B J Aviation Ltd v Pool Aviation Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE SCHIEMANN,Lord Justice Chadwick,LORD JUSTICE CHADWICK,SIR MURRAY STUART-SMITH
Judgment Date18 January 2002
Neutral Citation[2002] EWCA Civ 163
Date18 January 2002
CourtCourt of Appeal (Civil Division)
Docket NumberA3/2001/0871

[2002] EWCA Civ 163

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM CHANCERY DIVISION

(MR DAVID OLIVER QC, Sitting as a Deputy High Court Judge)

Royal Courts of Justice

Strand

London WC2

Before

Lord Justice Schiemann

Lord Justice Chadwick and

Sir Murray Stuart-Smith

A3/2001/0871

B J Aviation Limited
Appellant
and
Pool Aviation Limited
Respondent

MR R DE LACY QC (instructed by Emrys Jones & Co, Powys SY21 7RZ) appeared on behalf of the Appellant

MR D STOCKILL (instructed by England Stickland and Hampton, Birmingham B24 8AA) appeared on behalf of the Respondent

( )

Friday, 18th January 2002

LORD JUSTICE SCHIEMANN
1

Lord Justice Chadwick will deliver the first judgment.

LORD JUSTICE CHADWICK
2

This is an appeal against an order made on 29th March 2001 by Mr David Oliver QC sitting as a Deputy Judge of the High Court in Chancery Division on an appeal from Master Bowman in proceedings brought by the appellant, BJ Aviation Limited, against the respondent, Pool Aviation Limited, to recover possession of land and buildings known as Mid Wales Airport and situated near Welshpool in Powys. The appeal raises a short question of construction as to the effect in a clause giving an option to renew for a further seven years the agreement under which the respondent was appointed to operate the airport of the words "subject to the re-negotiation of the rent payable".

3

The underlying facts may be stated shortly. The appellant is the owner of the airport premises. By an agreement dated 20th December 1991 the appellant appointed the respondent "to be the manager of the airport"; and the respondent agreed to comply with the obligations on the part of the Operator therein contained. For convenience I will adopt the definitions in the agreement and refer to the parties as "the Owner" and "the Operator".

4

Clause 4 of the agreement was in these terms:

"This Agreement shall operate for a period of seven years from the date hereof and if during the six months prior to the expiration of the said term the Operator shall serve written notice upon the Owner requesting the renewal of the Agreement for a further period of seven years then subject to the re-negotiation of the rent payable in no less a sum than that which shall be payable under the terms of this Agreement at that date the Owner shall grant to the Operator a fresh agreement in the same terms hereof save and except for this clause for a further period of seven years."

5

The effect of that clause was that the agreement came to an end on 20th December 1998; but (subject to the question in issue in this appeal) the Operator could, by serving a notice on the Owner within the last six months of that term, require the Owner to grant a new operating agreement, commencing from that date, upon the same terms (save as to the option to renew) for a further seven years.

6

The reference in clause 4 of the agreement to the rent payable on a renewal of the operating agreement being "in no less a sum than that which shall be payable under the terms of this Agreement at that date" requires some explanation. The explanation is found in clauses 5 and 6 of the agreement. Clause 5 provides for the rent payable under the agreement to be £7,000 per annum (plus VAT) "increasing annually in accordance with the terms of the immediately following clause". Clause 6 provides for an annual uplift determined by reference to the retail prices index. The clause is in these terms:

"The yearly rent payable under this Agreement shall be reviewed annually and the new rent payable for each year shall come into effect on the anniversary of the commencement of this Agreement and the rent for each year shall be the rent payable for the previous year of this Agreement multiplied by one plus the percentage increase in the index of retail prices maintained by the Department of Employment for the twelve months ending on the 1st day of July immediately preceding the end of each period of one year and shall form the base rent for the calculation of the following year."

7

On 9th October 1998—that is to say, within the relevant six-month period—the Operator gave written notice of its request for a new agreement. Negotiations as to the initial rent that would be payable under a new operating agreement, if granted, were inconclusive. By a letter dated 22nd October 1999 the Owner required the operator to vacate the airport. The Operator refused to do so, relying on its right, as alleged, to have a new operator's agreement.

8

It was in those circumstances that these proceedings were commenced by the issue by the Owner of a claim form on 6th January 2000. The relief sought was an order that the Operator vacate the airport premises in consequence of the termination of the operating agreement on 21st December 1998(sic); and damages for use and occupation from 22nd December 1998 until possession was given up. It is not clear why it was thought that the operating agreement terminated on 21st December 1998—rather than on 20th December 1998 as clause 4 of the agreement provides—but nothing turns on that.

9

By way of anticipatory response to the expected claim that the Operator was entitled to a new operating agreement it was alleged, in paragraph 8.2 of the particulars of claim, that the provisions of clause 4 of the agreement as to renewal were void and of no legal effect because they did not specify the rent payable under the renewed agreement. It was alleged further, also by way of anticipatory response, that the Operator was at the date of the notice to renew and on 21st December 1998 in breach of the obligation under clause 10 of the agreement to maintain the lighting system to the runway.

10

The Operator served a defence and counterclaim. The first point taken by way of defence was that the agreement of 20th December 1991 took effect as a lease; that the tenancy thereby created was within Part II of the Landlord & Tenant Act 1954; and that the tenancy had not been terminated in accordance with the provisions of that Act. Subject to that, the Operator addressed the contention that the renewal provisions in clause 4 were void for uncertainty.

11

First, it was said that, on the true construction of the clause the rent payable on the grant of a new operating agreement was either (a) the rent of the previous year or, (b) the rent of the previous year increased by the index linked uplift for which clause 6 of the agreement provides, or (c) a fair rent. In the alternative, again as a matter of construction, it was said that the mechanism for the re-negotiation of the rent payable for the renewed term was either (a) that given in clauses 5 and 6—that is to say the previous rent with an index linked uplift; or (b) a fair rent. Although those may be conceptual alternatives, the effect, as it seems to me, is the same. Second, it was said that the Owner had agreed (expressly or by implication) to a renewal of the operating agreement and to a mechanism for the determination of the rent by an independent person or by arbitration; or had waived any defect in clause 4; or was estopped from objecting to a renewal of the agreement or to the validity of the clause on what is described as the technical point taken in the particulars of claim.

12

By counterclaim the Operator sought a declaration that it had a lease which was within Part II of the 1954 Act; in the alternative, a declaration that it had exercised the right to renew contained in clause 4 of the agreement and a declaration that the rent payable under the renewed agreement was the existing rent, alternatively the existing rent with an index-linked uplift, and (in the further alternative) an order that a person be appointed to determine the rent from 21st December 1998 or that there be an inquiry to fix such rent.

13

The Owner's response was to apply for summary judgment under CPR Part 24. That application came before Master Bowman on 1st August 2000. He rejected the Operator's contention that the agreement took effect as a lease. He accepted the Owner's contention that the provision for renewal in clause 4 of the agreement was of no legal effect. Accordingly, he made an order that the Operator vacate the airport by 30th September 2000, and directed an inquiry as to the compensation payable by the Operator for use and occupation since 22nd December 1998 until possession was given up. He made an order for an interim payment in the sum of £35,000 or thereabouts. He refused permission to appeal.

14

The Operator sought and obtained permission to appeal from the Master's order. When granting permission to appeal Rimer J stayed the order for possession. The appeal came before Mr Oliver QC at the end of January 2001. He delivered an oral judgment on 29th March 2001. He, too, rejected the contention that the agreement took effect as a lease; but he held that the Operator had a good case that the provisions of clause 4 were valid and of legal effect, which, as he said, provided a defence and was sufficient to dispose of the matter. He held, also, that the allegations of breach of the Operator's obligation under...

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