Bentleys Stokes & Loweless v Eagle Major Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Peter Smith,Mr Justice Peter Smith |
| Judgment Date | 23 January 2003 |
| Neutral Citation | [2003] EWHC 41 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2002/APP/712 |
| Date | 23 January 2003 |
[2003] EWHC 41 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London WC2A 2LL
The Honourable Mr Justice Peter Smith
Case No: CH/2002/APP/712
Mr Grant Crawford (instructed by Bentleys Stokes & Loweless) for the appellant
Mr John Wardell QC (instructed by Linnells) for the respondent
Hearing date: 14 January 2003
Approved judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION
This judgment arises out of an appeal by the defendants and the cross appeal by the claimant (both with permission) against the judgment of deputy master Behrens on 2 August 2002.
The deputy master dismissed the defendants' application to strike out the particulars of claim and/or grant them summary judgment on their defence, granted the defendants permission to appeal and the claimant permission to cross appeal if so advised and ordered the defendants to pay the claimants costs assessed at £10,000.00 (ten thousand pounds) plus VAT.
At the previous hearing Mr Wardell QC, who appeared for the claimant, abandoned the cross appeal, which related to the deputy master's finding that the primary limitation period in this case arose when the claimant entered into the lease the subject matter of the claim in these proceedings, as opposed to when it became aware of the amount required by the freeholder in June 2000 to purchase the reversion expectant on the lease.
BACKGROUND
The claimant is the leasehold owner of land at Horton-Cum-Studley, Oxfordshire ("the Land") on which it constructed the Studley Wood Golf Club, comprising an 18-hole golf course and club house. The cost incurred in constructing the golf club was approximately £1.6m (one point six million pounds).
The defendants are a firm of solicitors and at all material times were retained by the claimant to act for it on its behalf when it acquired the lease of the Land.
The lease of the Land ("the Lease") was dated 2 February 1994 and is made between Malish Investments AG (1) and the claimant (2).
This action is brought against the defendants alleging that they were negligent and in breach of contract in respect of their retainer by the claimant to act for it in the acquisition of the Lease. The issue relates to the rent review clause contained in the Lease.
TERMS OF LEASE
The Lease is a lease for a term of 100 years from 2 February 1994. The initial rent was £15000.00 (fifteen thousand pounds) per annum for the first two years and thereafter £45,000 00 (forty-five thousand pounds) per annum until the first review date. The first review date was the fifth anniversary of the term, ie 2 February 1999 and thereafter every five years.
Under clause 5 of the Lease the claimant covenanted with the landlord within two years from the date thereof to lay out and construct in accordance with all statutory requirements after the reasonable satisfaction of the Landlord a club house and a high class golf course. As I have said above the expenditure in respect of that was approximately £1 6m (one point six million pounds).
The only other provisions that are relevant are the rent review provisions, to be found in the third schedule.
Under schedule 3 paragraph 2 the initial rent is the sum of £45,000.00 (forty-five thousand pounds)and the increase is defined as meaning the amount by which if any the index exceeds the base figure. The index rent means the aggregate of the initial rent and the sum that bears the same proportion to the initial rent as the increase bears to the base figure. The index means "all items" index figure of the Index of the Retail Prices published by the Department of Employment or any successive Ministry or Department (clause 2.13). The base figure was the index for the month of September 1993 namely 141.9.
Under the third schedule the rent is to be reviewed five yearly after the initial period in accordance with the changes in the RPI.
However (and this is the area where the claim has arisen), either party under clause 4.3 of the third schedule can serve a six-month notice prior to a relevant market review date seeking that the rent be determined on a market rent basis being the rent as defined in paragraph 4.1.2, namely the yearly rental value of the premises having regard to the open market rental value as between a willing landlord and a willing tenant for the property at the relevant market review date, let without a premium for the residue of the unexpired term of the lease subject to the terms of the lease other than the amount of rent but including the provision for rent review and subject to various assumptions which I need not set out in this judgment.
The vital issue concerns the disregards for the purposes of the rent review set out in clause 4.2. Under clause 4.2.3 the following are disregarded:
"Any improvement to the Premises made by the Tenant the Tenant's sub-tenants or their respective predecessors in title with the consent of the Landlord oilier than those:
(a) made in pursuance of an obligation to the Landlord; or
(b) completed by the Tenant, the Tenant's sub-tenant and/or their predecessors in title more than 35 years before the relevant Market Review Date.
The operation of a review according to the RPI is entirely mechanistic and does not involve consideration of the premises but merely an application of the movement in the Index to the base rent of £45,000.00 (forty-five thousand pounds) per annum.
The alternative market value basis involves an assessment of the market value for the premises at the review date. It would be seen however that under clause 4.2.3(a) any improvements carried out pursuant to an obligation are not disregarded.
This has a significant impact because under clause 5 of the Lease as I have set out above there is an obligation to construct the golf course. It follows therefore that on the alternative market rental view basis the Tenant will pay rent on the value of the land as improved by it at its cost I have already observed that the amount of expenditure was approximately £1 6m (one point six million pounds).
This is a surprising obligation to my mind for a Tenant to take on board. The effect of this is that the Tenant is locked into a 100-year lease at a potential rack rent based on the value of the premises as improved by it on the initial conversion of the Land to a golf course. Prior to the construction of the works the premises comprised of agricultural land with a relatively modest rental value.
The claimant's case is that this clause was not agreed by it and the inclusion of the clause by the defendants was negligent, so that they have a lease, which is of substantially less value than otherwise they would have. Its claim for damages is a figure of approximately £750,000.00 (seven hundred and fifty thousand Pounds). Its case is that it understood it was obtaining a lease where the rent review on the market value basis was only to be adjusted by reference to the undeveloped site value with the benefit of planning permission for the construction of the golf course but not on the basis that the rent should be assessed taking into account its works of constructing the golf course.
The defendants deny liability.
ISSUES
There were before the deputy master five issues for consideration. Those issues are as follows:
(1) Can it be said that at this stage that the claimants' case has no prospect of success on the basis of a claim for negligence and/or breach of contract?
(2) If contrary to that primary submission there is a claim is the, claim time barred on the basis that it accrued when the Lease was entered into on 2 February 1994 and accordingly prima facie became time barred in contract and tort on 2 February 2000. In this context the claim form was issued on 24 July 2001.
(3) If the primary limitation period did not commence on 2 February 1994 did it commence in June 2000 for the reasons that I have set out earlier in this judgment?
(4) If the primary limitation period began on 2 February 1994 was that postponed by virtue of section 32 of the Limitation Act 1980?
(5)If the primary limitation period began on 2 February 1994 was it in the alternative postponed pursuant to section 14A Limitation act 1980? If so did the claimant have the requisite knowledge less than three years before the issue of the claim form?
The section 32 point was disposed of by the deputy master on the basis of the House of Lords decision in Cave v Robinson Jarvis and Ro1f [2002] 2 WLR 1107. The claimant did not appeal that decision.
The deputy master also determined that the prima facie limitation period commenced on 2 February 1994. Although the claimant sought to appeal that finding it was abandoned as I have set out above.
The only issues before me therefore were as to whether or not the claimant's action was sustainable in negligence and breach of contract and if so whether or not it was barred under the Limitation Act 1980 and in that context whether or not the claimants could rely upon the secondary limitation period provided by section 14A Limitation Act 1980.
PRINCIPLES
The defendant's application is on the basis that the amended particulars of claim should be struck out under CPR rule 3.4(2)(b) (the case is an abuse of the process) or alternatively, pursuant to CPR rule 24.2 that there is no reasonable prospect of the claim succeeding.
I remind myself that this is not the trial. Nor is there any power even under the CPR regime to conduct a pre-trial trial and no assessment should be made of evidence: see Wenlock...
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