Bristol Alliance Nominee No. 1 Ltd v Bennett
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Kitchin,Lord Justice Christopher Clarke |
| Judgment Date | 18 December 2013 |
| Neutral Citation | [2013] EWCA Civ 1626 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 December 2013 |
| Docket Number | Case No: A2/2012/2072 |
[2013] EWCA Civ 1626
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Mr David Donaldson QC, sitting as a Deputy High Court Judge
[2012] EWHC 2050 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rimer
Lord Justice Kitchin
and
Lord Justice Christopher Clarke
Case No: A2/2012/2072
Mr Lloyd Tamlyn (instructed by Eversheds LLP) for the Appellants
Mr Tom Shepherd (instructed by Salans LLP) for the Respondents
Introduction
This appeal is against an order made on 23 July 2012 in the Chancery Division by Mr David Donaldson QC, sitting as a deputy High Court Judge. He was ruling on an application for directions made by Neil Bennett and Alex Cadwallader as joint administrators of A Wear UK Limited ('the company'), to which office they had been appointed on 22 December 2011 pursuant to paragraph 14 of Schedule B1 to the Insolvency Act 1986.
The matters on which the administrators sought directions related to two separate, but similar, agreements entered into between the company's landlords and the company in respect of the company's leasehold premises in Bristol and Leicester. The issues were (i) whether, in the events that had happened, the landlords were entitled to be paid certain money held by two firms of solicitors in their client accounts; and (ii) if not, whether the landlords should be permitted to bring proceedings for specific performance of the agreements against the company, being proceedings which, if successful, would entitle the landlords to such money. As the company was in administration, no such proceedings could be brought without either the administrators' consent (which had been refused) or the court's permission (paragraph 43(6) of Schedule B1).
The judge, in a succinct reserved judgment, answered the first question in the negative and refused permission to bring proceedings. The landlords, represented as below by Mr Lloyd Tamlyn, appeal against his order. On 7 December 2012, the company moved from administration into creditors' voluntary liquidation, with the joint administrators becoming its joint liquidators; and it was the joint liquidators, by Mr Tom Shepherd, who also appeared below, who presented the argument in support of the judge's order.
The facts
The company was incorporated on 3 April 2008. It is the wholly-owned subsidiary of an Irish company. It traded as 'A Wear', its principal business being women's high street fashion and accessories, which it retailed through a small network of stores and concessions in the UK.
The company had leasehold stores in Leicester and Bristol. Its Leicester lease, dated 14 October 2008, was between (1) Highcross (No.1) Ltd and Highcross (No.2) Ltd as landlords, (2) the company as tenant, and (3) A Wear Ltd as surety. The term was 10 years from 24 June 2008. The initial rent was a basic annual rent of £210,000 with an upwards only review in 2013. The Highcross companies (together 'Highcross') were the third and fourth respondents to the application and are appellants.
The company's Bristol lease, dated 8 December 2009, was between (1) Bristol Alliance Nominee No. 1 Ltd and Bristol Alliance Nominee No. 2 Ltd as landlords, (2) the company as tenant, and (3) A-Wear Ltd as surety. The term was 15 years from 24 June 2008. The initial rent was a basic yearly rent of £340,000, with upwards only reviews in 2013 and 2018. The two Bristol companies (together 'Bristol') were the first and second respondents to the application and are also appellants.
The company traded at a loss from the outset. By January 2010, it was incurring heavy losses. In 2009, the company had asked Bristol to accept a surrender of the Bristol lease for no premium. That was not acceptable to Bristol, but following negotiations the parties to the Bristol lease entered into an 'Agreement for surrender and deed of variation' on 12 May 2010. The parties to the Leicester lease later entered into a similar agreement and deed. The argument before the judge and this court turned on the Bristol document and I shall now summarise its principal terms.
The Bristol 'Agreement for surrender and deed of variation'
By clause 5, the parties varied the terms of the lease in the manner provided in Schedule 3 to the deed. The effect was to release the company from any continuing obligation to pay the basic yearly rent of £340,000 and to substitute in its place a 'Turnover Rent' in the terms set out in Schedule 4.
By clause 2.1, the company also agreed to surrender the Bristol lease and Bristol agreed to accept such surrender. The surrender was to be effected by the execution of the transfer (in Form TR1, as amended) annexed to the deed. By clause 2.2, the consideration for the surrender was the payment by the company to Bristol of the ' Price' and the release to be given under clause 9.2. The ' Price' was defined as £340,000 plus VAT of £59,500; and clause 9.2 provided that 'on the date of Actual Completion' Bristol and the company were (subject to an immaterial exception) mutually to release each other from all obligations under the lease in the terms contained in the Form TR1.
Completion of the surrender was dealt with by clause 2.3. Clause 2.3.1 entitled Bristol 'at any time [to] give [the company] not less than six weeks written notice of the Completion Date', such notice being irrevocable. The 'Completion Date' was defined by the deed as the date so notified. Bristol was required to send the engrossment of the deed of surrender to the company not less than ten working days prior to such date. Clause 2.3.4 provided that completion of the surrender (i) 'is to take place on the Completion Date', (ii) 'is to be completed by [Bristol] and [the company] completing the [Form TR1]', and (iii) 'will operate to merge the title to the Lease in [Bristol's] title to the premises'. Clause 2.4 provided for the surrender to be with vacant possession.
I must say a little more about the ' Price'. The deed defined the 'Escrow Amount' as £340,000; and the 'Escrow Date' as the date on which Bristol's solicitors received the escrow amount into their bank account, which was in fact on 12 May 2010, the date of the deed. Clause 4, headed 'The Price', provided so far as material that:
'4.3 [Bristol] shall procure that [their] Solicitors hold the Escrow Amount in an escrow account to be released in accordance with the terms of this Deed.
4.4 The Escrow Amount shall be released by [Bristol's] Solicitors to [Bristol] at the Date of Actual Completion in partial satisfaction of the Price and the balance of the Price shall be transferred by [the company] to [Bristol] on that date. …
4.6 If this Deed ceases to have any effect in accordance with clause … 11 or if the Date of Actual Completion has not occurred by the end of the contractual term of the Lease the Price shall be released immediately by [Bristol's] Solicitors to [the company].'
And clause 11 provided that:
'11. This Deed shall not be assignable by [the company] and for the avoidance of doubt will cease to have effect if [the company] assigns or underlets its interest in the Lease prior to the Actual Date of Completion.'
The scheme of the agreement and deed was therefore simple. It changed the nature of the rent payable by the company under the lease. It also included an agreement to surrender the lease, to be completed on a date to be notified by Bristol to the company. Completion was to take place by an execution of the transfer in Form TR1, which contained a mutual release of the obligations imposed by the lease; and on completion, the ' Price' payable to Bristol was to be satisfied by (i) the release by Bristol's solicitors to Bristol of the escrow amount, £340,000; and (ii) the payment by the company of the VAT on that amount, £59,500. The ' Price' was, therefore, in the nature of a negative premium payable by the company to Bristol as consideration for a release from its obligations under the lease.
More facts
The parties to the Leicester lease entered into a similar 'Agreement for surrender and deed of variation' on 11 April 2011. It was on like terms as those of the Bristol surrender agreement. The rent was reduced to £75,000 a year, the ' Price' for the surrender was £210,000 (the original basic annual rent) plus VAT. An 'escrow amount' of £210,000 was paid into Highcross's solicitors' client account.
On 24 November 2011, Highcross served notice on the company requiring completion of the surrender of the Leicester lease on 5 January 2012. Highcross had, by then, found a new tenant for the premises.
On 1 December 2011, Bristol served notice on the company requiring completion of the surrender of the Bristol lease on 17 January 2012 (the notice mistakenly said 2011 and also mistakenly identified the year of the lease as 2011 rather than 2009). The company acknowledged receipt of that notice on 6 December 2011.
The company entered into administration on 22 December 2011.
As the company had entered into administration, the landlords submitted modified forms of the agreed form of transfer that reflected that change. The changes also reflected that, upon completion, only the escrow money would be paid to the landlords towards the ' Price': the landlords accepted that, following completion,...
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