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BHP Petroleum Great Britain Ltd v Chesterfield Properties Ltd

Judgment Weekly Law Reports The Times Law Reports The Law Reports Cited authorities 17 Cited in 19 Precedent Map Related
Vincent
JurisdictionEngland & Wales
JudgeLord Justice Jonathan Parker
Judgment Date30 November 2001
Neutral Citation[2001] EWCA Civ 1797
Date30 November 2001
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3 2001 0628 & 0639 CHANFI
Categories

[2001] EWCA Civ 1797

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT

CHANCERY DIVISION Mr Justice Lightman

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Judge

Lord Justice Jonathan Parker and

Mr Justice Bodey

Case No: A3 2001 0628 & 0639 CHANFI

Chesterfield Properties Ltd
Appellants
and
Bhp Great Britain Petroleum Ltd
Respondent

Mr Kim Lewison QC [Mr Simon Berry QC] and Mr Andrew P D Walker (instructed by Messrs Dechert for the Appellants)

Mr Michael Barnes QC (instructed by Messrs Herbert Smith for the Respondent/Cross-Appellant)

Lord Justice Jonathan Parker

This is the judgment of the court

INTRODUCTION

1

Before the court are an appeal and a cross-appeal against an Order made by Lightman J dated 27 February 200The appellant (the first defendant in the action) is Chesterfield (Properties) Ltd ("Chesterfield"). The respondent and cross-appellant (the claimant in the action) is BHP Petroleum Great Britain Ltd ("BHP").

2

The second defendant in the action, Chesterfield (Neathouse) Ltd, is not a party to the appeal or the cross-appeal.

3

By its Particulars of Claim, BHP seeks relief against Chesterfield in respect of alleged breaches by Chesterfield of its obligations under an Agreement for Lease made between them dated 30 April 1997 ("the Agreement"). By its Defence Chesterfield denies liability, contending (among other things) (a) that under the terms of the Agreement, on their true construction, its liability for the alleged breaches (which are denied) is materially less than that contended for by BHP, and (b) that it has in any event been released from such liability by the operation of a Notice dated 30 July 1999 which it served on BHP under section 8 of the Landlord and Tenant (Covenants) Act 1995 ("the 1995 Act"). By its Reply, BHP joins issue on both those contentions.

4

Both BHP and Chesterfield applied for summary judgment under CPR Part 2The applications were heard by Lightman J and led to the Order part of which is the subject of the appeal and cross-appeal. In his judgment, which is reported at [2001] 3 WLR 277, the judge determined the issue as to the construction of the Agreement in favour of Chesterfield and the issue as to the effect of the Notice in favour of BHP: that is to say, he concluded that the extent of Chesterfield's liability under the Agreement was as contended for by Chesterfield, and that Chesterfield was not released from that liability by the operation of the Notice. BHP now appeals against the judge's conclusion as to the true construction of the Agreement; Chesterfield appeals against the judge's conclusion as to the effect of the Notice. In procedural terms, as already mentioned, the appellant is Chesterfield and the cross-appellant is BHP.

5

Chesterfield appears by Mr Kim Lewison QC and Mr Andrew P. D. Walker of counsel; BHP appears by Mr Michael Barnes QC.

THE FACTUAL BACKGROUND

6

By the Agreement, Chesterfield agreed with BHP to undertake certain specified works to a substantial office building at One Neathouse Place, London SW1 and to grant a 20-year Lease of the greater part of the building to BHP. Since it is unnecessary for present purposes to differentiate between the building as a whole and the part of it which was to be leased (and which in the event was leased) to BHP, we will refer to the latter as "the Property". The Agreement contains obligations on the part of Chesterfield (to the terms of which we shall have to return) relating to the making good of defects in the Property and to the repair of physical damage to the Property.

7

On 1 July 1997, Chesterfield granted a Lease of the Property to BHP in accordance with the terms of the Agreement. On 9 July 1999 Chesterfield transferred its interest in the Property, subject to the Lease, to Chesterfield (Neathouse) Ltd.

8

On 30 July 1999 Chesterfield served the Notice on BHP. By the Notice, Chesterfield applied to be released from "the landlord's obligations under the tenancy" with effect from the date of the transfer of its reversionary interest (9 July 1999), pursuant to section 8 of the1995 Act.

9

Section 8 of the 1995 Act (to the detailed terms of which we turn below) entitles a tenant on whom a notice has been served by his landlord under the section to serve a counter-notice on the landlord objecting to the release of the obligations referred to in the landlord's notice. In the event, however, no counter-notice was served by BHP.

10

The exterior of the Property is clad largely in units of toughened glass, some of which are fixed in a non-vertical plane. In September 1999 two of the vertical units fractured. In April 2000 two further units fractured, one of which (a non-vertical unit) fell to the ground and injured a passer-by. This led to the service of a dangerous structure notice on 5 May 2000. Since then, two further units have fractured. Neither of these fell to the ground.

11

In the action, which was commenced on 10 October 2000, BHP claims that under the terms of the Agreement and in the events which have happened Chesterfield is liable not merely to replace the units which have fractured (that is to say, to repair the physical damage which has occurred) but also to replace all the other non-vertical units in the Property, on the footing that the use of the toughened glass in a non-vertical plane constitutes a defect in the Property which Chesterfield is liable to make good. Chesterfield, on the other hand, contends that on the true construction of the Agreement its liability is limited to replacing the units which have actually fractured, with the further proviso that in the case of each such unit the cost of replacement must exceed £50,000 (excluding VAT). Chesterfield did not contend before the judge that its liability is further limited by the proviso as to cost of replacement (although the point is missed in its application notice), but no objection is taken by BHP to this contention being raised on BHP's cross-appeal. In the alternative, as noted earlier, Chesterfield contends that it has in any event been released from liability by the operation of the Notice. We refer hereafter to the issues as to the true construction of the Agreement as "the Agreement issue", and to the issue as to the effect of the Notice as "the Notice issue".

THE AGREEMENT

12

As already noted, the Agreement provided that following completion of works of refurbishment to be carried out by Chesterfield, Chesterfield would grant BHP a 20-year Lease of the Property.

13

Clause 1.1 of the Agreement contains a number of definitions, of which only the following are material for present purposes:

"1.1.8 "Building Works Defect" any physical damage to the Demised Premises manifesting itself during the Defects Period or any defect in the Demised Premises which will result in physical damage to the Demised Premises manifesting itself during the Defects Period and in either case: -

1.1.8.1. which is caused by defective design materials or workmanship in the construction of the Building Works and

1.1.8.2. which one or more of the Warrantors is responsible to the Landlord to remedy pursuant to the provisions contained in any contract appointment or warranty between the Landlord and the Warrantors and

1.1.8.3. the cost of remedying which will in each such case exceed £50,000 (excluding VAT);

but excluding: -

1.1.8.4. any such damage which occurs or arises directly or indirectly as a result of any works undertaken by or on behalf of the Tenant to the Demised Premises or the Tenants use of the Demised Premises otherwise than in accordance with the provisions of the Lease and

1.1.8.5. (subject and without prejudice to the provisions of clause 12.2.7) any such damage to the extent that the cost of remedying such damage would result in the Landlord incurring costs and expenses pursuant to clause 12.2 of this agreement in excess of the Maximum Aggregate Sum."

"1.1.15 "the Defects Period" the period of six years commencing on and including the date of the actual completion of the Lease or if completion of the Lease is delayed otherwise than by reason of the default of the Landlord the period commencing on and including the date upon which the Lease should have been completed pursuant to the provisions of this agreement."

14

Clause 1.2 is headed "Interpretation". Clause 1.2.5, under that heading, reads as follows (so far as material):

"References in this agreement to the Landlord are references to Chesterfield Properties PLC and shall not include the Landlord's successors in title. All obligations on the part of the Landlord in this agreement. are personal obligations of the Landlord".

15

Clause 12 of the Agreement is headed "Concrete Frame Defects and Building Works Defects". Clause 12.2 deals with "Building Works Defects". Its opening words are:

"If on one or more occasions during the Defects Period a Building Works Defect manifests itself the following provisions shall apply:.".

16

Clause 12.2.1 provides that BHP shall notify Chesterfield in writing of a "Building Works Defect" as soon as reasonably practicable. Clause 12.2.3.2 is in the following terms:

"the Landlord shall with the minimum practical inconvenience to the Tenant and as economically as reasonably practicable remedy or procure the remedying of each Building Works Defect as quickly as reasonably practicable after obtaining the necessary building consents and after (if reasonably required by the Landlord) the Tenant and all other occupiers shall have vacated the Demised Premises or the part or parts of the Demised Premises affected by such Building Works Defects."

17

Clause 12.5 of the Agreement is...

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