Crossco No.4 Unlimited and Others v Jolan Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice McFarlane,Lord Justice Etherton |
| Judgment Date | 21 December 2011 |
| Neutral Citation | [2011] EWCA Civ 1619 |
| Docket Number | Case No: A3/2011/1085 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 2011 |
[2011] EWCA civ 1619
Lord Justice Arden
Lord Justice Etherton
and
Lord Justice Mcfarlane
Case No: A3/2011/1085
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
Mr Justice Morgan
HC10C01748
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Michael Driscoll QC and Ciaran Keller (instructed by Pinsent Masons LLP) for the Appellant
Mr Romie Tager QC and Mr Justin Kitson (instructed by Addleshaw Goddard LLP) for the Respondent
Hearing dates : 1st November 2011
Introduction
This is an appeal from an order of Mr Justice Morgan dated 31 March 2011 which, among other things, ordered that a lease of 19/31 Piccadilly, Manchester ("the Building"), of which the second appellant is the tenant and the second respondent is the landlord, be terminated in accordance with section 64 of the Landlord and Tenant Act 1954 ("the 1954 Act") without the grant of a new tenancy.
As the Judge wryly remarked in [11] of his judgment it is a remarkable fact that a 15 minute discussion on 18 February 2009, followed by a modest number of communications passing between the parties from 18 February 2009 to 10 March 2009, has resulted in a trial of 35 days. I would add to that statement of wonder that those matters have also led to a judgment of the Judge running to 107 pages and 429 paragraphs, 178 pages of written submissions and 5 bundles of authorities on the present appeal, and an appeal hearing lasting two and a half days even though the appeal has been restricted to only some of the matters in dispute before the Judge.
In the event, I consider that the outcome of this appeal turns essentially on findings of fact made by the Judge. Although the appeal raises an interesting question about the jurisprudential basis of what has become known as "the Pallant v Morgan equity", considered by the Court of Appeal in Banner Homes Group Ltd v Luff Developments Ltd [2000] Ch 372, the factual framework, and particularly the Judge's factual findings, inevitably lead to the failure of the appeal whichever way that type of constructive trust is characterised.
The context
The Judge's description of the facts covers many pages. The following account is confined to what is essential for the purpose of understanding what is in issue on this appeal and my reasons for concluding that it should be dismissed.
There were two sets of proceedings concerning the Building before the Judge.
By a lease dated 27 November 2007 ("the Lease") the Building was demised to the second appellant, Piccadilly, an unlimited company, for a term of 15 years commencing on 27 November 2007 and expiring on 26 November 2022. Clause 9 of the Lease contains a landlord's break clause operable on three months' notice. Between 31 October 2007 and 9 April 2009 the landlord of the Building was Crossco No 4 Unlimited ("Crossco"), the first appellant. On that day it was transferred to Jolan Piccadilly Ltd ("Jolan"), the second respondent.
Piccadilly trades from the ground floor of the Building, operating an amusement arcade there. The upper floors are vacant and in a poor state of repair. The Lease is within the security of tenure provisions of the 1954 Act.
Jolan wishes to carry out an extensive conversion and development of the Building. It wishes to convert the ground floor and basement into three retail or restaurant units and to convert the upper parts (adding a further floor in the process) into a 157 bedroom Travelodge hotel. Jolan has obtained planning permission for that development. It has pre-let the ground floor and basement units to Waitrose Ltd, Nando's Chickenland Ltd and Ask Ltd.
Jolan has served a notice on Piccadilly to operate the break clause in the Lease and has also served a notice on Piccadilly pursuant to section 25 of the 1954 Act. Jolan opposes the grant of a new tenancy to Piccadilly on the ground that it intends to redevelop the Building. It relies on the ground of opposition in section 30(1)(f) of the 1954 Act. The first set of proceedings before the Judge ("the 1954 Act proceedings") were brought by Jolan to obtain the termination of the Lease pursuant to section 29 of the 1954 Act. In those proceedings Piccadilly contends that Jolan has not proved the necessary intention to develop for the purposes of section 30(1)(f). That was rejected by the Judge.
In the second set of proceedings ("the main proceedings") Piccadilly claims that Jolan is not entitled to operate the break clause in the Lease insofar as it would bring to an end the right of Piccadilly to trade from the ground floor of the Building until the end of the full term of the Lease. It is this claim, and the Judge's dismissal of it, which has been the focus of the appeal.
That claim arises in the context of a division between two sides of the Noble family of the interests in a substantial commercial organisation ("the Group"). The division has been referred to as the demerger. A very broad and general summary is as follows. Philip Noble, the third appellant, and Michael Noble were brothers who had substantial interests in companies and partnerships which operated various leisure and entertainment business, including adult gaming centres, family entertainment centres, bingo premises, betting premises, bars, nightclubs, restaurants and a bowling alley. They were interested in those businesses partly directly and partly indirectly through family trusts, and their interests were equal in extent. In addition they were equal partners in a number of partnerships that owned a large number of properties, in some of which the leisure businesses were carried on. In the case of the Building, the Group, by different companies, both owned the freehold and carried on the business of an adult gaming centre or amusement arcade on the ground floor. The upper floors had been empty for some time, and the Building had been earmarked within the Group for development.
There was a high degree of separation between those in the Group involved in running the leisure businesses and those concerned with the ownership of the properties. Those who were concerned with the running of the leisure group were generally referred to as "the trading group", and those who were concerned with the ownership of the properties were generally referred to as "the property group". At the material times for the purposes of this appeal, the directors and managers of the trading group were different individuals from the directors and managers of the property group. So far as the businesses of the trading group were concerned, the key directors and managers at the material times were Mr Imrie, Mr Biesterfield, Mr Gill, Mr Horrocks, Mr Thompson, Mr Blain and Mr Fox. Mr Biesterfield was a lawyer. The key directors and managers of the property group at the material times were Mr Dalzell, Mr Wooldridge and Mr Wright.
Michael Noble died on 19 April 2006. His executors included his wife Gillian Noble, the fourth respondent, and John Barnsley, an accountant, the third respondent. Following Michael Noble's death, the Group was ultimately owned by Philip Noble and Gill Noble and their respective family trusts and other interests associated with them. It was decided to split the Group equally, that is to say in parts of equal value, between Philip Noble and his respective family trusts and associated interests ("Philip's Side"), on the one hand, and Gill Noble and her respective family trusts and associated interests ("Gill's Side"), on the other hand. Broadly speaking, the general rule was that Philip's Side was to take the trading businesses in the Group and Gill's Side was to take the property interests in the Group. The demerger was completed on 10 March 2009.
For the purpose of the demerger the surveyors and valuers Colliers CRE ("Colliers") were instructed to carry out valuations of some of the properties in the Group, and Close Brothers ("Close") were instructed to value the businesses. Close produced a lengthy valuation report dated 21 October 2008. Colliers and Close were instructed on behalf of both sides to the demerger, as were the other professional advisers, the accountants PWC and the solicitors Dickinson Dees.
By way of exception to the general rule, prior to 18 February 2009 it was intended that both the freehold of the Building and the business being carried on there, that is to say the Lease, would be owned post-demerger by companies controlled by Philip's Side. On 18 February 2009 that intention changed.
On that day there was a meeting at Philip Noble's office in London between Philip Noble, Mr Horrocks and Mr Barnsley. It lasted a couple of hours. A large number of items were discussed. Mr Barnsley raised for the first time, so far as Philip Noble and Mr Horrocks were concerned, the suggestion that the freehold of the Building should be transferred to Gill's Side. That suggestion was discussed for about 15 minutes and proved not to be controversial. It was agreed that the freehold of the Building would be transferred to a company associated with Gill's Side, with a value of £5 million being attributed to it, and that Philip's Side would retain the trading business on the ground floor. Other matters were discussed and considered in relation to the continued occupation of the Building by Philip's Side. I shall refer later to the findings of the Judge about precisely what was discussed and agreed at the meeting.
On 19 February 2009 there was a lengthy meeting attended by a large number of professional advisers involved in the demerger.
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