Englewood Properties Ltd v Patel and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 16 February 2005 |
| Neutral Citation | [2005] EWHC 188 (Ch) |
| Docket Number | Case No: CH/2004/APP/0559 |
| Court | Chancery Division |
| Date | 16 February 2005 |
[2005] EWHC 188 (Ch)
Mr Justice Lawrence Collins
Case No: CH/2004/APP/0559
(HC04 C 0849)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(MASTER MONCASTER)
Royal Courts of Justice
Strand
London WC2A 2LL
Mr David Hodge QC (instructed by Russell Cooke) for the Claimant/Respondent
Mr Mark Warwick (instructed by Jeffrey Green Russell) for the Defendants/Appellants
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
()
I The background
The claimant, Englewood Properties Ltd ("Englewood"), is a property developer, which at the material times owned a parade of shops in Dagenham. According to his evidence, the first defendant, Mr Shailesh Patel ("Mr Patel") is a property consultant and agent. The second defendant, Cornberry Ltd, is a BVI company.
Numbers 233 to 253 (odd) Heathway, Dagenham, Essex, consist of a three storey parade of shops. At a public auction held by Allsop & Co at the Berkeley Hotel, Wilton Place, London SW1, on December 3, 2003 the shops (together with other properties) were put up for sale in seven lots, Lots 10 to 16.
Lot 11 consisted of Numbers 235 to 241, which was a large Woolworths store ("the Property"), with ancillary accommodation. The title comprised within the Property is both freehold and leasehold. At the time of the auction the freehold owner was Englewood, which also owned the freehold of Lot 10 and Lots 12 to 16. The freehold and leasehold titles have not merged.
The auction catalogue distributed to prospective buyers at the auction incorporated Notices to Prospective Buyers, Particulars of Sale for each lot, and the Common Auction Conditions. The Notices to Potential Buyers stated (para 5.3) that the Conditions of Sale consisted of the Notices to Prospective Buyers, the Common Auction Conditions, the Special Conditions of Sale, and any addenda relating to the Lot. The Notices provided:
"6. Liability of Bidder
6.1 If you bid at the Auction, you will be personally liable in respect of any accepted bid. This will be the case even if you bid as agent or other representative for another party.
6.2 If you bid as agent or representative then you and the person or organisation on whose behalf you have bid will be jointly and severally liable under the contract of sale …"
The Common Auction Conditions included a section headed "The Conduct of the Auction" which provided as follows:
"if YOU make a successful bid for a LOT
YOU are personally liable to buy it even if you are acting as an agent. …
….
If the BUYER does not comply with its obligations under the CONTRACT YOU are personally liable to buy the LOT and must indemnify the SELLER in respect of any loss the SELLER incurs as a result of the BUYER's default."
The auctioneer was Mr Moir of Allsop & Co. Mr Patel successfully bid for the Property at the auction, which was knocked down to him at a price of £1,320,000. Mr Hodgson of Allsop & Co then inserted Mr Patel's name in section 2 of the Buyer's Slip under the heading "Full name, address and telephone number of the Buyer (ie. the person, firm or company who is intended to be the owner of the property)" and the name of Mr Patel's solicitors in section 4. Mr Hodgson then took the Buyer's Slip to Mr MacKilligan of Allsop & Co, who inserted Mr Patel's name in section 3 under the heading "Successful Bidder's full name" etc and asked Mr Hodgson to get Mr Patel to sign it. Mr Patel then signed the Buyer's Slip, which provides that Allsop & Co will sign any memorandum or contract of the sale on behalf of the relevant parties. Mr MacKilligan made a handwritten note on the Buyer's Slip "Shailesh to complete later." Mr Patel was also the successful bidder on Lot 14.
On December 4, 2003 Alan Ross & Partners, sent a client account cheque for the deposit of £132,000 to Allsop & Co with a covering letter signed by one of its partners, Mr Sanjiv R Patel, addressed to Mr MacKilligan of Allsop & Co referring to "my client Cornberry Limited's purchase of [the Property] at Auction yesterday" and confirming that Allsop & Co had authority to sign the contract on their behalf, or alternatively they could send the contract to him for signature.
Allsop & Co then prepared a sale memorandum in respect of the sale of the Property which showed Cornberry Ltd as the buyer of the Property at the bid price and signed it on behalf of Cornberry Ltd.
II The title
The parade, including the Property, was part of freehold land originally owned by the London County Council ("the LCC"). On June 30, 1939, the LCC granted a 99 year lease from March 25, 1938 ("the June 1939 headlease") of the parade to Wigram Family Settled Estates Ltd ("Wigram").
On October 18, 1939 Wigram granted an underlease ("the October 1939 lease") of the Property to FW Woolworth & Co Ltd ("Woolworths") as lessee. The underlease was for a term of 99 years (except for the last three days) from March 25, 1938.
On October 15, 1991 Englewood purchased the October 1939 lease at auction, and on November 12, 1991 ("the November 1991 underlease") Englewood granted a leaseback to Woolworths of the Property for a term of 25 years from September 29, 1991 at an initial rent of £85,000 p.a. The underleasehold title was subsequently registered under Title EGL291972.
Subsequently, as a result of transactions in November 1991, Englewood acquired the headlease interest in the parade, and in November 1998 Englewood acquired the freehold interest in the parade from the London Borough of Barking and Dagenham. On registration of the freehold, Englewood applied for first registration of the freehold title and merger of the June 30, 1939 headlease, and registration of the purchase and the merger were completed in April 1999. Freehold title is registered under EGL385095, and the charges register shows the October 1939 lease (and the other occupational leases of the other shops in the parade) as leases of which the proprietor of the freehold title would be the immediate reversioner.
III The covenants
Neither the October 1939 lease nor the November 1991 underlease was in evidence, but there is no dispute as to the relevant provisions. By clause 5(c) of the October 1939 lease:
"The Lessors will not during the term hereby granted sell or let any of their shops numbers 233, 243, 246, 247, 249 and 251/253 …to any person corporation or firm (except S.W. Woolworth [sic]…) whose primary business is that of a fixed price store and in particular but without limitation to the foregoing will not sell or let any such shops or any part thereof to [certain named companies] … and the Lessors will in every conveyance or lease of any such shops or any part thereof insert an appropriate covenant to prevent the purchaser or the lessee as the case may be from selling or letting any such shops to any person corporation or firm … whose primary business is that of a fixed price store or to [named companies] …"
The November 1991 underlease contains a lessor's covenant relating to the enforcement of provisions in the October 1939 lease. Clause 5.4 of the November 1991 underlease contains a covenant by the landlord "to enforce at the Landlord's cost the covenants contained or referred to in the Headlease on the part of the Lessor …". The "headlease" is defined as the October 1939 lease.
IV The special conditions of sale
The special conditions of sale in relation to the Property stated that on completion the seller was to deliver to the buyer with the freehold and leasehold land certificates the original and counterpart of the June 1939 lease, and the draft transfer provided:
"The Transferee and its successors in title hereby covenant with the Transferor at all times hereafter to observe and perform all the covenants conditions and stipulations on the part of the Landlord and Tenant contained or referred to in the Lease dated 30 th June 1939 made between the London City Council [sic] (1) and Wigram Family Settled Estates Limited (2) and to indemnify the Transferor and its successors in title from and against all proceedings costs claims demands and expenses arising out of any future breach or non-observance or non-performance thereof."
It is likely (but there is no evidence on the point) that there was a similar special condition in relation to the other Lots, and it is possible that the reference to the June 1939 headlease between the LCC and Wigram Family Settled Estates Ltd was an error, and that it was intended to refer to the October 1939 lease between Wigram Family Settled Estates Ltd and Woolworths.
V The problem arises
After the auction Stephenson Harwood, the solicitors for The Bank of Scotland, who were to provide finance for the purchase, raised questions on the covenant in the October 1939 lease. On December 16, 2003 the defendants' then solicitors, Alan Ross & Partners, asked Englewood's solicitors, Russell-Cooke, to confirm that in respect of each Lot a covenant not to let the properties for uses or to users which would breach that covenant was to be imposed on the buyers as required by the covenant in the October 1939 lease. Russell-Cooke immediately replied that the auction Special Conditions on the other Lots did not refer to the covenant. In the pleadings Englewood admits that in none of the agreements relating to the other properties was the relevant covenant or condition inserted.
Stephenson Harwood then suggested to Alan Ross & Partners that the defendants should seek indemnity insurance. First Title (who are legal indemnity providers) were...
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