive Limited (“Automotive”). Linpac and Automotive were then associated companies. At a later date Automotive ceased to be a member of the same group as Linpac and changed its name to Ecomold Limited. In May 2005 Ecomold entered into administration. Ecomold ceased paying the rents, and vacated the Units, which are currently empty.
On 11 March 2009 Ecomold sought NU's consent to the re-assignment of each of the 1972 Leases and the 2005 Lease to Linpac. On 19 March 2009 NU refused consent to the assignment of the 1972 Leases but...
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