Ferrishurst Ltd v Wallcite Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ROBERT WALKER,LORD JUSTICE THORPE,LORD JUSTICE STUART-SMITH |
| Judgment Date | 30 November 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J1130-2 |
| Docket Number | Case No: CCRTF 98/0731 CMS2 FC3 98/7273 CMS2 97/CHY 052 97/CHY 077 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 November 1998 |
[1998] EWCA Civ J1130-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON
COUNTY COURT
HIS HONOUR JUDGE WAKEFIELD
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Stuart-Smith
Lord Justice Thorpe
Lord Justice Robert Walker
Case No: CCRTF 98/0731 CMS2
CCRTF 98/0732 CMS2
FC3 98/7273 CMS2
97/CHY 052
97/CHY 077
Alexander Hill-Smith for Ferrishurst Ltd (instructed by Jim McKenzie & Co)
Paul Staddon for Wallcite Ltd (instructed by Walter Jennings & Son)
Park End is a cul de sac off South Hill Park, Hampstead, London, NW3. The property known as 12 Park End is a detached single-story building to the rear of 14 South Hill Park. This building was erected in 1973, with planning permission for its use as a depot and garage for a housing association called Second Counterbuild Housing Association (Second Counterbuild). The garage is a lock-up garage for one vehicle. The adjoining premises (which take up about three-fifths of the area) are now used as offices.
This building has for the past ten years been the subject of an acrimonious legal dispute which has involved two separate actions which were heard together in the Central London County Court by Judge Wakefield. The matter comes before this court on an appeal, with the leave of a single Lord Justice, from Judge Wakefield's order made on 20 February 1998.
The first of the two actions was commenced in the Central London County Court on 4 July 1994 by a company called Wallcite Ltd (Wallcite) against a company called Ferrishurst Ltd (Ferrishurst) and Ferrishurst's principal shareholder and director, Mr Barry Cousins. Wallcite claimed possession of the office part of the building and arrears of rent and mesne profits, Ferrishurst being sued as Wallcite's tenant and Mr Cousins as the tenant's guarantor and a person in actual occupation.
On 19 July 1994 Ferrishurst commenced proceedings against Wallcite in the Chancery Division of the High Court claiming specific performance of a contract for Ferrishurst to acquire a leasehold interest in the whole building, following a notice to exercise an option given by Ferrishurst on 30 September 1988. The High Court proceedings were transferred to the Central London County Court and consolidated, with revised pleadings in which Ferrishurst as plaintiff put in points of claim and points of reply and defence to counterclaim, and Wallcite put in points of defence and a counterclaim against Ferrishurst and Mr Cousins.
By two separate orders (drawn up on 24 February 1998) Judge Wakefield dismissed Ferrishurst's claim for specific performance and ordered the vacation of a caution entered against Wallcite's title. He made an order for possession in favour of Wallcite and awarded it £12,000 damages and interest against Ferrishurst and further damages of £14,312 and interest against Ferrishurst and Mr Cousins.
The Judge had essentially one issue to decide (together with consequential issues as to quantum). That was whether an option to acquire the reversion (not merely in the demised premises, but in the whole of the building) contained in a subunderlease of the offices granted on 1 October 1984 bound Wallcite despite the fact that no entry relating to the option appeared on Wallcite's registered title. Other issues were threatened in a long draft respondent's notice, but they (together with an abstruse point in paragraph 3 of the notice of appeal) were sensibly abandoned, enabling this court to concentrate on the central issue, which the Judge decided against Ferrishurst.
The central issue turns on the correct construction and effect of certain provisions of the Land Registration Act 1925 (the Act). If they operate against Ferrishurst the result may be thought surprising and unfair, since it is clear that Wallcite knew all about the option. On 29 February 1988 Mr Nicholls, a director and shareholder of Wallcite, wrote to Mr Cousins asking whether he wished to exercise the option to purchase the reversion. However in this appeal Ferrishurst has been facing a formidable obstacle, that is the decision of this court in Ashburn Anstalt v Arnold [1989] Ch 1. Mr Alexander Hill-Smith, appearing for Ferrishurst, did not shrink from the submission that, if not distinguishable, it ought not to be followed. Mr Paul Staddon, for Wallcite, rightly reminded the court of the stringent principles laid down in Young v Bristol Aeroplane Company [1944] KB 718. Ashburn is indeed a formidable obstacle, since it was a reserved judgment of the whole court, constituted by Fox, Neill and Bingham LJJ.
Having outlined the geographical context and the central issue I must now summarise the conveyancing history. This involves tracing the devolution of the freehold interest, a headlease for 40 years from 1 September 1972, an underlease for 40 years (less 10 days) from the same date, and subunderleases of the garage and the offices which were respectively agreed in 1973 and granted in 1984.
The freehold interest belonged to Messrs Adkins and Betts. On 29 January 1973 they granted to Mr Welbank a headlease for 40 years of the basement of 14 South Hill Park and an open area behind it. The rent was £900 a year with five-yearly reviews linked to the cost of living index. In 1987 the freehold interest was acquired by Wallcite.
Mr Welbank at once granted to Second Counterbuild an underlease (also dated 29 January 1973) for a term of 40 years less 10 days. The demised premises were the part of the open area on which the building was to be built, and Second Counterbuild covenanted to construct the building in accordance with plans approved by the lessor. It also covenanted to grant back to Mr Welbank a subunderlease of the garage in the completed building for a term of 40 years (less 15 days). The rent reserved by the underlease was £400 a year with five-yearly reviews linked to the cost of living index. The rent reserved by the subunderlease was to be £50 a year subject to similar review. In 1979 the liquidator of Second Counterbuild sold the underlease for £3,500 to a company known as Gracicoal Ltd (Gracicoal). Planning permission was obtained for the larger part of the building to be used as offices (rather than as a depot).
The underlease was transferred by Second Counterbuild (in liquidation) to Gracicoal on 24 August 1979, but for some reason the transfer was not registered at H.M. Land Registry until early 1984. On 22 February 1988 the underlease was transferred by Gracicoal to Wallcite for £22,500 and Wallcite became the registered proprietor under title number NGL 387486. So at that stage Wallcite owned the freehold interest and the underlease, but with Mr Welbank's 10 day reversion under the headlease interposed, and subject to the rights of those in occupation under the two subunderleases. At the end of 1988 Wallcite acquired the headlease from Mr Welbank for £10,750.
I have already referred to Mr Welbank's retention of the right to a long subunderlease of the garage in the completed building. That subunderlease was not granted promptly. Indeed it was not granted until 30 December 1988, when (no doubt as a result of negotiations between Mr Welbank and Wallcite) a term of 25 years from 30 December 1988 at a peppercorn rent was granted to Mr Welbank. It appears that until then Mr Welbank was occupying the garage on the strength of his contractual rights, and was an equitable tenant.
On 1 October 1984 a subunderlease of the offices was granted to Ferrishurst for a term of four years from that date, at an annual rent. Clause 1 of the subunderlease contained two options in the following terms
"AT THE END of the four year term herein, the Lessor shall allow the Lessee the option to enter into a further term of underlease for a similar period and under identical conditions and covenants stated herein excepting the option to purchase the Superior lease at a maximum of Twenty-eight thousand pounds and the amount of rent the rent to be negotiated between Lessor and Lessee not more than twelve months nor less than six months before the end of the four year term herein and in any event not to be greater than the equivalent to four thousand pounds after the same has been increased or decreased as the case may be by the percentage by which the cost of living index as published by Her Majesty's Government may have increased or decreased between the commencement and the conclusion of the preceding period of four years of the term DURING the term herein the Lessor shall allow the Lessee the option to purchase and have assigned to them the long term lease the Lessor herein has with the Superior Lessors for an amount to be negotiated, but in any event not greater than twenty-eight thousand pounds."
The Judge recorded that neither side contended that the subunderlease of the offices was a perpetually renewable lease. Nor did either side contend (either by reference to the word "herein" or otherwise) that the option to purchase the reversion was limited (or could at Ferrishurst's option be limited) to the reversion in the offices (to the exclusion of the garage).
The subunderlease dated 1 October 1984 was granted not (as might have been expected) by Gracicoal but by a company called P & C (Holdings) Ltd (P & C). Gracicoal and P & C were small trading companies run as quasi-partnerships by Mr Pincas and Mr Campbell. In 1983 they decided amicably to disentangle their interests, but they did so in an informal and incomplete way. The Judge devoted much of his long and thorough judgment to that aspect of the matter, and had the respondent's notice proceeded this court also would have been...
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