Durley House Ltd v Firmdale Hotels Plc
| Jurisdiction | England & Wales |
| Judge | Mr Stephen Morris |
| Judgment Date | 25 July 2014 |
| Neutral Citation | [2014] EWHC 2608 (Ch) |
| Docket Number | Case No: HC12E02625 |
| Court | Chancery Division |
| Date | 25 July 2014 |
[2014] EWHC 2608 (Ch)
Mr Stephen Morris QC
(Sitting as a Deputy High Court Judge)
Case No: HC12E02625
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Timothy Sisley (instructed by Evans Dodd LLP, Solicitors) for the Claimant
Frances Moraes (instructed by William Sturges LLP, Solicitors) for the Defendant
Hearing dates: 17 March and 4 April 2014
Mr Stephen Morris QC
Introduction
This case concerns the liability of Firmdale Hotels plc, the Defendant, pursuant to agreements it made with Durley House Limited, the Claimant, to pay for rent due under a lease made between the Claimant as tenant and a third party, the Lessor, for a lease of property known as Durley House, 115/116 Sloane Street, London SW1X 9PJ ("the Property"). The Lessor under the lease was the Honourable Charles Cadogan and Cadogan Estates Limited.
On 23 December 2013, I handed down the main judgment in this case (the "Main Judgment"). This judgment addresses matters consequential upon the Main Judgment. I use the same definitions of terms as in the Main Judgment.
In the Main Judgment, I concluded, inter alia, that, as a matter of construction of the 2000 Management Agreement and, in particular, of clauses 7.2.2. and 8, the Defendant (as well as another company, SSHM), are liable for rent under the Lease in respect of periods within the Operating Term, including rent which is determined and falls due after the expiry of the Operating Term: see Main Judgment §§271, second point, and 209. The relevant outstanding rent under the Lease for the period up to 19 January 2009 amounts to £932,386.88 ("the Relevant Rent"). I further concluded that the Defendant is not liable for rent under the Lease or for management fees in respect of any period after 19 January 2009 (§220) and that the Defendant's counterclaim against the Claimant in respect of contribution to the costs of the 2000 rent review succeeds to the extent of £170,963.11 (§270).
At §272, I invited submissions as to the appropriate orders to be made consequential upon my conclusions and in particular on the issue whether it is appropriate for there to be any money judgment in respect of the Relevant Rent. I noted, at §9, that it appeared that the Claimant itself had not paid to the Lessor the relevant sums. Thus, whilst prepared to grant declarations to reflect my conclusion on the issue of construction, I was not at that stage satisfied that it was necessarily appropriate to order the Defendant to pay any sums.
The consequential questions for determination now
As matters have developed, the issues which now fall for decision are as follows:
(A) The appropriate relief to be granted consequential upon my conclusion that the Defendant is liable for the Relevant Rent; in particular whether the Court should enter judgment and/or make an order for payment by the Defendant of, or sums which reflect, this Rent and whether payment should be made to the Claimant or directly to the Lessor ("Money Judgment issue").
(B) Whether, and if so, at what rate, the Defendant is liable to pay interest on sums awarded under (A) above.
(C) What order the Court should make in respect of the Defendant's successful counterclaim.
(D) Costs.
Events since the Main Judgment
Following judgment, on around 13 January 2014, the parties made some initial written submissions. The Claimant contended that it is entitled to judgment for the Relevant Rent, that this was an entitlement to damages for breach of contract, and that whether the Claimant has paid it to the Lessor is irrelevant, citing Total Liban SA v Vitol Energy SA [2001] QB 643 in turn citing a passage from the speech of Lord Goff in Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti) [1991] 2 AC 1 at 35–3The Defendant contended that the Claimant is only entitled to the Relevant Rent once it has paid the Lessor. Prior to payment to the Lessor, the Claimant is entitled at most to a declaration of entitlement to indemnity. Clause 7.2.2. of the Management Agreement imposes an obligation upon the Defendant to pay the Lessor, not the Claimant, and clause 8 is merely an indemnity.
In the light of these submissions, I decided to hold a further oral hearing and on 28 January 2014 sent a note to the parties seeking clarification of their respective cases, particularly on the Money Judgment issue. I asked for confirmation that the Relevant Rent had not been paid to the Lessor, whether the Lessor was still pressing the Claimant for payment of the Rent and whether there was any prospect of payment being made by the Claimant to the Lessor. I further asked the Claimant to clarify the legal basis of its claim for payment of the Relevant Rent, whether the Claimant's claim was a claim for payment of a contractually due sum (debt) or a claim for damages for breach of contract; and in either event under which contractual provisions in the Management Agreement and/or in the Licence such claim arose, and for submissions on the law relating to contracts of indemnity.
The oral hearing on these issues was fixed for 17 March 2014. By submissions dated 12 March 2014, the Defendant responded in writing to my note. On the Friday before that hearing, 14 March 2014, the Claimant served further substantial written submissions. More significantly, in response to my inquiry as to the prospect of the Claimant paying the Relevant Rent to the Lessor, the Claimant disclosed to the Court and to the Defendant, for the first time, the existence and terms of a settlement agreement which had been entered into between the Claimant and the Lessor on 24 July 2013 ("the Settlement Agreement"). I refer to the terms of the Settlement Agreement in detail below. In short, the Settlement Agreement provided for the payment over to the Lessor by the Claimant of the Claimant's "net recovery" in the present proceedings, in return for the discharge of the Claimant's existing liabilities to the Lessor. In its further submissions, the Claimant relied upon the terms of the Settlement Agreement as evidence that if the Court were to order payment to it of the Relevant Rent, that would then be paid over to the Lessor.
The further oral hearing on these matters took place on 17 March and was completed on 4 April. In total, more than 30 further authorities were cited in argument. At the hearing on 4 April, the Claimant produced a yet further version of its draft amended Particulars of Claim for which it seeks permission, if needed.
Background matters
As recorded in the Main Judgment, the Lease terminated toward the end of 2012 and the Claimant vacated possession owing a very substantial amount of rent. A statutory demand for the rent was served on 28 September 2012. In addition to the Relevant Rent, the Claimant owed the Lessor further sums in excess of £1,167,613. Towards the end of October 2012, the Lessor brought proceedings against the Claimant in the West London County Court ("the Possession Action") claiming possession of the Property and an order for payment of the then outstanding rent, damages for use and occupation and interest. As a result the Lease was forfeited. On 28 November 2012 the Lessor obtained judgment in those proceedings ("the Possession Action Order"), for arrears of rent in the sum of £2,129,830, damage for use and occupation at a rate of just under £1000 per day, and interest in the sum of £46,700.71 and continuing interest at the rate of £148.54 per day until possession is given. This judgment has not been satisfied and sums due under the Possession Action Order remain outstanding. The Claimant's only asset was the Lease. The Claimant is now insolvent. The Lessor obtained possession of the Property on 7 January 2013.
(A) The Money Judgment issue
The Claimant's submissions
The Claimant submits as follows:
(1) The Court should order payment by the Defendant to the Claimant of the Relevant Rent by way of damages for breach of its obligation to pay the Rent and/or of its obligation to indemnify the Claimant pursuant variously to clauses 7.2.2 and 8 of the 2000 Management and clause 6 of the Licence.
(2) As a matter of construction of the Settlement Agreement, the Claimant has not yet been released from all liability for Rent under the Lease (including liability for the Relevant Rent) nor from liability under the Possession Action Order. Further even if, as a result of the Settlement Agreement, the Claimant has been so released from liability, the Settlement Agreement is "res inter alios acta"; it is a distinct and unconnected transaction regulating relations between the Claimant and the Lessor. It does not mean that the Claimant's loss arising from the Defendant's failure to pay the Relevant Rent has been avoided.
(3) Alternatively the Court can and should order, by order of specific performance, that the Defendant pays the Relevant Rent directly to the Lessor.
(4) As regards amendment, permission to amend its claim is not required, and even if it is, it should be granted, since no prejudice will arise from late amendment, other than prejudice which can, if necessary, be compensated in costs.
The Defendant's submissions
The Defendant submits as follows:
(1) The Claimant has not pleaded the case it now seeks to make in respect of Money Judgment, and should not be granted permission to amend its claim at this late stage.
(2) The effect of the Settlement Agreement is that the Claimant has been released from all liability for the Rent under the Lease (including the Relevant Rent), whatever the outcome of these proceedings. Thus the Claimant has no rental liability against which it required to be indemnified by the Defendant and has no relevant loss to support a claim for damages. The Settlement Agreement is an...
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