Dominion Corporate Trustees Ltd and Others v Debenhams Properties Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Kitchin |
| Judgment Date | 27 May 2010 |
| Neutral Citation | [2010] EWHC 1193 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC09C01767 |
| Date | 27 May 2010 |
[2010] EWHC 1193 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: The Honourable Mr. Justice Kitchin
Case No: HC09C01767
Mr Stephen Jourdan QC (instructed by Balfour Manson LLP) for the Claimants
Mr Michael Barnes QC (instructed by Walker Morris Solicitors, Leeds) for the Defendant
Hearing dates: 4, 5 May 2010
Mr. Justice Kitchin:
Introduction
This is the trial of the issue of liability in proceedings arising out of an agreement for a lease of a number of units within a new extension to a shopping centre in Fareham (“the Fareham Shopping Centre”).
The first and second claimants (“Dominion”) were the long leasehold owners of the Fareham Shopping Centre until 19 November 2009, on which date title was transferred to the third and fourth claimants.
On 28 February 2007, Dominion entered into an agreement for lease (“the Agreement”) with the defendant (“Debenhams”).
The basic structure of the Agreement was as follows. In the first phase Dominion would carry out works (“the Landlord's Works”) in constructing the extension to the Fareham Shopping Centre, to include the units (“the Premises”) to be occupied by Debenhams. In the second phase, Debenhams would carry out any fitting works to the Premises (“the Tenant's Works”). In the third phase, Dominion would grant to Debenhams a lease of the Premises (“the Lease”) for a term of 15 years at an initial annual rent of £320,000 together with a turnover enhancement.
Under clause 13 of the Agreement, Dominion were required to make payment (“the Payment”) to Debenhams of £900,000 comprising (a) £50,000 payable within 5 working days of the exchange of the Agreement; (b) £425,000 within 10 working days of the date on which Dominion notified Debenhams that the Landlord's Works were completed for the purpose of commencing the Tenant's Works (“the Access Date”), provided access was taken for the purposes of the Tenant's Works; and (c) £425,000 within 10 working days of the date the Premises opened for permanent trade.
The first tranche of £50,000 was duly paid. The second tranche fell due for payment by 2 March 2009, that is to say, within 10 working days of the Access Date which is now agreed to have been 16 February 2009. It was not paid on that day, and the next day Debenhams served notice saying that it was terminating the Agreement under clause 19 which made provision for termination in the event of default by either party.
Dominion did not accept that Debenhams was entitled to terminate the Argreement, and sought to persuade Debenhams to accept the £425,000 late. Debenhams refused, and maintained that the Agreement was at an end.
It is common ground that, if Debenhams was not entitled to terminate the Agreement, its conduct constituted a repudiation of the Agreement. On 23 March 2009, Dominion elected to accept the repudiation and terminated the Agreement themselves.
On 28 May 2009, the claimants issued these proceedings, seeking damages for breach of the Agreement. Debenhams has defended, claiming it was entitled to terminate. It puts its case three ways. First, it says it was entitled to terminate in the event of any breach by Dominion. Alternatively, the failure by Dominion to pay the sum of £425,000 by the due date was a repudiatory breach because time was of the essence. In the further alternative, the circumstances were such that the failure to pay by the due date constituted a repudiatory breach. It has counterclaimed for the £425,000 and damages to be measured by reference to the expenditure it has incurred in starting to carry out the Tenant's Works.
The issues which now fall to be determined are therefore:
i) Did clause 19 of the Agreement entitle Debenhams to terminate the Agreement on 3 March 2009? If not,
ii) was the failure to pay the £425,000 on the due date a repudiatory breach because time was of the essence? If not,
iii) were the circumstances of non-payment such that the failure to pay on the due date constituted a repudiatory breach?
The relevant contractual terms
Clause 2 addressed the Landlord's Works and required Dominion to use reasonable endeavours to procure that the properly appointed contractor carried out the Landlord's Works in accordance with various specified requirements and with due diligence. It further required Dominion to use reasonable endeavours to procure completion of the Landlord's Works on or before a specified date referred to as the “Target Completion Date”. Clause 2.7 provided:
“If the Access Date has not occurred by the Longstop Date [1 November 2009, subject to extension] then either the Landlord or the Tenant may at any time thereafter (but not once the Access Date has occurred) by written notice to the other determine this agreement whereupon this agreement shall (save for clause 2.8) absolutely determine and shall be of no further effect but this shall not affect the rights of any party to this agreement against the other or others in respect of any prior breaches.”
Clause 6 was directed to the Tenant's Works and provided, so far as relevant:
“6.1 Not later than 6 months or such shorter period as may reasonably be required by the Landlord to consider the relevant details relating to the Tenant's Works prior to the anticipated Access Date the Tenant shall at its own cost prepare in triplicate and submit to the Landlord for approval a plan or plans and a specification (if any) of the Tenant's Works. The provisions of the Lease applicable to alterations shall apply to the Tenant's application for approval of the Tenant's Works.
6.2 As soon as practicable upon the Landlord's approval for the Tenant's Works being obtained, the Tenant shall apply for and obtain all Requisite Consents for the carrying out of the Tenant's Works.
6.3 Subject to the Tenant having obtained the Landlord's approval under clause 6.1 and all Requisite Consents required for the commencement of the Tenant's Works under clause 6.2, the Tenant shall commence the Tenant's Works on or as soon as practicable after the Access Date and if commenced the Tenant shall diligently proceed with the same in a proper and workmanlike manner as soon as reasonably possible so as to achieve completion of the Tenant's Works within 16 weeks of the Access Date (subject to extensions permitted by clause 2.5 as if it applied to the Tenant's Works) to the reasonable satisfaction of the Landlord.”
In summary, there was no obligation upon Debenhams to specify any particular works but any that it did specify had to be sent to Dominion for approval. Subject to approval having been obtained, Debenhams was required to begin the Tenant's Works on or as soon as practicable after the Access Date and, if commenced, to proceed diligently so as to complete them within 16 weeks of the Access Date.
The Access Date was defined in clause 1.1.1 as follows:
“ Access Date means the date upon which the Landlord notifies the Tenant that the Landlord's Works are completed for the purpose of commencing the Tenant's Works provided always that the Access Date shall (notwithstanding the achievement or not of the date of practical completion of the Landlord's Works as stated in the Certificate of Practical Completion) not for the purposes of this Agreement be deemed to occur unless and until all of the following conditions have been fulfilled (unless the Tenant waives any of the conditions by service of written notice on the Landlord to that effect):…”
Clause 13 dealt with the payments to the Tenant and provided:
“13.1 Subject to the clause 13.2 and 13.3, the Landlord will pay the Payment with any VAT due thereon in the following manner and within 10 Working Days of the following dates thus:—
13.1.1 £50,000 within 5 Working Days of the exchange of this Agreement;
13.1.2 the Access Date—£425,000 plus VAT (if payable) (provided access is taken for the purposes of the Tenant's Works);
13.1.3 the date the Premises open for permanent trade—£425,000 plus VAT (if payable).
13.2 Where VAT is payable:
13.2.1 The Tenant is to produce to the Landlord a copy of its election to waive exemption in respect of VAT in respect of the Premises together with evidence that notice of the election has been given to HM Revenue and Customs and acknowledged by them; and
13.2.2 The Tenant is to provide a valid VAT invoice to the Landlord on the making of the Payment in respect of any VAT properly payable.
13.2.3 The Landlord shall pay to the Tenant the Payment as a contribution to the cost of the materials of the flowing parts of the Tenant's Works: Fixed Walls (including plasterboard), Stud walling/fixed partitions, Wall Tiles & wallpaper, Fixed Ceilings (except features), Flooring (except Carpet or raised floors), Screed, Stairwells, Doors & frames, Architraves, skirting, picture rails, etc, 50% of column cladding, Bulkheads (except features), Glass windows, Structural builder's work.”
Clause 19 was concerned with “Default”:
“19.1 If:
19.1.1 either party shall in any respect fail or neglect to observe or perform any of the provisions of this Agreement; or
19.1.2 an Event of Insolvency arises,
then either party may by notice to the defaulting party any time after such occurrence terminate this Agreement, and upon service of such notice this Agreement shall determine but any such determination shall be without prejudice to any pre-existing right of action of any party in respect of any breach by any other party of its obligations under this Agreement
19.2 In the event that the licence fee or any other payment due under this Agreement or any part of this Agreement shall remain unpaid fourteen...
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